Fu Yu Fu.yu3@zte.com.

cn

Data Demands Is Increasing

User Experience Matters

Key Drivers for LTE When to Rollout LTE? LTE Business Model Our Understanding of Vietnam Market

CONTENT

Key Drivers for LTE

Customer Requirement

Competition

LTE Requirement

Cost Reduction

Revenue Growth

Heavy Competition Pressure for Leading Operators

Market Share Challenge for DoCoMo
Data Speed Challenge for Verizon

EVDO

Peak 3.1 Mbps Avg. 600Kbps

HSPA

Peak 7.2 Mbps Avg. 1.4 Mbps

AT&T has 2X to 3X speed advantage

Source: Japan MIC,2009

LTE pioneer usually are those leading operators which face very serious competitive pressure, like NTT DoCoMo, Verizon etc.

Both market share and operating revenue goes to decline, which is the key reason for NTT DoCoMos LTE plan;
Although revenue is growing, existing EVDO technology already lag behind competitors HSPA, which make Verizon be eager to migrate to LTE.

Customers Appetite for Bandwidth is Unlimited

Mobile Data Traffic vs Mobile Data Subs Projected Traffic Growth In USA

Source: TeliaSonera,2009

Source: AT&T, 3G Americas

With mobile data service blooming, customers bandwidth requirement increases sharply, which brings a big pressure to network expansion. Operators is looking for an higher capacity technology.

New Data Service Model Requires Lower Cost Technology

Traffic Traffic Volume Network Cost (Existing Technologies) Revenue Profitability Network Cost (LTE)
0.3 HSPA 0.6

(per MByte)

Typical cost per downlink MB at maximum use of network Decreasing Cost per Mbyte
WCDMA

0.1

LTE

Time
Voice Dominated Data Dominated
Source: Light Reading

Traffic
Profitable not profitable
Source: Analysys Research

With the traffic volume growth, the pricing model will evolve from voice based to capacity based pricing, and price per MByte has to be reduced to remain profitable.

Key Drivers for LTE When to Rollout LTE? LTE Business Model Our Understanding of Vietnam Market

CONTENT

Hype Cycle 3G Reference

Europe 3G auction in 2000 Visibility Will it be the case of LTE? LTE Current Position

3G Position

Maturity Peak of Inflated Expectations

Technology Trigger

Trough of Disillusionment

Slope of Enlightenment

Plateau of Productivity
Source: Gartner, ZTE Estimation

Timeline for LTE Deployment: Current View for Commercial Launch in 2012
3GPP standards finalized
Release 8 Release 9 Release 10

Spectrum allocations Terminal equipment readiness Network equipment readiness

2.6 GHz Awards across Europe

Digital Dividend Available

Early Devices

Data Centric Devices

Smartphones

Trial

Commercial Hardware & Software

2009

2010

2011

2012

2013

Commitments Globally

101 LTE network commitments in 41 countries Up to 22 LTE networks in service by end 2010 Around 50 LTE networks in service by end 2012 31 additional pre-commitment LTE trials 3 commercial network

Source of data: GSA report Evolution to LTE August 26, 2010

Global LTE Subscriber Growth Forecast

According to the forecast by Ovum, global LTE subscriber will grow to 116.8 million by the end of 2014;
Asia Pacific and Western Europe will lead the path of LTE; South and Central America will be the follower where HSPA is growing very fast in next five years.

Source: Ovum

Key Drivers for LTE When to Rollout LTE? LTE Business Model Our Understanding of Vietnam Market

CONTENT

Telcos Value is Shifting towards Device & Cloud

Value transferring from pipe to cloud & terminal
Revenue (2009)
$ 23.65bn

Operator must extend position in the value chain

Market Value (13 Apr.2010)

$ 182.1bn
Operator based App Store

$ 123.0bn

$ 155.7bn

ALL IP network

$ 42.9bn

$ 219.7bn
Managed life Managed work

Whats operators strategy for it ?

Extend to services and terminal to create more value

LTE Brings New Revenue Streams

Current Focus
Customer acquisition

Future Opportunity
Revenue growth M2M Medical Device Monitoring Supply Chain Management Remote Meter Reading Plant Floor Automation Energy Management Retail Kiosks Digital Lifestyle Laptops & Tablet PCs Digital Media Players Digital Cameras Gaming Devices Digital Books Auto & Telemetry Navigation Systems Automobile Systems Fleet Monitoring

Connecting

People

People + anything that can be controlled, monitored, maintained, automated, or managed Voice/VoIP Messaging Access Content Location-based Svcs. ?

Services

Voice Messaging Access Content Location-based Svcs. Population

Constraint

LTE can bring better experience in new connecting like M2M, Digital lifestyle and Auto&Telemetry, which make that population is no longer a constraint.

LTE Service Model Not A Revolution but Enhance Todays Service Experience

Person to Person Communication Rich Voice Video Telephony SMS/MMS

Social Networking Content Delivery

Communities
Blogging Gaming Photo/Video Sharing

Business Services High Speed Access

M-Commerce

Mobile TV
Video on Demand Mobile Music

Email
Mobile Conferencing

Banking
Mobile Payment Mobile Advertising

Same Services, Different User Experience

Increasingly Mobile Usage is about Data

Daily Usage Breakdown, % of Time Spent on Each Activity Average US Cell Phone User 40 min per day iPhone User 60 min per day

VS

Source: Morgan Stanley

Data Revenue from LTE

Services Operators Could Charge Premium for Global Non-Voice Revenue Breakdown

Source: Ovum

Source: Analysys Research

Multiplayer Gaming, Video and TV are the top-three services that respondents believe LTE operators will be able to charge a premium for, in comparison to todays price. P2P Messaging, Browsing, Games, TV, Music and Data Networking contribute over 80% of the non-voice revenue by the end of 2015.

Key Drivers for LTE When to Rollout LTE? LTE Business Model Our Understanding of Vietnam Market

CONTENT

Telecom Market In a Nutshell

2009

Mobile Operator

Mobile Subs: 89,655,600 Mobile Penetration: 102.8%

Fixed Line Subs: 11,892,000

Fixed Line Penetration: 13.6% Broadband Subs: 2,439,549 Broadband Penetration: 2.8%

Fixed Line Operator

Vietnam Fixed Marker Share

Internet Operator
Vietnam Internet Marker Share

2% 2% 6%

SPT 13% Others EVN Telecom

1% 12% SPT 15% 72% Viettel EVN Telecom VNPT

63%

14%

Viettel FPT Telecom

VNPT

Mobile Market High Penetration ,Small Market Space

Vietnam was growing very fast in the past three years

Latest mobile penetration exceeded 100%; Strong growth starts from 2006 and will slow down soon;

Start-up Period
Penatration

Fastest growth period

Saturation Period

80 102.8
50

Vietnam

20

Key Point Time

Source: Informa

Potential in Vietnam Great Incremental Broadband Market with Low Penetration

2.5 million

In the next five years, it is forecasted that there is a potential market of 2.5 million subscribers in Vietnam broadband market. Among several South East Asia markets, broadband penetration in Vietnam, which was 2.22% in 2008, is still relatively low.

Source: ITU and Ovum