1

Wireless Data Services

Simon Garth

Vice President, Marketing - Symbian

7/3/2006

2

Overview

• The mobile phone

…Where it is today

…Where it is going

…Modelling the opportunity

• Background - product adoption lifecycle

• Applying this to Wireless Data Services

• Example services

• Conclusion

3

Phone Evolution

Digital Revolution

4

Smaller, Faster, Better, CheaperFrom this...

to this...

…in twenty years...

5

Consumer electronics device sales 2004U

nit

s (

Millio

ns)

6

Worldwide mobile phone subscribers

Source: Merrill Lynch global wireless matrix

7

Mobile phone penetration by country

Source: Symbian market model, Feb 2004

0%

20%

40%

60%

80%

100%

1995 1997 1999 2001 2003 2005 2007

Korea

North America

World

Africa & MERest of Asia

South America

W. EuropeJapan

China

E. Europe

India

8

Enabling smartphone evolutionDifferent markets have different evolutionary speeds and directions

EstablishedPush-to-TalkWifiGPSEnterprise appsEmergingMultimediaInternetLocation Based ServicesMusicGames

EstablishedInternet

Micro paymentsSecurityGames

MultimediaImagingVideoMP3

ID verificationTerrestrial TV

EmergingPush-to-Talk

Automatic transactionsRFID

Personal monitoringTerrestrial TV

Location based servicesRemote control

TDMA / GSM / CDMA /

EDGE / CDMA2000 GSM → W-CDMA

PDC, CDMA → W-CDMA, CDMA2K

CDMA → CDMA2K

EstablishedEnhanced VoiceInternetGamesMultimediaMP3ImagingEmergingGPSRadioVideoBroadcast servicesSecurityLocation based services

9

The mobile phone today

• 3 Broad technologies

…GSM (Europe, Asia, Africa, some USA)

…CDMA (USA, Asia)

…W-CDMA, (evolution of GSM)

• Transition from voice phone to data phone

…Data added to voice services

…Priced by usage rather than connection time

…Stepping stone to 3G

• … but what do people what to do with 3G

• … will it turn out like the Internet?

10

Economics

• In Europe Licenses sold by auction

…Total cost of approx $100Bn

…+ Roll-out cost of $150Bn

• Funded by about 50% of the bond market from 1998-2002

• Total investment significant proportion of UK GDP

• Payback over 20 years

…Approx 2008 with substantial data take up

…Approx 2011 without

11

Market Dynamic

1. Voice goes

wireless

3. Content goes

mobile

100 fold market

increase in 10 years

2. Stabilisation

Some market saturation

3G license debts

US economic slowdown

2.5G, 3G bottleneck clearing

Demand for non-voice services

Combination of new technologies

New device categories imminentOver-hype!

Over-criticism!It’s easy to exaggerate the short-term impacts

of technological change,

and under-estimate the long-run effects

Time

Expectations; Reality

12

The mobile phone device

13

Software

1-2Mb

Hardware

Software

20-128Mb

Hardware

2000 2006

More complex phone technology

More software applications

Better user experience

Standardization of components

Eff

ort

required t

o b

uild

phon

eWhy do you need an OS?Phone software is increasingly valuable

14

Fundamentally, smartphones will increasingly develop like consumerelectronic appliances

Voice centric

Enriched experience

Segment optimised

Ph

on

e F

unctio

na

lity

Increased software

PortabilitySize, weight, battery life

FeaturesDisplay, memory, camera

Fit-for-purposeApplications, brand, formfactor, end-to-endsolutions

Differen-tiators

Phonevision

Evolving the phone with software

15

Projected handset sales

• Growth coming from emerging markets in Asia

• Growing 3G substitution assumed in Europe

Handset sales by region

651

810

912

1,029

1,1591,247 1,271

-100200300400500600700800900

1,0001,1001,2001,3001,400

2004

2005

2006

2007

2008

2009

2010

Millio

ns

Africa & ME

Americas

USA and Canada

Europe

Rest of Asia

Korea

Japan

India & Indonesia

China

Source: Symbian market model, Oct 2005

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Replacements form the bulk of total sales

68 106168

280391 409 402

509

651

810912

10291159

1247 12821342 1364

0

200

400

600

800

1000

1200

1400

1600

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Mo

bil

e p

ho

ne u

nit

sale

s (

Mil

lio

ns)

Replacements Net additionsSource: Symbian market model, Feb 2006

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In the hands of a small number of players

Source: Dresdner Kleinwort Wasserstein estimates, 21 April 2005

Others

LGE SEMC

Siemens

Motorola

Nokia

Others

LGE

SEMC

Siemens

Samsung

Motorola

Nokia

Others

LGE

SEMC Siemens

Samsung

Motorola

Nokia

<$120 $120-200 >$200

2004 Total= 628m

0

20

40

60

80

100%

Fraction of sales volume (2004)

Average sales price ($)

18

Typical BOM cost breakdown(direct cost only at June '02 prices)

-

25

50

75

100

125

150

175

200

225

250

8210 T68 7650 P800

Cost ($

)

Software

Mechanical parts

PCB

Camera

Battery

Display

Other semiconductor

Bluetooth

CPU

Baseband + RF

RAM

ROM

Modelling a consumer electronics device

(Symbian estimates)

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Sizing the smartphone market

Source: Symbian market model, Feb 2004

Addressable market forecast

427

489

544568 585 598 601

2657

87123

177229

265

0

100

200

300

400

500

600

700

2002 2003 2004 2005 2006 2007 2008

Un

it s

ale

s (

Millio

ns)

0

30

60

90

120

150

180

BO

M C

ost ($

)

Source: Symb ian market model, Feb 2004

20

Estimating volumes from price information

Total handset sales

0

700

2002 2003 2004 2005 2006 2007 2008

Unit s

ale

s (

m)

0

180

BO

M c

ost ($

)

Minimum specificationbill of materials

Addressable market

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What this tells us

• Mobile phone is mass-market…One for every 5 humans on the planet

…One in 2 by end of decade

…Market won’t tolerate user complexity

• Its personal, not family oriented…(unlike PC, TV)

…Opportunity

• Attractive to emerging economies…Limited existing fixed line infrastructure

…China, India set to become mass markets

22

The future

• Move to full IP backbone

• 3G

…Higher bandwidth

…Simultaneous voice and data

…IPv6

• 4G

…Adds local wireless (integrated telco and wireless)

…VoIP

…IEE 802.11 (Wireless LAN), Bluetooth

…Short range, high bandwidth, low cost potential

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Product adoption lifecycle

24

Thre

ats

Declining voice

Declining voice

Excess capacity

Excess capacityMarket saturation

Market saturation

Grow APPUGrow APPU

Control c

hurn

Control c

hurn

Lower

cost

s

Lower

cost

s

Mobile Industry

Faster Tim

e-to-M

arket

Compelling features

Simplify cost base

Industry business concernsN

eeds

Triple/Quad plays

25Source: DKWR – Corporate information

Operators seeking future revenue from mobile data

ARPU Breakdown for Orange

0

10

20

30

40

50

60

70

1998 1999 2000E 2001E 2002E 2003E 2004E 2005E 2006E 2007E 2008E 2009E 2010E

€ / M

onth

ASP / transaction

Content

Data Access

All voice

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Product lifecycle

Early Majority

Early Adopters

LateMajority

Laggards

27

High Tech adoption lifecycle

• After Geoffrey Moore “Crossing the Chasm”

• Requires “Whole Product Offering”

“Chasm”

28

Services overview

29

The services

• Voice

• Messaging

• Browsing

• Multimedia

• m-commerce

• games

• applications (delivered over the air)

• location-based services

• Corporate/enterprise

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Requirements

• 3 Classes of service

…Vertical

…Publish/subscribe

…Peer to peer

• “Whole product” is critical

…“Value chain” (who gets what revenue)

…“Delivery chain” (who delivers what)

…End user enchantment (cf WAP experience)

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Example - Multimedia Messaging

• Peer-to-peer

• “SMS with pictures and sounds”

• Whole product?

…Value chain

…Delivery chain

• Composer on the phone

• Needs a community

…Enchanting experience

• How to roll out

…Viral marketing

…Trojan horse/market power

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Changing behaviour and business models in adjacent markets

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• Creating new usage models and new experiences

… Life Diaries

… Video Chat

… Interactive content

… Remote monitoring

… Onboard photo editing

… Personalisation

… Remote printing

• New Business Models and New winners

Impact on ImagingEver present, Always Connected

34

Increasing Accessibility

More Accessible Content:

e.g. Mobile TV

…Mobile operators offering Mobile TV services on Symbian OS phones

• Including: TIM, Telefonica, ATT Wireless

New Sources of Images: Changing the production of Images

e.g. BBC & Cameraphones

… 2003: BBC issues 40 2.5G Symbian OS phones to BBC journalists for fast on-the-scene video capture

… 2004: 3G phones being rolled out to reporters

… Other broadcasters now running similar experiments

• Fox News, Reuters

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Music and Mobility

Market Momentum

• The worldwide ringtone market:… $3.5 billion in 2003, up 40% from 2002

… Representing about 10% of the global music market

… Forecast global sales > $5.3 billion in 2008

Source ARC Group

• 2007: 52% of data enabled phones will be music enabled.Source: Strategy Analytics

• The under-25 age group in the UK spends five times as much on mobile phone calls, texts and content as on traditional music formats Source: mobileYouth

Next generation iPod?• Onboard Storage in increasing e.g.

4Gbyte phone from Samsung

• Integrated Application Architecture, allowing users to do more with music

New Industry Players

• New record labels – Operators..?

• New distributors - Coca Cola, Sony, MSN, Tiscali, Wanadoo, HMV, Virgin, Woolworths, Wal-Mart, Carphone Warehouse, artists direct to customer

• E.g. Carphone Warehouse, European Retailer becomes Content Distributor

… Robbie Williams album sold on memory card in phone retailer

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Emerging services

• Multimedia Services

… TV – DVB-H, DMB

… Music

• Convergence Services… Operators looking at fixed and &

mobile assets

… Infrastructure, service and device convergence

… Dual-Mode devices shipped will increase rapidly over the next 3 years, reaching 26.8 million by 2009 (Yankee)

• BT Fusion

• Orange/FT NExT strategy

• Telecom Italia, T-Online/T-Com…

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Sky Mobile – Content on mobile

• Client-server solution to integrate TV with additional services

… Performance

… Functionality (vs browser)

… Phone Integration

• Shows how content providers will use Smartphones as a delivery channel

• Early example of major content going mobile

38

Games - consumer applications driver

• Growth market

• Channels are in place

• Very profitable use of data

39

High performance games

40

Mood

Generic & Custom Messages Location

Phone Status

New Service Paradigms

Virtual Identity

41

Conclusion

• Snapshot of mobile telecoms market

• Complex problem

…Technology

…Market

…Economics

…Social engineering

• Has the power to reshape the world

…Rather like the railways

…But like the railways – who will make the money?

42

• Questions or comments:

• simon.garth@symbian.com