Telecom Markets Trends

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Telecom Markets Trends
Raul Lucidovice president strategic marketing
Governmental regulatory affairs
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1995-2000 Unprecedented growth

• Internet access boom equals fixed line bonanza
• Corporate data needs skyrocket
• New revenue streams (US data)
• Hosting goes from zero to 2.5 billion
• eCommerce services reach 20 billion
• Mobile services create a boom
• Europe goes from 6 penetration to 54
• Japan goes from 7 to 50
• Hundreds of millions of handsets sold annually

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There is an irreversible long-term trend in
demand for telecoms
Source Analysys
4
driven, in part, by technology
Coopers Law states that the number of
conversations (voice and data) conducted over a
given area, in all of the useful radio spectrum,
has doubled every two and a half years for the
last 105 years, ever since Marconi discovered
radio in 1895
Source ArrayComm, Martin Copper
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and leading to a revolution in the structure of
the economy
6
Telecoms revenue is an accurate indicator of
wealth
Source Analysys
7
In a world where trade flows look like the
Internet
8
Prices are expected to continue to decline to
less than EUR0.05/min
Source Analysys Cutting the Cost
9
We know that demand grows steadily in the long
run
Source ITU/Analysys
10
so why have stock markets reacted like this?
Source BigCharts.com
11
Capacity is being reduced
Source Telecoms job cuts, Financial Times,
September 2001
12
and the change in business climate could last
one year or more
13
2001 Operators feel the bust in debt . . .
Debt levels of 5 European telcos (millions of
Euros)
Source Company reports
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. . . and in share prices
Share prices of 5 European telcos (US dollars)
Source Dow Jones, from ADRs listed on NYSE
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Nasdaq Telecommunications Index
Hype decisions
1972 1974 1976 1978 1980
1982 1984 1986 1988 1990
1992 1994 1996 1998 2000
2002
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Main factors creating the hyper-growth and crisis
Market Investments
Technology Investments
Good GDP development (US driver)
Geographical expansion
Digital Mobile
The hyper- growth of the late 1990s 2000
New competitors
Internet
Spectrum
LH Optics
Now

• Failure in new business models delaying new
  services
• Financing constraints (debts, cash,)

• Network spending exceeds demand in several areas
• Increased competition lower margins

• Hyper-growth gone/Macroeconomic instability
• Signs of subscriber growth maturity

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Next likely Steps

• Many more Operators/SP will go bankruptcy,
  Suppliers?
• From Growth focused to Return focused to
  Profitable Growth focused
• Define the core business and divest/close
  non-core assets
• Retain and explore installed customer base
• Fast consolidations to create necessary Returns
• The incumbent telcos will dominate drive
  consolidations

Consolidation has started. We will see 3 (4)
operators per market. The top 20 globally will
have more than 80 of revenues. Restructuring
Suppliers
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Main driving forces for the Future Telecom Market
Regulation
Customer Demands
Technology/ Products

• Consolidation Convergence
• Economy Development
• New Technologies/Services
• End-to-end Interoperability/Open standards
• Business Models

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A new communications architecture
Today Single-service networks
Future Multi-services network (carrier class)
Content
Applications
Service Networks Application enablers
Communication control
Wireless Networks
Wireline Networks
New Migrating end-to-end Protocols
Data/IP Networks
Cable TV Networks
Connectivity
Connectivity/ Backbone Network
MGW
MGW
MGW
MGW
Access Networks
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Seamless Interoperable Services - Key to Mass
Services
1 B Mobile
1 B (400 M Internet) Fixed
End-to-End

• E-2-E Connectivity
• E-2-E Call completion
• E-2-E Applications

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Business Model Mobile Services - Retail logic
Commission (for billing, customer
care,),Revenue sharing
Easy to use, Simple pricing, Relevant Services
Content Provider, Ads

Operator/ Service Provider
charges
charges
Subscriber
Best Practice i-mode,)
Entrance fee Monthly fee Volume based usage
fee
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SMS Growth, January 2000 to December 2002E
Billions/Month
SMS was standardized in 1991/1992
Source GSM Association
Jan-00
Mar-00
Jun-00
Sept-00
Dec-00
Mar-01
Jun-01
Sept-01
Dec-01
Mar-02E
Jun-02E
Sept-02E
Dec-02E
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Development Sha-mail service, J-Phone
47 of all subs
Sources Ovum and Reuters
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Broadband Access has now taken off

• Stronger Operator Business Cases
• Competitive Technologies

Subscribers (Million)
1999 2000 2001 2002E 2003E xDSL 0.7 6.0 17.0
33.0 52.0 CATV 2.4 9.0 14.0 23.0 33.0 Ethern
et 1.0 2.0 4.0
7.0 Source
Dell Oro, etc.
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Growth of Wireline Broadband Access
12
10
Ethernet metro access
8
USD bill.
Fiber Ethernet
6
4
DSLEthernet uplink
2
DSLATM uplink
0
2002
2003
2004
2005
2006
2007
2008
2009
2010
Sources EU commission, Jefferies Company, Inc
and ECTA, Pioneer Consulting 2001
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Mobile Subscriptions Doubling to 1.8 Billion by
2007
Mobile
Fixed (POTS/ISDN)
Subscriptions (million)
Fixed Broadband (Cable, xDSL, LMDS, Fibre)
(Year -end)
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World-wide Operator Services Revenues - demand

• GDP development/Asia
• Broadband, Multi-Media, Mobile Fixed
• Convergence

?

• GDP development
• Mobile
• Internet

• GDP development
• Deregulation

• GDP development
• Digitalization SPC

70s
80s
90s
2000
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Growth Opportunities

• Subscriber Growth
• Traffic/Usage Growth
• New Communication Services (Voice, Messaging,
  Imaging/Video,)
• New Content Applications

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Our Product VisionsWe believe in a main Product
Strategy that is based on the following

• Next Generation Networks that is based on an
  end-to-end carrier class all IP solution
  both mobile (3G) and fixed (Broadband)
• Seamless migration between todays networks and
  subscribers to Next Generation, driven primarily
  by the large operators
• Next Generation all IP is based on a single
  network and multi-purpose terminals (or
  networks) for multiple services (Multi-Services)
• Open defined standards and APIs, end-to-end

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Wireless Evolution
Analog
Digital
Wideband
3G WCDMA, EDGE CDMA2000
2G GSM, PDCTDMA,CDMA
1G AMPS, NMT, TACS etc
Wide Area Network (10km)
4G
Combined devices
Local Area Network (50m)
DECT, PHS
WLAN
CT1
Personal Area Network (20m)
Infra Red
Bluetooth
wire
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Ericsson Next Generation carrier class Broadband
Multi-services Network
Softswitch Control Applications
Telephony IN (ENGINE/AXE)
IP Multimedia (TSP)
Backbone Network IP/MPLS/ATM/SDH/WDM
MGW
MGW
MGW
Copper Access
Fixed Radio Access
Fibre Access
Fiber Ethernet Access
LMDS (W-LAN 3G)
Ethernet DSL Access( POTS/ISDN)
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Public Broadband access
Backoffice systems
Ethernet DSL Access
Service Engine
AAA
Service Selection
Copper
Switched Ethernet
Broadband access server
Ethernet access
IP network
Fiber
ATM
DSLAM
xDSL Access
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Product portfolio strategy Invest in Next
Generation
3-party applications Partners. Ericsson Mobility
World
Services
Network/roll-out/ Integration, System
Integration, Customer Management, Managed Services
Applications
Messaging, Browsing, Download,
Streaming, Positioning, VPN
Application enablers
Softswitch (TeS/MSC, IP-MM), HSS
EDGE NODE/BRAS ENGINE Integral (ATM/IP)/MGW
Ethernet Access/DSL LMDS/MINI-LINK BAS
Packet core, Circuit core, WCDMA RAN/OSS,
EDGE/GSM RAN, CDMA2000, MGW
Control
SDH opto/WDM/DXX, MINI-LINK, Juniper
Backbone/Transport
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Convergence Substitutions - Content migration
BUSD
m-commerce
Substitutions from other value chains
Public Services
Positioning
Advertisement
Mobile office
Media Music
Telecom services - GDP development - Business
Productivity - Competition - New Services
Gaming/Gambling
1000
Messaging
Time
2000
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The New Market logic
The ability to learn faster than
your competitors may be the only
sustainable competitive advantage
Arie de Geus