Who pays for mobile broadband?Open Mobile Summit, June 8th 2011 London, UK.

Dr. Kim Kyllesbech Larsen, Technology Economics

Technology, Deutsche Telekom.

A bygone time … not so long ago ...When 1 + 1 was close to 2.

2

... Bla …

Bla bla bla

Mobile Network

We talked (a lot)

We SMS’ed (even more)

Rarely did we use the (mobile) web.

Kim Kyllesbech Larsen, Mobile Open Summit 2011, June 8th, 2011, London, UK.

1User

1+Device

User & application initiated bandwidth demand.Device & application (IP addr, keep alive, …) driven signaling resources.

A new paradigm … 1 + 1 is no longer “just” 2 ... Applications have “taken over” the communications.

Many applications

3Kim Kyllesbech Larsen, Mobile Open Summit 2011, June 8th, 2011, London, UK.

Its all in the data package ... Mobile revenues in an Apps centric world could decline rapidly.

4Kim Kyllesbech Larsen, Mobile Open Summit 2011, June 8th, 2011, London, UK.

22.4 23.0

12.7

Source 2010 & 2015 Pyramid Research March 2011 Western Europe.

2010A 2015EMobilecentric

2015EApps

centric

Western Europe ARPU development in Euro

CS Voice SMS & MMS PS Data

15.7

3.4

3.3

13.0

3.8

6.2

6.5

6.2

Illustration

?By 2015

more than 70%of users have a smartphone

When the mobile network becomes a bit-pipe ... Apple iTune promotion in NL ... free downloads.

Promotion day

Normal

9× increase in peak throughput.

More than twice the total volume.

30+ thsd downloads in the peak.

5Kim Kyllesbech Larsen, Mobile Open Summit 2011, June 8th, 2011, London, UK.

Smartphone traffic tsunami ... and growth expected to continue for quite a few years more...

Volume

Throughput

Smartphones

Data signaling

December 2008 to December 2010

×5

×4

×6

×7Smartphone indicators

Problems!

May – June 2010 (Netherlands).

“iPhone overload T-Mobile (NL) network” (Volkskrant, May 2010).

“T-Mobile (NL) gives compensation”. (2 month no data charge & iPhone users gets €30.)

“T-Mobile (NL) admits not able to handle data growth in its mobile network“ (Tweakers.net).

6Kim Kyllesbech Larsen, Mobile Open Summit 2011, June 8th, 2011, London, UK.

Illustration

ca. 20% unlimited subscriptions

takes ca. 60% of data volume.

ca. 20% unlimited subscriptions

takes ca. 60% of data volume.

Less than 2% of Laptops

takes more than 20% of data volume.

Less than 2% of Laptops

takes more than 20% of data volume.

Smartphone usage ... 2GB = unlimited ... for most.

7

LaptopsToday

Illustration

Kim Kyllesbech Larsen, Mobile Open Summit 2011, June 8th, 2011, London, UK.

1 x3 x6 x5

x26

x64

Average 1GB 2GB Unlimited (iPhone)

Laptop 2GB

Laptop Unlimited

Outside bundle:4% of users with35% of volume

>2GB3% of users with30% of volume

Monthly volume relative to Average usage:

Mobile data growth will be very

challenging to support with HSPA-only.

Mobile data growth will be very

challenging to support with HSPA-only.

• HSPA alone cannot sustain the traffic.

• LTE deployment will be accelerated.

• In-door off-loading to WiFi and Femto.

• HSPA alone cannot sustain the traffic.

• LTE deployment will be accelerated.

• In-door off-loading to WiFi and Femto.

The profitability Squeeze.

8

Cash pressure by un-controllablemobile data growth

2010 2012 2014 2016 2018 2020

HSPA only - No LTE

HSPA, with LTE deployment

HSPA+LTE, 50% off-load

Free cash flow

Trends

As it looks today

Operator illustration

Kim Kyllesbech Larsen, Mobile Open Summit 2011, June 8th, 2011, London, UK.

Significant Capex savings.

Substantial Opex prevention.

Best shared network.

Significant Capex savings.

Substantial Opex prevention.

Best shared network.

Network sharing a way to profitability and cash.

9

The best sharing strategy depends on the business cycle and technology age.

Rollout

Illustration

Kim Kyllesbech Larsen, Mobile Open Summit 2011, June 8th, 2011, London, UK.

Rollout Phase (primarily coverage)

Steady State(capacity & in-fill)

Modernization (replacement)

< 5 years 4 – 8 years

HSPA / UMTS

> 7 years

HSPA+LTE

Little Capex benefits.

Substantial Opex savings.

Significant write-offs & re-structuring costs.

Little Capex benefits.

Substantial Opex savings.

Significant write-offs & re-structuring costs.

Steady state

Significant Capex savings.

Substantial Opex savings.

Minor write-off.

Re-structuring costs.

Significant Capex savings.

Substantial Opex savings.

Minor write-off.

Re-structuring costs.

Modernization

UMTS & GSM → LTE

The smartphone … The “killer” device and its “killer” applications…

10Kim Kyllesbech Larsen, Mobile Open Summit 2011, June 8th, 2011, London, UK.

The smartphone … The “killer” device and its “killer” applications…

Key challenges.What we need to be passionate about.

11

How to spend it

How to earn it back

Kim Kyllesbech Larsen, Mobile Open Summit 2011, June 8th, 2011, London, UK.

Let the discussion begin!

Contact: kim.larsen@t-mobile.nlMobile: +31 6 2409 5202http://nl.linkedin.com/in/kimklarsen

Acknowledgement: I am indebted to my fantastic team for always being patient with my data requests, for their great suggestions and support in creating this presentation.

The key value proposition of a mobile network is ....

mobility