Broadband Revolution in Japan November 23, 2005 Dr. Sachio Semmoto Founder, Chairman & CEO
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Transcript of Broadband Revolution in Japan November 23, 2005 Dr. Sachio Semmoto Founder, Chairman & CEO
Copyrights©2000-2005 eAccess Ltd. All rights reserved.
Broadband Revolution in Japan
November 23, 2005
Dr. Sachio SemmotoFounder, Chairman & CEO
eAccess Ltd.
IDATE 27th International Conference
2Copyrights©2000-2005 eAccess Ltd. All rights reserved.
Company NameCompany NameCompany NameCompany Name
Date of EstablishmentDate of EstablishmentDate of EstablishmentDate of Establishment
Capital SharesCapital SharesCapital SharesCapital Shares
Number of EmployeesNumber of EmployeesNumber of EmployeesNumber of Employees
Business FocusBusiness FocusBusiness FocusBusiness Focus
eAccess LimitedeAccess LimitedeAccess LimitedeAccess Limited
November 1, 1999November 1, 1999November 1, 1999November 1, 1999
\15.25 Billion (Shareholders Capital \27.57 Billion)\15.25 Billion (Shareholders Capital \27.57 Billion)\15.25 Billion (Shareholders Capital \27.57 Billion)\15.25 Billion (Shareholders Capital \27.57 Billion)
Approximately 400 employeesApproximately 400 employeesApproximately 400 employeesApproximately 400 employees
Broadband IP Telecommunications ServiceBroadband IP Telecommunications ServiceBroadband IP Telecommunications ServiceBroadband IP Telecommunications Service
AccomplishmentAccomplishmentAccomplishmentAccomplishment
-Be invested by Goldmansachs, Morgan Stanley, Carlyle as private equity fund-Completed its Initial Public Offering in Tokyo Stock Exchange Mothers on October 2003-Listed first section 1 of Tokyo Stock Exchange on November 2004 (the fastest record of first section of TSE for independent start-up)
-Be invested by Goldmansachs, Morgan Stanley, Carlyle as private equity fund-Completed its Initial Public Offering in Tokyo Stock Exchange Mothers on October 2003-Listed first section 1 of Tokyo Stock Exchange on November 2004 (the fastest record of first section of TSE for independent start-up)
(As of June 2005)(As of June 2005)
Corporate OverviewCorporate Overview
3Copyrights©2000-2005 eAccess Ltd. All rights reserved.
eAccess Accomplishment
11.1999 Founding of eAccess Ltd.
2.2000 Completion of private equity placement (\4.5 billion)
11.2000 Commenced ADSL commercial service
2.2001 Completion of private equity placement (\5.0 billion)
9.2001 Completion of private equity placement (\10.0 billion)
5.2002 Signed Business Purchase Agreement with Japan Telecom
10.2003 IPO on Tokyo Stock Exchange Mothers
7.2004 Acquisition of ISP Business from AOL Japan
11.2004 Listed on Tokyo Stock Exchange First Section
1.2006 Founding of eMobile Ltd.
11.2006 Awarded 3G Mobile License
4Copyrights©2000-2005 eAccess Ltd. All rights reserved.
eAccess Board StructureeAccess Board Structure
Strong Corporate Governance with Seven External DirectorsStrong Corporate Governance with Seven External Directors
CEOCEO Sachio Sachio SemmotoSemmoto
CEOCEO Sachio Sachio SemmotoSemmoto CFOCFO Eric GanEric Gan CFOCFO Eric GanEric Gan
【 3 Internal Board of Directors 】
Ex-Goldman SachsManaging DirectorEx-Goldman SachsManaging DirectorFormer KDDI Senior Vice PresidentFormer KDDI Senior Vice PresidentCo-Founder of DDI (KDDI)Co-Founder of DDI (KDDI)
PPaul Reynoldsaul ReynoldsPPaul Reynoldsaul Reynolds Bill SmithBill SmithBill SmithBill Smith Raymond KwokRaymond KwokRaymond KwokRaymond Kwok
Chief Executive of BT WholesaleChief Executive of BT Wholesale CTO of Bell South CorporationCTO of Bell South Corporation Vice Chairman of Sun Hung Kai Properties Ltd.Vice Chairman of Sun Hung Kai Properties Ltd.
ToruToru Hashimoto HashimotoToruToru Hashimoto Hashimoto
Chairman of Deutsche Securities Ltd, Tokyo BranchFormer CEO of Fuji-bank (Currently Mizuho bank)
Chairman of Deutsche Securities Ltd, Tokyo BranchFormer CEO of Fuji-bank (Currently Mizuho bank)
Dr. Toshio YasuiDr. Toshio YasuiDr. Toshio YasuiDr. Toshio Yasui Professor Jiro KokuryoProfessor Jiro KokuryoProfessor Jiro KokuryoProfessor Jiro Kokuryo
Former President of Solectron JapanFormer President of Solectron Japan Professor of Keio UniversityProfessor of Keio University
MoriMorihikohiko Tashiro TashiroMoriMorihikohiko Tashiro Tashiro
Former President of Tomen CorporationFormer President of Tomen Corporation
COOCOO Haruo Haruo TanenoTaneno
COOCOO Haruo Haruo TanenoTaneno
【 7 External Board of Directors 】・・・ Extensive Experience in the Global and Domestic Telecom, IT and Financials
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Market Size of Telecom and Broadcasting Industry
Source: Joho Tsushin Handbook 2005, Company estimates
Broadband TelecomBroadband Telecom :: Approx. 800 billion yenApprox. 800 billion yen
Mobile TelecomMobile Telecom :: Approx. 9 trillion yenApprox. 9 trillion yen
VoiceVoice
VoIPVoIP
MobileMobile
DataData
BroadbandBroadband
3G/3.5G3G/3.5G
Market Trend:Market Trend:
1.1. From Fixed to MobileFrom Fixed to Mobile2.2. From Narrowband to BroadbandFrom Narrowband to Broadband3.3. Telecom and Broadcasting ConvergenceTelecom and Broadcasting Convergence
Total Telecom Market Size Total Telecom Market Size Approx. 16 trillion yenApprox. 16 trillion yenTotal Contents/Broadcasting Market Size Total Contents/Broadcasting Market Size Approx. 4 trillion yenApprox. 4 trillion yen
Convergence [Going Seamless]Convergence [Going Seamless]
Fixed TelecomFixed Telecom :: Approx. 6.3 trillion yenApprox. 6.3 trillion yen
6Copyrights©2000-2005 eAccess Ltd. All rights reserved.
eAccess Growth StoryeAccess Growth Story
ADSL wholesale ADSL wholesale businessbusiness
ADSL wholesale ADSL wholesale businessbusiness
Acquisition of Acquisition of AOL ISP AOL ISP businessbusiness
Acquisition of Acquisition of AOL ISP AOL ISP businessbusiness
~~ 20032003~~ 20032003 3/20053/20053/20053/2005 2005200520052005 20062006 ~~20062006 ~~
Metallic phone and Metallic phone and ADSL bundled serviceADSL bundled service
Metallic phone and Metallic phone and ADSL bundled serviceADSL bundled service
Entry to the Entry to the mobile marketmobile marketEntry to the Entry to the
mobile marketmobile marketPartner with 30 ISPsPartner with 30 ISPsVoIP ServiceVoIP Service1M service for low-end users1M service for low-end users
Partner with 30 ISPsPartner with 30 ISPsVoIP ServiceVoIP Service1M service for low-end users1M service for low-end users
Product Roadmap - From ADSL to MobileProduct Roadmap - From ADSL to Mobile
Expand metallic phone service areaExpand metallic phone service areaExpand into telephone customer baseExpand into telephone customer base
Expand metallic phone service areaExpand metallic phone service areaExpand into telephone customer baseExpand into telephone customer base
Seamless fixed and mobile Seamless fixed and mobile
services.services.Broadband anywhereBroadband anywhere
Seamless fixed and mobile Seamless fixed and mobile
services.services.Broadband anywhereBroadband anywhere
ADSL ADSL ExpansionExpansion PhasePhaseADSL ADSL ExpansionExpansion PhasePhase ADSL Transition PhaseADSL Transition PhaseADSL Transition PhaseADSL Transition Phase Mobile Mobile Expansion PhaseExpansion PhaseMobile Mobile Expansion PhaseExpansion Phase
Accelerate migration from Accelerate migration from
narrowband to broadbandnarrowband to broadbandEntry to direct retail marketEntry to direct retail market
Accelerate migration from Accelerate migration from
narrowband to broadbandnarrowband to broadbandEntry to direct retail marketEntry to direct retail market
7Copyrights©2000-2005 eAccess Ltd. All rights reserved.
Japan accounts for 12% of the global 114.8 million ADSL marketJapan accounts for 12% of the global 114.8 million ADSL market
Source: Point Topic
(thousand lines) Global ADSL market Global ADSL market increased 48% YoYincreased 48% YoY 114,895
Worldwide ADSL Market GrowthWorldwide ADSL Market Growth
39,53946,392
52,094 56,890
6,721
6,7776,729
6,678
13,700
16,936
19,49721,230
12,600
13,736
15,106
15,929
8,257
9,229
10,27211,197
12,069
12,740
13,352
13,887
14,168
25,56730,614
35,89841,362
77,725
85,300
97,193
107,313
114,895
5,6404,223
3,301
7,023
69,810
48,486
64,144
55,185
0
20,000
40,000
60,000
80,000
100,000
120,000
2002/2Q 2002/3Q 2002/4Q 2003/1Q 2003/2Q 2003/3Q 2003/4Q 2004/1Q 2004/2Q 2004/3Q 2004/4Q 2005/1Q 2005/2Q
Japan 12.3%Japan 12.3%Japan 12.3%Japan 12.3%
US 13.9%US 13.9%US 13.9%US 13.9%
China 18.5%China 18.5%China 18.5%China 18.5%
Korea 5.8%Korea 5.8%Korea 5.8%Korea 5.8%
Others 49.5%Others 49.5%Others 49.5%Others 49.5%
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Japan’s Broadband Market Japan’s Broadband Market GrowthGrowth
Source : MIC
( thou. Subscribers)
DSL continues to grow rapidly and tremendously in the short term, DSL continues to grow rapidly and tremendously in the short term,
compared to FTTH and CATV.compared to FTTH and CATV.
2,379
7,020
11,25013,676 14,082
3,0622,960
2,580
2,070
1,45670
420
1,450
2,8523,410
3,905
9,510
15,280
19,48820,554
0
5,000
10,000
15,000
20,000
3/2002 3/2003 3/2004 3/2005 6/2005
DSL (68%)
CATV (15%)
FTTH (17%)
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Reasons for ADSL’s Growth -Price & Speed-
Source: MIC
World’s Fastest and Cheapest ADSL Service World’s Fastest and Cheapest ADSL Service
Comparison of ADSL Price in the World
(( $$ ))
50M50M 0.8M0.8M0.5M0.5M0.8M0.8M 0.5M0.5M1.5M1.5MSpeedSpeed
2527
3539
47 48
0
10
20
30
40
50
eAccess Seoul New York London Paris Düsseldorf
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High Growth Potential for the ADSL MarketHigh Growth Potential for the ADSL Market
Short Distance From NTT’s CO and the Customers’ Premises
Other ReasonsOther ReasonsHigh Population DensityHigh Population DensityLow Usage of CATVLow Usage of CATV
Reasons for ADSL’s Growth Reasons for ADSL’s Growth –Deregulation & Geography-–Deregulation & Geography-
Favorable Geographic EnvironmentFavorable Geographic Environment
Distribution of Telephone Line DistanceDistribution of Telephone Line Distance
Source: Sumitomo Electric Source: Sumitomo Electric MaterialsMaterials
USUSUKUKGermanyGermanyItalyItaly
15%15%40%40%45%45%70%70%
25%25%65%65%65%65%85%85%
50%50%80%80%75%75%90%90%
JapanJapan 8585 %% 9090 %% 9595 %%
~~3km3km
4k4kmm
5km5km
Favorable Regulatory EnvironmentFavorable Regulatory Environment
ADSL Nationwide ExpansionADSL Nationwide Expansion
Reduction in Collocation CostReduction in Collocation Cost
Shortened Provisioning PeriodShortened Provisioning Period
Unbundling of Modems (Adoption Unbundling of Modems (Adoption of the DIY menu)of the DIY menu)
IP Backbone Construction IP Backbone Construction (Unbundling of Dark Fiber)(Unbundling of Dark Fiber)
Introduction of Line-SharingIntroduction of Line-Sharing
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Mobile Market OpportunitiesMobile Market Opportunities
CATV 15%CATV 15% Approx. 300 operatorsApprox. 300 operators
FTTH 14%FTTH 14% Approx. 10 operatorsApprox. 10 operators
Source: MIC Source: MIC (( as of March 2005as of March 2005 ))
eAccesseAccess NTT groupNTT group Power companiesPower companies SoftbankSoftbank ACCAACCA Heisei DendenHeisei Denden othersothers
700 billion yen market700 billion yen marketShared by over 300 operatorsShared by over 300 operators
Source: TCA (as of July 2005)Source: TCA (as of July 2005)
8.5 trillion yen market8.5 trillion yen marketShared by 3 operatorsShared by 3 operators
J-COMJ-COM othersothers
Fixed Broadband MarketFixed Broadband Market (( 19.0 million subs19.0 million subs ))Fixed Broadband MarketFixed Broadband Market (( 19.0 million subs19.0 million subs )) Mobile MarketMobile Market (( 88.5 million subs88.5 million subs ))Mobile MarketMobile Market (( 88.5 million subs88.5 million subs ))
NTT DoCoMoNTT DoCoMo5656 %%
KDDI groupKDDI group2727 %%
VodafoneVodafone1717 %%
Mobile market is 12X larger than the fixed broadband market.Mobile market is 12X larger than the fixed broadband market.
ADSL 71ADSL 71 % % Approx. 30 operatorsApprox. 30 operators
NTT groupNTT group KDDIKDDI Power companiesPower companies UsenUsen SoftbankSoftbank STnetSTnet othersothers
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One of the World’s Highest ARPUOne of the World’s Highest ARPU
High ARPU in Japan Due to Lack of CompetitionHigh ARPU in Japan Due to Lack of Competition
ARPU Comparison (as of March 2005)ARPU Comparison (as of March 2005)
Source: Merrill Lynch “Global Wireless Matrix 1Q05”
$22.00$26.00
$39.00$42.00
$54.00
$63.00
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
Taiwan HongKong Korea UK US Japan
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625
389
298279
224200
175146 146 138 135 132 123 122 114 112
84 75
0
100
200
300
400
500
600
700
Growth Potential in Minutes of UsageGrowth Potential in Minutes of Usage
High Mobile Phone Charges Have Kept MOU Low in JapanHigh Mobile Phone Charges Have Kept MOU Low in Japan
(Mins)
Source: Merrill Lynch, “Global Wireless Matrix 1Q05”
MOU Comparison (as of March 2005)MOU Comparison (as of March 2005)
14Copyrights©2000-2005 eAccess Ltd. All rights reserved.
Expensive Cost per MinuteExpensive Cost per Minute
High ARPU and Low MOU, Resulting in High Cost per MinuteHigh ARPU and Low MOU, Resulting in High Cost per Minute
Cost per Minute (as of March 2005)Cost per Minute (as of March 2005)
Source: Merrill Lynch, “Global Wireless Matrix 1Q05”
$0.07$0.09
$0.11 $0.12
$0.28
$0.42
$0.00
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
$0.35
$0.40
$0.45
HongKong US Taiwan Korea UK Japan
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ADSLADSL Mobile TelecommunicationsMobile Telecommunications
Deregulation and User Demand of Telecommunications in JapanDeregulation and User Demand of Telecommunications in Japan
Releasing dry copper
Releasing collocation, line-sharing and dark-fiber, and applying DIY
Increasing of Broadband demands
Releasing 1.7G ㎐ Bandwidth
Installing MNP
Increasing of Mobile Broadband demands
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Mobile/PHSMobile/PHS Subscriber Forecasts and Penetration RatesSubscriber Forecasts and Penetration Rates
Mobile Phones/PHS Subscribers and Penetration rates
CAGR = 5.6CAGR = 5.6 %%(2006/3-20012/3)(2006/3-20012/3)
47,310
56,853
66,782
74,82081,118
87,05791,474
5,072 11,41618,395
27,28136,800 40,372 42,660
37.3%
44.8%
52.5%
58.7%
63.6%68.2%
71.6%75.6%
80.6%
86.1%
93.1%
100.6%103.6%
105.6%
1999/3 2000/3 2001/3 2002/3 2003/3 2004/3 2005/3 2006/3 2007/3 2008/3 2009/3 2010/3 2011/3 2012/3
Mobile/PHSSubscribers
[in thousands ]
134,134131,846
128,274
118,755
109,869
102,89096,546
Mobile/PHSPenetration
(%)
Source: TCA, company estimates
AdditionalAdditional DemandDemand
3G, Migration to Flat rate, Increased Data Demand and Increased usage of second handsets 3G, Migration to Flat rate, Increased Data Demand and Increased usage of second handsets will push the market to grow over 100% penetrationwill push the market to grow over 100% penetration
We expect 43 million additional subscribers from 2006/3We expect 43 million additional subscribers from 2006/3 ~~ 2012/32012/3
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Global Comparison of Mobile Phone PenetrationGlobal Comparison of Mobile Phone Penetration
Country Comparison of Mobile Penetration Rates Oct.-Dec. 2004
Source : Merrill Lynch "Global Wireless Matrix 4Q04"
105%
51%
56%
60%
61%
71%
105%
104%
104%
104%
100%
100%
99%
96%
95%
95%
94%
90%
89%
87%
87%
86%
80%
76%
74%
107%
110%
106%
109%
Russia
Malaysia
Poland
US
Japan
France
Korea
New Zealand
Belgium
Germany
Switzerland
Australia
Singapore
Denmark
Finland
Taiwan
Ireland
Spain
Austria
Netherlands
Greece
Norway
UK
Czech
Israel
Hong Kong
Portugal
Sweden
Italy
70.6%
60.0%
70.0%
80.0%
90.0%
100.0%
110.0%
6 Mos 12 Mos 18 Mos 24 Mos 30 Mos 36 Mos 42 Mos 48 Mos 54 Mos
JAPAN
Hong Kong
Greece
Portugal
ItalySweden
UK
Norway
Japan’s relative position of penetration rate
Penetration rate in Japan is low, relative to the global standard where in some countries exceed 100%Penetration rate in Japan is low, relative to the global standard where in some countries exceed 100% In high penetrated countries, prepaid SIM services and 2In high penetrated countries, prepaid SIM services and 2ndnd handsets for specialized purposes are widespread handsets for specialized purposes are widespread Despite the slowdown in Japan’s penetration level, huge potential for further market growth still existDespite the slowdown in Japan’s penetration level, huge potential for further market growth still exist
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Product Strategy – Convergence –Product Strategy – Convergence – Seamless FMC ServiceSeamless FMC Service
HomeHome While Moving / Outside OfficeWhile Moving / Outside Office
W-CDMA
Wi-Fi
Wi-Fi
ADSL
OfficeOffice
Wi-Fi
FMC
W-CDMA and Wi-Fi to switch seamlessly, depending on location (Voice and Data)
W-CDMA and Wi-Fi to switch flexibility, depending on contents
Utilize the best communication method depending on your location and preferred contents
Dedicated Lines
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Product Strategy - Mobile Applications –Product Strategy - Mobile Applications – Handset Conceptual ModelsHandset Conceptual Models
Multi-Functional Model Touch Screen Model
Wireless Data Communication ModelMusic Box Model
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MVNO
モバイルキャリア
Blank SIM Card
SIM card with data information
Order
Delivery
Order
Delivery
Sales Strategy/Distribution ChannelsSales Strategy/Distribution Channels
MVNO[ISP]
Distribution to existing members
[Business Users]
Strong sales channel
[Infrastructure Providers]
Providing comprehensive
telecommunicationinfrastructure
[Distributors/Manufactures]
Diversification of Handsets
Direct salesWeb sales
Carriershops
Sole Agent under trading companies
or manufactures
Independent representative
offices
Independent mass
retail stores
MVNO: Mobile Virtual Network Operator
[Portal]
Distribution to existing members
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ClosingClosing
This presentation has been prepared by eAccess Ltd. (“the Company”). This presentation contains forward-looking statements, which are subject to risks, uncertainties, and assumptions. This presentation is being presented solely for your information and is subject to change without notice. No representation or warranty, expressed or implied, is made and no reliance should be placed on the accuracy, actuality, fairness, or completeness of the information presented. The Company accept no liability whatsoever for any losses arising from any information contained in the presentation.
This presentation does not constitute an offer or invitation to purchase or subscribe for any shares of the Company, and no part of this presentation shall form the basis of or be relied upon in connection with any contract or commitment.
Thank You Very MuchThank You Very Much