broadband revolution in japan november 23, 2005 dr. sachio semmoto founder, chairman & ceo

Copyrights©2000-2005 eAccess Ltd. All rights reserved.

Broadband Revolution in Japan　

November 23, 2005

Dr. Sachio SemmotoFounder, Chairman & CEO

eAccess Ltd.

IDATE 27th International Conference

2Copyrights©2000-2005 eAccess Ltd. All rights reserved.

Company NameCompany NameCompany NameCompany Name

Date of EstablishmentDate of EstablishmentDate of EstablishmentDate of Establishment

Capital SharesCapital SharesCapital SharesCapital Shares

Number of EmployeesNumber of EmployeesNumber of EmployeesNumber of Employees

Business FocusBusiness FocusBusiness FocusBusiness Focus

eAccess LimitedeAccess LimitedeAccess LimitedeAccess Limited

November 1, 1999November 1, 1999November 1, 1999November 1, 1999

\15.25 Billion (Shareholders Capital \27.57 Billion)\15.25 Billion (Shareholders Capital \27.57 Billion)\15.25 Billion (Shareholders Capital \27.57 Billion)\15.25 Billion (Shareholders Capital \27.57 Billion)

Approximately 400 employeesApproximately 400 employeesApproximately 400 employeesApproximately 400 employees

Broadband IP Telecommunications ServiceBroadband IP Telecommunications ServiceBroadband IP Telecommunications ServiceBroadband IP Telecommunications Service

AccomplishmentAccomplishmentAccomplishmentAccomplishment

-Be invested by Goldmansachs, Morgan Stanley, Carlyle as private equity fund-Completed its Initial Public Offering in Tokyo Stock Exchange Mothers on October 2003-Listed first section 1 of Tokyo Stock Exchange on November 2004 (the fastest record of first section of TSE for independent start-up)

-Be invested by Goldmansachs, Morgan Stanley, Carlyle as private equity fund-Completed its Initial Public Offering in Tokyo Stock Exchange Mothers on October 2003-Listed first section 1 of Tokyo Stock Exchange on November 2004 (the fastest record of first section of TSE for independent start-up)

(As of June 2005)(As of June 2005)

Corporate OverviewCorporate Overview


eAccess Accomplishment

11.1999 Founding of eAccess Ltd.

2.2000 Completion of private equity placement (\4.5 billion)

11.2000 Commenced ADSL commercial service



5.2002 Signed Business Purchase Agreement with Japan Telecom

10.2003 IPO on Tokyo Stock Exchange Mothers

7.2004 Acquisition of ISP Business from AOL Japan

11.2004 Listed on Tokyo Stock Exchange First Section

1.2006 　 Founding of eMobile Ltd.

11.2006 Awarded 3G Mobile License


eAccess Board StructureeAccess Board Structure

Strong Corporate Governance with Seven External DirectorsStrong Corporate Governance with Seven External Directors

CEOCEO 　　 Sachio Sachio SemmotoSemmoto 　　

CEOCEO 　　 Sachio Sachio SemmotoSemmoto 　　 CFOCFO 　　 Eric GanEric Gan 　　CFOCFO 　　 Eric GanEric Gan 　　

【 3 Internal Board of Directors 】

Ex-Goldman SachsManaging DirectorEx-Goldman SachsManaging DirectorFormer KDDI Senior Vice PresidentFormer KDDI Senior Vice PresidentCo-Founder of DDI (KDDI)Co-Founder of DDI (KDDI)

PPaul Reynoldsaul ReynoldsPPaul Reynoldsaul Reynolds Bill SmithBill SmithBill SmithBill Smith Raymond KwokRaymond KwokRaymond KwokRaymond Kwok

Chief Executive of BT WholesaleChief Executive of BT Wholesale CTO of Bell South CorporationCTO of Bell South Corporation Vice Chairman of Sun Hung Kai Properties Ltd.Vice Chairman of Sun Hung Kai Properties Ltd.

ToruToru Hashimoto HashimotoToruToru Hashimoto Hashimoto

Chairman of Deutsche Securities Ltd, Tokyo BranchFormer CEO of Fuji-bank (Currently Mizuho bank)

Chairman of Deutsche Securities Ltd, Tokyo BranchFormer CEO of Fuji-bank (Currently Mizuho bank)

Dr. Toshio YasuiDr. Toshio YasuiDr. Toshio YasuiDr. Toshio Yasui Professor Jiro KokuryoProfessor Jiro KokuryoProfessor Jiro KokuryoProfessor Jiro Kokuryo

Former President of Solectron JapanFormer President of Solectron Japan Professor of Keio UniversityProfessor of Keio University

MoriMorihikohiko Tashiro TashiroMoriMorihikohiko Tashiro Tashiro

Former President of Tomen CorporationFormer President of Tomen Corporation

COOCOO 　　 Haruo Haruo TanenoTaneno 　　

COOCOO 　　 Haruo Haruo TanenoTaneno 　　

【 7 External Board of Directors 】･･･ Extensive Experience in the Global and Domestic Telecom, IT and Financials


Market Size of Telecom and Broadcasting Industry

Source: Joho Tsushin Handbook 2005, Company estimates

Broadband TelecomBroadband Telecom ：： Approx. 800 billion yenApprox. 800 billion yen

Mobile TelecomMobile Telecom ：： Approx. 9 trillion yenApprox. 9 trillion yen

VoiceVoice

VoIPVoIP

MobileMobile

DataData

BroadbandBroadband

3G/3.5G3G/3.5G

Market Trend:Market Trend:

1.1. From Fixed to MobileFrom Fixed to Mobile2.2. From Narrowband to BroadbandFrom Narrowband to Broadband3.3. Telecom and Broadcasting ConvergenceTelecom and Broadcasting Convergence

Total Telecom Market Size Total Telecom Market Size Approx. 16 trillion yenApprox. 16 trillion yenTotal Contents/Broadcasting Market Size Total Contents/Broadcasting Market Size Approx. 4 trillion yenApprox. 4 trillion yen

Convergence [Going Seamless]Convergence [Going Seamless]

Fixed TelecomFixed Telecom ：： Approx. 6.3 trillion yenApprox. 6.3 trillion yen


eAccess Growth StoryeAccess Growth Story

ADSL wholesale ADSL wholesale businessbusiness

ADSL wholesale ADSL wholesale businessbusiness

Acquisition of Acquisition of AOL ISP AOL ISP businessbusiness

Acquisition of Acquisition of AOL ISP AOL ISP businessbusiness

～～ 20032003～～ 20032003 3/20053/20053/20053/2005 2005200520052005 20062006 ～～20062006 ～～

Metallic phone and Metallic phone and ADSL bundled serviceADSL bundled service

Metallic phone and Metallic phone and ADSL bundled serviceADSL bundled service

Entry to the Entry to the mobile marketmobile marketEntry to the Entry to the

mobile marketmobile marketPartner with 30 ISPsPartner with 30 ISPsVoIP ServiceVoIP Service1M service for low-end users1M service for low-end users

Partner with 30 ISPsPartner with 30 ISPsVoIP ServiceVoIP Service1M service for low-end users1M service for low-end users

Product Roadmap - From ADSL to MobileProduct Roadmap - From ADSL to Mobile

Expand metallic phone service areaExpand metallic phone service areaExpand into telephone customer baseExpand into telephone customer base

Expand metallic phone service areaExpand metallic phone service areaExpand into telephone customer baseExpand into telephone customer base

Seamless fixed and mobile Seamless fixed and mobile

services.services.Broadband anywhereBroadband anywhere

Seamless fixed and mobile Seamless fixed and mobile

services.services.Broadband anywhereBroadband anywhere

ADSL ADSL ExpansionExpansion PhasePhaseADSL ADSL ExpansionExpansion PhasePhase ADSL Transition PhaseADSL Transition PhaseADSL Transition PhaseADSL Transition Phase Mobile Mobile Expansion PhaseExpansion PhaseMobile Mobile Expansion PhaseExpansion Phase

Accelerate migration from Accelerate migration from

narrowband to broadbandnarrowband to broadbandEntry to direct retail marketEntry to direct retail market

Accelerate migration from Accelerate migration from

narrowband to broadbandnarrowband to broadbandEntry to direct retail marketEntry to direct retail market


Japan accounts for 12% of the global 114.8 million ADSL marketJapan accounts for 12% of the global 114.8 million ADSL market

Source: Point Topic

(thousand lines) Global ADSL market Global ADSL market increased 48% YoYincreased 48% YoY 114,895

Worldwide ADSL Market GrowthWorldwide ADSL Market Growth

39,53946,392

52,094 56,890

6,721

6,7776,729

6,678

13,700

16,936

19,49721,230

12,600

13,736

15,106

15,929

8,257

9,229

10,27211,197

12,069

12,740

13,352

13,887

14,168

25,56730,614

35,89841,362

77,725

85,300

97,193

107,313

114,895

5,6404,223

3,301

7,023

69,810

48,486

64,144

55,185

0

20,000

40,000

60,000

80,000

100,000

120,000

2002/2Q 2002/3Q 2002/4Q 2003/1Q 2003/2Q 2003/3Q 2003/4Q 2004/1Q 2004/2Q 2004/3Q 2004/4Q 2005/1Q 2005/2Q

Japan 12.3%Japan 12.3%Japan 12.3%Japan 12.3%

US 13.9%US 13.9%US 13.9%US 13.9%

China 18.5%China 18.5%China 18.5%China 18.5%

Korea 5.8%Korea 5.8%Korea 5.8%Korea 5.8%

Others 49.5%Others 49.5%Others 49.5%Others 49.5%


Japan’s Broadband Market Japan’s Broadband Market GrowthGrowth

Source : MIC

（ thou. Subscribers)

DSL continues to grow rapidly and tremendously in the short term, DSL continues to grow rapidly and tremendously in the short term,

compared to FTTH and CATV.compared to FTTH and CATV.

2,379

7,020

11,25013,676 14,082

3,0622,960

2,580

2,070

1,45670

420

1,450

2,8523,410

3,905

9,510

15,280

19,48820,554

0

5,000

10,000

15,000

20,000

3/2002 3/2003 3/2004 3/2005 6/2005

DSL (68%)

CATV (15%)

FTTH (17%)


Reasons for ADSL’s Growth -Price & Speed-

Source: MIC

World’s Fastest and Cheapest ADSL Service World’s Fastest and Cheapest ADSL Service

Comparison of ADSL Price in the World

(( ＄＄ ))

50M50M 0.8M0.8M0.5M0.5M0.8M0.8M 0.5M0.5M1.5M1.5MSpeedSpeed

2527

3539

47 48

0

10

20

30

40

50

eAccess Seoul New York London Paris Düsseldorf


High Growth Potential for the ADSL MarketHigh Growth Potential for the ADSL Market

Short Distance From NTT’s CO and the Customers’ Premises

Other ReasonsOther ReasonsHigh Population DensityHigh Population DensityLow Usage of CATVLow Usage of CATV

Reasons for ADSL’s Growth Reasons for ADSL’s Growth –Deregulation & Geography-–Deregulation & Geography-

Favorable Geographic EnvironmentFavorable Geographic Environment

Distribution of Telephone Line DistanceDistribution of Telephone Line Distance

Source: Sumitomo Electric Source: Sumitomo Electric MaterialsMaterials

USUSUKUKGermanyGermanyItalyItaly

15%15%40%40%45%45%70%70%

25%25%65%65%65%65%85%85%

50%50%80%80%75%75%90%90%

JapanJapan 8585 ％％ 9090 ％％ 9595 ％％

～～3km3km

4k4kmm

5km5km

Favorable Regulatory EnvironmentFavorable Regulatory Environment

ADSL Nationwide ExpansionADSL Nationwide Expansion

Reduction in Collocation CostReduction in Collocation Cost

Shortened Provisioning PeriodShortened Provisioning Period

Unbundling of Modems (Adoption Unbundling of Modems (Adoption of the DIY menu)of the DIY menu)

IP Backbone Construction IP Backbone Construction (Unbundling of Dark Fiber)(Unbundling of Dark Fiber)

Introduction of Line-SharingIntroduction of Line-Sharing


Mobile Market OpportunitiesMobile Market Opportunities

CATV 15%CATV 15% 　　Approx. 300 operatorsApprox. 300 operators

FTTH 14%FTTH 14% 　　Approx. 10 operatorsApprox. 10 operators

Source: MIC Source: MIC （（ as of March 2005as of March 2005 ））

eAccesseAccess NTT groupNTT group Power companiesPower companies SoftbankSoftbank ACCAACCA Heisei DendenHeisei Denden othersothers

700 billion yen market700 billion yen marketShared by over 300 operatorsShared by over 300 operators

Source: TCA (as of July 2005)Source: TCA (as of July 2005)

8.5 trillion yen market8.5 trillion yen marketShared by 3 operatorsShared by 3 operators

J-COMJ-COM othersothers

Fixed Broadband MarketFixed Broadband Market （（ 19.0 million subs19.0 million subs ））Fixed Broadband MarketFixed Broadband Market （（ 19.0 million subs19.0 million subs ）） Mobile MarketMobile Market （（ 88.5 million subs88.5 million subs ））Mobile MarketMobile Market （（ 88.5 million subs88.5 million subs ））

NTT DoCoMoNTT DoCoMo5656 ％％

KDDI groupKDDI group2727 ％％

VodafoneVodafone1717 ％％

Mobile market is 12X larger than the fixed broadband market.Mobile market is 12X larger than the fixed broadband market.

ADSL 71ADSL 71 ％　％　Approx. 30 operatorsApprox. 30 operators

NTT groupNTT group KDDIKDDI Power companiesPower companies UsenUsen SoftbankSoftbank STnetSTnet othersothers


One of the World’s Highest ARPUOne of the World’s Highest ARPU

High ARPU in Japan Due to Lack of CompetitionHigh ARPU in Japan Due to Lack of Competition

ARPU Comparison (as of March 2005)ARPU Comparison (as of March 2005)

Source: Merrill Lynch “Global Wireless Matrix 1Q05”

$22.00$26.00

$39.00$42.00

$54.00

$63.00

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

Taiwan HongKong Korea UK US Japan


625

389

298279

224200

175146 146 138 135 132 123 122 114 112

84 75

0

100

200

300

400

500

600

700

Growth Potential in Minutes of UsageGrowth Potential in Minutes of Usage

High Mobile Phone Charges Have Kept MOU Low in JapanHigh Mobile Phone Charges Have Kept MOU Low in Japan

(Mins)

Source: Merrill Lynch, “Global Wireless Matrix 1Q05”

MOU Comparison (as of March 2005)MOU Comparison (as of March 2005)


Expensive Cost per MinuteExpensive Cost per Minute

High ARPU and Low MOU, Resulting in High Cost per MinuteHigh ARPU and Low MOU, Resulting in High Cost per Minute

Cost per Minute (as of March 2005)Cost per Minute (as of March 2005)

Source: Merrill Lynch, “Global Wireless Matrix 1Q05”

$0.07$0.09

$0.11 $0.12

$0.28

$0.42

$0.00

$0.05

$0.10

$0.15

$0.20

$0.25

$0.30

$0.35

$0.40

$0.45

HongKong US Taiwan Korea UK Japan


ADSLADSL Mobile TelecommunicationsMobile Telecommunications

Deregulation and User Demand of Telecommunications in JapanDeregulation and User Demand of Telecommunications in Japan

Releasing dry copper

Releasing collocation, line-sharing and dark-fiber, and applying DIY

Increasing of Broadband demands

Releasing 1.7G ㎐ Bandwidth

Installing MNP

Increasing of Mobile Broadband demands


Mobile/PHSMobile/PHS Subscriber Forecasts and Penetration RatesSubscriber Forecasts and Penetration Rates

Mobile Phones/PHS Subscribers and Penetration rates

CAGR = 5.6CAGR = 5.6 ％％(2006/3-20012/3)(2006/3-20012/3)

47,310

56,853

66,782

74,82081,118

87,05791,474

5,072 11,41618,395

27,28136,800 40,372 42,660

37.3%

44.8%

52.5%

58.7%

63.6%68.2%

71.6%75.6%

80.6%

86.1%

93.1%

100.6%103.6%

105.6%

1999/3 2000/3 2001/3 2002/3 2003/3 2004/3 2005/3 2006/3 2007/3 2008/3 2009/3 2010/3 2011/3 2012/3

Mobile/PHSSubscribers

[in thousands ］

134,134131,846

128,274

118,755

109,869

102,89096,546

Mobile/PHSPenetration

(%)

Source: TCA, company estimates

AdditionalAdditional DemandDemand

3G, Migration to Flat rate, Increased Data Demand and Increased usage of second handsets 3G, Migration to Flat rate, Increased Data Demand and Increased usage of second handsets will push the market to grow over 100% penetrationwill push the market to grow over 100% penetration

We expect 43 million additional subscribers from 2006/3We expect 43 million additional subscribers from 2006/3 ～～ 2012/32012/3


Global Comparison of Mobile Phone PenetrationGlobal Comparison of Mobile Phone Penetration

Country Comparison of Mobile Penetration Rates Oct.-Dec. 2004

Source ： Merrill Lynch "Global Wireless Matrix 4Q04"

105%

51%

56%

60%

61%

71%

105%

104%

104%

104%

100%

100%

99%

96%

95%

95%

94%

90%

89%

87%

87%

86%

80%

76%

74%

107%

110%

106%

109%

Russia

Malaysia

Poland

US

Japan

France

Korea

New Zealand

Belgium

Germany

Switzerland

Australia

Singapore

Denmark

Finland

Taiwan

Ireland

Spain

Austria

Netherlands

Greece

Norway

UK

Czech

Israel

Hong Kong

Portugal

Sweden

Italy

70.6%

60.0%

70.0%

80.0%

90.0%

100.0%

110.0%

6 Mos 12 Mos 18 Mos 24 Mos 30 Mos 36 Mos 42 Mos 48 Mos 54 Mos

JAPAN

Hong Kong

Greece

Portugal

ItalySweden

UK

Norway

Japan’s relative position of penetration rate

Penetration rate in Japan is low, relative to the global standard where in some countries exceed 100%Penetration rate in Japan is low, relative to the global standard where in some countries exceed 100% In high penetrated countries, prepaid SIM services and 2In high penetrated countries, prepaid SIM services and 2ndnd handsets for specialized purposes are widespread handsets for specialized purposes are widespread Despite the slowdown in Japan’s penetration level, huge potential for further market growth still existDespite the slowdown in Japan’s penetration level, huge potential for further market growth still exist


Product Strategy – Convergence –Product Strategy – Convergence – Seamless FMC ServiceSeamless FMC Service

HomeHome While Moving / Outside OfficeWhile Moving / Outside Office

W-CDMA

Wi-Fi

Wi-Fi

ADSL

OfficeOffice

Wi-Fi

FMC

W-CDMA and Wi-Fi to switch seamlessly, depending on location (Voice and Data)

W-CDMA and Wi-Fi to switch flexibility, depending on contents

Utilize the best communication method depending on your location and preferred contents

Dedicated Lines


Product Strategy - Mobile Applications –Product Strategy - Mobile Applications – Handset Conceptual ModelsHandset Conceptual Models

Multi-Functional Model Touch Screen Model

Wireless Data Communication ModelMusic Box Model


MVNO

モバイルキャリア

Blank SIM Card

SIM card with data information

Order

Delivery

Order

Delivery

Sales Strategy/Distribution ChannelsSales Strategy/Distribution Channels

MVNO[ISP]

Distribution to existing members

[Business Users]

Strong sales channel

[Infrastructure Providers]

Providing comprehensive

telecommunicationinfrastructure

[Distributors/Manufactures]

Diversification of Handsets

Direct salesWeb sales

Carriershops

Sole Agent under trading companies

or manufactures

Independent representative

offices

Independent mass

retail stores

MVNO: Mobile Virtual Network Operator

[Portal]

Distribution to existing members


ClosingClosing

This presentation has been prepared by eAccess Ltd. (“the Company”). This presentation contains forward-looking statements, which are subject to risks, uncertainties, and assumptions. This presentation is being presented solely for your information and is subject to change without notice. No representation or warranty, expressed or implied, is made and no reliance should be placed on the accuracy, actuality, fairness, or completeness of the information presented. The Company accept no liability whatsoever for any losses arising from any information contained in the presentation.

This presentation does not constitute an offer or invitation to purchase or subscribe for any shares of the Company, and no part of this presentation shall form the basis of or be relied upon in connection with any contract or commitment.

Thank You Very MuchThank You Very Much

broadband revolution in japan november 23, 2005 dr. sachio semmoto founder, chairman & ceo

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