LTE: Charting the future

The Operational and the Deployment challenges

What is LTE?LTE is Wireless broadband technology to support Internet (and eventually voice as well). LTE offers significant improvements over current prevalent cellular communication standards and hence is sometimes referred to as 4G (fourth generation) technology

What is LTE? What will LTE imply?•Standard for wireless communication of high-speed data for mobile phones and data terminals developed by the 3GPP•All-IP network – inherently based on Internet protocols•Not technically 4G yet, LTE as specified in the 3GPP Release 8, 9 document series does not satisfy the requirements of ITU-R for 4G

• Converging point for both CDMA and GSM

• Improved data speeds (>5X over 3G)

• Deliver enhanced video and multimedia for a better overall experience

• Improved Spectrum efficiency (data carrying capacity per bandwidth)

• Eventually, reduce data costs and voice costs

• Support for multiple bands via multi-band chipsets and devices

• Provides a global ecosystem of devices and network equipment

LTE: Implications

Subscriber

• High-speed content sharing with significantly improved throughput

• Smoother multimedia interactions for applications like video conferencing, gaming, through reduced latency

• Improved mobility and low interference, with better signal characteristics

• Enhanced security for highly sensitive data access

• Simplified roaming with operators world-wide migrating to common standard

Operator

• High Spectrum Efficiency - more capacity, less opex cost/MB (assuming high utilization)

• Co-existence and convergence of other standards

• Co-existence eventually of multiple frequency bands

• Ability to leverage advanced applications – video calling, telepresence, etc

LTE: The Convergence of technologies

CDMA2000 1X 1X EVDO EVDO

Rev.A/BLTE Rel

8/9LTE

Advanced

WCD

MA

Path

CDM

A200

0 Pa

th

4G3G

Technology Shift

Marketed by most carriers as 4G, but technically not

4G

WCDMA HSDPA HSPA-HSUPA

HSPA+LTE Rel

8/9

LTE Advanced

2000 2002 2007-09 2009-11 2012…

1After "freezing", a Release can have no additional functions added. However, detailed specifications may not yet be complete2LTE Rel. 8 with peak data rate of 300Mbps in downlink and peak spectral efficiency of 3.75 bps/Hz in uplink doesn’t meet the IMT-Advanced requirements for 4G technology (Peak data rate: 1Gbps, peak spectrum efficiency 6.75 bps/Hz in uplink)UMB/ EV-DO Rev. C discontinued by Qualcomm in November 2008Source: CDMA development group; Lit. search

LTE- Data Thru-puts

0

10

20

30

40

50

TD- LTE

Average

experience

Peak

experience

50+

HSPA+

21

EVDO Rev B

15

HSPA

7

EVDO Rev A

3

20 5 * 2 1.25 * 2 * 3 5 * 2 1.25 * 2Bandwidth ( MHz )

Downlaod throughput (Mbps )

30 50 50 50 65

Latency ( ms )

4G improves customer experience… but average experience likely below “claims”

0

1

2

3

4

5

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Sto

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uca

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min

Pla

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ing

Relative likelihood of using specific activities on a 3G/LTE network(Data users)

Basic 3G activitiesDegree of impact of 4G over 3G/EVDO

LTE will impact experience most profoundly for video applications, current user set more concerned about e-mail, social networking and basic activitiesFor most common current uses of internet (web searches, simple e-mail, etc) LTE will have only marginal experience difference

Significant difference Marginal differenceNote: Likelihood of usage values based on general population Source: Bain Wireless Consumer Survey – April 2010 (n=3429)

LTE Telco Opex

0

500

1,000

2,000

2,500

$9,000

EVDO Rev A ( 1

carrier )

2,0

25

50

6

26

EVDO Rev B ( 2

carrier )

2,5

26

63

2

32

HSPA

(10 codes )

4,3

56

1,0

89

44

HSPA

(15 codes )

5,1

59

1,2

90

52

LTE @ 2.3GHz

(20 MHz BW

)

8,6

49

2,1

62

86

Cost/ Sq Km

( $ )

10.8 6.0 8.3 7.4 3.8

Cost/Mb

(0.01 c/min )

Dense Urban Urban Rural Key Assumptions•This is a theoretical exercise and represented as an ideal case•Utilization of BTS has been assumed to be 100%•For EVDO Rev A, # carriers on a BTS =2; EVDO Rev B = 3; costs have been allocated

proportionately• LTE throughput has been taken as 30 Mbps

Not to scale

Global LTE Deployments

Countries with LTE TDD commercial networks launched Countries with LTE TDD studies, trials, deployments

9 commercial LTE TDD systems

LTE: Penetration

0

5

10

15

20%

2011 2012 2013 2014 2015

LTE Subscriber penetration (% of total mobile subsribers )

UK

Germany

France

Chile

Australia

Brazil

Spain

Indonesia

South Korea

Japan

China

USA

Source: Wireless Intelligence; Lit. search

“In the case of LTE, although the initial boom is in developed markets, there will be a loud echo afterward as operators in developing markets start upgrading from 3G.”

Analyst, Heavy Reading, Sep 2011

“LTE will be deployed in developed markets first, with wide-scale deployments in emerging markets expected after costs for equipment & handsets begin to decrease. Although potential for LTE in emerging markets in the next 5 years is limited.”

Pyramid Research, July 2011

Countries with LTE roll out begun and commercial service available in some regions

Countries with LTE spectrum auctioned but LTE deployments not yet commercial

Countries with planned LTE commercial deployments but spectrum not yet auctioned

Countries with LTE trial systems (pre-commitment)

Dev

elo

ped

co

un

trie

sD

evel

op

ing

cou

ntr

ies

LTE expected to reach subscriber traction only by 2015 in developed countries, emerging economies to be in nascence

LTE & 3G – The US Case

0

100

200

300M

US mobile subscriptions, Kagan

4G

3G

2G

2010 2011 2012 2013 2014 2015

-27%

19%

97%

'10-'15

CAGR

Even in the US, 3G subscription expected to maintain healthy growth through 2015Source: Kagan, Network Coverage & Subscriber Unit Projections (Dec 2010); Gartner, Forecast: Mobile Devices, Worldwide (4Q09, 4Q10)

Global data traffic break-up

0

20

40

60

80

100%

Share of

Subscriptions

(2015 )

LTE

WCDMA/HSPA

GSM

7B

Share of

data traffic

(2015 )

LTE

WCDMA/HSPA

GSM

3.3EB/month**

Share of key technologies* (Worldwide )

LTE TO HAVE 2.4X & 44X DATA USAGE PER USER COMPARED TO WCDMA AND GSM RESP.

OPERATORS EXPECT LTE TO HAVE SIGNIFICANT SHARE OF DATA TRAFFIC

“SK Telecom predicts that around 65% of its total data traffic will be handled by its LTE network by 2014, and it expects to have 10 million LTE users by 2015.”

Unwired Insight, Nov 2011

“The average smartphone user on their (Teliasonera) network consumed 375MB/month of data. The average broadband user on their network, largely 3G data cards, consumed 5 GB/month. But the average LTE consumer (essentially all data cards) used 14 GB – 15GB/month of data.”

Gigaom, Nov 2010

*GSM, WCDMA, HSPA & LTE together expected to comprise ~90% share of all technology subscriptions by 2015; **1 EB=10^18 bytesNote: GSM share of data traffic is low because a GSM subscriber would mainly utilize a basic phone for access and thus wouldnot exceed 60 MB data traffic per subscriber per month, even in 2015Source: Ovum, Jan 2011; Gartner, Jun 2011; Bain analysis; Lit. search

Global LTE deployments

0

20

40

60

80

100%

2011

2600 FDD

2100 FDD

900 FDD

800 FDD

700 FDD

2016F

Others

2600 TDD

2300 TDD

1900 TDD

2600 FDD

2100 FDD

900 FDD

800 FDD

700 FDD

Core band market share as a proportion of global addressable subscriber market

2600 TDD

0

20

40

60

80

100%

1800 MHz

2600 MHz

700 MHz

800 MHz

2300 MHz

2600 MHz

800/1800/2600

MHz

AWS

347*

Number of LTE devices by

operating frequencies (Oct 2011 )

“Most commercial/trial FDD LTE networks deploy the 2.6GHz band, but there are still a few rollouts including a couple of large ones using other bands (such as 700MHz, 800MHz and 2GHz) while for TDD LTE, 2.3GHz and 2.6GHz are expected to be the two major bands for global TDD LTE rollouts.”

Goldman Sachs, June 2011

2300 TDD LTE spectrums to gain traction only by 2016Currently, most devices support FDD

TDD

FDD

*Forecast calculated using average of estimates by HR and OvumSource: Global Opportunities for LTE TDD, Ovum, Feb 2011; White

Paper, Heavy Reading, March 2011; Bain Analysis; Informa Telecoms

LTE economics in India

LTE in India- Limited scope in near futureCity Sub density Attractiveness

Mumbai 4505 Profitable

Delhi 5689 Profitable

Bangalore 2760 Profitable

Chennai 1825 Profitable

Hyderabad 2190 Profitable

Kolkata 1678 Profitable

Pune 1968 Profitable

Ahmadabad 1103 Profitable

Surat 1292 Unprofitable

Coimbatore 1962 Profitable

11-50 1111 17 out of 40 cities profitable

51 -150* 366 7 out of 74 cities profitable

Economics suggest that a rational roll out would be limited to select cities over next 3-5 yearsProfitability is function of subscriber density and data usage characteristics

* Data not available for 26 citiesSource: Lit searches, Client materials; Bain analysis

LTE in India- Building scale

• Staggered launch schedule across 33 cities will limit LTE share of data traffic in the next 2 years to within 5-10%

• LTE on 2300MHz will require high density of BTS to offer sufficient coverage– LTE on 2300MHz has limited

coverage with lower wall penetration

• Customers unlikely to perceive high value in LTE vs 3G

• Other LTE spectrum holders like Aircel, Infotel not likely to launch immediately

• BSNL, Qualcomm looking to give away their spectrum slot

HSPA

EVDO

LTE

WDS subscribers (M )

Economics of 2300Mhz could strain LTE business case in short-medium term

LTE in India- The operational challenge

• Economics of 2300Mhz could strain LTE business case in short-medium term

• LTE on 2300MHz will require high density of BTS to offer sufficient coverage– LTE on 2300MHz has limited coverage with lower wall

penetration• 2300MHz LTS solution – unlikely to benefit from a scale ecosystem

as this will be among few 2300 MHz• LTE coverage likely to be pocketed, with fallback on 3G

– User Experience is limited because of nomadic coverage through mix of LTE/3G

• Voice services not expected or planned for. Internationally voice services (VOLTE) over LTE have not been developed fully

LTE Deployments: India• LTE deployments will in

India will target heavy users and early adopters

• Pricing per MB basis for heavy users at parity to 3G or even lower

• To offset nomadic coverage, 4G solution will partly be an indoor fixed Wi-Fi type solution (via CPE equipment/ IBS)

• Focus target segments:– Enterprises– SMEs (SME dense clusters)– High-end/professional

residential areas• Will try to uptrade, switch

heavy users and early adopters cream the 3G/EVDO data market

India LTE Deployments – Possible Roadmap

• 700 MHz Digital Dividend – key to economically sustainable deployments– Low CAPEX can trigger faster penetration– Larger eco-system support– Greater carpet area enhance broadband

penetration outside metros

Thank You