The document analyzes the evolution of messaging services, focusing on the introduction of Instant SMS as a solution to enhance user experience by combining SMS with instant messaging functionalities. It highlights market trends, the importance of addressing user demands for richer communication, and the potential benefits for operators in terms of revenue and efficiency. Instant SMS is positioned as a necessary step towards a fully converged messaging solution that meets the growing user expectations in Latin America and beyond.

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

2. 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.

3. 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

4. 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

5. 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.

6. 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 Operators should be attentive to the issue of relying on a large piece of their revenue pie from outdated technology.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.

7. Market Trends

8. 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

9. 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

10. 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

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

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

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

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

15. 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

16. 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

17. 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?

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

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

20. 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

21. 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

22. 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

23. 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

24. Challenges

25. 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

26. 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

27. 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

28. Service Description

29. 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

30. 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

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

32. 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

33. 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

34. 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

35. 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

36. 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

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

38. 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

39. 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

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

41. 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

42. Operator Benefits

43. 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

44. 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

45. 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

46. Summary

47. 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

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