Vývoj mobilního broadbandu v Evropě - Frank Gothardt, Capgemini

Capgemini Consulting is the strategyand transformation consulting brandof Capgemini Group

Mobile Broadband in Europe

Frank GotthardtExecutive Director Eastern EuropeCapgemini Consulting TME

Prague, 22nd April 2009

2

Copyright © 2009 Capgemini. All rights reserved.

PRESENTATION MOBILE CONFERENCE_PRAGUE_APR 2009 _MOBILE BROADBAND_.PPT

Contents

� Research Highlights

� Key Operator Initiatives to Drive Growth

� Future Challenges and Mitigation

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Although MBB is still in nascent stages, it is expected to grow robustly and overtake fixed broadband within a few years

Estimated Global MBB Subscriptions1, Millions, 2009E - 2012E

Analysts estimate MBB service revenues to reach $400 billion by 2012.

0

200

400

600

800

1000

1200

1400

2009 2010 2011 2012

FBB Subscribers - as per Ericsson FBB Subscribers - as per eMarketer & In-stat

MBB Subscribers - as per Ericsson MBB Subscribers - as per Juniper Research

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European MBB service revenues are estimated to grow robustly andcontribute significantly to operators’ revenue growth

Europe MBB revenue1 forecast, EUR billions, 2008-2012

0

2

4

6

8

10

12

2008 2009 2010 2011 2012

Estimate by Berg Research Estimate by Oppenheim Research

Expected Evolution of Various Components of Mobile Service Revenues, Selected 21

Operators in 7 EU Countries, 2008-2010E

Note: 1. MBB revenues in Europe consists access revenues from data cards, USB dongles and embedded Laptops. Excludes smartphones and other 3G phones 2. Non-SMS data include mobile internet access, video telephony, and instant messaging.Source: Capgemini TME Strategy Lab analysis. ING, “European telecoms - When will mobile data make a real difference?”, 2008. Oppenheim Research, “Telecommunications Industry Driver Mobile Broadband”, 2008.

77% 71%

15%15%

8%10%

4%

2008 2010

Voice Messaging

Other non-SMS Data Mobile Broadband Access

By offering high speeds and convenience, MBB is expected to play a key role in driving consumer uptake of non-SMS data services2 and thereby increasing operators’ data ARPUs further.

<1%

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Analysts project 1.2 billion MBB subscribers globally by 2012 with WCDMA/HSPA to be the dominant technology (75%).

Source: Capgemini TME Strategy Lab analysis. CDMA Development Group. GSM Association. Wireless Intelligence. UMTS Forum. Informa Telecom.

� MBB subscribers worldwide have grown by 41% from Q3-2007 to Q3-2008

� HSPA has demonstrated high growth rates, especially in Europe:

MBB Subscriptions1, Millions, Worldwide, Q3 2008

82 94

2002121

60

40

58

1415

105

0.7

APAC Europe USA/Canada Worldwide

WCDMA HSPA EV-DO

365

87

116143

Percentage of Subscribers using MBB in Addition to and Instead of Fixed Broadband, UK, Q1 2008

32%

47%

30% 26%33%

25%19%

68%

53%

70% 74%67%

75%81%

Total 16-24 25-34 35-44 45-54 55-64 65+

Consumers Using MBB in Addition to Fixed BB

Consumers Using MBB Instead of Fixed BB

� Almost 30% of consumers now use MBB as a substitute for traditional fixed-line broadband

� The youth segments prefer MBB over Fixed Broadband more than any other segment

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Contents




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The drivers of a robust MBB business are all focusing on a positive customer experience

Content

Speed

Availability and Affordability of Devices

Pricing

Key Operator Initiatives

Key Operator Initiatives Driving Growth of Mobile Broadband Services

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Growth of MBB is driven by increase in access speeds, aggressivepricing, affordability of feature-rich devices and access to content

� Operators continue to invest in new and improved technologies (HSxPA, HSPA+) to support higher speeds (~7.2 Mbps) and data usage

� As of date, all EU countries have commercial HSxPA deployments

� Falling prices with increase in inclusive data limits has lead to transparency and encouraged uptake

� Competitive pricing vis-à-vis fixed BB has encouraged substitution

Speed Pricing

� Wide range of handsets available withpre-installed applications

� Affordability of feature rich handsets(~$200), USB dongles (~€ 30) and laptops

� Bundling offers (with USB, laptops and netbooks) to increase affordability of devices

� Access to rich mobile content like videos

� Access to open Internet and partnerships with content players like Google, YouTube, Napster etc. have enhanced content availability for consumers

Availability and Affordability of Devices Content

Key Operator Initiatives

Key Operator Initiatives Driving Adoption and Usage of Mobile Broadband

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Operators continue to upgrade their mobile networks to deliver enhanced speeds and user experience

129

6

252

60

HSDPA Deployments HSUPA Deployments

Dec-07 Dec-08

112 HSDPA and 101 HSUPA networks are planned or in deployment stage

Growth in Number of Commercial HSPA2

Installations, Worldwide, Dec2007-Dec2008Comparison of Speeds of Various MBB

Technologies with those of DSL

Peak Speed Practical Speed

0,512

1

4

8

10

14

50

100

>1,000

Bandwidth

Evolution

Downlink

Mbit/s

Bandwidth

EvolutionEDGE

ADSL

100

~52

12

8-10

EVDO

1.9

3.1

14.4

EVDO

~70

12

HSDPA

~70

ADSL2

HSUPA

14.4

HSPA+ WiMAX VDSL1

VDSL22

~1-2 ~1-2

12 12

~4

MBB provides speeds comparable to DSL

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Moreover, data traffic is expected to increase significantly faster than revenues, leading to a monetization gap

In Sweden, average data usage through MBB has risen from 457 MB/month/user to 1,398 MB/month

In 2007, revenues from mobile data traffic increased by 60%, compared to 1000% growth in mobile data traffic

457

1,398

H1 2007 H1 2008

~ 202%

Growth in Data usage (MB/month/user), Sweden, H1 2007-H1 2008

0

1000

2000

3000

4000

5000

2006 H1 2007 2007 H1 2008

0

1000

2000

3000

4000

5000

Increase in Mobile Data Traffic Revenues from MBB

~ 60%

Monetization Gap~ 1000%

Growth in MBB Revenues (mn SEK) and Mobile Data Traffic (TBytes) , Sweden , H1 2007-H1 2008

Source: Capgemini TME Strategy Lab analysis. Analysys Mason, “Mobile broadband high take-up but high usage can lead to low profits”, December 2008. Swedish Post and Telecom Agency (PTS), December 2008. PTS, “The Swedish Telecommunications Market 2007”, June 2008.

Mob

ile D

ata

Tra

ffic

(TB

ytes

) MB

B R

evenues (mn

SE

K)

As MBB adoption continues to grow and traffic volume skyrockets, increase in monetization gap can have a far-reaching impact on profitability.

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European operators have reduced tariffs or increased monthly data allowances to lower the unit price of data (€/MB) significantly

Many European operators have reduced average MBB prices by ~35% to 50%:

� Latvia, Austria and the UK have experienced price declines of 53%, 43% and 35% respectively over the past year

Operators have also increased the average inclusive data allowance by around 30 percent:

� The average data allowance across various MBB tariff plans in Europe has almost doubled from 1.8GB in 2007 to 3.9GB in 2008

� The most common monthly user data allowance offered in Europe is now 5-10GB, up from 1- 3GB in 2007

Comparison of entry level Mobile BB Prices and DSL Prices2, %, June 2008

Austria

FinlandIreland Sweden

UK Italy

Norway Spain

France

Belgium

-100%

-50%

0%

50%

100%

150%

200%

250%

MB

B p

rice p

rem

ium

over D

SL(%

)1

MBB at a discount to DSL MBB at a slight premium to DSL

MBB at a significant premium to DSL

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Further, innovative handsets such as iPhone support high end applications, encouraging increased data usage and MBB uptake

Description

• Large display

• Long battery life

• Touch Screen

• Mac OS , Linux , Windows XP

• Support wireless internet through HSDPA,

Edge and Wi-Fi

• High end applications like Gtalk, GPS, audio-

video streaming, download and playback etc.

Handset functions

Operating systems

Others

Features

New handsets such as iPhone and G1 encourage uptake of high end applications…

iPhone Google’s G1

…resulting in increased data traffic

80%

57%

32%

42%

70%

70%

32%

18%

15%

10%

33%

26%

0% 20% 40% 60% 80% 100%

iPhone Smartphone

Accessed news/information

via browser

Accessed Web search

Watched Mobile TV/Video

Accessed a social

network site or blog

Listened to music

Used Email

(work or personal)

Data Traffic over iPhone and Smartphones, %, 2008

Source: Capgemini TME Strategy Lab analysis. eMarketer.

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Operators are now bundling MBB contracts with free USB donglesand data cards to stimulate demand

Examples of Entry Level MBB Contracts Bundled with USB Dongles and Other Devices,December 2008

Orange UK’s USB dongle

subscriptions surged by over 2000% (January 08 to December 08)

Vodafone’s European data card subscribers reached c2.6m subscribers (June 08)

Hutchison 3G’s European mobile broadband users reached around 1m (August 08)

Success resulted in:

“3 Mobile Broadband Plus – USB Stick”

• 500 minutes or texts

• Free unlimited 3-to-3

minutes

“Orange Mobile Broadband Everywhere – USB Modem”

Monthly Rental /

Contract Period

Speed / Data

Download

Devices Offered for

FreeOperators Offerings

Up to 3.6MB /

5GB

£15.00 /

18 Months

£15.00 /

12 Months

£15.00 /

18 Months

Up to 7.2MB /

5GB

Up to 3.6MB /

5GB

“Vodafone Mobile Broadband - USB Stick”

Between February and June 2008, sales of USB dongles nearly doubled from around 69,000 per month to 133,000 a month.

Source: Capgemini TME Strategy Lab analysis. Top 10 broadband website, 2008. Orange, “Orange Digital Media Index – Summer / Autumn 2008, 2008. Deutsche Bank, “ Mobile Broadband , A

silver lining among clouds”, October 2008.

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Similarly, availability of advanced offerings has resulted in increased uptake of mobile content and applications

4.4%

3.4%

9.0%

8.2%

6.4%

9.8%

12.3%

8.4%

9.6%

11.7%

13.7%

14.3%

15.6%

0% 5% 10% 15% 20%

September 2007 October 2007

Searched Internet for

local products / services

Watched / purchased a music video /

internet video (eg., YouTube)

Used instant messenger service

(eg., yahoo Messenger)

Connected with a social network

Got information about

Restaurants / bars

Got information about movies or

other entertainment

Searched Internet for products /

services outside my local area

Mobile Content has evolved from basic monophonic ring tones to music and video streaming…

…resulting in increased usage of mobile content services

Mobile Content used by US Mobile Phone Users, Sep 2007 - October 2008

MonophonicPolyphonic

MasterTones

Music Clips

Phone to PC Music

Music Downloads

Free Music Streaming

Free Music & Video

Streaming

On-demandVideo-based Browsers

Time

InfotainmentPortals

Java Storefronts

WAP Ring tonesSMS Ring tones,Logos

PC Stores & Portals

Evolution of Mobile Content from Ringtones to Richer Types of Multimedia

Re

ve

nu

e

Source: Capgemini TME Strategy Lab analysis. Forrester Research, “European Mobile Forecast: 2008 To 2013”, March 2008. Xellular website. eMarketer survey, “Mobile Content Used by US Adult Mobile Phone Users”, October 2008.

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Contents




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Operators face challenges to enhance capacity, improve profitability and increase revenues from MBB

Summary of Key Challenges and Mitigation Strategy for Operators Offering MBB

Enhance Capacity

Avoid Becoming a Dumb-pipe

� Capacity constraints on access and backhaul networks

� Traditional backhaul solutions won’t be sufficient and cost effective to meet expected traffic growth

� Increase in monetization gap resulting in lower profit margins

� Rise in backhaul cost likely to reduce EBITDA margins by 1.5%-3%

Challenge Key Area of concern

1

3

Pressure onProfit Margins

2

� Lower capital efficiency of MBB and falling data tariffs

� Limited data ARPU growth from flat rate pricing models and limited share of consumers’ expenditure on services and applications

Mitigation Strategy

� Enhance RAN capacity by investing in additional carriers, spectrum, technology upgrades and new towers

� Migrate from leased-lines to microwave and fiber based backhaul solutions

� Adopt tariff schemes such as tiered pricing, prepaid plans to increase revenues and implement fair-use policy to control data usage

� Replace backhaul opex with capex, share networks and offload traffic to Wi-Fi and Femtocell sites

� Offer a bouquet of value-added services and applications, either stand-alone or through partnerships, to maximize share of consumer spend on content accessed through MBB

Source: Capgemini TME Strategy Lab analysis.

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In Europe, expected 10-fold rise in wireless data traffic can exhaust current network capacities by 2010

55

80100

150

210

280

3828

2008 2009 2010 2011 2012 2013 2014 2015

Factors Driving Growth of Wireless Traffic

Flat-rate Tariffs

• Flat rate pricing and increase in data

usage allowance are encouraging consumers to use more data services

Expected Wireless Download Traffic growth in Europe, PB1 / month, 2008-2015E

Uptake of High-end Devices

• Devices such as I-phones, 3G embedded Laptops, Smart-phones and PDAs are increasing usage occasions of wireless data

Popularity of Bandwidth-

intensiveApplications

• Peer-to-peer sharing, video streaming and music downloads are exerting additional pressure on wireless bandwidth

~ 10x

Current Europe Broadband

Access Capacity2, 2008

(~44 PB/month)

Usage Growth Drivers

Description

Consequently, operators need to make further investments in RAN3 as well as in backhaul infrastructure to combat capacity constraints.

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MBB is also less capital efficient (lower revenue per MB) compared to other services

Compared to other services, MBB is less capital efficient

Moreover, average data tariffs are expected todecrease further by 10% annually

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12

4

0.008 0.004

Small-

screenbrowsing

Ringtone

download

MMS Mobile

Broadband

Mobile TV

Comparison of Capital Efficiency of Different Services, Revenues in USD per MB, August 2008

Note: 1. Based on € 20 for 3 GB per month tariffs available in most of the European markets.Source: Capgemini TME Strategy Lab analysis. Nokia Siemens, “Optimize backhaul to increase mobile data profits”, 2008. Capgemini TME Strategy Lab analysis. Company websites. AnalysysMason, “Are mobile operators rapidly becoming low-cost data pipes”, August 2007.

1

Expected Decrease in Data Tariffs, € per MB,2008-2011

0.22 0.20 0.18 0.19 0.18 0.17

0.42

0.6

0.50.45

0.4 0.38 0.36

1.18

1

0.9

0.8

0.7

0.6

0.39 0.38 0.36 0.32 0.3

2005 2006 2007 2008 2009 2010

US and Canada Asia Pacific

Eastern Europe Western Europe

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Operators should also aim to reduce opex through various cost management initiatives

Network Sharing to reduce Capex and Opex

Offload traffic to Wi-Fi& Femtocells to improve

coverage & ease traffic on core network

Reuse Existing Civil Infrastructure

Invest in Fibre based Backhaul

Cost Management

Initiatives

Cost Management Initiatives to Reduce Operating Expense

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Sharing of passive and active networks can provide significant capexand opex savings for operators

Passive Sharing1 / Sharing of Site Rentals

RAN Sharing2 Sharing Regional Infrastructure3

Subscribers database

Core network

Network controller

Base station


Network controller

Core network



Core network

Core network

Network controller

Base Station



Core network

Core network

Network controller

Network controller

Base station Base station

• RAN cost savings of around 10% • RAN cost savings of up to 20% • RAN cost savings of up to 25%

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e

vi

ce

s

t

r

a

t

e

gi

e

s

2

Network Sharing Alternatives and Expected Savings

Note: 1. Passive sharing includes sharing site rental, masts, power, lighting and air conditioning. 2. RAN sharing includes sharing antennae, base station equipment and transmission 3. MNO keeps base station sites and equipment separate, but its network interacts with that of another operator, thereby enabling customers' phones to connect through either network.

Source: Capgemini TME Strategy Lab analysis. Vodafone, “Annual Report FY2008“, 2008. Analysys Mason, “Cost minimization strategies are key as MNOs invest in mobile broadband”, August 2008.

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Offloading data traffic to cheaper Wi-Fi hotspots can provide cost savings and faster speeds

Operator Offer Details Operator Benefits

� Mobile broadband bundled with DSL and Wi-Fi

� Offers a free 8Mbps DSL connection for one year and access to 7,500 Wi-Fi hotspots

� Priced at GBP20 per month with data usage limits of 3GB per month

�Helps offload traffic to cheaper Wi-Fi hot-spots to ease-out heavy traffic on cellular networks

� Includes 8MB fixed line broadband, free 500 Wi-Fi minutes from BTOpenzone and free mobile broadband

� Offers unlimited data over fixed line and 1 GB/month data limit for mobile broadband

� Package offer priced at GBP 40 per month

�Automatically switches between Wi-Fi and 3G to provide fastest possible speeds and optimize network utilization

Examples of Operators Bundling MBB & Wi-Fi

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1

D

evi

c

e

st

r

a

t

eg

i

e

s

2

Source: Capgemini TME Strategy Lab analysis. Company websites.

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Using Femtocells can provide cost savings by offloading traffic from operators’ access networks

Cell Site

GSM/3G Handset

Indoor area (home/office)

covered by Femtocell

Cellular Network

IP Network

VoIP Gateway

Wireless Access

Switched Voice

VoIP

Interconnect

Schematic Representation of a FemtocellDeployment

� Femtocells are smaller mobile base stations that can be kept indoors to increase coverage:

� A femtocell is placed inside the customer premise to act as an extension of the cellular access network

� The user is provided a normal 2G or 3G handset

� The handset uses the cellular network when outdoors and ‘roams’ into the range of the femtocell when indoors

� The fixed broadband network is used to backhaul the femtocell to the core cellular network

� Femtocells help increase indoor coverage at low costs and are suitable for deployment even in residential homes:

� Femtocell provides improved indoor coverage by bringing dedicated 3G coverage into the home

� Femtocell helps to offload heavy data users from wide area network, resulting in reduction in required RAN capex

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When Indoors

When Outdoors

Source: Capgemini TME Lab analysis. Techworld, “Femtocells use set to soar”, March 2007. Telephone Magazines’ Complete Guide to IMS, “On the Go, In the Home - Femtocells “, May 2007.

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Therefore, operators face the challenges of identifying additional data revenue streams and monetizing them

Challenges for Mobile Operators for Increasing Mobile Data Revenues

� Services from Napster and iTunes are data intensive but provide only a modest share

of revenue to operators: – MusicStation, supported by Vodafone, allows unlimited downloads for just

GBP2 per week

� Third party applications like Google Maps, social networking sites threaten operators

revenue

Limited ARPU Growth with Flat Rate Pricing

Limited Share of Consumers’Expenditure on Services and Applications

� Flat-rate deals encourage adoption of new services, but can limit revenue growth once the customer base is established

� Once “all you can eat” plans are introduced price revisions are difficult due to

competitive pressure and customer expectations

� Markets like Sweden and Austria have witnessed sharp decrease in MBB prices (from

GBP30 per month to GBP15 per month for a 3GB allowance) due to competitive prices from Hutchison

Operators face the threat of being reduced to a ‘dumb- pipe’, gaining revenues from access, but little from services.

Source: Capgemini TME Strategy Lab analysis. Analysys Mason, “ Mobile operators’ data ambitions may be pipe dreams”, August 2008. Company websites.

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Operators can adopt different positioning strategies to achieve differentiation and enhance data revenues

Positioning Strategies for MBB Operators

� Differentiation: Wide selection of own and third-party services such as search, file

sharing, navigation, social networking, etc.

� Target customers who value services more than the access product

Mobile Internet Provider and Solution Aggregator

Integrated Communication ProviderMobile Internet and Solution

Provider

Basic Mobile Internet Provider

� Differentiation: Price and product simplicity

� Target price conscious consumers looking

at MBB as an alternative to DSL

� Differentiation: Operators’ self owned services such as music

library, mobile gaming, portal etc.

� Cross sell products based on

customer usage patterns

� Differentiation: Advanced convergence services delivering

triple or quadruple play

Strategic Options

1

2

3

4

Source: Capgemini TME Strategy Lab analysis.

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Operators such as Orange, Maxis and Vodafone are offering innovative services to differentiate and increase data revenues

Operators Initiatives to Enhance Data Revenues

� Differentiation through innovative services like Video Call, Maxis TV, gaming and community services like MBlog etc.

� Bundling of mobile broadband with IPTV

� Differentiation through services like Wallet Manager, Time Manager and GPS targeted towards kids

Strategic Positioning

Initiatives Key Success

� Number of mobile TV/VoDsessions increased at a CAGR of 74% (2005-2007) to 70 million subscribers in 2007

Operator

� Partnered with Google, Yahoo, YouTube and Facebook to enhance user experience through services like search, social networking and IM

� Also offers a bouquet of self-owned services like gaming, music, maps through Vodafone live

� In March 07, data revenues rose 21% over the corresponding quarter last year

� Data revenues (non-SMS) increased at a CAGR of 41% (2006-2008) to € 2,180 million in March 2008

� Partnered with Bebo, My Space and Facebook to provide social Networking services to its customers

� Since July 08, there has been a 40% increase in customers using social networking in September 08

� Real-time policy control and flexible charging mechanisms

have helped in mass-customisation

Mobile Internet and Solution Provider

Mobile Internet and Solution Provider

Mobile Internet Provider and Solution Aggregator

Integrated Communication Provider

Source: Capgemini TME Strategy Lab analysis. Company websites. Total telecom Mobile Broadband Watch, “Evolving Business Models”, November 2008.

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For further information please contact :


Frank Gotthardt

Executive Director Eastern Europe Consulting Services

Capgemini TMN GmbH Vaclavske Namesti 19

110 00 Praha 1, Czech Republic

Phone: +420 731 401 800E-Mail: [email protected]

Vývoj mobilního broadbandu v Evropě - Frank Gothardt, Capgemini

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