Title inserted here

1
Striving for innovation and Service leadership in
CEEThe power of bundle and multi-play
SEEF - Telecoms Sofia, Nov. 6th 2008
Contact Person Dr. Karim Taga Managing Director
Arthur D. Little Austria GmbH Schotteng. 1 A-1010
Wien Tel. [phone] Fax 43 1
51541-23 www.adlittle.at / www.adl.com
2
Striving for innovation and Service leadership in
CEE

• Platform competition from stand-alone to hybrid

Arthur D. Little Austria GmbH Schotteng. 1 A-1010
Wien Tel. [phone] Fax 43 1
51541-23 www.adlittle.at
Contact Person Dr. Karim Taga Managing Director
3
Operators in CEE countries are quickly adopting
new telecom technologies, some are being very
successful and some are even world leaders
1 Competing platforms Outstanding achievements
DVB-H
CDMAHSDPA
IPTV
CDMA 800
M-Payment
Hybrid TV
IPTV
CDMA 450
CDMA 450
CDMA 450
FTTH
CDMA 450
Flash-OFDM
FTTH
IPTV o. naked DSL
5 DTH Ops
CDMA 450
FTTH
DVB-H
IPTV o. WiMAX
national WiFi mesh
HSUPA
HSUPA
HSUPA
M-Payment
HR Croatia, BiH Bosnia and Herzegowina, SCG
Serbia and Montenegro
first in the world
very successful
first in CEE
4
Contents
5
Web content size has been steadily increasing
leading to higher speed requirement on the
customer side
1 Competing platforms Demand driver Internet
browsing
Evolution of a webpage Yahoo
Yahoo web page size in KBytes
CAGR98-0826
Note Number of objects and complexity of webpage
other determining factors
Source Université Polytechnique de Valence,
Nokia Networks, HSBC, Yahoo!, Exane BNP Paribas,
Arthur D. Little Analysis
6
There are at least three standard-families next
to proprietary developments competing for
dominance in MBWA
1 Competing platforms Evolution of the 3GPP,
3GPP2 and Wimax
Standards Environment for (Mobile) Broadband
Wireless Access
Mass-production
Pilots
Concept
Family
Body
Production
3GPP
EDGE Ph1/2
HSPA
GSM
GPRS
UMTS/HSDPA 1
LTE/SAE
EdgeEvolution
1
Regional technology organizations
3GPP2
CDMA 1x EV-DO
CDMAIS-95A
CDMA 2000 1xRTT
CDMA 1x Rev. A
CDMA Rev. B
CDMA Rev. C
2
802.11
802.11g
802.11b
802.11a
IEEE
802.16
3
802.16d (2004)
WiBro
802.16e
802.16g
PreWimax
802.16a
802.20
802.20
Proprie-tary
MC-CDMA / Navini
Flash OFDM / Flarion
TDMA/FDMA/HC-SDMA / iBurst
Standard(s) family
) 3GPP ARIB, ATIS, CCSA, ETSI, TTA, TTC
7
All three dominating standards (3GPP, 3GPP2,
Wimax) show high improvements in uplink and
downlink peak data rates in the next years
1 Competing platforms Evolution of the 3GPP,
3GPP2 and Wimax
2006
2007
2008
2009
2010
2011
3 GPP GSM EDGE Radio Access Network Evolution
EDGE
EDGE Evol. Ph2
DL 474 kbps UL 474 kbps
DL 1,9 Mbps UL 947 kbps
3 GPP UMTS Radio Access Network Evolution
3GPP
HSDPA
HSDPA/HSUPA
Rel. 7 HSPA
Rel. 8 HSPA
DL 14,4 Mbps UL 384 kbps In 5 MHz
DL 14,4 Mbps UL 5,76 Mbps In 5 MHz
DL 28 Mbps UL 11,5 Mbps In 5 MHz
DL 42 Mbps UL 11,5 Mbps In 5 MHz
3 GPP Long Term Evolution
LTE 2x2 MIMO
LTE 4x4 MIMO
DL 173 Mbps UL 58 Mbps In 20 MHz
DL 326 Mbps UL 86 Mbps In 20 MHz
CDMA2000 Evolution
3GPP2
UMB 2x2 MIMO
EVDO Rev 0
EVDO Rev A
EVDO Rev B
UMB 4x4 MIMO
DL 140 Mbps UL 34 Mbps In 20 MHz
DL 2,4 Mbps UL 153 kbps In 1,25 MHz
DL 3,1 Mbps UL 1,8 Mbps In 1,25 MHz
DL 14,7 Mbps UL 4,9 Mbps In 5 MHz
DL 280 Mbps UL 68 Mbps In 20 MHz
Mobile WiMAX Evolution
WiMAX
Wave 2
Wave 1
DL 46 Mbps UL 4 Mbps 10 MHz 31 TDD
DL 23 Mbps UL 4 Mbps 10 MHz 31 TDD
Fixed WiMAX
IEEE 802.16m
Source Rysavy, Arthur D. Little analysis
8
Although xDSL is the most spread technology, MBWA
is quickly becoming a competing technology,
threatening the fixed broadband business
1 Competing platforms MWBA in Slovakia
market snapshot

Broadband connections by technology
Comments

• Broadband technology is developing quickly in
  Slovakia
• 70 of all accesses in the mid 2007 account for 2
  competing technologies xDSL and MBWA
• MBWA was launched in late 2006 and quickly became
  a success with over 150k subscribers in mid 2007,
  with 2 access technologies
• HSDPA (Orange, T-Mobile)
• Flash OFDM (T-Mobile)

Connection (in tsd.)
CAGR 85
Source Ministry of Telecommunication, Arthur D.
Little, note for most part Wi-Fi
9
Mobile internet access is becoming extremely
popular and might pose a threat on the
development of the fixed line internet access
business
1 Competing platforms Internet connectivity
growth
Slovak internet subscribers (fixed vs. mobile)
Comments

• Internet usage in Slovakia has shown strong
  growth since 2002, with the strongest risen
  annual growth registered in 2006
• Growth drivers include the variety of ISPs
  offerings services, the countrys relatively high
  PC penetration (second amongst the CEE countries)
  and increasing economic wealth
• Internet penetration is growingoffering chances
  for growthHowever, mobile being thedriver

Penetration ( of population)
Subscribers (in Tsd.)
Source Ministry of Telecommunication, Arthur D.
Little
10
Contents
11

2 TV Distribution Demand driver HDTV
Ahead of all digital broadcast formats, HDTV sets
new standards for sound and picture quality in
television
The strive of HDTV
Increased picture quality
Wider picture
Increased sound quality

• Higher image resolution
• Progressive scanning method

• Aspect ratio 16X9 for HDTV vs. 4X3 for SDTV
• SDTV is adequate for small size TVs (lt30 inches)
  at normal (gt2 meters) viewing distances
• HDTV is for big screens (gtgt30 inches) viewed at gt
  2 meters

• Dolby Digital signal adapts to the viewer's
  playback system, delivering the best possible
  sound to all viewers, regardless of their
  equipment

HDTV has higher resolution, uses wider screen and
offers increased sound quality leading to a
better customer experience compared to SDTV
HDTV High Definition Television
SDTV Standard Television
12
There are six forward TV distribution
possibilities and a much higher number of options
for digital interactive TV using hybrid solutions
for the backward channel, operators have started
to use in the Forward and Backward channels a
combination of options
2 TV Distribution Competitive platforms
Possibilities for Interactive Digital TV
Backward channel for iTV
Forward TV-signal distribution
Dial up, DSL, WiMAX, 3G (IP/iMHP)
SAT (DVB-S)
1
Dial up, DSL, WiMAX, 3G (IP/iMHP)
Terrestrial (DVB-T)
2
Cable(IP/EuroDOCSIS)
Cable (CVB-C)
3
DSL, FTTH (IP-TV)
4
DSL, FTTH (IP)
Air Wireless (IP/EuroDOCSIS)
Air Wireless (DVB-T)
5
DSL Terrestrial
6
DSL (IP)
UMTS/HxPA, CDMA Rev A/B,
13
Despite a crowded DTH market, Dolce TV has sold
400k subscriptions in only a year after its launch
2 TV Distribution DTH competition in Romania
Dolce TV
Case Study
Dolce TV Overview
Subscribers

• DTH provider launched by the incumbent Romtelecom
• Started operations in November 2006
• Within 6 months sold 232k subscriptions
• As of March 2007, managed to become the second
  largest DTH provider in Romania
• Romtelecom invested 15 million into DTH
• Will also start IPTV trials late 2007, and launch
  operations 2008
• Base Offer
• Base package provides 45 channels for 5/month
  (and only 1,95 for Romtelecom voice customers)
• Full package includes broadcast package plus up
  to 25 additional channels (theme channels like
  sports, children, science, news, film and music)
• Installation is for free, customer just pays ca.
  90 for the antenna and activation fee
• Does not offer any Internet services yet (planned
  in 08)
• Premium Offer
• Premium packages for HBO, MTV and other
  channelsavailable in Hungarian and English
  language
• Monthly fee (on top of base offer) 0.8 3.9 EUR
  / month

Subscriber in Tsd.
growth 1233
Market assessment

• Informa projected a 18 growth for the DTH market
  between 2006-2007, assuming an organic growth of
  the subscriber base
• However, Dolce TV has increased its subscriber
  base almost eightfold in just half a year, and
  more than tenfold in just a year

Source Company Information, OTE, Broadband TV
news, Arthur D. Little
14
Content is the new growth domain for Telco
operators since it opens up a new playing ground
allowing for stabilization of ARPUs as well as
Churn reduction
2 TV Distribution Strategic rationale New
playing ground
Strategic rationale Revenue generation through
new markets/products

• Compensation of revenue decrease through content
  revenue
• Churn reduction
• ARPU stabilization

Content revenue
Revenues
Fixed line revenue
Time
15
It is important to understand the competitive
forces driving the TV market and the movements of
all stakeholders in considering a content strategy
2 TV Distribution Competitive environment
1. Customer segments
2. Telecommunication sector
3. Regulatory

• Moving away from PC
• Video offers emerging
• Mobile and Fixed services

Content Distributors
Online Portals

• PVR / time-shifting
• Broadband deployment
• Quadruple-play
• IPTV-like offers

Telco's
Incumbent Telco's
Content Owners
Device Oriented Players
Alternative Telco's

• MVNOs
• Broadband deployment

• Plug-and-play offers

4. Technology platforms
16
2 TV Distribution NAVO
Internet players content becomes available
everywhere on the office PC, on the mobile
phones, etc., introducing the era of NAVOs
Yahoo! example
Case study
Yahoo! Go
Key elements

• With April 2006 purchase of Meedio (a
  manufacturer of media PC, DVR and automation
  software), Yahoo! gained the intellectual
  property it needed to transform the PC into a
  whole-home media engine and deliver a full PVR
  experience including an integrated program guide
  to any networked TV in the home.
• Yahoo! can now deliver its entire library of
  web-based content to the TV, if the user is
  willing to go through the pains of hooking the PC
  to the TV
• Yahoo! Go also enables consumers to organize
  photos, videos and music and then ship this
  content around between your home or laptop PCs,
  mobile phones, and home TVs in a seamless and
  easy-to-use fashion
• Yahoo! Wants to become network agnostic virtual
  operator (NAVO) that doesn't own multi-systems
  but rides its multiple services on the networks
  of others. Through its personal entertainment
  guide, the NAVO can reach users through their
  cellphones, PCs, and TVs delivering content
  whenever and wherever they want.

Source Yahoo, Arthur D. little analysis
NAVO Network Agnostic Virtual Operator
17
Apple is leveraging its content and OS on
multiple devices including TV up to the home
environment
2 TV Distribution NAVO
Case study
Comment

• Provide overarching connectivity for seamless
  media access across TV, Computer and mobile
  device (Phone, Mediaplayer etc.)
• Premium content is only one aspect of the future
  media set free- and user generated (own) content
  will become part of the equation
• The user will be able to create, store, edit and
  share content via Mail, Communities or UGC sites
• Additional web-services are a key lever to
  increase retention rates (e.g. eMail address,
  online storage space)

Content store
UGC / Community
Television
Phone / mobile device
Computer
Set-Top Box
Online services
OS Operating System
18
Contents
19
While for many years the Telcos world was
dominated by technology, it looks like content
could finally become king a serious mind set
shift is ongoing
3 Content Shift in mindset
Case Study
Strategic rationale Content finally becomes king
Techno-centric companies
high
Technology(dominating)
Importance
Content
low
Today
Time
Public positioning TP, CEE conference in Romania,
Jan 2008
20
TP/Orange is in the process of implementing phase
2 of a new of content consumption
3 Content - End-to-end services
Case study
Moving toward an end-to-end service
Today
TV
mobile
PC
Phase 1 Client pays separately for access on
different devices to the same content
Public positioning TP, CEE conference in Romania,
Jan 2008
21
Contents
22
Swisscom's triple screen strategy focuses on an
integrated content delivery enabling a common
user experience on all platforms
4 Bundles Triple Screen Strategy
Case study
Interaction, programming
Example Turns on TV automatically when user is
entering home zone Access my content anytime
and anywhere
23
Its showtime - Multiplay of Virgin Media
4 Bundles Multi play is a reality
Case study
Source Company page, Arthur D. Little Analysis
24
4 Bundles Success of bundles _at_ Incumbents
Case study 11 points more than 12 months ago in
bundles subscribers where achieved leading to a
total of 25 of subscribers using bundle services
Incumbent Customer Split July 2007
Fix voice BB TV 1
14 subscribe to bundles
Fix voice 85
Fix voice BB 7
Fix voice TV 5
TV1
1Play 86
2P 12
3P 1
Source August 2008, Arthur D. Little analysis
NOTE results from urban
areas only
25
4 Bundles Success of bundles _at_ CaTV operator
Case study CaTV op. have the potential to
execute successfully their mobile strategy 55
of Cable X subscribers now subscribe to bundles
11 points more than 12 months ago
Cable X Customer Split July 2007
42 subscribe to bundles
Fix voice BB 3
Fix voice BB TV21
Fix voice 1
TV53
Fix voice TV 11
BB TV 7
BB4
1Play 58
2P 21
3P 21
Source August 2008, Arthur D. Little analysis
NOTE results from urban
areas only
26
The success stories are based on 5 key success
factors
Conclusion
Key learnings

• Limited broadband competitive environment in high
  performing fixed infrastructures
• Demand for broadband and entertainment

Market conditions
1

• It is not about a religious standard debate, it
  is about having a working infrastructure in
  place, network elements and multiple devices
  available from multiple suppliers (e.g. mobile
  handsets, data cards, STB )

Availability of a technology
2

• Provide services where consumers need them it
• Leverage existing legacy systems
  (backbone/transport, backhaul, sites,
  interconnections links etc.)

Coverage
3

• Mobile broadband is directly competing with fixed
  broadband services
• Tariff plans fit multiple customer segment needs,
  trade off between speed, capacity and usage
  patterns (e.g. prepaid mobile BB, DVB-H in
  Albania ..., DTH in Rumania )

Attractive and innovative pricing
4

• Attractive packaging, clear and simple
  communication and
• Strong mobilization of all existing and new
  distribution channels were the key components for
  the success

Leverage the brand - Creation of a need and
ability to sell it
5
Source Arthur D. Little
27

• Interesting future
• high impact
• high uncertainty

28
Digital TV is evolving on a fast pace in the CEE
countries, with only a few white spots
1 Competing platforms Digital TV developments
IPTV
IPTV
DTH
IPTV
Hybrid TV
IPTV
DVB-H
IPTV
DTH
DTH
IPTV
IPTV o. naked DSL
IPTV
DTH
DTH
IPTV
IPTV
IPTV
DVB-H
IPTV
IPTV o. WiMAX
IPTV
IPTV
DTH
DTH
HR Croatia, BiH Bosnia and Herzegowina, SCG
Serbia and Montenegro
first in the world
very successful
first in CEE
29
Operators in CEE are employing different MBWA
standards, some even combine both to achieve
higher population coverage
1 Competing platforms Mobile broadband roll-outs
CDMA450
20 Ops
CDMA
CDMA450
HSDPA
HSDPA
CDMA 450
CDMAHSDPA
CDMA 450
HSDPA/IPW
CDMA 450
CDMA 450
CDMA 450
Flash-OFDM
HSDPA
HSDPA
CDMA 450
HSDPA
HSDPA
HSDPA
HSUPA
HSUPA
HSDPA
HR Croatia, BiH Bosnia and Herzegowina, SCG
Serbia and Montenegro
first in the world
very successful
first in CEE
30
Telefonica O2 CZ was the first operator in the
world to deploy a CDMA2000 network. Additionally
it offers HSDPA to its customers, thus
effectively employing both standards
2 MBWA Case studies O2 CZ
Case Study
Overview
CDMA coverage

• EV-DO Rel. 0 coverage
• EV-DO Rev. A coverage (up to 30 of the
  population until 2007 are planned)

• Technical information
• 3G Network CDMA2000 (1X EV-DO). EV-DO rel.0
  commercial launch in August 2004, rev. A in
  November 2007.
• It further holds a UMTS license and offers HSDPA
  services in Prague and Brno. A 50 population
  coverage is planned by end of 2007
• Operating Frequency 450 MHz (CDMA) and 2100 MHz
  (UMTS)
• Infrastructure Vendor Nortel (CMDA), Nokia
  (UMTS)
• Other
• Czech Republic was the first country in the world
  to deploy CDMA2000
• Through the upgrade of the network from rel.0 to
  rev. A, O2 hopes to offer new services such as
  music downloads, VoIP and high quality PTT

Source Company information, Arthur D. Little
analysis
31
Nordisk Poland has acquired a CDMA 450 license
and plans a country wide roll-out until 2009,
offering broad services for both residential and
business
2 MBWA Case studies Nordisk mobiltelefon
Case Study
Company overview
Planned coverage in Poland

• Basic information
• Nordisk Mobiltelefon AB was established with the
  objective to deploy and operate premium grade
  mobile telecommunications networks
• CDMA2000 3G technology with radio transmission on
  the low frequency 450MHz and 410MHz bands
• Nordisk Poland has acquired a license in the
  410MHz band, issued until 2020
• Planned commercial launch in Poland 2008
• Services portfolio
• Mobile broadband EV-DO Rev. A (3.1/1.8 mbit
  DL/UL)
• 3G mobile telephony
• Fixed wireless telephony
• Machine-to-Machine remote device control

Coverage end 2007
2007 79 base stations
Planned 2009 coverage
2009e 750 base stations
Source Company information, Arthur D. Little
analysis