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New Trends in Telecom Industry : Wireless/Broadband October 2005

New Trends in Telecom Industry : Wireless/Broadband October 2005. 2004 Subscriptions. No Subscriber Growth. Broadband. 2.8B. Voice & Data Traffic Growing. Data Traffic Growing. Fixed. Mobile. EMC, Yankee, RHK. Technology Transition to VoIP/Multimedia. Telecom Market Trends. Fixed.

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New Trends in Telecom Industry : Wireless/Broadband October 2005

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  1. New Trends in Telecom Industry : Wireless/BroadbandOctober 2005

  2. 2004 Subscriptions No Subscriber Growth Broadband 2.8B Voice & Data Traffic Growing Data Traffic Growing Fixed Mobile EMC, Yankee, RHK Technology Transition to VoIP/Multimedia Telecom Market Trends Fixed Mobile Subscriber Growth Technology Transition To Multimedia/3G • Boundaries are Blurring between Fixed and Mobile • Mobile Data surpassed Fixed in 2004

  3. The Broadband Wireless Vision • Today: Mobility to Reachability • Still Voice, with some Data • Cost of coverage • GSM / EDGE, UMTS, CDMA • Tomorrow: Broadband Wireless • Layers of access: 3G, WLAN, etc. • Speed, Reliability, & Ubiquity • Future: Routed Wireless Edge • Trillions of interconnected Devices Wireless is Mobilizing ALL services, and driving Traffic to the Core

  4. Wireless Broadband – The New Category UMTS 3GPP Evol? Mobile Cellular Wireless Broadband HSDPA 1xEV-DO F-OFDM WiMAX 802.16e WiFi Cordless 802.11 n Local Area 802.11 a/b/g WiMAX 802.16d NG –DSL / DLC DSL / Cable / Fiber Fixed POTS Voice & Messaging Broadband 2004-2006 Rollout 2006+ Existing

  5. Mobile Market Trends

  6. 600 1400 UMTS 300 1200 500 Other 250 1000 GSM 400 CDMA 200 800 300 600 150 200 400 100 100 200 50 0 0 0 2002 2003 2004 2005 2006 2007 2008 2009 2002 2003 2004 2005 2006 2007 2008 2009 2002 2003 2004 2005 2006 2007 2008 2009 350 600 300 500 250 400 200 300 150 200 100 50 100 0 0 2002 2003 2004 2005 2006 2007 2008 2009 2002 2003 2004 2005 2006 2007 2008 2009 Subscriber Evolution 2009 - All Technologies Asia WE NB. FOMA excluded NA Rest of EMEA CALA Subscriber Growth in Developed markets is limited GSM evolution to UMTS has the highest growth

  7. Key Data Market Metrics Wireless Data Market – 2Q 2005 *Commercially open networks, excludes soft launches Total number of wireless users expected to grow 47 % between 2004 and 2008

  8. CDMA Market Trends • Surpasses 270m subscribers worldwide with close to 30% annual growth • CDMA2000 1x EV-DO subscriber base grew to 186m worldwide

  9. Wireless Metrics - Per Region 100% 700 90% 600 80% 500 70% 60% 400 Wireless Penetration 50% 300 MoU Per Month 40% 30% 200 20% 100 10% 0% 0 NA Asia Africa CALA Middle East Source: Pyr. Res. (MoU), Nortel Eastern Europe Western Europe 2004 2008 MoU 2004 MoU 2008 Voice Growth in GSM/UMTS • Voice users will increase from 1.2B in 2004 to 2B in 2008 • MoU per month is market specific • US=600+, WE=150+, India=300+ • Goldman Sachs estimates 3.5B people will be able to afford a mobile phone in 2010 • 3Bn people will have a mobile phone in 2010 Increasing wealth, Competition, Fixed line Substitution & Prepaid are fueling growth

  10. GSM/UMTS Traffic Growth Global Minutes of Use 2004-09 Source: Pyramid Research 1Q 05 MoU stays stable despite new user dilution Except for the US where they will continue to talk a lot………

  11. NA WE CALA Asia CEE GSM/UMTS Operator ARPU* Growth (1/3) Global Voice ARPUs 2004-09 ($) 60,00 50,00 40,00 $ 30,00 20,00 10,00 0,00 2004A 2005E 2006E 2007E 2008E 2009E *ARPU: Average Revenue Per User Voice ARPUs will remain stable over the next 5 years in GSM/UMTS Conclusion: Despite increasing volumes, Voice ARPU is flat and the business is becoming more commoditized Source: Pyramid Research 1Q 05

  12. GSM/UMTS Operator ARPU Growth (2/3)Data ARPU Evolution 2000-2009 - Pyramid Data as a % of Total ARPU* 45% 40% 35% North America 30% Western Europe 25% Data % 20% Japan 15% Korea 10% 5% 0% 00 01 02 03 04 05 06 07 08 09 *Note1: SMS revenues are excluded in data ARPU Note 2: Voice ARPUs in this period remain generally flat Significant Data ARPU growth expected in all Regions

  13. Mobile Commerce Email Messaging 9% 15% 46% 10% 20% Video Content GSM/UMTS Operator ARPU Growth (3/3) Non-Voice Operator Revenue 2008 Source: CSFB Jan 2005, Figures used valid for Western Europe • Messaging • SMS • MMS • IM • PoC • Content • Music • Java Downloads • Infotainment • Browsing • Video • Telephony • Messaging • Streaming • TV • Email • Consumer • Corporate • Commerce • Micropayments • Gambling • E-wallet • PoS Transaction 70% of non-voice ARPU will come from Person to Person Services Messaging, email, Videotelephony & VideoMessaging

  14. UMTS Market ($B) * FOMA excluded

  15. Top 20 UMTS Users 22.4M UMTS Subs at end Q1 05 23.2M at end April 05 Source: 3GMobile

  16. UMTS Terminals • Nokia plans to launch 10 new models in 2005 • Motorola plans to launch 12-14 new models in 2005 Talktime will continue to trail GSM, but cost will catch up in 1H2006

  17. UMTS Terminals (cont’d) • UMTS Battery Life • Mean talk time is 3h, mean stand-by is 8 days • Remains significantly below 2G talk time of 5-6 hours • Example: Motorola E1120 and E1080 weigh 85g and 110g • UMTS Terminal Weight • Mean weight is 130g • Comparable with 2G • Example: Motorola E1120 and E1080 weigh 85g and 110g

  18. Man. & Test Margin Customisation Packaging 350 Design Software 300 IPR Battery etc 250 Warranty Multimedia 200 Distribution Basic Modem 150 100 50 0 3G High End 3G Low End 2G High End 2G Low End 2G/3G Terminals Average Selling Prices (ASP) GSM Average Selling Price($) 300 250 200 GSM will reach the $40 terminal price in 2007 150 ASP ($) 100 50 0 1995 1999 2002 2005 2007

  19. Nortel presence in GSM/UMTS 147 GSM/GPRS/UMTS customers in 78 countries • 113 GSM networks • 102 BSS Radio Networks • 91 Voice Core Networks • 10 GSM-R Networks • 87 Networks supporting GPRS • 60 BSS Radio Networks • 70 Packet Core Networks • 20 EDGE Radio Networks • 25 WCDMA (UMTS) networks • 14 UTRAN • 21 Packet Core Networks • 8 Voice Core Networks • 19 networks in Commercial launch Source: Nortel

  20. Major CDMA CUSTOMERS 34% of global CDMA 2000 1X networks deployed by Nortel 12 out of 20 1x EV-DO operators use Nortel’s solutions • WE & EE • Czech Rep Eurotel • Latvia Telecom Baltija • AMERICAS • USA Coral Wireless • Guetamala Telefonica Moviles • Trinidad & Tobago LaqTel • Canada SaskTel • Canada Bell Mobility • Dominican Rep Verizon • Haitel Haiti • USA Horizon PCS • Puerto Rico Centennial Comms • Chile Smartcom • USA Sprint • Brazil VIVO • USA Verizon Wireless • Belize Speednet • MIDDLE EAST & AFRICA • Angola Movicel • Israel Pelephone • ASIA & AUSTRALIA • Vietnam Hutchison • Australia Telstra • China China Unicom • Russia SkyLink • Russia UralWestcom

  21. Turkey Wireless Broadband:Why/When • Wireless Broadband is an enabler • Education, Commercial, e-Goverment • Compelling event: Wireless data demand ready • Requirement: Regulation • Since each component of wireless broadband deployment is available, regulation work is expected and desired.

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