Fabrice Di Seze- Highview Media- LTE Business Model
Transcript of Fabrice Di Seze- Highview Media- LTE Business Model
HighView Media - Fabrice de SezeLTE : Opportunity for a new business model
Mobile data usage forecasts1 Technology to carry the load
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2010 2011 2012 2013 2014 2015
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163Avg. sector throughput2
Peak rate
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Average GB /user /month Throughput in Mbps (Downlink) HSPA+ and LTE comparedHigh scenario
Low scenario
The context : Explosion of Mobile Data
Mobile Data traffic will grow by more than 30 times by 2015
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LTE 4x4LTE 2x2HSPA+
Additional LTE performance improvements expected
over time due to ongoing development of standard
and roadmap (e.g. 4x4 MIMO, higher modulation,..)
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2010 2011 2012 2013 2014 2015
European mobile data traffic (P-bytes/year)
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Mobile broad-band
Mobile internet
May 20, 2010
New spectrum will be made available all over Europe
In a 4 operator configuration, neither 800MHz nor 2.6GHz frequencies cannot be evenly
distributed
800 MHz
30 MHz available
Coverage
The context : New Spectrum
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Coverage
Indoor penetration
5 MHz in LTE not enough to differentiate with HSPA+
2.6 GHz
70 MHz available
Dense Urban environment, hotspots
Optimal with 20 MHz
May 20, 2010
The context : New Spectrum – Example of Germany
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Growth in Mobile data can stabilize the top line but revenue generated by Mobile data
will hardly compensate voice and SMS revenue decrease
Telecom operators will need to significantly control their costs to maintain their
profitability
Delay CAPEX by using HSPA+ to cope with Mobile data growth
The context : Mobile Operators
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Use of additional spectrum and LTE is unavoidable in medium term
Network sharing is clearly the best way to reduce network costs
May 20, 2010
LTE can be use as the platform for network sharing without expensive restructuring costs
Data services
Flat IP architecture
Limited impact on legacy
The proposed model
LTE offers new opportunities for network sharing
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To build and operate a wireless broadband platform that is open to all operators and is
unrivalled in terms of both CAPEX / OPEX efficiency and geographical reach
To build a managed LTE access and core network and to offer network access and
resale of mobile telecommunications services to mobile network operators and service
providers on a wholesale basis.
Network capacity will be provided to other operators as managed capacity on a
wholesale basis only.
May 20, 2010
The new platform is based on LTE Greenfield case but
No subsidies for terminals
Very reduced sales and marketing costs
CAPEX for LTE transmission network is 40% lower than Greenfield due to synergies
with existing infrastructure
No direct sales – the new platform attracts fixed and mobile resale/wholesale partners by
LTE offers new opportunities for network sharing
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No direct sales – the new platform attracts fixed and mobile resale/wholesale partners by
leading the market in terms of coverage, bandwidth capacity and cost efficiency
The efficiency of the model requires the commitment of two existing operators :
Economy of scale
Limit the fight for frequencies
Existing sites from both operator can be re-use
May 20, 2010
New model : Network Architecture
SGSN/ MME
GGSN/ P/S-GW
IP networks
SAE
IP networks
MNO ISPs
P/S-GW
BSCRNC
GSM, WCDMA
LTEMME = Mobility Management EntityP/S-GW = PDN/Serving gateway
POP/ MNO
LTE – Shared Network
May 20, 2010
Operators can focus on their customers & Go-to-market strategy while the new platform
takes care of design, build-out, operation & capacity billing.
The operator can avoid paying high sums for the licenses in 800 MHz band.
The new platform reduces the ramp up investments for the network, minimizes time to
market and bears the commercial risk of Mobile Broadband.
New Model : Benefits for Operators
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Exclusion of direct sales to end-customers avoids channel conflicts.
The new platform will generate wholesale revenues with third parties thereby further
reducing the costs to wholesale partners.
The new model can be a first step to further network sharing.
May 20, 2010
The new platform offers the business and technical platform to “level the playing field” between
operators by creating tier-1 economics of scale for participants
� Exclusively wholesale model
� Common network platform shared by at least 2 MNOs creating economies of scale equal to competitors
� Further economies of scale gained by wholesale to larger established players (e.g. cable, largest ISPs) who also act as extended resellers of participating MNO's core products
Tier-1 economics
� Rapid roll-out of LTE technology nationally exploiting established infrastructures
� Best use of spectrums acquired from the Digital Dividend
� Made to work seamlessly with current technology deployments (HSPA, UMTS / voice)Best network
New model : key benefits
� Made to work seamlessly with current technology deployments (HSPA, UMTS / voice)
� Design criteria: “no capacity compromise” – afforded by fundamental proposition of sharing infrastructure
Best network
� Mobile data (data-cards)
� Smart Phone Data (LTE) + own 3G data and own voice
� Fixed Wireless AccessThe right products
� Tariff options and low prices (low costs) to meet specific needs of individual customer P&L’s
� Wide range of flexible wholesale tariff towards non-MNO customers – designed to attract the “long-tail” of service providers and consolidate them on this platform
Smart tariffs
May 20, 2010
The new model opens strategic options for other goals
� By mutualising network infrastructure costs the new platform can afford to be exemplary in its’ network design and dimensioning to enable at least peer if not superior technical performance of services offered compared to competition
� In no way does the new platform interfere with the competition at retail with existing MNO's
Differentiation
� By sharing costs of mobile broadband access, participating MNO’s have more options towards investments in, for example, fixed line infrastructure
� Participating MNO’s, still retain considerable alternative and fully independent infrastructures (2G Flexibility
New model : key benefits
� Participating MNO’s, still retain considerable alternative and fully independent infrastructures (2G to HSPA) which can remain as independent of collaborative as the two parties deem to be most beneficial
Flexibility
� It can be argued that by “levelling the playing field” between MNO's in terms of access to similar economies of scale at infrastructure level, then the level of competition at retail level is at least maintained if not strengthened
Regulation
� Over the next 10 years the transition to data centric services and pricing will take place
� The new platform offers a unique opportunity to exploit this transition by mutualising investments, risks and operational costs of network
Strategic opportunity
May 20, 2010
LTE - greenfield vs new model
Cum. Cash Flow
Total CAPEX
LTE -greenfield
1.6 BN EUR
2.9 BN EUR
New model
3.0 BN EUR
2.7 BN. EURTotal CAPEX(license cost included)
NPV (15%)
IRR
2.9 BN EUR
negative
14.9 %
2.7 BN. EUR
552 MM EUR
31.6 %
May 20, 2010
Greenfield approach suggests that a strong new operator could be established 20 years
after opening of the GSM-networks – an unrealistic assumption !
The new platform suggests leveraging on existing customers through resale /wholesale
partnership
The new model is superior in terms of risk, market entry speed, operational complexity,
Cash Flow, total CAPEX, NPV and IRR
Conclusion
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Cash Flow, total CAPEX, NPV and IRR
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