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Slide 1: Mobile Payments market scenarios and strategic options for service providers Milan, 13 Mar 2008 Giorgio Andreoli Director Strategic Marketing Ericsson MU South East Europe

Slide 2: Agenda Mobile payments facts Ericsson strategic vision Architecture components & business models Conclusions Ericsson Confidential 2 Planet Card 2008, Milan 2008-03-13

Slide 3: NETWORKS LEADERSHIP Ericsson • #1 GSM networks supplier (> 300 networks WW) • #1 in WCDMA (129 references out of 234) • Leading HSPA supplier Information & • Leader in fixed and IP networks Collaboration SERVICES LEADERSHIP • #1 in telecom services • 29,500 services professionals MOBILE HANDSETS (SonyEricsson) • 15% growth YoY (end 2007) • 50/50 partnership with Sony • #1 in managed services • #4 in mobile handsets • #1 in mobile music (Walkman series) WORLDWIDE PRESENCE • over 140 countries • Supporting networks with > 1 Bn subs TV Mobile Media The world leader in convergent communications Ericsson Confidential 3 Planet Card 2008, Milan 2008-03-13

Slide 4: Agenda Mobile payments facts Ericsson strategic vision Architecture components & business models Conclusions Ericsson Confidential 4 Planet Card 2008, Milan 2008-03-13

Slide 5: mobile payments in Italy Nov 2007 PosteMobile, the MVNO launched by Poste Italiane, launched remote P2P (peer-to-peer) mobile payments payments between PostePay customers e-topup of Prapaid accounts SIM based service Feb 2008 Telecom Italia announced launch of remote P2P payments by end 2008 – SIM based – partnership with Banks Feb 2008 Noverca (Acotel group) signed an MVNO agreement with a “primary Telco operator”, in the frame of a partnership agreement between Acotel and Intesa San Paolo Ericsson Confidential 5 Planet Card 2008, Milan 2008-03-13

Slide 6: Mobile Payments: alternative models CONTACTLESS REMOTE PAYMENTS PAYMENTS concept handset payment tool payment mobile service Japan (Felica) Philippines, Asia, Africa success stories EU: deployment started on 2007 EU: Poste (Italy), BASE (Belgium) pioneers Sony, NTT Docomo PayPal standardization GSMA (Pay-Buy mobile), NFC Forum GSMA (MMT) Ericsson Confidential 6 Planet Card 2008, Milan 2008-03-13

Slide 7: Mobile Felica (Giappone) main e-money provider • 34% Sony • 15% NTT Docomo Service Providers FeliCa Networks (57% Sony, 38% NTT Docomo, 5% JRE) Operatori mobili Ericsson Confidential 7 Planet Card 2008, Milan 2008-03-13

Slide 8: Mobile Felica, results Penetration: 50% [end 2007] – share of handsets Felica enabled Usage: 30% [end 2007] – users with a Felica-enabled handset that used mobile Felica at least once Roll-out & ROI – 1997: first Felica card (Hong Kong) – 2000-01: Felica infrastructure (R/W, cards) operating in Japan – 2004: Felica Networks start-up / launch of Mobile Felica – 2007: break-even for Felica Networks 4-5 between infrastructure deployment and mobile launch 4-5 between infrastructure deployment and mobile launch 7 years to Mobile Felica break-even (Felica Networks) 7 years to Mobile Felica break-even (Felica Networks) Ericsson Confidential 8 Planet Card 2008, Milan 2008-03-13

Slide 9: Agenda Mobile payments facts Ericsson strategic vision Architecture components & business models Conclusions Ericsson Confidential 9 Planet Card 2008, Milan 2008-03-13

Slide 10: Mobile Payments: alternative models CONTACTLESS REMOTE PAYMENTS PAYMENTS technology NFC SMS, http REPLACEMENT REPLACEMENT SIM NEEDED OPTIONAL REPLACEMENT HANDSET NEEDED REPLACEMENT POS (R/W) NEEDED Ericsson Confidential 10 Planet Card 2008, Milan 2008-03-13

Slide 11: Mobile NFC vs. Mobile Felica Share of NFC handsets / total global base ABI Research 2005 50% 50% by 2009 Mobile NFC based on 45% Frost&Sullivan 33% by 2012 Felica model 40% NFC Forum 30% by 2011 – Felica ⇔ NFC 35% ABI Research 2006 30% by 2011 – Felica Networks ⇔ TSM 30% Strategy Analytics 25% Estimated Penetration 25% by 2011 Complex value chain 20 15% by 2012 23% by 2013 Ovum 2007 23% by 2012 – TSM (3rd party) role 15% ABI Research 2007 20% by 2012 – Mobile Operators’ role 10% Juniper 12% by 2011 5% due SIM ownership Javelin 0 4% by 2012 2004 2006 2008 2010 2012 Unclear business model Source: Greenwich consulting for Ericsson for Telco CONCLUSIONS CONCLUSIONS mobile NFC will take >5 years to become mass market mobile NFC will take >5 years to become mass market Ericsson Confidential 11 Planet Card 2008, Milan 2008-03-13

Slide 12: Mobile Payments: alternative models CONTACTLESS REMOTE PAYMENTS PAYMENTS > 5 YEARS FOR MASS MARKET technology NFC SMS, http REPLACEMENT REPLACEMENT SIM NEEDED OPTIONAL REPLACEMENT HANDSET NEEDED REPLACEMENT POS (R/W) NEEDED Ericsson Confidential 12 Planet Card 2008, Milan 2008-03-13

Slide 13: Mobile peer-to-peer payments: use cases Person-to-Person Client-Merchant P2P informal transactions F2F transactions parent child e.g. taxi, kiosks friend friend Payments P2M transactions e.g. m-parking, m-gov, m-commerce Ericsson Confidential 13 Planet Card 2008, Milan 2008-03-13

Slide 14: P2P mobile payments: key end-user requirements Person-to-Person Payments Client-Merchant parent child m-parking taxi friend friend m-gov, m-commerce kiosks (MONTHLY) ACCOUNT REPORT (OPTIONAL (OPTIONAL (OPTIONAL PIN BELOW 20€) BELOW 20€) BELOW 20€) SIGNED RECEIPT NOT NEEDED REAL-TIME MONEY NOT NEEDED NOT NEEDED TRANSFER Ericsson Confidential 14 Planet Card 2008, Milan 2008-03-13

Slide 15: P2P mobile payments, implementation options END-TO-END TECH USER SUPPORTED USE CASES SOLUTION EXPERIENCE SECURITY NETWORK Federated BASED identity SIM WPKI (Wireless Public Key BASED Infrastructure) CLIENT J2ME client BASED (MIDP 2.0) VOICE/SMS IVR callback BASED SMS Person-to- Payments Client- Person Merchant OPTIMAL WORST (NOT SUPPORTED) Ericsson Confidential 15 Planet Card 2008, Milan 2008-03-13

Slide 16: Agenda Mobile payments facts Ericsson strategic vision Architecture components & business models Conclusions Ericsson Confidential 19 Planet Card 2008, Milan 2008-03-13

Slide 17: PosteMobile architecture MPGW CA Certiphication is the key 6. support for real-time notifications Authority component CRM Mobile Operator network teller system cryptographic 3. m-payments GW tunnel [MPGW] 1. SIM + SAT client 2. security infrastructure AML/CFT transaction reporting etc. processing Bank of Italy system UIC 4. e-wallet Solution features Solution features •• SIM based (128k, RSA) SIM based (128k, RSA) 5. transaction back-end system •• asymmetric keys model (WPKI) asymmetric keys model (WPKI) ERP •• SAT client as user interface SAT client as user interface Fraud • support for RT and guaranteed Financial • support for RT and guaranteed prevention system SMS notifications SMS notifications Ericsson Confidential 20 Planet Card 2008, Milan 2008-03-13

Slide 18: m-payments business models: decision tree for MNOs and Banks (sample) MNO to apply for license and setup EMI etc. full service yes MVNO MVNO model yes MNO to reselling become MNO ownes model scen. M-pay Trans. Sales scen. EMI(1) customers(2) # GW processing channel CC # Bank to Bank as Service 1 MNO MNO MNO MNO 1 become MNO or Bank MNO or MNO or no Provider MVNO 2 Bank Bank Bank 2 opportunistic 3 Bank Bank Bank Bank 3 define partnership partnering no model with partner Bank model fair Bank ownes partnership customer Bank as MVNO (1) EMI = E-Money Institute (IMEL in Italy) Note: TI and Banks position desumed (2) MNO acting as service provider for (small) banks based on public information Ericsson Confidential 21 Planet Card 2008, Milan 2008-03-13

Slide 19: Business models taxonomy Scenario 2 Scenario 4 MNO-driven Bank-driven partnership partnership Scenario 1 Scenario 3 Scenario 5 MNO IMEL 3rd party driven Bank MVNO Telco Bank centric centric potential for interoperability complexity Ericsson Confidential 22 Planet Card 2008, Milan 2008-03-13

Slide 20: Mobile Operator (MNO) CA Scenario 1 Scenario 1 MPGW wallet secure CRM tunnel flagship, franchisee dealer sys & specialized dealers MNO acting as EMI (E-Money Banks perspective Institute) or Payment Institute1 Pros banking license, e-wallet and – opportunity for co-branding back-end setup up to MNO and transaction processing 100% investments up to MNO Cons – competition increase – Banking system cut-off from m-payments market development 1 since 2010 Ericsson Confidential 23 Planet Card 2008, Milan 2008-03-13

Slide 21: Mobile Operator (MNO) Bank(s) CA Scenario 2 Scenario 2 MPGW wallet secure CRM tunnel flagship + dealer sys Bank franchisee teller sys agencies network MNO acting as turnkey Banks perspective m-payments service provider Pros Bank acting as Financial service – churn reduction provider – service differenciation Interesting model for small- – limited investments and risks medium Banks and possible – using MNO franchisee start-up model for large ones network may be an option investments mainly up to MNO Cons – no interoperability – partial control over user experience and add-on services Ericsson Confidential 24 Planet Card 2008, Milan 2008-03-13

Slide 22: Mobile Operators (MNOs) Service Centre Banks wallet Scenario 3 MPGW CRM wallet Scenario 3 MPGW wallet CRM MPGW secure user registry CRM tunnel wallet MPGW CRM CA Dealers’ Bank dealer sys teller sys network agencies Trusted 3rd party acting as Banks perspective Interoperable Service Centre Pros Naturally evolving towards – only scenario to guarantee full Mobile NFC ecosystem MNO/Banks interoperability investments shared between – open model allowing any role MNO IMEL MNOs and Banks Bank MVNO Cons – complex provisioning, service activation and assurance – complex agreements negot. – critical value chain and business model at start-up Ericsson Confidential 25 Planet Card 2008, Milan 2008-03-13

Slide 23: Mobile Operators (MNOs) Banks CA Scenario 4 Scenario 4 MPGW wallet secure CRM tunnel Dealers’ Bank teller sys network agencies Bank distribute and control MNO Banks perspective SIMs without becoming MVNO Pros – customer still retain existing – churn reduction MSISDN, tarif plan etc. – customer ownership – only m-payments application – control on user experience is managed by the Bank and add-on services (e.g. Likely target scenario for large m-commerce, m-taxes) Banks – focus on core business investments mainly up to Bank Cons – difficult to negotiate with MNOs Ericsson Confidential 26 Planet Card 2008, Milan 2008-03-13

Slide 24: Mobile Operator (MNO) Bank acting as MVNO Scenario 5 Scenario 5 MPGW wallet secure CRM tunnel CA Dealers’ Bank teller sys network agencies PosteMobile service model Banks perspective MNO acting as “dumb pipe” Pros Banks acting as MVNO – churn reduction – full-service model – full customer ownership – full control on user 100% investments up to Bank experience and add-on services (e.g. m-commerce, m-taxes) Cons – high level of investments – MNO swap requested to customers Ericsson Confidential 27 Planet Card 2008, Milan 2008-03-13

Slide 25: Agenda Mobile payments facts Ericsson strategic vision Architecture components & business models Conclusions Ericsson Confidential 28 Planet Card 2008, Milan 2008-03-13

Slide 26: Ericsson P2P Payments solution Ericsson Confidential 29 Planet Card 2008, Milan 2008-03-13

Slide 27: why Ericsson Standard-based WPKI solution Flexible and future proof: ONE platform supporting – remote P2P payments – mobile remittance – mobile top-up – multiple business models internal and external e-wallet MNO centric Bank centric 3rd party centric Scalability – just 1 or 2 SMS for transaction SIM-vendor independent – multiple SIM vendors supported, lower costs Evolving as TSM in a Mobile NFC ecosystem Ericsson Confidential 30 Planet Card 2008, Milan 2008-03-13

Slide 28: Conclusioni mobile payments: contactless (NFC) vs. remote – mobile NFC > 5 anni – remote payments (P2P) è partito – consenso su soluzione SIM-based modelli di business – Telco-centrico – Banca-centrico – 3rd party-centrico Fattori di decisione – propensione all’investimento – customer ownership – catena distributiva Evoluzione del mercato – start-up: modelli semplici – interoperabilità e roaming fondamentali nel lungo termine – numero limitato di tecnologie e vendor candidati a divenire “standard” Ericsson Confidential 31 Planet Card 2008, Milan 2008-03-13

Slide 29: Ericsson Confidential 32 Planet Card 2008, Milan 2008-03-13