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Now and the Future of Telecommunications

Now and the Future of Telecommunications. Ken Zhang CTO & VP Ericsson (China) Ltd. The Nasdaq Telecommunication Index. 1. 4. 0. 0. 1. 2. 0. 0. 1. 0. 0. 0. Many strategies and decisions were made here (“Growth driven”). “Profit driven”. 8. 0. 0. 6. 0. 0. 4. 0. 0. 2.

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Now and the Future of Telecommunications

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  1. Now and the Future of Telecommunications Ken Zhang CTO & VP Ericsson (China) Ltd

  2. The Nasdaq Telecommunication Index 1 4 0 0 1 2 0 0 1 0 0 0 Many strategies and decisionswere made here (“Growth driven”) “Profit driven” 8 0 0 6 0 0 4 0 0 2 0 0 0 2001,10,05 1971,02,05 1974,03,01 1977,03,25 1980,04,18 1983,05,13 1986,06,06 1989,06,30 1992,07,24 1995,08,18 1998,09,11 2001,10,05 1971,02,05 1974,03,01 1977,03,25 1980,04,18 1983,05,13 1986,06,06 1989,06,30 1992,07,24 1995,08,18 1998,09,11

  3. Main factors creating the hyper-growth and crisis Market Investments “Technology” Investments Good GDPdevelopment(US driver) Geographical expansion Digital Mobile The hyper-growthof the late 1990’s & 2000 New competitors Internet Spectrum LH Optics Now • Hyper-growth gone/Macroeconomic instability • Signs of subscriber growth maturity • Network spending exceeds demand in several areas • Increased competition & lower margins • Failure in new business models delaying new services • Financing constraints (debts, cash,…)

  4. The Current Status of the Mobile Industry • hyper Competition: 4-7 operators in most European/US markets • Heavy Debt for some major operators, from over-priced acquisition and spectrum/license fee (France Telecom and Deutch Telecom ‘repairing’ balance sheet). But not from operating side. • But worldwide operator’s revenue still growing at 5%-7% in 2001/2002, amid global GDP 2% growth • Major operators reporting healthy operating profit/revenue growth • Voice traffic growing, data revenue soaring

  5. Next likely Steps • Many more Operators/SP will go “bankrupt” • Fast consolidations to create necessary Returns • The “incumbent” telcos will dominate & drive consolidations Consolidation has started. We will see 3 (4) operators per market. The top 20 globally will have more than 80% of revenues. Restructuring Suppliers

  6. 2000 2001 2002 2003 2004 2005 2006 2007 Mobile Subscriptions Doubling to 1.8 Billion by 2007 Mobile 1800 1500 Subscriptions (million) 1200 Fixed (POTS/ISDN) 900 600 Fixed Broadband (Cable, xDSL, LMDS, Fibre) 300 0 (Year -end)

  7. Global Mobile Subscriber Growth– 2002 to 2007 APAC 51% CEMA 19% ~870 million new subscribers in six years WE 8% NA 12% LA 10%

  8. What is next step for the infrastructure, technology selection?what is the driving force for the development?

  9. Wireless Networks Cable TV Networks A new communications architecture FutureMulti-services network (carrier class) Today Single-service networks Service Networks & Application enablers Content Applications Communication control Data/IP Networks Wireline Networks New & Migrating end-to-end Protocols Connectivity/ Backbone Network Access Networks MGW MGW MGW MGW

  10. Mobile Services is the driver for 3G Portal with Personalized Services(Consumer, Business) • e-mail • Voice-mail • SMS/EMS • MMS (Imaging/Multimedia) • Instant Messaging (IMPS) • Information (news, sport, etc) • Entertainment(Music, Games, Imaging) • Location Services • Banking • Trading • Ticketing • Shopping Mobile Messaging Mobile -WWW (Browsing/streaming, download) Mobile Commerce (Transactions) Open Application standards (OMA) Open Connectivity standards (3GPP/IETF)

  11. Internet paradigm Media paradigm @AJA Deai Channel By Cybird Tsurun de Amigo! By Bandai Networks Wireless Internet Mobile Media • a "wireless Internet" that starts from the wired Internet by "cutting the cord" • saving time Chi-Q no Tomodachi By Nextech • the “mobile Media” starts from cable TV by “cutting the cord” • killing time Excite Friends By Excite Two services areas for the mobile Internet Mobile Internet Entry barrier: Corporate IT department Entry barrier: Digital Rights Management

  12. J-Phone’s (Vodafone) “Killer” Application –Pictures (Sha-mail) • Built-in camera • Send photo-mail directly from phone • Easy to use • 1 click to take a photo • Picture directly displayed on-screen • Simply attach to mail and send • Photo + text: The First Step to Mobile Multi-Media – already here!

  13. XXX Application Side Approach Picture Mail Video Software J-SKY(Web) Camera SKY Melody E-mail Colour Display SKY Walker Handset Side Approach Sound Software Key need Coherent service evolution simplifies learning Video Music Video(light) Picture Stand by Screen Melody Text Specific Key Source: http://www.vodafone.com/download/investor/presentations/vodafone_japan_2002.ppt

  14. Standard subscriptions Sha-mail users Development Sha-mail service, J-Phone 14 12 Subscriptions (million) 10 8 6 ~47%of allsubs 4 2 0 Launch Nov 2000 May 2001 Sept 2001 Dec 2001 Aug 2002 Sources: Ovum and Reuters

  15. Platform requirement Two mobile operator worlds Operator branded handsets Vendor branded handsets De facto approach OMA approach GSM Operators

  16. Platform requirement Operator branded handset world Vendor branded handset world Some services work with some brand Intra-operability = ALL services work together in ONE operator brand

  17. Data revenues Voice revenues 700 600 500 400 300 200 100 0 2000 2001 2002 2003 2004 2005 2006 2007 Mobile Revenues by Service Type (00-07) BUSD Messaging & Browsing/WWWdominate Voice will continue to dominate Source: Ericsson

  18. Technology path and selection

  19. Wireless Evolution Analog Digital Wideband 3G WCDMA (FDD/TDD), EDGE CDMA2000 1G AMPS, NMT, TACS etc 2G GSM, PDCTDMA,CDMA Wide Area Network (~10km) Combined devices 4G Local Area Network (~50m) CT1 DECT, PHS WLAN Personal Area Network (~20m) “wire” Infra Red Bluetooth

  20. 2000 2001 2002 2003 2004 2005 2006 2007 Cellular Subscriptions by System Standard (00-07) 1800 GSM/GPRS/EDGE & WCDMA PDC TDMA CDMA/CDMA2000 Analog & Others 1500 No of Subscriptions (million) 1200 900 600 ~75 - 80% of CAPEX 300 ~20 - 25% of CAPEX 0 (Year -end)

  21. Complementing Technologies Combining Air-Interfaces WCDMA EDGE CDMA2000 WLAN Local Area Network Wide AreaNetwork Not to Scale 1 Wide Area cell = ~10 000 WLAN cells

  22. Complementing Technologies Combining Air-Interfaces WCDMA EDGE CDMA2000 Personal Area Network Local Area Network Wide AreaNetwork Bluetooth

  23. 3Gis happening now-WCDMA • Many Networks has been launched (NTT DoCoMo, Austria Mobilkom, etc) • J-Phone and H3G UK, H3G Italy, has launched in the end of last year • 20++ Networks are in installation/testing stage Tens of Thousands of Base Stations have been delivered and installed worldwide!

  24. Global Mobile Market • Western Europe • Current all GSM • In process of launching WCDMA • Japan/Korea • DoCoMo(PDC) launched WCDMA Oct 2001 • J-phone • PDC=>WCDMA , • Soft Launch June, Commercial expected in Dec. • KDDI/LGT: cdmaONe=>CDMA 2000 1x • =>3G • North America • 50% TDMA=》GSM/GPRS • =>EDGE/WCDMA • 50% cdmaONe=>CDMA 20001x> • cdma1xEV • Central Europe, Middle East, Africa • Still in the GSM build-out phase • First WCDMA during 2003 • Price of licenses coming down • Latin America • Mostly TDMA, Pending transition mostly to GSM • 30% cdmaOne=>CDMA20001X • Asia-Pacific • Vast Majority GSM, • some presence of CDMA(growing in China,etc) • Licenses being issued during 2002 and 2003

  25. Concluding remarks: • 3G is designed to be a cost effective solution for high capacity voice, as well as high end-user data rate • Application is the driver for 3G development

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