The Wireless Opportunity Global and Israeli perspective

1
The Wireless Opportunity Global and Israeli
perspective

• Eyal Levy
• Managing Partner
• AIG Orion Fund
• Eyal_at_orion.co.il
• July 2002

2
AIG Orion Fund

• Committed capital
• 110 million
• Focus
• Israel-based information technology companies
• Mobile Internet, Convergence, Content Management
• Investment thesis
• Leverage strategic relationships management
  teams expertise to generate quality deal flow
  add value to portfolio companies
• Partners
• Leading information technology companies
  committing both financial and intellectual
  capital

3
The Israeli Cellular Phenomena

• Milestones
• 1986 1st cellular operator (PelePhone AMPS ?
  NAMPS ? CDMA / 1X)
• 1995 2nd operator begins service (Cellcom TDMA
  ? GSM /GPRS)
• 80,000 subscribers (1.5 penetration)
• Average monthly usage 550 minutes
• ARPU 150
• 1998 3rd Operator begins service (Orange GSM ?
  GPRS)
• 1.8 million subscribers (28 penetration)
• Average monthly usage 400 minutes
• ARPU 80
• 6/02
• 5.5 million subscribers (85 penetration)
• Average monthly usage 320 minutes
• ARPU 40

4
Wireless Technologies in Israel

• Identified as Mobile Brainware Center
• Motorola, Qualcomm, Nortel, Lucent ..
• Home Grown World leaders
• Comverse, Amdocs, ECI .
• Continuous mobile technology initiatives
• 200 Active Start-ups

5
Israel Cellular Start-Ups
6
Market Environment

• The World is going mobile
• 500 million mobile web-enabled devices are
  expected to be on the market by 2004 (IDC)
• More than 100 million mobile workers in the US
  (250 million worldwide)
• Content provisioning anytime/anywhere
• Internet/voice/video/data service will converge
• Mobile competition is driving margins down
• Customers acquisition/retention cost increasing
• Air time revenues are rapidly decreasing

7
Market Environment

• Excess wireless capacity
• Driven by deregulation and competition
• 2.5G is barely enough 3G is not economically
  viable
• Convergence of PDA and phone functionality
• Smart subscriber device prices are rapidly
  declining

8
Diversification is a must

• Growth in traditional market is limited and
  declining.
• Cellular companies are expected to grow at
  historical pace.
• Need to get into new businesses

9
Wireless Market - Key Drivers

• Wireless operators must offer more than voice
  as a vehicle for growth
• There is no money in solely providing pipes
• Content providers need to expand provisioning to
  the mobile world
• Customers (both consumers and enterprises)
  demanding information anywhere/anytime as
  promised
• Operators must do more for less
• reduce Opex by reducing maintenance and
  acquisition costs
• Reduce Capex by improving network utilization

10
Diversification Options

• Expand Mobile Services within market
• Mobile Data
• MMS
• M-Commerce
• Leverage Assets to build new businesses.
• Customers
• Real Estate
• CRM / Billing / Collection

11
Economy is not conducive to increasing consumer
spending

• Operators need to offer value propositions that
  either
• Clearly show cost savings (productivity
  improvement) ? Vertical market provide a more
  lucrative opportunity
• or
• Shift existing expenses ? replace landline
  phones, high speed data, insurance

Wireless Value Added Services could become the
new bubble
12
Opportunities

• Low cost ubiquitous coverage
• Network / Spectrum optimization
• Provisioning Platforms Service Applications
• Aggregation, Delivery, Billing
• Broadband wireless access
• Wireless LAN
• Infrastructure, Devices, Seamless Cellular
  roaming
• Low cost / High Functionality devices
• Security
• Device, Infrastructure
• Universal, friendly, user interface
• Vertical Applications
• Voice Services
• m-Commerce

13
Summary

• The mobile / wireless remains and attractive
  opportunity space
• Israel is and will continue to be a leader
  technology provider to this market
• The market needs to adapt to a new economic model
• Growth will come with solutions that customers
  are willing and could afford to pay for.
• Monitoring change and adapting is key
• Patience is even more important