Sms Marketing Execution Plan 220502 Short Version V2

SMS Marketing Execution Plan Discussion Document May 23rd, 2002

Agenda The Opportunity Relevance to Alltel Implementation Plan

The Opportunity SMS is a Global Phenomenon SMS has had explosive growth over the past 2 years in all continents … Global SMS Message Traffic Source: GSM World, EMC, Merrill Lynch, Mobile Streams DCI. Billions per Month CAGR:214% Message Traffic by Region Source: Merrill Lynch.

The Opportunity Revenue Contribution … and has become an important revenue source to operators all around the world. Sources: Baskerville, Company releases, DCI analysis. By Country Sources: Merrill Lynch, DCI analysis. Selected Carriers 53% 56% 72% NA 31% SMS Penetration

The Opportunity Key Success Factors Abroad Overseas experience indicate that key milestones need to be achieved to create an environment that fosters SMS adoption. Selected SMS Market Ramp-up Source: EMC, Merrill Lynch. Million Messages per Month Interoperability Prepaid SMS Portugal UK Germany ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Key Success Factors

The Opportunity Barriers to SMS Adoption in US are Coming Down ,[object Object],[object Object],[object Object],[object Object],Barriers to SMS adoption in the US are crumbling fast and the market is set to take off.

The Opportunity Interoperability Will Reach 75% of US Subscribers by July Date Total Subs (*) Vendor ,[object Object],[object Object],[object Object],[object Object],Comments Recent third party inter-carrier agreements in the US will enable ~75% of US subscribers to send and receive text messages across different networks by July 2002. Interoperability AT&T Wireless Nov 01 17.2M InphoMatch Century Tel Mar 02 0.7M InphoMatch Cincinnati Bell N/A 0.5M InphoMatch Cingular Mar 02 21.3M MobileSpring PrimeCo Mar 02 NA NA Sprint PCS Apr 02 12.7M MobileSpring Verizon Wireless Apr 02 28.7M InphoMatch VoiceStream Jan 02 6.3M InphoMatch (*) 3Q01. Nextel Jul 02 8.2M Wireless Services Corp.

The Opportunity Pricing Plans Send Plan 1 Plan 2 Plan 3 Major US carriers offer “pay-per-message plans” and AT&T has introduced “calling party pays” for text messaging setting a trend for the future. ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Receive Bucket Plans ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Pay-per-message

The Opportunity SMS Enabled handset Forecast Text Friendly Handset Form Factor Examples SMS enabled handsets in the US are expected to reach 99% of base by 2004. US SMS Enabled Handsets Sources: Yankee Group, Morgan Stanley, DCI analysis. SMS Handsets (M) 54.4 72.5 117.2 197.2 Handsets (Millions) SMS Handset Penetration

The Opportunity US SMS Penetration and Revenue Forecast Using conservative estimates based on international benchmarks and the recent moves by US carriers we expect SMS revenues to total $2.6B by 2004, equivalent to 2.8% of total industry revenues. ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],CAGR 01-04 Source: Yankee Group, Merrill Lynch, Morgan Stanley, DiamondCluster Analysis. Assumptions US Subscriber and SMS Penetration Forecast 135% 16% Rest of Subscribers % SMS Penetration SMS Revenues Industry Revenues 127M 158M 180M 199M % of Total $58B $71B $82B $90B $0.2B $0.5B $1.1B $2.6B 0.2% 0.7% 1.3% 2.8%

Agenda The Opportunity Relevance to Alltel A Winning Strategy

Relevance to Alltel Opportunity for Alltel ,[object Object],[object Object],[object Object],[object Object],SMS offers Alltel a cheap path to developing a portfolio of data services ahead of any major commitment to 3G.

Relevance to Alltel Revenue Impact Revenue Forecast A well-executed SMS strategy can result in approximately $138 M in revenues for Alltel in year 5. Users Usage Pricing Additional Assumptions (*) EOP. Key Revenue Drivers Sources: Yankee Group, MSDW, DCI analysis. ,[object Object],[object Object],[object Object],[object Object],[object Object],ILLUSTRATIVE Revenues ($M) Messaging revenues (M) Messaging penetration (% of base) 1.4 M 2.3 M 30 40 $0.15 $0.11 7.6M 7.9M Users (*) Msg/User (*) Revenue/ Message (*) Subscribers (*) 0.2 M 15 $0.27 7.3M 2.8 M 40 $0.10 8.1M 2.9 M 40 $0.10 8.2M

Relevance to Alltel Payback The SMS business opportunity requires a $6-10M investment with an expected NPV of over $120M. Financial Analysis ($ M) ,[object Object],[object Object],[object Object],[object Object],Comments Year Capex EBITDA Evolution Year 70 % EBITDA margin 79 % 86 % 86 % 86 % 0.10 SMS ARPU 0.40 1.00 1.30 1.40 Source: DiamondCluster Analysis. ILLUSTRATIVE

Relevance to Alltel Preparing for the Future: SMS as a Lead into Mobile Data In addition to short-term return, an effective SMS product would prepare ALLTEL and its subscriber base for future data offerings and increase long-term adoption of wireless data. ,[object Object],[object Object],Customer Segments ,[object Object],[object Object],[object Object],Offer Design ,[object Object],[object Object],[object Object],Pricing ,[object Object],[object Object],[object Object],[object Object],Communication & Promotion ,[object Object],[object Object],Handsets Preparing the Operator Preparing the Subscriber Base SMS can mitigate mobile data risks SMS teaches subscribers to use their handsets for other applications beside voice Key Benefit

[object Object],A Winning Strategy Strategic Guidelines A successful SMS strategy requires an action plan to reduce barriers to adoption in order to create the viral effect required to drive usage. ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Pricing Strategy Interoperability Handset Offer Design Communication and Promotion Customer Segments

A Winning Strategy Implementation Framework Implementing the strategy requires aggressive cross-functional coordination between marketing, sales, and the technical support functions. Program Management Billing Network/ SMSC Integration Sales and Customer Service Handset Strategy Construct and Monitor Business Case Marketing Plan Inter- Operability

A Winning Strategy Implementation Plan: Business Case Program Management Interoperability Sales and Customer Service Construct and Monitor Business Case Handset Strategy Marketing Initiatives ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Tasks Deliverables ,[object Object],[object Object],[object Object],Billing Network/SMSC Integration

A Winning Strategy Implementation Plan: Marketing Initiatives ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Tasks Deliverables ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Program Management Interoperability Sales and Customer Service Construct and Monitor Business Case Marketing Initiatives Handset Strategy Billing Network/SMSC Integration

A Winning Strategy Implementation Plan: Technical Support Coordination Dramatic growth must be anticipated and prepared for at all levels. ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Tasks Deliverables ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Program Management Interoperability Sales and Customer Service Construct and Monitor Business Case Handset Strategy Marketing Initiatives Billing Network/SMSC Integration

A Winning Strategy Implementation Plan: Sales and Customer Service Support In order to fully capitalize on the SMS opportunity, the “front line” must be involved, trained, and excited about the service. ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Tasks Deliverables ,[object Object],[object Object],Program Management Interoperability Sales and Customer Service Construct and Monitor Business Case Handset Strategy Marketing Initiatives Billing Network/SMSC Integration

A Winning Strategy Implementation Plan: Program Management One of the primary benefits of program management is to eliminate “surprises” and minimize or eliminate deadline slippage. Tasks Deliverables ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Program Management Interoperability Sales and Customer Service Construct and Monitor Business Case Billing Marketing Initiatives Network SMSC

A Winning Strategy High Level Plan for Launch Task Month 1 Alltel can leverage DCI’s expertise in this area to speed time to market and be in a position to fully launch a competitive SMS offer in just 6 months. Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Launch

A Winning Strategy Implementation Project Structure Project Lead Marketing Initiatives SMSC Roll Out DCI Steering Committee Subject Matter Experts Alltel DCI Alltel Alltel Billing System Roll-Out Alltel Interoperability Handset Strategy Alltel Sales and C.Care Training Alltel Business Case DCI PMO DCI Project Areas DiamondCluster team would be deployed in the marketing initiatives, including partnership evaluation, business case development, program management as well as interoperability negotiation support. DCI Alltel

Sms Marketing Execution Plan 220502 Short Version V2

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