Rewheel – who we are Established in 2009 Strategic mobile data advisory Team HQ in Helsinki Specialising into the mobile data transformation Market modelling & commercial strategy Technology strategy Spectrum valuation & strategy Strategic infrastructure procurement advisory Tier 1 and most progressive data CEO, CTO, CMO, CFO, CSO, shareholder challenger clients, mainly in Europe sponsored client engagements 10+ European operator clients (mostly challengers) Several European regulators Several European data-centric non-MNO-startups 5 European spectrum renewal/acquisition processes (800, 900, 1800, 2100, 2600 Mhz multi-band auctions) since H2 2011 EUR 1 bn+ of European spectrum investments/state proceeds impacted directly by Rewheel’s strategic advisory since H2 2011 Slide | 2
External megatrend, everybody knows: surging demand for mobile data The surge of mass consumer demand for smartphones poses a skyrocketing mobile data traffic demand worldwide The traffic volume demand is growing both due to the rapid growth of the data-centric customer and device penetration and the average data usage per customer Source: http://www.morganstanley.com/institutional/techresearch/pdfs/Internet_Trends_041210.pdf Slide | 3
But local market specific constrains often throttle actual growth While the mobile data consumer demand surge is universal, the actual data uptake observed in different markets is often heavily constrained by local market specific constrains of supply Number of MNO players: 4th and 5th palyers are more incentivesed to disrupt the voice-centric status quo by driving data-centric market transformation MNO ownership: is there at least one independent player not owned by incumbent Tier-1 telco groups? Are there independent players with fixed/cable ISP infra and customer base synergies? Market competitivenes Spectrum positions: do the MNOs that are the most incentivised in pushing mobile data have access to the needed low and high frequency spectrum? Regulatory attitude: is there the willingness to push data uptake even if it takes heavy confrontations with the incumbent ”historic” telcos and Source: EUROSTAT their owners? Slide | 4
Progessive markets: average smartphone usage is already on GByte level ... The local market specific factors typically constrain not only the penetration uptake but also the average volume generated by customer. In progressive markets, with unconstrained data offerings the usage per customer is set to rise, exceeding the 1GB per month per smartphone customer mark already today or in the near future. 1 GB 579 MB in 2015 (est) in H1 2011 300-600 MB in Q1 2011 Source: Swedish Regulator (PTS), 2011 H2 Source: Elisa Finland 3GB in 2017 (est) Source: Telenor Group, Q1 2011 Source: TeliaSonera, Q1 2012 >1GB in Q1 2011 >1GB in 2012 Source: T-mobile USA Q1 2011 Source: Three UK, Q1 2012 Slide | 5
... Driving steep, sustained aggregate traffic growth In progressive markets, where at least one MNO player strated driving the mobile data uptake truly aggressively, the combination of rising penetration and usage per customer results in sustained, sharp network traffic growth The large per capita consumption observed in progressive markets Austria already today projects ahead a high likelyhood of traffic 400 MB/month/capita exlosion in currently consumption constrained markets in Q2 2011 Moible Data Consumption per Capita GB/month/pop in H2 2010 0.8 0.7 0.6Source: Austrian Regulator 0.5 0.4 Finland 0.3 900 MB/month/capita in H1 2011 0.2 0.1 0 Source: Rewheel estimations based on various sourcesSource: FICORA, Finnish Regulator Slide | 6
MNOs future, even if historic telcos are trying to slow down the transition ... Yesterday Today Tomorrow Mobile operator developed proprietary ”value added services”: Vodafone live, Vodamail, Mobile TV, Ringtone, Permium voicemail, weather, stock news, daily news, traffic info, navigation, mobile parking, music download, game download Mobile internet access (marginal) Mobile internet access (main growth driver) Mobile internet access Voice & SMS services (”bit pipe”) (MNO core business) Voice & SMS services (MNO future core (MNO core business) business) Vertical service centric Layering (”Denial”) Utility (”Acceptance”) Slide | 7
... will be pure, no-frills mobile data connectivity Source: Telenor Group Q1 2011 Source: Vodafone Group CEO public presentation September 2011 Source: Tele2 Capital Markets Day September 2011 Slide | 8
Europe: 900, 1800 MHz license re-auction ”avalanche” started in H2 2011 ... : typical scope of combined multi-band auctions EU Bands harmonised for high speed data: 800, 900, 1800, 2100, 2600, 3400-3800 New bands: 800, 2600, 3400-3800 Historic bands: 900, 1800, 2100 FWA: Fit for MNO strategies: 800, 2600 Currently Currently 3400-3800 Currently free or occupied Strong MNO Assigned Unasigned by analogue television strategic and valuation Blocks of Blocks of or military radars interdependencies 900, 1800, 900,1800, 2100 2100 Radio Spectrum Policy Programme (RSPP) Europe 2020 A Digital Agenda Strategy For Europe GR CH RO IR NL A ... Slide | 9
... is disruptive for ”historic” telcos, catalyst for new data-centric utilities Fundamental industry transformation: mature 3G technology and ecosystem, internet going mobile, infinite demand for capacity, mobile operators shifting to utility role, eroding ”network effect” Europe: slow moving incumbents, falling behind in mobile data adoption, facing expensive license renewal investments Sustainable capacity Lowest cost base, no 1 advantage 2 frills utility business Comparable spectrum model Less customers Core consumer value proposition: unconstrained fast mobile internet affordable for all, on all connected devices Partnerships with Monetize on speed and 3 competitors’ big enemies 4 add-on devices Slide | 10
From the digital mobile utilities’ perspective this is a new, growth market Market service revenue forecast by device category Data centric consumer needs Market trigger: very cheap (sub €150) Machine-machine touchscreen smartphones connections Primary use: Data Key selling point: unrestricted data use Voice + SMS + Data Revenues Mobile broadband & Higher ARPU, growth market tablet connections No price war Revenue CAGR ~30% New market: Smartphones Concentrated in urban areas Data-centric / 2G network irrelevant Digital utility Voice only phones ”Historic” consumer needs Historic Primary use: Voice & SMS market: Key selling point: price Voice-centric / Multiple, inactive, Collapsing market services sporadic SIMs Subject to price war Fast eroding ARPU (accelerated by MTR 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 cuts, data centric push, voip and SMS substitution) Source: Illustrative extract from a Rewheel market entry business plan Low ARPU users with cheapest 2G only phones Slide | 11
What does it take to become a mobile digital utility in Europe? Needed: “Smartphone capacity friendly” spectrum (Europe: 2.1 GHz, HSPA+) Nonexistent or small “historic” voice/SMS centric revenue streams (= new entrant or existing MNO with small existing mobile base) – as part of those will be cannibalised inevitably LTE (1800 MHz, 2.6 GHz) will not be widely supported by affordable mainstream smartphones in the next 2-3 years Nice to have: Some “Smartphone coverage friendly” spectrum (Europe: 900 MHz, HSPA+) Without sub-GHz frequencies the footprint will be limited to urban areas – but a challenger does not necessarily need to shoot on the entire country to crack the market 800 MHz (LTE) will not be supported by affordable mainstream smartphones next 2-3 years Slow moving voice centric telco competitors – preferably owned by large incumbent slow moving telco groups Very useful synergies: Existing internet subscriber base, brand, distribution network and IP backbone/backhaul infrastructure (fixed broadband operators, ISPs, cable-cos) Existing lean mobile operator business, all-IP infra, base, brand, etc The ongoing and planned multi-band 800 and 2600 MHz auctions combined with 900, 1800, 2100 MHz re- auctions open an attractive window of opportunity for data-centric new entrants in Europe. While incumbent telcos put a large demand for these spectrum assets, hence driving the market value high, EU Regulators often reserve blocks for potential new entrants, substantially lowering the barrier of new entries. Slide | 12
Thank you Rewheel o n e • s t e p • a h e a dVisit insights.rewheel.fi for moreOr contact us at firstname.lastname@example.org / +358 44 203 2339Rewheel is specialised into being in the forefront of the mobile data transformationSince 2009 we have advised over 10 European mobile operators, including independent players andTier-1 OpCos, as well as several regulators and a number of private equity and institutional investorsand various mobile-date centric startups.Since the onset of the mobile broadband centric 900, 1800 and 2100 MHz license renewal avalanchein 2011 in Europe we have been providing strategy, spectrum valuation and auction theory advice(together with our world class CCA/SMRA auction theorist partners) to five European awardprocesses (operator or regulator side depending on country), including new entrants andacquisitions as well as license renewals in multi-band (typically 800,900,1800,2100 and 2600 MHz)auctions. So far our advisory support has been directly impacting over EUR 1bn of Europeanspectrum investments/state proceeds. Slide | 13
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