The Future of Mobile Internet 2010 Mobile Network Operator

1. The Future of Mobile Internet 2010 Mobile Network Operator 2005. 6.4 KEMBA Weekday Baek Chil Hyun, Kim Hak Rim, Ji Hyun Wook, Yang Seung Shik

2. 1. Summary Of Scenarios Four Scenarios Today, Mobile Network Operators (MNO) offers main channel for Mobile Internet Service. However, they should consider four probable developments or replacements of its business environment. One is that MNO keeps its position as providing main channel for Mobile Internet , second is the possible replacement with other network operator (WiMax), third is the co-existence with mesh network , fourth is hybrid between one and second. • New Wave • - Technology drives the Market • MNO must find the way of survival • (such as new license, alliance) Evolution - MNO develops it’s network - Service drives the market Today Open Policy - Data network is no money - Contents drive the market Hybrid - Tech & services drives the Market - M&A & convergence lead the market

3. 2. Scenario 1 : Evolution Cash Cow: Voice Price Down High Profitability Data network Investment Total Service Operator Data Revenue Increase High Speed Low Price HSDPA Launching High Capacity Contents Various Handset De-regulation Merger with Portal, Fixed Operator Wire-Wireless Convergence Service 2008 2007 2009 2006

4. Scenario 1 : Evolution 2006: As WiBro and DMB services lanuches in 2006,MNO launches HSDPA services. Although WiBro services launches well, limited types of Handset, narrow coverages and less various contents limit the growing Wibro services. and this leads low investment in WiBro network 2007: MNO enlarges it’s coverage for booming HSPDA service, various contents is provides by Contents provider who allied with MNOs. This leads the supply of various types of Handset and data use increase, Although WiBro service carriers enlarges coverage, the coverage still narrower than MNO’s. Because of this, only small subscribers churn into WiBro Market, limited contents still provides. 2008: MNO cuts DATA prices and offers fixed charge for data service. To response low price WiBro carriers cuts price in spite of high cost. Because of the lowered price, Wibro carries has problems for cash flow, and no allowance for increasing investment in coverage enlargement.

5. Scenario 1 : Evolution 2009: MNO merges WiBro carriers MNO provides combined services through HSDPA and WiMax 2010: Data revenues surpass the voice revenues. MNO becomes key players in Mobile internet services

6. 2. Scenario 2 : New Wave Introducing all Company Global Standard Price Down High Profitability Low Networking Cost Main Service Operator Nationwide Coverage Subscriber Increase Wide Coverage WiBro Servie Launching Various Handset IP-TV Service Deregulation Wire-Wireless Convergence Service VoIP Service 2008 2010 2007 2009 2005 2006

7. Scenario 2: New Wave 2006 : As WiMax becomes the standard of 2.3GHz Band portable internet service(WiBro), Global Manufacturing Company such as Samsung, LG, Nortel, Lucent, Alcatel enter the Korean WiMax Market. Knowing that no difference between WiBro and WiMax, they enter the Korea market for testing the possibility of High Speed Mobile Market success. Competition between manufacturers and overseas WiMax service launching make scale of economy in WiMax equipment. This leads the steep decrease of equipment price. KT who gets WiBro license from Government launches WiBro service in 2006, SKtelecom follows for response. KT who is biggest fixed carrier invest aggressively in WiBro for recovering the fixed market recession. For being competent, MNOs starts HSDPA Service in 2006. 2007 : Because of less coverage and contents and services in the first stage, customer prefer HSDPA to WiBro. However widening coverage and combining service such as Wi-Fi+WIBRO, DSL+WiBro, WiBro+CDMA attracts subscribers gradually The regulation over combined service is over due to customer’s needs. WiBro offers higher speed and low price through fixed charge, various combined service for customers

8. Scenario 2 : New Wave As Subscribers grows in WiBro market in 2007, the number of WiBro handsets grows rapidly, furthermore various contents is provided. The type of handsets changes PDA type into cellular phone type and modem type. 2008 : As WiBro introduces VoIP service, because of low pricemobile subscribers move into WiBro services gradually. And this leads more types of handset, increase of contents variety, new service and causes price down. Then more subscribers go to WiBro services. As the number of subscribers increase in Wibro market, the WiBro Network Operator invest for enlarging coverage. 2009 : The nationwide coverage of wide come true in 2009 For synergy and convergence service, M&A happens rapidly, especially fixed and mobile operators. Three big merges happens KT and KTF, SKtelecom and Hanarotelecon, LG telecom and DACOM in 2009. WiMax service introduces IP-TV services which can replace DMB services Consequently WiBro become main mobile internet services

9. Scenario 3: Open Policy Regression Continuous regression Market drive cost, technology Open Merger with MNO, Fixed Operator Wibro and DMB start Delay in investment Operators profit decrease MNO upgrade Nework Meshnetwork dominate Meshnetwork In Biz market Meshnetwork In horizontal market 2006 2008 2005 2007 2010 2009

10. Scenario 3: Open Policy 2005: regression and new competitors appeared: Government announced licensees for WiBro & DMB Business. MIC(Ministry of Information and Communication) expects economy to recover through the investment in W-CDMA. MNOs should decide where to invest for their future business such as EV-DO, WCDMA or DMB. MNOs make plan to upgrade Mobile Network for enterprise profit increse. Also the Licensees of WiBro reviews strategy considering huge amount of investment cost and keen competition with MNOs 2006: Delayed Investment and continuous Recession NGO and Subscribers urges to cut price down, but carriers has no room because of the new investment cost. In spite of the increasing demand to upgrade their network for ubiquitous services, carriers respond slowly with doubt. 2007 : Entrance of mesh network in biz Solution Mesh Network products spread in market very quickly with no communication charge and late response of carriers. Wireless Lan products of mesh network are deployed in for special business area such as Firefight department, Traffic Information System, and other products for Business Solution

11. Scenario 3: Open Policy 2008 : Market drive the wireless data service Cheep solutions of mesh network are developed and PCs with devices for Internet connection and Mesh Network are released. People can use various types of mesh network services inwireless LAN market. They only need to buy products and use services for free. As subscribers start to use free wireless LAN in horizontal market, data communication using Mobile Network decreases slowly. 2009 : Mesh Network dominate wilress LAN market With Its free communication charge and ease install technology advantage, Mesh network become to dominates in wireless data Network. Mesh network devices are added in most PC and widely used in Private network for their own business. Even though MNOs still provide infrastructure in nationwide service coverage, already lost their major market share in private network and local wireless network market in urban area. 2010 : Market reconstruction Wireless data network market is open totally. Fixed network, MON, and mesh network provide wireless network access service. Subscribers can chose any types of technologies. Finally, MNOs keep hand phone based or wide area wireless service Markets and mesh network technology plays major rolls in local or private wireless data network. MNOs has lost future data market, and Mobile data market becomes unprofitable. WiBro network hasn’t get the competitive power. M&As between Wired and Wireless carries happen vigorously

12. Scenario 3: Open Policy

13. Scenario 4: Hybrid 2006, Wibro sevices launches by Fixed Operator. However the coverage and contents are limited. MNO launches HSDPA services. However the capacity of HSDPA is less than WiBro. 2007 : The need for hybrid network which is WiBro in area and HSDPA in rural area increases both WiBro and HSDPA for filling up each weakness. Furthermore the regulation on wired and wireless combined service is over, the customer demand for convergence services increases. 2008 : MNO & Fixed operator tries to strengthen network thorough Hybrid network. The mergers and alliance happen actively in mobile internet market 2009 : Hybrid networks starts to provide with dual handsets. The new contents and various services thorough hybrid network attract customers. And this lead to increase data usage rates and makes it possible to cut price down 2010 : Data services using hybrid networks replaces DMB services by introducing IP-TV. Hybrid networks become main channel in mobile internet market, high profitable market.

14. Scenario Summary Table