Aupa, Barça! Key Takeaways from the

2011 Mobile World Congress (MWC)

Ronald Gruia

Program Leader, Principal Analyst - Emerging Telecoms

Frost & Sullivan ICT Practice

February 24th 2011

Today’s Presenter

Ronald Gruia, Principal Analyst

Frost & Sullivan

Functional Expertise14 years of telecom industry expertise accumulated at Frost & Sullivan (10 years) and Nortel Networks (4 years). Particular expertise in:

-NGN Transition: LTE (4G), IP Multimedia (IMS) and VoIP applications, services and standards

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-NGN Transition: LTE (4G), IP Multimedia (IMS) and VoIP applications, services and standards-Telco 2.0: business models, next-gen VAS (Value Added Services), service brokering -The Enterprise of the Future: IP Telephony, WLANs, Unified Communications, Speech, IVR apps

3+ years of power systems experience at Ontario Hydro including areas such as system and capacity planning, energy transmission, BPL (Broadband over Power Lines), reliability, etc.

Industry Expertise-Strong experience base covering telecom and power systems industry: -U.S. Patent holder: principal inventor of an algorithm optimizing a multimedia application-100+ speaking engagements at telecom conferences and industry shows-Featured columnist at IMS / NGN Magazine; wrote articles for Processor Magazine and TMC.net-Quoted on Business Week, Financial Times, Forbes, Wired, API, Reuters, MarketWatch, etc.-Appearances on CNBC (US), BNN, Report on Business Television and TechTV (Canada), Decision TV (Brazil) and Telecom TV (UK, live from Spain)

Aupa, Barça! - MWC Roundup

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Aupa, Barça! Key Takeaways from the 2011 MWC

Agenda

• MWC 2011: More Upbeat than Last Year

• Smartphone Growth, Advent of the Tablet

• Network Congestion / Data Explosion

• Policy Control / Management: Big Topic at MWC

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• Policy Control / Management: Big Topic at MWC

• Migration to 4G/LTE: Under Way

• Move to All-IP Networks

• RCS, WAC and Other App Initiatives

• Emerging Technologies Potpourri

• Conclusions

MWC 2011: More Upbeat than Last Year

• 20% increase in attendance over 2010, with over 60k visitors from 200 countries, 800 wireless operators and 2,400 press members

• Show will be back in Barcelona in 2012 but scheduled later in Feb.

• Rumors that the GSMA might move the 2013 edition of MWC to Paris, so exhibitors need to boost marketing budgets accordingly

• CTIA: please learn from the GSMA and increase show floor hours

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• Key show themes:

� Intelligence moves to the edge: smartphone growth, advent of the tablet

� Network congestion/data explosion still a hot topic of discussion

� Migration to 4G/LTE: under way

� Move to all-IP networks is already happening, as voice goes from circuit switched to packet switched networks, creating many new opportunities

� Applications: RCS/WAC being pushed by GSMA, new business models

� Others: Mobile commerce (NFC) and in-app transaction/subs. billing

Impressive Smartphone Growth Continues

• Overall vendor consensus: 2011 will be a good year (~ 50% YoY growth; est. CY11 global shipments: 415M)

• Qualcomm: beneficiary from the NOK/MSFT deal as it is the only vendor supporting WP7 today; announced next-gen Snapdragon quad core processors (up to 2.5GHz) & up to 150 Mbps data rates; appears to move into computing faster than Intel is diving into mobile

• Initial NOK WP7 device: targeted for X-mas ’11; we believe Nokia will

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Initial NOK WP7 device: targeted for X-mas ’11; we believe Nokia will pay Microsoft a royalty fee of $7/smartphone for the use of WP OS

• Many new devices w/ a few noteworthy launches:

� LG: Optimus 3D, with Wi-Fi, 8GB memory, 2 5-megapixel cameras

� HTC: 5 new smartphones inc. Salsa & ChaCha w/ “Facebook” button

� Sony/Ericsson: Xperia Play Android device w/ gaming capabilities

� Samsung: Galaxy S II Android w/ super AMOLED+, NFC support

• Android (MMI, HTC) and Apple keep gaining OS share; RIM strength internationally; Nokia will lose share as it transitions to MSFT

2011: The Year of the Tablet

• Tablet tsunami continues, with tablets following the smartphone lead and coming into the enterprise via the employee’s door

• Explosive growth in 2011 fueled by fast product cycles, subsidies and vanity; about ½ tablets will be used at work

• CY 2011 global shipments est. to be in the 45-50m range

• Apple: early leader (~82% share in 2010) but share will slip in 2011 with entrance of new players (HP, Samsung, RIM, Motorola, etc.);

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with entrance of new players (HP, Samsung, RIM, Motorola, etc.); unquestionably tablets will make up a multi-platform market

• At MWC, HTC, LG, RIM, Samsung all announced new units w/ launches to take place during March/April 2011

• RIM’s Playbook GA date might slip to April, but price tag (<$500) viewed favorably; only tablet that will recognize inputs from a mouse; good QoE w/ dual core; 2 versions (LTE, HSPA+) due on 2H11

• Motorola Mobility’s Xoom pricing ($800) at the high-end due to premium features and heavy Android integration (WiFi version: $600)

Data Growth Spurs Network Congestion & New Models

1. Mobile data traffic continues to grow

• Culprits: smartphones (iPhone, etc.), mobile

BB via USB modem, unmetered mobile data

plans, advent of video (streaming, P2P, etc.)

2. Network congestion becoming a key concern in 3

areas at varying degrees

• RAN (Radio Access Network): currently OK

but adding capacity in areas of dense

subscriber counts and high usage (e.g. in

urban environments: NY, SF, etc.)

Source: Cisco Systems’ VNI, Jan. 2011

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urban environments: NY, SF, etc.)

• Backhaul: critical issue w/ upgrade to IP

backhaul form circuit (old T1/E1 lines)

• Core / signaling: (10x increase in session

attempts/device for a smartphone)

3. Data traffic growth much higher than data

revenue growth

• Not all mobile data is profitable: 75-90% of

traffic -> ~10% of service revenues

• Unintended consequences: mobile data

growth -> lower MTRs (e.g. Sweden)Source: Broadband Forum

Mitigating Congestion

1. Adopt network management policies

2. Buy up additional spectrum (upcoming 700 MHz digital dividend auctions)

3. Macro offload: Femtocell and Wi-Fi

4. Site / network sharing (e.g.,, Tele2 / TeliaSonera, Bell / Telus HSPA overlay, 3UK / T-Mobile, etc.)

Source: NSN

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3UK / T-Mobile, etc.)

• Network savings from 4 to 11%

5. Technology evolution to get extra efficiency (e.g,. LTE)

• Lower latency (delay)

• Increased throughputs (~ DSL)

• Greater spectral efficiency

6. Service Tiering (e.g. TeliaSonera Sweden & Vodafone Spain)

TeliaSonera Sweden monthly pricing:

• Premium Fri: 249SEK. 5GB, highest pos. speed

• Premium På Gång: 229 SEK, 3GB, high speed

• Premium Start: 39 SEK, 1 GB; max 399 SEK

Once cap reached, user throttled to 57 kbps

Policy Control / Management: Big Topic at MWC

• Ongoing migration to 4G LTE & IMS is creating new growth opportunities in areas such as subscriber data management, policy control and deep packet inspection

• Consolidation already under way, with Tekelec buying Camiant (PCRF vendor) for $130m and Blueslice (SDM vendor) for $35m in 2010; NSN bought Apertio (SDM vendor) for €140m in 2009

• A host of other vendors remain, including Bridgewater Systems,

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• A host of other vendors remain, including Bridgewater Systems, Broadhop, Openet, RedKnee and Volubill; NEVs such as Alcatel-Lucent, Cisco, Ericsson, Juniper and NSN maintain relationships with the above pure play suppliers (e.g. JNPR/Bridgewater)

• Players such as IBM and HP could join the fray in this area via M&A

• Acme Packet announced its Net-Policy Director for LTE/IMS w/ support for roaming, over-the-top and MVNO federation

• Sandvine (DPI vendor) introduced its Policy Traffic Switch (PTS 22000) which combines IMS PCEF and PCRF functionality

Migration to LTE Under Way…

North America

USA

Aircell

AT&T Mobility

CenturyTel

Cox

Metro PCS

T-Mobile USA

Verizon Wireless

Canada

EMEA

EMT, Estonia

Hutchison 3 Austria

Hutchison 3 Ireland

Mobilkom Austria

Orange Austria

Orange France

Tele2 Sweden

T-Mobile Austria

T-Mobile Germany

Telecom Italia, Italy

Asia / Pacific

Australia

Telstra

China

China Mobile, China

China Telecom, China

Hong Kong

China Mobile

CSL Limited

Hutchison 3

New ZealandNew Zealand TelecomPhilippinesPiltelSingaporeM1StarhubSouth KoreaKTFLG TelecomSK Telecom

LTE Operator Commitments (Global)

EMEA

KPN, Netherlands

Elisa, Finland

DNA, Finland

SFR, France

Cell C, South Africa

Vodacom, South Africa

Zain, Saudi Arabia

STC, Saudi Arabia

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• 52 additional LTE trials ongoing (at the pre-commitment stage)

• 17 commercial LTE networks launched

• At least 64 networks anticipated to be in commercial service by the end of 2012

Canada

Bell Canada

Rogers Wireless

Telus

Brazil

Vivo

Source: GSMA, GSA

Telecom Italia, Italy

Telefonica O2, Spain

Telia Sonera, Sweden

Telia Sonera, Norway

Telenor Sweden

Telenor Norway

TMN

Vivacell-MTS Armenia

Vodafone Germany

Zain, Bahrain

Hutchison 3

PCCW

SmarTone-Vodafone

Japan

eMobile

KDDI

NTT DoCoMo

SoftBank Mobile

SK TelecomTaiwanChunghwa TelecomUzbekistanMTSUCell

128 operator commitments for LTE in 52 countries (Jan. 2011)

Will Pricing Pressures Help 4G/LTE?

• Operators shifting from CAPEX to OPEX-based models

• Service providers are moving towards utilization-driven pricing structures and opting for a just-in-time model as opposed to over-provisioning their systems as much as in the past

• Some carriers are reluctant to embrace the latest technology as they are increasingly realizing that early adopters often pay more (e.g., Vodafone 3G

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Source: Vodafone (based on its 3G experience)

more (e.g., Vodafone 3G example - Node B)

• HSPA+ first, LTE later

4G kit prices expected to drop over time, faster than for 3G

Current LTE Price points:

• Orange: €50 - €100M to upgrade

2 large French cities from 3.75 to

4G

• Telenor LTE overlay tender is

worth ~$200M over 6 yrs.

Move to All-IP Networks

• As voice-based mobile core networks transition to data based cores, existing RAN infrastructure vendors (ALU, Ericsson, NSN) face increasing pressure from IP plays such as Cisco and Juniper

• Operators plan to provision LTE using VoLTE w/o the need for CS fallback, which eliminates the need for many network boxes while creating new opportunities for components such as the SBC (APKT)

• At MWC Juniper introduced its EPC offering (MobileNext, formerly

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• At MWC Juniper introduced its EPC offering (MobileNext, formerly known as “Project Falcon”) w/ a GA date by the end of Q2, supporting HSPA+, TD-LTE and LTE

• TAM of $2B today growing to $3.2B by 2014

• Juniper believes that ~80% of LTE vendor decisions have yet to be made, so 3G packet core contracts using GGSN/SGSN architecture will need to be re-bid as 3G solutions are not scalable for 4G

• ALU, Cisco (Starent), Ericsson and NSN: fierce competitors

RCS, WAC and Other App Initiatives

• An enhanced version of RCS, i.e., RCS-e (or “RCS light” as nicknamed in the blogsphere) was announced by the GSMA to enable IM, live video sharing and file transfer across any device on any operator (initiative thus far has the support of the “big 5” from Europe: Orange, T-Mobile, Telefonica, TIM and Vodafone, alongside Bharti, Orascom, SK Telecom and Telenor)

• GSMA still remains committed to original RCS effort (R4 under way)

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• RCS-e changes the way presence is being tackled (moving from presence server to dynamic capabilities discovery based on SIP) so it will require a minor adaptation from RCS, requiring 1 month effort

• WAC also gained momentum in its 1st b-day, totaling 68 vendors (after 10 firms including Adobe, IBM and Panasonic joined in Feb.)

• WAC announced the rollout of WAC 2.0, which supports HTML 5 multimedia apps and handset orientation and calendar functionality

• Promising developments w/ Telefonica (Frigo) & SK Telecom/K-WAC

Emerging Technologies Potpourri

• NFC (Near Field Communications) was another hot topic at MWC, with some high profile announcements including T-Mobile’s introduction of a mobile wallet service (initial rollout in Germany and Poland in 2011 followed by the Czech Republic, Netherlands and the U.S. in 2012); DT is partnering w/ Samsung for NFC-enabled devices

• The GSMA is also spearheading an NFC initiative with several operators including America Movil, Bharti, China Unicom, DT, KT, MTS, Orange, SK Tel, Softbank, TIM, Telefonica, Telenor, Telekom Austria

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Orange, SK Tel, Softbank, TIM, Telefonica, Telenor, Telekom Austria and Vodafone

• Among handset vendors, RIM announced support for NFC in the future

• In-application transactions: emerging trend (e.g., in-app transactions across free and premium apps total 49% of iPhone developer revenues; RIM and Android app stores are also supporting in-app transactions)

• Next logical step: in-app billing (e.g., The Daily, a digital news journal being offered on Apple’s iTunes digital storefront)

• Following Apple’s lead, Google also offered One Pass, a competing digital content subscription platform

Conclusions

• 2011: a more upbeat edition of the MWC

• Interesting observations (via Ericsson): the first billion telephony users were accumulated over a 100-year period, however it only took 25 years to reach 5B mobile subscribers

• For many emerging markets, the first Internet end-user experience will be via a mobile handset

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will be via a mobile handset

• Every 1,000 new broadband connections yields 80 new jobs, while each 10% increase in BB penetration translates to a 1% increase in GDP, according to several industry sources

• The migration to 4G/LTE is under way and will span several years

• As operators transition to the NGN, they will have to tackle a variety of issues including app strategy, business models, congestion management, migration to IP cores, etc.

Thank You

Q & A Session

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Ronald F. Gruia

Program Leader - Emerging Telecoms, Principal Telecom Analyst

�rgruia@frost.com � +1-416-490-0493

Twitter: rgruia

Thank You

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For Additional Information

Ronald Gruia

Program Leader & Principal Analyst,

Emerging Telecoms

(416) 490-0493

rgruia@frost.com

Brian Cotton, PhD

Vice President

Information & Communication Technologies

(416) 490-0983

bcotton@frost.com

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