APECTEL 40Cancun Mexico, September 2009

An Overview of Roaming Initiatives in theSouth American Market

• IMOBIX Overview• Thoughts on Roaming• Current Global Roaming Initiatives• The South American Roaming Study

– Background & Objectives– Selected Results– Draft Initiatives

• Recommendations for APEC

Agenda

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IMOBIX Overview• Founded in 2005.• 20 employees and more than 30

consultants in over 10 countries.• Experts in the mobile industry with a focus

in Wireless Carriers & Roaming.• Projects from Strategy, through

Implementation and Operation.• Quality solutions for Network & end-to-end

testing. Pioneers in Roaming QoS & Drive Test consulting services.

• Roaming & Wholesale Management (including Startup, Strategy & Operations, Revenue Assurance & Reporting, Testing and QoS)

• Active Participants in:- GSM Association- GRQ (GSM Global Roaming Quality Group)- CITEL (Inter-American Telecommunication

Commission)- AHCIET (Ibero-American Association of

Research Centers and Telecommunication Enterprises)

IMOBIX Offices & Points of Presence

Some of our Clients

UK

Italy Florida Turks & C.

BrazilUruguay

Argentina

Asia (planned)

roaming as a business – “Roaming” Roaming is a complex business, involving many functional, technical, and

commercial areas. Roaming wholesale and retail pricing is complex, made up of several cost

components. Roaming departments inside mobile operators (due to multi-discipline

nature) are found sometimes in Network & Engineering, or Finance, or Wholesale, or Marketing.

Is a telecom regulator’s function to monitor its own country’s market, its residents, or both? What is a telecom regulator’s role in Roaming? (think about Inbound and Outbound Roaming)

How does Value Added Tax apply to Roaming? Does it apply based on residency, service location, or both?

Which cost components of Roaming should be except from VAT?

Thoughts on Roaming

Current Global Roaming Initiatives

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Region Entity Info

Europe European Union http://ec.europa.eu/information_society/activities/roaming/index_en.htm

South Africa Communications Regulators Association of South Africa

http://www.crasa.org

South America Initiative for the Integration of Regional Infrastructure in South America (IIRSA)

http://www.iirsa.org/BancoConocimiento/R/roaming_suramericano/roaming_suramericano_ENG.asp?CodIdioma=ENG

Central America Regional Technical Commission on Telecommunications (COMTECLA)

www.comtelca.org

PROJECT BACKGROUND & OBJECTIVES

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THE SOUTH AMERICAN ROAMING STUDY

www.iirsa.org/roaming.asp

• September/2000: Creation of the IIRSA initiative during the meeting with 12 South American countries Presidents:– Its main objective is the integration of South American physical

infrastructure as a key factor for promoting economic growth in the region.

– The original mandate is for ten years (2000-2010)

• November/2004: Definition of the consensual implementation agenda (AIC) by IIRSA’s Executive Steering Committee (CDE) with:– 31 priority projects to be implemented before 2010…– …among them, the South American Roaming agreement implementation

The South American Roaming Regional Study project was generated by an IIRSA initiative

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Project motivations

• Creation of competitive roaming markets in the South American region, to improve:– Costs– Quality– Coverage

• Need for regional coordination of the regulatory entities in countries involved in its implementation

• IADB proposes the Regional Technical Cooperation (CTR) RG-1302 within IIRSA’s Technical Coordination Committee IIRSA (CCT)

• March/2008: IIRSA-CITEL workshop on “International Roaming Services for Mobile Telecommunications”

TimelineIIRSA – CITEL

WorkshopWashington DC, USA

March 2008

First Exec Tech Group

Bogota, Colombia

November 2008

GSMLA Meeting / S.A. Roaming Presentation

Punta del Este, Uruguay

December 2008

Second GTE – CITELCuzco, Peru

May 2009

Presentation of Draft Initiatives by GSMLA

& RoundtableSan Jose, Costa Rica

July 2009

Deadline for comments to Action Plan

July 10, 2009

Dec07 Mar-08 Dec-08Sept-08Jun-08 Mar-09 Jun-09 Sept-09 Dec-09

S.A. Roaming Study

InitiativesImplementation

Member countries of IIRSA within scope of study (12 total)

Argentina Brazil Bolivia Chile

Colombia Ecuador Guyana Paraguay

Peru Suriname Uruguay Venezuela

What are the opportunities and challenges for a South American Roaming development?

TaxEconomics Legal/ regulatory

The objective is to identify opportunities and challenges for roaming development …

Technical

Opportu-nities(examples)

Challenges(examples)

• Limited purchase power

• Lack of prepaid roaming

• Incentive for border traffic

• Double taxation • 4 bands 2G and 2 bands 3G in the region

• Complexity for implementing prepaid roaming

• International tourism and trade growth

• Stability and economic growth

• Definition of multilateral tax agreement

• Telecommuni-cations regulation framework established in most countries

• GSM base growing predominance

• Effectiveness of fraud data interconnection

• Lack of effective legislation against fraud in most countries

• Most regulators govern only domestic traffic in country, not roaming

* GTE - IIRSA’s Executive Technical Committee

Activities

Phase

• Roaming market research, including:- Market context- Supply and demand

dynamics - Roaming agreements

• Opinion poll of relevant players in the market (regulators, operators, organizations)

• Identification of opportunities and threats for roaming initiatives in the region

• Priorization of initiatives for implementation

• Identification of resources and incentive mechanisms and for implementation

• Development of a communication strategy

• Development of presentation for GTE’s workshop

• International benchmark of roaming experiences, including:- Market context- Key success and failure

factors

• Relevance and viability analysis of the international initiatives in the South American market

Phase II: International experiences

Phase III: Action plan

Phase I: Initial Diagnosis and analysis

Completed

October/November 2008 Workshop with GTE*

July 2008 / Kick Off

Project Phases

SELECTED RESULTS

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THE SOUTH AMERICAN ROAMING STUDY

www.iirsa.org/roaming.asp

Prepaid service was the driver of growth in the region, with an average of 82% of the lines and penetration of more than 90% in 5 countries.

The size of the international intra-regional roaming is estimated at ~174M minutes and USD ~343M (~1% of total revenue)

The GSM Latin America study considers an alternative scenario for South American roaming

Using the GSMA estimates for ARPU and postpaid growth, the South American roaming market is expected to reach USD ~430M by 2012

Intra-regional travel* in Africa has a 2% penetration level**, similar to that in South America (3%)

Intra-regional travel* in the Asia-Pacific region has a low penetration level**, at 6%, which is similar to levels in South America

Travelers from Asia Pacific conduct ~73 million trips per year using roaming, which represents 30-35% of the total trips in the region

* Includes Singapore, Taiwan, Australia, Hong Kong, Japan, South Korea and New Zealand.** Includes Bangladesh, Bhutan, Brunei, Cambodia, China, Cocos I, Cook I, East Timor, Federated States of Micronesia, Fiji, French Polynesia (ex-Tahiti), Guam, India, Indonesia, Kiribati, Laos, Macau, Malaysia, Maldives, Marshall I., Mongolia, Myanmar, Nauru, Nepal, New Caledonia, Niue, Norfolk I., North Korea, Northern Marianas, Pakistan, Palau, Papua New Guinea, Philippines, Samoa, American Samoa, Solomon I., Sri Lanka, Thailand, Tonga, Vanuatu and Vietnam.Source: Informa, Work team analysis

South American regulatory coordination is carried out by 2 agencies focused on telecommunications (Regulatel and CITEL), and also the regional integration initiatives (MERCOSUR, CAN and IIRSA)

The study revealed the views of key figures in the South American roaming market with face-to-face interviews in four countries and supplementary questionnaires with the remaining stakeholders

The stakeholders are generally optimistic about the development of roaming, proposing an increase in the relative importance of total revenue from roaming services (from 1-5% in 2008 to 5-12% in 2011)

Opportunities and initiatives were identified to promote roaming in the region..

…and main challenges for development were also identified

The rates for roaming calls are cheaper in Asia Pacific than in South America (~20% lower)…

…while the rates for SMS in roaming are slightly higher than in South America (~5% higher)

Inter-operator tariffs (IOT) can vary widely between incoming and outgoing services…

Inter-operator tariffs are distinguished by voice and data, each with specific billing parameters

Retail rates for roaming calls vary widely among South American countries

Voice IOTs are higher in South America than in the EU and are affected by VAT, which is not applied in the EU

South American operators are standardizing their international roaming rates in an effort to increase transparency to the customer

Information on operator web sites and by call centers about client rates should be clearer and more transparent

Low availability of prepaid roaming in the region because few operators offer the service

Roaming services face the problem of double taxation in the application of concepts of locality and residency…

Crossing the taxes for both inbound and outbound billing generates an intra-regional VAT matrix…

…which shows that, in the majority of cases (72%), revenue from intra-regional roaming is affected by double taxation

As an effect of the double taxation of VAT and other fees*, roaming services end up being 35-60% more expensive than when excluding taxes

Of the 52 countries surveyed outside the EU and South America, VAT is applied to wholesale billing in 73% of the cases

The South American region has a lower average VAT than the EU but suffers from double taxation of VAT

Fraud causes significant losses for operators (3 to 5% of revenue), with ~24% occurring in roaming

DRAFT INITIATIVES

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THE SOUTH AMERICAN ROAMING STUDY

www.iirsa.org/roaming.asp

Draft Initiatives: Pricing & Taxation

Initiative Objective Principle Activities

1) Standardization of Information

Provide clear, comprehensive, and updated information to the end user.

• Analysis of Best Practices• Definition of an information

template to be provided by every operator to the information channel defined.

2) Double-Taxation Study Reduce the impact of taxation on roaming services

• Short term: focus on bi-lateral roaming agreements.

• Long Term: progress with the creation of a regional agreement to decrease double taxation.

Note: Initiatives listed above should be considered DRAFT and do not yet have final approval from the project participants.

Draft Initiatives: Technical & Fraud Aspects (1/3)

Initiative Objective Principle Activities

3) Prepaid roaming platform Increase roaming coverage for the prepaid market segment

• Feasibility study• Develop platform specifications• Pilot project with 3 operators in

at least 3 countries.• Development for additional

operators

4) NRTRDE (Near Real Time Roaming Data Exchange)

Reduce roaming fraud • Implement NRTRDE including coverage for Voice and Data.

• Other solutions such as retention of payments for suspected fraud and criminalization of IMEI cloning.

5) CLI Recognition Improve roaming quality of service

• Identify requirements for CLI improvement by country.

• Implementation of CLI recognition regionally.

Note: Initiatives listed above should be considered DRAFT and do not yet have final approval from the project participants.

Draft Initiatives: Technical & Fraud Aspects (2/3)

Initiative Objective Principle Activities

6) Global Roaming Quality (GRQ) Implementation

Improve roaming quality of service through monitoring of key performance indicators

• Definition of KPI to be monitored.

• Analysis of resources required to implement monitoring.

• Include Long Distance (LD) service providers (Carriers).

7) Development of a Regional IMS platform

Improve costs and quality of roaming through utilization of a Next Generation Network (NGN)

• Detailed analysis of investment required and expected returns.

• Analysis of current technological development plans for operators in the region and the eventual integration with the IMS network.

8) International Gateway Liberalization

Reduce roaming prices through increased competition.

• Analysis of the current situation and indication of existing monopolies by country.

• Identification of initiatives for selected countries.

Note: Initiatives listed above should be considered DRAFT and do not yet have final approval from the project participants.

Draft Initiatives: Technical & Fraud Aspects (3/3)

Initiative Objective Principle Activities

9) Bypass Fraud Improve user quality of service and protect against long distance fraud.

• Identification of the regulations and context in each country to prevent bypass.

• Recommendations per country.

10) Inadvertent Border Roaming

Limit undesired roaming between borders

• Analysis of best practices to limit inadvertent roaming in border regions.

• Implementation of recommendations in priority border areas.

Note: Initiatives listed above should be considered DRAFT and do not yet have final approval from the project participants.

Draft Initiatives: Regulation

Initiative Objective Principle Activities

11) Creation of a local border roaming zone

Improve communications prices for residents of border regions.

• Prioritize border regions to implement a pilot project.

• Analyze regulatory, technical, and commercial alternatives to create border regions.

• Implement pilot project and share results.

Note: Initiatives listed above should be considered DRAFT and do not yet have final approval from the project participants.

Establish solid and open dialogue between Regulatory Agencies and Mobile Operators (look at Roaming from both sides).

Include in discussions Intl and Long Distance carriers, industry and consumer organizations, country and regional taxation authorities.

Review in detail successes/failures in other regions.Establish cooperation with other regions for

implementation of certain initiatives. Look beyond Roaming pricing.

Recommendations for APEC

IMOBIX

Contact

For more information, please contact:

Jeff HunterCEO

jhunter@imobix.com

Tel: +1 (954) 865-8832