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World 3.0: Beyond Silicon Valley

Javier Santiso, MBA, PhD Managing Director Global Affairs & New Ventures Telefónica S.A. Index

1. The Rise of Emerging Markets

2. Telefónica’s bet on /Latin America startup ecosystems

3. A wake up call for Europe

2 Technology is booming

Largest economies by number of firms set up

The UK Russia (10) (5) (3) (2) Korea Japan Spain US (7) (6) (26) (11) (87)

India Taiwan (4) Colombia Philippines Brazil Vietnam Malaysia Perú (4) Singapore Australia (5) Chile Number of 10,000 internet firms, 2013 1,000 Argentina (00)=Number valued over $1bn

Source: Telefónica Brussels Office based on The Economist and World Startup Report, 2014. 3 Unicorns* startups (>$1 Bn) are now coming from everywhere

Top 10 Countries by Billion Dollar companies Top 10 Cities by Billion Dollar companies

(number of unicorns) (number of unicorns)

View

S. Francisco S.

Stockholm

Germany

Canada France

Russia New York Mountain

Palo Palo Alto

China Israel Japan Korea Berlin

Sweden Beijing London Guangzhon

Austin

UK US

77 27 6 5 3 3 3 3 2 2 2 2 25 15 6 6 6 5 4 3 3 3

*UNICORN = A technological company that have grown to be valued at one billion dollar or more. NOTE: the map represents countries and cities by number of unicorns (based on 139 unicorns),. Rankings show just the top 10 countries and cities by number of unicorns. Source: Telefónica Global Affairs & New Ventures based on Atomico, 2014. 4 Digital Disruption is on the rise

The Hospitality Sector(1) The Transport Sector

$10 Bn $18 Bn $8.2 Bn $6 Bn

$12 Bn

Estimated value 2014 Market Cap 2014 Estimated Value Market Cap 2014

0 +470,000 0 4,602 Hertz owned Hotels Hotels Cars- owned cars in the US The world's largest The world's largest A venture-funded Hertz and Avis: the 1st. hotel chain, without hotel chain, startup and and the 2nd. largest car owning a single hotel compared to its peers transportation network rental agencies in the company world, respectively

(1) Intercontinental Hotel (IHG) is the top 1 hotel chain in the world by number of rooms (675,982) and hotels (4,602) in 2012 compared to its peers. IHG market cap as of March 28th. 2014

Source: Telefónica Global Affairs and New Ventures based on FT, IHG’s Corporate Responsibility Report, Bloomberg, “The 325 Hotels Report 2013”, Techcrunch and Corporate Information, 2014. 5 A wake up call: Europe is losing leadership in Technology

Telco Technology Internet

US EU EM RoW US EU EM RoW US EU EM RoW 2 4 5 4 11 3 1 0 12 0 3 0

China Mobile 242 Apple 597 394 Verizon 206 380 200 AT&T 183 IBM 189 .com 149 Vodafone 86 Oracle 173 140 America Móvil 86 Intel Corp. 169 76 Softbank 82 Samsung 160 Ebay 67 NTT DoCoMo 71 Cisco 129 Priceline.com 59 Telefónica 68 Qualcomm 125 Yahoo 41 NTT 68 SAP 87 28 Deutsche Telekom 66 Siemens 79 LinkedIn 26 Telstra 58 Hewlett & Packard 69 Symantec 16 KDDI Corp 53 Accenture 54 11 China Telecom 50 Texas Instruments 50 F5 Networks 9 BT 49 Emerson 44 9 Singapore Telecom 47 Ericsson 41 Groupon 5

NOTE: Data Market Cap (in USD Bn. as of October 2014 and number of companies per region in each sector). US (); EU (Europe); EM (Emerging markets); RoW (Rest of the World)

Source: Based on Bloomberg. Data retrieved October, 2014. 6 Innovation & Technology is migrating outside Europe

Value Creation: Top 15 ICT Hypersector companies (by Market Cap. growth 2008-13, USD Bn)

2 2 1 10 From European RoW From USA Emerging 429 countries Companies (Japan)

278

161 140 139 139 107 92 91 87 86 84 83 66 62

Apple Google Amazon Samsung Microsoft Facebook Tencent Walt IBM Comcast Softbank Vodafone Oracle Qualcomm SAP (Tech) (Internet) (Internet) (Tech) (Tech) (Internet) (Internet) Disney (Tech) (Media) (Telecom) (Telecom) (Tech) (Tech) (Tech) (Media)

Source: Based on Telefónica’s ICT Hypersector Megatrends Report Edition 2014. 7 Players from emerging markets are increasing their leadership

YESTERDAY TODAY

The world’s largest mobile telecommunications <<<< company (by revenues, subscribers & market cap) <<<<

The world’s largest telecommunications equipment <<<< maker (since 2012) <<<<

The world's largest personal computer vendor by unit sales (since 2012)

The world’s biggest e-commerce company by net income (FY 2013: Alibaba $3.6 Bn; eBay $2.9 Bn; Amazon $0.3 Bn)

The world’s most valuable IT services firm after IBM (by Market cap, 2013, overtaking Accenture)

The world’s largest technology company by revenues (Rev. 2013: $178 Bn; #2 Apple $156 Bn)

The world’s 2nd. largest chip Maker (after Samsung Electronics).The world’s 5th. largest semiconductor firm (overtaking Texas Instruments by revenues in 2013)

Source: Based on web research, Companies last available annual reports and IHS iSuppli Semiconductor Analysis Report, 2014. 8 The rules are not written: Innovation from Emerging Markets is also disrupting the Internet “hall of fame”

The top countries’ largest Internet companies by values (USD Bn; Values at their peak)

UK SWEDEN KING ASOS SOUTH KOREA 6.3 FINLAND OPENTEXT 7.1 5 ROVIO RUSSIA NAVER 9.8 YANDEX JAPAN ISRAEL LINE 5.3 CHECK POINT $28 B FRANCE GERMANY 14.0 3 CRITEO 13.6 USA 2.8 $37 B 2 GOOGLE ITALY SPAIN YOOX ODIGEO CHINA $410 B ALIBABA.COM $200 B

6.6 Americas 6.4 $52 B AUSTRALIA Europe SOUTH AFRICA REA GROUP Africa ARGENTINA MERCADOLIBRE Oceania

Source: Based on “The World Startup Report, 2014”, 2014. 9 Index

1. The Rise of Emerging Markets

2. Telefónica’s bet on Europe/Latin America startup ecosystems

3. A wake up call for Europe

10 Telefónica 2015 Betting on entrepreneurship, talent & technology

Impact Impact Impact Impact

100,000 Kids & 2,000 hackers 1,000 startups 50 startups Teens 1,500 startups 12 countries 4 countries 5 countries 50 accelerators

5 countries

2013 2012 2011 2010

5-25 years old 25-75 years old

Source: Telefónica Global Affairs & New Ventures, 2014. 11 Amerigo: A global network of venture capital funds in Latin America and in Europe (5 funds created)

$378 M $50 M AMERIGO SPAIN

• To invest in ICT firms In • 2 Funds 2012 Chile and • Oct. 2014: $8M AMERIGO COLOMBIA • 1 Fund in 2012 AMERIGO BRAZIL $65 -> $100 M • 1 Fund in 2012 AMERIGO CHILE • To invest in Digital firms in early stages or expanding in • 1 Fund in 2012 Latin America • Oct. 2014 expands to $100M

Source: Based on Telefónica & Amerigo, 2014. 12 Wayra: A unique network of startup accelerators in Europe & Latin America

Dublin London München Praha Madrid Barcelona 12 México DF Countries Caracas Bogotá

Lima São Paulo ̴ 27,000 425

Buenos Aires Projects Start-ups Santiago

Source: Based on Wayra, November 2014. 13 Wayra is boosting the entrepreneurship and start-ups ecosystem

26,986

16.723 ̴ 27,000 received 13,279 projects 12,064 11,840 11,572 11,237 9,913 8,790 7,9628,322 6,931 6,444 5,702 5,374 4,710 4,192 2,975 2,078 3,444 1,566

1,217 985 581 512 897 518 664 328 742 487 1,031 360 468 1,123 1,324 335 268 224 1,215 Apr11 Apr11 Apr11 Jul11 Aug11 Sep11 Sep11 Nov11 Dec11 Feb12 Mar12 Mar12 Apr12 Apr12 May12 May12 May12 Sep12 Oct12 Dec12 Dec14

1st Global wayraCall

Source: Telefónica Global Affairs & New Ventures based on Wayra, 2014. 14 2014 Talentum Startups: An open Innovation Program

65

900 33 20 Talentum Startups Accelerators Universities

3 3 6 Corporates Foundations Town Halls

Number of partners of Talentum Startups

Source: Telefónica Global Affairs & New Ventures, 2014. 15 Talentum Startups: University students develop technology in high performance environments

Universities Short Track Develop their

own project

PROJECTS 50 50 Students of + Technological 20% careers (18-28 years)

Long Track Development

in a Startup +200 STARTUPS +200 80%

Source: Telefónica Global Affairs & New Ventures, 2014. 16 Talentum Startups: An open innovation program

GOLD (12) ACCELERATORS (33) UNIVERSITIES (25)

Source: Telefónica Global Affairs & New Ventures, 2014. 17 Talentum Startups Labs

App development to improve “Team Eleven Paths Lab Movistar” performance 1 Technology Mentor

Bikelab

10 Talentum El Bulli Lab App development for cycling Startups amateurs (6 months part time)

Space Lab

1 Cycling professional Others?

Source: Telefónica Global Affairs & New Ventures, 2014. 18 Expanding Talentum to other countries and broadening the Partners’ Network

Etc…

Source: Telefónica Global Affairs & New Ventures, 2014. 19 Talentum Schools: Boosting digital devotion among our kids & teens

Content / Hardware Platforms Partners

40,000 Talentum Schools

Web programming

Workshops Apps Mentors (80)

Augmented Reality Robotics

Source: Telefónica Global Affairs & New Ventures, 2014. 20 2014: Operating Talentum Schools in 40 Movistar Shops and 35 cities in Spain

Bilbao 2014 S. Sebastián A Coruña Oviedo Santander Santiago Vitoria Pamplona Vigo León Burgos Logroño Lleida Valladolid Girona (Launched in June 2013*)

Zaragoza Barcelona – Madrid – Gran Vía Tarragona P. Cataluña Madrid – G. Perón Alcalá Madrid – Goya 35 Cities Castellón Leganés Cáceres Toledo Valencia Movistar Shops Palma 40 Badajoz Albacete

Alicante 40,000 T. Schools Cordoba Murcia

Huelva Sevilla Operating Granada Almería Málaga Launch in June 2014 Cádiz S. Cruz de Tenerife Launch September 2014 Las Palmas

(*) In 2013 Talentum Schools was operating in 10 Movistar Shops having particpated in the Program, during 2013, 2,000 Kids & Teens since launching in June 2013.

Source: Telefónica Global Affairs & New Ventures, 2014. 21 “Satlab”, the space summer camp An example of practical application of the acquired knowledge

30 students designing their own space experiments for nano- satelites A two-weeks summer camp (July 2014) for the winners at the NASA’s Kennedy Space Center to launch their experiment to the space

Source: Telefónica Global Affairs & New Ventures, 2014. 22 Talentum Schools: Making technologies “seniors-friendly”

Workshops to learn the technology and its possibilities

Internet Smartphones E-mail Social Networks Internet Security

Zaragoza

Valencia

Sevilla

Source: Telefónica Global Affairs & New Ventures, 2014. 23 Index

1. The Rise of Emerging Markets

2. Telefónica’s bet on Europe/Latin America startup ecosystems

3. A wake up call for Europe

24 Europa 2015: 900,000 vacancies in the digital sector

Gap between supply and demand of Digital Jobs in EU

1000 Digital Jobs vacancies

900

800

700 New Telecommunications and computing engineers 600

500 900.000

400 vacancies 2015 300

200

100

0 2011 2012 2013 2014 2015

Source: Based on the European Commission, Eurostat, Empírica and TICJobs, 2014. 25 A wake up call: Europe needs to activate the Millenials…

Where are the Millennial leaders?(*)

Latin America 30% Europe US Others 25% Average Latin America 21% 20%

15%

10% Average Europe 9%

5%

0%

(*) They are a new subset of Millennials identified through the study "Global Millennial Survey, 2013," defined by their degree of experience with technology, passion for participating in the resolution of challenges that their communities and the world face and unity for success.

Source: Telefónica Global Affairs & New Ventures based on “2013-Global Millennial Survey: Global results”, 2014. 26 … as well as entrepreneurship

Strong correlation between Millennials and Entrepreneurship

30% R² = 0,7901

2013 2013 25% Chile Colombia

(*) Peru 20%

Brazil Argentina 15% Mexico US

10% Poland

Czech Rep. UK (% over total population) total(%over

5% Spain Germany stage entrepreneurial activity, activity, entrepreneurial stage - Italy France

Early 0% 0% 5% 10% 15% 20% 25% 30%

% of Millennial leaders, 2013

(*) As a percentage of individuals aged 18–64 in an economy who are in the process of starting or are already running new businesses. Source: Telefónica Global Affairs & New Ventures based on “2013-Global Millennial Survey: Global results” and “2013-Global Entrepreneurship Monitor”, 2014. 27 One Big Innovation Wave is ahead of Industrial Internet

INDUSTRIAL INTERNET Great Britain

United States (GDP per capita, % increase on previous on year) increase % capita,per(GDP Telegraph 2.5

WATT’s steam 2.0 engine Steam Locomotive Electrical Mobile Data generators PC 1.5

1.0

Indoor plumbing Web 0.5 Broadcast Radio 0

1300 50 1650 1700 50 1800 50 1900 50 2010 2020

Source: Telefónica Global Affairs & New Ventures based on Robert Gordon, NBER Working Paper and own projections, 2014.

28 Innovation is a key driver of growth… and employment!

Correlation between Innovation and Employment (2013)

30

Greece Spain 25

20

Portugal

15 Chipre Italy

Unemployment Unemployment (%) France

March, March, 2013,Eurostat) Estonia

( 10 Slovenia Finland Sweden UK Netherlands 5 Germany Austria Luxembourg

0 0.30 0.35 0.40 0.45 0.50 0.55 0.60 0.65 0.70 0.75 0.80

European Innovation Index, 2013

Source: Telefónica Global Affairs & New Ventures based on Eurostat and European Commission, 2014. 29 THANK YOU / DANKE

World 3.0: Beyond Silicon Valley Javier Santiso, MBA, PhD Managing Director Global Affairs & New Ventures Telefónica S.A.

@JavierSantiso

http://es.linkedin.com/pub/javier-santiso/22/83/aa