Advanced Mobile Data and Multimedia Communications

1. Advanced Mobile Data and Multimedia Communications Cap Gemini Group's Market Vision and Service Offering October 1999

2. Agenda • Overview • Market Developments • Market Potential • Applications • Licensing scheme • Technology • Network • Terminals • Application platforms • Implications for Operators • Strategy and Market positioning • Services • Tariffs and billing • Customer adoption • Technology implementation and migration • Network technology • Network architecture • System architecture • Organization and processes

3. Overview

4. OVERVIEW Emerging Third Generation mobile technology promises to revolutionise mobile data communications . . . Mobile Communications Networks First Generation—Yesterday Second Generation—Today Third Generation—Tomorrow • Analogue • Basic voice telephony • Low capacity • Limited local and regional coverage • E.g. NMT, AMPS, TACS • Digital: • Circuit switched • Voice plus basic data applications: • Fax • SMS (small message services) • Circuit-switched data • Low data speed • Regional coverage, with trans-national roaming • E.g. GSM, D-AMPS, PDC, CDMA • Digital: • Packet and circuit switched • Advanced data—i.e. multimedia applications • Fast data access • Global coverage • E.g. UMTS (W-CDMA) But Wireless data can be introduced without third generation mobile. Source: “Mobile data feels pressure from the need for speed”, Network News, 2 June 1998.

5. OVERVIEW . . . by enabling a variety of multimedia content and services to be delivered over mobile networks MultimediaContent Multimedia Services • TV programmes • Films/video • Music • Electronic games • Educational material • Reference material • Banking and shopping • Map information • Virtual office • Corporate databases • Stock records • Business news and reports • Video-on-demand • Interactive games • Video telephony • Interactive: • Home shopping • Banking • Business TV • Training • Information retrieval services • Video-conferencing • LAN-to-LAN interconnection • Internet/intranet access • Application sharing Source: UMTS Forum, The Future Mobile Market: Global trends and developments with a focus on Western Europe”, March 1999.

6. OVERVIEW The development of advanced mobile data and multimedia communications will be driven by four factors Growth in Mobile Communications and Internet • Mobile revenue growth rate is 10 times that of PSTN revenue growth rate • Mobile penetration has reached 50% in the most advanced market • Internet usage is growing rapidly • Use of wireless connections to access data will increase dramatically Technology Development Development of Advanced Mobile Data and Multimedia Communications Content Providers’ Push • Network: GSM enhancements and Third Generation open standard • Protocol: Sim ToolKit, WAP • Operating Systems: Symbian (EPOC), Microsoft (Windows CE, 3Com (PalmOS) • Connectivity: Bluetooth, Wireless Knowledge • IP explosion: world-wide data traffic on the PSTN networks growing at 1000% per year • Continuous increase in processing power: doubles every 18th month • Content providers are looking for new channels to reach customers • Mobile is the natural extension of the evolution from high street to telephone to Internet commerce • Banks, in particular, are actively experimenting with mobile services Regulatory / Standards Initiative • ITU has defined a framework for standardisation (IMT-2000) • Standards bodies have agreed to support an umbrella standard unifying various CDMA proposals • The industry is actively defining the Wireless Application Protocol • Regulators are in the process of allocating licences for Third Generation mobile networks

7. OVERVIEW Mobile is fast outgrowing PSTN communications and reaching high penetration levels Mobile Penetration Rates in Europe1 July 1999b World-Wide Mobile vs. PSTN Revenue, 1992–2005a Region Mobile Revenue PSTN Revenue Mobile Revenue as % of PSTN revenue CAGR 20.9% 2.1% Revenue ($ billion at 1998 prices and exchange rates) Mobile Revenue as % of PSTN Revenue Operators are looking for new revenue sources, as mobile penetration has reached half of the population in some countries. Source: a. Observatoire Mondial des Systèmes de Communication, Key Figures and Indicators for the World Telecommunications Market, 1998–1999. b. “Mobile Communications guide to West European cellular subscribers”, Financial Times Mobile Communications, 22 July 1999.

8. OVERVIEW When strong Internet growth is combined with mobile penetration, demand for mobile data appears inevitable Growth of Global Dial-up and Permanent Internet Connections 1998-2005a Method of Remote Data Access Used by US Remote Professionals in 1998 and Expected in 2000b (% of 300 telephone interviewees) CAGR 20.5% 66.2% Connections (million) By 2000, 63%of remote workers in the U.S. expect to use wireless connection to access data, compared to only 16% in 1998. Source: a. www.gsmdata.com, citing Ovum, Internet Market Forecasts: Global Internet Growth 1998-2005, December 1998. b. www.wirelessdata.org, citing Cahners In-stat Group, Access Requirements: The Growing Demands of Remote and Mobile Users, September 1998.

9. OVERVIEW At the same time, content providers are looking to extend channels to reach customers Evolution of Channels Banks: Examples of Push by Content Providers • Banks in Hong Kong and Singapore are especially active in launching mobile banking services: • HSBC and Hang Seng bank are launching mobile banking services, including securities trading, in Hong Kong in July 1999. • American Express Bank plans to launch services in Hong Kong at the end of 1999 that allow customers to trade stocks and foreign exchange, shop, and move money between various banks. • Standard Chartered Bank formed alliances with telecom firms, universities, mobile phone manufacturers, and smart card operators to develop mobile services in Hong Kong and Singapore. • Citibank also offers mobile banking services in Hong Kong and Singapore. • Banks in UK and France are also trialing mobile banking services: • Barclaycard is teaming with Cellnet to launch mobile phone ATMS. • Banque Nationale de Paris, Crédit Commercial de France, Crédit Mutuel and Société Générale have linked up with SFR to experiment on mobile banking services. • Crédit Agricole offers “infomobis”, which sends daily account messages to mobile phone subscribers. High Street Telephone Internet Mobile “Perhaps the net is already in danger of becoming ‘old-hat’ as banks consider the potential of mobile phone banking”. —A. Kahler, Australian Financial Review Source: Textlines.

10. OVERVIEW Substantial progress is being made in mobile network, terminal, and application enabling technology Network • GSM enhancements: HSCD, GPRS, EDGE • Third Generation: IMT-2000/UMTS (W-CDMA) Consortiums + small numberof open standards facilitateworld-wide adoption Terminals Application enablers • Improvements in performance/costs of semiconductors: • Reduced size, cost and power consumption of mobile devices • Improvements in user interface and display technologies • Protocols: WAP • OS: EPOC, Windows CE, Palm OS • Connectivity: Bluetooth (wireless radio links between devices) • Internet, intranet • Web platforms • SimTool Kit, Java-like technology • Service creation technology • Billing technology, payment technology • Voice handling and recognition technology

11. Enables Latent End-User Needs Internet Time OVERVIEW For mobile data, as for the Internet, technological developments and user demands reinforce each other Lower pricesBigger ChoiceEasier Buyingetc. Fuels Technological Developments Abundant BandwidthComputing PowerDigitisationetc. Technology and application development interact in a virtuous circle

12. OVERVIEW Government regulators and industry groups are actively promoting Third Generation mobile technologies • International Telecommunications Union (ITU) has defined a framework (IMT-2000a) for standardization, and regional bodies have developed proposals: • Europe: the European Telecommunications Standards Institute (ETSI) has adopted Universal Mobile Telecommunications System (UMTS), based on W-CDMA, as the new standard. • Japan: the Association of Radio Industries and Businesses (ARIB) has also adopted UMTS as the new standard. • US: the Telecommunications Industry Association (TIA) has endorsed cdma2000, while the Universal Wireless Communication Consortium (UWCC) has endorsed a standard based on TDMA. • In June 1999, the Operators Harmonization Group (OHG)—an international ad hoc group of cellular operators and manufacturers—recommended an umbrella standard unifying W-CDMA and cdma2000 proposals: • ITU has endorsed the OHG recommendation. • In July 1999, Third Generation Partnership Project (3GPP)—a group formed by regional standards bodies including ETSI and ARIB—has agreed to align its standards to the OHG recommendation. • Industry is actively defining the Wireless Application Protocol: • The WAP Forum gathers more than 100 players. • WAP v. 1.0 was released in April 1998, and WAP v. 1.1 was approved in May 1999. • WAP enabled servers, applications and devices are expected to be released later this year. • Government regulators are in the process of allocating licenses for Third Generation mobile networks. These bodies see Third Generation standards as the key to achieving a truly global wireless network. Source: “Standards body OK’s harmonised 3G technical changes”, 9 July 1999, www.totaltele.com; “Ericsson buries hatchet with CDMA group”, 15 June 1999, totaltele.com; “Operators propose 3G compromise”, 7 June 1999, www.totaltele.com; www.itu.int; “ITU gives up on single 3G standard”, 22 March 1999, www.totaltele.com; www.wapforum.org. a. IMT = International Mobile Telecommunications.

13. OVERVIEW Third Generation mobile developments will create significant new revenue opportunities for operators ... • The mobile voice market exploded, and growth may slow unless new value-added revenue sources are found. • The familiarity with and reliance on the Internet and multimedia is increasing. • The market for mobile data and multimedia communications is forecasted to grow substantially over the next decade. • Content providers are looking to mobile as another new channel to customers. • Development of bandwidth enhancing technology will enable delivery of multimedia applications over mobile telecom networks. • Standardization of technology will facilitate global adoption of new applications. • Innovation in facilitating ease-of-use will encourage trial and, more importantly, acceptance.

14. OVERVIEW … however, the advent of mobile Internet forces operators to reassess their business approach • Players need to define their precise positioning in the connectivity, hosting, aggregation, and content creation segments of the Industry. • Various players will need to form partnerships and alliances to bring products to market: • Operators will need to share revenues with content providers. • Content providers may become a revenue source for operators as they pay operators to deliver their services to end consumers. • The move from circuit to packet switching means users will have a permanent web-tone instead of minutes of connection: • Tariff schemes will need to reflect this new measure of usage. • Commodity services will face heavy price pressure: • Tariff schemes will need to differentiate between services that are commodities and services that provide significant value. Major Internet players are already developing and implementing these business models.

15. DEVELOPMENTS IN MOBILE DATA COMMUNICATIONS: MARKET Operator revenue from mobile data is forecasted to grow to $80 billion world-wide by 2010 European and US Mobile Data Revenue 1998, 2003 ($ billion)b World-wide Mobile Data Revenue 1998–2010 ($ billion)a Region W Europe US CAGR 78% 44% CAGR 59% Mobile Data Revenue as % of Total Mobile Revenue, 1998—2003b Revenue ($ billion) Region W Europe US Western Europe is forecasted to experience substantially higher mobile data revenue growth than the US. Source: a. www.analysys.com/news/dom.htm,citing Data over Mobile: Commercial Strategies for Mobile Operators, 22 April 1999. b. www.mda-mobiledata.org/news/eurous.htm, citing Strategic Analytics, European and US Cellular Data Market Forecast (1998–2003).

16. DEVELOPMENTS IN MOBILE DATA COMMUNICATIONS: MARKET In Europe, mobile multimedia could account for nearly 25% of total mobile revenue and 60% of total traffic by 2005 Penetration of Future Mobile Services in EU 2005, 2010 EU Mobile Revenue, 2005 Billion Euro EU Mobile Traffic, 2005 Million Million Mbytes/Month Mbytes/Users/Month Mobile multimedia users are expected to reach 23% of the population in the EU by 2010. Source: UMTS Forum, Report on UMTS/IMT-2000 Spectrum, December 1998 (using Analysys/Intercai study).