Future Networks Are the backbone of digital economy

Tulevaisuuden tietoverkot digitaalisen talouden peruspilareina

Jukka-Pekka Joensuu

Executive Vice President

Corenet

Introduction to the opportunity

Making Finland an international safe data hub, where data protection and integrity are top prioritiesSea Lion enabling the international connectivity

Trusted bridge

between East and

West

Strong commitment

toward privacy and

data protection

Stable political system

Clear legislative system and transparent

telecom regulatory framework

Why Finland? - Investment highlights

Competitive advantages why investing in Finland

Recently passed legislations to reduce the energy

taxes for data centers

Lower cooling-energy requirements due to the cold

weather

Availability of large base of qualified human resources

on the technical and operational levels

Most reliable power grid in Europe and the availability

of multi-source power (fossil, hydro & nuclear)

Relatively strong international telecom connectivity

infrastructure

Enabling High speed connections enables clustered

services and new services

Investments in infrastructure are boosting sustainable digital

growth

Phase 1 – € 20 M government seed investment

Phase 2 - € 50-60 M Baltic Sea Cable and private placements

Phase 3 - € 20-40 M International and national connectivity, partnerships and growth

Cutting edge connectivity services

Highly growing hosting services market

Independent company with strong public-private ownership structure

Finland provides a secure and digitally oriented platform for international investments.The region already hosts multiple data centers built by multinational companies. The planned Baltic Sea submarine cable offers a direct connection to Mainland Europe.

Knowledge in cyber security and strong

security policiesSolid experience

in energy efficiency for data centers

Cold climate and low cost of

energy provide a low cost base for the data centers

Investors already interested in leading investments on data centers in the region

Planned Baltic Sea cable

provides a direct connection from the Murmansk

landing point to Mainland Europe

Strong ICT sector with

knowhow and capable

workforce

Existing investments in the Nordic and Arctic Region exceed € 2 billion combined.

Finland as a facilitator of data center investmentsAppealing international investments

Data center investments

Finland offers an optimal location for data center investments. The region has already seen multiple investments from multinational companies.

High capacity companies

Big data companies , hosting companies and cloud service providers need a fast and reliable connection to operate. The arctic region could benefit from these rapidly growing industries.

New industries, startups

Good connectivity creates a fruitful environment for new industries and companies. The Nordic region could see an intense growth in number of companies.

Subsidiaries of multinationals

International companies require good connections for their operations. Finland could offer especially the banking, media, telecommunication and technology industries a favorable business location in the node between East and West.

ABB, data center developerSupplier of the world’s most powerful direct-current (DC) power distribution system and based in Switzerland, ABB is always interested in the expansion of safe, reliable and efficient data center technology.

Finland is focusing on providing a reliable and always-available hosting environment

Full use of the equipment

Balance between the

level of redundancy

and reliability

Ideal Data Center system

The data center industry depends on an unbroken continuity of a system’s operations.

Objective : best reliability• The system needs to operate for short periods

• Redundancy of equipment and delivery paths will provide with an increased reliability.

• The system’s equipment should be at a minimum, to avoid the failure of components.

The tier structure has so far been considered as an important industry guideline for designing data center infrastructure.

Finland• Will offer different possible submarine and terrestrial cable

routes• Provides with green- and brownfields for data center

constructions• Finnish data centers procure an Uninterruptible Power Supply

(UPS) • Corenet as Carrier-neutral to be the leading operator of the

country

Source: ABB, Pwc analysis

The Finnish government will invest 20 M € to build a submarine cable connection from Finland to FrankfurtThe existing direct route to Mainland Europe makes Finland an optimal location to become a node for the most direct connection between Europe and Asia.

Business plan for the Baltic Sea - cable

• The Sea Cable initiative has raised wideinternational interest

• The cable and new 80 Tbit/s capacity will offer analternative to existing routes and more directconnection to the current link to Germany whichruns through Sweden.

• The increased capacity allows digitaltransformation

• The Baltic Sea submarine cable can be branchedto countries alongside the route for attainingusers and investors.

• A public private SPV will run and manage thenetwork

• Planning and tendering will be conducted during2014

• Building and construction will take place 2015

• Network will be up and running 2015-2016

• The new route would provide increase in theattractiveness of the Finnish hub.

• Capacity will be sold as managed services,spectrum and capacity services, IRU´s of fiber

Existing connections in Finland and the planned Baltic Sea cable

Existing connections

Planned Baltic Sea - cable

Source: PwC analysis

PwC

Premium pass to European and globalnetworks

24

• Hosting and big data companies, such as Nebula, Academica and Microsoft, have a very high capacity need. Thesecompanies need to connect their data centers to European and global networks as efficiently as possible.

• Content providers that want to improve customer service with less time lag. An example potential customer is Rovio. Increasingly higher value in the internet and ICT industry is produced in application platforms, content and service production rather than networks.

High capacity clientsand international

companies (hostingand big data)

Teleoperators and regional networks

Banking and Media

• Teleoperators have the need to guarantee their own internal networks. Potential customers are Elisa, DNA, Sonera and Finnet-companies

• According to BMI, several operators in the Russian market are currently investing in the development of optical fibernetworks.

• Increasing use of IP video calls, watching movies through tablets or from Internet TV are increasing the need for fibercapacity in the Media segment. Example potential customers in Finland are YLE, MTV3 and Sanoma.

• In the Banking segment, the cable would enable faster and more reliable execution of payment transactions withEuropean stock exchanges such as DAX in Frankfurt.

• Banking and financial services is an area where modernisation and reform have the potential to drive a high level of IT spending especially in Russia according to BMI.

Global connectivity / East- West

• Global companies in different industries have the need for efficient data transfer e.g. from their service centers to globaloffices.

• In Russia, BMI forecasts that ICT will be used more broadly in sectors such as oil and gas, banking and the public sector. Russian enterprises are likely to invest in new IT systems as they become more integrated with global markets and supplychains.

In the next phase “The Arctic connect”– cable could be built providing a solution for the increasing need of high speed connection between the two great economies in East and West.

The Arctic Connect combined with the planned Baltic Sea – cable would create the shortest direct route from Asia to Mainland Europe

The Arctic Region as a node between East and West

Planned fiber optic connections to Mainland Europe

No dependency on other several countries

Relatively safe from ship traffic interferences

The shortest route for a direct connection between Europe and Asia

The Baltic Sea cable will connect the Arctic Region and the Baltic countries to Mainland Europe, through existing fiber optic connections.

Europe’s lowest energy costs with access to green energy and solid infrastructure.

Climate and cost efficient cooling systems perfect for the needs of data centers.

Geologically, politically, socially, economically and digitally one of the world’s most secure and stable locations.

Productive environment for development, knowhow and capable workforce.

A cluster of data center expertise through existing investments.

Inter-Europe objectives on ensuring high-speed broadband.

40% expected annual growth rate of the cloud services in the Nordics and Western Europe.

Benefits of the Arctic region

Finland, connected worldwide with the” Sea Lion” and Arctic Connect cables, is the optimal and safest digital hub for data centers

9

Coti 1

Coti 2Coti 3

Alger

Dubai

Djibouti

Singapore

Mumbai

Hong KongNew York

London

Paris Fra

Cyber secure connections between the world’s sovereign data hubs

Helsinki

Reliable data hubs are indispensable in today’s growing demand of interconnectivity

The existing connections between Europe and Asia are inadequate for the current and future demandHigh speed submarine cables already run between US and Asia and US and Europe, but the increasing data flow between Europe and Asia requires connectivity improvement.

278%is the expected growth of direct

traffic flow between Europe and Asia in the next 5 years

Source: Telegeography

Why a submarine cable

Allows a substantial amount of data traffic

Allows a high-speed connection

Low risk of damage from human activity

Source: PwC analysis

The existing submarine connection cables lack a direct connection between Asia and Europe

The Arctic connect cable, currently “the missing link“ in global connectivity would allow a saving of 91 mscompared to the currently used traditional route

The missing link between Europe and Asia, allowing a latency of 153 microseconds, saving 91 ms compared to the traditional route

The traditional Europe-Asia route with a latency of 247 ms

Other existing submarine connections. Line thickness represents the amount of traffic transmitted.

Source: PwC analysis, www.cablemap.info

47%

36%

64% 63%

22%

57% 53%

77%

50%

94% 97%

33%

75%83%

0%

20%

40%

60%

80%

100%

120%

AsiaPacific

LatinAmerica

NorthAmerica

WesternEurope

Centraland

EasternEurope

MiddleEast and

Africa

Global

2012 2017

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

45 000

2012 2013 2014 2015 2016 2017Asia Pacific North AmericaWestern Europe Central and Eastern EuropeLatin America Middle East and Africa

Increasing global data traffic supports the demand of connectivity between East and WestAnnual global IP traffic will surpass the zettabyte threshold by 2017. Especially traffic between the three biggest data producers; US, Asia and Europe; require fast and reliable connections.

12

Source: Cisco

Global IP traffic (PB/month) growth by region

Western Europe2012: 225Exabytes

2017: 770Exabytes

CAGR 28%

Eastern and central Europe

2012: 69Exabytes

2017: 325 Exabytes

CAGR 36%Middle East and

Africa2012: 17 Exabytes

2017: 157 Exabytes

CAGR 57%

Asia and Oceania2012: 319 Exabytes

2017: 1,9Zettabytes

CAGR 43%

North America2012: 469 Exabytes2017: 1,9Zettabytes

CAGR 32%

Latin America2012: 77 Eexabytes2017: 298Exabytes

CAGR 31%

Cloud computing growth by region

26%

23%

17%

21%17%38%

CAGR

Source: Cisco

Source: Cisco

Global data traffic has more than 4-folded in the past 5 years

• The major trends behind the forecasted increase in data traffic for years 2013 to 2017 are as follows:

• Busy-hour internet traffic growth

• Growth in non-PC devices

• Internet traffic via wireless and mobile devices will surpass the traffic from wired devices by 2017

• Fixed broadband speeds will quadruple by 2017

• IP Video will add up to 80 – 90% of all IP traffic

Share of broadband speed over 5Mbps per region (2012-2017)

Global internet and smart devices penetration is growing rapidly with remarkable focus in Asia. Higher demand for connections from internet and smart device users in addition to new industries created to answer to the changing needs of the consumers of the digital age.

• The changing ways of using the internet

• The rapid growth of smart devices and theopportunities generated by a good connectivity arechanging the demands of consumers.

• Traffic from wireless or mobile devices will exceedtraffic from wired devices by 2016.

• IP video traffic will be 69% of all consumer trafficin 2017. It would take an individual over 5 millionyears to watch the amount of video that crossesglobal IP networks in 2017.

• Smart devices represent globally a 21% share oftotal mobile devices and connection in 2013. Onaverage, smart devices generate 29 x more trafficthan non-smart devices.

13Source: Internet World Stats, Cisco

Global mobile devices and connections growth (Mb/month)

44,8 %

21,5 %

11,4 %

10,4 %

7,0 %

3,7 %1,0 %

Asia

Europe

North America

Latin America

Africa

Middle East

Oceania

Global internet traffic by services, 2012-2017

Source: Cisco

-

20 000

40 000

60 000

80 000

100 000

120 000

140 000

2012 2013 2014 2015 2016 2017

Consumers - video Consumers - file sharing

Corporations - web and other data Consumers - web and other data

Corporations - video Corporations - file sharing

Spread of internet users in the World (2012)

Source: Cisco

0

10 000

20 000

30 000

40 000

2013 2014 2015 2016 2017 2018

Nonsmartphones M2M module Wearable device

Smartphone 4G Smartphone Tablet

The Middle-East, “extremely well-placed to lead technological innovation in all aspects of daily life and business” (Cisco)

14

Source: Cisco

05

10152025303540

Strongest mobile data traffic growth for 2013-2018, with 70%

Over 86 million 4G connections forecast for 2018

Leading user of social media

51% of internet users in Saudi Arabia are Twitter users

35%

107%Mobile Data growth in

2012-2013

IPv6-Capable Devices by region, 2013-2018

Asia Pacific presents the strongest growth in internet penetration and data trafficA dynamic region with a digital future in focus, a booming economy and innovative ideas for its development

15

Source: Telegeography, Cisco, Internetworldstats, forbes

Forecast to be the largest economic region globally by 2030

Biggest data consumer (1,1 GB of data per month)

40% of the global internet users in 2013

Pioneers in the use of top technologies

Population 3,922 million

Internet Users (% of world total)

1,077 million(44.8%)

Internet penetration (% of population)

27.5%

Active mobile subscriptions

3,260 million

Snapshot – Asia Pacific

86%Mobile data traffic

growth in 2013

Europe is in full transition towards Smarter Mobile DevicesA Digital Single Market, ultra-fast Internet access and high data security are top priorities in the European digital strategy.

16

Source: Internet World Stats, Cisco, europa.eu , forbes

21,5% of the World’s Internet users

Digital Agenda for Europe, strategy for a digital economy by 2020

Ambition to become a global digital leader

Mobile data traffic forecast to grow 11% by 2018

Western Europe

+57%

Central and

Eastern Europe

+99%

Mobile data traffic growth, 2013

518,5 MillionInternet Users

Population 816 million

Internet Users (% of world total)

519 million (21.5%)

Internet penetration (% of population)

63.5%

Active mobile subscriptions

1,100 million

Snapshot – Europe

Contact details

Jukka-Pekka JoensuuExecutive Vice PresidentCorenet OyLäkkisepäntie 2300620 Helsinki+358 40 179 8855jukka-pekka.joensuu@corenet.fi