De-risking the broadband business model was presented at Informa's Industry Outlook 2012. The starting point summarizes the challenges the incumbent Telco is facing with the emergence of the smartphone, mobile applications and social media. Then it takes you to the Digital Agenda 2020 for Europe and inspects what needs to happen to make it come through.

1. De-risking the Broadband Business Model
Industry Outlook 2012 , November 24th 2011, London.
Dr. Kim Kyllesbech Larsen, Technology Economics
Technology, Deutsche Telekom.

2. Changing business models …
Dr. Kim Kyllesbech Larsen, Industry Outlook 2012, November 24 th 2011, London, UK. 2

3. A typical mobile data traffic day in Europe.
Illustration
data voice
00:00 6:00 8:00 10:00 12:00 17:00 22:00
On the On the
@Home @Work @Home
Go Go
Dr. Kim Kyllesbech Larsen, Industry Outlook 2012, November 24 th 2011, London, UK. 3

4. EU Broadband for All & Everything…
Digital Agenda Europe 2020.
Closing
coverage +
>20% <95% gap 100% LTE All have
DSL
<80% coverage + access to
HSPA pop 30 Mbps
coverage All FTT-eNB or higher.
Europeans
have
60% 3G access to
adaptation <50% cable Broadband
coverage (wireless) 50+% HH
+ subscribe
>50% to 100
<20% Mbps.
HSPA
FTTH
adaptation /
FTTx
DOCSISx
2011 2013 2020 + IoT 1
now +2 yrs +9 yrs
1 IoT = Internet of Things.
Dr. Kim Kyllesbech Larsen, Industry Outlook 2012, November 24 th 2011, London, UK. 4

5. Digital Agenda Europe 2020 ... What does it mean.
By 2013 at least 30k HSPA BTS to cover the EU 20+% pop gap.
By 2020 most (if not all) base stations support LTE advanced (<200K×2).
Internet-of-Things (IoT) Network for the 15+ Billion projected devices1
More than 100 million HH connected to fibre by 2020.
FTTH Investment >15 today’s fixed broadband earnings.
1 In Europe for every mobile device there will be 20+ IoT devices in 2020.
Dr. Kim Kyllesbech Larsen, Industry Outlook 2012, November 24 th 2011, London, UK. 5

6. Spectrum challenge 2012 - Pre-auction days.
Illustration
Uplink only
900 MHz
2 35 MHz
MNO2G
3G
1
3G
MNO 2
2G 3G
MNO 3
2G 3G
All FDD
(3G) (3G) (3G)
(GSM)
1800 MHz
LTE 2G LTE 2G LTE 2G LTE 2G LTE 2G Un-used spectrum
2 75 MHz (LTE) (LTE) (LTE) (LTE) (LTE) LTE LTE LTE LTE LTE
(GSM)
5 5 5 5 5 5 5 5 5 5 5 5
2100 MHz
2 60 MHz
3G core band
10 20 10 20 10
2600 MHz 70
2 70 MHz +
FBO 1 FBO 2
50 MHz (TDD)
(Tech neutral)
Note: MNO = Mobile Network Operator & FBO = Fixed-Broadband Operator.
Dr. Kim Kyllesbech Larsen, Industry Outlook 2012, November 24 th 2011, London, UK. page 6

7. Spectrum challenge 2012 - Pre-auction days.
Illustration
Uplink only
900 MHz
2 35 MHz
MNO2G
3G
1
3G
MNO 2
2G 3G
MNO 3
2G 3G
All FDD
(3G) (3G) (3G)
(GSM)
Billions of Euro in mobile network assets.
1800 MHz
2G 2G 2G 2G 2G Un-used spectrum
2 75 MHz
(GSM) 2G and 3G tightly integrated.
LTE (LTE) LTE (LTE) LTE (LTE) LTE (LTE) LTE (LTE) LTE LTE LTE LTE LTE
By 2012 still more than 20% on 2G.
5 5 5 5 5 5 5 5 5 5 5 5
2100 MHz
2 60 MHz
3G core band
No 100% 3G pop/geo coverage.
10 20 10 20 10
2600 MHz 70
2 70 MHz +
FBO 1 FBO 2
50 MHz (TDD)
(Tech neutral)
Note: MNO = Mobile Network Operator & FBO = Fixed-Broadband Operator.
Dr. Kim Kyllesbech Larsen, Industry Outlook 2012, November 24 th 2011, London, UK. page 7

8. Spectrum challenge 2012…major disruption possible.
5 5 5 5 5 5 Illustration
800 MHz Uplink only
2 30 MHz LTE LTE LTE LTE LTE LTE
(Tech neutral) Secure min. 2×10 MHz All FDD
5 5 5 5 5 5 5 Greenfield reservation
900 MHz
2 35 MHz
3G 2G
(3G)
3G 2G
(3G)
3G 2G
(3G)
3G MNO 2 loose
(Tech neutral) Secure min. 2×10 MHz spectrum game!
5 5 5 5 5 5 5 5 5 5 5 5 5 5 5
1800 MHz 2G 2G 2G 2G 2G
2 75 MHz LTE (LTE) LTE (LTE) LTE (LTE) LTE (LTE) LTE (LTE) LTE LTE LTE LTE LTE
(Tech neutral) Secure min. 2×20+ MHz
5 5 5 5 5 5 5 5 5 5 5 5
2100 MHz
MNO MNO MNO 3G 3G
2 60 MHz
3G core band 2 3 1
10 20 10 20 10
2600 MHz 70
2 70 MHz + FBO 1 FBO 2
50 MHz (TDD)
(Tech neutral) Secure min. 2×20+ MHz
Note: MNO = Mobile Network Operator & FBO = Fixed-Broadband Operator.
Dr. Kim Kyllesbech Larsen, Industry Outlook 2012, November 24 th 2011, London, UK. page 8

9. Spectrum challenge 2012…major disruption possible.
5 5 5 5 5 5 Illustration
800 MHz Uplink only
2 30 MHz LTE LTE LTE LTE LTE LTE
(Tech neutral) Secure min. 2×10 MHz All FDD
5 5 5 5 5 5 5 Greenfield reservation
900 MHz
2 35 MHz
3G 2G
(3G)
3G 2G
(3G)
3G 2G
(3G)
3G MNO 2 loose
(Tech neutral)
New entrant Secure min. 2×10 MHz
buying existing incumbent spectrum.
spectrum game!
5 5 5 5 5 5 5 5 5 5 5 5 5 5 5
Possible (catastrophic)2Gloss of spectrum. LTE
1800 MHz
LTE 2G LTE 2G LTE LTE 2G LTE 2G LTE LTE LTE LTE
2 75 MHz (LTE) (LTE) (LTE) (LTE) (LTE)
(catastrophic) Loss of MHz
(Tech neutral) Secure min. 2×20+ Value and Operation.
Loss of future growth possibilities in LTE.
2100 MHz
5 5
3G
5 5 5 5 5 5 5 5 5 5
3G
MNO MNO MNO
2 60 MHz
3G core band 2 3 1
10 20 10 20 10
2600 MHz 70
2 70 MHz + FBO 1 FBO 2
50 MHz (TDD)
(Tech neutral) Secure min. 2×20+ MHz
Note: MNO = Mobile Network Operator & FBO = Fixed-Broadband Operator.
Dr. Kim Kyllesbech Larsen, Industry Outlook 2012, November 24 th 2011, London, UK. page 9

10. De-risking disruptive spectrum moves.
Spectrum partnership alliance(s).
Value at risk game rather than incremental value add play.
Higher degree of network in-dependence … Network Factory / Sharing.
Dr. Kim Kyllesbech Larsen, Industry Outlook 2012, November 24 th 2011, London, UK. 10

11. When data demand exceeds spectral efficiency gains.
”Houston we have problems”.
Illustration of the European market 1
The spectrum crunch.
Total spectrum in use for mobile data
10 20 40 60 85 120 120 120 120 120 120
15 Leapfrog network capacity, e.g.,
Spectral Efficiency (*)
Spectral demand (limited) Densification
Spectral demand (unlimited) Spectral demand could
Increase over 2010
10
smart antennas
exceed spectral efficiency
3G  LTE  LTE-a Early LTE deployment
between 2014 - 2016.
Conversion
Price, Control & Policy.
5
NOT GOOD
AT More spectrum.
ALL!
0
2010 2012 2014 2016 2018 2020
1 Mobile
operator with (1) 20MHz @ 800MHz (LTE), (2) 20MHz @
A lot more
900MHz (2GHSPA),(3) 50MHz @ 1800MHz (2GLTE), (4)
30MHz @ 2100MHz (HSPA+). Total spectrum position 120 MHz. Complexity, Capex and Opex
(*) realWireless report for Ofcom,: 4G Capacity Gains, Final Report, January 2011.
Dr. Kim Kyllesbech Larsen, Industry Outlook 2012, November 24 th 2011, London, UK. 11

12. OTT Mobile Apps impact.
Mobile Apps “attacks” the highest margin services.
ARPU
22.4 1 23.0
By 2015
3.3 6.2 1
Data
Data
3.4
SMS more than 70% 3.8
of users have 12.7
SMS
a smartphone
6.2 1
15.7 Data
Voice 13.0
Voice
6.5
Voice
2010A 2015E
MNO Centric Mobile Centric
ARPU ARPU
1 Source 2010 & 2015 Pyramid Research September 2011 Western Europe.
Dr. Kim Kyllesbech Larsen, Industry Outlook 2012, November 24 th 2011, London, UK. 12

13. OTT Mobile Apps impact.
Mobile Apps “attacks” the highest margin services.
ARPU
22.4 1
By 2015
?
3.3 +
Data 9.7+ +43%
3.4 Data
SMS more than 70% ARPU
of users have 12.7
a smartphone MoIP 
6.2 1
15.7 Data Death to SMS.
Voice
VoIP @Home
6.5
Voice & maybe @Work.
2010A 2015E
MNO Centric Apps Centric
ARPU ARPU
1 Source 2010 & 2015 Pyramid Research September 2011 Western Europe.
Dr. Kim Kyllesbech Larsen, Industry Outlook 2012, November 24 th 2011, London, UK. 13

14. Traffic & revenue changes in the last 12 month.
Illustration of the European Market
#Customers #Customers
2010 2010
+12 Month +12 Month
Declining Minutes Declining SMS
0 100 200 300 400 500 600 700 0 50 100 150 200 250 300 350
MO MoU per Customer MO SMS per Customer
#Customers #Customers
2010 2010
+12 Month +12 Month
Increasing Data Declining ARPU
(and top-line)
0 100 200 300 400 500 600 0 50 100 150 200
Mega Byte per Customer Average Revenue per User (ARPU)
Dr. Kim Kyllesbech Larsen, Industry Outlook 2012, November 24 th 2011, London, UK. 14

15. How to uplift the mobile data business case.
Demand for new revenue, partnerships & collaboration models.
Economics of mobile data Structural off-loading1
Illustration of the European market
Increased spectrum availability.
Early LTE deployment.
Free Cash Flow
Mobile – Fixed partnership models.
Network Aware Apps & Devices
LTE
Network APIs.
Smarter & network friendlier devices.
Innovation
Mobile Business Femto cells.
model
breakdown
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
New revenue streams
Internet of Things
HSPA only, no LTE
Location / Notifications / Payments
HSPA + LTE w. 50% off-load from 2012
Customer insights
1 Note: off-loading here means any traffic migration from legacy technology or legacy spectrum bands to something else.
Dr. Kim Kyllesbech Larsen, Industry Outlook 2012, November 24 th 2011, London, UK. 15

16. New mobile revenue opportunities … making up lost.
How big will the piece of the cake be?
1 Sources:Apps from Berg Insight (2011), Social Media from Gartner (2011), Mobile Entertainment from Juniper Research (2011), Online Adds from MagnaGlobal (2011),
Handsets from MarketsandMarkets (2011), Internet of Things from GSMA (2011).
16
Dr. Kim Kyllesbech Larsen, Industry Outlook 2012, November 24 th 2011, London, UK.

17. Vision - network aware mobile apps (1 of 2).
Innovation is important remedy to mitigate risk.
Ad-hoc optimized route Synched notification
Optimized service
delivery
Traffic Profile
N × Events
vs
data 1 × Event
Primary indoor usage →
voice off-load possibilities.
Off-busy-hour In-fill delivery.
Dr. Kim Kyllesbech Larsen, Industry Outlook 2012, November 24 th 2011, London, UK. 17

18. Vision - network aware mobile apps (2 of 2).
Collaboration across Network, Device and Apps.
Self-Optimized & Cognisant Network
Dr. Kim Kyllesbech Larsen, Industry Outlook 2012, November 24 th 2011, London, UK. 18

19. Decreasing margins & increasing cash pressure
Network consolidation & new partnerships.
Sharing logic Economics
LTE HSPA+ HSPA UMTS + GSM (→LTE)
Total Opex
Rollout Steady StateModernization 100%
<5 years in 5 years > 5+ years
Cluster Opex
Rollout 40%
Significant Capex prevention. Technology
Substantial Opex prevention.
Network 10%
Best network … more for less. RAN 7%
Steady State RAN
Little Capex benefits. saving
Substantial Opex savings.
High write-off & restructure cost.
Experience.
When Network is NOT a differentiator.
Modernization
Capex prevention (sharing of modernization). SUBSTANTIAL financial benefits.
Substantial Opex savings. NOT a solution to spectrum CRUNCH.
Minor write-off & contract termination cost. COMPLEX Governance.
Dr. Kim Kyllesbech Larsen, Industry Outlook 2012, November 24 th 2011, London, UK. 19

20. Fixed – Mobile Convergence.
Technology & business reasons for FMC.
Mobile & Fixed the ideal partnership Most mobile data traffic is fixed-like.
Sharing 100 Mbps with up-to Data distribution across sites
100%
2,389
53 171
1,373
594
36
80% of
0.02
7000+ devices
327
90%
21
11
0.4
6
2.2
97
traffic in 2
0.04
80%
per macro-cellular radio node
48
24
sites or less
12
70%
0.8
4.3
Node 60%
5th Ranked Site
FTTS 100 Mbps 50%
24,409
11,864
5,959
4th Ranked Site
2,495
1,082
40%
501
3rd Ranked Site
0.2
196
Out-side in coverage
81
39
30%
2.4
13
2nd Ranked Site
20% Main Site
versus 10%
AP (e.g., WiFi or 0%
Femto,..) In-side out coverage
Usage category
Home Environment Fixed & Mobile enables:
with ca. 2.3 people
per Home • Transparent off-loading strategies.
FTTH 100+ Mbps • Inside-out coverage with in-home backhaul
Cable 100+ Mbps connectivity (i.e., via VDSL, Fiber, …).
VDSL 40+ Mbps
• Honest always-best-connected offers.
Dr. Kim Kyllesbech Larsen, Industry Outlook 2012, November 24 th 2011, London, UK. 20

21. What we need to be passionate about…
De-risking the broadband business model.
How to spend it
Internet of Things
Monetize social media
How to earn it back
Transform
Business Model
New partnership models
Dr. Kim Kyllesbech Larsen, Industry Outlook 2012, November 24 th 2011, London, UK. 21

22. Thank you
Acknowledgement: Many thanks to Bin Xi, Claire Hilton, Minoo Abedi and
Richard Marijs in particular and of course to my fantastic Technology
Contact: kim.larsen@t-mobile.nl
Economics team for great suggestions and kind advice on how to improve Mobile: +31 6 2409 5202
the presentation. http://nl.linkedin.com/in/kimklarsen