Monetizing Broadband in APAC

8/2/2019 Monetizing Broadband in APAC

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2010 Monetizing Broadband:Asia Pacific

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May 2010


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4

Table of Contents

22Opportunities

28About Frost & Sullivan

16Issues6Context

Slide

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List of Charts

11Broadband Services Market: Broadband Penetration and 3G Penetration (USA), 2001 to 2009

17Broadband Services Market: Wireless Broadband Challenges (World), 1999-2009

19Broadband Services Market: NPV Analysis (World), 2009

18Broadband Services Market: Wireless Broadband Usage (World), 2001-2009

15Broadband Services Market: Wireless vs Fixed Access (World), 2009

13Broadband Services Market: Wireless Broadbands share of Incremental Broadband (World), 2006-2008

12Broadband Services Market: Broadband Penetration and 3G Penetration (Philippines), 2001-2008

12Broadband Services Market: Broadband Penetration and 3G Penetration (USA), 2001-2008

9Broadband Services Market: Broadband Access Technology Mix (Asia Pacific), 2004-2014

8Fixed Broadband Market: Subscriber Base (Asia Pacific), 2004-2014

7Broadband Services Market: ARPU/GDP per capita (Asia Pacific), 2009

10Wireless Broadband Services Market: Broadband Access Technology Mix (Asia Pacific), 2006-2013

14Broadband Market: Fixed vs. Wireless Net Subscriber Additions (Asia Pacific), 2008-2013

7Broadband Services Market: Broadband Penetration (per 100 inhabitants) (Asia Pacific), 2009

Slide

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Context


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Broadband Adoption Is an Affordability Play

Broadband penetration is a function of affordability.

Penetration in APAC Affordability in APAC

51

13

9991

12

44

3

60

39

6

0

10

20

30

40

50

6070

80

90

100

Australia

China

Japa

n

Korea

Malay

sia

New

Zea

land

Philipp

ines

Sing

apore

Taiwan

Thailand

1.34.7

1.4 2.2 3.2 2.4

19.0

1.6 1.65.1

0

10

20

30

40

50

Australia Chin

a

Japan

Korea

Mala

ysia

New

Zealand

Philip

pines

Sing

apore

Taiwan

Thailand

Note: One fixed broadband on an average serves 2 users whereas a mobile broadband serves only the individual subscriberBroadband penetration is the sum of 2 times the fixed broadband subs and mobile broadband subs divided by the population

Broadband Services Market: Broadband

Penetration (per 100 inhabitants) (Asia Pacific),2009

Broadband Services Market: ARPU/GDP Per

Capita (Asia Pacific), 2009

BroadbandPenetration(%)

ARPU/GDPPerCapit

a(%)

Note: All figures are rounded; the base year is 2009.Source: Frost & Sullivan


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Fixed Broadband Market is Growing

63,102

84,300

108,713

130,391

155,171

182,042

212,654

244,592

277,711

310,862

342,910

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Year

Subscribers(Million)

0

10

20

30

40

GrowthRate(%)

Subscribers (Million) Growth Rate (%)

Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan

Fixed Broadband Market:Subscriber Base (Asia Pacific), 2004-2014

Broadband is the only real growth driver for fixed players; it is also a TINA effect.

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Access Technology Mix Would Continue


Sweating of Copper infrastructure is still critical with exception of markets like Japan, South

Korea and Taiwan.Broadband Services Market: Broadband Access

Technology Mix (Asia Pacific), 2004-2014

Note: Others include Satellite and Fixed -Wireless broadband access

58.0373.45

90.51109.19

130.03155.70

182.81

210.77

238.83

5.48

9.09

13.45

16.93

19.49

22.17

24.54

27.04

29.34

19.19

24.32

24.85

27.58

30.98

33.15

35.93

38.64

41.26

45.65

266.00

2.90

31.76

13.69

43.38

0.03

0.07

0.20

0.53

1.00

1.17

1.23

1.45

1.82

1.58

0.84

0

50

100

150

200

250

300

350

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Year

Subscribers(Million)

Others

Cable Broadband

FTTH

xDSL

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10

Mobile Broadband is Here

2008 was the breakout year for HSPA.

Wireless Broadband Services Market: Broadband Access Technology Mix (Asia Pacific), 2006-2013

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Note: All figures are rounded; the base year is 2009. Source: Frost & SullivanLTE


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11

Mobile Players Attack Fixed Line Players With HSPA

Wireless players are trying to gain market share through aggressive pricing in growing broadband

markets.

Growing broadband market Saturated broadband market

Integratedoperator

Mobile-onlyoperator

Fixed Substitute Fixed Complement

Similar performance tofixed broadband at lowerprices O2 Ireland

ONE Austria

Lower prices bundled withfixed and lower downloadlimits Mobikom in Austria

In markets like Indonesia

and Philippines

Cheaper than fixedbroadband M1 Singapore FET Taiwan

Capped usage similar pricesand bundling with fixed TeliaSonera (Sweden)

More expensive than fixed

KT in Korea

Wireless Broadband Services Market: WirelessServices Offerings (Asia Pacific), 2009

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Source: Frost & Sullivan


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12

Broadband Evolution Developed VS. Developing Markets

8

0 0 0

2 510

15

26

0

1220

2635

45

5358

00

10

20

30

4050

60

70

80

90

100

2001 2002 2003 2004 2005 2006 2007 2008 2009

3G Mobile Penetration Fixed Broadband Household Penetration

The dynamics between wireless and wireline technologies differ by market maturity.

Developed Markets: Fixed leadsmobile

Developing Markets: Fixed usuallylags mobile

0

2

4

6

0

1

23

5

0

0

2

4

6

8

2004 2005 2006 2007 2008 2009

3G Mobile Penetration Fixed Broadband Household Penetration

Fixed Broadband remains the speed andexperience leader

Mobile Broadband plays catch-up

High costs of fixed line deployment Pent-up demand in certain areas

Wireless broadband subs are morethan fixed in markets like Indonesia

Broadband Services Market: Broadband Penetrationand 3G Penetration (USA), 2001-2009 Broadband Services Market: BroadbandPenetration and 3G Penetration (Philippines),

2004-2009

Penetration(%)

Penetration

(%)



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13

And Mobile Broadband is Succeeding

Mobile broadband is gaining between 30-50% of incremental broadband additions in most markets

after launch of HSPA and 3G data cards.

Wider coverage and UMTS toHSPA migration

Flat rate pricing packages

USB Dongles gainingincremental broadband share

Broadband Services Market: Wireless Broadbands Shareof Incremental Broadband (World), 2006-2008


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MobileShareofBroadbandNet-a

dds


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14

External Devices are Making a Difference

3G Dongles are taking Asias telecommunications landscape by storm and many markets now have

more dongle users than DSL users.


Broadband Market: Fixed vs. Wireless Net Subscriber Additions (Asia Pacific), 2008-2013

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0

5,00010,000

15,000

20,000

25,000

30,000

35,000

40,000

2008 2009 2010 2011 2012 2013Broadband

NetAdditions(000s)

0

510

15

20

25

30

35

40

Total(%)

Fixed Broadband Net Additions (000s)External 3G Device Net Additions (000s)

External 3G Device Net Additions as a Percentage of Total (%)


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Making Mobile Broadband a Serious Alternative

Mobile broadband has a larger addressable market , technological scale and good incremental rollout

economics at sub 1Mbps speedsLarger addressable Market PCs, laptops, netbooks andsmartphones

User ARPU rather than HH ARPU

Shipments of netbooks plussmartphones to overtake PCshipments in 2010 globally

Technological Stability Clear roadmap to LTE

Over 230 HSPA deployments Global scale and support

Competitive at Sub 1 Mbpsspeeds

Urban centers Sweating of 3G networkinvestments

Broadband Services Market: Wireless vs FixedAccess (World), 2009

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Speeds

ADSL

FTTH

ADSL 2+LTE

HSPA

UMTS


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Issues


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De-Coupling of Traffic Volumes With Revenues

Huge data traffic volume increase;data > voice in most HSPAnetworks.

More than 50% data traffic videoand P2P.

Most pricing models all you caneat.

Declining Average Profit perMegabyte (APPMB).

Cost curve potential to overtakerevenue curve.

The challenges of fixed broadband economics are beginning to show in mobile broadband

as well

Broadband Services Market: Wireless BroadbandChallenges (World), 1999-2009

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Making Unlimited Packages Uncompetitive

Mobile broadband would find it tough to compete when usage goes beyond 4-5 GB a month and will

have unfavourable economics

Usage in MB per month Mobile will reach fixed typeusage behavior in 2-3 yrs

Leading to a change ineconomics of mobilebroadband

Backhaul Kbps per provisioned user

Current

3

40

12-15 times increase inbackhaul capacity

More number of cells tomanage RAN capacity

Limited availability of spectrum Significant increase in capex

per sub: $350 400

...

At 4-5 GB per month

Pay as you goAvg = 200 MB

Flat rate with fair usage policyAvg = 1 GB

Fully unlimited package

Avg = 3-5 GB

Heavy p2p users

MB/month/user

Share of users

Broadband Services Market: Wireless Broadband Usage (World), 2001-2009

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1500

900

4,000

10,000

iPhone

Current

Mobile BB

avg usage

Develping

market

fixed BB

Developed

market

fixed bb


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And Making Pricing Decision a Profitability Determinant

Getting the pricing right is critical for profitability of the mobile broadband business case

For an usage level of 1 GB per month, the positive NPV generation ARPU should be close to $20 permonth (assuming 65% of new capex goes for data and 60% of peak utilization and no increment fromvoice).

The above can be reduced to $15 per month based on various market and operator conditions.

Source : JP Morgan Analysis, Frost & Sullivan

NPV Analysis

Broadband Services Market: NPV Analysis (World), 2009

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Smart the Pipe: Bite the App(le)

The app store success has significant implications for telcos

Rapid change within a year Implications for telcos

Creates an open sourceinnovation platform

Single marketplace, Centralized billing Immediate provisioning

On-device discovery Revenue distribution model

App stores being developed byoperators as well like T-Mobileand O2

What should be the number ofapps to start with and the pricingof the same?

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But is It Another Walled-Garden Trap With a Fancy Name?

Operators are ramping up their capabilities to compete with app stores

Partnering

Doing it ontheir own

Helped byVendors

O2 Litmus Orange

Vodafone

JIL Group formedby

China Mobile Softbank Verizon

Wireless Vodafone

Options

Amdocs App StoreFramework

Ericsson hostedservices

Do nothing: Pocket the dataARPUs by benefiting from theecosystem

Create the App Store using

white label APP Stores andother enablers in theecosystem: Work with theparticipants in the app storeecosystem to create a ready toserve App Store

Build an App Store: Leveragethe subscriber base and leadthrough unique differentiatedesp.. for emerging markets

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Opportunities


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Business Model Choices

Not so much about networks after all

What is the alternative andwhat is your promise?

Is it a fixed linereplacement, complement

or a new experience?

Entry point inflectionRecurring pricingTiered bandwidth

Data usage per month

Device affordability andownership

Digital natives> 4 devices

Productivityseekers ~ 2

devices

First internetexperience

device

?

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Reduce the Cost Per Bit

Anticipation of

data growth

Degree of

integration/Sharing

Operationalefficiency

Key characteristics of the services Data vs. voice vs. video traffic

Flexibility and time to market

Ownership of backhaul infrastructure Integrated/converged strategy:

consumer vs. enterprise vs. wholesale Infrastructure sharing

Multi-tiered bandwidth Reduction in cost per bit

Network criticalities

Traffic dimensioning Level of control and integration

Service awareness Security

Re-use of core and backhaulnetworks

Multi-service network design

Scalability Transport and backhaul efficiency Cost reductions

Broadband costs can easily spiral out of control if not managed properly.

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Expand the Addressable Market

Important to expand the addressable market

Expansion of access devices Expansion of applications Expansion of attention

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Evaluate the App Store Opportunity

Operators are ramping up their capabilities to compete with app stores

Options

Do nothing: Pocket the

data ARPUs by benefitingfrom the ecosystem

Change the VASbusiness model: Viewthe entry of app stores

to re-orient theorganization but dontbuild an app store

Evaluate owned AppStore: Leverage the

subscriber base and leadthrough uniquedifferentiated esp. foremerging markets

Our Recommendation

Evaluate the App store for strategicreasons

Fit with vision Emerging market focus weak in

current app store initiatives Bottom-up innovation benefits that

mitigate risk of disintermediation

The financial expectation gets determined bythe Do Nothing option floor (base case).

Utilize this project evaluation as a process tosee the alignment on VAS/Service strategyand readiness across various group cos (theTrojan horse).

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Key Issues to be Addressed

Cost effective infrastructure (incl. backhaul)expenses

Rigorous Network planning and

dimensioning

Right Portfolio Mix

Differentiated Services

Network exposure

Open Innovation

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About Frost & Sullivan


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Who is Frost & Sullivan

The Growth Consulting Company

Founded in 1961, Frost & Sullivan has over 45 years of assisting clients with theirdecision-making and growth issues

Over 1,700 Growth Consultants and Industry Analysts across 32 global locations Over 10,000 clients worldwide - emerging companies, the global 1000 and the

investment community

Developers of the Growth Excellence Matrix industry leading growthpositioning tool for corporate executives

Developers ofT.E.A.M. Methodology, proprietary process to ensure that clientsreceive a 360

operspective of technology, markets and growth opportunities

Three core services: Growth Partnership Services, Growth Consulting andCareer Best Practices

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What Makes Us Unique

Exclusively Focused on Growth

Global thought leader exclusively focused

on addressing client growth strategies

and plans Team actively engaged in

researching and developing of growthmodels that enable clients to achieve

aggressive growth objectives.

Industry Breadth

Cover the broad spectrum of industriesand technologies to provide clients with

the ability to look outside the box and

discover new and innovative ideas.

Global Perspective

32 global offices ensure that clients

receive a global coverage/perspective

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360o

Perspective

Proprietary T.E.A.M.TM

Methodology

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Growth Monitoring

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Trusted Partner

Working closely with client Growth Teams

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Frost & Sullivan assets to accelerate their

growth.

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T.E.A.M. Methodology

Frost & Sullivans proprietary T.E.A.M. methodology, ensures that clients have

complete 360 Degree Perspective from which to drive decision-making. Technical,

Econometric, Application, and Market information ensures that clients have a

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Technical

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Global Perspective

1,700 staff across every major market worldwide Over 10,000 clients worldwide from emerging to global 1000 companies

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Monetizing Broadband in APAC