Evolution to 3G :Evolution to 3G :Financial and Technical Financial and Technical PerspectivesPerspectives

March 29, 2000March 29, 2000

Myungsoon ParkMyungsoon Park

SK TelecomSK Telecom

2

Contents

1.1. SK Telecom and Korean Wireless MarketSK Telecom and Korean Wireless Market

2.2. 2G Network Architecture2G Network Architecture

3.3. IS-2000 NetworkIS-2000 Network

1.1. Objectives & Benefits, Market Forecasting, etcObjectives & Benefits, Market Forecasting, etc

4.4. Network Evolution PlanNetwork Evolution Plan

1.1. Evolution Scenario, Rollout Plan, etcEvolution Scenario, Rollout Plan, etc

5.5. SummarySummary

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SK Telecom

17 17 years of cellular and paging operationyears of cellular and paging operation

CDMA commercial service in Jan. 1996CDMA commercial service in Jan. 1996

World’s largest CDMA cellular service providerWorld’s largest CDMA cellular service provider

Subscriber base (as of Feb, ‘00)Subscriber base (as of Feb, ‘00) Cellular : 10.2MCellular : 10.2M

Operation scale (as of Feb, ‘00)Operation scale (as of Feb, ‘00) Cellular : over 40 MSCs, over 3,000BTSsCellular : over 40 MSCs, over 3,000BTSs

SubsidiarySubsidiary SK Teletech : Mobile & multimedia handsets manufacturerSK Teletech : Mobile & multimedia handsets manufacturer SK Telink : International call serviceSK Telink : International call service Netsgo : Internet service providerNetsgo : Internet service provider

Strategic allianceship with STIStrategic allianceship with STI

4

Korean Cellular Penetration

0

10

20

30

40

50

60

1996 1997 1998 1999E 2000E

2,000

4,034

1,395

1,680

12,000

10,000

5,966

4,571

2,891

0

2000

4000

6000

8000

10000

12000

1996 1997 1998 1999 2000E

(‘000)

Korean Cellular Penetration

SKT’s Subscribers

[%] Cellular Penetration surpass Fixed line in Aug. 99

Cellular

Fixed line

5

CDMA Operators in Korea

SystemsSystemsLGIC

SamsungHyundai

SamsungHyundaiLucent

SamsungMotorola(Daewoo)

SamsungLucent

LGIC

SKT

CDMA(Cellular)CDMA(Cellular) CDMA(PCS)CDMA(PCS)

OperatorOperator STI KTF HS LGT

10,110Subs.Subs.(thousand)(thousand)

3,238 4,267 2,741 3,085

TotalTotal

23,441

SamsungLGIC

HyundaiLucent

Motorola

SK TelecomShinsegi Telecom

KT FreetelHansol

LG Telecom

SamsungLGIC

HyundaiSK Teletech

HanhwaMaxsonAppeal

Infrastructure VendorsInfrastructure Vendors OperatorsOperators Handset ManufacturersHandset Manufacturers

(Dec 1999)(Dec 1999)

Source : SK TelecomSource : SK Telecom

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2G Network Architecture

T1/E1T1/E1

R2R2

T1/E1T1/E1

ISUPISUP

IS41IS41

IS41IS41IS41IS41

WorldWorld

TCP/IPTCP/IP

COISCOISTCP/IPTCP/IP

ISUPISUP Paging NetworkPaging Network

ITU-TITU-TITU-TITU-TITU-TITU-T

CDMA (IS-95A/B)CDMA (IS-95A/B)

Intelligent Network & Intelligent Network & VASVAS

External External NetworksNetworks

InternationalInternational Roaming Roaming

Under developmentUnder development

E1E1

UWCNUWCN

LGLG SamsungSamsung HyundaiHyundai

FLEXFLEXPOCSAGPOCSAG

TMSTMSPMSPMSFMSFMS CMSCMS CDCD

PSTNPSTN

STI/PCSSTI/PCS

GSMGSMWorldWorldIridiumIridium

BillingBillingRTMSRTMS

Cellular NetworkCellular Network

E1E1

LAPDLAPD

IS41IS41

E1E1

IS41/ISUPIS41/ISUP

E1E1

IS41/ISUPIS41/ISUP

IS41IS41

IS41IS41

IS41IS41

E1E1

IS41IS41

AUCAUC

IPIP

NMSNMS

VMSVMS

SMSSMS

PPSPPS

VPNVPN

HLRHLR

RFCRFC

IWFIWF

E1E1

IS658IS658

CDMA (IS-2000)CDMA (IS-2000)

STPSTP

ITU-TITU-T

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IS-2000 Network

IS-2000IS-2000 Network Network

Objectives & BenefitsObjectives & Benefits

Market ForecastingMarket Forecasting

Financial ValueFinancial Value

Rollout PlanRollout Plan

Network ConfigurationNetwork Configuration

2G Interworking2G Interworking

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Objectives & Benefits

ObjectivesObjectives Secure data market leadershipSecure data market leadership Cost effective network investmentCost effective network investment

– Capacity : larger than IS-95A/BCapacity : larger than IS-95A/B

– Compact : more reliable and better quality systemCompact : more reliable and better quality system

Enhanced quality & service capabilityEnhanced quality & service capability– Standby time, enhanced featuresStandby time, enhanced features

BenefitsBenefits First mover into high speed wireless data marketFirst mover into high speed wireless data market Smooth migration to 3G network (IMT-2000)Smooth migration to 3G network (IMT-2000)

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Market Forecasting

Thousand Thousand SubscribersSubscribers

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

95A

Total subscribers

IS-2000

95B

SKT’s Cellular Penetration

Market trendsMarket trends Penetration almost saturatesPenetration almost saturates Wireless internet & data Wireless internet & data

market will supercede voicemarket will supercede voice

Subscribers requirementsSubscribers requirements various data services in various data services in

higher speedhigher speed lower pricelower price

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Financial Value

Revenue : Revenue : $Mil$Mil

0

200

400

600

800

1,000

1,200

1,400

1,600

Voice

Total

Data

Revenue Forcecasting

Profit ValueProfit Value Total Expense : $1.2BTotal Expense : $1.2B IRR : 28%IRR : 28% NPV : $520MNPV : $520M

AssumptionsAssumptions Data market will supercede Data market will supercede

voicevoice In 2002, IMT-2000 (3G phase 2) In 2002, IMT-2000 (3G phase 2)

service will be launchedservice will be launched

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Rollout PlanRollout Plan

Cities/TownsCities/Towns 79/23479/234 73%73% 100%100%

--

Highways (Km)Highways (Km) 2,5002,500 65%65% 89%89%

100%100%

Coverage (% of Pop)Coverage (% of Pop) -- 75.3%75.3% 88.4%88.4%

100%100%

TotalTotal 20002000 20012001 20022002CoverageCoverage

System developmentSystem development Technical trial : ‘99. 9Technical trial : ‘99. 9 Requirement : ‘00. 1Requirement : ‘00. 1 Pilot test : ‘00. 4Pilot test : ‘00. 4 Field test : ‘00. 6 ~ 9Field test : ‘00. 6 ~ 9

Network implementationNetwork implementation Installation : ‘00. 6 ~ 8Installation : ‘00. 6 ~ 8 Optimization : ‘00. 9Optimization : ‘00. 9 Trial/commercial svc : ‘00. 10Trial/commercial svc : ‘00. 10

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Network ConfigurationNetwork Configuration

PSTN

IP Fax

PDSN

HA

MSC/VLR

RADIUS Server

HLR

IWF

Gateway Router

ManagedWAN

BTS

PDA

MTIP Phone Notebook

BSC

BTSMTNotebook

BSC

BTSMTIP Fax

VMS/FMS

SMSCSCPSCE/SMS

Maintenance Console

Internet

IP Phone

MSC/VLRBSC

BTSMTIP Fax

22G(95-A/B)G(95-A/B)

IS-2000IS-2000

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2G Interworking

Backward compatibilityBackward compatibility HandoffHandoff

– 2G-3G soft handoff2G-3G soft handoff– Data handoff : 2G->3G ,3G-> 2GData handoff : 2G->3G ,3G-> 2G

Roaming to 2G networkRoaming to 2G network

Service differentiation depends on networkService differentiation depends on network 2G network : low speed data services (14.4k, 64k)2G network : low speed data services (14.4k, 64k) 1X network : high speed data services(144k)1X network : high speed data services(144k)

– Packet mode : fast internet accto for N-generationPacket mode : fast internet accto for N-generation

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Network Evolution Plan

Network Evolution PlanNetwork Evolution Plan

Evolution ScenarioEvolution Scenario

Rollout PlansRollout Plans

3G System Technology3G System Technology

3G Network Deployment Strategy3G Network Deployment Strategy

3G Network Architecture3G Network Architecture

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Evolution Scenario to 3G

Reduce technological risks by phased enhancement ofReduce technological risks by phased enhancement of

network and servicesnetwork and services

Avoid uncertainties for 3G service marketAvoid uncertainties for 3G service market

Provide medium rate data services and create higherProvide medium rate data services and create higher

rate data service need with 3G phase 1 networkrate data service need with 3G phase 1 network

2G Network(IS-95A/B)

3G Network(phase 2)(IMT-2000)

3G Network (phase 1)(IS-2000)

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Rollout PlansRollout Plans

Jan 1996(IS-95A)Jan 1996(IS-95A)Aug 1999(IS-95B)Aug 1999(IS-95B) 2000 42000 4QQ 2002 22002 2Q Q

3G ph.1 3G ph.1 Network Network(IS-2000)(IS-2000)

22G NetworkG Network(IS-95A/B)(IS-95A/B)

22G NetworkG Network(IS-95A/B)(IS-95A/B)

33G ph.2 NetworkG ph.2 Network(IMT-2000)(IMT-2000)

2G 2G 2G3G ph.1

2G 2G 2G 2G

22G NetworkG Network(IS-95A/B)(IS-95A/B)

3G ph.1 3G ph.1 Network Network(IS-2000)(IS-2000)

3G ph.1

3G ph.1

3G ph.2

3G ph.2

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3G System Technology

Evolved GSMEvolved GSM

MSCMSC

Evolved ANSI-41Evolved ANSI-41

MSCMSC

IMT-DSIMT-DSIMT-MCIMT-MC

• Need to develop Need to develop

Hook & ExtensionHook & Extension

DS-41 SystemDS-41 System

Evolved from existing Evolved from existing CDMA technologyCDMA technology

Complementary Complementary method of MC and DSmethod of MC and DS

Advantage in global Advantage in global roamingroaming

IMT-MC to build upon IS-2000 networkIMT-MC to build upon IS-2000 network

DS-41 system to bridge existing CDMA technology with IMT-DSDS-41 system to bridge existing CDMA technology with IMT-DS

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3G3G Network Deployment Strategy Network Deployment Strategy

BTS

IWFHLR

MSC/VLR

BTS

BSC

800800MHzMHzIS-95CIS-95CSystemSystem

2GHzIMT-DS

2GHzIMT-MC

ANSI-41 MAP

PDSN

RADIUSServer

O&M Server

WAN

Gateway Router

HA

Minimize IMT-2000 investment cost by deploying IS-2000 network capable of Minimize IMT-2000 investment cost by deploying IS-2000 network capable of supporting IMT-MC/DS supporting IMT-MC/DS

Expand IMT-2000 upon IS-2000 core network to ensure call qualityExpand IMT-2000 upon IS-2000 core network to ensure call quality

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3G Network Architecture

BTSBTSMSMS

BTSBTSMSMS

BTSBTSMSMS

RNCRNC

RNCRNC

PSTNPSTN

InternetInternet

HAHA

GMSCGMSC

MSCMSC

RADIUSRADIUSServerServer

ServerServer

Service Service PlatformPlatform

MSCMSC

22G G CellularCellular

Develop core technologyDevelop core technology

VoiceVoiceNetworkNetwork

DataDataNetworkNetwork

HLRHLR

DNSDNSDirectoryDirectory

IMMCIMMCPortalPortalWeb ...Web ...

PDSNPDSN

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Summary

Benefits of IS-2000Benefits of IS-2000 MarketingMarketing

– Secure data market leadershipSecure data market leadership

TechnicalTechnical– Enhanced quality and service capabilityEnhanced quality and service capability

FinancialFinancial– Cost effective network investmentCost effective network investment

Network evolutionNetwork evolution– Smooth migration to IMT-2000Smooth migration to IMT-2000