Had the pleasure to deliver " Who pays for mobile broadband 2.0" at the Open Mobile Summit 2011 conference in San Francisco. The 2.0 as it is an extension and further thoughts on my delivery at Open Mobile Summit in London 2011 also named " who pays for mobile broadband".

1. Who pays for mobile broadband 2.0
A European perspective.
Open Mobile Summit , November 2nd 2011, San Francisco.
Dr. Kim Kyllesbech Larsen, Technology Economics
Technology, Deutsche Telekom.

2. Changing business models …
Dr. Kim Kyllesbech Larsen, Open Mobile Summit , November 2 nd 2011, San Francisco. 2

3. A typical 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, Open Mobile Summit , November 2 nd 2011, San Francisco. 3

4. OTT Mobile Apps impact.
Mobile Apps “attacks” the highest margin services.
ARPU
22.4 1
By 2015
?
3.3
Data +
3.4 9.7+ +43%
SMS more than 70% Data
of users have 12.7 ARPU
a smartphone
6.2 1
15.7 Voice
Data
SMS ? 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, Open Mobile Summit , November 2 nd 2011, San Francisco. 4

5. Postpaid traffic changes the last 12 month.
Illustration of a 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, Open Mobile Summit , November 2 nd 2011, San Francisco. 5

6. Prepaid getting in on the mobile data feast…
Illustration of a European Market
-20% MO-SMS
MBoU doubled
-10% MO-MoU
-15% ARPU
Last 12 month
Dr. Kim Kyllesbech Larsen, Open Mobile Summit , November 2 nd 2011, San Francisco. 6

7. The mobile business model could breakdown within a
few years with mounting cash and demand pressure.
Mobile Profit & Loss - Today Mobile Profit & Loss - Tomorrow
Total Revenue ↓ 70% of Total Revenue Today
− Usage Cost (Voice dominated 10% - 20%)
Reduce
− Market Invest SAC & SRC (ca. 20%) Cost
− Personnel Cost (<20%) with
New business, operation
− Technology Cost (15% - – 20%)
Technology Cost (ca. 15% 20%) ↑ and cooperation models 30%!
− Other Cost (5% - 10%)
↓ Maintain Today’s EBITDA of ca. 37%
=
= EBITDA (WEU ca. 37% 1)
De-risk the mobile business model
− Network depreciation (ca. <20% of Revenue)
− Spectrum Amortization ↑ New revenue sources.
New cost reduction strategies.
− Capex (ca. 7% to 15% of Revenue) ↑ New partnership models.
1 BoA ML Global Wireless Matrix 1Q11, margin data for 4Q 2010.
Dr. Kim Kyllesbech Larsen, Open Mobile Summit , November 2 nd 2011, San Francisco. 7

8. 3G Growth …will continue … for some time
growth …will continue
and eventually decline as subs convert to LTE.
Illustration of a European Market
with ca. 50+% prepaid base.
Total 3G Data Traffic1
CAGR 45% @ 2012 - 2017
GSM 3G Conversion
3G
Prepaid 3G LTE
CAGR 75% Conversion
@ 2006 - 2011
3G
Contract
2006 2017 2025
1 Note: Due to the complex dynamics of technology migration and dependency on operator policy the phase-off of 3G is highly uncertain.
Dr. Kim Kyllesbech Larsen, Open Mobile Summit , November 2 nd 2011, San Francisco. 8

9. Total growth … another leap with LTE.
Illustration of a European Market
LTE introduction 2013 earliest.
CAGR 52% @ 2020 - 2025
Total Data Traffic
by 2025
3G LTE Conversion 500+ 2015 traffic
@ 100% LTE share
LTE CAGR 84%
@ 2013 - 2018
LTE 2 3G Traffic
@ 30% LTE share LTE
2012 2018 2025
Dr. Kim Kyllesbech Larsen, Open Mobile Summit , November 2 nd 2011, San Francisco. 9

10. When data demand exceeds spectral efficiency gains.
”Houston we have problem”.
Illustration of a 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 antennas2
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, 2 Note: smart antennas included DAS based solutions.
Dr. Kim Kyllesbech Larsen, Open Mobile Summit , November 2 nd 2011, San Francisco. 10

11. How to uplift the mobile data business case.
Demand for new revenue, partnerships & collaboration models.
Economics of mobile data Structural off-loading1
Illustration of a 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
Business Femtos 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, Open Mobile Summit , November 2 nd 2011, San Francisco. 11

12. Mobile revenue opportunities (worldwide) by 2015.
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)/
Dr. Kim Kyllesbech Larsen, Open Mobile Summit , November 2 nd 2011, San Francisco. 12

13. Vision - network aware mobile apps (1 of 2).
Optimized service delivery – macro-level.
Primary indoor usage → off-load possibilities
Traffic Profile
What can be learned?
30+% in-fill possibility.
Cognisant network required.
data
Optimized service delivery
Network friendly apps.
Cloud-Device optimization.
voice
E2E SON.
Off-busy-hour In-fill delivery
Dr. Kim Kyllesbech Larsen, Open Mobile Summit , November 2 nd 2011, San Francisco. 13

14. Vision - network aware mobile apps (2 of 2).
Collaboration across network, device and apps.
E.g., Synched
Capacity limit notification
E.g., Ad-hoc
Optimized route
Average
load
BH time frame (sec by sec)
Self-Optimized & Cognisant Network
Dr. Kim Kyllesbech Larsen, Open Mobile Summit , November 2 nd 2011, San Francisco. 14

15. Decreasing margins & increasing cash pressure
forces network consolidation & new partnerships.
Sharing logic Economics
LTE HSPA+ HSPA UMTS + GSM (→LTE)
Total Opex
Rollout Steady State Modernization 100%
<5 years in 5 years > 5+ years
Cluster Opex
Rollout 40%
Significant Capex prevention. Technology
Substantial Opex prevention.
Network 10%
Bets 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, Open Mobile Summit , November 2 nd 2011, San Francisco. 15

16. What we need to be passionate about.
How to spend it
Internet of Things
Monetize social media
How to earn it back
Transform
Business Model Monetize (non-linear) TV
Kim Kyllesbech Larsen, Mobile Open Summit 2011, June 8th, 2011, London, UK. 16

17. The key value proposition of a mobile network is ....
Freedom
& Mobility
Acknowledgement: I am indebted to Xi Bin, Dejan Radosavljevik and Veli– Contact: kim.larsen@t-mobile.nl
Pekka Kroger, as to the rest of my Technology Economics Team, for being
patient with my data requests, and for their great suggestions in creating and
Mobile: +31 6 2409 5202
improving this presentation. http://nl.linkedin.com/in/kimklarsen