This document discusses the challenges facing mobile networks from increasing data usage and new applications. Smartphones and apps are driving more data consumption, which could reduce mobile revenues if voice and messaging apps allow free use of these services. Deploying 4G LTE networks requires additional spectrum, fiber backhaul to support high speeds, and new infrastructure like small cells. Offloading data to fixed networks can help financially but requires cooperation. Preparing for early LTE deployment may be needed to manage these challenges to the mobile business model.

1. Eurasia Mobile MarketsChallenges to our mobile networks & business models.Mobile Network Optimization Eurasia Summit 2011, 20th September 2011..Dr. Kim Kyllesbech Larsen, Technology EconomicsTechnology, Deutsche Telekom.

2. The mega challenges …Mega bucksMega bitsMega Hz2Dr. Kim Kyllesbech Larsen, Mobile Network Optimization Eurasia Summit 2011, September 20th2011, Istanbul.

3. The smartphone … The “killer” device and its “killer” applications…3Dr. Kim Kyllesbech Larsen, Mobile Network Optimization Eurasia Summit 2011, September 20th2011, Istanbul.

4. OTT Mobile Apps impact.Mobile revenues in an Apps-centric world could decline rapidly.(Free) OTT VoIP and Messaging Apps can lead to adramatic loss of most profitable MNO revenuesIllustrationCS VoiceSMS & MMSPS Data23.0122.41By 2015more than 70%of users have a smartphone6.2?3.33.43.812.715.713.06.26.52010A2015EMobile centric(“worry-free”)2015EApps centric(“doom”)1 Source 2010 & 2015 Pyramid Research March 2011 Western Europe.4Dr. Kim Kyllesbech Larsen, Mobile Network Optimization Eurasia Summit 2011, September 20th2011, Istanbul.

5. Tellabs global study 1 …The End of Profit.The end to the mobile-only business model as we know it?Western Europe mobile carrier“End to Profit” (Tellabs study).Annual Growth Projection until 2020.Mounting cashpressureBusinessmodelbreakdownWhat can be learned?End of Profit in WEU between 2014 -2016

6. Accelerate LTE deployment.

7. Manage traffic via pricing, policy & control.

8. Spectrum acquisition.Western Europe assessment5Dr. Kim Kyllesbech Larsen, Mobile Network Optimization Eurasia Summit 2011, September 20th2011, Istanbul.

9. Mobile margin doom… 3-player market with equal market share illustration.Mobile Apps offering “free” voice and messaging (picky bagging on data plans) can lead to a dramatic loss of revenue and margin. Capex to Revenue ratioEbitda & marginmodernizationLTEDifference primarilydue to RevenueIllustration6Dr. Kim Kyllesbech Larsen, Mobile Network Optimization Eurasia Summit 2011, September 20th2011, Istanbul.

10. Uncontrolled data growth ... Apple iTune promotion in NL ... free downloads.180 GB & 855 Mbps9× increase in peak throughput.More than twice the total volume.30+ thsd downloads in the peak.Promotion dayNormal7Dr. Kim Kyllesbech Larsen, Mobile Network Optimization Eurasia Summit 2011, September 20th2011, Istanbul.

11. Off-loading benefits are tremendousBut it demands new partnership models for mobile-only.Off-loading Economics.Mobile data is “80% fixed”Free Cash Flow“20% mobility”BusinessmodelbreakdownData traffic per userWhat can be learned?2010201120122013201420152016201720182019202080% of data traffic carried by 3 sites.

12. 20% of users generate 80% of traffic.

13. Off-loading is an effective financial remedy … but not easy to achieve!HSPA only, No LTEHSPA No LTE 50% off-load from 2012HSPA + LTEHSPA + LTE 50% off-load from 20128Dr. Kim Kyllesbech Larsen, Mobile Network Optimization Eurasia Summit 2011, September 20th2011, Istanbul.

14. Today 50+% on 3G/HSPA

15. 2011+ Ramp-up LTE deployment.

16. 2015 620 mio mobile subs …10% LTE.

17. 2020 670 mio mobile subs …60% LTE.

18. 2G below 10% ca. 2015.LTE later in Growth markets, but will catch up fast.Western Europe 1Mobile EuropeGrowth Markets 1 2Mobile Growth Markets (APAC)Today less than 20% on 3G/HSPA

19. Before 2015 limited LTE deployment.

20. 2017 4.0 bn mobile subs …10%+ LTE.

21. 2020 4.5 bn mobile subs … 60%+ LTE.

22. 2G below 10% after 2018.1 Pyramid Research (April 2011) until 2015. After 2015 technology diffusion model applied to technology development favoring LTE as main conversion technology.2 China, India, Indonesia, Malaysia, Pakistan, Philippines, Taiwan, Thailand, Vietnam.9Dr. Kim Kyllesbech Larsen, Mobile Network Optimization Eurasia Summit 2011, September 20th2011, Istanbul.

23. LTE deployment requires available spectrum.900 MHz (2G some 3G)400 MHz700 MHz (LTE)800 MHz (LTE)UL(35MHz)DLULDLULDLUL(30MHz)DL1,800 MHz (2G)1,500 MHz (MSS L-band)UL(75 MHz)DLTDDUL(58 MHz)DLTDD(20 MHz)2,100 MHz (MSS S-band)2,100 MHz (3G)2,300 – 2,400+ MHzDLUL(60 MHz)TDD(100 MHz)DL3GTDDpart TDD(mainly APAC)3GTDDUL(20 MHz)2,600 1 MHz (4G & LTE)3,400 – 3,500+ MHzUL(70 MHz)TDD(50 MHz)DLpart TDDThis band provides interesting backhaul P2P options in some Greenfield scenarios1 The shown structure consistent with European band plan. In USA this band is held by Clearwire and primarily used forTDD WiMax.10Dr. Kim Kyllesbech Larsen, Mobile Network Optimisation Eurasia Summit 2011, September 20th 2011, Istanbul.

24. Spectrum re-farming … a very complex process...Additional spectrum provides control & mitigate risks.Today situationE.g., GSM3GReady forre-farmComplex &Difficult to controlTime2GAdd “new”spectrumMigrateTrafficE.g., LTEIllustration11Dr. Kim Kyllesbech Larsen, Mobile Network Optimisation Eurasia Summit 2011, September 20th2011, Istanbul.

25. Spectrum demand and availability.There are still large amount of untapped spectrum resources available.20Hz3kHz50MHz4GHz300GHz400THzX-RAYMICROWAVESULTRA-SOUNDINFRARED4GHz700MHz50MHzWHITESPACE TRADITIONAL CELLULAR / MOBILE SPECTRUM RANGEVery HighSmallBANDWIDTHCOVERED UNIT AREAVery LargeVery LowWith current data growth, by 2030 spectral BW demand could be beyond 4 GHz.199550MHz (900 MHz)Voice Centric12010340 MHz (900,1800 & 2100 MHz)Voice Centric with mobile data×72015590 MHz (800, 900,1800, 2100, 2600 MHz)Broadband data centric with voice.×12+1 …12Dr. Kim Kyllesbech Larsen, Mobile Network Optimisation Eurasia Summit 2011, September 20th 2011, Istanbul.

26. LTE deployment models.Availability of a wide range of frequencies will be essential for economical network deployment.Throughput / Capacity2.3 - 3.6 GHz Typical BWs/Operator > 40 MHz Femto-cellsHot-Spots2.3To3.6 GHzRural Fixed-likeTypical BWs/Operators < 20 MHzLTE connectivityUrban – Suburban:Up-to 2100 MHzRural / Nation-wide: Digital dividend  900 MHzIllustration13Dr. Kim Kyllesbech Larsen, Mobile Network Optimization Eurasia Summit 2011, September 20th2011, Istanbul.

27. Backhaul will force you to re-think network design.LTE’s extremely power-full air-interface, i.e., 100+ Mbps, will require extensive backhaul fiber deployment.LTE air-interface30mean to 100+peak Mbps(per sector)DWDMDWDMEvolvedPacketCore100 GbpsDWDMeNode100GbEDWDMDWDMFTTS1 100+ Mbps32:1320:1eNodes per element3200:1BH Throughput3+32+320+In GbpsIllustration14Dr. Kim Kyllesbech Larsen, Mobile Network Optimization Eurasia Summit 2011, September 20th2011, Istanbul.

28. The backhaul challenge … macro vs micro.Distribute mobile broadband traffic differently.IllustrationLTE provides up-to 100Mbpsper sectorAP (e.g., WiFi / Femto,..)NodeFTTS1 100+ Mbps100+ to40 Mbps300 – 7,000 active devicesper macro-cellular node(dense-urban / urban)100+ Mbpsshared with up to 7,000 devices.Home Environmentwith ca. 2.3 people per Home 1connected to Fiber, Cable or VDSL.Up-to 100+ Mbpsshared by2+ people.1 Average for Western Europe.15Dr. Kim Kyllesbech Larsen, Mobile Network Optimization Eurasia Summit 2011, September 20th2011, Istanbul.

29. Key challenges.What we need to be passionate about.Backhaul -> Gbps will be needed -> Think Fiber and off-loading.Radio nodes -> multi-mode SDR capabilities to mitigate uncertainty .Spectrum -> acquisition and re-purposing of legacy bands.Prepare for early LTE deployment -> might be needed sooner than later.16Dr. Kim Kyllesbech Larsen, Mobile Network Optimization Eurasia Summit 2011, September 20th2011, Istanbul.

30. Thank you for your interest!Contact: kim.larsen@t-mobile.nlMobile: +31 6 2409 5202http://nl.linkedin.com/in/kimklarsenAcknowledgement: I am indebted to my fantastic team for always being patient with my data requests, for their great suggestions and support in creating this presentation.