The Need for Speed Before 5G

Alex Arena Executive Director and Group Managing Director

HKT 3 November 2015

Mobile Market in Hong Kong

61% 60% 59% 59% 58% 57% 55% 54% 54% 53% 56%

39% 40% 41% 41% 42% 43%

45% 46% 46% 47% 44%

0

2

4

6

8

10

12

14

16

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Jul-15

No

. of

Sub

scri

be

rs (

'M)

Mobile Subscriber Growth Trend in Hong Kong

Mobile Penetration Rate over 220%

Source : OFCA, Oct 2015

Postpaid

Prepaid

Market Saturation with Penetration Rate over 220%

Mobile Market in Hong Kong

0

2

4

6

8

10

12

14

16

18

20

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Jul-15

Mo

nth

ly D

ata

Usa

ge (

PB

) Mobile Data Usage Trend in Hong Kong

Source : OFCA, Oct 2015

Mobile Data Usage increases 8 times in the past 5 years

The market saturation limits customer growth yet growth in data usage demands more capital investment

How to monetise data growth?

Mobile Market in Hong Kong - Challenges

How to maintain an optimal growth in mobile business

1. How to generate sustainable revenue in view of market saturation ?

2. How to restrain the cost to improve the profit margin?

3. How to keep the technology in line with data usage increase?

Data Usage

Service Revenue

Cost Good Margin

Sustainable Margin

Worse Margin

Mobile Market in Hong Kong – Pricing Strategy

Unlimited Plan

Revenue Forgone

Pay-As-You-Go

Data Usage

Service Fee Revenue

Forgone

Pay-As-You-Go

Data Usage

Service Fee

Quota Plan with thereafter bandwidth control

Evolution in Pricing Plans

1. Pay-As-You-Go (PAUG) => too expansive, not affordable, deterring use of data

2. Unlimited Data Plan => unable to manage cost, revenue foregone

3. Quota Data Plan with thereafter bandwidth control => customer complains, revenue forgone

Mobile Market in Hong Kong – Pricing Strategy

HKT is the leader in moving away from unlimited data plan in Feb 2012

In 2012, average data usage per user at 1-1.5GB per month

Majority of 85-95% users are within 3-5GB data usage

HKT decided to offer data quota plan of HK$359 for 5GB per month with thereafter HK$40/200MB, well sufficient for majority users

Users are prompted for user friendly top-up upon exceeding quota

Enter your mobile phone number and password

Click "Detail & Top-up" in "Usage"

Select a top-up pack and click

"Continue"

Top-up is complete

You can use the new top-up mobile data and check the "Top-up History" instantly

Mobile Market in Hong Kong – Pricing Strategy

HKT is the leader in moving away from unlimited data plan in Feb 2012

In 2012, average data usage per user at 1-1.5GB per month

Majority of 85-95% users are within 3-5GB data usage

HKT decided to offer data quota plan of HK$359 for 5GB per month with thereafter HK$40/200MB, well sufficient for majority users

Users are prompted for user friendly top-up upon exceeding quota

HKT is also the leader not charging local voice in Sep 2012

Voice Call Data Usage

As of today, mobile operators in HK are offering quota plans, and moving away from unlimited data plan

The data growth rate becomes rational at CAGR = 57% and the network cost is restrained at a healthy level

HKT stopped charging for local voice minutes to simplify the choice for our customers with 1GB, 2.5GB, 6GB, or 10GB tariff plans

Synergy in Market Consolidation – May 2014

Consolidation

Synergy in Network Integration

Operational Efficiency:

1. Site Consolidation with co-location

for site rental saving

for site backhaul saving

2. Switching Centre consolidation - for resilient and operational efficiency

Upon CSL acquisition, HKT integrates all 2G/3G/4G networks into a single network

User Experience and Network Quality:

1. Unify user experience across HKT and CSL customer bases to support new unified brands and

2. Maximizes the mobile broadband data speed by leveraging the combined spectrum asset

Synergy in Network Integration

CSL “45400”

C-Net

C-Net

CSL “45400”

CSL Network

CSL RAN RNC Site Backhaul

CSL Core

GGSN / PGW SGSN / MME MGW MSC HLR/HSS

HKT RAN RNC Site Backhaul

HKT Core

GGSN / PGW SGSN / MME MGW MSC HLR/HSS

HKT “45419”

HKT “45419”

H-Net H-Net

HKT Network HKT

HKT “45419” HKT

“45419”

CSL CSL Network MOCN enabled

HKT Network MOCN enabled

CSL “45400”

CSL “45400”

Phase 1: RAN Sharing to both Cores enabled by MOCN

HKT

CSL

GGSN / PGW SGSN / MME MGW MSC HLR/HSS

Common Core

RNC Site Backhaul Common RAN

HKT “45419”

Common Network

HKT “45419” CSL

“45400”

CSL “45400”

HKT CSL

Phase 2: Common Core and RAN

Synergy in Network Integration

Synergy in Network Integration

2014 Q4

2015 Q1

2015 Q2

2015 Q3

2015 Q4

Site Consolidation in good progress in accordance with plan Site backhaul replaced with 1000Mbps fiber backhaul

Synergy in Network Integration

Site Integration Progress (as of 1H15)

No of Site Total Before Integration

Zone Integrated (end 1H15) Zone Yet To Integrate

Site Count (end 1H15)

Change vs Original Before After

Serving H-Customers 2,482 1,272 1,518

1,210 2,728 +246 (10%)

Serving C-Customers 2,191 1,051 1,140 2,658 +467 (21%)

Total : 4,673 2,323 1,518 2,350 3,868 -805

Sites serving H & C Customers increased by 246 (+10%) & 467 (+21%) respectively

Total 805 redundant sites removed, representing 48% of target reduction

Activated by 3-Jul

H1

H1 H1

H1

Activated by 3-Jul

K8

K8

K7

K7

K6 K6

K9

Synergy in Fixed-Mobile Convergence

Strong Fixed Network with 87% FTTB Coverage territory wide

Providing 1Gbps Mobile Backhaul

Support super high speed mobile network

FTTH-ready 82.1%

(as of Oct 2015)

FTTB-ready 87.1%

1.5M or above 98%

HKT’s 10G PON Service Launch

Unleashing HKT’s Fiber-rich Network

2015 onward

Massive Passive Optical Network (PON) Deployment

2010 - 2014

Fiber-supported Copper

Pre - 2010

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

100

Mbps

Bro

adband S

peed (

Mbps)

HKT launched 10G PON Service on 3 August, 2015

1,000

Mbps

Beyond the first landing socket

1st landing socket

Home Networking

Home

Automation

Home

Entertainment

Home

Monitoring

& Security

Digital

Products

& eHealth

Home IT Consultancy

Fiber-to-the-Home

Broadband

Makes use of technologies to enhance your quality of living by bringing you extra comfort, convenience, and efficiency at home.

Enables Customer Media Management.

Coming in, going out and

within the home

Synergy in Spectrum

FDD 850 / 900FDD 850 / 900 FDD 850 / 900

FDD 1800

FDD 1800 FDD 1800

FDD 1800

FDD 2100

FDD 2100FDD 2100

TDD 2100

TDD 2100TDD 2100

TDD 2300

TDD 2300

TDD 2300

FDD 2600

FDD 2600

FDD 2600

FDD 2600

218.6(37.2%)

134.4(22.9%)

107.6(18.3%)

96.4(16.4%)

0

20

40

60

80

100

120

140

160

180

200

220

240

260

HKT-CSL 3HK SMT CMHK 21 ViaNet

Spe

ctru

m A

sse

t (M

Hz)

30.0( 5.1%)

Most Spectrum Share in the Market

Synergy in Spectrum

Band 3 3H

K

SM

T

HK

T (C

SL

)

HK

T

SM

T

HK

T (C

SL

)

HKT(CSL)

HKT(CSL)

SMT CMHK 3HK HKT

HK

TH

KT

CM

HK

CM

HK

CM

HK

CM

HK

1.6

MH

z

1.6

MH

z

1.6

MH

z

1.6

MH

z

1.6

MH

z

1.6

MH

z

10

MH

z

10

MH

z

10

MH

z

10

MH

z

10

MH

z

10

MH

z

0.8

MH

z0

.8 M

Hz

0.8

MH

z0

.8 M

Hz

0.8

MH

z0

.8 M

Hz

GBL GBL SMT CMHKHKT(CSL)

HKT(CSL)

CMHK

10 M

Hz

5 M

Hz

15 M

Hz

20 M

Hz

20 M

Hz

Band 7

2CC CA 300Mbps Spectrum Aggregation

through CSL Acquisition

2014 : Launched LTE Carrier Aggregation - 2CC 300Mbps

Band 3 3H

K

SM

T

HK

T (C

SL

)

HK

T

SM

T

HK

T (C

SL

)HKT(CSL)

HKT(CSL)

SMT CMHK 3HK HKT

HK

TH

KT

CM

HK

CM

HK

CM

HK

CM

HK

1.6

MH

z

1.6

MH

z

1.6

MH

z

1.6

MH

z

1.6

MH

z

1.6

MH

z

10

MH

z

10

MH

z

10

MH

z

10

MH

z

10

MH

z

10

MH

z

0.8

MH

z0

.8 M

Hz

0.8

MH

z0

.8 M

Hz

0.8

MH

z0

.8 M

Hz

GBL GBL SMT CMHKHKT(CSL)

HKT(CSL)

CMHK

10 M

Hz

5 M

Hz

15 M

Hz

20 M

Hz

20 M

Hz

Band 7

3CC CA 450Mbps Spectrum Aggregation

through CSL Acquisition

2015 : Launched LTE Carrier Aggregation - 3CC 450Mbps

+

Spectrum Aggregation through RAN Sharing

Synergy in Spectrum

Band 3 3H

K

SM

T

HK

T (C

SL

)

HK

T

SM

T

HK

T (C

SL

)

HKT(CSL)

HKT(CSL)

SMT CMHK 3HK HKT

HK

TH

KT

CM

HK

CM

HK

CM

HK

CM

HK

1.6

MH

z

1.6

MH

z

1.6

MH

z

1.6

MH

z

1.6

MH

z

1.6

MH

z

10

MH

z

10

MH

z

10

MH

z

10

MH

z

10

MH

z

10

MH

z

0.8

MH

z0

.8 M

Hz

0.8

MH

z0

.8 M

Hz

0.8

MH

z0

.8 M

Hz

GBL GBL SMT CMHKHKT(CSL)

HKT(CSL)

CMHK

10 M

Hz

5 M

Hz

15 M

Hz

20 M

Hz

20 M

Hz

Band 7

4CC CA 525Mbps

2016 : To launch LTE Carrier Aggregation - 4CC 525Mbps

+

Spectrum Aggregation through RAN Sharing

+

Spectrum Aggregation through CSL Acquisition

Spectrum Aggregation through Auction

Mobile Broadband Strategy – unlicensed Band LAA : License Assisted Access

Licensed Spectrum

Unlicensed Spectrum

LTE Carrier Aggregation

900/1800/2100/2600 MHz

5 GHz

LTE Carrier (Primary)

LTE Carrier (Secondary)

LTE Base Station

LTE Small Cell

Data

LWA : LTE Wi-Fi Aggregation

Licensed Spectrum

Unlicensed Spectrum

PDCP Layer Aggregation

LTE Carrier (Primary)

Wi-Fi (Secondary)

Wi-Fi

LTE Base Station

Data

LTE / WiFi Aggregation please visit HKT booth

LWA total at ~490Mbps WiFi at ~355Mbps LTE at ~140Mbps

Speed Meter

Mobile Broadband Strategy – licensed Band

(c) 4x4 MIMO (a) 4CC CA (b) 256 QAM

>1Gbps

256QAM 10MHz

1800MHz

2600MHz

20MHz

20MHz

1800MHz

2600MHz

20MHz

8 ~ 10x Gain

+ +

World First 4.5G 1Gbps Network using 4CC CA + 256QAM + 4x4 MIMO Please visit exhibition area for the demo

Welcome to visit the exhibition area for the demonstration

Thank You