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Make better business decisions

11/09/2009

9/7/2011

www.informatm.com Confidential

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Strategies

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Executive Summary
Paul Lambert
Senior Analyst, Operator Strategies

11/09/2009

Author
Paul Lambert

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Paul is Editor of Global Mobile and the Mobile Operator Intelligence

Centre. He has eight years experience of covering the mobile sector
as a journalist. Pauls areas of focus are mobile operator strategy;
technology trends; emerging markets; and regulation.
Paul is currently working on various aspects of the mobile operator
business case: the threat to incumbents from new entrants and new
technologies, such as WiMAX; the rush to acquire operators in
emerging markets; and the ongoing consolidation among mobile
operators within and between regions.

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During his time at Informa, Paul has been at the forefront of

covering major trends that have made the mobile industry what it is
today: the development of 3G technology and launch of 3G
networks; the (on-going) search for a viable 3G business model; the
fall-out on the mobile industry from the bursting of the dotcom
bubble; the imposition of roaming regulation; and the consolidation
that has taken place among mobile operators and vendors alike.
To stay ahead of events in the industry, Paul regularly attends
conferences and has regular dialog with mobile operators, financial
analysts and vendors to gauge and exchange opinion on what
trends are shaping the future of the mobile industry and their likely
impact on it.
paul.lambert@informa.com
11/09/2009

Case studies

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Tingting Liu, Research Analyst

Asia

Kristin Paulin, Research Analyst

Americas
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Elson Sutanto, Research Analyst

Europe

Dario Talmesio, Principal Analyst

Europe

11/09/2009

LTE commercial launches by network, 1Q11

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Confidential

LTE network launch forecasts, 2009 to 2014

and beyond

www.informatm.com
Confidential

LTE addressable market, by operator and

by network, March 2011

Millions

Alcatel-Lucent

Ercisson

Huawei

Nokia Siemens

100
90
80
70
60
50
40
30
20
10
0

Source: Informa Telecoms & Media

www.informatm.com
Confidential

Operators are phasing LTE network rollouts

TeliaSoneras LTE rollout road map

Verizons LTE rollout road map

Network rollouts are in line

with strategic objectives,
whether a rural rollout or
targeting an improved
experience for high-end urban
users

Vodafone Germanys LTE road map, 2010-2011

www.informatm.com
Confidential

Main strategic drivers for early-to-market

LTE operators
Early-mover LTE launches have been driven overwhelmingly by specific market
requirements, although alleviating capacity on existing networks is a key
universal driver for all operators

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Confidential

Competitive advantages for operators launching

LTE first

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There are threats and opportunities to rolling

out LTE early

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LTE early launches: Initial findings

Marketing the benefits of LTE is a challenge to operators and speed is being

used as the key differentiator over 3G.
Initial pricing has been reduced in Sweden and the US, suggesting that end
users are unwilling to pay a significant premium for LTE services, despite
operators convincing attempts to convey the clear benefits of LTE over 3G,
namely the speed benefits.

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We can identify four different LTE operator types:

1) Opting into a global technology standard

2) Taking the early technology lead
3) New service model
4) Offering DSL-like services in rural areas

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LTE operator type 1: Opting into a global

technology standard (Verizon Wireless)
Verizon must make a success of LTE if it is to be the strongest player in the US
mobile broadband market.
It has fashioned a potentially significant advantage with an incredibly bold
strategy that saw it become the first operator in the US to launch a large-scale
LTE network.
Verizon is trying to differentiate itself from its rivals by persuading the countrys
increasingly data-hungry mobile users that it offers the best mobile broadband
experience available.

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LTE operator type 2: Taking the early technology

lead (Telia Sweden)
TeliaSonera wanted to demonstrate technology leadership by claiming an
industry first and, at the same time, reinforce its brand image for technology
leadership in the Nordic markets where it launched.
By launching LTE first, TeliaSonera also wanted to gain an early lead in the
market for LTE subscribers, targeting early adopters and certain segments of
the enterprise market ahead of its rivals with the speed and latency
improvements that LTE has over 3G.

www.informatm.com
Confidential

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LTE operator type 3: New service model

(Cyfrowy Polsat)

Mobyland and Centernet signed a letter of intent to share

telecommunications resources in August 2009:

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Confidential

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LTE operator type 4: Offering DSL-like services in

rural areas (Vodafone Germany)
Because LTE offers excellent signal propagation in lower frequencies, some
operators are focusing their initial LTE rollouts on rural areas.
Vodafone Germany, which had to launch LTE in rural areas first to meet
licensing requirements, has launched LTE as a home-zone-only service in
these areas to target households without any type of broadband connection.

Vodafone Germanys LTE roadmap, 2010-2011

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Confidential

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Examples of three different pricing approaches:

Aggressive (Verizon Wireless)
Signing up as many users as possible to 4G with 4G price plans price on a par
with 3G. USB modems only available on 4G plans.
Cautious (Telia)
Telia charges a 30-50% premium on a like-for-like monthly download
allowance between 4G and 3G services.
Conservative (Telenor)
Price services higher than rivals to allow room for reductions while ensuring
high-end users dont churn to rivals (e.g., Telenor).

www.informatm.com
Confidential

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Options for LTE challengers that are not based

on price

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LTE will enable operators to price services

in new ways

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Video including streaming and downloads will drive

the greatest volume of traffic on LTE networks, according
to Informas LTE survey
Which service or application will drive the greatest volume of
traffic on LTE networks?

www.informatm.com
Confidential

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Evolution of LTE pricing

Verizon's LTE price plans (non-smartphone) compared with 3G

price plans, 2Q10

www.informatm.com
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LTE marketing no real surprises here

4G and LTE dominate as brand
names
Speed is the attribute overwhelmingly
highlighted

www.informatm.com
Confidential

23

LTE success barriers: Battery life will impede take-up

of early smartphones launched into the market

A charge with minimal usage

gives about 8-10 hours before
the phone shuts off! Very poor
life and not what I would
expect from Samsung. My
other phones would last 3-4
days on a charge. If this is the
way Samsung is going to
supply phones, I will not buy
another

This phone has the worst battery life I

have ever seen. Steer clear of it.
The craft is a phone I have been waiting
for, but now that I have it, It lacks juice. I
charged my battery overnight. Take it to
work with me @ 6:00am, by 11:00 am the
phone was down to 1 bar battery life. I
talked with my carrier service, they told me
to turn off wifi, bluetooth, also turned
vibrate off & dimmed the backlight

Source: Samsung.com

www.informatm.com
Confidential

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Conclusions

www.informatm.com
Confidential

07/09/2011

25

LTE early launches: What has worked and what hasnt

What works?
Guaranteeing speeds (Telia in
Sweden does this and it provides
something tangible that users are
willing to pay for).
Having good coverage (Verizon
Wireless offers this and is able to
claim something approaching
nationwide coverage).
Targeting new user groups, e.g., rural
areas and new service models.

What doesnt?
Offering unlimited downloads from the
outset. How can operators develop
their service offering from here?
Charging too much of a premium
unless an operator doesnt want to
encourage user uptake.
Launching with a big fanfare and
limited (or in the case of Glo in Africa
no) network coverage.

The jury is still out on which pricing model works best

www.informatm.com
Confidential

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LTE early launches: Some initial findings

LTE is a much more powerful tool than 3G. Operators should allow maximum flexibility in
the overall LTE service bundle: pricing; data downloads; guaranteeing quality/ speed of
service; charging different rates for different types of service area are all levers that
operators should retain as much control as possible over.
Video will be a key driver of LTE uptake and operators should consider how best to
communicate the benefits of video over LTE compared with video over 3G.
Pricing is the most important decision facing an operator and, after the timing of the launch,
represents the biggest single factor in determining service uptake.
Early LTE operators must be ready to improve the value of their offers to new and existing
users when competitors launch, otherwise they will see their hard-won early gains diminish.
Operators can prevent the LTE paradigm shift to consumers using more mobile data
services than they do at present from being as pronounced and ubiquitous as it
potentially could be. They should avoid pricing LTE services expensively and without
clarity, and ensure that they engage well with partners and potential partners.
LTE services will only truly become mass-market in 2013 and beyond. Early LTE launchers
are perfectly positioned to outperform future rivals by learning how best to react to the end
users changing tastes and behavior.
www.informatm.com
Confidential

27

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A global
of title
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status
ecosystem
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Thomas Wehmeier
Principal Analyst

LTE World Summit, Amsterdam

17 May 2011

11/09/2009
07/09/2011

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Image: Wordle

Measuring the pulse of the LTE ecosystem

Survey conducted during April-May 2011

More than 500 responses from industry executives
More than 250 operator executive responses
Full representation from across entire ecosystem

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Confidential

07/09/2011

29

Image: Getty Images

Survey sample
In which region are
you based?
AsiaPacific
25%

North
America
13%
Latin
America
10%

Middle
East &
Africa
17%

Europe
35%

What is your
functional area of
work?
Other
8%

Technica
l, R&D,
engineeri
ng
36%

Board
member
8%

Executiv
e,
professio
nal,
manage
ment
22%

Sales &
marketin
g
26%

What is your
company's
primary area of
business?
Other
30%

Chipset
device
vendor
6%
Network
equipme
nt vendor
18%

Mobileonly
operator
26%

Fixedonly
operator
4%
Converg
ed
operator
16%

Source: Informa Telecoms & Medias LTE Survey 2011, n= 527

www.informatm.com
Confidential

07/09/2011

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15

Image: Getty Images

4 out of 5 operators committed to LTE

Is your company planning to
deploy an LTE network?

How do you intend to brand

services offered via your LTE
network?

Use a
technology
-agnostic
brand
14%

No
18%

Other
3%

4G
48%
Yes
82%

LTE
35%

Source: Informa Telecoms & Medias LTE Survey 2011, n= 250

www.informatm.com
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07/09/2011

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Image: Getty Images

LTE set for lift-off in 2012

When are you planning to launch
commercial services using LTE?

What is your primary motivation for

deploying LTE?

40.0%
To enter mobile data market
for the first time

35.0%

Modernizing legacy radio

network architecture

30.0%
25.0%

Build brand value through

technology leadership

20.0%
Create new revenue streams
based on LTE

15.0%

Reduce the cost of mobile

data

10.0%
5.0%

Current networks do not offer

sufficient capacity

0.0%
2011

2012

2013

2014

2015

2016+

0% 5% 10%15% 20%25%30%35%

Source: Informa Telecoms & Medias LTE Survey 2011, n= 250

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16

Image: Getty Images

Core bands emerging, but spectrum

fragmentation still prevalent
Which spectrum bands do you intend to use to deploy LTE?
25%
20%
15%
10%
5%
0%
700

800

900

1400

1500

1700

1800

1900

2100

2100
(IV)

2300

2600 Other

Source: Informa Telecoms & Medias LTE Survey 2011, n= 250

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07/09/2011

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Image: Getty Images

Multi-band support critical to device sales

Please rate how important each of the following
characteristics are in driving mass-market adoption of LTE
handsets
Other
Multi-band support
Critical

Voice support

Very important
Important

Appealing form factor and size

Neutral
Not important

Day-long battery life

Wholesale device cost
0%

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Source: Informa Telecoms & Medias LTE Survey 2011, n = 527

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17

Image: Getty Images

Industry divided on roaming readiness

Operators are well prepared to offer roaming services across
LTE networks?
Strongly agree
7%

Strongly
disagree
5%

Agree
27%
Disagree
31%

Neither agree
nor disagree
30%
Source: Informa Telecoms & Medias LTE Survey 2011, n= 527
www.informatm.com
Confidential

07/09/2011

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Image: Getty Images

The year of TD-LTE?

What variant of LTE do you
intend to deploy?

Networks based on TD-LTE

...will offer a different set of
services compared to networks
based on FDD-LTE?
...will take a significant share of
LTE connections?

Both
33%

...will be deployed more heavily in

emerging markets than developed
markets?

FDD
48%

...will provide more growth

opportunities for vendors
compared to WiMax?
...will allow new vendors to grow
profitable business and enter the
LTE ecosystem?
...will lead to successful greenfield
operations?

0%

TDD
19%

20% 40% 60% 80% 100%

Strongly agree

Agree

Neither agree nor disagree

Disagree

Strongly disagree

Source: Informa Telecoms & Medias LTE Survey 2011, Q1 n= 250, Q2 n = 527
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07/09/2011

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Image: Getty Images

Will operators command a premium with LTE?

Operators will be able to price mobile data services using
LTE networks at a premium to alternative access
technologies such as 3G or fixed broadband
Strongly agree
11%

Strongly disagree
3%
Disagree
21%

Neither agree nor

disagree
20%

Agree
45%

Source: Informa Telecoms & Medias LTE Survey 2011, n = 527

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07/09/2011

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Image: Getty Images

Over-the-top voice gets on the table

What do you think will be the primary
solution for voice over LTE?

Circuitswitch
fallback
13%
Managed
OTT VoIP
12%

Unmanaged
OTT VoIP
(e.g Skype)
11%

Other
2%

IMS-based
VoIP
(VoLTE)
62%

Source: Informa Telecoms & Medias LTE Survey 2011, n = 527

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Image: Getty Images

Long, slow transition to packet-switched

voice dominance
When do you think packet-switched voice traffic
over LTE will exceed voice traffic over existing
circuit-switched cellular technologies (e.g. GSM,
CDMA, WCDMA)?
60%
50%
40%
30%
20%
10%
0%
By 2015

By 2020

By 2025

Never

Other

Source: Informa Telecoms & Medias LTE Survey 2011, n = 527

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07/09/2011

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Image: Getty Images

Small cells seen as key to effective LTE

deployment strategy
Small cells (pico, femto, etc) will be more important than
macro cells for an effective LTE deployment strategy
Strongly disagree
1%
Disagree
15%

Neither agree nor

disagree
23%

Strongly agree
20%

Agree
41%

Source: Informa Telecoms & Medias LTE Survey 2011, n = 527

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07/09/2011

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Image: Getty Images

LTE: just another piece in the jigsaw

How will LTE deployment impact fixed
broadband?
LTE will
heavily
substitute
fixed
broadband
17%

LTE will
substitute
fixed
broadband in
only limited
segments
25%

LTE will be
complemen
tary to
fixed
broadband
58%

Source: Informa Telecoms & Medias LTE Survey 2011, n = 527

www.informatm.com
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07/09/2011

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Image: Getty Images

The transition to LTE will alter market

structures
The transition to LTE will
result in consolidation of the
total number of operators in
each market.
Strongly
disagree
2%

Strong
agree
11%

A wholesale strategy will be

essential for all operators
offering LTE.

Strongly
disagree
1%
Disagree
9%

Strong
agree
15%

Disagree
13%
Neither
nor
24%
Neither
nor
23%

Agree
51%

Agree
51%

Source: Informa Telecoms & Medias LTE Survey 2011, n = 527

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Image: Getty Images

The road to mass market adoption

What factor will have the greatest impact on the growth and
maturity of the LTE ecosystem?
Other
Vodafone/China Mobile/Verizon alliance
LTE roaming
Operator subsidies
Spectrum harmonisation
Launch of a variety of LTE smartphones
Expansion of LTE coverage
0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Source: Informa Telecoms & Medias LTE Survey 2011, n = 527

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07/09/2011

43

Thank you.
Please direct any
questions to:
Thomas Wehmeier
Principal Analyst
thomas.wehmeier@informa.com
+44 207 017 5379
@twehmeier

http://uk.linkedin.com/in/thomaswehmeier

07/09/2011

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Make better business decisions

23