ICT mobile summit http://www.ict-mobilesummit.eu/

1. Smartphone Operating Systems,
mobile services and market impact
Eduardo Fernandez Rojo
Research In Motion
Session, 11th June 2009 ICT-MobileSummit 2009 Copyright 2009 Eduardo Fernandez Rojo - BlackBerry

2. Setting the scene: major trends
• Value shifting Wireless • Consumers
towards mobile landscape
services and embracing
applications
changing massively mobile
services and
• Smartphone • Mobile OS and applications.
era SW platforms are
reshaping the • Enterprise
Value Shift in wireless landscape mobility has
become strategic
mobility • Innovation driven
through developer
community and Demand &
partnerships market growth
ARPU and Revenue opportunities
Carriers as main • Value propositions
catalyzers • LifeTime Value revenues
Session, 11th June 2009 ICT-MobileSummit 2009 Copyright 2009 Eduardo Fernandez Rojo - BlackBerry

3. Value is shifting towards mobile Services and
Applications
Wireless
landscape
• Value changing
• Consumers
embracing
•
shifting towards
massively
Hardware is becoming a commodity:
mobile services
and applications mobile
• Smartpho • Mobile OS services and
and SW platforms applications.
ne era are reshaping the
wireless landscape
Value Shift in • Enterprise
mobility • Innovation mobility has
strong price and margin erosio n driven through developer
community and
partnerships
become
Demand
strategic &
market growth
• Differentiation through hardware alone ARPU & Revenue opportunity
is becoming increasingly difficult Carriers as main catalyzers
• Enterprises have long required software and services beyond just
hardware — same trend now in the consumer market
Session, 11th June 2009 ICT-MobileSummit 2009 Copyright 2009 Eduardo Fernandez Rojo - BlackBerry

4. Value is shifting towards mobile Services and
Applications
• Differentiation and value-add comes from software and services
• Consumers are increasingly making purchasing decisions based on software
and services driven propositions.
• The enterprise market has consolidated around most integrated, flexible and
scalable mobility platforms.
• Software and service-led model (platform) players are outperforming in
today’s economic climate. (RIM BlackBerry, Apple, etc)
Session, 11th June 2009 ICT-MobileSummit 2009 Copyright 2009 Eduardo Fernandez Rojo - BlackBerry

5. Mobile OS and Software Platforms are
reshaping wireless landscape
Wireless
landscape
• Value changing
• Consumers
embracing
•
shifting towards
massively
As Bill Gates taught the world, one who controls
mobile services
and applications mobile
• Smartpho • Mobile OS services and
and SW platforms applications.
ne era are reshaping the
wireless landscape
Value Shift in • Enterprise
• Innovation
the operating system controls de hardware world. mobility mobility has
driven through developer become
community and
Demand
strategic &
partnerships market growth
ARPU & Revenue opportunity
Carriers as main catalyzers
Mobile OS form the foundation for SW
platforms and developer communities
A growing world
of fragmented
preferences
who in turn deliver innovative services for
and applications consumers
and
professionals
serving – through optimized mobile
platforms ensuring a positive end user
experience –
Session, 11th June 2009 ICT-MobileSummit 2009 Copyright 2009 Eduardo Fernandez Rojo - BlackBerry

6. Mobile OS and Software Platforms are
reshaping wireless landscape
• Mobile operating systems and platforms are the key enabler for
uptake of value added services and applications.
• Vendors strategically positioning/extending mobile OS and
platforms as a key differentiator:
Different • Reduce cost, achieve economies of scale
approaches, similar • Reduce time to market
drivers • Create platforms for the delivery of
applications and services
• OS differentiation will happen through UI/hardware (devices) and
application support (including application distribution models)
• Smartphones determine ultimately market impact, OS penetration
and evolution.
Session, 11th June 2009 ICT-MobileSummit 2009 Copyright 2009 Eduardo Fernandez Rojo - BlackBerry
.

7. Mobile OS and Software Platforms are
reshaping wireless landscape
• Players are diversifying • Smartphone vendors in fierce competition
shift to royalty free/open source OS.
• The long-term winners will be those
who can deliver wide-ranging but still balancing on multi OS approach.
experiences through tight integration
of hardware, services and software
Applications
• Software platforms and mobile OS
are at the core of this strategy.
Hardware Services
Source: CCS Insights 2008 – Adapted for BlackBerry template
• The same trends apply to both consumer and enterprise
• More fragmentation in the short term, but future consolidation will happen
• Partnerships are critical for everyone in the value chain.
Session, 11th June 2009 ICT-MobileSummit 2009 Copyright 2009 Eduardo Fernandez Rojo - BlackBerry

8. Mobile OS platform ecosystem: driving
innovation through developer communities
Wireless
landscape
• Value changing
• Consumers
embracing
shifting towards
mobile services massively
and applications mobile
• Smartpho • Mobile OS services and
and SW platforms applications.
ne era are reshaping the
wireless landscape
Value Shift in • Enterprise
mobility • Innovation mobility has
driven through developer become
community and
Demand
strategic &
partnerships market growth
ARPU & Revenue opportunity
Carriers as main catalyzers
Session, 11th June 2009 ICT-MobileSummit 2009 Copyright 2009 Eduardo Fernandez Rojo - BlackBerry

9. Partner Community – Consumer Applications
Mapping & Navigation
Travel & Reference
Guides
Music, Video and
Multimedia
Information & News
Services
eCommerce
Search, Messaging and
Sharing
Games and
Entertainment
Session, 11th June 2009 ICT-MobileSummit 2009 Copyright 2009 Eduardo Fernandez Rojo - BlackBerry

10. Partner Community – Business Applications
ERP – SCM, HR,
Financials, CRM
Business Intelligence
Sales Force Automation
Field Service Automation
Fleet Management &
Dispatch
Unified Communications
IT Systems Management
Document Management &
Printing
Security & Compliance
Session, 11th June 2009 ICT-MobileSummit 2009 Copyright 2009 Eduardo Fernandez Rojo - BlackBerry

11. Partner Community – Industry Solutions
Financial Services
Professional Services
Health Care & Life
Sciences
Government & Law
Enforcement
Manufacturing
Real Estate
Session, 11th June 2009 ICT-MobileSummit 2009 Copyright 2009 Eduardo Fernandez Rojo - BlackBerry

12. Demand and Market growth
Wireless
landscape
• Value changing
• Consumers
embracing
shifting towards
mobile services massively
and applications mobile
• Smartpho • Mobile OS services and
and SW platforms applications.
ne era
Evidence that end users are embracing massively
are reshaping the
wireless landscape
Value Shift in • Enterprise
mobility • Innovation mobility has
driven through developer become
community and
Demand
strategic &
partnerships market growth
applications and services
ARPU & Revenue opportunity
Web services are driving consumer uptake of non-voice Carriers as main catalyzers
and non- text services
• Social networking sites have a combined membership of over 350 million
usersMySpace: 200+ million users, Facebook: 125 million users (50 million in Jan 2008)
Social networking phenomenon is turning to mobile. Mobile likely to become leading
interface for social networking and user-generated content
• Facebook has 15 million active mobile users
• BlackBerry Facebook application downloads of 2.5 million
• AT&T MySpace text service saw 75 million premium text messages sent in eight months
• Top four searches on Vodafone Mobile Internet: Facebook, Bebo, Ebay and Windows
Live Hotmail (May 2008)
Broader interest in mobile applications
Apple’s App Store has seen over 200 million cumulative downloads
since 11 July 2008
App Store now has a catalogue of more than 5,500 applications
Session, 11th June 2009 ICT-MobileSummit 2009 Copyright 2009 Eduardo Fernandez Rojo - BlackBerry

13. Enterprise Mobility evolving, now strategic
Session, 11th June 2009 ICT-MobileSummit 2009 Copyright 2009 Eduardo Fernandez Rojo - BlackBerry

14. ARPU and Revenue opportunities
Wireless
landscape
• Value changing
• Consumers
embracing
shifting towards
mobile services massively
and applications mobile
• Smartpho • Mobile OS services and
and SW platforms applications.
ne era are reshaping the
wireless landscape
Value Shift in • Enterprise
mobility • Innovation mobility has
driven through developer become
community and
Demand
strategic &
partnerships market growth
ARPU & Revenue opportunity
Carriers as main catalyzers
Mobile Data usage is growing but
ARPU is decreasing
Session, 11th June 2009 ICT-MobileSummit 2009 Copyright 2009 Eduardo Fernandez Rojo - BlackBerry

15. ARPU and revenue opportunities are ahead
driven by Lifetime Value propositions
• Lifetime Value (LTV)
– LTV is the measure of all future cash flows for a customer discounted back
to a present day value.
• Carriers use of LTV
– The high expense of acquiring new customers means that their value to the
carrier is negative for the first year or more.
– Carriers use LTV to assess the long-term profitability of acquiring customers
today.
• Example of Customer Lifecycle to Carrier:
Day 1 Day 30/60/90/… Day 720+
Customer Buys a Phone Customer pays Bill $50+ Customer Churns
or
Carrier Carrier Customer Upgrades
- Subsidizes phone - Pays ongoing usage costs
- Pays commission to retail/dealer - Pays customer support costs
- Network Capacity already built - Approximately 53% margin
Net Cash Flow Net Cash Flow
$400-$600 negative Approximately $30+ positive per month
Session, 11th June 2009 ICT-MobileSummit 2009 Copyright 2009 Eduardo Fernandez Rojo - BlackBerry

16. BlackBerry Value Proposition
Driving Partner Profitability - ARPU and LTV (North America)
ARPU /
LTV
Source: OPEX Data from Yankee Group (US Mobile Carrier Monitor Sept 2008)
Source: ARPU Data from Nielson Mobile Q1 2008
Session, 11th June 2009 ICT-MobileSummit 2009 Copyright 2009 Eduardo Fernandez Rojo - BlackBerry

17. BlackBerry Value Proposition
Lifetime Value Calculation
Non BB
Source Formula Basic Phone Smartphones Blackberry
Carrier ARPU
Voice ARPU Neilson a $ 37.48 $ 44.23 $ 50.47
Other ARPU Neilson b $ 7.11 $ 9.02 $ 12.20
Data ARPU Neilson c $ 7.89 $ 20.85 $ 25.94
Total ARPU d=a+b+c $ 52.48 $ 74.11 $ 88.61
Total OPEX Yankee e $ (24.67) $ (34.83) $ (39.07)
Gross Margin f = (d-e) / d 53% 53% 56%
Churn Yankee g 1.27% 1.27% 1.27%
Discount Rate h 12.50% 12.50% 12.50%
PV of Gross Margin j = d x f / (g + h/12) $ 1,203.28 $ 1,699.08 $ 2,143.01
HandHeld Subsidy Yankee k $ (150) $ (150) $ (200)
Other Acquisition Costs Yankee l $ (375) $ (375) $ (375)
Network Infrastructure Costs Yankee m $ (99) $ (140) $ (105)
Lifetime Value n = j - (k + l + m) $ 578.89 $ 1,033.76 $ 1,462.53
Breakeven Period (months) o = (k+l+m) / (d x f) 22.4 16.9 13.7
Source: OPEX Data from Yankee Group (US Mobile Carrier Monitor Sept 2008)
Source: ARPU Data from Nielson Mobile Q1 2008
Source: Opex and COA based on Yankee estimates. Adjustments for Blackberry
SAF & additional subsidy based on RIM estimates.
Session, 11th June 2009 ICT-MobileSummit 2009 Copyright 2009 Eduardo Fernandez Rojo - BlackBerry

18. Conclusions
Wireless landscape
• Value shifting changing
• Consumers
embracing
towards mobile
services and massively mobile
applications services and
• Smartphone • Mobile OS and SW applications.
The wireless landscape is undergoing a era
Value Shift in
platforms are reshaping the
wireless landscape
• Innovation driven
through developer community
• Enterprise
mobility has
become strategic
mobility and partnerships
fundamental change with Mobile OS and Demand & market
growth
SW platforms at the core
ARPU & Revenue opportunity
Carriers as main catalyzers
• Value is shifting from hardware to software & services
• Users have high expectations in all areas — device, UI, ubiquitous
access, applications and services, both in the enterprise and consumer
space
• Partnerships are critical — no single player can deliver solutions
independently
• Demand for applications and services is tangible and a significant
growth opportunity for everyone in the value chain
– And specifically for carriers in terms of ARPU/revenue generation.
Session, 11th June 2009 ICT-MobileSummit 2009 Copyright 2009 Eduardo Fernandez Rojo - BlackBerry