001130

© CMG Telecommunications, 2000 www.cmgtelecom.com

SM

SC

Bus

ines

s de

vice

AUSTRALIA · BRASIL · CHINA · CZECH REPUBLIC · IRELAND · THE NETHERLANDS · SINGAPORE · USA

Steven van ZanenProduct Manager

High Performance SMSC

SKIPINTRO


SM

SC

Bus

ines

s de

vice

DISCLAIMER

With respect to the information contained herein, other than information oropinions contained in presentations made by employees of Morgan Stanley &Co. Limited or any of its affiliates (together, “MSDW”), no representation ismade that such information is accurate or complete. No review, evaluation,investigation or editing of such information or any opinions contained hereinhas been undertaken by MSDW. MSDW takes no responsibility for any of suchinformation or opinions. Any views or opinions expressed herein other thanthose expressed by employees of MSDW are solely those of the speakers and donot necessarily reflect the views or opinions of MSDW.


SM

SC

Bus

ines

s de

vice

CMG Credentials

• Anglo-Dutch Company Operating since 1964

• Over 11,000 employees World Wide

• Consultancy and Telecom Products

• Delivers a suite of Best of Breed products

• SMS, WAP, Mobile Email, CBS & Billing

• Caters for 7 out of 10 Largest GSM Operators

• Leading Global Vendor

e.g 40% Share in South-America in 6 months


SM

SC

Bus

ines

s de

vice

Highest Performing SMSC in the world

• 10 SM/s in 1993• 40 SM/s in 1995• 80 SM/s in 1996• 125 SM/s in 1997• 160 SM/s in Q3 1998• 320 SM/s in Q2 1999• 500 SM/s in Q4 1999• 1000 SM/s in Q4 2000• 2500+ SM/s in Q1 2001 0

500

1000

1500

2000

2500

1993 1995 1996 1997 1998 1999 2000

Network

Capacity

Staying ahead of Market demand


SM

SC

Bus

ines

s de

vice

SMSC Market Share for Top 10 GSM Operators

0

10000000

20000000

30000000

40000000

50000000

60000000

70000000

CMG Nokia SEMA Logica

Source: GSM Association June 2000

Subscribers

GSM is in more countries than McDonalds: 137 countries It took the entire U.S. cellular industry more than 4 years to reach

as many customers as GSM has added in past 12 months


SM

SC

Bus

ines

s de

vice

Global Subscriber base - GSM Leading the Pack

June 2000Source EMC

CDMA14%

PDC10%

TDMA10%

GSM66%

67.9 m47.7 m

336 m

50.2 m

Most SMS traffic today is generated in GSM


SM

SC

Bus

ines

s de

vice

SMSC matures into a Business Critical device

• 1989: SMSC accepted as part of GSM specification

• 1999: First High Performance SMSC at Mannesmann

• 1999: 20 Million messages in Europe per day (Source: IDC)

• 2000: Doubling SMS traffic every 6 months (Source: GSM association.)

• 2000: ? 250 million revenue per Month globally (assuming ? 0.10 per billable message)

• 2001: 82 Million messages in Europe per day alone

Where are Mobile Data revenues coming from?


SM

SC

Bus

ines

s de

vice

“Data Traffic is growing exponentially ...”

“In the UK...a ten-fold growth within the last 12 months..”The Mobile Data Association December 1999

Pre-EnhancedMessaging

WAPGPRSUMTS

400% growthin SMS in theNetherlands

Algemeen DagbladMay 4 2000

“from 3 to 15 Billion messages in 2000 ...”GSM Association

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

19941995

19961997

19981999

20002001

2002

Msg/S

ec

Two-way SMS over TDMA hits the USunlimited free messaging until February

Total Telecom 19 October 2000

“...and will double to 40 Billion messages in 2001 ...”Mobile Lifestreams 2000


SM

SC

Bus

ines

s de

vice

Driving the initial SMS success

• Prepaid subscribers

• Young people

• Services over SMS


SM

SC

Bus

ines

s de

vice

Common SMS Services

• Person to person messaging• SMS for Prepaid• Picture Messaging• Mobile E-mail• SMS chat• Tamagotchi• Mass mailings• Machine-to-machine• Entertainment• WAP over SMS

SMSC

Corporate

Home

WAP

Stock


SM

SC

Bus

ines

s de

vice

SMS services: the PUSH factor

• Direction services• Joke• Insult• Tamagotochi• Dice• Quiz• Games (Casio, Black jack etc)• Ringtones• Images

Only SMS allows instant reaction to PUSHOnly SMS allows instant reaction to PUSH


SM

SC

Bus

ines

s de

vice

Markets - SMS usage by age group0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Under 25

Between 25 and 35

Between 35 and 45

Between 45 and 55

Over 55

Source: O

vum 1999


SM

SC

Bus

ines

s de

vice

Convergence in the Mobile industry

• Operators go way beyond traditional role- Telefonica (TV & Entertainment)- NTT DoComo (Content)

• Innovative (SMS) services are crucial: Role for ASP’s

• Entertainment in relation to Television- VJ tickertape, Big Brother alarming,- Televoting, Teleshopping, Quiz, notice boards

• Advertising- Welcome notes- Subscriptions with free (Sponsored) SMS


SM

SC

Bus

ines

s de

vice

60% of ASPs will fail by the end of 2001 - Gartner

Application Service Providers

• 480 retail ASP’s today

• 1999: $1 billion revenue

• 1999: North America : 65% of all ASP revenue

• 2004: Europe and Asia/Pacific : 55% revenue (Source: Gartner)

• 2004: $ 25.3 billion revenue

• More sophisticated, business-user-focused applications

• Greater penetration of mobile/cellular users in Europe/Asia


SM

SC

Bus

ines

s de

vice

Global Market Prognosis SMS users

0

100.000.000

200.000.000

300.000.000

400.000.000

500.000.000

600.000.000

700.000.000T

ota

l Nu

mb

ers

of

Use

rs

1999 2000 2001 2002 2003 2004 2005Years

Source: Ovum and ARC


SM

SC

Bus

ines

s de

vice

SMS applications: where is the money today?

• Chat– around 50-150k SMS per day

• TV based applications– at least 1 million SMS per 2 million viewers

• Entertainment services– hard to estimate, but revenues expected to be

the second largest mobile revenue source

from 2003.


SM

SC

Bus

ines

s de

vice

Interactive SMS - triggering reaction

l Individual to individual

Mobile originated

l Machine to machine

Telemetry

l Individuals to Groups

Mobile originated/Chat

l Individuals to Engine

Mobile originated Voting and Gaming


SM

SC

Bus

ines

s de

vice

Degrees of interaction

TelephonePanel

SMS

Letter

IVR

Fax

WAP

Web/Email

Penetration levels

Speed of interaction

Pagers (US)

Fast response triggers more SMS TrafficFast response triggers more SMS Traffic

# of possible simultaneous interactions

Pagers (EU)


SM

SC

Bus

ines

s de

vice

Why interactive SMS TV?

• Mass media can yield a HUGE number of SMS messages- TV Shows will typically have 200.000 - 20.000.000 viewers- Low threshold to participate- On average, more than 45% of the viewers will have a GSM- 20% to vote - between 4 - 8 SMS per person

• Winners can be drawn online- High stickiness factor- Extremely Interesting for advertisers/Sponsors

• Promotion for use of SMS• Open new markets for SMS (non youth)

- Straight into the living room- Incentives outside the age group


SM

SC

Bus

ines

s de

vice

• SMSC PerformanceCan the Operators guarantee a minimum degree of interaction?

• SMS Prepaid Billing SystemsCan the Billing Systems handle real time credit checks?

• User Profile Can the data be collected, distributed and interpreted?

• Network CapacityIs there enough signalling capacity available for SMS?

• Game & program logisticsIs the right Advertising, Award and explanation in place

• Critical massAre enough operators involved?

SMS TV - Planning for success


SM

SC

Bus

ines

s de

vice

0

10

20

30

40

50

60

70

80

90

100

monday tuesday wednesday thursday

The four Basics for Operator SMS success

• SMSC must be able to handle exceptional traffic peaks

i.e Highly available, Reliable, Scalable

• Prepaid Billing system must prevent fraud

• Mine and combine invaluable data

• Manage Network Capacity


SM

SC

Bus

ines

s de

vice

CongratulationsYou won a trip to the IoW for 2.Please dial 334and give thisnumber: 765A

Managing and growing the revenue stream

• SMSC as a Business critical device

• Stimulate Cross departmental stakeholdership

• Identify and Empower all Players

• Strive to react to the market instantly

• Dare to Market!


SM

SC

Bus

ines

s de

vice

G-Force explained

l 1G covers Analogue (NMT Networks, etc.)

l 2G covers Digital (GSM, TDMA, CDMA, PDC etc)

l 2.5G covers all extensions of GSM (HSCSD, GPRS, EDGE) Standardized by European Telecommunication Standards Institute (ETSI)

l 3G covers

- UMTS (Migrated from GSM/TDMA/PDC) and

- CDMA2000 (Migrated from CDMA-One) Standardized by 3rd Generation Partnership Project (3GPP)


SM

SC

Bus

ines

s de

vice

Multi-media is now

l Enhanced SMS Messaging (concatenated messages)

- Pictures

- Animation

- Formatted text

- Sound

l Handsets available in 2001

l GPRS will help make Multimedia successful

l Youth potential


SM

SC

Bus

ines

s de

vice

Formatted Text- Three font sizes (normal, large, small), - Three Alignments (left, centre & right), - Styles (normal, bold, underlined or strikethrough).

Pictures sizes- Small (16*16 pixels), Large (32*32 pixels) or variable size (Variable size pictures are multiple pictures connected together max 6 large). - Black and white image supported.

Animations- Predefined in the handset- User defined animations consisting of 4 pictures which are 8*8 pixels and the large 16*16 pixels

Embedded Sound- Predefined in the handset up to 10 User defined melodies (iMelody format)

3GPP Standardised Enhanced SMS


SM

SC

Bus

ines

s de

vice

MultiMedia SMS: Simple, available, reliable

l 2001 : Boosting the Messaging hype even further- Prefab Immages- Prefab Ringtones

l In line with strategy Handset Vendors- Youth

l High availability SMSl Will pave the way for 3G messaging

7 billion greeting cards sent in the USA value of

over $5 billion dollars


SM

SC

Bus

ines

s de

vice

MultiMedia Messaging Service

CMG Implementation View: From SMS to MMS


SM

SC

Bus

ines

s de

vice

Eurovision Song contest SMS voting in 2001?

• 500 Million Global subscribers• 800 million Europeans• 200 million European Mobile subscribers (mainly GSM)• 128 million Prepaid subscribers in December 99• 236 Million EuroVision viewers in May 2000• 3 million viewers/listeners went through MSN• 35% of Europeans will have Internet connection by 2002

The new frontier in Mobile Entertainment


SM

SC

Bus

ines

s de

vice

CMG Short Message Service Centre:

up to 2500 messages per second from a single system

Email: [email protected]

MultiMedia MultiMedia MessagingMessaging

© 2000 Nets AG. All rights reserved. Proprietary & Confidential. Do not distribute. page 1

With respect to the information contained herein, other than information oropinions contained in presentations made by employees of Morgan Stanley& Co. Limited or any of its affiliates (together, “MSDW”), no representationis made that such information is accurate or complete. No review,evaluation, investigation or editing of such information or any opinionscontained herein has been undertaken by MSDW. MSDW takes noresponsibility for any of such information or opinions. Any views or opinionsexpressed herein other than those expressed by employees of MSDW aresolely those of the speakers and do not necessarily reflect the views oropinions of MSDW.

DISCLAIMER


Company profile Nets AG

• Nets develops and sells technology for developing, testing, andproducing communication applications.

• Nets‘ Communication Chain Management™ („CCM“) - Platformsupports quick implementation of different communication applicationsin large numbers.

• Communication applications based on the CCM-Platform allow forindividual communication at the reach of mass media. They (will):

• Run on all prevalent channels, devices, standards and protocols („free access“);

• Support all processes and automate flow („automatic goal attainment“);

• Adress users in real time, individually, adaptively and location dependent(„automatic personalization“).

• The Dialog Solutions™ product and services offering of Nets is modularand includes a licence of the CCM-Plattform plus three lines of services:

• Analytical services;

• Vertical applications;(DIARY™ in Pharma and Healthcare, RAIDS™ in Media and Entertainment);

• Production.

• Nets products and services are available in Europe and the USA.

Source: Nets


TechnologyProvider

ApplicationServices Provider

From application servicesprovision to technology provisionNets range of products and services

Source: Nets

Licencing and Maintenance

Analytical and Integration Services

Application Development

Production


Television game tosupport brand relaunchGoal of television show: „Jede Sekunde Zählt“

• Situation:“Aktion Mensch“ successfulrelaunch of „Aktion Sorgenkind“,the leading charity lottery in Germany;

• Tension:Name recognition still not quite athistoric levels;

• Release:Relaunch campaign supported bynew television show on leadingtelevision station ZDF: „Jede Sekunde Zählt“.

• Task:Design, test andimplement an interactivegame for the audience toimprove name recognitionin the target group of theshow;

• Challenge:Involve audienceindividually, personalizedand in real time at reachof television broadcast

Tasks and challange

Source: Nets

Situation, Tension and Release


Win

• Logo of“Aktion Mensch”formed by agroup of kids

• Show masterexplains task:“Guess numberof kids!”

Create real time dialogsGame storyboard

Excite

• Spectatorssend theirguess bySMS to shortnumber

• Spectatorsreceiveimmediatefeedback bySMS:

• Too high/ toolow, please tryagain!

• You are right!

• Winnersdrawn fromcorrectanswers

• Names ofwinnersdisplayedon televison

Push Pull

Source: Nets


New business throughconvergent use of mediaRoles and business relations

Source: Nets

Players(Audience)

Sponsor Show(Lottery)

Station(ZDF)

Producer Show(G.A.T.)

14all, 1way

Sponsor Game(Motorola)

Operators(D1, D2, Viag)

Technology(Nets and CMG)

121, 2way


Individual communicationwith reach of mass mediaSummary of results

*Target segment: 14 to 49 yr. old consumersSource: Nets

35 %•Enrollment for Reminder Service

~ 400 SMS/s•Average performance (inbound)

1000 SMS/s•Peak performance (inbound)

1.2 Million•Total Nr. of SMS (sent/received)

7•Average Nr. of SMS per player

600.000•Nr. of messages received

90.000•Nr. of different players

0.8 Million•Size of target segment*

2.5 Million•Size of audience

Approx. ValuesParameter

Dialogbringstraffic

High peakcapacity

necessary

Superiorfollow up


Performance peaked at1000 SMS/sSMS rate inbound

0

1200

20:44:53 20:52:05 20:59:17 21:06:29 21:13:41 21:20:53

Time (October 12, 2000)

Mes

sage

s pe

r S

econ

dNets Gateway LoadSMS-Center Load

Source: Nets

Nets Gateway LoadCMG SMSC Load


Multiple guesses per playerthanks to interactivityGuess histogramm

0

2000

4000

6000

8000

10000

12000

14000

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Number of Tips

Num

ber o

f Pla

yers

Source: Nets


Players „talk“ to a machineLearnings

Source: Nets

• Time to market:Individual communication at a mass market scale –it‘s here today;

• Role of established media:Convergent use of established media brings enormous traffic;audience glued to carrier medium;

• Key traffic generator:“Push-Pull“ Dialogs bring traffic an order of magnitude above„Push-Style“ messaging-players „talk“ to a machine;

• Technical requirement:High peak capacity key to keep people talking;

• Relationship to network operators:Operator involvement vital;

• Success:Enrolement for further contact 15 x higher than throughtraditional means;

• Next steps:Great perspective for Loyalty (Ad-$) and m-Commerce.


Outlook on mobile applicationlandscape apparently dim ...Situation

• Applications sofar only moder-ately successfull:

• Few applications– no real„killers“;

• Applications too„techie“ and yettechnicallyflawed;

• Unfortunatepricing byoperators.

Source: Nets

• Pressure tosucceedenormous:

• UMTS-licencesauctioned at anenormousprice;

• Operators withhigh invest-ments in infra-structure;

• User expec-tations extremeand fueled bymedia hype.


„Acceptance“

„Roll-out“

„Revenues“

„Applications“

Uncer-tain

Probeand

learn

Tension

Major developmentsuncertainForeseeable and uncertain developments

Source: Nets

„Convenience“

„Content“

„Capacity“

„Customer base“

Fore-seeable

Planand

imple-ment


Implement, learn and manageoptionsSolution: summary

Source: Nets

Useracceptance

Appicationlandscape

Many Few

Aktive

Passive

a

b

c

d

ef

g

h

Portfolioapplications

Provide bestinformation

Know needsbest

Be quickestBe mostflexible


Fill pipeline to create optionsThe Applications Factory™

Source: Nets

ProductionTestDevelopment

Many

Rapidly

Different

Recycle

Industry-applications

Niche-applications

Flops

Killer-applications


Vertical Segments

Market to industries with theadditional inch of expertiseNets products and services: target customers

Source: Nets

Horizo

ntal M

arket

for C

ommun

icatio

n App

licati

ons Telecommunications

Pharma and Healthcare

Media and Entertainment

Financial Products and Services

Logistics

CRM and Dialog Marketing

Automotive

Consumer Products


Nets USA, Inc.Dr. Ingo BeinlichChairman and President

555 Hamilton AvenuePalo Alto, CA 94301USA

Tel. +1 650 322 5665Fax +1 650 322 1919

Nets AGDr. Thomas KapsnerDr. Günter SchmidManaging Directors

Nets Media & Entertainment GmbHMichael FrostManaging Director

Nets Healthcare GmbHDr. Stephan HeinzManaging Director

Nets Technology GmbHLars SchluckebierDr. Philippe VerplanckeManaging Directors

Nets Institute GmbHAlfred MüllerManaging Director

Pettenkoferstraße 3580336 MünchenGermanyTel. +49 89 544 795 0Fax +49 89 544 795 195

Contacts

www.nets-ag.de


Q&A

• Press *1 to ask a question in Europe• Press 1 to ask a question in the US.• Press *2 to withdraw a question in Europe• Press # to cancel a question in the US.

www.msdw.com/waprap/

Questions: [email protected]@nets-ag.de


Audio ReplayAudio ReplayA replay of each week’s event will be available two hours after the presentation.The replay number in the UK/Continental Europe is +44 (0) 1296 618 700 (id 200539)and in the US (320) 365 3844 (id 509442).

The replay number will remain the same every week.

How to access a Present OnLine replayStep 1 - Go to www.presentonline.comStep 2- Click on ‘Conference Archive’, located on the Present OnLine title bar at the top of the page.Step 3 - Enter the owner number 10815 and click on ‘Continue’Step 5 - Then click on the file and you will be taken to the audio replay presentation.

For a Biography of our speakers please refer to our URL: www.msdw.com/waprap/For additional information about “WAP Rap on Thursdays”, or to request that specifictopics be addressed during a particular session please [email protected]

Documents

001130