An Integrated Approach to Billing, Call Center and Customer Relationship Management

1. An Integrated Approach to Billing, Call Center and Customer Relationship Management A Discussion Document August 31, 2000

2. Agenda • Context • Key issues for China Mobile • The Communications Enterprise Solution Architecture (CESA) • Customer Relationship Management (CRM) • About PricewaterhouseCoopers

3. Context • China Mobile facing growing competition from both Unicom and China Telecom • CMCC’s billing and IT infrastructure are inadequate to sustain competitive advantage • Large scale and rapid IT infrastructure development is required • CMCC has requested PricewaterhouseCoopers’ assistance in building a worldclass IT infrastructure • We are the undisputed leaders in this area worldwide, and have unique delivery capabilities in China

4. Key Issues for China Mobile Key Trends in Mobile Telecoms

5. USA Cellular EBITDA % 1998 - 2002 Note: This data represents results for a “typical” cellular company Source: DLJ Mobile voice is maturing The value of mobile voice services has peaked. Much of the value growth in the US is now substitutive Average Revenue Per Subscriber is declining ... … keeping EBITDA margins flat Penetration ARPU * Sonera is re-branded Telecom Finland Mobile

6. In the US, mobile valuations generally exceed cash generation by a significant margin It is thought that data services will ultimately fill this “value gap”, with mobile devices becoming the ECommerce “tool of choice” for most consumers % Mobile Value • FMC 100% Other • Substitution 70% • Data/Broadband Voice Services

7. GSM TDMA PDC Investors believe that the introduction of mobile data technologies will create significant new opportunities... Asia -- Japan, Hong Kong, Taiwan, and Singapore -- portend to be leaders in the introduction of mobile data applications 2002+ 2001-02 2000-01 Info access: Intranet access: WWW access; always “on” line; Mobile ISP; image transfer 1999 - 2000 Info access; Intranet access; real time apps;, interactive sessions Wireless multimedia, voice, video, multimedia applications, M-commerce Information Broadcast: Weather; banking; news; stocks 1998 File transfer; download Data 9.6 - 14.5 kbps SMS HSCSD GPRS 115.2 kbps EDGE WCDMA 384 kbps - 2 Mbps Data 9.6 SMS CDPD 19.2 kbps CDPD, GPRS 57.6 - 115.2 kbps 136+ 115.2 - 384 kbps WCDMA 384 kbps - 3 Mbps Data 28.8 kbps SMS WCDMA 384 kbps - 3 Mbps

8. Many believe that Internet access will move to the “handset” Projections of WAP, Cellular Subs, and Internet Subs Growth 1,400,000,000 1,200,000,000 1,000,000,000 Projected Cellular Subscribers 800,000,000 Projected PC's Connected to theInternet(Dataquest 10/98) 600,000,000 400,000,000 Projected WAP Handsets 200,000,000 - 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

9. Consumer Business Other Mobile data will enable myriad new service opportunities • Information Services • Entertainment • Games • Banking • E-Commerce • E-mail • Video telephony • Personal navigation • Internet access • Database search • Corporate databases • Email • File transfer • Intranet access • Internet access • Vehicle navigation • Video telephony • Specialist products: • Telemetry • Machine monitoring • Navigation & logistics products • Alternative products: • Return channels for broadcast technologies • Wireless homes

10. Mobile data will create a new value chain for mobile operators The combination of multiple services and segments will lead to the development of a complex new value chain that combines content, transport and solutions Traditional Mobile Value Chain Customer Network Management Service Provision Activities • Network planning • Network construction • Network operation • Sales and marketing • Billing • Customer care Future Mobile Value Chain Customer Transport Solutions Content Activities • Production, distribution and aggregation of content • Editors, Magazines, On-Line, and Portals • Core and access transmission of data • Internet backbone providers, Access providers (e.g. GSM and UMTS) • Hardware and software solutions enabling the products to be used • Smartphones, PDAs and Internet browsers; Corporate Intranet software Examples

11. In the consumer market, as the network becomes unbundled, value creation will migrate to either content or solutions … transport and access will become “low value” commodities ... Solutions Content Transport CONTENT SERVICE CREATION TRANSPORT ACCESS INTEGRATION MOBILE TERMINALS Consumers Portals Media Value Added Service Provider Operator … owning a network will not be essential for participation in the mobile consumer market ...

12. In the corporate market, mobile operators may lose direct customer access Solution providers are poised to capture a majority of the value ... Today The Future Corporate Corporate Corporate Solution Providers Fixed Telecoms Mobile Telecoms IT IT Fixed Telecoms Mobile Telecoms

13. Most existing mobile operators are not well-positioned except in the traditional personal segment Content Transport Solutions Customer Segments MNC Large National SME Personal Household Poorly Positioned Moderately Positioned Well-Positioned

14. This may lead to a “mobile network break-up” This “break up” is consistent with what has happened in fixed line services ... Corporate Personal GSM (TDMA/CDMA) Country X Country Y GSM GPRS DECT Other UMTS EDGE GMPCS

15. Key Issues for China Mobile Key Near-Term Success Factors

16. In PwC’s experience, 5 strategic imperatives are common to developing mobile operators • Identify, develop, and retain target customers through on-going segmentation and analysis • Secure existing revenues through revenue integrity measures • Become customer centric, and begin to develop a Customer Management System • Switch fixed to variable costs through outsourcing • Optimise the business portfolio to capture and invest in new revenues streams

17. 1. Segment the Customer Base Understanding the true profitability of customers is essential to get full value from the current customer base Typical Customer Profitability Distribution Unprofitable Marginally Profitable Highly Profitable Segmentation variables: • customer type • needs/usage patterns • service complexity • location • costs vs revenues # of Customers Promotions, product development, marketing, pricing, sales and support should focus on finding, acquiring, retaining and enhancing profitable customer segments

18. Telephone 2. Create a Customer-Centred Organisation To create “winning” services for customers, operators increasingly build Customer Management (CMS) Systems to collect, analyze, and use customer information and perform increasingly sophisticated segmentation exercises Data Sources Touch Points Analysis Areas Transaction Data Customer Acquisition Personal Computer Demographics Database Marketing System Financial Management Brokers/branches/dealers Mail Psychographics Direct Marketing Planning / Create MID Communications History Customer Management Other Systems Internet

19. 2. Creating a Customer Centered Organisation Spending by telecom operators on Customer Management Systems is approaching US$ 20 billion annually $ Bn 60 4.29 4.79 0.84 7.48 3.83 50 Market Management 3.43 6.64 18.19 5.9 3.07 40 16.12 Order Management 5.24 14.3 12.67 30 11.23 18.36 Network Management 16.56 14.94 20 13.48 12.16 Customer Management 10 16.96 15.35 13.89 12.57 11.38 Business Management 0 1998 1999 2000 2001 2002 Source: The Yankee Group, 1998

20. 2. Creating a Customer-Centered Organisation Board of Directors The organisation needs to be structured around key customer and product groups, with accountabilities across all customer facing functions Audit Chief Executive Officer COO Chief Chief Strategic Customer Technical Financial Planning Operations Officer Officer Human Customer Customer Ops. Engineering Resources Operations Corporate & & Network Finance Procurement Consumer Large Accts. Construction and SME Corporate Communications Customer Network Customer Operations Operations & Operations Legal Admin Internet Maintenance New Media Carrier Relations & Reg. Affairs Chief Investor Revenue Information Risk Relations Assurance Officer (IT) Management Real Estate

21. 3. Secure existing revenues Many mobile businesses are losing revenues already earned because of flaws in their systems and processes Lost Revenues: • Lost call records • Poor test phase control • Delayed billing • Inaccurate rating/discounting • Inadequate credit control • Excessive aged debt • Ineffective fraud prevention Current Revenues Action to enhance revenue integrity will flow through immediately to the bottom line

22. 3. Secure existing revenues Revenue leakage points can occur anywhere in the end to end revenue lifecycle and can cause poor quality of customer service, loss of reputation, etc ... Typical revenue leakage problems…….. Exchange • Files overwritten before collection • Files lost/incomplete or corrupted • Inadequate information for billing • Valid data rejected • Data not transferred on a timely basis Billing and Pricing • Incorrect prices set-up • Inconsistent prices on different pricing engines • Incorrect/incomplete customer data • Incorrect discount information • Loss of call records Billing and pricing revenue leakages will cause even greater problems with the mobile data since billing and pricing will become more complex

23. 3. Secure all existing revenues Examples Revenue diagnostic tools can identify leakages. Stemming revenue leakages can add 5-10% to annual revenues at minimal additional cost Asian Cellular Operator US Cellular Operator US IXC ISSUE Inaccurate interconnection charges Incorrect rating tables in billing system Inadequate revenue integrity Process review and changes Billing accuracy assessment Diagnostic review SOLUTION $2 million annualised savings $7 million annualised underbillings Revenue integrity framework in place RESULT … giving enhanced shareholder value, improved customer service and better focus on high risk areas

24. 4. Switch fixed to variable costs Outsourcing, sub-contracting, and co-operation with other organisations can replace fixed costs with more flexible variable costs ... Activities that can be outsourced include: • Market research • Advertising and promotion • Sales channel management • IT management • Payroll processing • Facilities management • Network design and construction • Fleet management Contribution Margin Fixed costs Break-even

25. 5. Optimise the business portfolio Four Step Strategic Review Management should seek to continually fine-tune the business portfolio and reinvest to create new value 1. Dispose of non-core “value destroying” businesses + ve Illustrative 2. Reorganise core business - de layer - simplify and focus $ 3. Obtain greater value from under-utilised non-core assets, e.g. land Value destroying operations Current portfolio value Value creating operations Potential portfolio value 4. Outsource non- strategic processes and activities - ve

26. Key Issues for China Mobile Assumptions and Next Steps

27. Looking Forward PwC has the following assumptions about CMCC’s future operation: • CMCC’s business will get increasingly complex as a result of growth, competition, technological change, and market change • Significant performance improvement will be required to sustain shareholder value • Competency in new service creation, mobile data, and customer management will be required for sustainable, long-term leadership • Strong partnerships and alliances will be critical to success

28. CESA An Enterprise -Wide Solution from PwC For Communications Business Growth

29. Value Drivers for a Telecom Company Revenue Growth Operating Profit Margin The Seven Principal Value Drivers: Cash Tax Paid Working Capital Capital Expenditure Cost of Capital Competitive Advantage Period

30. Critical Issues that Affect the Value Drivers Time to market Attracting & Keeping Profitable Customer Financing Revenue Growth Operating Profit Margin Cash Tax Paid Working Capital Capital Expenditure Cost of Capital Competitive Advantage Period Brand Differentiation Channel Distribution Efficient, technically advanced network

31. Our Response to the Top 6 Critical Issues Critical Issues Response A One-Stop-Shop Communications Enterprise Solution Time to market Attracting & Keeping Profitable Customers • Proven Organisational and Business Process Templates • Pre-integrated System Solution • Proven Implementation Process • Pre-Evaluated Best-in-Class Technology, Vendors and Applications • Investment Geared to Business Growth • Integrated Customer Care Focus to Minimise Churn and Maximise Revenue Return • Scaleable Low-Risk Solution • Leading Edge but Based on Proven Technology • Integrated Performance Measurement Framework Financing Revenue Growth Operating Profit Margin Cash Tax Paid Working Capital Capital Expenditure Cost of Capital Competitive Advantage Period Brand Differentiation Channel Distribution Efficient, technically advanced network

32. Which Responses Resolve Which Critical Issues? Responses Critical Issues Proven Organisational and Business Process Templates Pre-integrated System Solution Proven Implementation Process Best-in-Class Solutions Investment Geared to Business Growth Integrated Customer Care Scaleable Low-Risk Solution Leading Edge but Proven Technology Integrated Performance Measurement Time to Market Attracting and Keeping Profitable Customers Financing Efficient, Technically Advanced Network Brand Differentiation Channel Distribution

33. Typical Communications Business Development Phases Issue Phase • Phase 1 - Launch • Single Solution Procured • Rapid Deployment Required • Phase 2 - Growth • System Capacity and Performance Constraints • Diverse Applications Implemented • Phase 3 - Replacement • System Becomes Uneconomic to Continue to Scale and Enhance • Replacement Systems Selected and Commissioned • Phase 4 - Integration • Large-scale Integration and Re-Engineering Required to deliver Business Synergy • Phase 5 - Support 4 - Integration • Upgrades, ongoing, maintenance (in-house) Raise Capital Cash Flow Return on investment Profit per subscriber Differentiation

34. The CESA Solution and Its Impact on the Business Development Phases • Typical Development Phases • Phase 1 - Launch • Single Solution Procured • Rapid Deployment Required • Phase 2 - Growth • System Capacity and Performance Constraints • Diverse Applications Implemented • Phase 3 - Replacement • System Becomes Uneconomic to Continue to Scale and Enhance • Replacement Systems Selected and Commissioned • Phase 4 - Integration • Large-scale Integration and Re-Engineering Required to deliver Business Synergy • Phase 5 -Support • Upgrades, ongoing maintenance (in -house) • CESA Development • Phases • Phase 1 - Launch • Integrated solution procured • Rapid deployment • Phase 2 - Growth • Utilize additional features of system • Scale hardware • Additional licenses procured • More sophisticated performance measurement deployed • Phase 3 - Support • Upgrades, on-going maintenance supported by vendor partners Typical Investment CESA Investment $ Phase5 Phase1 Phase2 Phase3 Phase4

35. A Complete Enterprise Architecture for Communications Businesses Organizational Build and Business Process Model Integrated Performance Measurement Framework Reference Data Model Data Warehouse Data Model Pre- Integrated for Quick Start Interface Best-in-Class Product Set Definition Current Systems Implementation Service Pre-integrated System Solution

36. Market Identification Organizational Build and Business Process Model Customer Value Chain Product Management Service Delivery Service Assurance Contact Management Marketing Sales Billing PM SS SA MI SD BI MA CC Business Operations Process Manage Supply Chain Manage HR Maintain External Relationships MS E HR Deploy and Manage IS / Outsourcing Plan & Govern Business Manage Finance P D MF Network Management Value Chain Manage the Network Manage Network Performance Plan Network Design Network Construct/ Configure Network Test Network Service Generation PN TN MP DN SG MN CN = In Scope

37. Usage Collection Rating Bill Calculation Bill Rendering Payment Processing Debt Processing Settlement Billing Payment Processing Debt Processing Inter-Connect Billing SLA Management Internal Reporting Regulatory Reporting Product Definition Product Planning Product Development Product Deployment Product Tracking Product Retirement Market Research & Analysis Customer Segmentation Product Segmentation Customer Management Customer Queries Contact Management Trouble Management Upselling and Cross-selling Management Market Strategy Development Campaign Management Prospect Management Pricing & Packaging Channel Support Customer Management Reporting Sales Strategy Definition Channel Management Account Planning Selling Sale Close Customer Winback and Retention Order Fulfillment Service Provision Typical Measures / Micro-drivers / projects Integrated Performance Measurement Framework • Customer Value chain Customer Contact Management • Value Drivers Market Identification Product Management Service Delivery Service Assurance Sales Marketing Billing • Turnover growth • Profit Margin • Tax Rate • Working Capital • Fixed Rates • Cost of Capital • Growth duration Cost per line installed Market Growth Interconnection cost Tariff plans /Regulation Cross-subsidy mobile handsets Market share Churn rate Fixed line penetration Subscriber / Base station Cost per line serviced Overhead/employee Digitalization /ATM projects Cellular coverage GDP growth (Solution to contain set of pre-developed value reports)

38. BI1- Usage Collection BI2- Rating BI3- Bill Calculation BI4- Bill Rendering BI5- Payment Processing BI6- Debt Processing BI7 - Settlement Billing BI8- Inter-Connect Billing MI-1 Market Research & Analysis MI-2 Customer Segmentation MI-3 Product Segmentation PM-1 Product Definition PM-2 Product Planning PM-3 Product Development PM-4 Product Deployment PM-5 Product Tracking PM-6 Product Retirement MA1- Market Strategy Development MA2- Campaign Management MA3- Prospect Management MA4- Pricing & Packaging MA5- Channel Support MA6 - Customer Management Reporting SS1- Sales Strategy Definition SS2- Channel Management SS3- Account Planning SS4- Selling SS5- Sale Close SS6- Customer Winback and Retention SD1- Order Fulfillment SD2 - Service Provision SA1-SLA Management SA2- Internal Reporting SA3- Regulatory Reporting CC1- Customer Management CC2- Customer Queries CC3- Contact Management CC4- Trouble Management CC5- Upselling and Cross-selling Management Applications implementing the Customer Value Chain in the Demonstration PM MA SS SD SA BI CC MI Customer Contact Management Market Identification Product Management Service Delivery Service Assurance Marketing Sales Billing Application Integration: Vantive Geneva Oracle Apps. 11

39. Market Identification Product Development Service Delivery Customer Care Service Assurance Marketing Sales Billing Systems Impact on the Value Chain Automatic Call Distribution/CTI Data W’hse - customer seg. - product seg. Data W’hse - what ifs - customer anal. - product anal. - unit anal. Work Flow Management VRU Prospect Management Order Processing Mediation device ‘network’ Inventory Usage Rating Trouble Ticketing Service Level Agreement Data W’hse - customer seg. - product seg. Data W’hse Access Work Force Management Integrated Billing Sales Force Automation Trouble Ticketing Accounts Receivable Service Provision. Network Management Support Systems Data Warehouse Products Inventory Customers

40. Customer Field Service - Customer Contact Call Center - Trouble Ticketing - Vantive Point of Sale - Sales & Marketing - Vantive Data Warehousing - Oracle Apps Billing - Geneva Business Support - Oracle Apps Integration Fraud Provisioning Mediation Network Management Within scope of demonstration Outside scope of demonstration An Integration Architecture and Preferred Vendor Product Set Integrated Design Principles • Single CSR user interface • Single point of order entry • Use workflow engine (Vantive) to support / CSR process • Single technology platform • Utilize standard APIs • Built upon generic / reusable integration where achievable

41. Integrated data repository Customers Inventory Products Core Application Architecture of CESA Call Centre Customer Management Support Applications C o m m o n U s e r I n t e r f a c e Internet Access C U S T O M E R S Asset Management Procurement Finance Sales and Marketing Field Service Customer Contact Project Accounting/ Mngt. HR Paper Access WORK FLOW Service Centre MIS Marketing Call Rating Invoice Calculation Invoice Rendering Voice Access Customer Analysis ABCAnalysis Business Unit Analysis Data Warehouse Billing Fraud Management CDR Mediation & Service Provisioning Network Management Centre Data Collector Data Collector

42. A Proven Implementation Approach Integrated Multi-Track Approach Analysis Implement Design/Build Integrate B Establish Technical Strategy and Development Structure I Support Development and Establish Production Infrastructure Q Maintain Technical Infrastructure and IT Readiness Technology Infrastructure O Cutover Planning T Execute Cutover and Rollout U Implementation Support and Refinement Project Management Methodology C Data Planning J Data Conversion Management Applications Implementation R System Integration Testing K Custom Code Design and Build A Project Scoping and Planning D Process Analysis M Security and Controls L Process Design and System Prototyping E Team Training Business Process Change P User Procedures and Training Development S Training Delivery F Organizational Dynamics and Impact Assessment N Organization & Facilities Design Organizational Change G Transition Management G Transition Management • Manage Communications • Secure Commitment to Change • Build Teams and Transfer Skills H Project Management

43. Established Telco (Possible new business venture) 18 months -24 months 1 Month 4 months 7 months 11 months Full Legacy Data Migration Customer Care Full MIS Full Billing Full Contract Evaluate i on Operational signed and Legacy Delivery Oracle Implementation and Integration system Customer New CC Full Business Process Change Process Review Process Greenfield License 10 months - 12 Awarded 3 months 6 months months Customer Care and Full MIS Provisional billing Billing Contract signed Oracle Implementation New Process Established and Integration 4 months Pre License Award License awarded 9 months 2.5 months 5.5 months Customer Care Process Full MIS Initial Process Model and Billing Contract Training Tech and Design Delivery Agreed Oracle Implementation and Integration New process established Full 1 month Contract PwC/ Oracle Team A Flexible Implementation Approach Established

44. The largest telecommunications provider in Switzerland The second fixed telecoms network in Spain A joint venture between BT, Viag and Telenor. A global voice over internet protocol operator Dolphin Telecommunications - the UK's first commercial licensee of the newly emerging Tetra PMR standard. CESA: The Communications Enterprise Solutions Architecture Successes to date

45. Customer Relationship Management Why CRM Is So Important Today?

46. The Search For Competitive Advantage Compete on Customer Relationships Source of Competitive Advantage …. enter the web Compete on Quality and Lower Costs Compete on Market Share 70’s 80’s 90’s 00’s An organization’s ability to understand and deliver (near) real-time on consumer interests, needs & expectations will drive competitive advantage

47. Process Customers Have Become Very Demanding Brand and product focused Retail and channel focused Customer focused Customer driven Hierarchical Distributed Flat Empowered Organization Functional & Business Unit Silos Product-based Streamlined Segment-based Management Info. Systems ERP and Back Office Automation Transaction Processing Front & Back Office Integration Technology