ITU-BDT Seminar on IMT-2000
Ljubljana, Slovenia 1 -3 December, 2003
Economic Aspects of
Evolution Towards
IMT-2000
Kiritkumar Lathia, C.Eng., F.I.E.E,
ITU-T SSG Vice Chairman
Vice President - Standards & Fora
Strategic Product Planning
Siemens Mobile Communications S.p.A.
Italy
E-mail: kirit.lathia@siemens.com
ITU-BDT Seminar on IMT-2000
1-3 December, 2003
Ljubljana, Slovenia
© Siemens, 2003
1
Presentation Scope
Successful business requires analysis of
regulatory environment and market
dynamics for whole system life cycle
Choice of technology becomes critical!
IMT-2000 licence scorecard (June, 2003):
n 34 countries have awarded licences:
n103 operators have chosen UMTS
n
5 operators have chosen CDMA-2000
n
4 operators have returned their
licence (regulatory / financial reasons)
ITU-BDT Seminar on IMT-2000
1-3 December, 2003
Ljubljana, Slovenia
© Siemens, 2003
2
Contents
n What do users want?
n What do operators need to know?
n European Regulatory Environment
n Standards / Technology Environment
n Evolution towards UMTS/IMT-2000
n Business model for the life-cycle ( ~ year 2015)
n Conclusions
ITU-BDT Seminar on IMT-2000
1-3 December, 2003
Ljubljana, Slovenia
© Siemens, 2003
3
User Needs – users do not buy technology!
n Enhance (multi-media) life-style experiences
n Additional M2M applications & Services:
- Machine to Machine
- Machine to Mobile
- Mobile to Machine
n Ease of use across different networks (VHE)
n Global roaming for voice and data (~ 20% revenue!)
n SMS / MMS capability across networks (tourism!)
• “Security”
• Meter readings
• Pay systems
• Vending
machines
• Games
• Cargo tracking
across EU
• eEurope
•…
These capabilities
are only possible
within the same
IMT-2000 family
member – see
SSG work; this
means that today
GSM/GPRS/UMTS
can not work with
CDMA2000.
n Simple billing and/or pre-paid capabilities
ITU-BDT Seminar on IMT-2000
1-3 December, 2003
Ljubljana, Slovenia
© Siemens, 2003
4
Contents
n What do users want?
n What do operators need to know?
n European Regulatory Environment
n Standards / Technology Environment
n Evolution towards UMTS/IMT-2000
n Business model for the life-cycle ( ~ year 2015)
n Conclusions
ITU-BDT Seminar on IMT-2000
1-3 December, 2003
Ljubljana, Slovenia
© Siemens, 2003
5
Pressures on ARPU and Overall Revenue
p Competition and demography requirements
p Subscriber Acquisition / Retention Costs and
p attractive services customization & segmentation
ARPU (US$/month)
Voice
Voice and Data ARPU
Revenue (US$B)
$60
(1999 -2005)
2005)
(1999
450
ARPU
400
Revenue
$50
CAGR (1999
(1999--2005)
2005)
Overall ARPU:
Voice ARPU:
ARPU:
Data ARPU:
350
300
250
$30
200
ARPU CAGR
$20
$10
1999-2005
-10.1%
-13.4%
-13.9%
-8.5%
-6.9%
-7.6%
World
N America
Asia Pacific
W Europe
C&S America
Other
$0
1 9 9 9 2000
2001
2002
150
2005-2010
-6.9%
-5.3%
-7.8%
-15.6%
-5.4%
-4.2%
2003
2004
2005
100
50
\\2 0 1 0
0
ARPU/Month (US$)
$40
-22%
%
-88%
%
+30%
+30%
$60
Data ARPU
$55
Voice ARPU
$50
$45
$40
$35
$30
$25
$20
1999
2000
2001
2002
2003
2004
2005
Source : Deloitte Consulting Analysis, Ovum
ITU-BDT Seminar on IMT-2000
1-3 December, 2003
Ljubljana, Slovenia
© Siemens, 2003
6
Operator Issues
n Wireless connectivity vs. Content Provisioning
T-zones
Vodafone Live!
i-mode
n Infrastructure Ownership / sharing vs. MVNO
3 (video multimedia)
n Service Provisioning vs. Partnerships
financial
risk/reward sharing
n Regulatory & Financial Constraints
EU Environment
n Cultural & “disposable income” constraints
n International Roaming & VHE capabilities
1-3 December, 2003
Market /client
segmentation
~ 20% revenue
Compatibility
is an issue
n Customer Care Capabilities
ITU-BDT Seminar on IMT-2000
…
Ljubljana, Slovenia
© Siemens, 2003
7
Strategy and Business Plan Development
Various steps from conceiving a corporate vision up to
detailing implementation activities are necessary.
Vision and Concept
•Vision
•Corporate
philosophy
•International alliances
Entry Strategy
•Develop a strategy
- Business units
- Products, Channels,
Segments, Entry
•Regulator
Company build up
Implementation
•Organization
- Process driven
- Customer oriented
•Integrated
processes
•Up-date strategy
•Technology and
network planning
Market Definition
•Assess market
•Understanding
the market
•Positioning
Business Planning
• Build a business case
with const and turnover
estimates
• Budgeting
• Investments
•IT Systems
• Implement the
concept
to build and
develop core
capabilities
•Focus resources
on market
entry date
•Key functions
- Marketing
- Sales
- Customer Care
•Support functions
Integrated project management
ITU-BDT Seminar on IMT-2000
1-3 December, 2003
Ljubljana, Slovenia
© Siemens, 2003
8
Business Plan Development – Customers benefit
Typical questions to be answered
Contribution of Siemens
• We intend to buy a 2G/3G license.
Could the project be feasible from a
Financial feasibility study
Business Development Process
financial point of view?
• How does market, penetration, ARPU etc.
look like? Can investors expectations be met?
Investors Case
• Is our strategy in line with my financial
expectations?
Development of fully comprehensive
operators business plan
• When do we have to consider technology
migration?
Strategy assessment
• What new services do we need to improve
financial performance?
ITU-BDT Seminar on IMT-2000
1-3 December, 2003
Ljubljana, Slovenia
© Siemens, 2003
9
© Siemens, 2003
10
Contents
n What do users want?
n What do operators need to know?
n European Regulatory Environment
n Standards / Technology Environment
n Evolution towards UMTS/IMT-2000
n Business model for the life-cycle ( ~ year 2015)
n Conclusions
ITU-BDT Seminar on IMT-2000
1-3 December, 2003
Ljubljana, Slovenia
European Single Market Regulatory Environment
n EU Accession countries need to follow EU Regulations
(Cyprus, Czech Republic, Estonia, Latvia, Lithuania,
Hungary, Malta, Poland, Slovak Republic, Slovenia.)
n Bulgaria, Romania and Turkey are next accession
countries and should prepare for EU harmonisation
n Need to follow Framework Directive and other relevant
Directives, Decisions, … which de-facto implies:
- At least one UMTS operator (Single Market roaming)
- ITU Harmonised core bands for FDD and TDD
Number portability
- “Open Network” Provisioning (Access Directive)
- Conformance to ETSI Standards
- Compliance to R&TTE Directive
n EU Harmonised Spectrum Allocation and usage for
PAMR/PMR and emergency/security/public services
(Police, Fire, Health, disaster Relief, …)
ITU-BDT Seminar on IMT-2000
1-3 December, 2003
Ljubljana, Slovenia
© Siemens, 2003
11
© Siemens, 2003
12
Contents
n What do users want?
n What do operators need?
n European Regulatory Environment
n Standards / Technology Environment
n Evolution towards UMTS/IMT-2000
n Business model for the life-cycle ( ~ year 2015)
n Conclusions
ITU-BDT Seminar on IMT-2000
1-3 December, 2003
Ljubljana, Slovenia
IMT-2000 Radio Technology Standards
CDMA
IMT-DS
Direct
Spread
(UMTS-Japan)
(UMTS-Europe)
TDMA
IMT-MC
Multi
Carrier
FDMA
IMT-TC
Time
Code
IMT-SC
Single
Carrier
(UMTS-China)
(UMTS-Europe)
(UMTS-USA)
W- CDMA
1xRTT
1xEV -DO
HSDPA
1xEV -DV
UTRA - TDD
TD-SCDMA
HSDPA
FDD
cdma2000
TDD
IMT-FT
Frequency
Time
DECT
EDGE
TIA – ETSI – T1
Chinese
Cingular, SBC and ATT -WS
>50% US mobile market
GERAN
• same core platforms
Same
GSM/UMTS
core
ITU-BDT Seminar on IMT-2000
1-3 December, 2003
• cost effective upgrade
• technology flexibility
• powerful release concept
Ljubljana, Slovenia
Source: ITU
© Siemens, 2003
13
UMTS/IMT-2000 Standards
n Principle body is 3GPP – a partnership between
China, ETSI, Japan, Korea and USA (T1) SDOs
n ITU-R WP8F and ITU-T SSG transpose results
n Evolve from GSM/GPRS to UMTS/IMT-2000
3GPP
n Follows release management concepts of GSM
n Guarantees multi-vendor interoperability
n Guarantees terminal roaming & compliance
across networks and countries
ITU-BDT Seminar on IMT-2000
1-3 December, 2003
Ljubljana, Slovenia
ITU -T
•R-99
(Q.1741.1)
• R4
(Q.1741.2)
• R5
(Q.1741.3)
• R6
GSM- A and EICTA
work together to
define ETSI test
specifications
© Siemens, 2003
14
Contents
n What do users want?
n What do operators need?
n European Regulatory Environment
n Standards / Technology Environment
n Evolution towards UMTS/IMT-2000
n Business model for the life-cycle ( ~ year 2015)
n Conclusions
ITU-BDT Seminar on IMT-2000
1-3 December, 2003
Ljubljana, Slovenia
© Siemens, 2003
15
Why Evolve to UMTS/IMT-2000?
Drivers for 3G
Things yet to do for 3G
Ø Prestige / Image for the 3G user
End user
ØPersonalization and localization of
services and content anytime,
anywhere
Ø Costs for handsets and usage of
new services and content
Ø Full coverage and network
interoperability
Ø Multimedia capability (pictures,
videos, etc. on colored screens)
Mobile
Network
Operator
Ø New applications and content
addressing business customers
as well as consumer life styles
Ø New revenue streams and
revitalized, increasing ARPU
ITU-BDT Seminar on IMT-2000
Ø Operators “need” to invest in
order to fulfill coverage
requirements of the regulator
1-3 December, 2003
Ø Successful migration of existing
customer base towards 3G
Ø Convincing services and
applications (“killer application”)
to create customer´s demand
Ø Value-based selling by providing
End-to-end solutions
Supplier
Ø Frequency clearance, regulatory
issues
Ø Standardization of interfaces
Ø UMTS handsets for mass market
rollout
Ljubljana, Slovenia
© Siemens, 2003
16
Challenges for the Mobile Network Operator
Voice
Exceeding
user expectations
Reducing – Total Cost
of Ownership
n Voice quality
n Availability
n Investment protecting
3G introduction
n Low time-to-market (3G)
n OPEX reduction
GSM/GPRS to
EDGE / UMTS
Variable
service
access
n Flexibility in network
adaptation
Real-time
Multimedia
n Successful launch
of attractive
multimedia services
n Optimal traffic routing
for peer-to-peer
multimedia services
Data
n Excellent
service quality
and throughput
n Cost efficient
management of
strong traffic growth
ITU-BDT Seminar on IMT-2000
1-3 December, 2003
Easy
service
introduction
Flexible
network
optimization
Reduced costs
by network
simplification
Ljubljana, Slovenia
© Siemens, 2003
17
Economically Cost Effective Evolution Paths
2G
UMTS
UMTS
Adapted from ITU News #6, 2003
PDC
PDC
GSM
GSM
3G
2.5G
TD-SCDMA
TD-SCDMA
GPRS
GPRS
W-CDMA
W-CDMA
HSDPA
HSDPA
EDGE
EDGE
TDMA
TDMA
cdma2000
cdma2000
IS-95
IS-95
1xRTT
1xRTT
1xEV-DV
1xEV-DV
1xEV-DO
1xEV-DO
Source: ITU News #6, 2003
ITU-BDT Seminar on IMT-2000
1-3 December, 2003
Ljubljana, Slovenia
© Siemens, 2003
18
Mobile vs. Fixed and
Mobile subscribers by technology
Source: ITU News #6, 2003
ITU-BDT Seminar on IMT-2000
1-3 December, 2003
Ljubljana, Slovenia
© Siemens, 2003
19
IMS – new multi-media services
Communication
n Push-to-talk / push-to-see
n Instant Messaging
n Multi-Party Chat
n Video Telephony
Entertainment
n Multimedia Conferencing
n Person-to-Person Gaming
n Audio and Video Streaming
Enterprise and on the road
n Interactive Shows and Events
n Dynamic Info Services
n Multi-Media Mobile Advertisement
n Interactive guidance
n Remote Facility Control
n Collaborative working
n Interactive learning
ITU-BDT Seminar on IMT-2000
1-3 December, 2003
Ljubljana, Slovenia
© Siemens, 2003
20
IMS: Fixed / Mobile Service Convergence (NGN)
3GPP IMS permits Services Convergence:
Same “look and feel”
Fixed data
Fixed Voice
Mobile voice
Fixed voice
Fixed data
Mobile data
Visual images
ITU NGN studies will be based on 3GPP IMS
ITU-BDT Seminar on IMT-2000
1-3 December, 2003
Ljubljana, Slovenia
© Siemens, 2003
21
© Siemens, 2003
22
Contents
n What do users want?
n What do operators need?
n European Regulatory Environment
n Standards / Technology Environment
n Evolution towards UMTS/IMT-2000
n Business model for the life-cycle ( ~ year 2015)
n Conclusions
ITU-BDT Seminar on IMT-2000
1-3 December, 2003
Ljubljana, Slovenia
Subscriber Migration to new Technology:
2G Networks will be with us for a long time!
2G vs. IMT-2000 forecast
Legend:
2G
IMT-2000
Learning curve
Timing
Technology churn
Coverage
2002
2003
2004
2005
2006
2007
2008
2009
3G Subs
ITU-BDT Seminar on IMT-2000
2010
2011
2012
2013
2014
2015
2G Subs
1-3 December, 2003
Ljubljana, Slovenia
© Siemens, 2003
23
Many New market players – “mass market”
standardized platform and Interoperability
Today‘s Scenario
(vertical segmentation)
Each operator
own everything
User
Mobile
Operator
User
Airtime
Revenue
Service
Provider
3G Scenario
User
User
(horizontal segmentation)
n Outsourcing
Settlements
Service
Mobile
n Third parties
Provider
Operator
n Site / Network
Services
sharing
Content
Advertiser
Content
Advertiser
n VMNOs
Provider
Provider
ITU-BDT Seminar on IMT-2000
1-3 December, 2003
Ljubljana, Slovenia
© Siemens, 2003
24
Structure of Siemens Business Plan model
OPEX
Module
CAPEX
Module
Subscriber
Module
From market share growth to:
- Reduce Churn
- Increase ARPU
- Increase use of services
- Affordable new services
Accounting
Module
Revenue
Module
ITU-BDT Seminar on IMT-2000
Considerations:
- Regulations (old & new)
- Purchasing Power (pre-paid)
- GDP and major trade partners
- Virtual Home Environment
1-3 December, 2003
Ljubljana, Slovenia
© Siemens, 2003
25
Siemens Business Plan Support is modular
The market and revenue simulations are the key modules
of our business plan tool.
Operator Benchmarking
Business Plan Results:
Profitability
Ratios
Business Plan Methodology:
network
Network
planning
Cash Flow
Statement
OPEX
Module
Profit / Loss
Statement
% market
CAPEX
Module
Subscriber
Module
ARPU
ITU-BDT Seminar on IMT-2000
Revenue
Module
1-3 December, 2003
Balance Sheet
Accounting
Module
P&L
RoR
NPV
DSCR
Ljubljana, Slovenia
© Siemens, 2003
26
Our services cover all market phases from
late 2G entrant to future IMT -2000 incumbent
Customer Market Phase
New entrant
in delayed market
Investors‘ case
Fully comprehensive
business plan
Stimulate investors
Migration
2G ? IMT-2000
Detailed subscriber model
Migration benefits,
operators’ market attractiveness,
competitive churn,
technology churn,
retention mechanisms
Position against “new comers”
“2nd wave UMTS” - Data revenues, applications/solutions
centric, bottom-up scenario modeling
UMTS new entrant
Build key strategic relationships
Supplier/product related incremental
“2nd wave UMTS” - revenues, OPEX, CAPEX
UMTS incumbent Link to product business plans
Evaluate alternative relationships
ITU-BDT Seminar on IMT-2000
1-3 December, 2003
Ljubljana, Slovenia
© Siemens, 2003
27
Recipe for success: Flexibility and Cost-Efficiency
User Experience
Community Excitement
Networks and solutions are built around
primary business drivers:
Information
n Superior User Experience
Best possible customer retention and
differentiation on the basis of personalized,
attractive services;
Make Money
Value Network
Mobile
Network
Access
Intelligent
Service
Connectivity
Service
Enabling
Apps &
Content
Provisioning
n Make Money
Safe introduction of new data and
multimedia services and industry-leading
charging capabilities
n Save Money
Maximum reliability, solid upgrade path,
high flexibility and cost- efficiency
Save Money
ITU-BDT Seminar on IMT-2000
1-3 December, 2003
Ljubljana, Slovenia
© Siemens, 2003
28
Mastering Both Opportunities and Challenges:
Making and Saving Money with Your Mobile Network
Personalization
n Meet user demand by offering personalized services
tailored to preferences and terminals
Opportunity
“Make money”
Challenge
“Save money”
Flexibility
n Stay ahead of unpredictable changes by fast creation of
new services and business models
Innovation
n Get ready for fast and safe launches of innovative and
attractive real-time multimedia
Simplification
n Stay in control of increasing complexity of multi-service
network
Smooth migration
n Gain upper hand in cost efficient migration steps towards 3G
Performance & Reliability
n Satisfy bandwidth hunger of new real-time multimedia
services efficiently
ITU-BDT Seminar on IMT-2000
1-3 December, 2003
Ljubljana, Slovenia
© Siemens, 2003
29
© Siemens, 2003
30
Contents
n What do users want?
n What do operators need?
n European Regulatory Environment
n Standards / technology Environment
n Evolution towards UMTS/IMT-2000
n Business model for the life-cycle ( ~ year 2015)
n Conclusions
ITU-BDT Seminar on IMT-2000
1-3 December, 2003
Ljubljana, Slovenia
Conclusions
Users will (and hence operators need to) choose
mass market standard
M2M and cross border roaming, services, etc.
towards major trading partners
Develop 2.5G (GSM/GPRS) for transition to 3G
UMTS provides required network flexibility
(GSM/GPRS/EDGE/FDD/TD-SCDMA/IMS/MBMS …)
Evolution to UMTS/IMT-2000 requires a new
business model of “horizontal” partnerships
Business model for the 10 year life-cycle
Remember “back-office” applications
UMTS is the only economical choice!
ITU-BDT Seminar on IMT-2000
1-3 December, 2003
Ljubljana, Slovenia
© Siemens, 2003
31
Business and Technology
Partnership with
Thank You
very much!
Kiritkumar Lathia, C.Eng., F.I.E.E,
Vice President - Standards & Fora
Strategic Product Planning
Siemens Mobile Communications S.p.A.
Italy
E-mail: kirit.lathia@siemens.com
ITU-BDT
Seminar
on Network
Evolution
ITU-BDT
Seminar
on IMT-2000
21-24
January, 20032003
1-3 December,
Sofia, Bulgaria
Ljubljana, Slovenia
© Siemens,
© Siemens,
2003 2003
32