Digital Services: What is Your Digital Business Worth?
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We outline our ‘proxy model’ for valuing Digital Services Businesses, based on current best practice, which has significant advantages over traditional approaches. This report, our second of two on valuation, gives a worked example of a telco’s digital business in Asia that is already worth $1bn, and includes an analysis of approaches being taken by some leading telcos today.
Format: PDF filePages: 22 pages Charts: 11 Author: Matt Jones Publication Date: April 2015
Table of Contents
- Executive Summary
- Fixed-Mobile Convergence: How tangible are the synergies?
- Recap: Digital businesses are especially challenging to value
- A Digital Valuation Framework
- ‘Net synergy’ has four components: benefits and costs, to and from the core
- Benchmark data theoretically leads to conservative valuations
- How to Build a Proxy Model
- What is a ‘Proxy Model’?
- Proxy models have several advantages over DCF, but they also have data availability challenges
- Case Study: SK Telecom’s MelOn could be worth $1bn+
- How to Measure Synergies
- The Theory: Clinical trials reduce the synergy problem
- Case Study: A leading European MNO works with its OpCos to run clinical trials
- Conclusions and Next Steps
- STL Partners and Telco 2.0: Change the Game
Table of Figures
- Figure 1: Fixed-mobile convergence driven by synergy value
- Figure 2: Conceptual and practical challenges caused by synergy value
- Figure 3: MTN Mobile Money Uganda, Gross Profit Contribution, 2009-12
- Figure 4: ‘Net synergy’ across four categories
- Figure 5: ‘Net synergy’ as a component of digital business value
- Figure 6: Facebook monthly active users vs. valuation, Q1 2010-Present
- Figure 7: Proxy model output – SME SaaS providers (financial driver)
- Figure 8: Total VC Investment by Geography, 2010-13
- Figure 9: Example operational and financial ‘Emerging Market Discounts’
- Figure 10: Proxy model output – Digital Music (operational driver; South Korea)
- Figure 11: Correlation vs. Causation
Technologies and industry terms referenced include: B2B2x, Causation, Clinical trial, Correlation, DCF, Discounted Cash Flow, facebook, Fixed-mobile convergence, FMC, M-PESA, MelOn, MTN Mobile Money, Net synergy, Proxy Model, SK Telecom, SME SaaS, Strategy, Synergy Value, Telecoms, transformation, valuation, Venture Capital, Vodafone