LTE: moving from a promising technology to

real business

Claudio Adriani, CTO

8th September 2009

VIP Executive Arts Hotel, Lisbon

Company Profile

LTE key characteristics

The approach to have a sound and

reliable Business Case

An LTE Business Case

Content

2

WiTech – At a glance

Solutions, consulting and engineering company founded in 2003 as a spin-

off of the University of Pisa, Italy

Gained quickly a foothold in the NGN/NGS scenario focusing on standard

3G and 4G wireless technologies such as HSxPA, WiMAX and LTE.

Providing the market with:

State-of-art Business Case Analysis tools for WiMAX and LTE

Next-Gen OSS/BSS components and integrated solutions, with a focus on the delivery of turnkey WiMAX CSNs, that leverage the company‟s modular and scalable WROP (access & service management) and TelcoGIS (geographic information system) platforms

Selected high-value services such as strategic consulting on technology and investment plans and engineering services for network planning and design

Regular Member of the WiMAX Forum and a Member of the TM Forum.

3

Company Profile

LTE key characteristics

The approach to have a sound and

reliable Business Case

An LTE Business Case

Content

4

LTE - Why it is a Promising Technology?

Improved radio specifications:

OFDMA digital modulation schema

Multiple antenna technologies

Scalable bandwidth

Time-frequency resource

allocation

5

New core architecture:

Flat and IP based architecture

Low latency

More efficient QoS

GSM/UMTS backward

compatibility

LTE - The Natural Evolution of the 3G Family

LTE is a cost-effective evolution from an existing 3G infrastructure:

Re-use of existing network assets (sites and infrastructure, backhauling,

spectrum frequencies, etc.)

Enhanced user experience and new services for (hopefully) higher

ARPU

Frequency refarming (optimized spectrum usage)

Lower cost per Mbyte

GSM

UMTS

HSPA

LTE

6

Company Profile

LTE key characteristics

The approach to have a sound and

reliable Business Case

An LTE Business Case

Content

7

You Need a Holistic and Iterative Approach ….

Taking into account all market, technical,

economic and financial aspects

Ensuring the best possible alignment

between business and technology strategies

Identifying clearly the main cost drivers

Evaluating correctly the feasibility of the

investment

Avoid focusing on the single facets separately but consider all these

different elements in a comprehensive and integrated view, building

the business case through successive approximations

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…. to have a sound and reliable Business Case

The Value of an Integrated Business Case Analysis Tool

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The holistic and iterative approach can be

more effectively adopted when equipped with

an appropriate business case analysis tool

capable of performing all key analyses in a

integrated manner

Market Analysis: estimating the

potential market and revenues for LTE

services

Technical Analysis: dimensioning the

network infrastructure to derive the

required bill of quantities

Economic & Financial Analysis:

calculating all key economic & financial

projections and indicators

Scenario & Sensitivity Analysis:

analyzing the influence of parameter and

boundary condition changes

Company Profile

LTE key characteristics

The approach to have a sound and

reliable Business Case

An LTE Business Case

Content

10

The Whole Picture

11

Usagescenario

Operator

Existing 3G Operator

SuburbanUrbanDense Urban

Territory

Technology

2.6 GHz, 10 MHz, FDD

User Equipment

Target MarketConsumersHouseholds

SoHo

Service Profile

Flat data + voice

Italy

Smartphone

USB Dongle

Netbook

Home GW

Market Analysis – Territorial Data

Key information for the coverage and capacity planning

12

North West Italy

North East Italy

Central Italy

South ItalyIslands

Target %

100 %

50 %

100 %

0 %

Market Analysis – Service Profile

13

Personal

€ 27.20

Mobile Silver Mobile Gold

Home Office Silver Office Gold

20 Mbps

DL UL DL UL

PIR CIR

4Mbps 64

Kbps32

Kbps

1

VoIP lines per user

20 Mbps

DL UL DL UL

PIR CIR

4Mbps 64

Kbps32

Kbps

€ 19.20 € 24.90

20 Mbps

DL UL DL UL

PIR CIR

4Mbps 128

Kbps64

Kbps

20 Mbps

DL UL DL UL

PIR CIR

4Mbps 256

Kbps128Kbps

1

VoIP lines per user

€ 36.90

20 Mbps

DL UL DL UL

PIR CIR

4Mbps 512

Kbps256Kbps

1

VoIP lines per user

€ 41.90

20 Mbps

DL UL DL UL

PIR CIR

4Mbps 512

Kbps256Kbps

2

VoIP lines per user

€ 49.90

Targeted to Consumers Targeted to Consumers Targeted to SoHo

Targeted to Households Targeted to SoHo Targeted to SoHo

Market Analysis – Users and Revenues Forecast

The potential market and turnover have been estimated taking into

account the “Bass Diffusion Model” (inclination to innovation and „word

of mouth‟ phenomenon):

Penetration rate @ Y10: Consumers 9%, Households 6%, SoHo 5%

Churn rate @ Y10: Consumers 7%, Households 5%, SoHo 3%

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Net Users @ Y10 4 M

Revenues @ Y10 1.5 B €

Technical Analysis – Technology Profile

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Parameters:

Operating Band: 2.6 GHz

Channel Bandwidth: 10 MHz

Duplexing Format: FDD

Technical Analysis – Equipment Configuration

Enhanced NodeB User Equipment

16

Technical Analysis – Performance

The LTE performance has been evaluated by taking into account:

Link Budget Analysis (eNB/UE configuration, margins, etc.)

Path Loss (Cost 231 Hata Model)

Modulation & Schemes distribution

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Average Radius: 1.2 ÷ 2.5 Km

Average Capacity per Sector:

MIMO 2x2: UL 9.5 Mbps, DL 16.2 Mbps

MIMO 4x4: UL 20.5 Mbps, DL 34.9 Mbps

Technical Analysis – Network Dimensioning

A number of relevant parameters have been taken into consideration:

Down and up link capacity demand per year

Existing backbone infrastructures, sites and radio links

Wireless backhaul technology distribution

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6624 eNB

19872 Logical Sectors

34 MME

34 S-GW

34 P-GW

2264 Radio Links

Technical Analysis – Network Roll-out

The network roll-out has been defined in terms of the percentage

of year-on-year deployed infrastructure by taking into account

capacity requirements

Steady-state condition (100% roll-out) @ Y5

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Economic & Financial Analysis – CAPEX and OPEX

To forecast expenditures, all main CAPEX and OPEX figures have

been defined and calculated

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Total Cumulated COS 3.2 B €

29% VoIP

22% eNB

Total Cumulated SG&A 1.4 B €

62% Mktg & Sales

16% G&A

Total Cumulated CAPEX 1.6 B €

42% UE

27% eNB

Economic & Financial Analysis – Profit & Loss

EBITDA > 0 @ Y3

EBIT > 0 @ Y3

Net Income > 0 @ Y4

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Economic & Financial Analysis – Cash Flow

Peak Funding 780 M €

PBP 6 Years

NPV @ Y10 858 M €

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Total Cost of Ownership

Scenario & Sensitivity Analysis – Critical factors

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The most critical factors for the success of the LTE initiative have

been identified analyzing the influence of parameter and boundary

condition changes:

Service bundles

Segment market penetration

Operating frequency

Duplexing format

Channel Bandwidth

MIMO features

Scenario & Sensitivity Analysis

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Scenario & Sensitivity Analysis – Channel Bandwidth

10 MHz 5 MHz 20 MHz

eNB 6624 10011 51% 5051 -24%

Sectors 19872 30033 51% 15153 -24%

Radio Links 2264 4295 90% 1320 -42%

Cumulated Total CAPEX [M€] 1578 1898 20% 1451 -8%

Cumulated Total OPEX [M€] 4619 5114 11% 4441 -4%

Cumulated Total COS [M€] 3239 3733 15% 3061 -5%

EBITDA @ Y10 [M€] 872 811 -7% 894 3%

EBIT @ Y10 [M€] 807 737 -9% 833 3%

NPV @ Y10 [M€] 858 507 -41% 988 15%

Funding Peak [M€] 780 1162 49% 659 -16%

LTE Business Case Conclusions

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ARPU

CAPEX

OPEX

Broadband device proliferation

Enhanced user experience

Value added applications

Spectral efficiency

Reuse existing network assets

Flat and IP based architecture

Flat and IP based architecture

TEA|LTE – Key Characteristics

Analyzing the business case for the LTE initiative with a holistic approach, in an

integrated and iterative way, taking into account all critical aspects

Supporting a fast and simplified configuration of more than 500 input parms

with a number of them pre-set to typical/recommended values in the technical part

Enabling the user to view results instantly in an animated graphical format

through a dashboard-styled and very easy-to-use GUI

Compliant with the latest version of the LTE standard

Allowing the definition of custom bands

Allowing the manual setting of the number of Users, eNodeBs, Logical Sectors,

Radio Links, MME, S-GW and P-GW

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Obrigado!

WiTech S.p.A.

Via Giuntini 25

56023 Navacchio di Cascina PISA

Italy

www.witech.it

Phone: +39 050 775 056

+39 050 754 719

+39 050 754 720

Fax: +39 050 75 47 22

E-mail: tea.info@witech.it

Claudio Adriani

CTO

claudio.adriani@witech.it

Phone: +39 050 775 056 int 216

Mobile +39 347 17 39 202

Back up slides – The Business Case Analysis Tool

TEA|LTE

Claudio Adriani, CTO

8th September 2009

VIP Executive Arts Hotel

Lisbon

TEA|LTE

Empowering 4G LTE players with an effective business case analysis

tool to set a solid foundation for a successful initiative

Unique and integrated application

Built over five years of extensive industry experience with

strategic assignments and projects for major operators and equipment

suppliers

Full compliant with the latest version (Release 8) of the LTE standard

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TEA|LTE – Key Characteristics

Analyzing the business case for the LTE initiative with a holistic approach, in an

integrated and iterative way, taking into account all critical aspects

Supporting a fast and simplified configuration of more than 500 input parms

with a number of them pre-set to typical/recommended values in the technical part

Enabling the user to view results instantly in an animated graphical format

through a dashboard-styled and very easy-to-use GUI

Compliant with the LTE standard

Allowing the definition of custom bands

Allowing the manual setting of the number of Users, eNodeBs, Logical Sectors,

Radio Links, MME, S-GW and P-GW

32

Estimating the potential market and revenues for 4G LTE services

Dimensioning the network infrastructureto derive the required bill of quantities

Analyzing the influence of

parameter and boundary condition changes

Calculating all key economic &

financial projections and

indicators

TEA|LTE - Four Main Integrated Analyses

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Estimating the potential market and revenues for 4G LTE services:

Extension of the geographical areas (up to 5) to be served and their specificscenario distribution

Market segments (up to 6) to be addressed

Service profiles (up to 6) to be offered

Market segment penetration per year

Impact of churn

TEA|LTE – Market Analysis

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Dimensioning the network infrastructure to derive the required bill of quantities:

Technology characterization

Type of eNB (up to 3) and UE (up to 6)

Path loss model for the link budget analysis

Down and up link capacity demand per year

Existing backbone infrastructures

Existing sites

Existing radio links

Wireless backhaul technology distribution

TEA|LTE – Technical Analysis

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TEA|LTE – Economic and Financial Analysis

Calculating all key economic & financial projections and indicators to assess the feasibility of the initiative:

CAPEX & OPEX

Depreciations

Interest rate on borrowings, tax rate, discount rate

Financing

Equity

Perpetual growth

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TEA|LTE – Scenario and Sensitivity Analysis

Analyzing the influence of parameter and boundary condition changes, toidentify the most critical factors for the success of the initiative

Allowing a fast and iterative fine-tuning of the business case, in real-time andtotal privacy

Presenting the results in an animated graphical format instantly from thedifferent Market, Technical, Economic & Financial perspectives

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TEA|LTE – Comprehensive Report

Automatically compiled and published in editable and PDF formats.

Containing a complete summary (with tables, diagrams and charts) of:

Inputs and assumptions

Results of the market analysis

Outcome of the technical modeling

Economic and financial statements for up to ten years

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