economic aspects of evolution towards umts · evolution towards imt-2000 1 kiritkumar lathia,...
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© Siemens, 2003ITU-BDT Seminar on IMT-2000 1-3 December, 2003 Ljubljana, Slovenia
Economic Aspects of Evolution Towards
IMT-2000
1
Kiritkumar Lathia, C.Eng., F.I.E.E,ITU-T SSG Vice Chairman
Vice President - Standards & ForaStrategic Product PlanningSiemens Mobile Communications S.p.A.ItalyE-mail: [email protected]
ITU-BDT Seminar on IMT-2000Ljubljana, Slovenia 1 -3 December, 2003
© Siemens, 2003ITU-BDT Seminar on IMT-2000 1-3 December, 2003 Ljubljana, Slovenia 2
Successful business requires analysis of regulatory environment and market dynamics for whole system life cycle
Choice of technology becomes critical!
IMT-2000 licence scorecard (June, 2003):
n 34 countries have awarded licences:
n103 operators have chosen UMTS
n 5 operators have chosen CDMA-2000
n 4 operators have returned theirlicence (regulatory / financial reasons)
Presentation Scope
© Siemens, 2003ITU-BDT Seminar on IMT-2000 1-3 December, 2003 Ljubljana, Slovenia 3
nWhat do users want?
nWhat do operators need to know?
nEuropean Regulatory Environment
nStandards / Technology Environment
nEvolution towards UMTS/IMT-2000
nBusiness model for the life-cycle ( ~ year 2015)
nConclusions
Contents
© Siemens, 2003ITU-BDT Seminar on IMT-2000 1-3 December, 2003 Ljubljana, Slovenia 4
n Enhance (multi-media) life-style experiences
n Additional M2M applications & Services:- Machine to Machine- Machine to Mobile- Mobile to Machine
n Ease of use across different networks (VHE)
n Global roaming for voice and data (~ 20% revenue!)
n SMS / MMS capability across networks (tourism!)
n Simple billing and/or pre-paid capabilities
User Needs – users do not buy technology!
• “Security”
• Meter readings• Pay systems• Vending
machines• Games• Cargo tracking
across EU• eEurope• …
These capabilities are only possible within the same IMT-2000 family member – see SSG work; this means that today GSM/GPRS/UMTS can not work with CDMA2000.
© Siemens, 2003ITU-BDT Seminar on IMT-2000 1-3 December, 2003 Ljubljana, Slovenia 5
nWhat do users want?
nWhat do operators need to know?
nEuropean Regulatory Environment
nStandards / Technology Environment
nEvolution towards UMTS/IMT-2000
nBusiness model for the life-cycle ( ~ year 2015)
nConclusions
Contents
© Siemens, 2003ITU-BDT Seminar on IMT-2000 1-3 December, 2003 Ljubljana, Slovenia 6
p Competition and demography requirementsp Subscriber Acquisition / Retention Costs andp attractive services customization & segmentation
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A R P U
R e v e n u e
\\
ARPU (US$/month) Revenue (US$B)
ARPU CAGR
1999-2005 2005-2010World -10.1% -6.9%N America -13.4% -5.3%Asia Pacific -13.9% -7.8%W Europe -8.5% -15.6%C&S America -6.9% -5.4%Other -7.6% -4.2%
Source : Deloitte Consulting Analysis, Ovum
$20
$25
$30
$35
$40
$45
$50
$55
$60
1999 2000 2001 2002 2003 2004 2005
Data ARPU
Voice ARPU
AR
PU
/Mo
nth
(US
$)
CAGR (1999CAGR (1999-- 2005)2005)Overall ARPU:Overall ARPU: --2%2 %Voice ARPU: Voice ARPU: --8%8 %Data ARPU: Data ARPU: +30%+30%
Voice and Data ARPU Voice and Data ARPU (1999(1999--2005)2005)
Pressures on ARPU and Overall Revenue
© Siemens, 2003ITU-BDT Seminar on IMT-2000 1-3 December, 2003 Ljubljana, Slovenia 7
nWireless connectivity vs. Content Provisioning
n Infrastructure Ownership / sharing vs. MVNO
nService Provisioning vs. Partnerships
nRegulatory & Financial Constraints
nCultural & “disposable income” constraints
n International Roaming & VHE capabilities
nCustomer Care Capabilities
Operator Issues
T-zones
Vodafone Live!
i-mode
3 (video multimedia)
…
~ 20% revenue
EU Environment
financialrisk/reward sharing
Market /clientsegmentation
Compatibilityis an issue
© Siemens, 2003ITU-BDT Seminar on IMT-2000 1-3 December, 2003 Ljubljana, Slovenia 8
•Vision
•Corporatephilosophy
•International alliances
Vision and Concept
•Assess market
•Understanding the market
•Positioning
Market Definition
Company build up
•Organization- Process driven- Customer oriented•Integrated processes
•Technology and network planning
•IT Systems
•Key functions- Marketing- Sales- Customer Care•Support functions
•Up-date strategy
• Implement theconceptto buildand develop core capabilities
•Focus resourceson marketentry date
Implementation
Integrated project management
Various steps from conceiving a corporate vision up to detailing implementation activities are necessary.
Strategy and Business Plan Development
•Develop a strategy- Business units- Products, Channels, Segments, Entry •Regulator
Entry Strategy
• Build a business casewith const and turnoverestimates• Budgeting• Investments
Business Planning
© Siemens, 2003ITU-BDT Seminar on IMT-2000 1-3 December, 2003 Ljubljana, Slovenia 9
Business Plan Development – Customers benefit
Financial feasibility study
Investors Case
Development of fully comprehensive operators business plan
Strategy assessment
Business Development Process
• We intend to buy a 2G/3G license.
Could the project be feasible from a
financial point of view?
• How does market, penetration, ARPU etc.
look like? Can investors expectations be met?
• Is our strategy in line with my financial
expectations?
• When do we have to consider technology
migration?
• What new services do we need to improve
financial performance?
Typical questions to be answered Contribution of Siemens
© Siemens, 2003ITU-BDT Seminar on IMT-2000 1-3 December, 2003 Ljubljana, Slovenia 10
nWhat do users want?
nWhat do operators need to know?
nEuropean Regulatory Environment
nStandards / Technology Environment
nEvolution towards UMTS/IMT-2000
nBusiness model for the life-cycle ( ~ year 2015)
nConclusions
Contents
© Siemens, 2003ITU-BDT Seminar on IMT-2000 1-3 December, 2003 Ljubljana, Slovenia 11
n EU Accession countries need to follow EU Regulations (Cyprus, Czech Republic, Estonia, Latvia, Lithuania,
Hungary, Malta, Poland, Slovak Republic, Slovenia.)
n Bulgaria, Romania and Turkey are next accessioncountries and should prepare for EU harmonisation
n Need to follow Framework Directive and other relevant Directives, Decisions, … which de-facto implies:
- At least one UMTS operator (Single Market roaming)- ITU Harmonised core bands for FDD and TDD- Number portability- “Open Network” Provisioning (Access Directive)- Conformance to ETSI Standards- Compliance to R&TTE Directive
n EU Harmonised Spectrum Allocation and usage forPAMR/PMR and emergency/security/public services(Police, Fire, Health, disaster Relief, …)
European Single Market Regulatory Environment
© Siemens, 2003ITU-BDT Seminar on IMT-2000 1-3 December, 2003 Ljubljana, Slovenia 12
nWhat do users want?
nWhat do operators need?
nEuropean Regulatory Environment
nStandards / Technology Environment
nEvolution towards UMTS/IMT-2000
nBusiness model for the life-cycle ( ~ year 2015)
nConclusions
Contents
© Siemens, 2003ITU-BDT Seminar on IMT-2000 1-3 December, 2003 Ljubljana, Slovenia 13
IMT-2000 Radio Technology Standards
CDMA TDMA FDMA
IMT-DSDirectSpread
IMT-MCMulti
Carrier
IMT-TCTimeCode
IMT-SCSingleCarrier
IMT-FTFrequency
Time
EDGE
Source: ITU
SameGSM/UMTS
core
TD-SCDMA
1xRTT1xEV -DOW-CDMA
1xEV -DV HSDPAHSDPA
cdma2000 GERAN
UTRA-TDD
DECT
TDDFDD
ChineseTIA – ETSI – T1
Cingular, SBC and ATT-WS>50% US mobile market
(UMTS-USA)(UMTS-Japan)(UMTS-Europe)
(UMTS-China)(UMTS-Europe)
• same core platforms
• cost effective upgrade
• technology flexibility
• powerful release concept
© Siemens, 2003ITU-BDT Seminar on IMT-2000 1-3 December, 2003 Ljubljana, Slovenia 14
nPrinciple body is 3GPP – a partnership between China, ETSI, Japan, Korea and USA (T1) SDOs
n ITU-R WP8F and ITU-T SSG transpose results
nEvolve from GSM/GPRS to UMTS/IMT-2000
n Follows release management concepts of GSM
nGuarantees multi-vendor interoperability
nGuarantees terminal roaming & compliance across networks and countries
UMTS/IMT-2000 Standards
3GPP ITU-T
•R-99 (Q.1741.1)
• R4 (Q.1741.2)
• R5 (Q.1741.3)
• R6
GSM-A and EICTA work together to define ETSI test specifications
© Siemens, 2003ITU-BDT Seminar on IMT-2000 1-3 December, 2003 Ljubljana, Slovenia 15
nWhat do users want?
nWhat do operators need?
nEuropean Regulatory Environment
nStandards / Technology Environment
nEvolution towards UMTS/IMT-2000
nBusiness model for the life-cycle ( ~ year 2015)
nConclusions
Contents
© Siemens, 2003ITU-BDT Seminar on IMT-2000 1-3 December, 2003 Ljubljana, Slovenia 16
Why Evolve to UMTS/IMT-2000?
Supplier
Mobile Network Operator
End user
Ø Value-based selling by providingEnd-to-end solutions
Ø Operators “need” to invest inorder to fulfill coveragerequirements of the regulator
Ø Standardization of interfaces
Ø UMTS handsets for mass market rollout
Ø New applications and content addressing business customersas well as consumer life styles
Ø New revenue streams and revitalized, increasing ARPU
Ø Frequency clearance, regulatoryissues
Ø Successful migration of existingcustomer base towards 3G
Ø Convincing services and applications (“killer application”)to create customer´s demand
Ø Prestige / Image for the 3G user
ØPersonalization and localization of services and content anytime, anywhere
Ø Multimedia capability (pictures, videos, etc. on colored screens)
ØCosts for handsets and usage of new services and content
Ø Full coverage and network interoperability
Drivers for 3G Things yet to do for 3G
© Siemens, 2003ITU-BDT Seminar on IMT-2000 1-3 December, 2003 Ljubljana, Slovenia 17
Exceeding user expectations
Reducing – Total Cost of Ownership
GSM/GPRS toEDGE / UMTS
Variableservice access
Easyservice introduction
Flexiblenetwork optimization
Reduced costs by network simplification
Datan Excellent
service quality and throughput
n Cost efficient management of strong traffic growth
Voice
n Voice quality
n Availability
n Low time-to-market (3G)
n Investment protecting 3G introduction
n OPEX reduction
n Flexibility in network adaptation
Real-timeMultimedia
n Successful launch of attractivemultimedia services
n Optimal traffic routing for peer-to-peer multimedia services
Challenges for the Mobile Network Operator
© Siemens, 2003ITU-BDT Seminar on IMT-2000 1-3 December, 2003 Ljubljana, Slovenia 18
Economically Cost Effective Evolution Paths
Source: ITU News #6, 2003
cdma2000cdma2000
UMTSUMTS
GSMGSM GPRSGPRS
EDGEEDGE
W-CDMAW-CDMA
IS-95IS-95 1xRTT1xRTT
1xEV-DO1xEV-DO
1xEV-DV1xEV-DV
PDCPDC
TDMATDMA
TD-SCDMATD-SCDMA
HSDPAHSDPA
3G2.5G2G
Ada
pted
from
ITU
New
s #6
, 200
3
© Siemens, 2003ITU-BDT Seminar on IMT-2000 1-3 December, 2003 Ljubljana, Slovenia 19
Mobile vs. Fixed andMobile subscribers by technology
Source: ITU News #6, 2003
© Siemens, 2003ITU-BDT Seminar on IMT-2000 1-3 December, 2003 Ljubljana, Slovenia 20
Entertainmentn Person-to-Person Gamingn Audio and Video Streaming
n Interactive Shows and Eventsn Multi-Media Mobile Advertisement
Enterprise and on the road n Dynamic Info Servicesn Interactive guidancen Remote Facility Controln Collaborative working
n Interactive learning
Communicationn Push-to-talk / push-to-seen Instant Messaging
n Multi-Party Chat n Video Telephonyn Multimedia Conferencing
IMS – new multi-media services
© Siemens, 2003ITU-BDT Seminar on IMT-2000 1-3 December, 2003 Ljubljana, Slovenia 21
IMS: Fixed / Mobile Service Convergence (NGN)
3GPP IMS permits Services Convergence:Same “look and feel”
Fixed data
Fixed Voice
Visual images
Fixed data
Mobile data
Mobile voice
Fixed voice
ITU NGN studies will be based on 3GPP IMS
© Siemens, 2003ITU-BDT Seminar on IMT-2000 1-3 December, 2003 Ljubljana, Slovenia 22
nWhat do users want?
nWhat do operators need?
nEuropean Regulatory Environment
nStandards / Technology Environment
nEvolution towards UMTS/IMT-2000
nBusiness model for the life-cycle ( ~ year 2015)
nConclusions
Contents
© Siemens, 2003ITU-BDT Seminar on IMT-2000 1-3 December, 2003 Ljubljana, Slovenia 23
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
3G Subs 2G Subs
2G vs. IMT-2000 forecast
Subscriber Migration to new Technology:2G Networks will be with us for a long time!
Learning curve
Timing
Technology churn
Coverage
Legend:
2G
IMT-2000
© Siemens, 2003ITU-BDT Seminar on IMT-2000 1-3 December, 2003 Ljubljana, Slovenia 24
Revenue
Today‘s Scenario(vertical segmentation)
Each operatorown everything
MobileOperator
ServiceProvider
Airtime
Many New market players – “mass market” standardized platform and Interoperability
3G Scenario(horizontal segmentation)n Outsourcingn Third partiesn Site / Networksharingn VMNOs Advertiser
MobileOperator
Advertiser
ServiceProvider
ContentProvider
ContentProvider
User
User
User
User
Settlements
Services
© Siemens, 2003ITU-BDT Seminar on IMT-2000 1-3 December, 2003 Ljubljana, Slovenia 25
AccountingModule
OPEXModule
SubscriberModule
RevenueModule
CAPEXModule
Structure of Siemens Business Plan model
From market share growth to:- Reduce Churn- Increase ARPU- Increase use of services- Affordable new services
Considerations:- Regulations (old & new)- Purchasing Power (pre-paid)- GDP and major trade partners- Virtual Home Environment
© Siemens, 2003ITU-BDT Seminar on IMT-2000 1-3 December, 2003 Ljubljana, Slovenia 26
Operator Benchmarking
Profitability Ratios
Cash FlowStatement
Profit / Loss Statement
Balance Sheet
Business Plan Methodology:
Business Plan Results:
Siemens Business Plan Support is modular
The market and revenue simulations are the key modulesof our business plan tool.
AccountingModule
OPEXModule
SubscriberModule
RevenueModule
CAPEXModule
ARPU
% marketNetworkplanning
network
P&LRoRNPVDSCR
© Siemens, 2003ITU-BDT Seminar on IMT-2000 1-3 December, 2003 Ljubljana, Slovenia 27
Our services cover all market phases fromlate 2G entrant to future IMT-2000 incumbent
New entrantin delayed market
Migration2G ? IMT-2000
“2nd wave UMTS” -UMTS new entrant
“2nd wave UMTS” -
UMTS incumbent
Detailed subscriber modelMigration benefits,operators’ market attractiveness,competitive churn,technology churn,retention mechanisms
Stimulate investors
Position against “new comers”
Data revenues, applications/solutionscentric, bottom-up scenario modeling
Supplier/product related incrementalrevenues, OPEX, CAPEXLink to product business plans
Build key strategic relationships
Evaluate alternative relationships
Investors‘ caseFully comprehensivebusiness plan
Customer Market Phase
© Siemens, 2003ITU-BDT Seminar on IMT-2000 1-3 December, 2003 Ljubljana, Slovenia 28
Networks and solutions are built around primary business drivers:
n Superior User ExperienceBest possible customer retention and differentiation on the basis of personalized, attractive services;
n Make MoneySafe introduction of new data and multimedia services and industry-leading charging capabilities
n Save MoneyMaximum reliability, solid upgrade path, high flexibility and cost-efficiency
Excitement
User Experience
Value NetworkValue Network
MobileNetworkAccess
IntelligentService
Connectivity
ServiceEnabling
Apps &Content
Provisioning
Make Money
Save Money
InformationCommunity
Recipe for success: Flexibility and Cost-Efficiency
© Siemens, 2003ITU-BDT Seminar on IMT-2000 1-3 December, 2003 Ljubljana, Slovenia 29
Simplificationn Stay in control of increasing complexity of multi-service
network
Smooth migration n Gain upper hand in cost efficient migration steps towards 3G
Performance & Reliabilityn Satisfy bandwidth hunger of new real-time multimedia
services efficiently
Personalizationn Meet user demand by offering personalized services
tailored to preferences and terminals
Flexibilityn Stay ahead of unpredictable changes by fast creation of
new services and business models
Innovationn Get ready for fast and safe launches of innovative and
attractive real-time multimedia
Challenge“Save money”
Opportunity“Make money”
Mastering Both Opportunities and Challenges: Making and Saving Money with Your Mobile Network
© Siemens, 2003ITU-BDT Seminar on IMT-2000 1-3 December, 2003 Ljubljana, Slovenia 30
nWhat do users want?
nWhat do operators need?
nEuropean Regulatory Environment
nStandards / technology Environment
nEvolution towards UMTS/IMT-2000
nBusiness model for the life-cycle ( ~ year 2015)
nConclusions
Contents
© Siemens, 2003ITU-BDT Seminar on IMT-2000 1-3 December, 2003 Ljubljana, Slovenia 31
Users will (and hence operators need to) choose mass market standard
M2M and cross border roaming, services, etc. towards major trading partners
Develop 2.5G (GSM/GPRS) for transition to 3G
UMTS provides required network flexibility (GSM/GPRS/EDGE/FDD/TD-SCDMA/IMS/MBMS …)
Evolution to UMTS/IMT-2000 requires a new business model of “horizontal” partnerships
Business model for the 10 year life-cycle
Remember “back-office” applications
Conclusions
UMTS is the only economical choice!
© Siemens, 2003ITU-BDT Seminar on IMT-2000 1-3 December, 2003 Ljubljana, Slovenia
Thank Youvery much!
© Siemens, 2003ITU-BDT Seminar on Network Evolution 21-24 January, 2003 Sofia, Bulgaria 32
Business and TechnologyPartnership with
Kiritkumar Lathia, C.Eng., F.I.E.E,Vice President - Standards & ForaStrategic Product PlanningSiemens Mobile Communications S.p.A.ItalyE-mail: [email protected]