Who pays for mobile broadband 2.0
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Transcript of Who pays for mobile broadband 2.0
Who pays for mobile broadband 2.0A European perspective.Open Mobile Summit , November 2nd 2011, San Francisco.
Dr. Kim Kyllesbech Larsen, Technology Economics
Technology, Deutsche Telekom.
Changing business models …
2Dr. Kim Kyllesbech Larsen, Open Mobile Summit , November 2nd 2011, San Francisco.
Mobile OperatorGarden
CS VoiceSMS
Mobile Data
NetworkSIM Bill ing
50 – 700MHzCloud
SIM
“New”Billing
Whitespace
OTT Apps
Coolstuff
Smartdevices
A typical data traffic day in Europe.
3Dr. Kim Kyllesbech Larsen, Open Mobile Summit , November 2nd 2011, San Francisco.
00:00 10:00 12:00 22:0017:00
Illustration
6:00 8:00
voicedata
@Work @HomeOn the
Go@Home
On theGo
Voice?
SMS ?
OTT Mobile Apps impact.Mobile Apps “attacks” the highest margin services.
4
22.4 1
12.7
1 Source 2010 & 2015 Pyramid Research September 2011 Western Europe.
2010AMNO Centric
ARPU
2015EApps Centric
ARPU
15.7Voice
3.4SMS
3.3Data
6.5Voice
6.2 1
Data
?By 2015
more than 70%of users have a smartphone
+9.7+Data
ARPU
ARPU
Death to SMS.
VoIP @Home
& maybe @Work.
Dr. Kim Kyllesbech Larsen, Open Mobile Summit , November 2nd 2011, San Francisco.
+43%
Postpaid traffic changes the last 12 month.
5Dr. Kim Kyllesbech Larsen, Open Mobile Summit , November 2nd 2011, San Francisco.
0 100 200 300 400 500 600 700MO MoU per Customer
2010
+12 Month
0 50 100 150 200 250 300 350MO SMS per Customer
2010
+12 Month
0 100 200 300 400 500 600Mega Byte per Customer
2010+12 Month
Illustration of a European Market
Declining minutes Declining SMS
Increasing Data
0 50 100 150 200Average Revenue per User (ARPU)
2010
+12 Month
Declining ARPU(and top-line)
#Customers #Customers
#Customers#Customers
Prepaid getting in on the mobile data feast…
6
MBoU doubled
-10% MO-MoU
-15% ARPU
Dr. Kim Kyllesbech Larsen, Open Mobile Summit , November 2nd 2011, San Francisco.
Last 12 month
-20% MO-SMS
Illustration of a European Market
The mobile business model could breakdown within a few years with mounting cash and demand pressure.
7
Total Revenue
Technology Cost (ca. 15% – 20%)
Usage Cost (Voice dominated 10% - 20%)−
Market Invest SAC & SRC (ca. 20%)
−
= EBITDA (WEU ca. 37% 1)
Personnel Cost (<20%)
Other Cost (5% - 10%)
−
−
−
Network depreciation (ca. <20% of Revenue)−
Spectrum Amortization−
Capex (ca. 7% to 15% of Revenue)−
Mobile Profit & Loss - Today
1 BoA ML Global Wireless Matrix 1Q11, margin data for 4Q 2010.
70% of Total Revenue Today
= Maintain Today’s EBITDA of ca. 37%
Mobile Profit & Loss - Tomorrow
Reduce Cost with 30%!↑
↑
New business, operation and cooperation modelsNew business, operation and cooperation models
New revenue sources.
New cost reduction strategies.
New partnership models.
New revenue sources.
New cost reduction strategies.
New partnership models.
De-risk the mobile business model
↓
↓
Technology Cost (15% - 20%)
Personnel Cost (<20%)
Dr. Kim Kyllesbech Larsen, Open Mobile Summit , November 2nd 2011, San Francisco.
↑
3G Growth …will continue … for some timeand eventually decline as subs convert to LTE.3G growth …will continue
8Dr. Kim Kyllesbech Larsen, Open Mobile Summit , November 2nd 2011, San Francisco.
Illustration of a European Marketwith ca. 50+% prepaid base.
2006 2017
3GContract
3GPrepaid
CAGR 75%@ 2006 - 2011
Total 3G Data Traffic1
3G LTEConversion
CAGR 45% @ 2012 - 2017
2025
GSM 3G Conversion
1 Note: Due to the complex dynamics of technology migration and dependency on operator policy the phase-off of 3G is highly uncertain.
Total growth … another leap with LTE.
9Dr. Kim Kyllesbech Larsen, Open Mobile Summit , November 2nd 2011, San Francisco.
Illustration of a European MarketLTE introduction 2013 earliest.
2012 2018 2025
Total Data Traffic
LTE CAGR 84%@ 2013 - 2018
CAGR 52% @ 2020 - 2025
3G LTE Conversionby 2025
500+ 2015 traffic@ 100% LTE share
LTE 2 3G Traffic@ 30% LTE share LTE
10 20 40 60 85 120 120 120 120 120 120
0
5
10
15
2010 2012 2014 2016 2018 2020
Total spectrum in use for mobile data
Inc
rea
se
ove
r 20
10
Spectral Efficiency (*)
Spectral demand (limited)
Spectral demand (unlimited) Spectral demand could exceed spectral efficiency
between 2014 - 2016.
Spectral demand could exceed spectral efficiency
between 2014 - 2016.
When data demand exceeds spectral efficiency gains.”Houston we have problem”.
10
1 Mobile operator with (1) 20MHz @ 800MHz (LTE), (2) 20MHz @ 900MHz (2GHSPA),(3) 50MHz @ 1800MHz (2GLTE), (4) 30MHz @ 2100MHz (HSPA+). Total spectrum position 120 MHz.
Illustration of a European market 1
(*) realWireless report for Ofcom,: 4G Capacity Gains, Final Report, January 2011, 2 Note: smart antennas included DAS based solutions.
Dr. Kim Kyllesbech Larsen, Open Mobile Summit , November 2nd 2011, San Francisco.
3G LTE LTE-aConversion
Leapfrog network capacity, e.g.,
Densification
smart antennas2
Early LTE deployment
Price, Control & Policy.
More spectrum.
Leapfrog network capacity, e.g.,
Densification
smart antennas2
Early LTE deployment
Price, Control & Policy.
More spectrum.
The spectrum crunch.
A lot moreComplexity, Capex and Opex
A lot moreComplexity, Capex and Opex
NOT GOODAT
ALL!
How to uplift the mobile data business case.Demand for new revenue, partnerships & collaboration models.
11
Economics of mobile data
Free Cash Flow
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Businessmodel
breakdown
Innovation
Increased spectrum availability.
Early LTE deployment.
Mobile – Fixed partnership models.
Increased spectrum availability.
Early LTE deployment.
Mobile – Fixed partnership models.
Structural off-loading1
Network APIs.
Smarter & network friendlier devices.
Femtos cells.
Network APIs.
Smarter & network friendlier devices.
Femtos cells.
Network Aware Apps & Devices
Internet of Things
Location / Notifications / Payments
Customer insights
Internet of Things
Location / Notifications / Payments
Customer insights
New revenue streams
Dr. Kim Kyllesbech Larsen, Open Mobile Summit , November 2nd 2011, San Francisco.
HSPA only, no LTE
HSPA + LTE w. 50% off-load from 2012
Illustration of a European market
1 Note: off-loading here means any traffic migration from legacy technology or legacy spectrum bands to something else.
LTE
Mobile revenue opportunities (worldwide) by 2015.
12
Mobile Revenues$1,200 Bn
Internet of Things$1,200 Bn
???
Social Media
$30+ Bn
Mobile Entertain
$55+ BnOnline Ads
$100+ Bn
Handsets$340+ Bn
Apps
$12+ Bn
Dr. Kim Kyllesbech Larsen, Open Mobile Summit , November 2nd 2011, San Francisco.
1 Sources: Apps from Berg Insight (2011), Social Media from Gartner (2011), Mobile Entertainment from Juniper Research (2011), Online Adds from MagnaGlobal (2011), Handsets from MarketsandMarkets (2011), Internet of Things from GSMA (2011)/
Vision - network aware mobile apps (1 of 2).Optimized service delivery – macro-level.
Traffic Profile
30+% in-fill possibility.
Cognisant network required.
Optimized service delivery
Network friendly apps.
Cloud-Device optimization.
E2E SON.
30+% in-fill possibility.
Cognisant network required.
Optimized service delivery
Network friendly apps.
Cloud-Device optimization.
E2E SON.voice
data
13
Primary indoor usage → off-load possibilitiesPrimary indoor usage → off-load possibilities
What can be learned?
Off-busy-hour In-fill deliveryOff-busy-hour In-fill delivery
Dr. Kim Kyllesbech Larsen, Open Mobile Summit , November 2nd 2011, San Francisco.
Vision - network aware mobile apps (2 of 2).Collaboration across network, device and apps.
14
BH time frame (sec by sec)
Averageload
Capacity limit
Smar
t (in
terc
onne
cted
) dev
ices
Self-Optimized & Cognisant Network
Network optimized O
S & Apps
Dr. Kim Kyllesbech Larsen, Open Mobile Summit , November 2nd 2011, San Francisco.
E.g., Synched notification
E.g., Ad-hocOptimized route
When Network is NOT a differentiator.
SUBSTANTIAL financial benefits.
NOT a solution to spectrum CRUNCH.
COMPLEX Governance.
When Network is NOT a differentiator.
SUBSTANTIAL financial benefits.
NOT a solution to spectrum CRUNCH.
COMPLEX Governance.
Decreasing margins & increasing cash pressureforces network consolidation & new partnerships.
15
Sharing logic
Experience.
Economics
Total Opex100%
Technology
Network 10%
RANsaving
RAN 7%
Cluster Opex40%
Rollout<5 years
Steady State in 5 years
Modernization> 5+ years
LTE HSPA+ HSPA UMTS + GSM (→LTE)
Significant Capex prevention.
Substantial Opex prevention.
Bets network … more for less.
Significant Capex prevention.
Substantial Opex prevention.
Bets network … more for less.
Rollout
Little Capex benefits.
Substantial Opex savings.
High write-off & restructure cost.
Little Capex benefits.
Substantial Opex savings.
High write-off & restructure cost.
Steady State
Capex prevention (sharing of modernization).
Substantial Opex savings.
Minor write-off & contract termination cost.
Capex prevention (sharing of modernization).
Substantial Opex savings.
Minor write-off & contract termination cost.
Modernization
Dr. Kim Kyllesbech Larsen, Open Mobile Summit , November 2nd 2011, San Francisco.
What we need to be passionate about.
16
How to spend it
How to earn it back
Kim Kyllesbech Larsen, Mobile Open Summit 2011, June 8th, 2011, London, UK.
Internet of Things
Monetize social media
Monetize (non-linear) TV
TransformBusiness Model
The key value proposition of a mobile network is ....
Freedom
Contact: [email protected]: +31 6 2409 5202http://nl.linkedin.com/in/kimklarsen
Acknowledgement: I am indebted to Xi Bin, Dejan Radosavljevik and Veli–Pekka Kroger, as to the rest of my Technology Economics Team, for being patient with my data requests, and for their great suggestions in creating and improving this presentation.
& Mobility