Andrea Rossini

Marketing Business 
Barbara Cavaleri
Planning & Control

Vodafone Youniversity Contest

Marketing Consumer Strategy

Andrea Duilio Claudio Farina Innovation

Vincenzo Scarlato
 1Kick-Off
Communicate 2 Contest
Business Cases 3 Award
&Follow up

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Nelle Aule degli studenti di Setup Vodafone
Ingegneria Gestionale

2
 Vodafone 
Youniversity
Contest

Claudio Farina
Head of Strategy Vodafone Italia
6 th May 2011
Who I am
Claudio Farina

Professional Experience
Head of Strategy, Vodafone Italia (2007)
Principal, The Boston Consulting Group

Married with Francesca, father of two children

GIANFILIPPO CATERINA
4
Agenda of today

Vodafone Italy: presentation and key facts

Strategic Challenges: mobile data and 4th generation networks

The Contest: description, key hypotheses and deliverable

5
 Telco market in Italy:
41 €bn
Market  
Growth
~2% 2% 6% Other
9% 5% 2%
Vodafone
13% 9%
Mobile ‐2%
18% 9% o.w.
14% 4% +20%
Mobile Data
36% 11%

Fixed ‐2%
70%
55%
o.w.
+9%
36% Broad Band
73%
o.w.
o.w.
~21 €bn ~5 €bn
~5 €bn ~20 €bn
Mobile ow
ow
(excl. Handsets) BB
BB Fixed
(excl. Handsets)

Source: IDC, Deutsche Bank as of Apr ’09; for fixed BB internal analysis based on Analysys Mason and Company Reports
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 Vodafone Italy, a big
Italian Company

Vodafone* Vodafone Italy

Customers** 343 Mln (proportioned) 31 Mln

Revenues
50 Mld€ 9 Mld€
(FY09/10)

Ebitda 17 Mld€ 4 Mld€ 20-25%

(FY09/10)

Capex
7 Mld€ 1 Mld€
(FY09/10)

Employees** 85.000 8.000

Enterprise Value*** ~ 140 Mld€ ~ 24 Mld€ 15-20%

*Revenues, Ebitda e Capex with exchange rate as of 31/03/2010

**Employees by 31/03/2010, Customers by 31/12/2010
***Enterprise Value by 19/04/2011
Vodafone Italy: Our Strategy
VF Market share Market Growth

Brand Defend
Mobile ~36% ~(2)%
Value

Lead the 
Mobile Data Market ~37% ~20%

@Home Attack the ~12% ~9%

@Office Market (B.B.) (B.B.)
People

Efficiency and
simplicity
 Vodafone Italy: Our Results
Leader Customer Satisfaction
Leader Brand Preference
Leader on Teens, high value and  1.6m BB Cust.  #1 for
“Modern Enterprises” Growth
@Home
Leader on “On‐liners”
@Office
10m Cust.
1m Cust. #1 in 
Mobile Data Mobile 
in 
31m Cust. 2010
20m Cust.
Dati
2m Cust. Mobili
Mobile
Voce e Messaggi
(Voice and SMS)

1995 1997 1999 2001 2003 2005 2007 Today

9
Agenda of today

Vodafone Italy: presentation and key facts

Strategic Challenges: mobile data and 4th generation networks

The Contest: description, key hypotheses and deliverable

10
 The background:
Mobile data boom yet to arrive (device)
# device (installed base)
(2008=100) Today  Mobile Data CAGR 10 ‐ 14
10x
Tablet 75%
9x

6x Smartphone 40%
5x

Mobile 
2x Broadband 10%
Mobile Core

1x 1x Mobile Voice 0%

2008 2009 2010 2011 2012 2013 2014

Source: Strategy Analytics 2011, IDC 2010, Analysys Mason 2011. Mobile voice e Broadband connections end of period, Tablet and Smartphone installed base
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 The background:
Mobile data boom yet to arrive (traffic)

Mobile traffic 08‐15 Western Europe
PTByte/month
CAGR
346 08‐15

218

140
54%
332
92
205

62 129
43
34 81
23 33
51 7x
Data 16
26
3x 10
Voice 7 7 11 11 11 13 14 10%
2008 2009 2010 2011 2012 2013 2014 2015

Source: Analysis and Mason, Wireless network traffic 2008–2015: forecasts and analysis

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 Evolution of Radio Technology
144 Mbps with 4G, potential beyond 1 Gbps 144 1 Gbps

84

42
Max  28.8
theoretical
14.4 
speed 7.2
(Mbps) 3.6

Radio  4G 
3G
technology (LTE)
2008 / 2009 2010 2011 2012 2013
Average speed
per customer <1 1‐2 2‐4 4‐6 6‐10 10‐15 20‐40
(Mbps, standard 
conditions)

13
 Spectrum usage:
Today and tomorrow Used by Telco Players
Potentially auctionable by end 2011

Today Tomorrow
52,5 MHz
68,5 MHz  TV TV
87,5 MHz
108 MHz  Radio Radio Coverage Capex per 
174 MHz unit area
230 MHz  TV / Radio TV / Radio (Net of spectrum cost)
470 MHz
TV TV
800  790 MHz 
1 X 
MHz  862 MHz 
TV (channels 61‐69) 2G‐3G‐4G
880 MHz (Base)
900  915 MHz 
GSM 2G‐3G‐4G
925 MHz
MHz  960 MHz 
1452 MHz
1492 MHz  Radio Radio
1.800  1715 MHz
Ministry of Defence
MHz  1830 MHz  2G‐3G‐4G 3 X
1735 MHz
1785 MHz 
1.800  1830 MHz GSM 2G‐3G‐4G
and  1880 MHz 
1900MHz
2.100 1980 MHz 
2010MHz
MHz 2025 MHz 
2110MHz
3G 2G‐3G‐4G
2170 MHz 

2.600  2500 MHz
Ministry of Defence 2G‐3G‐4G 4,5 X
MHz  2690 MHz 

Source: SCF Associates LTD

14
Agenda of today

Vodafone Italy: presentation and key facts

Strategic Challenges: mobile data and 4th generation networks

The Contest: description, key hypotheses and deliverable

15
 Contest: description

• What: provide recommendation to an Italian TelCo Operator (“Alpha”) on whether to deploy 
(and to which extent) the 4th generation network (also named LTE)

• How: scenarios analysis covering both qualitative and quantitative aspects
 Examples of qualitative aspects include (but not limited to) market positioning, analysis of competitive 
advantage, marketing mix vs customers’ needs, etc. 
 Examples of quantitative aspects include (but not limited to) NPV valuation (DCF) of different scenarios vs
base case, etc.

• Base case: neither Alpha, nor competitors will deploy LTE

• Scenarios: 3 variables will shape possible scenarios:
 Alpha (and competitors) to deploy LTE: yes / no (for simplicity’s sake let’s assume that if Alpha deploys 
LTE so do competitors) 
 If LTE yes: which option to acquire necessary spectrum (described later)
 If LTE yes: level of deployment in terms of % of population reached by LTE service (choose from 20%, 
40%, 60%, 80%, 90%, 100%)

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 Contest: key hypotheses
• Spectrum acquired by Alpha as bundle of frequencies; acquisition costs provided as input and depending 
upon license duration. Three options available:
 600 m€ for 10 years (extendable for another 10 yrs for 300* m€)
 800 m€ for 20 years (extendable for another 20 yrs for 400** m€)
 1 bn€ for unlimited use of spectrum
• Capex required to deploy LTE provided as input and variable according to level of population reached
• If Alpha deploys LTE, there will be the chance to increase by 20% the marginality on the fixed broadband 
market (for simplicity’s sake let’s assume to apply the incremental 20% on the fixed broadband customer
base reached by LTE services) 
• Valuation of base case provided as input. Several simplifying assumptions considered:
 Valuation of market as: mobile market + fixed broadband market 
 Alpha representing exactly 1/3 of the market 
 Mobile market assumed to include solely mobile broadband, internet on smartphones, voice and 
messaging
 No distinction between consumer and business, no taxes, no additional capex required
 NPV computed (and required) on Operating Free Cash Flow (OpFCF)
 OpFCF assumed to be represented by (EBITDA‐Capex): no working capital analysis, no depreciation 
and amortization required 
 WACC (weighted average cost of capital)=15%, perpetual growth rate = 1%
• Information and strategic implications provided in this deck can and should be used
*Timing of second payment during year 10
** Timing of second payment during year 20
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 Contest: input provided
Fixed broadband (Market and Alpha)
Voice and sms (Market and Alpha)
Internet on smartphone (Market and Alpha)
2011 2012 2013 2014 2015 2016 2017
Mobile broadband (Market and Alpha)
CB EOP 6000 6.186 6.448 6.787 7.202 7.695 8.269 8.928
Net adds 186 262 338 415 493 574 659
CB avg 6.093 6.317 6.618 6.994 7.448 7.982 8.599
Gross adds 1000 1.100 1.210 1.331 1.464 1.611 1.772 1.949
YoY % 10% 10% 10% 10% 10% 10% 10%
Churn 914 948 993 1.049 1.117 1.197 1.290
Churn rate % 15% 15% 15% 15% 15% 15% 15%

Revenues 877.395 909.684 952.940 1.007.178 1.072.569 1.149.428 1.238.215

Monthly ARPU 12 12 12 12 12 12 12
SAC 33.000 36.300 39.930 43.923 48.315 53.147 58.462
SAC per unit 30 30 30 30 30 30 30
EBITDA 581.177 600.479 627.128 661.102 702.483 751.453 808.289
EBITDA margin - % 70% 70% 70% 70% 70% 70% 70%

+
Alpha valuation (DCF)
+
Spectrum acquisition costs, coverage capex, other
assumptions
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 Contest:
process going forward and deliverable

• Process:
 Today: in class case presentation
 By Monday, 9th May : upload data input / valuation on web tool 
 By Friday, 10th June: deadline for final submission of deliverable

• Deliverable is:
 Power Point Presentation 
 Imagine to deliver presentation to top executives: 8‐12 slides, additional backups when 
/ if required (e.g., detailed assumptions, valuation tables, etc.)
 Presentation should include (but not limited to):
 Executive summary (1 page)
 Opportunities and  potential threats for Alpha
 Market positioning, competitive positioning, assessment of competitive advantage in the 
long term
 Analysis / evolution of marketing mix according to current and future customers’ needs
 Description and NPV valuation (through DCF) of different scenarios vs base case
 Final recommendation and closing remarks

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 Deadlines

Subscription: April 29th until May 13th

Award Ceremony: Final June

Each participant will submit his/her own work according to the Managers’ indications

The work can be submitted either in English or in Italian

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 Questions and Answers

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