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We make ICT strategies work
LTE Licensing StrategiesWorkshop
Content
1. About Detecon – Who We Are? 2. African LTE Technology and Licensing Gap3. Licensing Challenges and Solutions for African Regulators4. Licensing Challenges for Operators5. Summary and Key Take-Aways
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About Detecon – Who We Are
Detecon International GmbH is an ICT consultancy company with HQ in Germany, branch offices in 12 countries, about 1000 employees and a turnover of $190m (2013).
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Our permanent staff in Johannesburg orchestrates all Detecon consultancy projects in Sub-Saharan Africa
Over 50 consultants currently working on variousprojects in the region
On demand support from global Detecon experts andfull access to expert knowledge and the skill pool ofDeutsche Telekom.
Global Branch Offices and Positioning Detecon Office Central and Southern Africa
We are international, with successful realization of more than 6000 projects
in 165 countries
We are the ICT and regulatory experts with more than 50 years of consulting know-how in the telecommunications
sector
Detecon - Services portfolio
Detecon is a cross sector Management & ICT consulting company bridging the business and IT side through a combination of process orientation and the use of technology.
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Corporate Strategy Marketing Strategy
Sales Strategy Wholesale Strategy
Regulatory Strategies and Regulatory Compliance
Strategy & Marketing
Corporate Finance Cost Efficiency Programs & Measure Detailing
Full Due Diligence for Mergers/ Acquisition Company Analysis and Assessment
Interims and turn around management
Financial Performance & Due Diligence
Service Oriented Enterprise Architecture Infrastructure, IT & Innovation Strategy
Network Optimization & IT Application Mgmt. Network Operations, Design & Change
ICT Governance & Risk Management
Infrastructure & Technology
Organization Design & Detailing Process Design & Re-engineering
CRM and SCM Human Resources Management
Field Force Optimization
Organization & Processes
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References – LTE Support
Detecon - LTE References
Detecon has successfully delivered projects in the area of LTE for a large number of clients worldwide.
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RussiaBroadband Technology Study
GermanyLTE License Bid Support
GermanyCore Network Evolution
GermanyPMO for LTE Rollout
CanadaLTE Advisory
GermanySolution Design VoLTE
BulgariaLTE Cost Model
South AfricaTechnical Design
RussiaLTE Tender Compilation
EgyptBroadband Strategy
ChinaLTE Market Research
KazakhstanLTE Benchmarking
NamibiaNGMN Research Study
KazakhstanLTE Benchmarking
RussiaLTE Radio Network Planning
UAETechnology Roadmap
ThailandLTE Tender Compilation
MalaysiaLTE Tender Compilation
Content
1. About Detecon – Who We Are?2. African LTE Technology and Licensing Gap3. Licensing Challenges and Solutions for African Regulators4. Licensing Challenges for Operators5. Summary and Key Take-Aways
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African Technology Gap
Two thirds of the countries that still have not introduced 3G are on the African continent. These countries in particular should think about a leap-froging to 4G directly.
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World Commercial 3G Coverage Map
* Source: Estimate, ITU World Communication/ICT Indicators database
Singapore76% since 2005
Malaysia56% since 2005
Philippines26% since 2006
China20% since 2009
Thailand12% since 2010
Vietnam21% since 2008
Indonesia37% since 2006
India6% since 2008
Portugal77% since 2004
Spain84% since 2004
Italy70% since 2004
Libya9% since 2006
Russia27% since 2007
Ukraine12% since 2008Poland
60% since 2006
2G Only Network 2G/3G Network
Numbers show 3G penetration rate for 2012 and year of 3G launch
Iran3% since
2008/2012
World 2G/3G Coverage Map (2012)
World LTE Coverage Map (March 2014)
African Technology Gap
Most countries outside Africa have deployed LTE, more than 70 countries put LTE in service in 2012 and 2013.
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LTE in service LTE trial
LTE planned No info about LTE
Canada ; 9,74%Since July 2011
USA ; 22,06%Since Sept 2010
Mexico: 0,043%Since Oct 2012
Brazil: 0,21%Since Dec 2011
Uruguay:0,06%Since Dec 2011
Austraia: 15,3%Since Sept 2011
Japan: 23,7%Since Dec 2010
Singapore: 18,8%Since June 2011
New Zealand: 3,7%Since Feb 2013
HK : 3,5%Since Dec 2010
S.Korea: 47,1%Since July 2011
India: 0,0%Since April 2012 Philippines : 0,01%
Since April 2012
Malaysia: 0,9%Since Jan 2013
Swedenl: 8,98%Since Dec 2009
Norway: 10,39%Since Dec 2009
France: 0,76%Since Nov 2012
Germany: 2,75%Since Dec 2010
Austria: 4,02%Since Nov 2010
Denmark: 3,34%Since Dec 2010
S.Africa 1,01%Since Oct 2012
Namibna: 0,22%Since May 2012
Uganda: 0,05Since Oct2012
Nigeria: 0,02%Since Feb 2013
UAE: 01,6%Since Sept 2011
Oman: 0,398%Since July 2013
Russia: 0,043%Since Jan2012
Kazakhstan: 0,28%Since Dec 2012
Croatia: 3,26%Since May 2012
Estonia: 1,49%Since Dec 2010
SA: 1,68%Since Sept 2011
Angola: 0,9%Since April 2012
Legend:
“X,x%” = LTE penetration as of Q3/2012
“Since xx“ = LTE in service, based on march 2014 Source: Detecon Analysis; WCIS Mobile BB Subscription, Q3/ 2013;4G Americas Global Deployment Status, March2014
Global Penetration Outlook
Digital Divide between Africa and the rest of the world has narrowed for mobile voice in the past, but the gap is increasing again for mobile broadband.
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Source: IDATE 2013, Informa 2013
Despite fast subscriber growth over the next five years in the African and Middle Eastern region the penetration is expected to be less than 10% in 2018.
88% of LTE subscribers will live in developed regions, also leading in terms of LTE subscriber penetration.
In combination with the under-developed fixed broadband infrastructure the African continent is going to miss the economic growth opportunities from global broadband access and applications.
There is a clear necessity to speed up LTE licensing from the regulator’s side and to invest into LTE from the operator’s side.
1.500
1.200
900
600
300
0
Subs [m]
2018
1.359
2017
961
2016
653
2015
432
2014
276
2013
150
2012
69
24289
82
685
260APACN America
MEAEurope
S America
0
15
30
45
60
2012 2013 2014 2015 2016 2017 2018
APAC
N America
S AmericaMEA
Europe
113%
CAGR 2013/2018
112%76%
34%
58%
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Key Findings & ChallengesGlobal LTE Subscriber Take-Up
Global LTE Subscriber Penetration [%]
Frame TemplateMobile Data Traffic Explosion
The Information society of the future is based on ubiquitous mobile data. African operators will face significant challenges to upgrade networks accordingly.
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More devicesper user
Higher speeds
More richcontent
Usage ofcloud
services
More mobile traffic
The formula for mobile data growth
GPRS
EDGE
UMTS
HSDPA
LTE 25 MBit/s
7 MBit/s
384 Kbit/s
217 Kbit/s
53,6 Kbit/s
+13.098%
2025
510.206
2011
3.866
Dat
a Tr
affic
(PB
)
LTE and Global Challenges
LTE can overcome some of the global challenges, but only if African Regulators are changing policy.
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Global Trends and the Necessity for LTE Licensing Challenges
Fixed - Mobile Convergence Users want to have internet
access to any service on any device.
Future networks in high density areas will consist of a small-cell in every building connected with fiber.
There is no more physical difference between a “fixed” or “mobile” network.
Only if LTE small-cells will have the same costs as a WLAN shrinking profitability can be avoided.
Traffic Explosion Also in Africa mobile data traffic
will double every year. Most fixed operators do not
have the financial capacities to expand backbone networks accordingly.
IxPs and CDNs lacking
Mobile operators cannot monetize new data traffic, but need to increase CAPEX and OPEX to invest in new Access and Aggregation capacities.
This will result in shrinking profitability.
Restrictive regulation African Regulators have to license
LTE asap Technology and service specific
licensing needs to be replaced by technology neutral licensing.
New spectrum has to be opened for LTE usage, existing spectrum has to be re-farmed.
Restrictions for mobile operators to offer fixed network components and services should be released.
Content
1. About Detecon – Who We Are?2. African LTE Technology and Licensing Gap3. Licensing Challenges and Solutions for African Regulators4. Licensing Challenges for Operators5. Summary and Key Take-Aways
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Issuing a license to allow the deployment of telecoms infrastructure by private entities is one of the regulatory instruments still commonly used in developing countries.
General Authorization Licensing Contracting PPP
Telecoms Laws imposes the
„Licensing Principle“
Telecoms Laws states the freedom of
operation
Everything is forbidden unless explicitly allowed
Authorization by means of a license
Everything is allowed unless otherwise specified
Specific authorization required for scarce resources only
Everything is forbidden Authorization only by
means of contractual agreements
Examples: Many BOT contract variations
Involvement of private partner in execution of a public mandate
Authorization by partnership with the private investor
No Telecoms Laws or no legal authorization
foreseen
Risk sharing between State and the private
partner
Examples
Syria Thailand Implemented worldwide
AfricaEU 27
Alternative Ways of Developing and Deploying Telecoms Infrastructure
Global Licensing Trends
Licensing and Regulatory Vision
The Regulator’s vision and objectives are important to design the licensing type, conditions and process.
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Qualification process timing, license
duration, regulatory milestones, …?
All existing operators, some existing
operators, external or internal newcomer(s)?
Market value of license depending on
all regulations and spectrum ?
Universal service obligations,
infrastructure sharing, national roaming, … ?
Maximize license revenue or economic
investment or roll-out or protect incumbent, ... ?
LTE monopoly, LTE wholesale monopoly, infrastructure or service competition, MVNOs, …?
Strategic Structuring of the Regulatory Framework
The selection process for the operators can guarantee, that only competent bidders will be licensed Restricting the bid to 2 or 3 national operators will likely lead to collusion and limit the value of the licenses
The auction design (Combinatorial Clock Auction, Sealed Bid and Simultaneous Multi Round Auction ) can determine the number of successful bidders and state objectives
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For spectrum reasons the no. of LTE MNOs has to be limited. A combination of Beauty Contest and Auction is best suited to select best capabilities and best Business Plan.
Content
Price fixed
First Come First Serve
fixed
Lottery
variable
AuctionBeauty Contest
fixed
“Hybrid” Option
+ Lottery (tied bids)
Direct Granting
fixed
fixed
Competitive selection options
fixed
fixed
variable fixed variable
variable
Others N/A N/A N/A N/A N/A
Possible Selection Methods
Licensees
Leapfrog or classical technology evolution
A technology-neutral license would allow each operator to use his technology of choice and to optimize the mix of technologies according to the individual situation.
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All operators could get a LTE license immediately.
Advantages
Immediate jump into state-of the art technology Complexity reduction with less systems and more
efficient technology, - consequently lower OPEX High data rates, good rural coverage if low frequencies
are used
Modern latency dependent services (cloud, banking, games) need LTE
Disadvantages
Possibly low LTE capable device penetration in Africa Challenging Voice over LTE implementation
Operators with 2G license could get a 3G license first and an LTE license later.
Advantages
Easy implementation of single RAN based on mature and cheap technology
Retarded negative impact on WiMAX and existing 3G operators
Usage of hidden 3G potential of existing devices in Africa
Less problems with voice and core networkDisadvantages
More than 150 operators have launched LTE, Africa would be behind leading technologies for years.
Higher total cost due to less efficient interim technology
Classical Technology Evolution Leap-Frog to LTE
GSMUMTS
LTEHSPA+
GSM
LTEUMTS
Service offering portfolio allowed Spectrum allocation
Number portability enforced Rights of way granted
Technical standards required Fees, taxes, penalties
Interconnection rules Infrastructure sharing enforced
(National) Roaming enforced Retail price regulation
Universal Service Obligations Roll-out targets and QoS rules
Legal interception requirements Privacy and data protection rules
Dispute resolution process ….
Impact on License Value…
Information Memorandum Press Releases
Invitation to pre-qualify Invitation to tender
Administrative documents Terms of Reference, Terms of
Conditions
Draft License Agreement Connected regulatory documents
specifying rights and obligations …
Business Case for LTE License
…reflected in documents and B.-Case
License Value
Accurately anticipating cash flows for specific Regulatory Scenarios is important to achieve a fair license value. The impact of the regulatory framework on NPVs is key.
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New LTE License:
Bidders will pay max. the NPV of the expected
additionalprofits from the license
Blended monthly Retail ARPA
Scenario: Initial Parameter Scenario: TD Aligned Parameter
FiberCo Debt Financing in % of total funds FiberCo TD Equity Share
80% 24,9% Revenue80 249
FiberCo Wholesale price sensitivity / (€) FiberCo CAPEX sensitivity / (cumulative mn€)
0% 0%100% 0%
0% 0%0% # 0%
Total FiberCo JV Equity (mn €) TD Equity contr. @ 24,9% Equity share (mn €) Total FiberCo debt (mn €)
2.668 664 10.672 FiberCo NPV (20 yrs- 2012-2032) Serve & SalesCo NPV (20 yrs- 2012-2032) TD total scenario NPV (20 yrs- 2012-2032)
3.049 - 820 61 Capex (mn€) NPV Effects (mn€) EBITDA
Serv&Sales Co Retail price sensitivity (€) FiberCo "Wohnungsstich"CAPEX sensitivity / (cumulative mn€)
-
2.000
4.000
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032FiberCo Serve&SalesCo
FiberCo & Serve&SalesCo
0500
1.0001.5002.0002.5003.0003.500
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
FiberCo Serv&SalesCo-4.000
-3.000
-2.000
-1.000
-
1.000
2.000
FiberCo NPV Serve & SalesCo NPV
TD total NPV effect -1.000,0
-
1.000,0
2.000,0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
FiberCo Serve&SalesCo FiberCo & Serve&SalesCo
14,25 15.801
15 16 25 25 29 31 34 35 37 38 40
-
50
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
131TD Peak Funding (mn€)/ Peak Funding
20183.597 43,78
Parameter Scenario Selection
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Baseline
Detecon uses a straightforward modeling approach to determine the value (typically used for Reserve Price) per spectrum lot.
License Valuation – Modeling Approach
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Traffic Demand Incremental Network Costs NPV over license lifetime
202520202015
Traffic
High Demand
Low Demand
Baseline
’25’24’23’22’21’20’19’18’17’16’152014
CAPEXOPEX
’25’24’23’22’21’20’19’18’17’16’152014
Alternative Scenario
-43%-35%
NPV comparison
Baseline
Alternative 2Alternative 1
Determination of traffic forecast (baseline)
Sensitivity within certain range Traffic split per operator Focus on data traffic
Calculating incremental network costs based on defined scenarios
Cost projection per operator
NPV comparison between baseline and alternative scenarios’ costs determination of savings size
Highest savings potential basis for Reserve Price
Modeling Approach for a specific (status quo) Regulatory Scenario
License Value
A “Regulatory Net Benefit Analysis” for different Regulatoy Scenarios provides a basis for the comparison of different regulatory regimes for operators and the Government.
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The Approach: Compare predicted revenue flows to government on different bases
The aim is to identify the most suitable and preferred regulatory regime
Status Quo Alternative A Alternative B Alternative C Net Gain
License (SQ1)
Spectrum (SQ2)
Profit Share.....
License (A1)
Spectrum (A2)
Profit Share.....
License (B1)
Spectrum (B2)
Profit Share.....
License (C1)
Spectrum (C2)
Profit Share.....
∑ (ALTi - Sqi) = ∆.......
For each alternative and regulatory field consider the delta between alternative and status quo If delta >0 then the government would be better off on the alternative regulatory regime If delta <0 then the government would be better off on the status quo Ranking the alternative by the highest delta will lead to the preferred regulatory regime
The aim is to identify the most suitable and preferred regulatory regime
LTE can use virtually any Frequencies
By end of 2013, 800MHz, 1500MHz, 1800MHz and 2600MHz will be most commonly deployed around the world. What should the LTE operators deploy in Africa?
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Regulators have different options to provide the right set of spectrum for coverage and capacity optimization Re-farming or declaration of
service neutrality for existing spectrum
Distributing new spectrum in the 700/800 band plus 2100-2600 band
Device availability and price for less common spectrum is key.
Spectrum is the most valuable element of the license value! Operators need a combination of low and high Mhz spectrum
LTE Frequency Spectrum (2013E) Remarks
Source: Informa 2013; IDATE 2013; Detecon Analysis
900 MHz 2700 MHz
MHz 700 800 900 1500 1800 1900 2100 2300 2500 2600
N-America 2 1 1 2 1
S-America 4 2 2 5 5 5
W-Europe 15 12 12 21
E-Europe
Middle East 1 2 3
Africa 4 1 5 1 1 3 1 5
Asia Pacific 2 2 1 8 1 1 4 2 3
SE Asia 1 1 1 3 2 3
Total 9 24 2 15 32 8 12 7 4 40
Frequency Coverage
Reserve Price Calculation – Example
Based on the benchmark results, spectrum reserve price ranges can be calculated. It is important to adjust according to country size, license duration, exchange rates, etc.
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Reserve Price Calculation for 800 MHz Spectrum (PMP in USD)
Package A2x10 MHz
800 MHz range
Package B2x10 MHz
2,600 MHz range
USD 41,300,000
USD 4,000,000
Band: 20 MHz
Population: 5,000,000
Band: 20 MHz
Population: 5,000,000
Reserve Price Calculation for 2,600 MHz Spectrum (PMP in USD)
0.574
AT
0.314
AU
0.357
HK
0.027
DE
0.004
FR
0.492
DK
0.110
CZ ES UK
0.114
KR
0.5180.260 Ø 0.413
0.739
0.413
SERO
0.715
1.267
0.048
CHPT
0.594
IE
0.5050.389
HRBE IT
0,027
0,099
0,011
0,145
0,0400,001
0,000
0,0630,082
0,039
0,069
0,0060,003
FI DEFR
0,0040,003
CH
Ø 0,04
UK
0,005
ESSESGRO
0,005
PTNO
0,004
NZNLLV
0,016
ITHK
0,269
DK
0,002
CZBEATAU
Content
1. About Detecon – Who We Are?2. African LTE Technology and Licensing Gap3. Licensing Challenges and Solutions for African Regulators4. Licensing Challenges for Operators5. Summary and Key Take-Aways
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LTE Vendor Analysis and Deployment Status
Most of LTE-enabled user devices are available for the European frequency bands. 1/3 of all LTE devices offered are smartphones, showing strong growth towards VoLTE.
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Source: GSA (Global Mobile Supplier Association), August 2013
FDD-LTE Band Devices
2600MHz band 7 324
1800MHz band 3 284
800Mhz band 20 243
700Mhz (#12,17) 224
2100MHz band 1 215
700MHz band 13 211
800/1800/2600MHz tri-band 209
AWS band 4 203
900MHz band 8 105
850MHz band 5 80TD-LTE Band Devices2600MHz band 38 1532300MHz band 40 1371900MHz band 39 452600MHz band 41 37
CameraFemtocell
0,11%
0,63%
PC Cards
0,21%Notebooks
3,06%
Tablets8,02%
Modules9,49%
Dongles 13,92%
Routers
31,22%
Smartphones33,33%
Since 2011 the availability of LTE-enabled smartphones has surpassed the number of routers demonstrating strong growth towards VoLTEdevelopment. Also, the first LTE-enabled camera has been launched.
Devices by typeDevices by LTE band
948 different LTE User Device product announcements by 100 manufacturers, including frequency and carrier variants
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Impact on Core Network
Aggregation and core network have to be upgraded to handle the exploding data traffic, if 4G is introduced. The core requires all IP and fiber upgrade.
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Expected mobile data traffic growth requires also capacity expansion in the core network, however if it is a fiber network it should not be a problem.
However, an all IP network is required - LTE does not provide circuit switched services
Builds on 3GPP IP Multimedia Subsystem specification for delivery of multimedia services
Flat system architecture; separation between “control” and “user” traffic
"Always-on" connectivity
Idle-mode signaling reduction (ISR): more efficient mobility management for UEs with multiple radio access technologies
Simplified QoS concept
IPv4/v6 support
Traffic Growth Core Network Impact
123,10
6,401,300,170,02
Fixed Double Play
8x
Fixed Triple Play
Handset Internet iPhone
5x8x
19x
Mobile Broadband
Handset Internet Smartphone
3G and 4G mobile devices will multiply data traffic, soon. This will be a major upgrade problem for the aggregation network, if 3G and 4G antennas are co-located on 2G sites.
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Operators with an existing mobile network have to evaluate the value of a specific spectrum lot based on plans for new sites versus expansion of existing ones.
Spectrum Valuation for Operators
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U2100L1800L2600
U2100L1800L2600
Baseline– expansion by new sites
U2100L1800
U2100L1800
U2100L1800
New capacity site
Alternative scenario 1 – expansion of existing sites with LTE800
U2100L1800L800
U2100L1800L800
Adding LTE on existing sites
Adding LTE on existing sites
OR
Under the existing spectrum operators might need to build additional “capacity filler” sites
When new frequencies (800, 2600) are allocated to operators they can deploy capacity by expanding existing sites
The value of the spectrum will be determined by the difference NPV of “new site” – NPV of “expanded site”
• U2100 – UMTS / 3G on 2100MHz
• L800/1800/2600 – LTE on respective frequency
Legend
Alternative scenario 2 – expansion of existing sites with LTE2600
Spectrum Value determination for Capacity Expansion Scenarios
How to monetize LTE?
LTE License prices can be monetized, if Telcos are able to increase ARPU levels compared to 3G ARPU. Forecasts for the APAC region are encouraging.
– 26 –
Key Findings & Implications3G vs. LTE ARPU – Example APAC
Source: Juniper “4G LTE Strategy” 2013; Pyramid Research “APAC Mobile Data Forecast” Q2/; 2013; Detecon Analysis; *) inflation is not taken into consideration
Currently LTE ARPU levels are significantly higher compared to 3G ARPU levels.
Although LTE ARPUs will decrease over time, it is expected that LTE ARPU levels than be kept higher than today’s 3G APRU levels (>40%*)
As LTE penetration increases, 3G penetration will decrease; less 3G revenues is generated .
Telcos in APAC (esp. in Korea, Japan, and Singapore) have adapted their LTE pricing to realize higher ARPUs.
Data flat rates are avoided as of now. Consumers are willing to pay a premium for
the new technology and the better QoSattached
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15,818,722,8
29,037,0
47,1
66,7
75,881,6
88,9
98,8
112,2
0
20
40
60
80
100
120 +41,6%
2017F2016F2015F2014F2013E2012
LTE ARPU3G ARPU
0
50
100
150
200
250
300
350
LTE price premium
%ARPU [USD]
Monetize Voice over LTE
OTT VoIP solutions will be popular in LTE considering the higher bandwidth advantage. Operators need to overcome the CS voice challenge in LTE to maintain competitiveness.
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VoLGAInitiative
1 An industry initiative that lacks operator support so far. The LTE network is simulated to be a 2G/3G network through protocol translation by a special network controller. Special terminals are needed but currently not available.
CS Fall-Back Solution
2 The terminal is pushed to connect over a co-existing 2G/3G network for conducting the circuit switched call. Currently this solution is being adopted by the early launches of LTE with dual-mode mobile devices
IMS BasedSolution
3 The IMS is a VoIP based multi-media function that is to be the future architecture for managing voice independent of access type. Currently there are no commercially successful models and its integration is complex
Circuit Switched (CS) Voice LTE Options Commercial Implications & Challenges
Several operators foresee LTE as a data only option initially
Whether in fixed or mobile use cases users will have the choice to utilize OTT VoIP solutions over the LTE data connection even better than 3G.
Additionally providing the voice service in its traditional sense is expected by users therefore putting more pressure on operators to adopt a solution quickly
As dual mode devices are most likely to find their way to the market soon, the CS Fall-Back solution is the most likely to be adopted until a feasible IMS solution is made possible
Challenges: How to best integrate voice services over
LTE into tariff offerings?
How to charge for voice services over LTE?
LTE Coverage
VoLGA elements
3G Environment
LTE Coverage
3G Coverage
Voice Call
Data Connection
Voice & Data
LTE Coverage
2G/3G Coverage
IMS
With the launch of the LTE generation new and innovative tariff designs need to be introduced focusing on customer-centric structures.
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1. Core Tariff 2. Add-on Options 3. Value-Added Services 4. Device Subsidy
General Tariff information Tiered pricing based on
data volume, speed, time, service, location etc.)
Bundled offering of various services (incl. data, voice, VAS)
Flex tariff (automated optimization for customer)
… Charges for off-bundled
usage Payment method: prepaid,
postpaid, hybrid
Various add-on options for data and other services to optionally subscribe to: “Speed Booster” “Volume Booster” “Night Pass” “24 hour Pass” “Zero-Rating Pass” Per unit charge VoLTE charge Rich Communication Suite
charge International Roaming
charge for voice and/ or data
…
General charges independent from actual tariff for using value-added data or voice services Mobile TV Any applications (esp.
for tablet & smartphones)
HD-video voice calling …
Market- and segment-specific recommendation to balance b/w LTE service penetration and high subsidy costs: “classical” subsidy
included in postpaid plans Reverse device subsidy
(Full price of device and monthly discounts on tariff plan)
Device leasing (Separate leasing agreement for device independent from tariff)
“Bring your own Device” –SIM-only offerings
…
Monetize Voice over LTE
From Core Tariff Structure to Add-on Options & Device Subsidy
Selection of Possible LTE Wholesale Strategies
Regulatory obligations, internal targets as well as the competitive situation of operators result in different strategic options for the players in the market.
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Strategic options for LTE network operators
Combined
(Retail and Wholesale)
Stand-alone
(Retail or Wholesale)
LTE WholesaleStrategy
PartneringNetwork sharingNational roaming
Joint infrastructure
Operators going for a retail only strategy strengthen their market position by providing best in class quality, offering highest bandwidths, being the innovation leader, etc.
A pure infrastructure provider with aWS only approach is mostlikely driven by regulators.Commercial offers of the playersbuild the basis for competition.
Fiber backhaul for 3rd partiesas WS product
Offering retail and whole-sale LTE services is likely to be the business model for most of the operators in the mid- to long-term.
This approach ensures additional revenues for operators.
Fiber backhaul for 3rd partiesas WS product
Infrastructure sharing focuses on cost efficient way to roll-out LTE infrastructure. It decreases the initial infrastructure investment.
National roaming provides the opportunity to costs efficiently expand network coverage.
Using LTE technology a small cell approach for the network enables operators to face the exploding traffic figures.
Partnering necessary in aggregation networks. Synergies are possible with FTTx roll-out.
Selection of Possible LTE Wholesale Strategies
The different options can be categorized in cost driven and revenue driven approaches. The strategic directions may change over time due to evolving market conditions.
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Strategic options categorized in cost-driven and revenue-driven
Cost-driven Revenue-driven
Partneringmodel 1
1a - Joint infrastructure1b - Network sharing
Stand-alonemodel 2
Retail offer only
Partneringmodel 2
National roaming
Combined offers
Retail + Wholesale
Stand-alonemodel 1
Pure wholesale
Regulatoryobligation
Please note: External and internal circumstances differ from country to country and from operator to operator.Implication: Therefore, operators as well as regulators need to consider all these aspects while developing the right
LTE WS strategy.
Please note: Furthermore, telecommunication markets are highly dynamic, which means that market conditions are rapidly changing.
Implication: Consequently, operators need to judge the short term and a long term view in their strategy. It possibly results in different options and strategic scenarios for the business model of the respective company.
Rationale for wholesale & partnering models – Project example
Cost Impacts
Increasing LTE subscriber numbers and higher bandwidth demand will require large investments into mobile infrastructure especially into RAN equipment and fiber.
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Source: Strategy Analytics (2Q/13), Detecon Research
0
2
4
6
8
10
12
2010 2012 2014 2016 2018 2020 2022 2024
35
30
25
20
15
10
5
0
GB
34,0
10,2
5,0
Subs [m]
Transmission
PSTN
Internet
RAN Core
SubscribersGB/month per sub
Upgrade
Requirem
entsPassive
Active
Core
20%
Transmission
30%
RAN
50%
45%
55%
High investments are necessary of which 80% are counting for RAN and Transmission.
MNOs seeking for ways to lower the costs for example by sharing and partnering.
% of total cost
Fast growing subscriber numbers plus fast growing traffic per subscriber will impact total capacity costs.
Content
1. About Detecon – Who We Are?2. African LTE Technology and Licensing Gap3. Licensing Challenges and Solutions for African Regulators4. Licensing Challenges for Operators5. Summary and Key Take-Aways
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Executive Summary
A fast implementation of LTE licenses are a major prerequisite for Africa to close the digital divide and realize the required ICT infrastructure for economic development.
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Development
LTE Licensing
LTE License Value
Operator Retail Strategies
Operator Wholesale Strategies
Digital Divide
2
3
4
5
6
1The African “Digital Divide” has been significantly narrowed for mobile voice, but is worse than ever for fixed and mobile broadband.
This will most likely become a bottleneck for African economic development in future, if regulators and operators do not start with LTE implementation, now.
African Regulators have to adapt their licensing, in particular license in a technology neutral way, remove fixed network licensing restrictions, price according to spectrum value corrected by regulatory obligations.
Operators need a bundle of spectrum with low frequencies for coverage and high frequencies for capacity increase. Benchmarks can be used for reserve prices, auctions to find the best bidder with the most profitable business case.
A clear solution for Voice over LTE is a major prerequisite for LTE implementation in Africa. Innovative retail pricing plans according to customer segment and LTE-lifecycle are required to monetize the LTE potential.
MNOs in Africa need to think about partnering and profitable wholesale strategies to realize a profitable LTE business case. This is in particular true for smaller, independent operators.
1,5
1,0
0,5
0,0Broadband (BB)
1,41,2
Internet
1,1
0,8
Mobile Telephony
0,80,6
Fixed Telephony
0,7
0,4
GDP Growth
(%)
Low Income EconomiesHigh Income Economies
Contact Sheet
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Dr. Arnulf HeuermannManaging PartnerDetecon International GmbH
Sternengasse 14-1650676 Cologne (Germany)Phone:+49 221 9161 1550Mobile:+49 171 225 42 17
e-Mail: [email protected]
Ties HartmanPartner
Detecon International GmbHBldg. 27 – The Woodlands Office Park, Woodlands Drive, Woodmead 2191,Sandton, South Africa
Phone: +27 11 2081850Mobile: +27 82 6565553Email: [email protected]
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