Consumer and Customer Strategies for 2001

1
AHCIET Latin America Strategy
Discussion Prepared by Richard Siber,
SiberConsulting LLC
March 16, 2005 CTIA-New Orleans
Confidential and Proprietary 2004-2005
2
Latin America in the News
03.07.2005 Yahoo re-enters the mobile
market 03.03.2005 SMS revenues to reach US4bn
by 2009 03.02.2005 Number of Cell Phones in
Chile reaches 8.5 Million in 2004 03.01.2005 Top
ten wireless services and the way to ARPU
growth 02.25.2005 Mobile Communications What
Comes Next? 02.25.2005 Handset replacements to
reach 57 - Brazil, Mexico 02.24.2005 How can
ARPU be increased? 02.24.2005 Industry moves to
address low-income market 02.23.2005 EDGE used
for remote telemetry applications 02.22.2005
Brazil Jan Cell Phone Customers Reach 66.6
Million, 42 On Year
3
First.Dramatic Implications!!!!!!!
The GSM/CDMA Debate

• Is this a step forward or backward for Latin
  America?
• What are the timelines?
• When will 3G be reached (again)?
• What are the Capex and Opex requirements?
• Who will handle supply chain? Handset swap-out?
• What will happen to ARPU and Churn?
• What does the Customer want?

4
Latin America Snapshot
Source Pyramid Research Mobile Forecast Latin
America 2Q 2004
5
Overall Cellular Market Geographic Growth
Cellular Revenue CAGR (2004 -2008) by Region-The
Opportunity
Middle East Africa 12.1
Source Ovum 2004
6
Wireless Capex Spending-The Challenge
Source Lehman Brothers January 2005
7
Developing Trends in the Wireless Market- A Macro
View

• Facing declining growth rates, wireless carriers
  are now focusing on market segmentation to drive
  growth
• Market segments focused by various wireless
  carriers include corporations, SMEs, families,
  high-end consumers, value consumers (pre-paid),
  youth and young adults and ethnic groups. MVNO

• Wireless carriers are offering stylish,
  feature-rich integrated devices (color screens,
  PDAs, digital cameras, MP3s), targeted price
  plans and differentiated value-added services to
  drive adoption and usage
• Handsets are becoming fashion items (consumers)
  and tools for improving worker productivity
  (business)

• Focus on increasing customer base and usage of
  devices
• Carriers are offering services such as SMS,
  weather and sports, games, picture mail, IM, ring
  tones and screen savers
• Industry data revenues are expected to increase
  to 4X by 2005, driven by messaging services

• Bluetooth enabled integration becoming the norm
• Carriers have begun to evaluate next generation
  integrated devices that includes Wi-Fi phone
  connectivity
• Wi-Fi/WiMAX connectivity will further accelerate
  the use of higher bandwidth data applications

• Trend is driven by young adult segment that uses
  a cell phone as a primary phone due to low cost
  and mobility

Future applications
Short videos, video clips, interactive gaming,
financial transactions
Source JP Morgan
8
What do we need to be thinking about?

• 2G vs 3G/4G Requirements
• Pervasive Wireless Broadband
• International
• Enterprise/Vertical Solutions
• Content
• Location Based Services
• MVNO/MVNE
• Prepaid vs Postpaid
• Device Explosion

• Winners and Losers
• Public Policy/Regulatory
• Consolidation/MA
• Technology Options
• Licensed Spectrum
• Unlicensed Spectrum
• Cost Take-out
• Supply Chain
• Reverse Supply Chain
• Telematics
• RFID
• MobileTV

9
Road to 4G-More Options and More Decisions
Flarion, IP Wireless
Super 3G
Source Accenture
so
10
Wireless Data Rate Comparison
Pervasive Wireless Broadband is nearly here!
Source Accenture, RCR , SiberConsulting LLC
Average rate ranges vary by network Peak rates
theoretical, based on UMTS World estimates and
various sources
11
Device Evolution

• Lots of Choice
• User Interface
• Blackberry
• 7100
• DigitWireless
• Functionality
• 2.0 mega pixel digital
• camera
• Flash
• Zoom
• Video camera
• 4x Zoom
• PDA

• Processor Multifunctional
• Speed
• WAN
• LAN
• GPS
• Bluetooth
• Battery
• Chemistry Evolution
• 300-400 hours
• Memory
• Sticks
• Hard drives

Issues (Opportunities) include Supply Chain,
Reverse Supply Chain, Recycling and Training
12
Interaction with Content is Here
Mobile Media Usage U.S. versus U.K.
13
Wireless Works Overview
Wireless Works is a Wholesale Distributor and
leading provider of Supply Chain and
Remanufacturing services to wireless
manufacturers, carriers, and MVNOs.
Wholesale Distribution Handsets New, Used,
Refurbished Accessories Bulk, Packaged
Fulfillment Logistics Programming Customizing Ki
tting
Remanufacturing Services Support Insurance /
Warranty programs In- and Out-of-Warranty
Reverse Logistics Retrieve wireless equipment
from field operations Maximize return on idle
assets Any Technology / Age / Quantity
Best-in-Class Level 3 Certified Motorola,
Nokia, Sony Ericsson EPA-compliant Scale 2
repair centers, Capacity
Market Participants Brightstar, InfoSonics,
Progressive Telecom ReCellular, RMS, WSA
Distributing
www.wirelessworks.com info_at_wirelessworks.com
14
A New Way to Look at Wireless..
Capture New Customers
Grow Revenue with New Products and Services
Reduce Cost
Improve Customer Loyalty
Source Accenture, SiberConsulting LLC
15
Illustrative ME Content Distributor
Attract New Customers
Keep Customers Loyal

• MVNO
• Leverage brand
• Differentiate through Technology
• Preview movies

• Affinity Program/Rewards
• Mobile Hot List
• SMS-late fees/notification

Reduce Cost
Grow New Revenues

• MVNO/MVNE
• Promotions tied to New Releases
• Up-sell/Cross-sell
• Ringtones
• Games/Bundles

• Check-out (no lines)
• Payment (limited human interaction

16
Addressing the Market with an MVNO Approach
Achieving wireless profitability in the
underserved markets, requires either an increase
in revenue or decrease in cost.
Ability To Deliver
MVNO Characteristics
Carrier
MVNO
Increased Revenue
M L L M L L L
Value Added Services Applications Added
Content Niche Focus Strong Brand Multiple
Sales/Distribution Channels Mass Market High
Volume/Low Cost
H H H H H H H
Media Entertainment
Retail
DecreasedCost
Source Accenture
17
US MVNO Aspirations (non-exhaustive)

• AOL
• New Line Cinema
• Sony
• Sony Pictures
• Virgin Mobile
• Quest
• ATT Wireline
• 7-Eleven
• And Now 2 Hispanic MVNOs

• Disney
• ESPN
• Viacom
• MTV
• Fox Sports
• 20th Century Fox
• American Idol
• Warner Brothers
• Warner Music

18
Parting Observations

• Leverage Critical Mass
• Speak with One (or Two) Voice(s)
• Import Lessons Learned
• Proceed with Caution

19
Wireless Success Roadmap

• Right Strategy Business case to drive value
• Right Solution Scalable, well-architected
  
• Right Technologies
• Right Partner Ecosystem

20
NTT DoCoMo

• 56 million subscribers
• - 57 market share
• February 1999 Launched iMode 42 million
  subscribers
• - 300 yen (3.00 US)
• - 5,000 official sites (Hosting/Billing 9
  Commission)
• - 65,000 unofficial sites
• October 2001 Launched first 3G Service on
  WCDMA
• - FOMA
• - 10 million customers today (March 05)
• - InMotion- 30 second downloadable video clips
• June 16, 2004 Launched FeliCa Smart Wallet
  based on
• microchip technology (developed by Sony)
• - 32 Partners (AM/PM, Other Retail,
  Transportation (Trains and Airplanes), other)
• - More than 10,000 outlets by October 2004!

21
Why Become an MVNO?
Financial incentives, brand extension and value
added service offerings make the wireless market
attractive to candidate MVNOs

• MVNO Business Drivers (Non-Exhaustive)
• Revenue Growth
• Direct wireless service revenue
• Share of minutes
• Handset sales
• Increased sales of core products over wireless
  channel
• mCommerce transactions
• Direct promotions to wireless subscribers
• Revenue from 3rd party wireless advertising
• Extension of media / channels available to
  advertising customers
• Additional Brand Promotion
• Phone logo / faceplate
• Brand promotional content to existing, and
  potentially new customers
• Customer Loyalty
• Strengthening existing loyalty programs
• Bundled with core products and services
• Informational content on special offers / events
  / personalized requests

• The potential to grow bottom line revenue via
  wireless voice and data (value added services),
  increase brand awareness and customer loyalty by
  offering a wireless retail service generates
  demand from candidate MVNOs.
• Candidate MVNOs such as those listed below lack
  the expertise, spectrum and infrastructure to
  turn up a wireless service.
• As a result, they will require the services of an
  MVNE

Source Accenture
22
MVNO/MVNE Introduction
Roles and Responsibilities through a Division of
Labor
Carrier
In their traditional role, carriers have
performed each activity in the wireless value
chain. In the MVNO model, carriers only provide
network access, the MVNE / MVNO combination
performs the remaining activities.
Nextel T-Mobile ATT Wireless Verizon
Wireless Sprint PCS Cingular
MVNE (Mobile Virtual Network Enabler)
The MVNO concept provides non wireless companies
(Virgin, Boost, ATT) the ability to offer
wireless retail services, however most companies
lack the infrastructure, spectrum and competency
to become a wireless service provider. Thus,
MVNEs provide turnkey platform solutions to MVNOs.
Network (Carriers)
Products Services
Billing
Customer Service
West Corp. MDS Visage CSG Samsung
MVNE negotiates with Carrier for MVNO
Performed by the MVNE for the MVNO
MVNO (Mobile Virtual Network Operator)
MVNOs leverage the infrastructure and competency
of the MVNE to perform activities that are not
part of their core business. The MVNOs provides
strong marketing, branding and sales skill.
Network (Carriers)
Products Services (MVNE)
Billing (MVNE)
Customer Service (MVNE)
Marketing Branding
Sales
Virgin Boost Tracfone 7-11 Qwest ATT Blockbuster?
MVNO purchases from the MVNE
Performed by the MVNO
Source Accenture, Siber Consulting LLC
23
Comprehensive MVNE Offering
The MVNE provides turn-key business management,
customer operations, and integration of value
added services. MVNOs go to market quickly while
focusing on its core competencies.
Consumer
Carrier
MVNO
MVNE
Business Management
MVNE Operations

• Youth
• Credit Challenged
• Elderly

MVNO(n)
The draft operating model enables the MVNO to
focus on marketing, distribution and service
creation
Source Accenture
Content Providers
Value Add Providers