Instant SMS: Messaging Just Got Personal Bringing SMS To The Next Phase

Bringing SMS To The Next Phase This presentation aims to share our analysis of recent developments for Mobile Instant Messaging services and the opportunities for both Instant SMS and Mobile Portal IM service for operators in Latin America. Our analysis is based on our experience in other regions as well as observations on market trends and technology.

This presentation aims to share our analysis of recent developments for Mobile Instant Messaging services and the opportunities for both Instant SMS and Mobile Portal IM service for operators in Latin America.

Our analysis is based on our experience in other regions as well as observations on market trends and technology.

What is Enhanced Messaging? Enhanced Messaging: the evolution of today’s messaging services towards the next generation communication experience (the converged communications experience) Revolution by Evolution : phased approach towards the fully implemented converged messaging solution Key Factors : Services are simplified and matched with the best of the internet experience Inherent Fixed-Mobile Convergence Migration from Signaling (SS7) to IP based communication

Enhanced Messaging: the evolution of today’s messaging services towards the next generation communication experience (the converged communications experience)

Revolution by Evolution : phased approach towards the fully implemented converged messaging solution

Key Factors :

Services are simplified and matched with the best of the internet experience

Inherent Fixed-Mobile Convergence

Migration from Signaling (SS7) to IP based communication

What is Instant SMS? Instant SMS is today’s initial service implementation of tomorrow’s Enhanced Messaging providing a new messaging experience Instant SMS is a service that can be implemented now! Why start with Instant SMS? To fill the gap between user’s mobile and internet communication patterns

Instant SMS is today’s initial service implementation of tomorrow’s Enhanced Messaging providing a new messaging experience

Instant SMS is a service that can be implemented now!

Why start with Instant SMS?

To fill the gap between user’s mobile and internet communication patterns

Service Background: Instant Messaging According to the Radicati Group over 900 million registered instant messaging accounts of which according to IDC 300 million are active users. IM has become popular due to its conversational based messaging rhythm and the introduction of the Presence concept to the world. It is one of the most popular applications on the Internet.

According to the Radicati Group over 900 million registered instant messaging accounts of which according to IDC 300 million are active users.

IM has become popular due to its conversational based messaging rhythm and the introduction of the Presence concept to the world.

It is one of the most popular applications on the Internet.

Service Background: Text Messaging SMS is undisputedly the king of data. However, operators are facing the beginning of a saturated market indicated by flattening of SMS growth and revenue . SMS is an ‘old’ technology that has not been upgraded since its introduction. Operators should be attentive to the issue of relying on a large piece of their revenue pie from outdated technology. Finally, today's user experience does not satisfy the demands of the user who is exposed to a much richer and broader messaging experience on the internet.

SMS is undisputedly the king of data. However, operators are facing the beginning of a saturated market indicated by flattening of SMS growth and revenue .

SMS is an ‘old’ technology that has not been upgraded since its introduction. Operators should be attentive to the issue of relying on a large piece of their revenue pie from outdated technology.

Finally, today's user experience does not satisfy the demands of the user who is exposed to a much richer and broader messaging experience on the internet.

Market Trends

Market Trends Introduction of smart handsets suitable for mass market IP enabled Fixed-Mobile Convergence is happening Business: Telcos merge Mobile and Fixed assets Applications: VM2MMS, Instant SMS, Email2MMS. Improved Handset Capabilities Cost reduction initiatives (SS7 to IP) Shared back end components improving network efficiency Growing Demand for Convergence IP Penetration Matching demand for internet communication alternatives Responding to the existing void for impulsive communications Internet Threat

Introduction of smart handsets suitable for mass market

IP enabled

Fixed-Mobile Convergence is happening

Business: Telcos merge Mobile and Fixed assets

Applications: VM2MMS, Instant SMS, Email2MMS.

Cost reduction initiatives (SS7 to IP)

Shared back end components improving network efficiency

Matching demand for internet communication alternatives

Responding to the existing void for impulsive communications

SMS Business Overview SMS mass market success: ~100% penetration agnostic to device, technology, location and operator Worldwide 90% of all non-voice revenue comes from SMS SMS revenues will continue to grow Global SMS volumes are expected to continue rising with almost 2.38 Trillion messages in 2010 Operators enjoy 90-95% profit margin on SMS

SMS Trends “ SMS is likely to remain the dominant messaging application for a long time – well beyond 2010” Portio Research 2007 “ SMS is set to enjoy revenue of $67 billion by 2012” Portio Research 2007 Graphs: Ovum, 2006 & Strategy Analytics, 2007 SMS is here to stay High Volume Growth (Millions) SMS Revenue Growing, Yet Slower

Latin America Mobile Demand Source: LATIN AMERICA MOBILE DEMAND - June 2006, Pyramid Research

Mobile Messaging Revenues in LA 2000-2009 Mobile Messaging Trends in Latin America, Pyramid Research 2005

SMS Usage in LA 2002-2011 Source: LATIN AMERICA MOBILE DEMAND - June 2006, Pyramid Research

Probability of Users Adopting IM Data ARPU, Mobile Penetration & SMS Usage Source: LATIN AMERICA MOBILE DEMAND - June 2006, Pyramid Research

The Internet Shapes our Users Lifestyle Users are spending hours a day connected to the internet The Internet and it’s services also penetrated to the business environment (email…) Person-to-Person communication is affected Immediacy/Interaction level Language abbreviations Personalization Self Expression “ Less talking = more writing” Emoticons Books: TTYL – Talk to you later – Internet girls New Impulsive Communication Culture at&t commerical

Users are spending hours a day connected to the internet

The Internet and it’s services also penetrated to the business environment (email…)

Person-to-Person communication is affected

Immediacy/Interaction level

Language abbreviations

Personalization

Self Expression

“ Less talking = more writing”

Emoticons

Major Trends US carriers as opposed to their European counterparts have embraced strong internet brands like AOL, MSN and Yahoo. EU carriers, on the other hand, have focused on trying to launch their own operator branded mobile IM services which in some instances failed due to the absence of a strong and established community to empower the service Partial list

US carriers as opposed to their European counterparts have embraced strong internet brands like AOL, MSN and Yahoo.

EU carriers, on the other hand, have focused on trying to launch their own operator branded mobile IM services which in some instances failed due to the absence of a strong and established community to empower the service

Examining the End-User’s Communication Values Richness Interaction Level How engaging is the channel? How does it answer an immediate communication method? What is the user experience? How rich is the communication channel?

The Internet Communication Services Richness Interaction Level Talk (VoIP/Video) Chat Instant Messaging Send a Message Email

The Mobile Communication Services MMS Interaction Level Richness Talk Voice/Video Portal IM SMS Mobile Email

The Mobile Communication Services MMS Interaction Level Richness Talk Voice/Video Portal IM Mobile Email SMS Send a Message Chat Users expect to find the PC/Internet experiences on their mobile But only one Service for impulsive conversations (ISP based) Various services for sending a message

The Converged Communication World …more than just a unified bill Single Address Book across all terminals Seamless handover between terminals Simplified and improved messaging experience Optimal network with flexible service pricing Communication Service Provider

Worldwide Market Activities Regional activity: North America- emerging market, high traction for Enhanced Messaging EMEA- first launches (TMO, Telefonica. TMN), slower rollout than expected APAC- India, Malaysia, Singapore have committed to launch throughout 2007/8 Standard Bodies’ activities: CTIA is pushing the service forward with T1’s, defining interconnectivity and service framework GSMA is leading the activity and defining the service framework OMA- CPM group is defining the service functionality of enhanced messaging Market is happening and moving forward

Regional activity:

North America- emerging market, high traction for Enhanced Messaging

EMEA- first launches (TMO, Telefonica. TMN), slower rollout than expected

APAC- India, Malaysia, Singapore have committed to launch throughout 2007/8

Standard Bodies’ activities:

CTIA is pushing the service forward with T1’s, defining interconnectivity and service framework

GSMA is leading the activity and defining the service framework

OMA- CPM group is defining the service functionality of enhanced messaging

Major Market Dynamics: Mobile Interoperability 15 of the world’s leading mobile Operators announced to rollout instant messaging services that will work across networks Provide a new messaging experience to be ubiquitous among mobile users Create a critical mass of users from day one by opening networks Enable connectivity to Portals GSM Announcement- Feb 06

15 of the world’s leading mobile Operators announced to rollout instant messaging services that will work across networks

Provide a new messaging experience to be ubiquitous among mobile users

Create a critical mass of users from day one by opening networks

Enable connectivity to Portals

Challenges

Challenges in the Messaging Landscape Reduce OPEX to increase service margins Maintaining the existing SMS service value Preserve brand equity and customer loyalty Improve User Experience Increase ARPU to compensate for flattening SMS revenue Respond to internet messaging threat Operator’s Challenges

The Solution = Instant SMS Evolutionizing the existing SMS service with the richness and real-time user experience of Instant Messaging SMS + Instant Messaging = Instant SMS

SMS + Instant Messaging = Instant SMS Mass market service Wide inter-carrier interoperability All revenues directed to operator Core messaging service No registration process Perceived as reliable Focused on the mobile community Real-time communication Supports text and multi-media IP based service Conversational-base interface Multi party conversations Presence enhanced service Instant SMS combines the best of both worlds

Service Description

User Experience Comparison Emoticons Multiparty Conversation Conversation Message Type Address Book SMS way Instant SMS way Did you see the game last night? I am late. Will be there in a few min Sorry, will stop by at 5pm Hi Wassup? Gr8 ! and U :) ;-) :-( )-x A B D C Hi Of course Sure

Did you see the game last night?

I am late. Will be there in a few min

Sorry, will stop by at 5pm

Hi

Wassup?

Gr8 ! and U

Presence Enhanced Address Book Native Address Book Instant SMS Contact List Initial Contact List Status All contacts are “SMS” users Adding Presence information Presence Information is added for other contacts when available Presence

Native Address Book

Instant SMS Contact List

Initial Contact List Status All contacts are “SMS” users

Adding Presence information

Presence Information is added for other contacts when available

Instant SMS Chat Experience Selecting an “IM” contact Spontaneously adding a multimedia object Chatting with IM contact Instant SMS user Instant SMS user

Instant SMS to Legacy SMS SMS user Instant SMS user SMS user composes message SMS user replies to a message Message is received and displayed in the relevant conversation thread Composing and sending a message Message is received as SMS by the other party Selecting an “SMS” contact

Presence Options Availability Status can be set manually or by the network Basic status set to keep simplicity Offline status does not affect messaging delivery Personalization The user can set his own profile Display Picture, Personal Message, Display name Immediately shared with contacts Rich self expression options

Availability

Status can be set manually or by the network

Basic status set to keep simplicity

Offline status does not affect messaging delivery

Personalization

The user can set his own profile

Display Picture,

Personal Message,

Display name

Immediately shared with contacts

Rich self expression options

Bubble Up the Online Friends Bubbling the online contacts to the top of the list Visual alerts for notifying a new online contact Spontaneously triggers communication

Bubbling the online contacts to the top of the list

Visual alerts for notifying a new online contact

Spontaneously triggers communication

Presence goes Beyond Messaging …but needs to start there “ Presence and Availability is the New Age Dial Tone” Ed Fish, AOL SVP and GM of Desktop Messaging Notifications Profile Device Capabilities Social Networking Applications

Rich Conversation Experience Typing Indication See when the other party is writing a message One of the most popular features in internet IM Keeps the other side engaged Multiparty Conversation Message conferencing capabilities Message is sent to all participants Invite others to join, be invited See who else is in the conversation

Typing

Indication

See when the other party is writing a message

One of the most popular features in internet IM

Keeps the other side engaged

Multiparty Conversation

Message conferencing capabilities

Message is sent to all participants

Invite others to join, be invited

See who else is in the conversation

PC Client PC Client Allows messaging from the PC Seamless conversation transfer Address book is replicated Can also include Voice Call capabilities

PC Client

Allows messaging from the PC

Seamless conversation transfer

Address book is replicated

Can also include Voice Call capabilities

Target Segments (1) Combination of work and fun Productivity benefit Early adopters of technology Immediacy and efficiency New trendy IM “addicts” – heavy daily users Peer pressure Communication with close groups of friends Know friends availability New, trendy, fun, and colorful Affordable price Teens 12-19 Young professional 25-35 White collar Single No children

Combination of work and fun

Productivity benefit

Early adopters of technology

Immediacy and efficiency

New trendy

IM “addicts” – heavy daily users

Peer pressure

Communication with close groups

of friends

Know friends availability

New, trendy, fun, and colorful

Affordable price

Target Segments (2) Communication for coordination Immediacy Affordable price Basic Messaging as priority for effective communication Influenced by kid’s usage pattern Families > 35 Contacts work & family Party animals 20-30 Working class Single / no children Work to party at weekends

Communication for coordination

Immediacy

Affordable price

Basic Messaging as priority for effective communication

Influenced by kid’s usage pattern

Why Instant SMS? User Experience FMC IP Various solutions exists for each domain, but only Instant SMS answers the needs of all domains

Beyond Instant SMS User Experience FMC IP Multi party conversation Typing indication Presence (mood, status text, gaming) Notifications Multi identity Multi terminals Network Address Book Seamless handover Improved network efficiency resulting in reduced OPEX Flexible service pricing options Various solutions exists for each domain, but only Instant SMS answers the needs of all domains When all domains are fully addressed Converged Messaging becomes a reality

Multi party conversation

Typing indication

Presence (mood, status text, gaming)

Notifications

Multi identity

Multi terminals

Network Address Book

Seamless handover

Improved network efficiency resulting in reduced OPEX

Flexible service pricing options

Operator Benefits

Operator Benefits Increase ARPU Providing an enhanced user experience resulting in additional messaging traffic Open service environment Through messaging continuity and backward compatibility to legacy messaging services Fix Mobile Convergence Meets requirements for fix and mobile environments Improve ROI for network capital investments Reduce OPEX Cost reduction from migration to IP Shared back end network components

Increase ARPU

Providing an enhanced user experience resulting in additional messaging traffic

Open service environment

Through messaging continuity and backward compatibility to legacy messaging services

Fix Mobile Convergence

Meets requirements for fix and mobile environments

Improve ROI for network capital investments

Reduce OPEX

Cost reduction from migration to IP

Shared back end network components

Operator Benefits Extract additional value from existing services via Instant SMS Marks the first step towards a fully Enhanced Messaging offering Future proof solution through IP compatibility (IMS ready) Supports messaging continuity (IP and legacy) Response to internet threat Filling the messaging void : Meeting the user’s need for an impulsive, real-time communication experience Matching the Portals service offering to block them from further penetration into the mobile domain Content delivery tool Enables users to easily access/ be exposed to a broad range of content services

Extract additional value from existing services via Instant SMS

Marks the first step towards a fully Enhanced Messaging offering

Future proof solution through IP compatibility (IMS ready)

Supports messaging continuity (IP and legacy)

Response to internet threat

Filling the messaging void : Meeting the user’s need for an impulsive, real-time

communication experience

Matching the Portals service offering to block them from further

penetration into the mobile domain

Content delivery tool

Enables users to easily access/ be exposed to a broad range of

content services

Operator’s Business Potential Improve overall messaging traffic due to enhanced messaging experience (avg. SMS user/mo ~ 56 vs. avg. IM user/mo ~170) Reduce OPEX by migrating message traffic from SS7 to IP based barriers Improved ROI on existing network capital investments (SMS, MMS, Fixed assets, etc.) One solution answering the needs of triple/quad players

Improve overall messaging traffic due to enhanced messaging experience (avg. SMS user/mo ~ 56 vs. avg. IM user/mo ~170)

Reduce OPEX by migrating message traffic from SS7 to IP based barriers

Improved ROI on existing network capital investments (SMS, MMS, Fixed assets, etc.)

One solution answering the needs of triple/quad players

Summary

Summary Enhancing the text messaging service with the superior internet instant messaging user experience will generate significant increase in traffic nation-wide Instant SMS with SMS continuity ensures mass-market adoption from day one Instant SMS meets the demand for engaged conversational based messaging currently being offered via the IM portals only Operators gains full control over service revenues and roadmap Instant SMS paves the way towards Converged Messaging

Enhancing the text messaging service with the superior internet instant messaging user experience will generate significant increase in traffic nation-wide

Instant SMS with SMS continuity ensures mass-market adoption from day one

Instant SMS meets the demand for engaged conversational based messaging currently being offered via the IM portals only

Operators gains full control over service revenues and roadmap

Instant SMS paves the way towards Converged Messaging

Thank you Raúl Castañón Martínez PSE – Latin America [email_address] www.comverse.com