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Even if LTE is still technically in a pre-mature phase, it is arousing unprecedented interest from equipment vendors and operators, as it promises to fundamentally change the mobile ecosystem enabling new services and applications. However, in these uncertain economic times, there is no room for risky and poorly analyzed business decisions that will influence heavily the success of the LTE initiative. Therefore, the keystone is the adoption of a holistic and iterative approach, capable of taking into account all market, technical, economic and financial aspects, ensuring the best possible alignment between business and technology strategies, identifying clearly the main cost drivers and evaluating correctly the feasibility of the investment. This requires not focusing on the single facets of the revenue forecast, technical decisions and cost calculation, but considering all these different elements in a comprehensive and integrated view, building the business case through successive approximations. This presentation sets out the guidelines for this holistic and iterative approach in order to transform such promising technology in a real business. This presentation is supported by a business case related to the deployment of a LTE infrastructure to provide broadband services to residential users located in the five most important Italian cities.
Citation preview
LTE: how to transform a promising technology
in a real business
Andrea Calcagno, CEO & EVP
10th September 2009
Radisson SAS Hotel
Amsterdam Schiphol Airport
Company Profile
LTE Project Life Cycle
Holistic and Iterative Approach
LTE Business Case
In a Nutshell
Content
2
Company Profile
LTE Project Life Cycle
Holistic and Iterative Approach
LTE Business Case
In a Nutshell
Content
3
Company Profile
Solutions, consulting and engineering company founded in 2003 as a spin-
off of the University of Pisa.
Gained quickly a foothold in the NGN/NGS scenario focusing on standard
3G and 4G wireless technologies such as HSxPA, WiMAX and LTE.
Providing the market with:
State-of-art Business Case Analysis tools for WiMAX and LTE
Next-Gen OSS/BSS components and integrated solutions, with a focus on the delivery of turnkey WiMAX CSNs, that leverage the company’s modular and scalable WROP (access & service management) and TelcoGIS (geographic information system) platforms
Selected high-value services such as strategic consulting on technology and investment plans and engineering services for network planning and design
Regular Member of the WiMAX Forum and a Member of the TM Forum.
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Company Profile
LTE Project Life Cycle
Holistic and Iterative Approach
LTE Business Case
In a Nutshell
Content
5
Building a carrier-class LTE network is and will remain
a complex undertaking …
LTE Project Life Cycle – Initial planning stage
… and the initial planning phase is very critical for
the success of the initiative
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What will be the best addressable market
segment with a chosen technology
characterization?
What will be the effect on the P&L when
changing the CIR in a service bundle?
How will the characterization of the
technology influence the network
dimensioning?
What will be the best tradeoff between
coverage and capacity requirements in
the network deployment?
How will different types of eNodeBs/user
equipments affect the TCO?
In these uncertain economic times, there is no room for risky and poorly
analyzed decisions when facing crucial questions, such as:
Initial Planning Phase – Facing Crucial Questions
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Company Profile
LTE Project Life Cycle
Holistic and Iterative Approach
LTE Business Case
In a Nutshell
Content
8
Keystone
Holistic and iterative approach, capable of:
taking into account all market, technical,
economic and financial aspects
ensuring the best possible alignment
between business and technology strategies
identifying clearly the main cost drivers
evaluating correctly the feasibility of the
investment
Not focusing on the single facets but considering all these different
elements in a comprehensive and integrated view, building the
business case through successive approximations
9
Company Profile
LTE Project Life Cycle
Holistic and Iterative Approach
LTE Business Case
In a Nutshell
Content
10
Applicative scenario
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Applicative scenario
Operator
CLECGreenfield
SuburbanUrbanDense Urban
Scenario
Technology
2.6 GHz, 10 MHz, FDD
UserEquipment
Target Market
Consumers
Service Profile
Mobile Broadband (Flat data + voice)
Business case analysis tool
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The business planning activity can be better done when equipped with an
appropriate business case analysis tool that allows performing four main
integrated analyses:
Market Analysis: estimating the potential market and revenues for
4G LTE services
Technical Analysis: dimensioning the network infrastructure to
derive the required bill of quantities
Economic & Financial Analysis: calculating all key economic &
financial projections and indicators
Scenario & Sensitivity Analysis: analyzing the influence of
parameter and boundary condition changes
Market Analysis – Territorial Data
Useful information for the coverage and capacity planning
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Market Analysis – Service Profile
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7 Mbps
DL PIR UL PIR
Internet Access VoIP lines per user
Technical Features
2 Mbps1
€ 27.2
Monthly Service Fee
Pricing Policies
VoIP
Data
One time Activation Fee
Monthly Lease Fee
€ 200
€ 150
€ 5User Equipment Distribution
80%
20%
DL CIR
64 Kbps32 Kbps
UL CIR
Market Analysis – Users and Revenues Forecast
The potential market and turnover have been estimated taking into
account the Bass Diffusion Model (inclination to innovation and ‘word of
mouth’ phenomenon):
Penetration rate @ Y10: 9%
Churn rate @ Y10: 7%
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Net Users @ Y10 324,774
Revenues @ Y10 130 M €
Technical Analysis – Technology
Parameters:
Operating Band: 2.6 GHz
Channel Bandwidth: 10 MHz
Duplexing Format: FDD
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Technical Analysis – Equipment Configuration
Enhanced NodeB User Equipment
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Technical Analysis – Performance
The LTE performance has been evaluated by taking into account:
Link Budget Analysis (eNB/UE configuration, margins, etc.)
Path Loss (Cost 231 Hata Model)
Modulation & Schemes distribution
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Average Radius: 0.8 ÷ 2.34 Km
Average Capacity:
Up Link 7.32 Mbps
Down Link 16.24 Mbps
Technical Analysis – Network Dimensioning
A lot of relevant parameters have been taken into consideration:
Down and up link capacity demand per year
Existing backbone infrastructures, sites and radio links
Wireless backhaul technology distribution
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478 eNB
1434 Logical Sectors
3 MME
3 S-GW
3 P-GW
46 Radio Links
Technical Analysis – Network Roll-out
The network roll-out has been defined in terms of the percentage of year-
on-year deployed infrastructure by taking into account capacity
requirements
Steady-state condition (100% roll-out) @ Y5
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Economic & Financial Analysis – CAPEX and OPEX
To forecast expenditures, all main CAPEX and OPEX figures have been
defined and calculated
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Total Cumulated CAPEX 118 M €
32% UE
28% eNB
Total Cumulated COS 255 M €
40% VoIP
23% eNB
Total Cumulated SG&A 110 M €
48% Mkt & Sales
30% G&A
Economic & Financial Analysis – Profit & Loss
EBITDA > 0 @ Y3
EBIT > 0 @ Y4
Net Income > 0 @ Y5
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Economic & Financial Analysis – Cash Flow
Peak Funding 77 M €
PBP 6.3 Years
NPV @ Y10 60 M €
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Scenario & Sensitivity Analysis
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Company Profile
LTE Project Life Cycle
Holistic and Iterative Approach
LTE Business Case
In a Nutshell
Content
25
In a Nutshell
26
A holistic and iterative approach that takes into account all business and
technology aspects since the outset is the keystone
The business plan activity can be better done when equipped with an
appropriate business case analysis tool, which has to have some key
characteristics:
Based on real best practices
Equipped with calibrated, LTE-technology-related, market, technical and
economic models
Presenting manageable input and output with meaningful correlations
Supporting an iterative way of working by design in order to optimize results
TEA|LTE by WiTech supports and provides exactly all of the above
Thank You
for
Your Attention
WiTech S.p.A.
Via Giuntini 25
56023 Navacchio di Cascina PISA
Italy
www.witech.it
Phone: +39 050 775 056
+39 050 754 719
+39 050 754 720
Fax: +39 050 75 47 22
E-mail: [email protected]
Andrea Calcagno
CEO & EVP
Phone: +39 050 775 056 int 203
Mobile +39 347516 44 01
Back up slides – The Business Case Analysis Tool
TEA|LTE
Andrea Calcagno, CEO
10th September 2009
Radisson SAS Hotel
Amsterdam Schiphol Airport
TEA|LTE
Empowering 4G LTE players with an effective business case analysis
tool to set a solid foundation for a successful initiative
Unique and integrated application
Built over five years of extensive industry experience with
strategic assignments and projects for major operators and equipment
suppliers
Full compliant with the latest version (Release 8) of the LTE standard
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TEA|LTE – Key Characteristics
Analyzing the business case for the LTE initiative with a holistic approach, in an
integrated and iterative way, taking into account all critical aspects
Supporting a fast and simplified configuration of more than 500 input parms
with a number of them pre-set to typical/recommended values in the technical part
Enabling the user to view results instantly in an animated graphical format
through a dashboard-styled and very easy-to-use GUI
Compliant with the LTE standard
Allowing the definition of custom bands
Manual setting of number of Users, eNodeBs, Logical Sectors, Radio Links, MME,
S-GW and P-GW
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Estimating the potential market and revenues for 4G LTE services
Dimensioning the network infrastructureto derive the required bill of quantities
Analyzing the influence of
parameter and boundary condition changes
Calculating all key economic &
financial projections and
indicators
TEA|LTE - Four Main Integrated Analyses
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Estimating the potential market and revenues for 4G LTE services:
Extension of the geographical areas (up to 5) to be served and their specificscenario distribution
Market segments (up to 6) to be addressed
Service profiles (up to 6) to be offered
Market segment penetration per year
Impact of churn
TEA|LTE – Market Analysis
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Dimensioning the network infrastructure to derive the required bill of quantities:
Technology characterization
Type of eNB (up to 3) and UE (up to 6)
Path loss model for the link budget analysis
Down and up link capacity demand per year
Existing backbone infrastructures
Existing sites
Existing radio links
Wireless backhaul technology distribution
TEA|LTE – Technical Analysis
33
TEA|LTE – Economic and Financial Analysis
Calculating all key economic & financial projections and indicators to assess the feasibility of the initiative:
CAPEX & OPEX
Depreciations
Interest rate on borrowings, tax rate, discount rate
Financing
Equity
Perpetual growth
34
TEA|LTE – Scenario and Sensitivity Analysis
Analyzing the influence of parameter and boundary condition changes, toidentify the most critical factors for the success of the initiative
Allowing a fast and iterative fine-tuning of the business case, in real-time andtotal privacy
Presenting the results in an animated graphical format instantly from thedifferent Market, Technical, Economic & Financial perspectives
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TEA|LTE – Comprehensive Report
Automatically compiled and published in editable and PDF formats.
Containing a complete summary (with tables, diagrams and charts) of:
Inputs and assumptions
Results of the market analysis
Outcome of the technical modeling
Economic and financial statements for up to ten years
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