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Examine the economics of rolling-out LTE

LTE World Summit 2010, Tuesday May 18th, Amsterdam, The Netherlands.

Dr. Kim (Kyllesbech Larsen) International Network Economics, Technology, T-Mobile

Story..

Kim Kyllesbech Larsen, Technology T-Mobile, 18 May 2010

Kim Kyllesbech Larsen, Technology T-Mobile, 18 May 2010

The incumbent mobile operators near-future it aint pretty!

The 3G traffic jam! 3G capacity crunch. Re-farming existing spectrum. New spectrum demand. Re-farming GSM! 1 MHz in LTE 5 MHz in 3G. Too little too late?

Empty 2G roads - in time?

Kim Kyllesbech Larsen, Technology T-Mobile, 18 May 2010

The Greenfield happy short-term, a tougher future.


Tougher future growth limitations.

Fixed-like demand! Dramatic Hz / customer drop! Limited free cash for growth?

Happy startup plenty of quality.

Lots of Hz per customer! Higher speed than HSPA+? ROI optimized?

Kim Kyllesbech Larsen, Technology T-Mobile, 18 May 2010

The mobile broadband traffic jam Turnaround?


avoiding customer dissatisfaction

Kim Kyllesbech Larsen, Technology T-Mobile, 18 May 2010

Telco Europe is all about efficiency


avoiding shareholder unhappiness
EBITDA GROWTH

REVENUE GROWTH

Growth markets
OPEX GROWTH

Western Europe
REVENUE PRESSURE

2010 2014 ILLUSTRATION

Kim Kyllesbech Larsen, Technology T-Mobile, 18 May 2010

The Netherlands 2014 broadband everywhere, for everyone.


2016

Every house-hold has at least 2 PCs. PCs

Mobile Broadband Population 16.7mn House-holds Fixed broadband 7mn Every house-hold has (fixed) broadband.

6 out of 10 people will have mobile broadband.

Kim Kyllesbech Larsen, Technology T-Mobile, 18 May 2010

The Dutch 2.6 GHz auction is c$ 0.15 / MHz / pop cheap?

2.6mn for 130 MHz FDD.

cabled entrants with wireless ambition.

Is there (economically) room for 2 more?

Kim Kyllesbech Larsen, Technology T-Mobile, 18 May 2010

2.6GHz mobile coverage range is poor the business model could mitigate this forced focus on wireless DSL?
DL power

Digital dividend
2.6 GHz 1800 MHz 850 MHz

3 dB

10 dB
distance

Propagation Loss - 3 dB

Link Budget

In-Building Penetration Loss up-to: - 2 dB

- 5 dB

0 dB

2.6 GHz needs 2 more sites to match 1800 MHz mobile coverage.

Kim Kyllesbech Larsen, Technology T-Mobile, 18 May 2010

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Greenfield minimum requirements by 2012 80 km2.


Greenfield operator 75 125 LTE nodes. max. 460,000 (3%) pop. Cash required ca. 150 mn.

Market projections 1 mn (4%) LTE devices. Illustration


No (0%) coverage 100% coverage

$3.3 bn mobile data top-line.

Note: there are many ways to deploy the Greenfield network and ultimately will depend on the chosen business model. Kim Kyllesbech Larsen, Technology T-Mobile, 18 May 2010
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Greenfield minimum requirements by 2016 800 km2.


Greenfield operator 750 1,250 LTE nodes. Ca. 2.3 (14%) mn pop. Cash required ca. 400 mn.

Market projections 5 mn (20%) LTE devices. Illustration


No (0%) coverage 100% coverage

$4.5 bn mobile data top-line.

Note: there are many ways to deploy the Greenfield network and ultimately will depend on the chosen business model. Kim Kyllesbech Larsen, Technology T-Mobile, 18 May 2010
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Partnership with an incumbent operator will provide the Greenfield much better economics and market timing.
Site
(acq. + build)

Radio
(electronics)

Backhaul
(transport)

Backbone
(transport)

Core

BSS

Greenfield Core

BSS

BTS / NODE-B eNodeB

Incumbent Core BSS

Capex prevention Opex prevention

50%-70%

min 35%

up-to 50%

up-to 50%

Partly possible Partly possible

Less likely Less likely

min. 35%

ca. 35%

scale discount

scale discount

Kim Kyllesbech Larsen, Technology T-Mobile, 18 May 2010

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Is the service worth paying for ? (it is in fixed broadband!)

In relative usage

100+ 70+ 20

1/3

Mobile broadband
850 MHz 2.1 GHz

BWA
2.3 2.5+ GHz

Fixed with WiFi

Mobile industry: hardly any QoS pricing mainly based on volumetric FUP.

Wireless & Fixed Broadband business model uses QoS-based pricing.

Kim Kyllesbech Larsen, Technology T-Mobile, 18 May 2010

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Always best connected with QoS-based pricing.


Illustration

$
$
BEST EFFORT e.g. < 2 Mbps

$
MEDIUM QoS REQUIREMENT

HIGH QoS REQUIREMENT AND HIGH VOLUME

Etc

e.g.<14 Mbps

Bandwidt h

Mobile, Nomadic & In-door broadband


850 MHz 2.5+ GHz with Cable/DSL

Kim Kyllesbech Larsen, Technology T-Mobile, 18 May 2010

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Why should we care?


2.5 GHz Greenfield LTE deployment appears un-economical.

Partnership model (e.g., network sharing) is essential.

Managing broadband demand is a critical success factor.

Kim Kyllesbech Larsen, Technology T-Mobile, 18 May 2010

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Cabled 2.6 GHz Greenfield does it make sense?


Strength. Weakness.

Existing fixed broadband customer base. Leverage on own backhaul & backbone. One single (mobile) technology to optimize.

Almost all house-holds have fixed broadband. Negative 10 year standalone NPV. 2.6 GHz is coverage in-efficient .

Opportunities.

Threats.

Fixed-like strategy mitigate poor propagation. Network sharing on 1800 MHz best-fit grid. Partnership reducing total cost pressure.

Mobile competition better spectrum position. Growth limitation due fixed-like demand. Lack of mobile broadband scale.

Kim Kyllesbech Larsen, Technology T-Mobile, 18 May 2010

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Thank you very much!


Acknowledgement: Denis Gautheret and many other very talented colleagues in T-Mobile & DTAG. Furthermore, many thanks to Michael Lai, CEO P1 Malaysia, for allowing re-use of their great ad campaign of cut the wires. Contact:

kim.larsen@t-mobile.nl
Tel: +31 6 2409 5202
http://nl.linkedin.com/in/kimklarsen

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