Ericsson: Latam Insights, June 2015 - Leading the way in the Networked Society

JUNE 2015

Leading the way in the Networked Society

LATAMINSIGHTS

2 INSIGHTS: REGION LATIN AMERICA AND CARIBBEAN JUNE 2015

All industries are facing transformation, with the digitization of services and the shift from physical consumption to virtual products. In the modern, disruptive environment, businesses are turning to smarter ways of working and new collaborative models, all of which are driving demand for greater levels of connectivity and mobility.

The introduction of 5G will not happen in a single, clearly visible step. 5G will, just as the generations of mobile technologies before it, evolve gradually over time, and become an essential component in realizing the Networked Society. We expect that fully commercial 5G systems will enter the market sometime around the year 2020 and that today’s LTE technology will evolve to become part of 5G.

We believe that in the 5G era, operators will have one physical network infrastructure and one pool of frequency bands, supporting many separate virtualized networks (slices), each with unique characteristics for meeting the specific requirements of the 5G application it serves – for example in a utility or transport context.

5G will put substantial requirements on the radio interface, the core network, support solutions and the devices. It will require enormous technological advances. In many machine-to-machine applications, for example, 5G will require enhanced air interfaces,

enhancements to the core network, as well as strengthened support systems. 5G will need to meet new performance levels. It will enable the Networked Society to realize its full potential, where everything is not only connected, but connected for a purpose.

WELCOME

5G – transforming INDUSTRY AND society

The foundation of mobile telephony

~1980

1G

Mobile telephony for everyone

~1990

2G

The foundation of mobile broadband

~2000

3G

Mobile broadband enhanced

~2010

4G

Embracing a Networked Society

~2020

5G

Source: Ericsson Mobility Report, November 2014

App coverage with data rates exceeding 10 Gbps

Network latency under 1 millisecond

Capacity expansion by a factor of 1,000

Energy efficiency gains by a factor of 1,000 per transported bit

5G

Source: Ericsson Mobility Report, November 2014

The world is becoming increasingly connected and ICT is starting to fundamentally transform large parts of society. Networks are now relevant not only to people using their smartphones, but also businesses and society as a whole.

As an industry leader, Ericsson has set out a clear long-term commitment to leadership and driving change through mobility in an evolving ICT landscape. Many of the solutions we see in today’s Networked Society seemed unbelievable not too long ago.

In our latest Insights brochure, we take a look at some of our regional projects, alongside highlights from the Ericsson Mobility Report and ConsumerLab reports. In addition, we share the latest consumer and market trends currently driving the transformation journey.

I hope that you will enjoy reading this brochure, and I or any other Ericsson representative would be happy to engage in a further discussion about these topics.

Regards,Sergio Quiroga da CunhaHead of Ericsson Region Latin America and Caribbean

3 3INSIGHTS: REGION LATIN AMERICA AND CARIBBEAN JUNE 2015

ICT unlocks value and changes rules of business across industries

As the Networked Society becomes a reality, ICT solutions enable cross sector collaborations, bringing value to society, industries and citizens. The digital lifestyle of urban citizens will impact energy management, travel patterns, transport modes and purchasing behaviors. The energy sector is experiencing increasing requirements for renewable energy, and changing regulations for smart grids, real time data collection and analytics.

Key points

> Over 70 percent of consumers believe that traffic volume maps, energy use comparison apps and water quality checkers will be mainstream by 2020

> Rapid uptake of smart meters, for example, in 2016 Estonia will be the world’s first country with 100 percent coverage

> 50 percent of drivers worldwide would switch to a comparable brand to get Connected Car services

> Solar energy used for the grid is expected to increase by 20 percent

This year:

> More people will watch streamed on-demand video than broadcast TV on a weekly basis > Video will generate half of mobile data traffic > LTE subscriptions growth will exceed 80 percent, exceeding 800 million > World mobile broadband coverage will be above 70 percent

KEY market TRENDS 2015

ANSFORMING INDUSTRIES

TR

New media services enable digital lifestyles and personalization

On-demand video consumption will continue to grow rapidly in 2015, driven by the increasing availability of IP-delivered TV services. New and personalized TV services will expand due to consumers’ willingness to pay and the availability of smart recognition capabilities. Communication over video is growing primarily in the younger segments as well as in the enterprise segments for professional use.

Key points

> In 2015, 50 percent will agree it is very important to have personalized on-demand content

> Smartphone video viewing will increase by >30 percent, comparable to 2012 figures, reaching 6 hours per week

> More than 50 percent of all YouTube consumption will occur on mobile devices

PERSONALIZED MEDIA LIFESTYLE

Security top-of-mind as efficiency and new services drive cloud deployment

Cloud and network functions virtualization (NFV) adoption is rising; however concerns about security and governance are limiting factors to fully embracing cloud technology. IT systems continue to increase in complexity. Operators and enterprises are exploring technologies that ease complexity while ensuring security. Increasingly, organizations are beginning to build infrastructure and applications that are cloud-optimized and software-defined.

Key points

> Over 50 percent of operators expect to have their first virtualized network functions deployed in a live commercial network in the next 12-24 months

> 74 percent of enterprises are concerned about cloud security and governance

> By 2015, the spending on cloud services is expected to grow by 20 percent and large data centers will account for more than 25 percent of all data hardware

CLOUD EVOLUTION

DATA MONETIZATION

Successful data monetization driven by innovative strategies

An increasing set of operators, known as ‘Frontrunners’*, are successfully converting strong global data growth into profitable revenue growth. Frontrunners achieve continued success by securing innovation, tailoring data offerings and focusing on user experience and superior network performance. Financially, these Frontrunners grew their revenues faster than competition at an average rate of 13 percent compared to 3 percent (2009-2014).

Key points

> Data traffic will grow up to 8 times by 2020, with a compound annual growth rate (CAGR) of 40 percent

> In 2015, data traffic for smartphones, tables and laptops will increase by 50-60 percent from 2014

> The number of Frontrunners is predicted to increase in 2015 from 20 to 30 operators

> Frontrunners are projected to continue to have service revenue growth – reaching more than 10 percent expected 2015 year-on-year for the group

*Frontrunners are defined as (equal or more than): 40% smartphone penetration, 4% revenue growth YoY,10% market share

> One-third of all Frontrunners are in the Americas

Data consumption redefines need for app coverage and performance

In 2015, half of all subscribers will have a smartphone and expect access to content, services and data-intensive apps anywhere, anytime. Enterprises are rapidly adopting cloud-based solutions and services, thus increasing the demand for bandwidth and app coverage. The need for bandwidth-intensive apps in urban areas makes indoor and small cell coverage a vital high growth area this year.

Key points

> Mobile data traffic will grow by more than 50 percent during 2015. Video will account for half of total traffic

> For good quality performance, 2 Mbps speed is required while 1 Mbps is sufficient. In 2015, the probability of experiencing a mobile network throughput of at least 1 Mbps will reach 80 percent globally

> LTE subscriptions worldwide expected to grow >80 percent, with rapid uptake in emerging markets

SUPERIOR PERFORMANCE

> Network quality is a key differentiator that operators can explore in Latin America as many users are dissatisfied and investments in the network improve financial returns, as shown by our Value of Performance study

4 INSIGHTS: REGION LATIN AMERICA AND CARIBBEAN JUNE 2015

ERICSSON MOBILITY REPORT

Scan the QR codeto read the latestEricsson Mobility

Report findings

According to our interim Ericsson Mobility Report published in March 2015, two-thirds of app data traffic over mobile networks comes from top five apps in each country studied, with video streaming and social networking dominating.

MOST USED APPS IN LATAM & CARIBBEAN

Top five apps by mobile traffic volume

US

Base: 153,939 users

South Korea

Facebook 20%

AfreecaTV 16%

YouTube 11%

NAVER 11%

Android browser 9%

Other 33%

Base: 146,190 users

Spain

Base: 19,613 users

YouTube 10%

Facebook 20%

Instagram 13%

Chrome 10%

Android browser 11%

Other 36%

Facebook 16%

YouTube 15%

Netflix 12%

Instagram 9%

Snapchat 9%

Other 39%

Mexico

Base: 3,867 users

Brazil

Facebook 28%

Instagram 6%

Other 22%

Base: 29, 336 users

Facebook 36%

Chrome 10%

Other 19%

Instagram 4%

Whatsapp 5%

Whatsapp 13%

Chrome 16%

YouTube 26%

YouTube 15%

Facebook is the number one app in all countries included in the study. In Brazil, the mobile social network platform is responsible for 28% of all mobile data traffic. In addition, Google Chrome and YouTube follow with 16% and 15% of data traffic in the country, with WhatsApp and Instagram accounting for 13% and 6%.

Mobile data traffic in Latin America & Caribbean

158,191 425,342 610,847 836,314 1,121,111 1,492,821

1,940,143

2,601,265

231,445 361,438

531,216

734,795

982,470

1,296,967

1,667,645

2,233,816

175,018

346,549

608,045

995,020

1,510,879

2,267,940

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

PC+ Tablets + Routers + Smartphones+ Basic phones Traffic TB/month (December value)

Tablets, Traffic TB/month (December value)

Smartphones, Traffic TB/month (December value)

PC, Traffic TB/month (December value)

Routers, Traffic TB/month (December value)

Basic phones

LTE data traffic

8,000,000

TB/month

The Ericsson Mobility Report June 2015 release shows that by 2020, advanced mobile technology will be commonplace around Latin America and the Caribbean. Smartphone subscriptions will more than double, reaching 603 million, with 86% of the region’s population using smartphones. The comprehensive update on mobile trends shows that growth in mature markets comes from an increasing number of devices per individual. In developing regions, it comes from a swell of new subscribers as smartphones become more affordable; Latin America will add more than 330 million smartphone subscriptions by the end of 2020. With the continued rise of smartphones comes an accelerated growth in data usage: smartphone data is predicted to increase seven-fold by 2020, when 86% of all mobile data traffic will come from smartphones. Average monthly data usage per smartphone in Latin America will increase from 0.8 GB in 2014 to 3 GB by 2020.

86% OF LATAM & CARIBBEAN USING SMARTPHONES BY 2020

INSIGHTS: REGION LATIN AMERICA AND CARIBBEAN JUNE 2015 5

liberationfrom location

A report from Ericsson ConsumerLab shows that the boundaries between work and personal life, and between being at home and outdoors are blurring in the way consumers use their mobile devices. People tend to switch screens (devices) to access services and content across different locations, regardless of time and place.

Communication is a quintessential need. We meet it by being accessible to our friends, family and extended community in person and more often nowadays, online. Being able to make decisions on-the-go using relevant content that is accessible anytime, anywhere has assumed paramount importance among consumers. This Ericsson ConsumerLab Latin America study highlights the connectivity expectations of consumers as they go

In general, smartphones are becoming as popular as PCs in frequency of internet usage, although there is preference for smartphones in Mexico and PCs in Uruguay:

about their lives. The data presented in this report was gathered from a total of 9,812 face-to-face interviews and 1,027 online interviews conducted in 2014 across six countries in Latin America: Argentina, Bolivia, Uruguay, Brazil, El Salvador and Mexico. Interviews were conducted with consumers aged 15–69 years old. Overall, the data represents 189 million people living in Latin America.

Calls, messages and music are the most popular activities on mobile phones/smartphones, while social networking, internet browsing and on-line shopping are the top activities on PCs. Tablets are yet to pick up, but they are widely used for watching video content.

Frequency of internet use per device and country, users who access the internet at least daily

40%

30%

50%

60%

70%

20%

10%

PC Mobile phone Tablet

ARGENTINA BOLIVIA BRAZIL EL SALVADOR MEXICO URUGUAY OVERALL

Source: Ericsson ConsumerLab, Liberation from location, Latin America 2015Base: Consumers aged 15-69

Scan the QR codeto read the

ConsumerLab report, “Liberation from Location”

Ericsson ConsumerLab

77%

Activities performed across different devices (mobile/smartphone, PC and tablet)

Source: Ericsson ConsumerLab, Liberation from location, Latin America 2015

52% 46%21% 65% 60%38% 80% 43%

MUSIC GAMINGSOCIAL NETWORKING

CALLS ONLINE SHOPPING

VIDEOWORK/STUDY RELATED

MESSAGING INTERNET BROWSING

MOBILE/SMARTPHONE

PC

TABLET

62% 45% 22%91% 34% 23%90% 57% 62%

44% 33% 31%15% 23% 17%23% 45% 27%

6 INSIGHTS: REGION LATIN AMERICA AND CARIBBEAN JUNE 2015

ENABLING CHANGE-MAKERSThe Networked Society is transforming entire industries. They are being reshaped and redefined by technological developments, society’s changing needs and a more collaborative culture. ICT tools are rapidly becoming everyday resources that are fundamental for businesses, organizations and people.

The telecom business is transforming, and the scope depends on what role you want to play in the Networked Society:

> Network Developer Focus on providing connectivity services to consumers, as well as for wholesale and M2M business. Maximizing utilization of the network and spectrum assets is a key priority.

> Service Enabler Aim to add value to connectivity by distributing and reselling services and content, as well as providing an extended portfolio of business-enabling services to enterprises.

> Service CreatorFocus on developing new consumer and business services in, for example, media, finance, smart home and other sectors. They have a strong focus on driving and collaborating in broad innovation to create new offerings and business models.

Whichever you choose, we can find solutions to support the key issues you face and help drive the business. Have you decided the role you want to play in order to achieve success?

GROW YOUR BUSINESS TO CREATE NEW TOP LINE GROWTH Rethink how to boost revenue growth by launching innovative new services to existing customers, and increasing usage and service uptake by offering outstanding service performance. Transform your business by enabling growth through fresh roles in the eco-system: new business models, new distribution channels and new services to new customers.

DRIVE PROFITABLE GROWTH BY ENABLING SERVICES AND TRANSFORMING PROCESSES New services and connected devices appear constantly, driving expansion and customer demand. It is a challenge to meet that demand while keeping costs under control. Gain insights for the activation of Customer Experience Management and new enterprise and cloud-based services. Drive the enablement of consistent digital sales and interaction channels.

OPTIMIZE YOUR NETWORK PERFORMANCE AND OPERATE AT MAXIMUM EFFICIENCY People expect their services to work. High performing networks are key to success. To be able to meet future demands, evolve your networks with radio technology, and discover and leverage efficiencies through services, partnerships and platform virtualization. Optimize performance to deliver a better user experience and increase your competitive edge.

EXPLORE THE POWER OF ICT TO CREATE NEW OPPORTUNITIES Properly deployed, ICT can both improve and simplify business practices and processes across a number of diverse sectors, including utilities, transport and public safety. Apply ICT to simplify and improve business practices and processes; capitalize opportunities driven by connectivity and data analytics. Manage mobility, connectivity, security and applications by envisioning future ICT expansion opportunities and find out ICT’s potential for business innovation.

grow

drive

perform

EXPLORE

At Ericsson, we pride ourselves on our history of innovation and technology leadership. Below you will find examples of where we have really pushed the boundaries, working to meet the evolving needs of our customers throughout Latin America and the Caribbean.

BANKING ON FINANCIALINCLUSION

We partnered with ASBANC, Peru's National Bank Association, to design and implement Mobile Money to benefit 2.1 million Peruvians to own a mobile wallet by 2019.

JOINT R&D PROJECT FORNETWORK VIRTUALIZATION

Partnership between Ericsson and Telefonica will shorten time-to-market and enable innovation for new network services with superior performance.

CONNECTING THEPERUVIAN AMAZON

Telefonica Peru and Ericsson are implementing the first rural connectivity project in Latin America to provide internet to Amazon communities with 4G/LTE technology.

SUPPORTING PEACE ANDHARMONY IN MEXICOEricsson and the Whitaker Peace & Development Initiative have joined efforts to help violence-affected and vulnerable communities on the path to reconciliation and resilience.

EMERGENCY REPONSESYSTEM LOWERS CRIMEIn Brazil, the city of São José dos Campos saw crime rates fall after an emergency response system developed by Ericsson was implemented.

LATIN AMERICA’S FIRST LTENETWORK ON APT700 BAND

Entel, Chile and Ericsson are modernizing the operator’s 2G, 3G and 4G network access, and will deploy the first LTE network in Latin America on the APT700 Mhz band.

RADIO DOT DEPLOYMENTFIRST IN LATAM

Ericsson’s small cell solution for indoor coverage, the Radio Dot System, as been deployed by Claro in a commercial building in Rio de Janeiro, Brazil.

YOUNG EXECUTIVES PROGRAMSHAPES TOP TALENTEricsson Latin America’s Young Executives Program is preparing top engineering and business graduates for a career in ICT, supporting our customers with the most knowledgeable experts in the industry.

INCREASING EFFICIENCY INURBAN MOBILITY

Volvo Bus Latin America and Ericsson are working together to foster urban mobility through real-time traffic management and passenger information systems.

35,000 granted patents

USD 34 billionnet sales 2013

25,000 R&D employees

64,000 service professionals

ERICSSON AT A GLANCEEricsson is the driving force behind the Networked Society, and a world-leading provider of communications technology and services. Our long-term relationships with all major telecom operators in the world allow people, businesses and societies to fulfill their potential and create a more sustainable future.

118,000 employees

180countries with customers

USD 5 billioninvested in R&D annually

#1 LTE market sharein the world’s 100 largest cities

35,000 granted patents

USD 33 billionnet sales 2014

1 billion subscribers served by networks for which we provide managed services

25,000 R&D employees

2.5 billion subscribers supported by us

#1 > MOBILE INFRASTRUCTURE> OSS/BSS > SERVICES> TV PLATFORMS AND DELIVERY

65,000 services professionals

USD 1 billionin R&D in 15+ years

10,000service professionals

26countries with Ericsson offices

123 yearsUSD employees

11,000 in Latin America

Regionally:

Globally:

SMART CITIES UNITCREATED

New Latin American unit to focus on solutions for urban mobility, public safety and energy efficiency.

INSIGHTS: REGION LATIN AMERICA AND CARIBBEAN JUNE 2015 7

EricssonSE-126 25 Stockholm, SwedenTelephone +46 10 719 0000www.ericsson.com

RLAM-15:003006 Uen@Ericsson AB 2015

There are growing expectations on how interactivity will benefit society. The Internet of Things (IoT) will not only raise our quality of life, but above all, is a great business opportunity.

IoT will revolutionize our lives and business models. When smart products are connected, we can have a connected life that opens doors to new business opportunities and disruptive ideas involving things yet to be named, and markets yet to be discovered.

IoT will bring increased automation to everything that is connected through the internet. We are going from stovepipe solutions to a connected life. For instance, cars that communicate with each other and with other elements on the road can save lives and solve traffic congestion problems; a coffee machine and a car heater connected to your morning alarm can make life smoother.

To capture evolving business opportunities, it’s important to understand all the dimensions. And this is happening right now. In a few years, we will look back on all this and say, “that was when it all started.” Ericsson has brought together thought leaders to weigh in the Internet of Things ecosystem. So take a look into the future – a future that is already here!

internetof things

Scan the QR codeto learn more about

business opportunities in the Internet of Things

Growth Codes 2.0

Scan the QR codeto learn more about successful operator

strategies

With voice revenues under pressure and mobile data use soaring, operators have been forced to evolve both their networks and their business models. Some have been more successful than others—we call these operators “Frontrunners.” Between 2010 and 2014, Frontrunners enjoyed a 9.6% CAGR, while competitors in their markets achieved only 2.7%. To understand how these Frontrunners have consistently outpaced the competition, Ericsson, in collaboration with EY, embarked on an study where six common traits—which we call the Growth Codes—were defined: Gap Minding, Streetwise Metrics, Showcasing, Unboxing, Ecosystematic and Co-Partnering.

While the Frontrunners make use of all the Growth Codes, they tend to place a larger focus on a subset of these depending on the growth strategy they apply. In Growth Codes 2.0, we have investigated Frontrunners’ differentiation, customer, market and product scope, as well as their approaches to technology and operations, going deeper into their own competitive strategies to uncover three different paths to achieve profitable growth:

Three strategies to profitable growth

Differentiate on high-performing

networks and strong brand preference

Differentiate on quick adaptation to market

conditions

Differentiate on being first to market with uniquely designed

offerings

Quality-ledprogression

Market-ledadaptation

Offering-ledtransformation

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