Lte: How To Transform A Promising Technology In A Real Business

LTE: how to transform a promising technology in a real business Andrea Calcagno, CEO & EVP 10th September 2009 Radisson SAS Hotel Amsterdam Schiphol Airport

Content  Company Profile  LTE Project Life Cycle  Holistic and Iterative Approach  LTE Business Case  In a Nutshell 2

Company Profile  Solutions, consulting and engineering company founded in 2003 as a spin- off of the University of Pisa.  Gained quickly a foothold in the NGN/NGS scenario focusing on standard 3G and 4G wireless technologies such as HSxPA, WiMAX and LTE.  Providing the market with:  State-of-art Business Case Analysis tools for WiMAX and LTE  Next-Gen OSS/BSS components and integrated solutions, with a focus on the delivery of turnkey WiMAX CSNs, that leverage the company’s modular and scalable WROP (access & service management) and TelcoGIS (geographic information system) platforms  Selected high-value services such as strategic consulting on technology and investment plans and engineering services for network planning and design  Regular Member of the WiMAX Forum and a Member of the TM Forum. 4

LTE Project Life Cycle – Initial planning stage Building a carrier-class LTE network is and will remain a complex undertaking … … and the initial planning phase is very critical for the success of the initiative 6

Initial Planning Phase – Facing Crucial Questions In these uncertain economic times, there is no room for risky and poorly analyzed decisions when facing crucial questions, such as:  What will be the best addressable market segment with a chosen technology characterization?  What will be the effect on the P&L when changing the CIR in a service bundle?  How will the characterization of the technology influence the network dimensioning?  What will be the best tradeoff between coverage and capacity requirements in the network deployment?  How will different types of eNodeBs/user equipments affect the TCO? 7

Keystone Holistic and iterative approach, capable of:  taking into account all market, technical, economic and financial aspects  ensuring the best possible alignment between business and technology strategies  identifying clearly the main cost drivers  evaluating correctly the feasibility of the investment Not focusing on the single facets but considering all these different elements in a comprehensive and integrated view, building the business case through successive approximations 9

Applicative scenario Technology 2.6 GHz, 10 MHz, FDD Service Profile User Equipment Mobile Broadband (Flat data + voice) Applicative scenario Operator Target Market CLEC Consumers Greenfield Scenario Dense Urban Urban Suburban 11

Business case analysis tool  The business planning activity can be better done when equipped with an appropriate business case analysis tool that allows performing four main integrated analyses:  Market Analysis: estimating the potential market and revenues for 4G LTE services  Technical Analysis: dimensioning the network infrastructure to derive the required bill of quantities  Economic & Financial Analysis: calculating all key economic & financial projections and indicators  Scenario & Sensitivity Analysis: analyzing the influence of parameter and boundary condition changes 12

Market Analysis – Territorial Data  Useful information for the coverage and capacity planning 13

Market Analysis – Service Profile Technical Features Pricing Policies € 200 7 Mbps € 150 1 2 Mbps 64 Kbps 32 Kbps DL PIR DL CIR UL PIR UL CIR Internet Access VoIP lines per user € 27.2 VoIP User Equipment Distribution €5 Data 80% Monthly One time Monthly Lease 20% Service Fee Activation Fee Fee 14

Market Analysis – Users and Revenues Forecast  The potential market and turnover have been estimated taking into account the Bass Diffusion Model (inclination to innovation and ‘word of mouth’ phenomenon):  Penetration rate @ Y10: 9%  Churn rate @ Y10: 7%  Net Users @ Y10 324,774  Revenues @ Y10 130 M € 15

Technical Analysis – Technology  Parameters:  Operating Band: 2.6 GHz  Channel Bandwidth: 10 MHz  Duplexing Format: FDD 16

Technical Analysis – Equipment Configuration Enhanced NodeB User Equipment 17

Technical Analysis – Performance  The LTE performance has been evaluated by taking into account:  Link Budget Analysis (eNB/UE configuration, margins, etc.)  Path Loss (Cost 231 Hata Model)  Modulation & Schemes distribution  Average Radius: 0.8 ÷ 2.34 Km  Average Capacity:  Up Link 7.32 Mbps  Down Link 16.24 Mbps 18

Technical Analysis – Network Dimensioning  A lot of relevant parameters have been taken into consideration:  Down and up link capacity demand per year  Existing backbone infrastructures, sites and radio links  Wireless backhaul technology distribution  478 eNB  1434 Logical Sectors  3 MME  3 S-GW  3 P-GW  46 Radio Links 19

Technical Analysis – Network Roll-out  The network roll-out has been defined in terms of the percentage of year- on-year deployed infrastructure by taking into account capacity requirements  Steady-state condition (100% roll-out) @ Y5 20

Economic & Financial Analysis – CAPEX and OPEX  To forecast expenditures, all main CAPEX and OPEX figures have been defined and calculated  Total Cumulated CAPEX 118 M €  32% UE  28% eNB  Total Cumulated COS 255 M €  40% VoIP  23% eNB  Total Cumulated SG&A 110 M €  48% Mkt & Sales  30% G&A 21

Economic & Financial Analysis – Profit & Loss  EBITDA > 0 @ Y3  EBIT > 0 @ Y4  Net Income > 0 @ Y5 22

Economic & Financial Analysis – Cash Flow  Peak Funding 77 M €  PBP 6.3 Years  NPV @ Y10 60 M € 23

Scenario & Sensitivity Analysis 24

In a Nutshell  A holistic and iterative approach that takes into account all business and technology aspects since the outset is the keystone  The business plan activity can be better done when equipped with an appropriate business case analysis tool, which has to have some key characteristics:  Based on real best practices  Equipped with calibrated, LTE-technology-related, market, technical and economic models  Presenting manageable input and output with meaningful correlations  Supporting an iterative way of working by design in order to optimize results  TEA|LTE by WiTech supports and provides exactly all of the above 26

Thank You for Your Attention Andrea Calcagno WiTech S.p.A. CEO & EVP Via Giuntini 25 56023 Navacchio di Cascina PISA Andrea.calcagno@witech.it Italy Phone: +39 050 775 056 int 203 www.witech.it Mobile +39 347516 44 01 Phone: +39 050 775 056 +39 050 754 719 +39 050 754 720 Fax: +39 050 75 47 22 E-mail: tea.info@witech.it

Back up slides – The Business Case Analysis Tool TEA|LTE Andrea Calcagno, CEO 10th September 2009 Radisson SAS Hotel Amsterdam Schiphol Airport

TEA|LTE  Empowering 4G LTE players with an effective business case analysis tool to set a solid foundation for a successful initiative  Unique and integrated application  Built over five years of extensive industry experience with strategic assignments and projects for major operators and equipment suppliers  Full compliant with the latest version (Release 8) of the LTE standard 29

TEA|LTE – Key Characteristics  Analyzing the business case for the LTE initiative with a holistic approach, in an integrated and iterative way, taking into account all critical aspects  Supporting a fast and simplified configuration of more than 500 input parms with a number of them pre-set to typical/recommended values in the technical part  Enabling the user to view results instantly in an animated graphical format through a dashboard-styled and very easy-to-use GUI  Compliant with the LTE standard  Allowing the definition of custom bands  Manual setting of number of Users, eNodeBs, Logical Sectors, Radio Links, MME, S-GW and P-GW 30

TEA|LTE - Four Main Integrated Analyses Analyzing the Estimating the influence of potential parameter and market and boundary revenues for 4G condition LTE services changes Calculating all Dimensioning the key economic & network financial infrastructure projections and to derive the indicators required bill of quantities 31

TEA|LTE – Market Analysis Estimating the potential market and revenues for 4G LTE services:  Extension of the geographical areas (up to 5) to be served and their specific scenario distribution  Market segments (up to 6) to be addressed  Service profiles (up to 6) to be offered  Market segment penetration per year  Impact of churn 32

TEA|LTE – Technical Analysis Dimensioning the network infrastructure to derive the required bill of quantities:  Technology characterization  Type of eNB (up to 3) and UE (up to 6)  Path loss model for the link budget analysis  Down and up link capacity demand per year  Existing backbone infrastructures  Existing sites  Existing radio links  Wireless backhaul technology distribution 33

TEA|LTE – Economic and Financial Analysis Calculating all key economic & financial projections and indicators to assess the feasibility of the initiative:  CAPEX & OPEX  Depreciations  Interest rate on borrowings, tax rate, discount rate  Financing  Equity  Perpetual growth 34

TEA|LTE – Scenario and Sensitivity Analysis  Analyzing the influence of parameter and boundary condition changes, to identify the most critical factors for the success of the initiative  Allowing a fast and iterative fine-tuning of the business case, in real-time and total privacy  Presenting the results in an animated graphical format instantly from the different Market, Technical, Economic & Financial perspectives 35

TEA|LTE – Comprehensive Report  Automatically compiled and published in editable and PDF formats.  Containing a complete summary (with tables, diagrams and charts) of:  Inputs and assumptions  Results of the market analysis  Outcome of the technical modeling  Economic and financial statements for up to ten years 36

Lte: How To Transform A Promising Technology In A Real Business

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