maximizing the emerging market bwa business plan
DESCRIPTION
WiMAX Forum Global Congress09, 2- 3 June 2009, RAI, Amsterdam, The Netherlands.TRANSCRIPT
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Maximizing the Growth MarketBWA Business Plan
WiMax Forum Congress Global09Amsterdam, June 3rd, 2009.
Kim Kyllesbech LarsenTechnology, T-Mobile International
2
Story.
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BWA Greenfield in growth markets.
BWA spectrum availability.
Maximizing the BWA value.
Technology migration towards LTE* - when, why & how.
Partnerships.
3
Broadband wireless access vision.Technology enables Connected Life and Work ….
At home. On the move. At work.
Connecting the next 1 billion un-connected
4
Connecting the un-connected at home.
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Years
Growth marketsPC & FBB penetration
(of Households)
PC
FBB: Fixed BroadbandBB: Broadband
FBB
GROWTH MARKETS will drive the demand for Broadband Wireless Accesswill have a substantial proportion of HH un-connected.
will have more than 60% of all new broadband connectionsfixed broadband infrastructure access is poorly developed.
today
BB ≥ PC
Years
Mature marketsPC & BB penetration
(of Households)
today
will drive the demand for Broadband Wireless Access
50%
5
Internet connectivity is more than “just” fixed.
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Years
Growth marketPC and broadband
penetration(of population)
FBB: Fixed BroadbandWBB: Wireless Broadband
today
PC
WBBFBB
Fixed-based offering (i.e., CPE-based) is often the right starting point for a BWA startup business.
Nomadic (i.e., dongles & data cards) and limited-mobility services (i.e., handsets)
can be offered within the coverage footprint
Explore enhancing the business model towards quadruple play service enablers
Access, Voice/text, Broadcast & Mobility.
6
ARPU Zone
Is a profitable BWA business viable in Growth Markets with very low ARPU?
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Nominal GDP per capita per month
ARPUtrends
* Only major growth markets considered: China, India, Thailand, Philippines, Vietnam, Indonesia, Malaysia.
$0
$10
$20
$30
$40
$0 $200 $400 $600
APAC*
Source: Pyramid
Monthly spend trends:Mobile <3.5 %> GDP/CapitaDSL <10%> of GDP/CapitaHigh prepaid share <87%> with typical >90%.Annual ARPU decline anticipated across all cats.
xDSL / Cable
Mobile Prepaid
Mobile Contract
Mobile blendIndia China
7
Substantial difference in the Mobile and BWA business model logic and economics.
Mature and emerging markets Aim near 100% pop &
geographical coverage.
Multiple access technologies. Mobile voice primary revenue
stream and broadband data secondary.
Macro-mobility main value add.
High Opex is driven by country wide network coverage, market invest and usage-based cost.
Very high Capex pressure due to country-wide coverage.
Attractive in emerging markets Dense-urban and urban city-based
coverage, income-profit based rollout.
Single access technology. Broadband wireless data primary
revenue stream with premium ARPU. Voice over IP (VoIP) can be offered.
House-hold based DSL substitution, nomadic mobility and at later stage city-based mobility for data and VoIP.
Lower Opex due to city-based coverage strategy, often only broadband alternative with minor usage-based cost.
Lower overall Capex due to significant reduced rollout footprint.
Mobile business model BWA business model
8
The traditional Mobile network model – don’t go there with BWA (initially).The traditional Mobile network model
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Top Cities
UrbanSub-urban (SU)
Rural (RA)
Radio Nodes
Traffic (Revenue)
Total Cost
Coverage and mobility drives up site numbers. 50% or more of total site count are RA & SU.
70% or more of traffic is generated in Top Cities and Urban areas
Ca. 50% of (network) cost is driven by RA & SU.
9
BWA network deployment in growth markets – a City-focused (inside-out) model.
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Radio Nodes
Traffic (Revenue)
Total Cost
Target the Top Cities of growth markets. Top-cities often have 5 -10 times the country
GDP per capita. Opportunistic-based rollout.
Develop BWA-based DSL propositions. High-quality* customer value propositions. Explore nomadic, VoIP, broadcast options.
Synchronizing cost with revenue. Build-to-need. Don’t compete with the mobile business model
* With high-quality should be understood better than existing fixed (and mobile) broadband packages in market, which can be very different from for example European quality levels.
Top Cities
10
T-Mobile UK& Orange TD-TV
TDD spectrum at lower frequencies are scarce.
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UL(75 MHz)
DLUL(35MHz)
DL
UL(70 MHz)
TDD(50 MHz)
DL
900 MHz 1,800 MHz
2,500 MHz
UL(60 MHz)
DL
2,100 MHz
TDDpart TDD
2,300 – 2,400+ MHz
part TDDThis band provides interesting backhaul P2P
options in some Greenfield scenarios
3,400 – 3,500+ MHz
China: SD-CDMA alloc.
UL DL
400 MHz
UL DL
700 MHz
Coverage
Capacity
TDD
TDD
(20 MHz) (15 MHz)
(20 MHz)
Source: TeleGeography - WiMAX Research Service, Q4 2008.Note: Ignoring traditional WiMax frequency at 3.6 GHz, 4.9 GHz and 5.8 GHz.
Airway in China
TDD
BSNL in India
11
A quarter of WiMax deployments so far are at or below 2.6 GHz and primarily in Asia.
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17% WiMax deployments @ 2.5 GHz of which 50% are in Asia of which 95% are in Growth Markets 50 MHz will be available in most WEU
countries within the next 1 – 3 years.
8% WiMax deployments @ 2.3 GHz. of which 75% are in Asia. of which 90% are in Growth Markets. Unlikely to be harmonized across EU,
high degree of occupation.
75% of WiMax deploymentsare above 2.5GHz
57% @ 3.5
2.52.3
WiMax deploymentdistribution
Source: TeleGeography - WiMAX Research Service, Q4 2008.
12
Some factors for technology selection.
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Note: Logos depicted here are by no means all inclusive DT, simply examples of industry contact points.
Cost:Efficient Capex & Opex.Support (passive & active) network sharing.
Performance:Spectrally efficient and flexible.Continuous capacity & quality improvement.Future proof (i.e., at least 10 yrs).
Legacy Support & Ease of Migration:Smooth technology migration.Development backwards compatible with 802.16e.
Terminals/Ecosystem:Low-production cost.Significant scale (regional & worldwide).Terminal diversity: CPE, Dongle, “handsets”,...Diversity of applications: Access, Broadcast, VoIP, etc..
13
The potentially biggest entry opportunity in a Growth Market is by targeting the un-exploited households demand for internet access.
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HH
PC
FBBtoday
+5 Years
10 mio
28 mio
62 mio +1.4% pa
0.7 mio
1.5 mio1.2mio0.8 mio0.4 mio0.1 mio
Subscriptions
Opportunistic business model targeting high-value city-based customer segment
providing high-quality* broadband wireless access.
ILLUSTRATION of TOP-20 City-basedcoverage business model:
* Compared to the relevant market.
14
Business model – building the network.
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Years
New Sites /Nodes
Basic Sites
Special Sites
Capacity Nodes
Modernization Nodes
1 2 3 4 5 12
2 10 20 20Cities covered
2.5 5.2 6.8 7.7 In millionsHH coverage
1.0 3.3 5.4 5.71Area covered In thsd km2
0.1 0.4 0.8 2.3 In millionsSubscriptions 1.2 1.5
300 800 1,300 2,100 (unique sites)BWA Nodes 1,600
300
500
500
300
50 50 25 53 55 57 59 61
300
500
500
300 35
3
562
537
364
Illustration
15
Business model – capital expenditures.
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Illustration
up to 70% RAN
ca. 5% Other
ca. 15% IT & VASca. 10% Core
CAPEX DISTRIBUTION
Absolute Capex levels lower than a mobile business model. 10 Yr average Capex to Revenue ratio 12 ± 2. Steady-state Capex to Revenue ratio < 8. Consider 5 year RAN wear-out cycles (obsolescence). Typically cash positive within 3 to 4 years after launch.
16
Business model – Operational expenditures.
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Illustration
OPEX DISTRIBUTION
The BWA Opex distribution is fundamentally different from a mobile voice-centric business model.
The BWA’s Opex to Revenue ratio is more favorable than compared with a traditional mobile business.
Typically EBITDA positive within 2 to 3 years after launch. Maximum EBITDA margin over a 10 Yr period easily above 40%.
15% Usage cost
up to 35% Technology
ca. 5% Personnel30+% Market Invest
ca. 15% Other
17
Business model – financial dynamics.
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1 2 3 4 5 6 7 8 9 10 11 12Years
Subscriptions
FinancialRevenue
Opex
Ebitda
GROWTH OPTIMIZATION
ARPU
$22 pm
$15 pm
2.3 mio
Illustration
0
0
Market
18
Business model – BWA quality does not need to be pricy.
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0.1
0.7
1.3
1.9
2.5
3.1
3.7
4.3
4.9
5.5
6.1
6.7
7.2
Yr1 Yr1038
30
23
15
8
0
ARPU CAGR -3%
Subscriptions
NPV10Yr > 0
NPV10Yr< 0
Illustration
ARPUper
month
20
50
40
30
10
0
Fixed DSL price range in growth markets$20 – $40 per month
19
Migrating to the next radio access technology – how to continue?
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Next-generation WiMax (802.16m/TDD-LTE) will become available in the next 2 to 5 years (2011 – 2014).
Spectrum management issues.
Use part of existing spectrum (if capacity allows).
Obtain additional spectrum (should always be pursued).
Backwards compatibility with previous technology should be safe-guarded (by standardization & innovation).
CPE equipment could be designed to be future proof.(i.e., supporting both 802.16e and LTE*).
LTE standard backwards compatible (e.g., 802.16m).
(if capacity allows).
(should always be pursued).
* Subject to chipset availability.
20
Migrating to the next radio access technology.
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Assumptions: New technology introduction
after ca. 5 years. All Gross Adds adapt the new
technology. Increased & accelerated
voluntary CPE replacement of installed base.
No forced migration assumed (i.e., subsidies).
Illustration
37%
23%
11%3% 1%
53%
73%
0%
20%
40%
60%
80%
100%
1 2 3 4 5 6 7 8 9 10 11 12
WiMax802.16e
WiMax 16m(TDD-LTE)
Years
Access technology share of devices
TDD-LTE intro 2011 - 2014
Many years of technology overlap!
21
The Growth Markets BWA business model is highly promising.
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Addressing inherent high demand for internet access.
BWA-based DSL is often only option for internet access.
Powerful substitute for poor fixed “DSL/cable”.
Potential to out-perform UMTS/HSPA in raw IP-throughput and scalability providing an equivalent grid.
TDD spectrum is relative cheap (compared to FDD).
WiMax is here now!.
22
The mature markets business model might not be as promising.
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Broadband & PC penetration window closed.
High fixed broadband (i.e., >70%*) penetration.
Very high mobile (i.e., >100%) penetration (saturation).
Existing high-quality / multi-faceted broadband service offerings (i.e., multi-play) at relative low pricing.
Entering a saturated, highly competitive and efficient market with multiple mobile and fixed operations.
* In Western Europe
23
Greenfield challenges to look out for.
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Information Technology
(not an afterthought)
Backhaul
connectivity
Service management
Measure your customer
Site sharing possibility
(speedy rollout)
The right partnering
(strategic & financial)
Manage bandwidth
Regulatory policy& support
Backbone & Interconnect
connectivity
Opportunity basedNetwork rollout
Network Turnkey &
managed services
Technology choicenow & tomorrow
24
Partnership.
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Deutsche Telecom Group is one of the biggest Telco's in terms of purchasing power of Mobile and Fixed infrastructure.
Procurement benefits & synergies by leveraging on more than 160 thousand operational radio-nodes.
Benefit from network design, planning & operational excellence from operating 17 mobile networks and serving more than 120 mio. customers worldwide.
Leverage on Fixed, Mobile and ISP operational know-how.
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Thank you for your attention.
Contact details:[email protected] +31 6 2409 5202http://www.linkedin.com/in/kimklarsen
Acknowledgement: Many thanks to Stefan Wilhelm (DTAG), Minoo Abedi (T-Mobile), Alan Yeo (DT Asia), Dirk Schoneboom (T-Mobile) for invaluable discussions and challenges and the many entrepreneurs that I have had the privilege to meet and discuss with over the last couple of years.