GINA WP2.2 Business Model and Initial Commercial Feasibility Study November 5 th 2009 Dublin GNSS for INnovative Road Applications

GINA WP2.2

Business Model and Initial Commercial Feasibility StudyNovember 5th 2009

Dublin

GNSS for INnovative Road Applications

GNSS for Innovative road Applications

Company’s

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Progress Status of D2.2 – Business model and initial commercial feasibility study

19/04/23 Page 2GINA WP2 – Analysis of Applications / Services

• Service concept definition

• Trials sample definition

• Competitive scenario analysis and framework

• Business model definition

• Value chain structure and key players assessment

• Addressable market and market potential

Progress status Remarks

• Completed

• Partnership strategy for EETS provider developed in WP4.2

• EDAS role to be analysed

• Completed

• Completed

• Preliminary costs estimation done with Giroads reference values: analysis to be refined with costs inputs from GINA partners – Capex to be evaluated

D2.2 Chapters

• To be completed after cost structure consolidation

• Defined scenarios for sensitivity analysis

• Completed

• Completed

• Revenues generation potential

• Cost structure definition

• Profitability

• Sensitivity scenarios


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Content







• Sensitivity analysis

Page 420091105_GINA_PM2_WP2.2_v0 GNSS for Innovative road Applications

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High Level Architecture

CENTRAL INFRASTRUCTURE

SERVICE CENTER

GALILEO/ EGNOS

OBUsSERVICE CENTER

SERVICE CENTER

EXTERNAL DATA

SOURCES

Mobile Network

(GPRS/UMTS)

Internet secure

connection

The On Board Units receive the signal from the GNSS system and communicate through GPRS/UMTS signal with the Central Infrastructure, deployed to provide

all basic and common services to the system


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EGNOS/GALILEO OPERATING COMPANY

EETS PAN-EUROPEAN SERVICE PROVIDER

Key Economic Flows in Service Provisioning

OPERATING COMPANY

GNSS SERVICE PROVIDER

Guaranteed service

END USER/CUSTOMER(Private + Business)

Service bundle

Service fee

Fee per bundle

*When applicable for the specific type of Service according to Business Model definition

TOLL CHARGER1, 2…N

SERVICEPROVIDER

TELCO

Fee per subscriber

Payment for usage

Fee per subscriber*

Payment for usage

Payment for usage

INFRASTRUCURE OWNER

PUBLIC INSTITUTIONS

Service/product flows

Economic flows


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Content









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GINA High Level Value Chain

Regulation and Supervisory

Authority

Signal provisioning

and guarantee

Content generation

Service provider

Telecommuni-cation channel

Vehicle / OBU manufacturer

Customers

•GSA

•European commission

•States members

•Operating Company

•GNSS service provider

•EDAS Service Provider

•Roadmap databases

•Navigation algorithms

•Infomobility

•Turistic/ service DB

•Weather information

•Personal data access

•Entertainment

•Vehicle assistance

•Driver assistance

•Wireless transmission of telematics services

•Vehicle integrators

•Car manufacturers

•On Board Unit manufacturers

•Private clients (Consumer and Business)

•Institutional clients

•Road infrastructure management companies

•Police

•Municipalities

Enhancers / Facilitators

Important partnership for the Service Provider


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Key Players assessment

Regulation and supervisory authority

Signal Provisioning and guarantee

Content generators

Telco

Vehicle / OBU manufacturer

Customers

Role in the value chainPossible

enhancersPossible

partnership

EETS Service Provider

Public and istitutional clients

•To develop vehicle related contents (roadmap database, navigation algorithms, traffic DB…) and non-vehicle related contents (weather info…)

Standardization and enforcement

•To define the general legislative and regulatory framework, incentivising the use of GNSS technology in the road sector

•To guarantee the signal service

•To allow to EETS users to pay tolls in all EU with a single on-board equipment (OBE) and a single contract

•To make communication channels available at the required SLA

•To make available OBUs according to EETS requirements at decreasing costs

•-


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Potential market- EU Actual Members


• For the addressable market the Business Case has analysed the last available data relevant to the European market of cars, buses, light commercial vehicles, light, medium and heavy trucks, using CAGR of the last 4 years to project data till 2012 and an adjusted value to project data from 2012 to 2022.

• The analysis took into consideration the countries belonging to EU27.


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Forecast for circulating cars in Europe(2008-2022)


0

100

200

€300M

2008

235

2009

240

2010

244

2011

249

2012

251

2013

253

2014

255

2015

258

2016

260

2017

262

2018

265

2019

267

2020

270

2021

272

2022

275

Germany

I taly

France

Great Britain

Spain

Poland

Netherlands

Others

• EU 27 cars market expected to increase from 235 Mln in the 2008 to 275 Mln in the 2022 with a CAGR equal to 1,13%

• Relative weight of the first 7 countries (Germany, Italy, France, GB, Spain, Poland, Netherlands) out of the total EU market decreases from 78% in 2008 to 75% in 2022

Source: Euromonitor + Anfac report February 2009


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Forecast for circulating LCV, Trucks and Buses in Europe (2008-2022)


0

10

20

30

40

€50M

2008

33

2009

34

2010

36

2011

37

2012

37

2013

38

2014

38

2015

38

2016

39

2017

39

2018

40

2019

40

2020

41

2021

41

2022

42

Germany

I taly

France

Great Britain

Spain

Poland

Netherlands

Others

• EU 27 commercial vehicles and trucks market expected to increase from 33 Mln in the 2008 to 42 Mln in the 2022 with a CAGR equal to 1,6%

• Relative weight of the first 7 countries (Germany, Italy, France, GB, Spain, Poland, Netherlands) out of the total EU market decreases from 78% in 2008 to 71% in 2022

Source: Euromonitor + Anfac report February 2009


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Market potential vs Penetration- Private segment


0

100

200

300

0

10

20

30

40%

2008

235,2

2009

240,0

2010

244,1

2011

248,6

2012

250,8

2013

253,0

2014

255,3

2015

257,6

2016

260,0

2017

262,4

2018

264,8

2019

267,3

2020

269,9

2021

272,5

2022

275,1

Data referred to EU27

GINAPenetration (%)

No. of carsin EU27 (Mil)


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Market potential vs Penetration- Business segment


0

10

20

30

40

50

0

10

20

30

40%

2008

33,4

2009

34,4

2010

35,6

2011

36,9

2012

37,3

2013

37,6

2014

38,0

2015

38,4

2016

38,9

2017

39,3

2018

39,7

2019

40,2

2020

40,7

2021

41,2

2022

41,7

Data referred to EU27

GINAPenetration (%)

No. of LCV, Trucks & Buses in EU27 (Mil) Light Commercial Vehicles (W< 3,5 tons)

Light- Medium Trucks (3,5<W<16 ton)

Heavy Trucks (W>16 tons)

Buses


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Price assumptions


• For the private segment, an all inclusive flat fee structure is assumed from the end customer side.

• On the operators’ side, since they can benefit from cost and investments savings, a fee per subscriber can be assumed.

• Since aggressive penetration pricing is a key success factor for the mass market diffusion in the consumer segment as highlighted in previous project (Vert and Giroads), the price can be in the range 6-15 €/month.

• For the business segment a more flexible approach shall be adopted due to the different type of customers to be served, spanning from large delivery companies operating on international basis with hundreds of vehicles to small companies operating on local basis with few vehicles.

• In the preliminary business model anyhow a flat fee is assumed for simplicity reason with a price in the range 100-130 €/month.

• Also for the business segment, on the operators’ side, a fee per subscriber is assumed.


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Revenue stream


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5.000

10.000

15.000

€20.000M

2011

1.031

2012

1.940

2013

2.310

2014

3.510

2015

5.719

2016

8.609

2017

11.619

2018

14.313

2019

16.479

2020

18.097

2021

19.242

2022

19.772

Consumer BusinessPrice assumptions:

• Price of bundle package for Consumer segment decreasing from 2012 to 2022 from 10 to 6,5 €/month

• Price of bundle package for Business segment decreasing from 2012 to 2022 from 80 to 60 €/month

• Average fees from motorway operators equal to 12 €/year/customer flat from 2012 to 2022

PRELIMINARY


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Cost structure elements


• The cost structure is referred to the GINA Service Provider, i.e. the company that sells the service packages to the final customers by aggregating inputs of specific service providers.

• Costs are evaluated under the hypothesis that the architecture as a whole as well as the single system components change, in terms of costs and performance, with the number of final users.

• The Architecture cost structure assumes to have a “Smart OBU” in order to be compliant with Privacy issues. Main costs element are the following:

Telecomunication costs

EGNOS/Galileo Service costs

OBU costs

SG&A

Operating costs

Depreciation of capital expenditures


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Telco costs


• The communication channel among the OBUs and the main infrastructure will be done by GPRS/UMTS.

• Reports will be sent daily for each vehicle with only the RUC data (smart OBU). This optimizes bandwidth and server usage.

• It should be taken into account that VAS have different communication needs from RUC. Depending on the type of VAS there might be the need of a continuous real-time communication – which would considerably increase the cost for frequent users - (e.g. navigation, traffic information) or information which can occur on-the-spot (e.g. ecall) or can be dumped on a daily basis (e.g. PAYD).

• Communication among service centers will be through a secure internet access.

• For the business plan purpose the following assumptions are made:

Communication process will decrease with subscribers increase due to better tariff negotiation;

Business segment will require higher communication costs vs. consumer segment;

3 hours of communication time per day per vehicle (based on average time of private car usage of 2 hours per day and average time of business segment vehicle usage of 8 hours per day)

Increase factor of 2 for the communication time to take into account peak condition versus average situation

Average of 7 euro/month/subscriber for communication costs


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Signal operating costs and guarantee costs


• About the signal operating and guarantee costs, reference is made to GIROADS study relevant to EGNOS System operating costs, that provides the following figures:

• System operations costs between 30 and 35 million euros per annum (indicative cost allocation for the road domain between 3 and 15 million euros per year);

• Galileo Concessionaire costs for GNSS services equal to 1,5 € per annum per OBU

• EDAS costs have not yet been analysed: input from GINA partners for a cost estimation is necessary


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OBU costs


• Actual costs range for commercial OBUs spans from 175€ to 600€ but a precise benchmark among different vendors has to be carried out

• Price of OBU is highly depending on the overall market quantity since production costs are highly affected by scale economies

• Therefore actual costs/prices of OBU can be used only as reference since strong cost/price decrease is expected along the business plan horizon

• Besides, installation costs (actually around 60€/OBU) could drastically be reduced in case of partnership with car manufacturers since it can be supposed that cars commercialized in the future will be already equipped with an OBU suitable for EETS

• The actual assumption of the Business Case is that at regime condition the cost supported by the EETS provider will be the lease rate for an OBU costing 100 €, with a leasing of three years at 10% interest rate


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SG&A


About SG&A, the Business Plan uses the following assumptions:

• Commercial costs:

Commissions to sales agent (either belonging to third parties or to an own sales force network) equal to 5% of total revenues (based on telecom benchmark where commissions go from 4 to 8% of revenues)

Fixed share of commercial costs equal to a percentage of the steady state revenues (assumed to be reached in 10 years after GINA launch)

• Marketing costs: 0,5% of the revenues (based on telecom benchmark) for advertising and promo costs for product launch, customer retention initiatives and brand/product awareness building

• Administration, Finance & Control: staff of 600 employees for the pan-European service provider at regime condition (average of 20-30 employees per country) costing 80k€ each

• Other costs: rent and other minor costs assumed to be 10 M€ at regime condition

• In analyzing the deployment of EETS (taking into consideration the need to establish agreement with Toll Chargers in the different EU Member States), the possibility to focus on strategic corridors or areas could optimize the SG&A costs


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Operating costs


• Operating costs based on Giroads costs strucure

• To be finalized based on GINA architecture and partners review

COST ELEMENT MAINTENANCE OPERATIONSOPERATIONSPERSONNELHEADCOUNT

OPERATIONSPERSONNELUNIT COST

OPERATIONSPERSONNEL

COST

DATA SERVER Operating System - Web Platform - Cartography/Maps Data Base - Client+OBU Data Base - Back up system - OtherCENTRAL INFRASTRUCTURE -SYSTEM 2.750.000 2.000.000 1.600 50.000 80.000.000

Communications Management (Front end - Back end) - Database Management - Cartography/Maps Management - Administration, Control, Accounting & Blling Module - Equipment Diagnosis Module - Liability-critical processing - Multiservice Manager - Call centerOtherCENTRAL INFRASTRUCTURE -APPLICATION 3.500.000 1.000.000 1.200 50.000 60.000.000

CENTRAL INFRASTRUCTURE -TOTAL 6.250.000 3.000.000 2.800 140.000.000

SP1- Highway Operation 126.000 28.800 - SP2- Insurance Companies 157.195 56.141 - SP3 - Trafic Information Generation 126.000 28.800 - SP4 - Transport Operator 157.195 56.141 - SP6 - Emergency centers 157.195 56.141 - SP7 -Traffic Info centers 527.727 - - SP8 -Navigation & Routing assistant 360.000 180.000 - OtherSERVICE CENTRES-TOTAL 1.611.313 406.023 400 40.000 16.000.000

TOTAL I T CORE 7.861.313 3.406.023 3.200 156.000.000

TOTAL COSTS 167.267.336


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Depraciation of Capital expenditures


• Capital expenditure cost elements are referred to Hardware, Software, Development costs and depreciation.

• Depreciation assumptions for the different type of expenditures are the following:

• Hardware: 5 years

• Software: 3 years

• Other material: 5 years

• Other not material: 15 years


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Regime Cost Structure


0

5.000

10.000

15.000

€20.000M

Regime Cost Structure (2022)

1.147

1.968

4.419

8.404

16.102165

1%

52%

27%

7%

12%

%

EGNOS/GALILEOService

Telco

OBU

SG&AOPEX

PRELIMINARY


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Content







• Sensitivity scenarios


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Scenarios for sensitivity analysis


In order to carry out a preliminary sensitivity analysis, price and penetration values will be changed in comparison with the base scenario analysing the following different scenarios:

Best case

Worst Case

• Penetration rate: 10% higher than base case (assuming that the enforcement strategy will be successful and stakeholders playing the role of GINA enablers will work properly)

• Price: 5% higher than base case

• Penetration rate: 20% lower than base case

• Price: 15% lower than base case

Base Case

• Reference prices of the business model, decreasing along the overall time horizon

• Penetration rate consolidated in Giroads final report (to be noted that these penetration values look already “aggressive” considering also the Galielo overall project status


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Milano Municipality involvement in GINA


• Mid September 2009: established a first contact with AMAT (Mobility, Transportation & Environment Agency of Milano Municipality)

• October 30th, 2009: meeting with AMAT Representatives (Dott. Valentino Sevino and Dott. Paolo Campus) with the aim of illustrating GINA project and evaluating possibility for a direct involvement of Milano municipality

• Milano municipality main areas of interest are:

Traffic Data collection and management for traffic control and info distribution to drivers;

Fleet management (taxi, public transportation, car sharing fleet);

Tracking of commercial vehicles and management/optimization of logistic flows within urban areas

• Next steps:

Prepare a report for Mobility, Transportation & Environment Councillor, Mr. Croci

Arrange an official meeting with Milano municipality by the end of 2009 with the participation of GSA

Invite officially Milano municipality at the Stockholm workshop of March 2010

Thank you

Documents

GINA WP2.2 Business Model and Initial Commercial Feasibility Study November 5 th 2009 Dublin GNSS for INnovative Road Applications