APAC M2M Outlook

Jayesh Easwaramony Vice President, ICT Practice

2

Business Models 2

Forecasts 3

Overview 1

3P4E6-60

Changing face of telecom

The next 10 years will look very different from the last 10 years

Source: Frost & Sullivan

Penetration

Till 2010

Growth in connected devices

Till 2020

Explosive growth

>12%

Mature Growth

Telecom Outside

Telecom inside

0.9

5

6

80

4-5%

Smart enabler

Connections (bn) Connected devices (bn)

Consumer centric

4

Why the perfect storm

CEO360

ECONOMIC

• Fiscal stimulus of $ 1 trn over 2010-12 across APAC leads to new wave of infrastructure creation

GLOBAL

• Rapid Urbanization • Innovating to zero –

sustainability

INDUSTRY

• Convergence of industries – smart grids, energy, comms, logistics

CUSTOMER

• New middle class • Generation Y • Flexibility

TECHNOLOGY

• Broadband as utility• Cloud computing • Geo-tagging

COMPETITIVE

• Service revenues • New business models

BEST PRACTICES

• Smart city – fulcrum of new investments

• Connected communities

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Machine to Machine ( M2M) – Lots of possibilities

M2M has the ability to impact multiple industries

Vertical

Segment

Business Government Consumer

Automotive Utilities

Finance Energy

Healthcare Retail Logistics

Manufacturing

Public/Society

Consumer Electronic

Telematics X                  

Track and Trace X           X X    X

Remote Sensor/Monitoring X  X  X   X  X  X X X  X X

Smart Metering & Grid   X   X            

POS/Payment     X     X        

Security X  X  X  X  X X X  X  X  X

Connectivity         X         X

Source: Frost & Sullivan

Machine to Machine(M2M) as any kind of communication between geographically distributed wireless devices through a centrally managed software platform. A M2M system comprises of connectivity enabled devices to capture events and collect the data, a cellular/hybrid network to communicate with the server and a software application that allows the data to be analyzed, reported, and acted upon.

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M2M System Architecture

Layer Key Components Functions

Application Layer Fleet Management /Supply Chain Management /Health Care Remote Diagnose etc.

Business Intelligence

Management Layer Service Management, OSS/BSS/NMS etc Data Analysis ; Provision; Billing ;

Sensing Layer M2M Devices with Camera; RFID, GPS, Sensors and actuators

Data Collection

Communication Layer 2G/3G/WiMAX/LTE/ADSL Transmission

The M2M system consists of four layers: sensing layer, communication layer, management layer and application layer.

System Architecture

7

Major Applications of M2M

M2M Applications

• Remote Monitoring/Diagnostics • Remote asset management• Prototype testing• Regulation compliance (carbon

credits)

• Remote Monitoring/Diagnostics • Remote asset management• Prototype testing• Regulation compliance (carbon

credits)

• Remote patient care• Remote Monitoring /

Diagnosis • Weather / Temperature

Monitoring

• Remote patient care• Remote Monitoring /

Diagnosis • Weather / Temperature

Monitoring

• Mobile Payment/Mobile Wallet• Remote Asset Management • Security • Remote Servicing

• Mobile Payment/Mobile Wallet• Remote Asset Management • Security • Remote Servicing

• Automated metering• Energy usage and optimization• Check on pilferage and theft• Street light management• Monitoring for seismic activity

and other dangerous natural phenomena

• Automated metering• Energy usage and optimization• Check on pilferage and theft• Street light management• Monitoring for seismic activity

and other dangerous natural phenomena

• Healthcare• Personal Navigation • E-Reader• Baby/Old Care /Locator • Residence Security

• Healthcare• Personal Navigation • E-Reader• Baby/Old Care /Locator • Residence Security

• Inventory update across distributed locations/warehouses• POS / Vending Machine • Mobile Payment/Mobile Wallet

• Inventory update across distributed locations/warehouses• POS / Vending Machine • Mobile Payment/Mobile Wallet

• Real-time stock management• Tracing sensitive items

• Real-time stock management• Tracing sensitive items

• Vehicle tracking • Telemetric• Navigation and routing• Route optimization• Fleet Management

• Vehicle tracking • Telemetric• Navigation and routing• Route optimization• Fleet Management

Automotive/Transportation

Logistics

Utilities & Energy

Retail

Manufacturing

Consumer

Finance

Healthcare & Others

APAC M2M Market Outlook: Market Segmentation

8

Enablers

Constraints

Enablers

Constraints

Revenue opportunities for MNOs

Adoption of Mobile Technologies:

3G/WiMAX/LTE

Lack of standardization Lack of economy of scale

Costs of initial deployment

M2M Drivers and Restrains

Government andregulatory support

Falling cost of M2M modules and devices

Shift of business model

Source: Frost & Sullivan

APAC M2M Market Outlook: Drivers and Restrains

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Business Models 2

Forecasts 3

Overview 1

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Complex Value Chain

The value chain is very complex

Source: Frost & Sullivan

Device Vendor

s

M2M Chipset Vendors

M2M Module Vendors

Application Developer

M2M Platforms

M2M Service

Distributors

Vertical specific/ System

integrators

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M2M Operators Market Development 2004 & before 2005 2006 2007 2008 2009 2010 2011

Dev

elop

ed M

arke

ts

Em

ergi

ng

Mar

kets

* Vodafone platform

* China Mobile

* Maxis Launch M2M

* NTT DoCoMo

* Softbank * nPHASE (Qualcomm and Verizon)

* Telstra

* KDDI

* China Unicom

* China Telecom

* Celcom (Malaysia)

* Sprint NextTel & DataSmart

* AT&T Platform

Globe Leaders

(Alliance & Platform)

* SKT

* KTAPAC

Early Adopters

APAC

Fast Followers

* CSL

* Globe

* StarHub

* Reliance

* KPN platform

Source: Frost & Sullivan

* Telenor Connexion

12

M2M Business Models

M2M Chipset Vendors

M2M Module Vendors

M2M Device

Vendors

M2M Application Developer

M2M Service

Providers

M2M Service

Distributors

Vertical Industries & Enterprises Consumers

M2M Connection Providers

Model 1: Device Driven Model Telco: AT&T

Telco: AT&T

ConsumersConsumersAmazonAmazon

KindleKindle AmazonAmazon

Telco: SprintTelco: Sprint

NPHASENPHASEBusiness & ConsumersBusiness & ConsumersVerizonVerizonQUALCOMM QUALCOMM

Model 2: Consortium Model

Various Partners Various

Partners

Verizon Verizon

VerizonVerizon

Source: Frost & Sullivan

13

M2M Business Models (Contd…)

Model 3: Platform Model

(usually through partnerships) TelstraTelstra

Business & ConsumersBusiness & Consumers

Model 4: Operator Driven Model

Business& Consumers Business&

Consumers

Jasper WirelessJasper

Wireless

TelstraTelstra

M2MPlatform

Vertical Industry & Enterprise

Vertical Industry & Enterprise

China Mobile & Various Partners

( SKT, NTT Docomo )

China Mobile & Various Partners

( SKT, NTT Docomo )

China Mobile/ SKT/ DoCoMoChina Mobile/ SKT/ DoCoMo

Source: Frost & Sullivan

M2M Chipset Vendors

M2M Module Vendors

M2M Device

Vendors

M2M Application Developer

M2M Service

Providers

M2M Service

Distributors

Vertical Industries & Enterprises Consumers

M2M Connection Providers

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Operators’ Strategy ( Developed Markets)

 Metrics

Device Driven Consortium DrivenPlatform Driven with Partners

Operator Driven

Amazon (Kindle) Verizon (nPHASE) AT&T NTT DoCoMo

Connections (end of 2010)

7-8 million from AT&T and Sprint network (Estimation)

8.3 Million 9.3 Million 2.1 Million

YoY Growth More than 250% (Estimate)

16% 50% 45%

Key Verticals Consumer • Telematics• Smart Grid • Mobile Commerce

• Shipping & Logistics• Telematics• Mobile Commerce

• Pet and Personal tracking,• Remote content delivery; • Monitoring & Security• EPOS, Vending

Network Infrastructure

WCDMA/ EVDO CDMA/EVDO/LTE GSM/WCDMA/LTE FOMA(3G); HSDPA; LTE

Key Partners AT&T, Sprint Qualcomm, Vodafone, OnStar

Jasper Wireless NEC, Panasonic, Nokia;

Operation Strategy • Independent device & service provider

• Partnership / Alliance for vertical development and international expansion• Open platform development

• Open platform and Partnership with device providers to increase the go to market speed

• Initially focused on B2C market, now move to B2B as part of the government eJapan Plan• Device Certification

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Operators’ Strategy ( Emerging Markets)

  Metrics

Platform Driven Operator Driven

China Telecom China Mobile

Connections (end of 2010)

2.1 Million 6.5 Million

YoY Growth 38% 60%

Key Verticals

• Smart Grid • Telematics • Smart Home /Campus • Mega Eyes (Monitoring and Security) • Remote Lottery sale

• Telematics, • Smart Grid, • Enterprise/Residence security• Fire Monitoring • Remote POS

Network Infrastructure CDMA/CDMA2000 GSM/TD-SCDMA

Key Partners ZTE; Shenzhen Hongdian, Tri-Sun Electronics,

Ericsson; Huawei; Tri-Sun Electronics;

Operation Strategy • Launched a open M2M platform, integrated the develop, management and billing features.

• Established M2M R&D center • Defined WMMP Interface Operation through China Mobile Chongqing subsidiary

16

Strategy Parameters Comparison

1 2 3 4

Telco

CAPEX

OPEX

Go To Market Speed

ROI

Scalability

M2M

Application

Provider

Investment

ROI

Go To Market Speed

Flexibility (Change Connection Providers)

Scalability

Neutral Unfavorable Favorable

1. Device Driven Model 2. Consortium Driven Model 3. Platform Driven Model 4. Operator Driven Model

Source: Frost & Sullivan

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M2M Game Changers

Chipset • Big players dominate market • High cost of chipsets

• Scale gains • Cost will be driven down by 30%

Module • High cost • High Power Consumption • Proprietary

• Cost will be driven down by 50%• Smaller Size • Plug and play

Device • Operators certification • Lack of standardization

• Standardization • More devices• Use of web interface

Network • 60% M2M service are based on GSM/CDMA network, 40% on 3G/WiMAX.

• 70% M2M service are running on 3G/WiMAX, 20% on 4G ( LTE). The rest 10% on WiMAX/CDMA, GSM. • Lower network cost • Higher bandwidth usage

Platform • Less than 10% M2M applications were developed by platform.

• 70% of the M2M services come from developers that developed their services on the M2M platform.

Application •55% revenue comes from smart grid and vehicle Telematics. Highly concentrated in utility and vehicle markets.

• More than 60% revenue comes from asset and people tracking, logistic management/healthcare diagnostics/ consumer touch security applications. Convergence of M2M platform and cloud computing.

• Convergence of M2M platform and cloud computing.

2011 2015

18P4E6-60

M2M – Future Industrial revolution

Source: Frost & Sullivan

M2M

Internet of things

Smart Infrastructure

19P4E6-60

Cross industry business models

Customers(Business or Consumer)

Utilities (Water)

Utilities (Electric)

Utilities (Gas)

CSP(as a VSO)

Virtual ServicesOperators (VSOs)(CSP or Others)

Suppliers (CSP and Others)

Fixed & Mobile

BB

Content Supplier

#3

Content Supplier

#2

Content Supplier

#1Cloud

ServicesData

Storage

Concept-to-Cash: Partner Orchestration, Fulfillment, Monetization and ManagementThe CSP is an Enabler of New Virtual Services and Manages the Business Enablement Platform

Others …

Healthcare Supplier

#1Healthcare Supplier

#2

Healthcare Provider

CSP

VSO2. . .

VSO3 VSOnand/or

20

Business Models 2

Forecasts 3

Overview 1

21

APAC M2M Connections Forecasts by Country

Source: Frost & Sullivan

The APAC M2M connections was 20.8 million in 2010 and is expected to reach 116.6 million by 2015. China is the biggest M2M market, in terms of connections. China has 8.7 Million connection enabled devices in 2010 while Japan has 3.5 million and South Korea has 2.0 million. China is going to have 57.6 Million connections by 2015, followed by Japan and South Korean, with 20.9 million and 10.2 million connections respectively. Among these countries, we expect China, Malaysia and India to grow faster than the APAC average level.

APAC M2M Connections Forecasts

0

20

40

60

80

100

120

140

2008 2009 2010 2011 2012 2013 2014 2015

Year

Co

nn

ecti

on

s (M

illi

on

)

Others

Indonesia

India

Malaysia

Australia

South Korean

Japan

China

APAC M2M Market Outlook: Connections Forecasts by Country (2011-2015)

22

APAC M2M Connections Forecasts

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

2008 2009 2010 2011 2012 2013 2014 2015

Year

Rev

enu

e ($

Mill

ion

)

Others

POS/Payment

Security

Remote Sensor/ Monitoring

Trace and Track

Connectivity(Consumer)

Vehicle Telematics

Smart Grid

APAC M2M Market Outlook: Connections Forecasts by Application (2011-2015)

The APAC M2M connections was 20.8 million in 2010 and is expected to reach 116.6 million by 2015. Smart Grid is the biggest contributor, followed by vehicle telematics. These two together were accounted for 63.4% of the total APAC connections in 2010. The percentage will decrease to 54% when other services start to gain traction. The consumer connectivity services are expected to be the one that grows at CAGR 51.9%, the highest growth among all the applications, which reflects the trend of M2M application move beyond industry usage.

APAC M2M Connections Forecasts by Application

23

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For Additional Information

Donna JeremiahCorporate CommunicationsAsia Pacific+603 6204 5832djeremiah@frost.com

Carrie LowCorporate CommunicationsAsia Pacific+603 6204 5910carrie.low@frost.com

Jayesh EaswaramonyVice PresidentICT+65 6890 0999 jayesh.e@frost.com

Jessie LohCorporate CommunicationsAsia Pacific+65 6890 0942jessie.loh@frost.com