The European way to think the Digital World Mobile services IDATE International Conference Montpellier (France), 23 November 2005 Frédéric.

The European way to think the Digital Worldwww.idate.org

Mobile servicesIDATE International Conference

Montpellier (France), 23 November 2005

Frédéric Pujol

Head of the mobile services division, [email protected]

IDATE © 200523 November 2005

www.idate.org

23G, when media meets mobile

Mobile services in Western Europe

Mobile subscribers and distribution

243288 309 335

363 384 394 403 410 416 42162%

74%79%

85%92%

97%100% 102% 103% 105% 106%

0

50

100

150

200

250

300

350

400

450

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

years

Mo

bile

bas

e

Mo

bile

dif

fusi

on

Total mobile subscribers (millions) Mobile diffusion-base w hole population

2 billion mobile subscribers worldwide of which 1.4 billion using GSM technology

Western Europe mature market seeking new revenue streams

EU15 + Norway & Switzerland

Source : IDATE (in « 3G economics » report)


www.idate.org


31,527,9 27,1 26,4 25,8 25,3 24,8 24,3 23,8 23,3 22,9

2,1

2,8 3,7 4,7 5,2 5,7 6,4 6,9 7,7 8,5 9,3

0

5

10

15

20

25

30

35

40

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

EUR/month

ARPU voice ARPU data

ARPU (Average Revenue Per User)

Western European: total ARPU

Close to 85% of data ARPU= SMS & MMS in 2005

Non messaging data ARPU

Non messaging data ARPU will grow from 15% of total ARPU in 2004 to 35% in 2010

Voice represented 83% of the total ARPU in 2004 and will account for 71% in 2010

0

10

20

30

40

50

60

Bill

ion

EU

ROther revenue sources 0,0 0,1 0,6 1,4 2,2 3,9 5,9 8,5 12,0 15,0 17,4

SMS & MMS revenues 4,9 8,7 12,6 16,9 19,7 22,7 23,8 24,1 25,2 28,9 30,8

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Source : IDATE (in « 3G economics » report)



www.idate.org


Western Europe

Differences between European mobile markets

0

50

100

150

200

250

2000 2001 2002 2003 2004

France Germany Italy Spain Sweden UK Netherlands

MoU (Minutes of Usage) reflect price levels



www.idate.org


ARPU - Trends

Western Europe (€) USA (2004)€42 Cingular, T-Mobile

€51.6 Sprint PCS

€56.7 Nextel

€46.7 Q2 2005

South Korea€33.5

(Q2 2005- Merill Lynch) €36.5

(SKT Q3 2005)

0

5

10

15

20

25

30

35

40

2000 2001 2002 2003 2004

Germany

0

5

10

15

20

25

30

35

40

2000 2001 2002 2003 2004

Italy

0

5

10

15

20

25

30

35

40

2000 2001 2002 2003 2004

France

0

5

10

15

20

25

30

35

40

2000 2001 2002 2003 2004

UK

0

5

10

15

20

25

30

35

40

2000 2001 2002 2003 2004

SwedenSource : IDATE (in « 3G economics » report)


www.idate.org


ARPU - Japan

Average ARPU 2004: €52 (DoCoMo & au)

3G ARPU: FOMA/DoCoMo: €70 – 34% data

KDDI: €53 – 26% data

Vodafone: €44 – 22% data


www.idate.org


3G development

3G growing faster than GSM in the early 90s

100 WCDMA networks launched worldwide (11/2005)UMTS in Western Europe

02 000 0004 000 0006 000 0008 000 000

10 000 00012 000 00014 000 00016 000 00018 000 000

Dec 2

003

Mar

ch 2

004

June

200

4

sept

-04

Dec 2

004

Mar

ch 2

005

June

200

5

sept

-05

3G s

ub

scri

ber

s

Top 10 Europeanmarkets

Hutchison is the first 3G operator

Major mobile operators have launched 3G

3G represents 4% of mobile subscribers in Western Europe

3G expected to reach 25 million subscribers at end 2005

Source : IDATE

(in « 3G economics » report)


www.idate.org


3G issues

Real launch of 3G by major players in Western Europe- 3G brings higher data rates, capacity (and unlimited packages for voice)

Flat-rate tariffing for data: - KDDI : € 30A trend in Western Europe – which tariff ?

3G Launch date

Technologies 3G subscribers – June 2005

Western Europe

2003 WCDMA 12 million

Japan 2001 WCDMA CDMA 2000

15 million (DoCoMo + Vodafone) KDDI: 3.2 million EV-DO (total CDMA 18.5 million)

South Korea 2002 WCDMA CDMA 2000

2000 (KTF & SK Telecom) 31.3 million (EV-DO)

USA 2005 WCDMA CDMA 2000

1000 (Cingular Wireless) N/A (< 1 million ?) (67 million CDMA 2000 Sprint PCS + Verizon 1Q2005)


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Mobile operators: M&A - Financial results

USA: Cingular/AT&T Wireless, SPRINT/Nextel Recent M&A in Western Europe:

Financial results:EBITDA margins generally in the 30-50% range

Cash available for 3G investments

Country Target Buyer Status

Finland DNA TDC October 2005 ?

Italy Wind Orascom June 2005

Netherlands Telfort (2G & 3G) KPN Mobile June 2005

Norway Sense (MVNO) TeliaSonera August 2005 91% shares

Spain Amena (2G & 3G) France Telecom July 2005 80% shares

Spain Xfera (3G) Hutchison ? Discussions 50% shares

Sweden Vodafone Sweden (2G & 3G)

Telenor November 2005 $1.25 billion

UK, Germany, Ireland mmO2 (2G & 3G) Telefonica October 2005 € 26 billion


www.idate.org


Mobile VoIP

New technologies now enable end-to-end mobile IP communications(UMTS TDD, UMTS FDD: release 6, CDMA 2000 EV-DO rev.a, Flash-OFDM, I-Burst, WiMAX)

A real threat:- New technology enablers- Dual-mode terminals- FMC- Existing services

Wireless VoIP network technologies and availability:

Impact on voice ARPU likelyWestern European mobile operators seem reluctant to introduce dual-mode

handsets

Network Terminal Availability

Wi-Fi only PC cards, handheld terminal 2004-2005

Wi-Fi/cellular Dual-mode terminal 2005

WiMax PC cards, handheld terminal 2007

Cellular EDGE or 3G PC cards, handheld terminal or smartphone 2005


www.idate.org


2000-2004 2005 2006-2010

Mobile data services

Messagingapplications

Mobileoffice

Entertainment

Otherapplications

Music

Games

Video

TVBrowsing

LBS

Mobile payment

Enhanced data rates: HSDPA

RingtonesMusic

downloading

Networkcapabilities Enhanced data rates: EDGE

Enhanced data rates: UMTSEnhanced datarates: HSUPA

Beyond 3G

Mobile VoIP

SMS P2P Premium SMS MMS & PMMS

mobile email

Streaming TV Broadcast TV MBMS ?

PoC

Mobile IM

Video streaming

Game downloading multiplayer online games ?

Micro-paymentsolutions

Contactlesssolutions

First applications Integrated applications

Mobile blogs

Enhanced data ratesE-mail, Intranet &Internet access

Mobile data services.

Future growth

generators ?


www.idate.org


New mobile services: music

Music- From ringtones to full track downloading- Mobile music value chain:

Main questions- DRM (Digital Rights Management)- Which business model ?- Player and memory also included in the terminal is there a risk for a camera

phone effect ?

Content owners

Application developers Publishers WASP Portal Operator

Devicemakers

Creates original content

Funds the dvlpt, selects the bundle app, ensure s mkg

Operates the platform

Offers the content

Provides the connectivity

Provides the devices

Creates a packaged offering

Payment for content creation, protect content

Payment for marketing made,

remain sole way to market content

Payment pfor development

achieved

Payment for access

Payment for connectivity,

increase traffic

Payment for manufacturing an adequate

device

Payment for packages creation

Sony, EMI, UM

Wavefront Sony BMGiTouch, MForma

VodafoneLive!

Orange World

OrangeT-Mobile

NokiaSamsung


www.idate.org


New mobile services: mobile TV

Mobile TV- Streaming TV on 3G is attractive but is not a medium-term solution

Requires too much bandwidth on 3G networksBroadcast mode is necessaryNew frequency bands are necessary

- A host of experiments being conducted

- Choice of the technology (DVB-H, T-DMB, S-DMB, MediaFlow, MBMS)?DVB-H and T-DMB in Western Europe

- Content? Dedicated or not?

- Which business model? Relationship between the mobile sector and the media sector for broadcasting?


www.idate.org


Japan 1/3

General situation- Penetration rate of 69% in May 2005 – 37% are 3G subscribers- Decreasing ARPU levels: ARPU to move into Yen 6000 (€ 43.5) range- Increasing competition with more pressure from KDDI and potential new

entrants- Number portability’s expected impact on churn

Source : DoCoMo

Situation of DoCoMo:The first WCDMA (UMTS) operatorStill controls 56% of mobile

subscribers in Japan

Revenues and profits down

i-mode: transition from 2G to 3G and the impact for data flat rate

Felica Networks (JV with Sony) Retention strategy ? From wallet-type to credit card functionality Interest from KDDI & Vodafone


www.idate.org


Japan 2/3

KDDI’s impact Controls 27% of mobile subscribers in Japan

Very aggressive on data pricing (flat-rate) and 3G growth with CDMA 2000 1X/ EV-DO

ServicesGames (« EZ Game Street »)Music downloading (« Chaku-uta full »)Mobile auctionsBlogsAnalogue TV

€30


www.idate.org


Japan 3/3

New entrants- 2 new mobile licenses in the 1.7 GHz band (paired spectrum):

Softbank BB

eAccess

These two players are already in the DSL business in Japan

- one new mobile license in the 2 GHz frequency band (unpaired spectrum: TDD technology likely – IMT 2000 mandatory?):

IP Mobile (TD-CDMA tests)

Willcom (evolution of the PHS network)

Livedoor (iBurst technology from ArrayCom)

Yozan will open a commercial WiMAX service at 5 GHz before end 2005

Licenses awarded to Softbank, eAccess and IP Mobile in November 2005


www.idate.org


Key questions

Impact of FMC, data flat rate & mobile VoIP?1

2

3

Which role for Internet players: Google, MSN, eBay...?

Mobile broadband: which applications/cost for HSDPA?

Regulatory environment? MVNOs, newcomers in the mobile sectorTermination rates, SMS

4

5

Impact of new mobile services (TV, music...) on ARPU?

The European way to think the Digital World Mobile services IDATE International Conference Montpellier (France), 23 November 2005 Frédéric.

Documents

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g economics report

data slide

mobile services division

messaging data arpu

g issues real launch