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Now and the Future of TelecommunicationsKen ZhangCTO & VPEricsson (China) Ltd

bmc|02

Torbjörn Nilsson | B 1 | The Direction bmc|02 May 29-30 20022

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The Nasdaq Telecommunication Index

Many strategies and decisions were made here (“Growth driven”)

“Profit driven”

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bmc|02

Torbjörn Nilsson | B 1 | The Direction bmc|02 May 29-30 20023

Main factors creating the hyper-growth and crisisMarket Investments

The hyper- growth of the late

1990’s & 2000

“Technology” Investments

• Failure in new business models delaying new services

• Financing constraints (debts, cash,…)

• Network spending exceeds demand in several areas

• Increased competition & lower margins

• Hyper-growth gone/Macroeconomic instability

• Signs of subscriber growth maturity

NowSpectrum

Geographical expansion

New competitors Internet

LH Optics

Digital Mobile

Good GDP development (US driver)

bmc|02

Torbjörn Nilsson | B 1 | The Direction bmc|02 May 29-30 20024

The Current Status of the Mobile Industry

• hyper Competition: 4-7 operators in most European/US markets

• Heavy Debt for some major operators, from over-priced acquisition and spectrum/license fee (France Telecom and Deutch Telecom ‘repairing’ balance sheet). But not from operating side.

• But worldwide operator’s revenue still growing at 5%-7% in 2001/2002, amid global GDP 2% growth

• Major operators reporting healthy operating profit/revenue growth

• Voice traffic growing, data revenue soaring

5

Next likely Steps

• Many more Operators/SP will go “bankrupt”

• Fast consolidations to create necessary Returns

• The “incumbent” telcos will dominate & drive consolidations

Restructuring Suppliers

Consolidation has started. We will see 3 (4) operators per market. The top 20 globally will have more than 80% of revenues.

6

Fixed Broadband(Cable, xDSL, LMDS, Fibre)

Fixed(POTS/ISDN)

Mobile

Mobile Subscriptions Doubling to 1.8 Billion by 2007

2000 2001 2002 2003 2004 2005 2006 2007

0

300

600

900

1200

1500

1800

Su

bsc

riptio

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(mill

ion

)

(Year -end)

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~870 million new subscribers in six years

Global Mobile Subscriber Growth – 2002 to 2007

CEMA 19%

APAC 51%

NA 12%LA 10%

WE 8%

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What is next step for the infrastructure, technology selection?

what is the driving force for the development?

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Dat

a/IP

Net

wor

ks

Wire

less

Net

wor

ks

Wire

line

Net

wor

ks

Cab

le T

V N

etw

orks

A new communications architecture

Today Single-service networks

Future Multi-services network (carrier class)

Access Networks

Service Networks & Application enablers

Communication control

Connectivity/Backbone Network

ApplicationsContent

MGW MGW

MGWMGW

New

& M

igra

tin

g e

nd

-to

-en

d P

roto

cols

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Mobile -WWW(Browsing/streaming, download)

• Information (news, sport, etc)• Entertainment (Music, Games, Imaging)• Location Services

Mobile Commerce(Transactions)

• Banking• Trading• Ticketing• Shopping

• e-mail• Voice-mail• SMS/EMS• MMS (Imaging/Multimedia)• Instant Messaging (IMPS)

Mobile Services is the driver for 3G

Portal with Personalized Services (Consumer, Business)

Open Application standards (OMA)

Mobile Messaging

Open Connectivity standards (3GPP/IETF)

Rev PA1 2001/10/09 11 Nippon Ericsson K.K.Michael Björn CONFIDENTIAL

Two services areas for the mobile Internet

Mobile Internet

• a "wireless Internet" that starts from the wired Internet by "cutting the cord"

• saving time

Wireless Internet

Internet paradigm

Entry barrier:Corporate IT department

Entry barrier:Digital Rights Management

• the “mobile Media” starts from cable TV by “cutting the cord”

• killing time

Excite FriendsBy Excite

Tsurun de Amigo!By Bandai Networks

Chi-Q no TomodachiBy Nextech

@AJA Deai Channel 　By　Cybird

Mobile Media

Media paradigm

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J-Phone’s (Vodafone) “Killer” Application –Pictures (Sha-mail)

• Built-in camera• Send photo-mail directly from phone• Easy to use

– 1 click to take a photo– Picture directly displayed on-screen– Simply attach to mail and send

• Photo + text: The First Step to Mobile

Multi-Media – already here!

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Stand by Screen

Picture

Video(light)

Handset Side Approach

Melody

Video Software

Camera

Colour Display

Specific Key

Video Music

Sound Software

Application Side Approach

Picture Mail

J-SKY(Web)

SKY Melody

E-mailSKY Walker

XXXXXX

Source:　http://www.vodafone.com/download/investor/presentations/vodafone_japan_2002.ppt

Text

Key need

Coherent service evolution simplifies learningCoherent service evolution simplifies learning

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Development Sha-mail service, J-Phone

Sources: Ovum and Reuters

~47% of all subs

Standard subscriptions

Sha-mail users

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Aug 2002Dec 2001LaunchNov 2000

May 2001 Sept 2001

Rev PA1 2001/10/09 15 Nippon Ericsson K.K.Michael Björn CONFIDENTIAL

Two mobile operator worldsTwo mobile operator worlds

Operator branded handsets Vendor branded handsets

GSM Operators

De facto approach OMA approach

Platform requirement

Rev PA1 2001/10/09 16 Nippon Ericsson K.K.Michael Björn CONFIDENTIAL

Operator branded handset world

Operator Handset vendor

Brand-value +

(user selects operator, NOT

handset)

—

(cost-plus pricing)

Service end-end control + —Handset financial risk —

(operator commits to volume)

+

Intra-operability = ALL services work together in ONE operator brand

Operator Handset vendor

Brand-value —

(user selects handset, NOT

operator)

+

(user selects handset, NOT

operator)

Service end-end control — +

(e.g. Club Nokia)

Handset financial risk + —

Vendor branded handset world

Platform requirement

Some services work with some brand

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Mobile Revenues by Service Type (00-07)

Voice will continueto dominate

Messaging & Browsing/WWW dominate

BU

SD

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2000 2001 2002 2003 2004 2005 2006 2007Source: Ericsson

Data revenues

Voice revenues

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Technology path and selection

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Local AreaNetwork (~50m)

Personal AreaNetwork (~20m)

Wide AreaNetwork (~10km)

Wireless Evolution

4GCombined

devices

Digital

DECT, PHS

Infra Red

Wideband

WLAN

Bluetooth

Analog

CT1

“wire”

3GWCDMA

(FDD/TDD), EDGE

CDMA2000

2GGSM, PDC

TDMA,CDMA

1GAMPS, NMT,

TACS etc

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Cellular Subscriptions by System Standard (00-07)

GSM/GPRS/EDGE & WCDMA

PDC

TDMA

CDMA/CDMA2000

Analog & Others

~75 - 80% of CAPEX

~20 - 25% of CAPEX

0

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600

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1800

2000 2001 2002 2003 2004 2005 2006 2007

No

of

Su

bsc

riptio

ns

(mill

ion

)

(Year -end)

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WCDMA

EDGE

CDMA2000Wide AreaNetwork

Local Area

Network

Combining Air-Interfaces

WLAN

Not to Scale1 Wide Area cell = ~10 000 WLAN cells

Complementing Technologies

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Bluetooth

WCDMA

EDGE

CDMA2000

Wide AreaNetwork

Local Area

Network

Personal Area

Network

Combining Air-Interfaces

Complementing Technologies

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3G is happening now-WCDMA

Many Networks has been launched (NTT DoCoMo, Austria Mobilkom, etc)

J-Phone and H3G UK, H3G Italy, has launched in the end of last year

20++ Networks are in installation/testing stage

Tens of Thousands of Base Stations have been delivered and installed worldwide!

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Global Mobile Market

North America• 50% TDMA= 》 GSM/GPRS =>EDGE/WCDMA• 50% cdmaONe=>CDMA 20001x>cdma1xEV

Western Europe• Current all GSM• In process of launching WCDMA

Asia-Pacific• Vast Majority GSM, • some presence of

CDMA(growing in China,etc)• Licenses being issued during

2002 and 2003

Central Europe, Middle East, Africa• Still in the GSM build-out phase• First WCDMA during 2003• Price of licenses coming down

Latin America • Mostly TDMA, Pending

transition mostly to GSM• 30%

cdmaOne=>CDMA20001X

Japan/Korea•DoCoMo(PDC) launched WCDMA Oct 2001

•J-phone PDC=>WCDMA , Soft Launch June, Commercial expected in Dec.

•KDDI/LGT: cdmaONe=>CDMA 2000 1x

=>3G

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Concluding remarks:

• 3G is designed to be a cost effective solution for high capacity voice, as well as high end-user data rate

• Application is the driver for 3G development