Wireless Market Trends

Iman Hirawadi 7 April 2009

Agenda

1. Updates on Indonesian Wireless Market 2. Market Evolution 3. Technology Trends 4. Conclusions

2 | Wireless Market Trends | 07 April 2009

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Updates on Indonesian Wireless Market

3 | Wireless Market Trends | 07 April 2009

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Wireless Market Outlook in 2008: Strong Growth, Tougher Competition

157 Million wireless subscription (E/2008) vs 101 Million (E/2007) 55% Growth 17 Million FWA subscription (E/2008) vs 10 Million (E/2007) 70% Growth 85% GSM market share (2008) vs 86% (E/2007) GSM-CDMA Share Remain Unchanged 2 cents $/MoU vs 18 cents $ in 2006 Dropped 90% in the past two years 66% wireless subscription. As some people hold multiple subscriptions, actual penetration is estimated 45-50%
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Wireless Market Outlook in 2008: GSM Operators

HCPT: 2.2% NTS: 1.3%

2008
Telkomsel XL 17% Indosat 23% 42%

HCPT: 1%

NTS: 0%

2007
XL 16% Indosat NTS: 0% 25% Telkomsel 45%

Operator Telkomsel Indosat Excelcom HCPT NTS

Subsciber E/2008 (million) 66 36 26 3.5 2

Subsciber E/2007 (million) 46 25 16 1 0

Two biggest players had lost market share slightly. Excelcom/HCPT/NTS grew market share appx. 1% for each players
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Wireless Market Outlook in 2008: CDMA Operators

Bakrie: 4.5% Smart: 1.6% Indosat: 0.5% M8: 2.2% STI: 0.2% Bakrie: 3.4% Smart: 0.5% Indosat: 0.5% M8: 2.9% STI: 0.2% Telkom: 6.0%

2008
Telkom: 5.9%
Operator

2007

Telkom Mobile-8 Bakrie Smart Indosat Sampoerna

Subsciber E/2008 (million) 9.5 3.5 7 2.5 1 0.3

Subsciber E/2007 (million) 6 3 3.5 0.5 0.6 0.2

Two biggest players gained market share slightly. Progress made by Smart Telecom. M8 & STI lost market share
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Wireless Market Prediction (BMI Report 1Q2009)

500,000 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 2006 2007 2008e 2009f 2010f 2011f 2012f 2013f 200 180 160 140 120 100 80 60 40 20 0 Number of Mobile Subscriber ('000) Number of 3G Subscriber ('000) Number of Mobile Phone/100 Inhabitants

278 Million additional subscription in the coming 5 years!!! Probably need to revisit once market situation settles

Agressive pricing scheme proved to significantly increase overall subscriber base, and continue to remain the main reason for strong growth (though it will be slower than 2007/2008 growth)
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Internet/Broadband Market Prediction (BMI Report 1Q2009)

20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0
20 06 20 0 20 7 08 e 20 09 20 f 10 20 f 11 20 f 12 20 f 13 f

12,000 10,000 8,000 6,000 4,000 2,000 0 Number of Internet Users ('000) Broadband Subscriber ('000)

Strong growth of broadband market, to reach appx.10Million subscriber in the next 4 years. Brighter future is predicted when government allows WiMAX deployment
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Current Cellular Spectrum Allocation in Indonesia

Operators Indosat Telkomsel Excelcom HCPT NTS Telkom Bakrie Telekom Mobile 8 Smart Sampoerna

900 10 7.5 7.5

Allocated Bandwidth (MHz) UMTS GSM CDMA 1800 2100 450 850 20 5 2.5 22.5 5 7.5 5 10 10 15 10 3.75 3.75 5 7.5

1900

6.75

Total 37.5 35 20 20 25 3.75 3.75 5 6.75 7.5

56% of cellular spectrum allocated to top three players, while the remaining shared by other 7 operators 82% of cellular spectrum allocated to GSM/UMTS operators, while the remaining shared by 6 CDMA operators
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Market Evolution

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Focus to Tap New Market Segments and Increase User-Experience

Three key market segments for growth:

Poverty

1. Lower ARPU
subscribers already covered but cant afford the service
-Potential

Other subs priorities

2. Rural
Potential subscribers outside network reach

Majority of Upcoming Subscriber

Telecom Access Today Urban Suburban

Real access gap

3. Advanced broadband users

Affluent urban subscribers demanding richer services (broadband, entertainment, personalised services)

Rural Accessibility

Networks need to be optimised: TCO, Coverage, Broadband / Multimedia

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Next Generation Network to Answer Market Requirements

Market Key Challenge #1: Improved network economy (TCO)
Flat-IP architecture, IP transport (META) Infrastructure sharing i.e. RAN Sharing More efficient, higher-capacity network elements, use of open IT platform

Affordability

How to serve decreasing ARPU profitably?

Market Key Challenge #2:

Accessibility
How to extend service into new market/area

Wireless
Trend towards lower frequency bands for wireless broadband: 450/700/900 MHz Deep indoor coverage with Femto cells

Market Key Challenge #3:

Improved broadband performance

New radio technologies offer DSL like data speeds Optimized, flat architecture reduces latency Data centric backhauling

Versatility/Broadband
How to optimize the network for broadband / multimedia?

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Technology Trends

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Beginning of Mobile Communication

A base transmitter station covers big area, and the spectrum was quickly saturated even with small number of users. Among first users were police force
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Evolution of Mobile Standards: Characteristics of each generation First Generation (1G)

Created for voice communication purpose Analog radio, inconsistent voice quality Lack of security: rampant cloning and eavesdropping Mainstream standard: Nordic Mobile Telephony (NMT), Advanced Mobile Phone System (AMPS), Total Access Communication System (TACS)

Second Generation (2G)

Mainly for voice communication with improved data application (SMS, packet data) Digital radio Address main weakness of 1G system with better voice quality, robust security measures Relatively low packet data rate Mainstream standard: GSM/GPRS/EDGE, CDMA IS95, CDMA2000 1x

Third Generation (3G)

Mutimedia communication (voice, video, data) Increased data rate, improved spectrum efficiency Suitable for broadband data applications Ready for IP Mainstream standard: UMTS FDD (WCDMA), UMTS TDD, CDMA2000 1xEV-DO Rev0/RevA

Next Evolution
Flat Architecture Fully data, voice is just one data application Advance antenna techniques to further Improve capacity Low latency, suitable for demanding realtime applications such as gaming Mainstream standard: 3G LTE (Long Term Evolution), Ultra Mobile Broadband (UMB)

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Data Performance of Wireless Technology

1000 Mbps 100 Mbps

While 4G supports higher data rates, it is also more efficient and supports more users at higher quality

Today UMB LTE WiMAX

Wireless VoIP / Video Conferencing Broadcast Video

10 Mbps

1 Mbps

EVDO UMTS UMTS EDGE R99 GPRS

HSDPA HSDPA

HSUPA

Streaming Video Web Browsing

100 Kbps

GSM
10 Kbps

CDMA 2000 1xRTT

Email

Voice

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Source: Morgan Stanley Research & Company estimates

Wireless technologies evolving to become more broadband. WiMAX as a disruptive technology benefiting from the first-mover effect
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Flat IP Architecture
TODAY
GSM GPRS EDGE UMTS HSPA
Voice Channels BTS IP channel Node B BSC / RNC SGSN MSC
Circuit Switched Core (Voice)

Voice SMS MGW Email VPN GGSN Internet

Packet Switched Core

Flat IP Architecture -> Introduced with LTE

LTE/EPC

IP channel SGW eNode B

MME PCRF

Evolved Packet Core

PDN GW

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Telecom Platform is Moving Towards Open IT-based Platform i.e ATCA

Traditional Telecom Platform: Next-Generation Server-Based Platform:

The trend can be seen for both core network (MSC, HLR etc) as The trend can be seen for both core network (MSC, HLR etc) as well as radio network (BSC) well as radio network (BSC) Lower hardware cost Lower hardware cost Lower maintenance cost Lower maintenance cost Higher capacity Higher capacity Higher flexibility to accommodate growth Higher flexibility to accommodate growth Reduce time to market for new features Reduce time to market for new features Designed for 99.999% availability Designed for 99.999% availability Future-proof investment Future-proof investment
ATCA: Advanced Telecom Computing Architecture
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Radio Network Sharing

Two operators share physically the Radio Access Network (NodeB and RNC) from a common supplier, but do not share any Core Network node Each operator uses its own licensed spectrum, broadcasts its own PLMN id Mobility is handled on separate layers Mobile camps on appropriate cell, shows right operator logo Handovers are directed to cells of the same operator (both 3G and 2G) RNC supports multiple Ius to independent Core Networks Routing to CN operator based on the current cell PLMN id Full differentiation on network services Shared RAN
Operator A Subscriber f1, PLMN1 Operator B Subscriber f2, PLMN2 f1, PLMN1 NodeB RNC f2, PLMN2
Iu Iu

Core Network A

Core Network B

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Small Base Stations

Micro

micro

10

-6

Pico

10

-12

Femto

10

-15

Application Main target Appx. Output Power Appx.Cell range

Indoor/Outdoor Hotspot, Blank coverage 5W 1 Km

Indoor Office 200mW 200-300m

Indoor Home, Office 20mW 30m

Various solutions to address different segments. Femto is the smallest form of base station portfolio available today
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BSR-Femto: the Heart of the Converged House

A single unit enables multiple services

WideBand DECT BSR-Femto Notebook Wifi Tablet Handset 2nd Floor

Connect to IP Camera for surveillance

HomePlug

Av/Coax

Broadband Connection

ADSL Router
1st

Floor

Outdoor Area

Power line
21 | Wireless Market Trends | 07 April 2009

Ethernet

Coax
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Cellular-Broadcast Convergence Over 220 operators have already launched mobile video services, ~110 Live TV (+40 in 12 months)
KOREA (TU Media sources) Launch May 05, 1.2M subs in Feb 07 Average: 63 per day Monthly subscription: $10 basic + $4 option + $2 for VOD

Activities in the SEA Region

Malaysia MiTV (December 2007) Maxis (Q3 2008) Singapore M1 (1st of July) Mediacorp (DVB-T network already in place) Philippines Smart Globe (Q3 2008) Vietnam VTC

Broadcast

Broadcast
ITALY (Tre sources) Started June 06 1.1M subscribers (March 07) ~10/month (various packages)

Broadcast
JAPAN Launch March 06 May 07 On the next 12 new handset types by SoftBank, 7 include MTV March 08: 22M phones

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Integration of DVB Network with Cellular Network

Ku /S

Ba nd

3 S Band
S/U HF Ba Terrestrial broadcast nd 1

Service Delivery Platform

2
Mobile Networks (2.5/3G/HSDPA) Unlimited channels, interactivity

Nationwide coverage: Satellite broadcast (DVB-SH) 9 channels*

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IP Multimedia Subsystem (IMS)

IMS Services

IP Backhaul

Triple Play

Expanding to IP services on Multi-access technologies

BB-Wireless IP

BB-Wireline IP (DSL, FFTx)

VoWLAN (UMA/SIP) IAD POTS/ISDN SIP Phones (VoIP & Video)

IMS is the key for network convergence and critical to operator to avoid becoming pipe provider
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IMS Enables True Rich Communication

The dumb dial pad is past history

Messaging (IM/SMS/e-Mail)

VoiceIP - VideoIP

VideoShare
Presence Driven Communication

Dynamic @ Book

2G/3G Call

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Conclusions

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Conclusion

Wireless communication has evolved from simply supporting voice services to rich services including video & data services. It will evolve further to greatly improve enduser experience in terms of more speed, more real time, more personalized services in more cost-efficient manner

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