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Enabling Growth through Mobility Services

Enabling Growth through Mobility Services. Dr Walid Moneimne Senior Vice President Nokia Networks Europe, Middle East and Africa. Mobile market development in Middle East. 2003. 2007. Middle East & Turkey 125M. Middle East & Turkey 58M. 2.15 Bn. 1.38 Bn.

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Enabling Growth through Mobility Services

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  1. Enabling Growth through Mobility Services Dr Walid Moneimne Senior Vice President Nokia Networks Europe, Middle East and Africa

  2. Mobile market development in Middle East 2003 2007 Middle East & Turkey 125M Middle East & Turkey 58M 2.15 Bn 1.38 Bn Source: EMC Mobile Subscribers Forecast December 2003

  3. Diverse markets in Middle East and Turkey • Prepaid share of markets: • UAE: 83.9% • Kuwait: 79.8% • Bahrain: 60.1% • Qatar: 40.6% • Turkey: 33.2% • Jordan: 24.3% • Saudi Arabia: 23.1% • Oman: 17.4% • Lebanon: 14.5% • Palestine: 11.1% • Egypt: 8.0% • Yemen:3.9% • Pakistan 2.3% • Syria:1.5% • Afghanistan: 0.5% • Iran: 0% • UAE, Kuwait, Bahrain, Qatar, Turkey, Saudi Arabia and Oman penetration over 50% by 2007 • Other countries steadily reaching 20-30% penetration level by 2007 • Strong correlation between prepaid market share and mobile penetration level Source: EMC Mobile Subscribers Forecast December 2003

  4. Comparison of Monthly ARPU by Region US$ Source: EMC December 2003

  5. Targeting new mobile users • Driving fixed to mobile substitution Focus on mobile voice • Targeting new mobile users • Driving fixed to mobile substitution Drive mobile multimedia • Enrich service offering to current subscribers • Openness for market growth and long-term success Success in Middle East requiresa two-fold strategy

  6. Population Expected penetration in 2008 Penetration now Growth shifts to lower incomesegments Example income distribution • Subscriber growth in Middle East coming from markets with low mobile penetration • Revenue potential from high volume of low ARPU increments Share of population High Upper mid Mid Low Very low Income classes

  7. Profitability in entry segmentsbased on lowered costs Key driver for growth: Affordability Operator competitiveness through cost-effectiveness 8$ 16$ Subscriberacquisition 6$ HANDSET Service OPEX 8$ 4$ Network OPEX Depreciation 4$ 2$ SERVICE Profit Example ARPU levels $/month TODAY 2010 2015 Subscriber acquisition costs Services costs Network costs • Handset subsidies • Distribution • Promotion • Customer care • Prepaid refill • Service offering • Content and interconnection • Coverage rollout • Capacity upgrades • Network operations

  8. New distribution solutions for growthand lower subscriber aquisition costs SMART Philippines: • SMART launched e-refill “Load” 2Q 2003 • Dealer numbers increase to >400.000 by 1Q 2004 • Variety of new distribution channels Results: • 1Q 2004 2.8m transactions/day • 86% of prepaid subscribers use “Load” • Capture ~70% of new subscribers in 2003(three-player market) • Subscriber growth is acceleratng • Electronic prepaid refill: • Reduced costs and dealer commissions • Small (0.5 USD) prepaid denominations possible • Affordability increases usage Cost per USD 5 refill Scratch card E-refill Voucher systemmanagement Voucher printing& logistics Transaction cost

  9. Fixed and mobile infrastructure Total: $ 18.440 Mobile voice services (with fixed lines for fax and modem) Total: $ 14.650 K$ 20 21 % cost savings with one voice infrastructure for the customer and…. 66 % revenue increase for the operator 15 10 Mobile Telephony Costs Fixed Telephony Costs 5 2003 2002 Full mobility saves enterprise costs while boosting mobile operator revenue Total voice communication costs (Jan. – June) Case Motoman Robotics Finland

  10. Focus on mobile voice • Targeting new mobile users • Driving fixed to mobile substitution Drive mobile multimedia Success in Middle East requires a two-fold strategy • Enrich service offering to current subscribers • Openness for market growth and long-term success

  11. Healthy Growth continues in Mobile Services Market 2003 2008 Data services CAGR 30% (2003-2008) Data and messaging Person-to-person messaging Content and business services 13% 87% 11% 18% 71% Voice and other calls Total 400 BEUR Voice and rich call services CAGR 5% (2003-2008) Total 635 BEUR Source: Nokia March 2004

  12. SMS was just the beginningStandardized enablers will increase revenuefrom non-voice services Person-to-person services Real time video sharing Content-to-person services Push-to-talk Video messaging Photo and audio messaging Business services Full Internet browsing experience, high-value videos Enhanced browsing, versatile applications Short videos Improved performance and usability Basic applications Basic browsing, rich terminal personalization Messaging and mobile e-mail Secure corporate connectivity

  13. Voice Text messages Ringtones Entertainment & media Icons/Wallpaper Multimedia messages Browsing & service discovery Email Adult entertainment Downloadable games Instant messaging & chat Video call Online gaming Streaming music Services adoption will be very personal % 100 • Number of different services will explode 90 80 70 • Individuals will adoptselected services initially 60 50 • Few services exceed 20% subscriber penetration • A huge number of services will be bubbling under 40 30 20 10 0 2001 2002 2003 2004 2005 2006 2007 Source: Nokia Service Forecast Dec 2003

  14. Cost of delivery example (CAPEX) GPRS Practical bit rate [kbps] Cost of data capacity per MB EDGE 800 WCDMA Relative cost 600 400 200 0 100 150 50 0 Mbyte/sub/month GPRS EDGE WCDMA HSDPA GPRS EGPRS WCDMA HSDPA Network evolution for richer service experience at reduced cost EDGE: Seamless coverage and capacity extension for 3G services • WCDMA: • Highest bandwidth and mass-market capacity WCDMA128-384kbps EDGE 80-160kbps

  15. Learning from SMS success: Open technology Interconnections, Roaming and IOP are key for mass market growth of mobile services SMS penetration in USA 35% US SMS interconnection agreements SMS market in USA grew 300-400% when interconnections were in place 30% 25% 20% % using SMS 15% No SMS interconnections Optus: 100 % increase in MMS traffic when interconnections were in place 10% 5% 0% Dec.99 Jun.00 Dec.00 Jun.01 Dec.01 Jun.02 Dec.02 Jun.03 Date Source: Nokia

  16. Nokia market update • GSM: Nokia supplies GSM systems to over 120 operators in over 50 countries • GPRS: Nokia has close to 80 operators use Nokia GPRS solutions • MMS: Nokia has delivered 60 MMS solutions • EDGE: 16 commercial networks launched as of April 2004 – Nokia supplying to 12 of them • 77 customers rolling-out Nokia GSM/EDGE hardware in 38 countries • Nokia has 25 public EDGE references • Over 75% of Nokia GSM hardware deliveries EDGE • 3G WCDMA: 26 commercially launched networks – Nokia is a supplier for 12 of them • Nokia has 43 public WCDMA 3G references Source: Nokia April 2004

  17. Conclusions • Success in rapidly growing markets requires a dual focus: Mobile voice and multimedia • Full benefits of mobile voice opportunity are achieved with strict cost controls and innovative business models • Mobile multimedia services based on openness help to boost ARPU and customer loyalty with high spending users • Dual market strategy results in growth and improved profitability

  18. Thank you!

  19. Backup material

  20. 16 Public EDGE launchesNokia delivering EDGE network solution for 12 of the operators Finnet TeliaSonera Rogers Bite GSM Pannon Cingular Wireless Bermuda Telecom Westel AT&T Wireless AT&T Wireless, BE CSL AT&T Wireless, PR AT&T Wireless, BA AIS Dialog GSM Telefonica Movil Sources: Nokia and GSM mobile Suppliers Association http://www.gsacom.com Nokia as a supplier

  21. 3GIS SE** T-Mobile DE 3 UK VF SE SFR FR VF Omnitel IT 3 HK Connect AT MTC-VF Bahrain VF KK JP 3 AT STET Hellas GR Based on public sources 26 Commercial WCDMA networks today12 supplied by Nokia **Shared network, no own license/subscribers VF DE 3 DK VF UK 3 SE VF NL VF PR TeliaSonera SE VF SP Mobitel SL NTT Docomo JP 3 IT TMNPR tele.ring AT Launched commercial 3 AU Mobilkom AT Supplied by Nokia

  22. EDGE is in commercial use! • 77 customers rolling-out Nokia GSM/EDGE hardware in 38 countries • Nokia has 25 public EDGE references • Over 75% of Nokia GSM hardware deliveries EDGE • Global operator commitment to EDGE from e.g.: • North-America: AWS, Cingular, T-Mobile USA… • Latin-America: Comcel, Conecel, TIM Brazil… • Europe: TIM, TeliaSonera, Bouyges… • Asia-Pacific: CSL, Smart, AIS, DTAC… • Sixteen commercial networks launched as of April 2004 • Nokia delivered 12 of the 16 operators, e.g. AWS, CSL Hong Kong, Telefonica Movil Chile and TeliaSonera Finland • Virtually all new Nokia GPRS and WCDMA terminals will be EDGE capable • Twelve models already launched by Nokia • Nokia alone expected to ship close to 100M EDGE phones by 2005

  23. WCDMA subscribers increasing rapidly • 26 commercially launched WCDMA networks in addition to world’s first shared network launch. Nokia is a supplier for 12 of them. • 4.9 million subscribers in WCDMA networks • Nokia is a leader in WCDMA deployment • 30, 000 base stations delivered • 43 public references • 27 roll-outs in 15 countries • First Commercial 3GPP compliant Network launched with J-Phone in Dec 2002 • World’s first WCDMA/GSM terminal Nokia 6650 and Nokia 7600 WCDMA/GSM terminal WCDMA/GSM subscribers early days 6 000 000 WCDMA GSM 5 000 000 4.9 M WCDMA subscribers end of March 2004 4 000 000 subscribers 3 000 000 2 000 000 1 000 000 0 1Q 2Q 3Q 4Q 5Q 6Q 7Q 8Q 9Q 10Q 11Q Quarters since first launch Source: EMC database

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