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GINA WP2.2

G NSS for IN novative R oad A pplications. GINA WP2.2. Business Model and Initial Commercial Feasibility Study November 5 th 2009 Dublin. Progress Status of D2.2 – Business model and initial commercial feasibility study. D2.2 Chapters. Progress status. Remarks.

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GINA WP2.2

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  1. GNSS for INnovative Road Applications GINA WP2.2 Business Model and Initial Commercial Feasibility Study November 5th 2009 Dublin

  2. Progress Status of D2.2 – Business model and initial commercial feasibility study D2.2 Chapters Progress status Remarks Service concept definition Trials sample definition Competitive scenario analysis and framework Business model definition Value chain structure and key players assessment Addressable market and market potential Completed Completed Completed EDAS role to be analysed Partnership strategy for EETS provider developed in WP4.2 Completed Revenues generation potential Completed Preliminary costs estimation done with Giroads reference values: analysis to be refined with costs inputs from GINA partners – Capex to be evaluated Cost structure definition To be completed after cost structure consolidation Profitability Sensitivity scenarios Defined scenarios for sensitivity analysis GINA WP2 – Analysis of Applications / Services 13/10/2014 Page 2

  3. Content Business model definition Value chain structure and key players assessment Addressable market and market potential Revenues generation potential Cost structure definition Sensitivity analysis GINA WP2 – Analysis of Applications / Services 13/10/2014 Page 3

  4. High Level Architecture GALILEO/ EGNOS EXTERNAL DATA SOURCES SERVICE CENTER CENTRAL INFRASTRUCTURE OBUs SERVICE CENTER Mobile Network Internet secure connection (GPRS/UMTS) SERVICE CENTER The On Board Units receive the signal from the GNSS system and communicate through GPRS/UMTS signal with the Central Infrastructure, deployed to provide all basic and common services to the system 20091105_GINA_PM2_WP2.2_v0

  5. Service/product flows Economic flows Key Economic Flows in Service Provisioning EGNOS/GALILEO OPERATING COMPANY TOLL CHARGER 1, 2…N SERVICE PROVIDER TELCO OPERATING COMPANY GNSS SERVICE PROVIDER Payment for usage Fee per subscriber Payment for usage Fee per subscriber* Payment for usage Guaranteed service Service fee EETS PAN-EUROPEAN SERVICE PROVIDER Fee per bundle Service bundle END USER/CUSTOMER (Private + Business) INFRASTRUCURE OWNER PUBLIC INSTITUTIONS *When applicable for the specific type of Service according to Business Model definition 20091105_GINA_PM2_WP2.2_v0

  6. Content Business model definition Value chain structure and key players assessment Addressable market and market potential Revenues generation potential Cost structure definition Sensitivity analysis GINA WP2 – Analysis of Applications / Services 13/10/2014 Page 6

  7. Regulation and Supervisory Authority Signal provisioning and guarantee Content generation Service provider Telecommuni-cation channel Vehicle / OBU manufacturer Customers GINA High Level Value Chain Enhancers / Facilitators Important partnership for the Service Provider GSA European commission States members Operating Company GNSS service provider EDAS Service Provider Roadmap databases Navigation algorithms Infomobility Turistic/ service DB Weather information Personal data access Entertainment Vehicle assistance Driver assistance Wireless transmission of telematics services Vehicle integrators Car manufacturers On Board Unit manufacturers Private clients (Consumer and Business) Institutional clients Road infrastructure management companies Police Municipalities 20091105_GINA_PM2_WP2.2_v0

  8. Key Players assessment Possible enhancers Possible partnership Role in the value chain To define the general legislative and regulatory framework, incentivising the use of GNSS technology in the road sector Regulation and supervisory authority Standardization and enforcement Signal Provisioning and guarantee To guarantee the signal service Content generators To develop vehicle related contents (roadmap database, navigation algorithms, traffic DB…) and non-vehicle related contents (weather info…) EETS Service Provider To allow to EETS users to pay tolls in all EU with a single on-board equipment (OBE) and a single contract Telco To make communication channels available at the required SLA Vehicle / OBU manufacturer To make available OBUs according to EETS requirements at decreasing costs - Customers Public and istitutional clients 20091105_GINA_PM2_WP2.2_v0

  9. Content Business model definition Value chain structure and key players assessment Addressable market and market potential Revenues generation potential Cost structure definition Sensitivity analysis GINA WP2 – Analysis of Applications / Services 13/10/2014 Page 9

  10. Potential market- EU Actual Members For the addressable market the Business Case has analysed the last available data relevant to the European market of cars, buses, light commercial vehicles, light, medium and heavy trucks, using CAGR of the last 4 years to project data till 2012 and an adjusted value to project data from 2012 to 2022. The analysis took into consideration the countries belonging to EU27. GINA WP2 – Analysis of Applications / Services 13/10/2014 Page 10

  11. Forecast for circulating cars in Europe(2008-2022) EU 27 cars market expected to increase from 235 Mln in the 2008 to 275 Mln in the 2022 with a CAGR equal to 1,13% Relative weight of the first 7 countries (Germany, Italy, France, GB, Spain, Poland, Netherlands) out of the total EU market decreases from 78% in 2008 to 75% in 2022 Source: Euromonitor + Anfac report February 2009 GINA WP2 – Analysis of Applications / Services 13/10/2014 Page 11

  12. Forecast for circulating LCV, Trucks and Buses in Europe (2008-2022) EU 27 commercial vehicles and trucks market expected to increase from 33 Mln in the 2008 to 42 Mln in the 2022 with a CAGR equal to 1,6% Relative weight of the first 7 countries (Germany, Italy, France, GB, Spain, Poland, Netherlands) out of the total EU market decreases from 78% in 2008 to 71% in 2022 Source: Euromonitor + Anfac report February 2009 GINA WP2 – Analysis of Applications / Services 13/10/2014 Page 12

  13. Market potential vs Penetration- Private segment Data referred to EU27 No. of cars in EU27 (Mil) GINA Penetration (%) GINA WP2 – Analysis of Applications / Services 13/10/2014 Page 13

  14. Market potential vs Penetration- Business segment Light Commercial Vehicles (W< 3,5 tons) Light- Medium Trucks (3,5<W<16 ton) Heavy Trucks (W>16 tons) Buses Data referred to EU27 No. of LCV, Trucks & Buses in EU27 (Mil) GINA Penetration (%) GINA WP2 – Analysis of Applications / Services 13/10/2014 Page 14

  15. Content Business model definition Value chain structure and key players assessment Addressable market and market potential Revenues generation potential Cost structure definition Sensitivity analysis GINA WP2 – Analysis of Applications / Services 13/10/2014 Page 15

  16. Price assumptions For the private segment, an all inclusive flat fee structure is assumed from the end customer side. On the operators’ side, since they can benefit from cost and investments savings, a fee per subscriber can be assumed. Since aggressive penetration pricing is a key success factor for the mass market diffusion in the consumer segment as highlighted in previous project (Vert and Giroads), the price can be in the range 6-15 €/month. For the business segment a more flexible approach shall be adopted due to the different type of customers to be served, spanning from large delivery companies operating on international basis with hundreds of vehicles to small companies operating on local basis with few vehicles. In the preliminary business model anyhow a flat fee is assumed for simplicity reason with a price in the range 100-130 €/month. Also for the business segment, on the operators’ side, a fee per subscriber is assumed. GINA WP2 – Analysis of Applications / Services 13/10/2014 Page 16

  17. Revenue stream PRELIMINARY Price assumptions: • Price of bundle package for Consumer segment decreasing from 2012 to 2022 from 10 to 6,5 €/month • Price of bundle package for Business segment decreasing from 2012 to 2022 from 80 to 60 €/month • Average fees from motorway operators equal to 12 €/year/customer flat from 2012 to 2022 Consumer Business GINA WP2 – Analysis of Applications / Services 13/10/2014 Page 17

  18. Content Business model definition Value chain structure and key players assessment Addressable market and market potential Revenues generation potential Cost structure definition Sensitivity analysis GINA WP2 – Analysis of Applications / Services 13/10/2014 Page 18

  19. Cost structure elements • The cost structure is referred to the GINA Service Provider, i.e. the company that sells the service packages to the final customers by aggregating inputs of specific service providers. • Costs are evaluated under the hypothesis that the architecture as a whole as well as the single system components change, in terms of costs and performance, with the number of final users. • The Architecture cost structure assumes to have a “Smart OBU” in order to be compliant with Privacy issues. Main costs element are the following: • Telecomunication costs • EGNOS/Galileo Service costs • OBU costs • SG&A • Operating costs • Depreciation of capital expenditures GINA WP2 – Analysis of Applications / Services 13/10/2014 Page 19

  20. Telco costs • The communication channel among the OBUs and the main infrastructure will be done by GPRS/UMTS. • Reports will be sent daily for each vehicle with only the RUC data (smart OBU). This optimizes bandwidth and server usage. • It should be taken into account that VAS have different communication needs from RUC. Depending on the type of VAS there might be the need of a continuous real-time communication – which would considerably increase the cost for frequent users - (e.g. navigation, traffic information) or information which can occur on-the-spot (e.g. ecall) or can be dumped on a daily basis (e.g. PAYD). • Communication among service centers will be through a secure internet access. • For the business plan purpose the following assumptions are made: • Communication process will decrease with subscribers increase due to better tariff negotiation; • Business segment will require higher communication costs vs. consumer segment; • 3 hours of communication time per day per vehicle (based on average time of private car usage of 2 hours per day and average time of business segment vehicle usage of 8 hours per day) • Increase factor of 2 for the communication time to take into account peak condition versus average situation • Average of 7 euro/month/subscriber for communication costs GINA WP2 – Analysis of Applications / Services 13/10/2014 Page 20

  21. Signal operating costs and guarantee costs • About the signal operating and guarantee costs, reference is made to GIROADS study relevant to EGNOS System operating costs, that provides the following figures: • System operations costs between 30 and 35 million euros per annum (indicative cost allocation for the road domain between 3 and 15 million euros per year); • Galileo Concessionaire costs for GNSS services equal to 1,5 € per annum per OBU • EDAS costs have not yet been analysed: input from GINA partners for a cost estimation is necessary GINA WP2 – Analysis of Applications / Services 13/10/2014 Page 21

  22. OBU costs Actual costs range for commercial OBUs spans from 175€ to 600€ but a precise benchmark among different vendors has to be carried out Price of OBU is highly depending on the overall market quantity since production costs are highly affected by scale economies Therefore actual costs/prices of OBU can be used only as reference since strong cost/price decrease is expected along the business plan horizon Besides, installation costs (actually around 60€/OBU) could drastically be reduced in case of partnership with car manufacturers since it can be supposed that cars commercialized in the future will be already equipped with an OBU suitable for EETS The actual assumption of the Business Case is that at regime condition the cost supported by the EETS provider will be the lease rate for an OBU costing 100 €, with a leasing of three years at 10% interest rate GINA WP2 – Analysis of Applications / Services 13/10/2014 Page 22

  23. SG&A About SG&A, the Business Plan uses the following assumptions: • Commercial costs: • Commissions to sales agent (either belonging to third parties or to an own sales force network) equal to 5% of total revenues (based on telecom benchmark where commissions go from 4 to 8% of revenues) • Fixed share of commercial costs equal to a percentage of the steady state revenues (assumed to be reached in 10 years after GINA launch) • Marketing costs:0,5% of the revenues (based on telecom benchmark) for advertising and promo costs for product launch, customer retention initiatives and brand/product awareness building • Administration, Finance & Control: staff of 600 employees for the pan-European service provider at regime condition (average of 20-30 employees per country) costing 80k€ each • Other costs: rent and other minor costs assumed to be 10 M€ at regime condition • In analyzing the deployment of EETS (taking into consideration the need to establish agreement with Toll Chargers in the different EU Member States), the possibility to focus on strategic corridors or areas could optimize the SG&A costs GINA WP2 – Analysis of Applications / Services 13/10/2014 Page 23

  24. Operating costs Operating costs based on Giroads costs strucure To be finalized based on GINA architecture and partnersreview GINA WP2 – Analysis of Applications / Services 13/10/2014 Page 24

  25. Depraciation of Capital expenditures • Capital expenditure cost elements are referred to Hardware, Software, Development costs and depreciation. • Depreciation assumptions for the different type of expenditures are the following: • Hardware: 5 years • Software: 3 years • Other material: 5 years • Other not material: 15 years GINA WP2 – Analysis of Applications / Services 13/10/2014 Page 25

  26. Regime Cost Structure PRELIMINARY GINA WP2 – Analysis of Applications / Services 13/10/2014 Page 26

  27. Content Business model definition Value chain structure and key players assessment Addressable market and market potential Revenues generation potential Cost structure definition Sensitivity scenarios GINA WP2 – Analysis of Applications / Services 13/10/2014 Page 27

  28. Scenarios for sensitivity analysis In order to carry out a preliminary sensitivity analysis, price and penetration values will be changed in comparison with the base scenario analysing the following different scenarios: Reference prices of the business model, decreasing along the overall time horizon Penetration rate consolidated in Giroads final report (to be noted that these penetration values look already “aggressive” considering also the Galielo overall project status Base Case Penetration rate: 10% higher than base case (assuming that the enforcement strategy will be successful and stakeholders playing the role of GINA enablers will work properly) Price: 5% higher than base case Best case Worst Case Penetration rate: 20% lower than base case Price: 15% lower than base case GINA WP2 – Analysis of Applications / Services 13/10/2014 Page 28

  29. Milano Municipality involvement in GINA • Mid September 2009: established a first contact with AMAT (Mobility, Transportation & Environment Agency of Milano Municipality) • October 30th, 2009: meeting with AMAT Representatives (Dott. Valentino Sevino and Dott. Paolo Campus) with the aim of illustrating GINA project and evaluating possibility for a direct involvement of Milano municipality • Milano municipality main areas of interest are: • Traffic Data collection and management for traffic control and info distribution to drivers; • Fleet management (taxi, public transportation, car sharing fleet); • Tracking of commercial vehicles and management/optimization of logistic flows within urban areas • Next steps: • Prepare a report for Mobility, Transportation & Environment Councillor, Mr. Croci • Arrange an official meeting with Milano municipality by the end of 2009 with the participation of GSA • Invite officially Milano municipality at the Stockholm workshop of March 2010 GINA WP2 – Analysis of Applications / Services 13/10/2014 Page 29

  30. Thank you

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