UMTS

Forum

Realistically Forecasting 3G Users

and Revenues

Paola Tonelli
UMTS Forum Operators’ Group
Chairperson

UMTS 2001, Barcelona, 17 October, 2001

DRAFT
© UMTS 2001 www.umts
www.umts--forum.org
The UMTS Forum has just updated
3G demand forecasts UMTS
Forum

To account for recent dramatic changes…

!General worldwide economic downturn

! Telecom sector-specific downturn
!Delays in delivery of new technologies
!Delays in operator trials and launch dates

Some baseline assumptions were changed from the April

analysis based on market evidence and fact-based
rationale only
© UMTS 2001 2
Original assumptions
UMTS
Forum
! Growth in 3G subscribers validated against other forecasts by
reputed analysts
! Worldwide 3G service subscriptions determined using adoption
rates, based on percentage of mobile subscribers with access to 3G
systems
! Service revenue forecasts determined from known willingness-to-pay
for analog services
! No additional operator-retained revenue included for those services
and applications users will expect as part of their future service
package
! Average worldwide pricing assumed
! Significant price declines assumed over the forecast period for each
service
! Country level service demand determined considering current mobile
penetration levels and other economic, social and regulatory factors
© UMTS 2001 3
Realistic forecast:
3G subscribers example UMTS
Forum
Worldwide
Worldwide 3G
3G Subscribers
Subscribers
2009
2009

1,500
1,500

1,000
1,000
(M)
Subscribers (M)
Subscribers

1,100
1,100

500
500

493
493

--
UMTS
UMTS Forum
Forum HSBC
HSBC *

Source: UMTS Forum and Telecompetition Inc., August 2001

© UMTS 2001 * Derived from HSBC Global Wireless, Q3 2001 4
Changes to assumptions UMTS
Forum

! 3G adoption rate lowered to account for

! Slower start-up in early years
! More gradual ramp-up of countries new to 3G in later
years
! Network availability dates moved out
! Worldwide 3G services demand modified slightly to
reflect technical and market complexity to offer some
of the services
! Video component within Rich Voice and Multimedia
Messaging
! Market for Location-Based Services reduced slightly
© UMTS 2001 5
New results for 3G demand UMTS
Forum
! Worldwide 3G subscribers in 2010 will be 28% of all mobile subscribers
! $320.5B in revenues in 2010 (down from $322 billion)
! Cumulative revenues of about $1T from 2002 until 2010 (down less than
1%)
! In 2010 the average 3G subscriber will generate about $30 per month
on 3G data services
! Non-voice service revenues will dominate voice revenues by 2004 and
comprise 66% of 3G service revenues by 2010
! Asia Pacific represents the single largest total revenue opportunity —
approaching $120B in 2010
! Europe and North America will provide the highest annual revenue per
POP.

The key change is the slower uptake in early years, due to

supply constraints, but the pent-up demand is still there!

© UMTS 2001 6
The 3G advantage UMTS
Forum

! Even though 3G services will be an evolution of

current services, users’ perception will change
! Always-on
! Personalised
! Location aware
! Real-time and flexible
! Easier, better and faster

Users will see a radical and fundamental change

in the way they experience services

© UMTS 2001 7
The 3G advantage (2) UMTS
Forum
This is because 3G will take full advantage of IP solutions and
higher network capacity
! IP transport in access and core networks
! Separation of control and transport functionalities
! QoS mechanisms and architectures
! IP Multimedia Subsystem (IMS) to enable provision of IP multimedia
services to mobile devices
The users will see
! Greater range of enriched multimedia services
! Fixed Internet services will be easily and quickly adapted to mobile
! Higher data rates for a greater number of users
! Lower costs in the long term because of network efficiencies

© UMTS 2001 8
Service categories UMTS
Forum
INFORMATION AND CONTENT (Non-Voice) VOICE

CONTENT MOBILITY
CONNECTIVITY
(Internet)
PEOPLE
PERSONAL LOCATION
CONNECTIVITY

Direct Link Always on, Knowledge

to a Person IP-
IP-based of Location

Mobile Rich
Mobile Multimedia Location
Intranet/ Customised Voice and
Internet Messaging -based
Extranet Infotainment Simple
Access Service Services
Access Voice

Source: Telecompetition,Inc
Telecompetition,Inc August 2000

© UMTS 2001 9
 Business models UMTS
Forum
Information and content
Voice
(non-voice)

CONTENT CONNECTIVITY
MOBILITY
(Internet)

Rich
Mobile Multimedia
Mobile Location-
Location- Voice
Intranet/ Customised Messaging
Internet Based and
Extranet Infotainment Service
Access Services Simple
Access (MMS)
Voice

Portal
Access Focused Approach Focused Mobile Specialised Services
Approach

Source: Telecompetition,Inc
Telecompetition,Inc August 2000

© UMTS 2001 10
Long-term revenue growth to 2010 UMTS
Forum
Worldwide
Worldwide Revenues
Revenues -- All
All Services
Services

$350,000
$350,000
$350,000
Simple
SimpleVoice
Simple Voice
Voice
Rich
Rich Voice
Rich Voice
Voice
$300,000
$300,000
$300,000
Location-Based
Location-BasedServices
Location-Based Services
Services
Mobile
MobileInternet
Mobile InternetAccess
Internet Access
Access
($M)
Revenues ($M)

$250,000
$250,000 Multimedia
$250,000 MultimediaMessaging
Multimedia MessagingService
Messaging Service
Service
Mobile
MobileIntranet/Extranet
Mobile Intranet/ExtranetAccess
Intranet/Extranet Access
Access
Service Revenues

$200,000
$200,000 Customised
CustomisedInfotainment
Customised Infotainment
Infotainment
$200,000

$150,000
$150,000
$150,000
Service
Service

$100,000
$100,000
$100,000

$50,000
$50,000
$50,000

$-
$-
$-
2001
2001
2001 2002
2002
2002 2003
2003
2003 2004
2004
2004 2005
2005
2005 2006
2006
2006 2007
2007
2007 2008
2008
2008 2009
2009
2009 2010
2010
2010

© UMTS 2001 Source: UMTS Forum and Telecompetition Inc., August 2001 11
Long-term revenue opportunities for
operators UMTS
Forum

!Customised Infotainment will be the largest

revenue opportunity for the consumer segment
!Mobile Intranet/Extranet Access is the largest
revenue opportunity for the corporate sector
!MMS is the second largest revenue opportunity
for the business sector:
! Managed corporate services will serve to retain
customers, but will not be a significant revenue
stream
! Location-based services may not be a significant
revenue opportunity for operators
© UMTS 2001 12
Long-term revenue opportunities for
operators (cont'd) UMTS
Forum

!For both sectors "simple" voice will remain a vital

component of operators’ service portfolio:

! In 2010 subscribers using a 3G device will

generate almost $88B revenues from simple voice
services, compared to $233B for all other services

!From now to 2010 3G services will generate

around one trillion dollars of additional revenue for
operators alone

© UMTS 2001 13
Revenues by segment UMTS
Forum
Worldwide 3G Revenues - Consumer and Business
(excluding Simple Voice)
$250,000

$200,000
Revenues ($M)

Business
$150,000

Consumer

$100,000

$50,000

$0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: UMTS Forum and Telecompetition Inc., August 2001
© UMTS 2001 14
Revenues: data and voice
UMTS
Forum
Worldwide
Worldwide 3G
3G Revenues
Revenues -- Data
Data and
and Voice
Voice
(including
(including Simple
Simple Voice)
Voice)

$350,000
$350,000

$300,000
$300,000

$250,000
$250,000
($M)
Revenues ($M)

Data
Data
$200,000
$200,000 Voice
Voice
Revenues

$150,000
$150,000

$100,000
$100,000

$50,000
$50,000

$0
$0
2001
2001 2002
2002 2003
2003 2004
2004 2005
2005 2006
2006 2007
2007 2008
2008 2009
2009 2010
2010

Source: UMTS Forum and Telecompetition Inc., August 2001

© UMTS 2001 15
Revenues by revenue type UMTS
Forum
Worldwide
Worldwide 3G
3G Revenues
Revenues by
by Revenue
Revenue Type
Type

$250,000
$250,000

$200,000
$200,000
Messages,
Messages, Airtime,
Airtime, and
and Subscriptions
Subscriptions
Advertising
Advertising
($M)
Revenues ($M)

$150,000
$150,000 Transactions
Transactions
Revenues

$100,000
$100,000

$50,000
$50,000

$0
$0
2001
2001 2002
2002 2003
2003 2004
2004 2005
2005 2006
2006 2007
2007 2008
2008 2009
2009 2010
2010
Includes
Includes Operator
Operator Retained
Retained Revenue
Revenue Only.
Only.
Source: UMTS Forum and Telecompetition Inc., August 2001
© UMTS 2001 16
Revenue comparison by service by
region — 2010 UMTS
Forum

$50,000
$50,000

$40,000
$40,000
($M)
Revenue ($M)
Services Revenue

$30,000
$30,000

$20,000
$20,000
Services

$10,000
$10,000

$0
$0
Asia
Asia Pacific
Pacific Europe
Europe North
North America
America Rest
Rest of
of World
World
Customised
Customised Infotainment
Infotainment $42,636
$42,636 $29,256
$29,256 $5,994
$5,994 $7,894
$7,894
Mobile
Mobile Intranet/Extranet Access
Intranet/Extranet Access $16,778
$16,778 $17,175
$17,175 $20,950
$20,950 $5,759
$5,759
Consumer
Consumer MMSMMS $6,681
$6,681 $6,420
$6,420 $2,849
$2,849 $1,866
$1,866
Mobile
Mobile Internet
Internet Access
Access $3,509
$3,509 $4,008
$4,008 $4,219
$4,219 $2,418
$2,418
Business
Business MMS
MMS $8,170
$8,170 $8,344
$8,344 $4,434
$4,434 $2,789
$2,789
Location-Based
Location-Based Services
Services $2,336
$2,336 $3,252
$3,252 $3,659
$3,659 $372
$372
Rich
Rich Voice
Voice $4,802
$4,802 $7,134
$7,134 $8,011
$8,011 $886
$886
Simple
Simple Voice
Voice $33,628
$33,628 $27,386
$27,386 $17,977
$17,977 $8,851
$8,851

Source: UMTS Forum and Telecompetition Inc., August 2001

© UMTS 2001 17
ARPU trends UMTS
Forum

!The introduction of new services on 2G networks is

beginning to contribute to ARPU stabilisation by

! Gaining new customers

! Generating incremental revenue growth
! Providing additional revenue “lift”

!The introduction of 3G will accelerate this trend

! Voice minutes will continue migrating from fixed to mobile
! Non-voice services will provide the long-term growth
! Complemented by alternative technologies

© UMTS 2001 18
Impact of 3G on ARPU levels UMTS
3G Deployment Scenario Analysis Forum
(3G share of global mobile subscribers)
$40
Worldwide ARPU per Month ($)

70% 3G share

50% 3G share

$20 28% 3G share

(Report Forecast)

Voice Only - no 3G
(All Cellular)

$0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Source: UMTS Forum and Telecompetition Inc., August 2001

© UMTS 2001 19
3G incremental revenues UMTS
Forum
3G
3G Revenue
Revenue per
per 3G
3G Subscriber
Subscriber
(excludes
(excludes Simple
Simple Voice)
Voice)
$60
$60
Month)
per Month)

$45
$45 $44
$44
$39
$39
$40 $39
$39
$40
($ per

$34
$34
$32
$32 $32
$32 $32
$32 $31
$31
Revenues ($
Revenues

$20
$20

$0
$0
2002
2002 2003
2003 2004
2004 2005
2005 2006
2006 2007
2007 2008
2008 2009
2009 2010
2010

Source: UMTS Forum and Telecompetition Inc., August 2001

© UMTS 2001 20
Challenges for 3G operators UMTS
Forum

! New business models

! The business models which operators and their partners choose
will have a high impact on operator retained revenue streams
! Business models may vary by service
! New operator roles
! Shift from a simple voice-only, direct relationship with the user to
an increasingly complex one
! A portfolio of services
! Multiple partners and revenue sharing
! Increased competition with third parties also targeting the end-user
! Shift to becoming a system integrator
! Coordination of the complete value chain

© UMTS 2001 21
Challenges for 3G operators (2) UMTS
Forum

!Integration of Internet and mobile

! At the device level

! At the service level
! At the transport level

Bringing together two different worlds to come up with

services that the users will want to pay for!

© UMTS 2001 22
 Business models UMTS
Forum
Information and content
Voice
(non-voice)

CONTENT CONNECTIVITY
MOBILITY
(Internet)

Rich
Mobile Multimedia
Mobile Location-
Location- Voice
Intranet/ Customised Messaging
Internet Based and
Extranet Infotainment Service
Access Services Simple
Access (MMS)
Voice

Portal
Access Focused Approach Focused Mobile Specialised Services
Approach

Source: Telecompetition,Inc
Telecompetition,Inc August 2000

© UMTS 2001 23
Business Models: Example 1 UMTS
Forum
Mobile intranet/extranet access

Corporate Billing for

portals Network Security Firewall air time

• ISPs
User Profile
•Roaming
ISP or partners
Subscriber
corporate
profiles
profile • Fixed line
operators
Business
segment
Opportunities for
Connectivity
new services

Customers 3G operators 3rd parties

Business model: Access focused approach

Sources: The UMTS Forum and Telecompetition Inc., September 2000

© UMTS 2001 24
Business Models: Example 2 UMTS
Forum
Customized infotainment

Affinity partner
or supplier • ISPs

Mobile • Banks
User Profile
Consumer portal
segment • Entertainment
Billing for
service • Etc.

Customer
profile Mobile
content
portal
Revenue sharing

Customers 3G operators 3rd parties

Business model: Portal focused approach

Sources: The UMTS Forum and Telecompetition Inc., September 2000

© UMTS 2001 25
Conclusions UMTS
Forum
! Prospects for 3G are very encouraging
! Supply and technology constraints will only slow down the uptake in the
early years
! The demand is still there
! Over the long term, only 3G will be able to generate a mass
market for multimedia services
! Simple voice will remain a key source of revenue
! 3G data services will provide additional revenue “lift” and
incremental revenue growth
! 3G will generate significant long-term revenue opportunities for
operators as well as for other players in the value chain
! The biggest challenges will be
! Shift from a one-service mind-set to a portfolio of services, new business
models, multiple partnerships and complex relationships
! Integration of Internet and mobile.

© UMTS 2001 26
 UMTS
Forum

The UMTS Forum has presented

a realistic forecast
of 3G users and revenues

DRAFT
© UMTS 2001 www.umts
www.umts--forum.org