WCDMA Base Station: Embracing the New Generation

Analyst: Frances Guan In-Stat February 2007

Table of Contents
Executive Summary........................................................................................................ 3 Methodology.................................................................................................................... 3 Definition of the New Generation WCDMA Base Station ............................................. 4 Introduction ..................................................................................................................... 4 Development of WCDMA Market.................................................................................... 4 Worldwide WCDMA Network Deployment ................................................................. 5 Worldwide WCDMA Subscriber ................................................................................. 5 Contract Award of WCDMA Network.......................................................................... 6 Global Deployment of WCDMA Base Station ............................................................... 7 WCDMA Base Station Deployment Overview ............................................................ 7 Geographic Distribution of WCDMA Base Station...................................................... 9 What is the New Generation WCDMA Base Station ................................................... 14 Evolution of WCDMA Base Station .......................................................................... 14 Features of the New Generation WCDMA Base Station .......................................... 15 Benefits for Operators by the New Generation WCDMA Base Station..................... 17 Future Evolution of the New Generation WCDMA Base Station .............................. 19 Main Suppliers of the New Generation WCDMA Base Station .................................. 20 Vendors and Their products ..................................................................................... 20 Market Share of WCDMA Market by Contract Award............................................... 23 Main Operators Who Have Adopted the New Generation WCDMA Base Station .... 25 Main Operators ........................................................................................................ 25 Business Case ......................................................................................................... 26 Conclusion .................................................................................................................... 28

Executive Summary
Intensive competitions, stagnant revenue growth and enormous investments to the network bring operators many risks. So the challenges in front of operators are how to catch subscriber by more attractive services and how to cut down the cost. Now operators are realizing that a network with better performance and reduced operational cost is more and more crucial. Since the beginning of 2006, operators are committed to upgrading their network. 3G deployment will enter into a fast growing phase. Among the 3G technologies, WCDMA has a faster development: there are 139 WCDMA networks and over 300 thousands WCDMA base stations were deployed worldwide. Now most WCDMA operators are upgrading their network to HSDPA. Where is the demand, where is the driver to innovate. With limited performance, the first generation WCDMA base station launched around 2001, can no longer satisfy operators requirements. To meet these requirements of operators, many WCDMA system suppliers, such as Huawei, Ericsson, Nokia, etc. have launched their new generation WCDMA base station products since 2005. Featured with efficient integrated digital power amplifier, multi-carrier TRX, High-performance HSPA, open architecture, multi-band and IP transmission, the new generation WCDMA base station can bring benefits of large capacity and coverage, smoothing upgrading and CAPEX/OPEX cut down to operators. These new products are winning the acceptance of the industry. By far, the new generation WCDMA base station has been adopted in 74 contracts worldwide. From the aspect of technology evolution, a new generation base station product will be released in 3 to 5 years. Since the first launch of WCDMA network in 2001, now its base station product is embracing a new era: the era of the new generation WCDMA base station.

Methodology
This report was produced using primary and secondary data from a number of known reliable sources. Equipment manufacturers and wireless carriers have participated in the generation of the data presented in this report during face-to-face and phone interviews. Information from company annual reports, company web sites, as well as other publicly
3

available material, was used as well, only when this information was deemed to be from a reliable source.

Definition of the New Generation WCDMA Base Station

System vendors have their own roadmaps on the development of their WCDMA base station products. By learning their understanding on the technology evolution, this report defines that the new generation WCDMA base station has technology improvements featured with efficient integrated digital power amplifier, multi-carrier TRX, High-performance HSPA, open architecture, multi-band, and IP transmission.

Introduction
Since the first launch of UMTS in Japan in 2001 by NTT Docomo, services such as mobile TV, video streaming and mobile email are commonplace and the public awareness of 3G network has got great progress. The challenge facing the mobile telecommunication industry today is how to improve the end-user experience by appealing services through a series of technology innovation. On one hand, operators are committed to meeting the demand by developing attractive services through upgrading their networks, 2G to 3G, for example; on the other hand, operators are concerned their investment on network construction and operation. Generally, expenditure on base station takes about 30% to 40% of total cost in network construction, so base stations with high-performance and reduced CAPEX (cost of capital) and OPEX (cost of operation) are crucial in the deployment of network. In GSM system, new generation GSM base station with improved performance has been released every 4 or 5 years, since the first commercial system was released in Europe in 1991. Similarly, the first generation WCDMA base station, released in 2001, can not meet the requirement of higher performance with low cost. At present, the mainstream vendors of the industry are delivering the new generation WCDMA base station gradually. Therefore, after 2005, the revolution of WCDMA RAN (Radio Access Network), including base station, is coming.

Development of WCDMA Market

Cellular operators are taking effort to roll out 3G systems. While among 3G mobile technologies, WCDMA is the most popular and used widely in Europe, Asia Pacific, Africa Middle East and North America.
4

Worldwide WCDMA Network Deployment

As shown in Table 1 and Figure 1, there are 139 WCDMA systems deployed worldwide so far, making up 70% 3G deployment, with 121 commercial and 18 non commercial networks. While 62 CDMA2000 1X EV-DO systems were deployed in the last several years, with 57 commercial and 5 non commercial networks. In 2005, 35 new WCDMA systems were deployed, as well as 7 new CDMA2000 1X EV-DO systems. In terms of the number of deployments, WCDMA has a large advantage, but most carriers with WCDMA deployments are now in the process of upgrading them to HSDPA.
Table 1 Worldwide 3G Deployment per Technology and Commercialization
Africa 3 2 5 0 10 Western Europe 1 0 60 4 65 Eastern Europe 6 0 24 6 36 North America 16 0 1 1 18 South America 17 0 0 0 17 Middle East 1 0 5 2 8 Asia Pacific 13 3 26 5 47 Total 57 5 121 18 201 139 201 Total

Regions CDMA2000 1xEV-DO CDMA2000 1xEV-DO - Not Commencial WCDMA WCDMA- Not Commencial Total Source: In-Stat, 02/07

62

Figure 1

Worldwide 3G Deployment per Technology and Commercialization

WCDMANot Commencial 9%

CDMA2000 1xEV-DO 28%

WCDMA 61%

CDMA2000 1xEV-DO Not Commencial 2%

Source: In-Stat, 02/07

Worldwide WCDMA Subscriber

WCDMA subscribers make up the largest group of 3G subscribers. By 2011, In-Stat believes that WCDMA subscribers will grow to near 500 million, with a CAGR of 26.3% from 2007 to 2011 (Table 2 and Figure 2).
Table 2. WCDMA Subscriber (In Thousand)

Estimated 2005 2006 Subscriber 44,400 100,610 Growth rate 126.6% Source: In-Stat, 02/07

1000

2007 195,486 94.3%

2008 273,485 39.9%

Forecast 2009 376,315 37.6%

2010 434,268 15.4%

2011 498,105 14.7%

2006 - 2011 CAGR 26.3%

Figure 2.

WCDMA Subscriber (2005-2011)

In thousand 600,000 500,000 400,000 300,000 60% 200,000 100,000 0 2005 2006 2007 2008 2009 2010 2011 Subscriber Growth rate 40% 20% 0%

140% 120% 100% 80%

Source: In-Stat, 02/07

Contract Award of WCDMA Network

The trend in cellular infrastructure contract awards is a good indicator of cellular equipment demand and cellular handset demand. When cellular service providers are awarding new contracts to equipment makers, this is an indication that the cellular provider is either updating its equipment, expanding its coverage and/or capacity, or all of the above. Figure 3 indicates that 63 WCDMA contracts were awarded in 2005 with a growth rate of 31.3% compared with that of 2004. By 2006, the contract awards reaches to 137, this is more than the total number of 2004 and 2005.
Figure 3. Global WCDMA Contract Award

160 140 120 100 80 60 40 20 0

137

63 48

2004
Source: In-Stat, 02/07

2005

2006

Global Deployment of WCDMA Base Station

WCDMA Base Station Deployment Overview
It is clear that the majority of base stations deployed were GSM. It is not surprising since GSM had the most worldwide subscribers in worldwide. With 3G networks spreading in worldwide, CDMA and WCDMA base station were strongly required. While WCDMA shows a faster growth. From 2006 to 2011, WCDMA base station grows at the CAGR of 17.4% (Table 3).
Table 3. Worldwide Total Deployed Base Station and Forecast (Units)
Deployed Base Stations 2005 2006 2007 2008 Units 200,054 220,083 238,406 247,826 CDMA 10.0% 8.3% 4.0% y/y growth 1,018,287 1,088,306 1,137,507 1,163,048 GSM 6.9% 4.5% 2.2% y/y growth 59,898 55,860 51,029 46,597 PDC -6.7% -8.6% -8.7% y/y growth 231,287 302,762 389,808 491,128 WCDMA 30.9% 28.8% 26.0% y/y growth Total 1,509,526 1,667,011 1,816,751 1,948,599 y/y growth 10.1% 10.4% 9.0% 7.3%
Source: In-Stat, 02/07

2009
254,328 2.6% 1,216,036 4.6% 42,530 -8.7% 562,574 14.5%

2010
258,146 1.5% 1,246,016 2.5% 41,296 -2.9% 620,404 10.3%

2011
261,288 1.2% 1,251,914 0.5% 41,315 0.0% 676,499 9.0%

'06 - '11 CAGR

3.5% 2.8% -5.9% 17.4%

2,075,468 2,165,862 2,231,015 6.5% 4.4% 3.0%

8.1%

Figure 4.

Worldwide Total Deployed Base Station per Technology (Units)

Base Stations 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 2005 2006 2007 2008 2009 2010 2011

CDMA

GSM

PDC

WCDMA

Source: In-Stat, 02/07

WCDMA has run the full gamut, from wild hype and excessive license fees to disappointment and failure. Currently the expectations for the technology have approached more realistic levels than that of any emerging technology with a solid future. Without a doubt, WCDMA is growing faster than any technology before it, so it shouldnt come as a surprise that demand for WCDMA infrastructure will increase in the future. In-Stat believes that a greater number of base stations will be required to meet wireless data coverage expectations than originally anticipated. Due to WCDMA is used in different brands in different countries, many more base stations are required at either the 1.8 GHz and 900 MHz bands. Another factor that is leading to increased demand for WCDMA infrastructure is the increasing use of wireless data services, because WCDMA can offer faster data speeds than EDGE and sometimes at a lower price. Both O2 in the UK and NTT DoCoMo are reporting that they get more than 25% of their ARPU from data portion of their WCDMA subscribers bills with faster growth than that from voice services. This increased data ARPU translates into increased WCDMA capacity required, which means more cellular base stations required. Table 4 shows a stable incremental demand for WCDMA base station.
Table 4. Worldwide New Deployed Base Station per Technology (Units)
New Deployed Base Stations 2005 Units 20,758 CDMA y/y growth 91,286 GSM y/y growth 26 PDC y/y growth 67,036 WCDMA y/y growth Total 179,105 y/y growth
Source: In-Stat, 02/07

2006
27,321 31.6% 98,251 7.6% 27 5.1% 66,877 -0.2%

2007
25,797 -5.6% 80,367 -18.2% 21 -22.3% 83,145 24.3%

2008
19,531 -24.3% 69,555 -13.5% 5 -77.7% 99,311 19.4%

2009
17,148 -12.2% 61,701 -11.3% 0 -100.0% 76,608 -22.9%

2010
13,194 -23.1% 51,609 -16.4% 0 68,067 -11.1%

2011
11,856 -10.1% 45,309 -12.2% 0 71,526 5.1%

'06 - '11 CAGR

-15.4% -14.3% -100.0% 1.4%

192,476 7.5%

189,330 -1.6%

188,402 -0.5%

155,457 -17.5%

132,870 -14.5%

128,691 -3.1%

-7.7%

Figure 5.

Worldwide New Deployed Base Station per Technology (Units)

Base Stations 200,000 150,000 100,000 50,000 0 2005 2006 2007 2008 2009 2010 2011

CDMA

GSM

PDC

WCDMA

Source: In-Stat, 02/07

Geographic Distribution of WCDMA Base Station

Over view
Europe remains to be the largest WCDMA market. Figure 6 shows that In 2005 Europe made up 50% deployed WCDMA base stations, followed by Japan 30%. But Asia will witness a fast growth of WCDMA base station deployment. As indicated in Figure 7, after 2008 incredible grown in Asia will like cause the number of WCDMA base stations there to exceed those in Western Europe.
Figure 6. Geographic Distribution of WCDMA Base Station Deployment 2005
Asia (excluding Japan) 8%

ROW 4%

North America 8%

Japan 30%

Europe 50%

Source: In-Stat, 02/07

Figure 7.

Geographic Distribution of WCDMA Base Station Deployment 2011

ROW 10% Asia (excluding Japan) 30%

North America 10%

Europe 33% Japan 17%

Source: In-Stat, 02/07

Asia, North America and Europe went ahead of other regions in terms of WCDMA infrastructure deployment in 2005, presenting near 94% (Figure 8) of new WCDMA base station deployment. While at 2011, there is a break of WCDMA infrastructure deployment in Japan and North America, for the operators will be fully using the network by launching various mobile applications and waiting for the demand following up. But 2011 sees the widely spread of WCDMA infrastructure in Asia, which takes 54% (Figure 9) in new WCDMA base station deployment.
Figure 8. Geographic Distribution of New Deployment of WCDMA Base Station 2005

Asia (excluding Japan) 26%

ROW 6%

North America 23%

Source: In-Stat, 02/07

Japan 20%

Europe 25%

Figure 9.

Geographic Distribution of New Deployment of WCDMA Base Station 2011

10

ROW 11%

North America 6%

Europe 20%

Asia (excluding Japan) 54%

Japan 9%

Source: In-Stat, 02/07

North America
WCDMA is the fastest growing technology in terms of total macro base station deployment. This shouldnt be surprising, because before 2004, none of these base stations existed in the Americas. It is anticipated that most of the growth will occur in 2006 and 2007 since Cingular deployed a token number of WCDMA base stations in 2004.
Table 5. Total North America Base Station Deployment (Units)
Deployed Base Stations 2005 Units 83,140 CDMA 96,375 GSM 0 PDC 17,594 WCDMA Total 197,109
Source: In-Stat, 02/07

2006
84,734 97,206 0 31,213

2007
85,370 96,100 0 43,216

2008
83,800 96,489 0 51,451

2009
81,734 97,620 0 57,516

2010
79,488 95,481 0 61,945

2011
77,091 95,664 0 65,472

'06 - '11 CAGR

-1.9% -0.3% n/a 16.0%

213,153

224,686

231,739

236,870

236,914

238,227

2.2%

Figure 10.

Total North America Base Station Deployment (Units)

Base Stations
250,000 200,000 150,000 100,000 50,000 0 2005 2006 2007 2008 2009 2010 2011

CDMA

GSM

PDC

WCDMA

Source: In-Stat, 02/07

11

Europe
Western Europe is the real home of WCDMA, and this region is expected to have the largest number of WCDMA base stations deployed until 2008. Eastern European deployments are similar to those in Western Europe, although the transition to WCDMA is still much an unknown.
Table 6 Total Europe Base Station Deployment (Units)
2006
2,468 469,827 0 137,587

Deployed Base Stations 2005 Units 2,030 CDMA 458,065 GSM 0 PDC 116,026 WCDMA Total 576,120
Source: In-Stat, 02/07

2007
4,187 486,556 0 160,128

2008
6,034 492,352 0 187,874

2009
6,751 513,767 0 206,052

2010
7,626 521,380 0 217,579

2011
8,661 514,839 0 228,091

'06 - '11 CAGR

28.5% 1.8% n/a 10.6%

609,882

650,871

686,260

726,570

746,585

751,592

4.3%

Figure 11 Total Europe Base Station Deployment (Units)

Base Stations
800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 2005 2006 2007 2008 2009 2010 2011

CDMA

GSM

PDC

WCDMA

Source: In-Stat, 02/07

Japan
Japan has always been a unique market when it comes to cellular technology, in that PDC is deployed in Japan but nowhere else in the world. Japans PDC network was very overloaded, so when WCDMA came along, it was a natural transition from the PDC network. In a short period of time, Japan has gained more WCDMA subscribers than every where else in the world combined, and the rate of adoption continues to grow.
Table 7. Total Japan Base Station Deployment (Units)

12

Deployed Base Stations 2005 Units 22,042 CDMA 0 GSM 58,620 PDC 70,047 WCDMA Total 150,710
Source: In-Stat, 02/07

2006
26,315 0 54,544 78,411

2007
32,117 0 49,656 89,707

2008
34,846 0 45,191 97,999

2009
37,844 0 41,124 107,001

2010
38,708 0 39,890 112,332

2011
38,708 0 39,889 112,332

'06 - '11 CAGR

8.0% n/a -6.1% 7.5%

159,270

171,479

178,037

185,969

190,931

190,929

3.7%

Figure 12.

Total Japan Base Station Deployment (Units)

Base Stations
200,000 150,000 100,000 50,000 0 2005 2006 2007 2008 2009 2010 2011

CDMA

GSM

PDC

WCDMA

Source: In-Stat, 02/07

Asia (Excluding Japan)

Asia, excluding Japan but including China, has experienced a huge amount of growth in these last few years, but even in China, the growth has slowed. WCDMA has taken hold in China, but the battle for 3G in China continues. China has not to give out 3G licenses, although the cellular operators continue to trial 3G technology, including CDMA2000 and WCDMA, and many use these technologies, even if not licensed.
Table 8. Total Asia (excluding Japan) Base Station Deployment (Units)
Deployed Base Stations 2005 Units 53,973 CDMA 316,917 GSM 0 PDC 17,598 WCDMA Total 388,488
Source: In-Stat, 02/07

2006
63,215 339,663 0 34,084

2007
69,757 345,881 0 61,105

2008
73,949 346,794 0 107,505

2009
75,990 358,056 0 137,718

2010
77,488 365,027 0 167,182

2011
78,628 366,144 0 202,409

'06 - '11 CAGR

4.5% 1.5% n/a 42.8%

436,962

476,744

528,247

571,764

609,697

647,180

8.2%

Figure 13.

Total Asia (excluding Japan) Base Station Deployment (Units)

13

Base Stations 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 2005 2006 2007 2008 2009 2010 2011

CDMA

GSM

PDC

WCDMA

Source: In-Stat, 02/07

What is the New Generation WCDMA Base Station

Evolution of WCDMA Base Station
The first generation WCDMA base station was released in 2001, which is based on 3GPP R99/4 standard. It adopts independent analog linear power amplifier and narrowband transceiver, supports limited HSDPA performance and a proprietary interface between baseband unit and radio unit. In addition, in Americas, Japan, and Europe, other frequency bands besides 2.1GHz were also, adopted, such as 1.7GHz ,1.9 GHz 850 MHz, 900 MHz. While with the increasing concerns of operators on the cost and performance of base station and network quality and reliability, and different requirements to the frequency band, the conventional WCDMA base station can no longer satisfy operators requirements for better network performance. The launch of 3GPP R5/R6 standards has paced the road to the new generation WCDMA base station. CPRI (The organization of Common Public Radio Interface, initiated by Ericsson, Huawei, NEC, Nortel and Siemens) and OBSAI (The organization of Open Base Station Architecture Initiative, initiated by Nokia, LG and Samsung) also contributes to tech innovation. The technology breakthroughs drive the new generation WCDMA base station to come out: The adoption of new technologies improves the power amplifier efficiency up to 30% from 9%; the high-performance ASIC strengthens the processing ability of base band, which can realize high-performance HSPA. With these technologies, the new generation WCDMA base station will have advantages in smaller size, more efficient power amplifier, less power consumption, higher reliability, lower cost and smooth evolution. The new generation WCDMA base stations were used more and more widely. The new generation WCDMA base station made up 9.2% in the 1st half 2005. While by the 2st half
14

of 2006, the percentage of new generation WCDMA base station has reached to 60% (Table 9 and Figure 14), Table 9. Adoption of the New Generation WCDMA Base Station Unit
01/05-06/05 New Generation WCDMA Base Station Conventional WCDMA Base Station Source: In-Stat, 02/07 2,900 28,600 Share 9.2% 90.8% 07/05-12/05 6,700 28,800 Share 18.9% 81.1% 01/06-06/06 11,400 20,100 Share 36.2% 63.8% 07/06-12/06 21,200 14,300 Share 59.7% 40.0%

Figure 14.

Adoption of the New Generation WCDMA Base Station

100% 80% 60% 40% 20% 0% 01/05-06/05 07/05-12/05 01/06-06/06 07/06-12/06

Conventional WCDMA Base Station New Generation WCDMA Base Station

Source: In-Stat, 02/07

Features of the New Generation WCDMA Base Station

Efficient Integrated Digital Power Amplifier
New power amplifier technology, which is becoming more and more mature, brings power consumption savings, higher density, larger capacity and better stability. The adoption of DPD (Digital Pre-Distortion) coupled with Doherty technology improves the power amplifier efficiency up to over 30% from about 9%.

Multi-carrier TRX
Both network coverage and capacity should be taken into long-term consideration in 3G network construction. In the new generation WCDMA base station, each TRX supports two or more carriers, saving equipment cost greatly and facilitating future upgrades.

High-performance HSPA

15

Global 3G market is stepping into a fast development period. Subscribers' requirement for network performance is becoming higher and higher, thus operators begin to focus on the bit rate of wireless data service. The new generation WCDMA base station can support HSPA (High Speed Packet Access which realizes high speed downlink transmission with , HSDPA and uplink transmission with HSUPA, thus can support more subscriber access and provide high data rate services

Open Architecture
Distributed base station, a latest industrial focus, speeds up network deployment and saves construction cost greatly. Distributed base station accords with open architecture based on open CPRI or OBSAI standard, which standardize the interface between baseband unit and radio unit.

Multi-band
Besides the IMT-2000 core frequency bands, the new generation base station also supports other WCDMA frequency bands, including 1.7 GHz, 1.9 GHz, 850 MHz and 900 MHz. The open internal interfaces enable a rapid introduction of new frequencies.

IP transmission
The new generation WCDMA base station is also featured with IP transmission between RNC (Radio Network Controller) and base station. Compared with TDM, ATM, and MSTP, IP technology can help to reduce network cost for best-effort services, such as some data services.
Figure 15. Comparison between the New Generation WCDMA Base Station and Conventional WCDMA Base Station
Conventional Base Station
Standalone Analog Linear PA

New Generation Base Station

Integrated Digital PA

Single-carrier TRX

Multi-carrier TRX

Limited HSDPA Performance

High-Performance HSPA

Proprietary Architecture

Open Architecture

Single-band

Multi-band

Pure TDM/MTSP/ATM

IP Transmission

Source: In-Stat, 02/07

16

Benefits for Operators by the New Generation WCDMA Base Station

Operators usually evaluate the performance of base station from the aspects of coverage, capacity, future evolution and cost saving.

Coverage and capacity

The sector and carrier indexes usually present the performance of coverage and capacity of a base station product. The first generation base station usually support 31 TRXs three sectors and one carrier per sector, and then 32 TRXs. But the new generation products are more integrated, which can support 34 or 62 TRXs, even more, which expands the coverage and capacity greatly.

TCO (Total cost of ownership) saving Because of the costly investment of 3G network roll-out, reducing the TCO of network is a significant challenge for operators. Thus, to cut capital expenditure (CAPEX) and operational expenditure (OPEX) more and more becomes the main concern of an operator in both deployment and operation phases.
Figure 16. TCO Breakdown
TCO

CAPEX

OPEX

Purchasing Equipment

Deployment Site acquisition

Operation Operation

Maintenance Hardware & Software

Accessory Antenna

Installation & Commissioning Civil works Transportation

Site rental Leased line

Manpower

Source: In-Stat, 02/07

17

Figure 17.

CAPEX and OPEX Breakdown

Maintenance Operation Deployment Purchasing 0%

14% 13% 60%

13%

OPEX 73%

CAPEX 27%

20%

40%

60%

80%

100%

Source: In-Stat, 02/07

Equipment purchasing and network deployment make up the main part of CAPEX. Featured with smaller size, larger capacity and coverage, distributed base station, software expansion and upgrade, etc, the new generation WCDMA base station can help to reduce cost of sites acquisition, installation, civil works, transportation, etc. in the network deployment phase.
Figure 18. CAPEX Breakdown

Transportation 5% Civil works 30%

Equipment 20%

Accessory 20% Installation 10% Site acquisition 10% Antenna 5%

Source: In-Stat, 02/07

It is expected that OPEX makes up 70% in TCO. So operators more and more concern about the operational expenditure. By boosting the power amplifiers efficiency with advanced technologies from 10% to over 30%, the new generation WCDMA base station consumes much less power; integrated design enables less site space, which helps to cut down the site rental which is a long-term expenditure for operators; smaller size and light weight, and network expansion or upgrade by software download, dramatically cut .the operational cost; IP transmission can reduce the leased line; high reliability and remote upgrade by software download can also save the expenditure of maintenance.

18

Figure 19.

OPEX Breakdown

Manpower 5% Hardware & Software 10% Leased line 30% Operation 15%

Power consumption 10%

Site rental 30%

Source: In-Stat, 02/07

Note: The breakdown of CAPEX and OPEX will vary from network to network Future evolution
When deploying the network, operators always hope the network can support or can be upgraded smoothly to support future services. The key challenge for 3G operator is to attract the maximum number of subscribers as well as high-end subscribers by various 3G applications. The new generation WCDMA base station supports HSPA technology to boost downlink and uplink data speeds and capacity, which enables the delivery of multimedia services as well as enhanced differentiated services in the future, such as mobile TV, mobile HD VOD (Video on Demand), Internet access, video surveillance, etc., which can improve the user experience significantly. In addition, the new generation WCDMA base station will save TCO for operators: remote capacity provisioning by software licensing will expand base station capacity without costly site visit, allowing a smooth capacity expansion.

Future Evolution of the New Generation WCDMA Base Station

Further cut down power consumption In the future, technology innovation will help to reduce power consumption. It is said that in the future 50% power consumption of the new generation WCDMA base station will be cut down. All-IP network With the development of IP technology, services that require high-level QoS can be
19

carried on IP network. Thus IP transmission in RAN will substitute TDM, SDH and MSTP and serve for both data and voice services. In the future, the current hybrid IP solution will evolve to all-IP transmission. Modular The macro base station will realize fully modular in the future. All parts of the base station can be developed independently. Distributed base station is a case of module base station with independent RRU (Remote Radio Unit) and BBU (Base Band Unit). In the future, the RRU part of distributed base station will be smaller, which can be deployed more flexible. RRU can be set beside the antenna with much less RF (Radio Frequency) cables, which can reduce civil work, engineering cost and the loss of signal through the feeder, thus it is possible to enlarge the coverage then need more than 10% less base stations. MIMO & OFDM In the era of beyond 3G, MIMO (Multiple-Input Multiple-Output) and OFDM (Orthogonal Frequency Division Multiplexing) technologies will be used in the RAN. By these more advanced technologies, base station can support much higher transmission speed up to 100Mbit/s, larger capacity, better reliability as well as.

Main Suppliers of the New Generation WCDMA Base Station

Vendors and Their products
Huawei
Huawei launched the new generation WCDMA base station products firstly in February. 2005 with the new products of BTS3812E/3812A, BBU3806C, RRU3801C, BTS 3803C,, etc. Since the first adoption by STC (Saudi Telecom Company) in March 2005, its new generation WCDMA base station products have been adopted in 37 networks and used in Saudi Arabia, Portugal, Bulgaria, Poland, New Zealand, UAE, Indonesia, Hong Kong, Spain, Japan, etc. In November 2005, Huawei became one of the five approved UMTS suppliers of Vodafone Global Supply Chain. In August 2006, Vodafone selected Huawei to construct part of its UMTS/HSDPA commercial network in Spain. Huawei will deliver several thousands new generation WCDMA base stations to deploy the UMTS/HSDPA UTRAN network in certain key cities of Spain. In July 2006 Huawei was selected as 3G equipment provider to deploy Japan's first-ever All IP-based HSDPA radio access network
20

by eMobile and will support roll out of eMobiles nationwide UMTS/HSDPA network with its new generation WCDMA base station products. In Oct 2006, Huawei signed a WCDMA contract with Etisalat, and would supply over one thousand new base stations for it. This WCDMA network will be the largest and first IP-based HSDPA network in Middle East and North Africa. Huaweis innovative WCDMA base stations make it to become a leading WCDMA system vendor and lead the trend of the industry.

Ericsson
Ericsson formally announced its new generation WCDMA base stations to the public in Feb. 2006 with the products of RBS 3206, RBS 3303, RBS 3214/RBS 3518, etc. But the first large scale usage for these products is much earlier in the contract with Cingular in Nov. 2005. In the biding for Cingular WCDMA network in America, Ericsson won with its high performance new base station products and deployed thousands of new generation WCDMA base stations for Cingular. By far its new generation WCDMA base stations have been used in 28 networks in North America, Australia and Europe, etc. Ericsson is considered as the largest WCDMA system supplier in the world, but it is facing challenges in the intensive competitions. Other system vendors, such as Huawei, Nokia Siemens, Alcatel Lucent, etc. are catching up. For example, Huawei launched its new generation WCDMA base station products several months earlier and is very aggressive in terms of new markets breaking in; Nokia and Siemens also hope to domain this market by their combination.

Nokia
Nokia launched its new WCDMA base station product, Flexi, in Nov. 2005 and gained three contracts for Flexi in 2nd half of 2006: with TIM Hellas in Greece on Aug. 2006 (network expansion), with Vivatel in Bulgaria on Sept. 2006 new contracts.
Table 10 Public Announce and First Adoption for the New Generation WCDMA Base Station Products of Vendors
Company Huawei Ericsson Nokia
Source: In-Stat, 02/07

Public Announce of New Generation WCDMA Base Station Products 2005.02 2006.02 2005.11

First Adoption for New Generation WCDMA Base Station Products 2005.03 2005.11 2006.08

Figure 20.

Public Announce and First Adoption for the New Generation WCDMA Base Station Products of Vendors

21

Public Announce 1Q05 First Adoption 4Q05 1Q06 3Q06

Source: In-Stat, 02/07

Table 11.

Networks Adopt the New Generation WCDMA Base Station Products by 2006

Networks Adopt the New Generation Company WCDMA Base Station Products Huawei 37 Ericsson 28 Nokia 9 Total 74 Source: In-Stat, 02/07

Market Share 50.0% 37.8% 12.2% 100.0%

Figure 21.

Market Share of Vendors by Networks Adopt the New Generation WCDMA Base Station Products by 2006
Nokia, 12.2%

Ericsson, 37.8%

Huawei, 50.0%

Source: In-Stat, 02/07

Table 12.

Market Share of Vendors by Unit Shipment of the New Generation WCDMA Base Station by 2006
Company Huawei Ericsson Nokia Source: In-Stat, 02/07 Shipment 18,600 17,800 5,900 Market Share 44.0% 42.1% 13.9%

22

Figure 22.

Market Share of Vendors by Unit Shipment of the New Generation WCDMA Base Station by 2006

Nokia 13.9% Huawei 44.0% Ericsson 42.1%

Source: In-Stat, 02/07

Market Share of WCDMA Market by Contract Award

Indicated in Table 13, Ericsson, Nokia, Siemens and Huawei are leading WCDMA system suppliers. Ericsson makes up 24.8% market in 2004, 2005 and 2006 in terms of contract award, followed by Nokia 21.2%, Huawei 20.4% and Siemens 18.8%.
Table 13. Market Share of Vendors by Contract Award
2004 Company Contract Awards 8 12 12 4 6 6 Market Share(%) 16.7% 25.0% 25.0% 8.3% 12.5% 12.5% 100.0% 2005 Contract Awards 21 11 8 14 3 8 65 Market Share(%) 32.3% 16.9% 12.3% 21.5% 4.6% 12.3% 100.0% Year-to-year Growth Rate(%) 162.5% -8.3% -33.3% 266.7% 33.3% -22.2% 35.4% 2006 Contract Awards 33 30 27 33 4 10 137 Market Share(%) 24.1% 21.9% 19.7% 24.1% 2.9% 7.3% 100.0% Total Contract Awards 62 53 47 51 13 24 250 Market Share(%) 24.8% 21.2% 18.8% 20.4% 5.2% 9.6% 100.0%

Ericsson Nokia Siemens Huawei Alcatel Others

Total 48 Source: In-Stat, 02/07

Note: Motorola OEM Huawei in its WCDMA awards.

Figure 23. Contract Award of Vendors

23

35 30 25 20 15 10 5 0

3330 21 12 12 8 4 6 6 11 14 8 3 2005
Nokia Siemens Huawei Alcatel

33 27

8 4

10

2004
Ericsson

2006
Others

Source: In-Stat, 02/07

Figure 24.

Market Share of Vendors by Contract Award in 2004, 2005 and 2006

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2004 2005 16.7% 25.0% 32.3% 25.0% 12.3% 16.9% 12.5% 12.5% 8.3% 12.3% 4.6%

7.3% 2.9% 24.1%

21.5%

19.7%

21.9%

24.1%

2006

Ericsson

Nokia

Siemens

Huawei

Alcatel

Others

Source: In-Stat, 02/07

Table 14 and Figure 25 show the market share by new contract award in 2005 and 2006. Huawei wins most contracts in new WCDMA market with a market share of 32.9% by contract award.
Table 14. New Contract Award and Market Share in 2005 and 2006

24

Huawei Ericsson Nokia Siemens Alcatel Others Total Source: In-Stat, 02/07

2005 11 17 6 6 2 9 51

Market Share 21.6% 33.3% 11.8% 11.8% 3.9% 17.6% 100%

2006 23 14 13 9 3 8 70

Market Share 32.9% 20.0% 18.6% 12.9% 4.3% 11.4% 100%

Figure 25.

New Contract Award and Market Share in 2006

Others, 11.4% Alcatel, 4.3% Siemens, 12.9% Nokia, 18.6% Ericsson, 20.0% Huawei, 32.9%

Source: In-Stat, 02/07

Note: New contracts exclude network expansion projects.

Main Operators Who Have Adopted the New Generation WCDMA Base Station
Main Operators
With more and more demand of high-speed data services and under the pressure of reducing TCO, operators realize that the RAN equipments are essential to the quality and cost control toward wireless network. Since the launch of new generation WCDMA base station products, many operators have adopted the new base stations in the network deployment, for these base station products can better meet their requirements.
Table 15. Main Operators Who Signed Contract for the New Generation WCDMA Base Station

25

Operator Vodafone eMobile Mobily Saudi Telecom Company Natrindo Telepon Selular KPN Cingular Wireless Telstra T-Mobile Swisscom Rogers Communication Bite Xfera Moviles PCCW B-Mobile Econet Wireless GloBul Optimus P4 Excelcom ANTEL UTS Indosat Utel TIM Hellas Telkomsel Vivatel Indosat T-Mobile Ukrtelecom Source: In-Stat, 02/07

Country or Region Germany,Portugal,UK,Spain Japan Saudi Arabia Saudi Arabia Indonesia Netherlands USA Australia, USA Hungary Switzerland Canada Lithuania Spain HongKong Brunei New Zealand Bulgaria Portugal Poland Indonesia Uruguay Netherlands Antilles Indonesia Ukraine Greece Indonesia Bulgaria Indonesia USA Ukraine

Supplier Ericsson,Huawei Ericsson,Huawei Ericsson,Huawei Ericsson,Huawei Ericsson,Huawei Ericsson Ericsson Ericsson Ericsson Ericsson Ericsson Ericsson Ericsson Huawei Huawei Huawei Huawei Huawei Huawei Huawei Huawei Huawei Huawei Huawei Nokia Nokia Nokia Nokia Nokia Nokia

Business Case
Vodafone
Vodafone is the largest mobile operator in the world with a significant presence in Europe, the Middle East, Africa, Asia Pacific and the United States. In the intensive competitions, Vodafone sees opportunities in 3G and considers 3G as its growth platform. As a leading 3G operator, Vodafone concludes 3 KSFs (Key Success Factor) in its future growth: Capacity increase Lower marginal cost 3G/HSDPA enabling DSL-style data experience To achieve these goals, Vodafone has very strict criteria toward RAN equipment supply. It is a must that the equipments to be adopted have very high performance, for example, supporting large capacity and coverage, saving TCO and realizing high performance
26

HSDPA, etc. In its HSDPA network deployment in Germany, Portugal, Spain, UK, etc., after a strict technology certification, Vodafone adopts the new generation WCDMA base station products provided by Ericsson and Huawei. The reasons why Vodafone prefers these innovative base station products are: the feature of higher performance HSDPA can help Vodafone to build world-class HSDPA; lower power consumption, distributed and integrated base station can significantly reduce capital and operational cost, which can help Vodafone to keep competitiveness in the rivalrous environment. In the equipment evaluation, it is said that the new generation products benefit in following aspects: Capacity: With 34 or 62 TRXs per new base station, capacity has been improved 50% to 150%. Coverage With higher sensibility and more TRXs, coverage has been improved over 30. Power consumption Power consumption has been cut down 30% to 50% by adopting new PA technologies, which saved electricity bill for 30% to 50%. Distributed deployment By using distributed base station about 30% site rent has been saved. Distributed base station was flexible in network deployment Vodafone realizes that the base station technology evolution can help him to maximize the benefits offered to customers and improve its competitive position in the marketplace.

eMobile
eMobile, a new comer to mobile communication in Japan, obtained a WCDMA commercial license in Nov. 2005. As a new mobile operator, eMobile wishes to catch high-end business market segment with the demand for high-speed data services, so eMoblie need RAN equipment with high-performance HSDPA; and because of lack of existing network resource, such as equipment room, to save cost of network deployment, and fully use of the IP network of its mother company eAccess (a famous ADSL service provider in Japan), eMobile attaches importance to IP transmission in the RAN. In the network deployment, eMobile adopts Huawei and Ericssons new generation base stations, because these new generation products have much better performance and smaller size which can minimizing space and cost. Especially, all-IP networks will significantly save the TCO for eMobile.

Hutchison Whampoa Limited (HWL)

27

HWL is a late telecom entrant but early 3G services provider, rolling out 3G networks internationally since early 2003. As far, HWL has been successfully operating 3G networks in Australia, Austria, Denmark, Hong Kong, Ireland, Israel, Italy, Sweden and the United Kingdom. Now Hutchison is planning to upgrade its network to HSDPA in 2007. Because of providing 3G services very early, HWL has been being committed to solid profitable growth by tight cost control. From the beginning of network deployment, HWL has been very keen on reducing capital and operational expenditure. So in the network upgrade and deployment in the future, HWL is likely to adopt the new generation WCDMA base station with higher performance and lower cost.

Conclusion
To attract more subscribers and improve ARPU, operators have to deliver more attractive services, such as VOD, streaming video, mobile gaming etc. which need larger bandwidth.and have more requirements to the network and base station products. Now operators are more concerned about the performance and TCO of RAN equipment. This demand side drives the technology innovation by equipment vendors. Huawei, Ericsson, Nokia, etc have launched their new generation WCDMA base station products. The new base station products can support larger capacity and coverage, reduce power consumption and cut down the network construction and operation cost for operators, which meets the requirement of high quality and low cost of operators. From the aspect of technology evolution, base station technology breakthroughs happen in every 3 to 5 years. The first generation WCDMA base station was launched from 1999 to 2001. Now WCDMA base station is embracing a new era: the era of a new generation.

28