Eurasia mobile markets - challenges to our mobile networks & business model

Eurasia Mobile MarketsChallenges to our mobile networks & business models.Mobile Network Optimization Eurasia Summit 2011, 20th September 2011..

Dr. Kim Kyllesbech Larsen, Technology Economics

Technology, Deutsche Telekom.

The mega challenges …

2Dr. Kim Kyllesbech Larsen, Mobile Network Optimization Eurasia Summit 2011, September 20th 2011, Istanbul.

Mega bits

Mega bucks

Mega Hz

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


OTT Mobile Apps impact.Mobile revenues in an Apps-centric world could decline rapidly.

4

22.41 23.01

12.7

1 Source 2010 & 2015 Pyramid Research March 2011 Western Europe.

2010A 2015EMobile centric(“worry-free”)

2015EApps centric

(“doom”)

(Free) OTT VoIP and Messaging Apps can lead to adramatic loss of most profitable MNO revenues

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

Dr. Kim Kyllesbech Larsen, Mobile Network Optimization Eurasia Summit 2011, September 20th 2011, Istanbul.

• End of Profit in WEU between 2014 -2016

• Accelerate LTE deployment.

•Manage traffic via pricing, policy & control.

•Spectrum acquisition.

• End of Profit in WEU between 2014 -2016

• Accelerate LTE deployment.

•Manage traffic via pricing, policy & control.

•Spectrum acquisition.

Tellabs global study 1 …The End of Profit.The end to the mobile-only business model as we know it?

5

Western Europe mobile carrier“End to Profit” (Tellabs study).

What can be learned?

Western Europe assessment

Businessmodelbreakdown

Mounting cashpressure

Annual Growth Projection until 2020.

5%

20%

70%

87%

47% 47%

0.5% 1.0%

61% 61%

28% 28%

0%

20%

40%

60%

80%

100% 2010 - 20152015 - 2020


0.950.93

0.90 0.870.81

0.76

0.70

0.67

0.62

0.58

0.54

35%37%

39% 39% 39% 37%36%

34%31%

28%25%

36%37%

38% 39% 40% 41% 41% 41%39%

37%36%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Year

Ebitda - doom Ebitda - "worry free"

Mobile margin doom… 3-player market with equal market share illustration.

6

Mobile Apps offering “free” voice and messaging (picky bagging on data plans) can lead to a dramatic loss of revenue and margin.

7%

7%

10%

11%

11%

10%

10%

11%

11%

8%

7%

7%

7%

9%

9%

9%

8%

8%

8%

9%

7%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Year

Capex to Revenue - doom Capex to Revenue -"worry free"

LTE modernization

Difference primarilydue to Revenue

Capex to Revenue ratioEbitda & margin

Illustration


Uncontrolled data growth ... Apple iTune promotion in NL ... free downloads.

180 GB & 855 Mbps

Promotion day

Normal

9× increase in peak throughput.

More than twice the total volume.

30+ thsd downloads in the peak.


• 80% of data traffic carried by 3 sites.

• 20% of users generate 80% of traffic.

• Off-loading is an effective financial remedy … but not easy to achieve!

• 80% of data traffic carried by 3 sites.

• 20% of users generate 80% of traffic.

• Off-loading is an effective financial remedy … but not easy to achieve!

Off-loading benefits are tremendousBut it demands new partnership models for mobile-only.

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Off-loading Economics.

What can be learned?

Mobile data is “80% fixed”


31

2 3 4 3 3 2 2 2 1 1 1 1

0

5

10

15

20

25

30

35100% traffic80%+ traffic

“20% mobility”

Data traffic per user

Free Cash Flow

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

HSPA only, No LTE HSPA No LTE 50% off-load from 2012

HSPA + LTE HSPA + LTE 50% off-load from 2012

Businessmodel

breakdown

• Today 50+% on 3G/HSPA

• 2011+ Ramp-up LTE deployment.

• 2015 620 mio mobile subs …10% LTE.


• 2G below 10% ca. 2015.

• Today 50+% on 3G/HSPA

• 2011+ Ramp-up LTE deployment.



• 2G below 10% ca. 2015.

• Today less than 20% on 3G/HSPA

• Before 2015 limited LTE deployment.

• 2017 4.0 bn mobile subs …10%+ LTE.

• 2020 4.5 bn mobile subs … 60%+ LTE.

• 2G below 10% after 2018.

• Today less than 20% on 3G/HSPA

• Before 2015 limited LTE deployment.

• 2017 4.0 bn mobile subs …10%+ LTE.

• 2020 4.5 bn mobile subs … 60%+ LTE.

• 2G below 10% after 2018.

LTE later in Growth markets, but will catch up fast.

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Growth Markets 1 2

Western Europe 1

1 Pyramid Research (April 2011) until 2015. After 2015 technology diffusion model applied to technology development favoring LTE as main conversion technology.2 China, India, Indonesia, Malaysia, Pakistan, Philippines, Taiwan, Thailand, Vietnam.

2G

3Gincl. HSPAevolution

LTE &evolution

0%

20%

40%

60%

80%

100%

2010A 2015E 2020E 2025E

2G

3Gincl. HSPA evolution

LTE & evolution

0%

20%

40%

60%

80%

100%

2010A 2015E 2020E 2025E

Mobile Growth Markets (APAC)

Mobile Europe


LTE deployment requires available spectrum.

UL(75 MHz)

DL

UL(35MHz)

DL

UL(70 MHz)

TDD(50 MHz)

DL

900 MHz (2G some 3G)

1,800 MHz (2G)

2,600 1 MHz (4G & LTE)

UL(60 MHz)

TDD(100 MHz) DL

2,100 MHz (3G)

3GTDD

part TDD(mainly APAC)

2,300 – 2,400+ MHz

part TDDThis band provides interesting backhaul P2P

options in some Greenfield scenarios

3,400 – 3,500+ MHz

UL DL

400 MHz

UL DL

700 MHz (LTE)

TDD

(20 MHz)

(20 MHz)

3GTDD

1 The shown structure consistent with European band plan. In USA this band is held by Clearwire and primarily used forTDD WiMax.

UL(30MHz)

DL

800 MHz (LTE)

UL(58 MHz)

DL

1,500 MHz (MSS L-band)

TDD

10

UL DL

2,100 MHz (MSS S-band)

Dr. Kim Kyllesbech Larsen, Mobile Network Optimisation Eurasia Summit 2011, September 20th 2011, Istanbul.

Spectrum re-farming … a very complex process...Additional spectrum provides control & mitigate risks.

11

Complex &

Difficult to control

Today

situation

Add “new”

spectrum

Migrate

Traffic

Ready for

re-farmTime

E.g., GSM

E.g., LTEIllustration

2G

3G

Dr. Kim Kyllesbech Larsen, Mobile Network Optimisation Eurasia Summit 2011, September 20th 2011, Istanbul.

Spectrum demand and availability.

1 …

12Dr. Kim Kyllesbech Larsen, Mobile Network Optimisation Eurasia Summit 2011, September 20th 2011, Istanbul.

X-RAYMICROWAVESULTRA-SOUND20Hz 3kHz 50MHz 4GHz 300GHz 400THz

INFRARED

TRADITIONAL CELLULAR / MOBILE SPECTRUM RANGE700MHz 4GHz50MHz

WHITESPACE

11995 50MHz (900 MHz)Voice Centric

×72010 340 MHz (900,1800 & 2100 MHz)Voice Centric with mobile data

×12+2015 590 MHz (800, 900,1800, 2100, 2600 MHz)Broadband data centric with voice.

There are still large amount of untapped spectrum resources available.

With current data growth, by 2030 spectral BW demand could be beyond 4 GHz.

Very HighSmall

Very LowVery Large

BANDWIDTH

COVERED UNIT AREA

Rural / Nation-wide: Digital dividend 900 MHz

LTE deployment models.Availability of a wide range of frequencies will be essential for economical network deployment.

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Urban – Suburban:

Up-to 2100 MHz

Hot-Spots

2.3To

3.6 GHz

Throughput / Capacity

2.3 - 3.6 GHz Typical BWs/Operator > 40 MHz

Femto-cells

Rural Fixed-likeTypical BWs/Operators < 20 MHz

LTE connectivity

Illustration


DWDM

DWDM

DWDM

DWDM

100 GbpsDWDM

EvolvedPacketCore

Backhaul will force you to re-think network design.LTE’s extremely power-full air-interface, i.e., 100+ Mbps, will require extensive backhaul fiber deployment.

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FTTS1 100+ Mbps

LTE air-interface30mean to 100+peak Mbps

(per sector)

eNode

100GbE

Illustration

32:1 320:1eNodes per element 3200:1

BH Throughput 3+ 32+ 320+ In Gbps


The backhaul challenge … macro vs micro.Distribute mobile broadband traffic differently.

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Node

300 – 7,000 active devicesper macro-cellular node(dense-urban / urban)

100+ Mbpsshared with

up to 7,000 devices.

FTTS1 100+ Mbps

Home Environmentwith ca. 2.3 people per Home 1

connected to Fiber, Cable or VDSL.

Up-to 100+ Mbpsshared by

2+ people.

AP (e.g., WiFi / Femto,..)LTE provides up-to 100 Mbpsper sector

100+ to40 Mbps

1 Average for Western Europe.

Illustration


Key challenges.What we need to be passionate about.

Prepare for early LTE deployment → might be needed sooner than later.Prepare for early LTE deployment → might be needed sooner than later.

Radio nodes → multi-mode SDR capabilities to mitigate uncertainty .Radio nodes → multi-mode SDR capabilities to mitigate uncertainty .

Backhaul → Gbps will be needed → Think Fiber and off-loading.Backhaul → Gbps will be needed → Think Fiber and off-loading.

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Spectrum → acquisition and re-purposing of legacy bands.Spectrum → acquisition and re-purposing of legacy bands.


Thank you for your interest!

Contact: [email protected]: +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.

mailto:[email protected]

Eurasia mobile markets - challenges to our mobile networks & business model

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