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My first Qtel Group Keynote address at the Telecoms World Middle East 2012 conference in Dubai. Its been great fun to do this parting with Europe analysis and the Outlook for the next 8 years. As I will not be totally retired by 2020 please remember that you will be able to hold me accountable for some of my predictions ;-) The Good Ones, The Bad Ones and for sure The Ugly Ones ... Enjoy and shoot back!
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Telco 2020 – A Mature Market OutlookTelecoms World ME, October 2nd 2012, Dubai.
Dr. Kim Kyllesbech Larsen, Technology Transformation,
Technology, Qtel Group.
Dr. Kim Kyllesbech Larsen, Telco 2020, Telecom World ME 2012, Dubai | 2nd October 2012 | 2
Changing business models …
Mobile OperatorGarden
CS VoiceSMS
Mobile Data
NetworkSIM Bil l ing
“New”Billing OTT Apps
Regulation
New SIMs
Internetof
ThingsSmart devices& smarter OS
Coolstuff
Cloud
Virtualization
Dr. Kim Kyllesbech Larsen, Telco 2020, Telecom World ME 2012, Dubai | 2nd October 2012 | 3
EU Broadband Ambition …Digital Agenda Europe 2020.
2014+2 yrs
2012now
All Europeans
have access to
Broadband(wireless)
All have access to 30 Mbps or higher.
2020+8 yrs
50+% HH subscribe to 100 Mbps.
<80%HSPA pop coverage
60% 3G adaptation
<20% HSPA adaptation
<95%DSL
coverage
<50% cable coverage
FTTx
>20%+
100% LTE+
FTT-eNB
+>50%FTTH
&DOCSISx
+ IoT 1
1 IoT = Internet of Things.
Closing coverage gap
Dr. Kim Kyllesbech Larsen, Telco 2020, Telecom World ME 2012, Dubai | 2nd October 2012 | 4
Digital Agenda Europe 2020 ... What does it mean?
By 2013 at least 30k additional radio nodes to cover the EU 20+% population gap.
By 2020 most (if not all) base stations support LTE advanced (ca. 200+k nodes ).
More than 100MM Households connected to Fibre.
Total FTTH Investment >15 today’s fixed broadband earnings.
Internet-of-Things1:15+ Billion Devices of which 3.5+ Billion on mobile networks.
1 In Europe for every mobile device there will be 5+ IoT devices in 2020. 70% of IoT devices short-range nature primarily assumed to be connected to WiFi.
Ballpark ~ $4B on-off + $0.3B recurring
Ballpark ~ $10+B on-off wo FTTS considered
5 to 10 IoT devices for every mobile
2011 we had less than 2MM CAGR 50+%
Very (very) long term ROI horizon
Dr. Kim Kyllesbech Larsen, Telco 2020, Telecom World ME 2012, Dubai | 2nd October 2012 | 5
Dreaming … “that’s the easy part” … now the challenge!
Tera bits
Mega bucks
Mega Hz
Dr. Kim Kyllesbech Larsen, Telco 2020, Telecom World ME 2012, Dubai | 2nd October 2012 | 6
The Past & Future…. Europe 2020 vis-à-vis 2011
+6.8%pa
+7.0%pa +0.7%
pa
+2.8%pa
Inflation
2.1% paInflation
2.0% pa
Next 10 years will add 150+ MM Subs &
ONLY $13Bn of Revenues
Past 10 years added 245+ MM Subs &
$85Bn of Revenues PROFITABILITY
2002 - 2011 2011 - 2020
Dr. Kim Kyllesbech Larsen, Telco 2020, Telecom World ME 2012, Dubai | 2nd October 2012 | 7
Europe 2020 … A soft landing?
Europe Mobile Revenue
Europe Mobile Opex
Europe Mobile Ebitda
2008
2002
2020
37%
38%
Just prior to crisis
2005
35%31%
38%
Constant margin
2010
-15%
+15%
Inflationary growth
CAGR 0.8%
CAGR 1.9%
Total Revenue
Technology Cost (ca. 15% – 20%)
Usage Cost−
Market Invest SAC & SRC
−
= EBITDA (WEU ca. 37% 1)
Personnel Cost
Other Cost
−
−
−
Network Depreciation−
Spectrum Amortization−
Capex (new rollout < +10+% of Revenue)−
1 BoA ML Global Wireless Matrix 1Q11, margin data for 4Q 2010.
Spectrum invest (0.8 – 0.05 € per MHz-Pop)−
Red color represent Technology driven cost
+ New Revenue?
Defend philosophy!Stop / Slow Revenue Decline
New business!QoS, IoT,, Media, FMC, …
Efficiency gameDefend / Slow Ebitda Decline
Increased cash pressureNew technology /
Modernize
The Hunt for $30+Bn
1.9%
0.8%
Dr. Kim Kyllesbech Larsen, Telco 2020, Telecom World ME 2012, Dubai | 2nd October 2012 | 8
Internet of Things
$250Bn (total)
Social Media
$10+Bn
Mobile Entertain
$15+Bn
Mobile (consumer) Apps
$5+Bn
Sources: Apps from Berg Insight (2011), Social Media from Gartner (2011), Mobile Entertainment from Juniper Research (2011), Online Adds from MagnaGlobal (2011), Handsets from Markets (2011), Internet of Things from GSMA (2011) and Machina Resarch (2011).
Mobile M2M
$50+Bn (20%)
2020Mobile Revenues
$200Bn(60% from data)
New mobile revenue opportunities … 2020.How big could the piece of the cake be?
Online Ads
$50+Bn
Handsets$70+Bn
Dr. Kim Kyllesbech Larsen, Telco 2020, Telecom World ME 2012, Dubai | 2nd October 2012 | 9
Internet-of-Things (IoT) & Web-of-Things (WoT)
$250 Billion revenues.
$50 Billion attributed to mobile.
3.4 Billion IoT (incl. M2M) devices.
5 - 20 IoT devices for every mobile.
70% short-range devices (e.g., WiFi)
New topline source for MNOs.
$250 Billion revenues.
$50 Billion attributed to mobile.
3.4 Billion IoT (incl. M2M) devices.
5 - 20 IoT devices for every mobile.
70% short-range devices (e.g., WiFi)
New topline source for MNOs.
Europe 2020 Projections
Question! are our people-centric mobile networks the best to serve IoT?Question! are our people-centric mobile networks the best to serve IoT?
Dr. Kim Kyllesbech Larsen, Telco 2020, Telecom World ME 2012, Dubai | 2nd October 2012 | 10
We are getting older, live longer and more separated…
14%16%
17%
21%
26%
36+in 2011
56+in 2011
75+in 2020
100+MM (20+%) above 65 years.
Age group 55+ in 2011.
More 25% will live alone.
Many will have no children (at all / near)
Will have large social media network.
100+MM (20+%) above 65 years.
Age group 55+ in 2011.
More 25% will live alone.
Many will have no children (at all / near)
Will have large social media network.
Health aspects very important.
IoT will play important role.
Wearable/bio-integrated devices.
Mobile Health Apps.
Monitoring, automation & alarm.
Security, etc….
Health aspects very important.
IoT will play important role.
Wearable/bio-integrated devices.
Mobile Health Apps.
Monitoring, automation & alarm.
Security, etc….
65+ in 2020
Share of 65+ in EU25
Connected at all times everywhere
Health care spend of GDP 10% 16% 20+%
Pharmaceutical sales in $Bn 240 360 700!?
Dr. Kim Kyllesbech Larsen, Telco 2020, Telecom World ME 2012, Dubai | 2nd October 2012 | 11
22
Is internet worth massive lifestyle changes?What would you give up for 1 year of internet access.
80 8075 74
68
48
3027
Source: The Boston Consulting Group Report on “The Internet Economy in the G-20”, March 2012.
Dr. Kim Kyllesbech Larsen, Telco 2020, Telecom World ME 2012, Dubai | 2nd October 2012 | 12
The customers perspective.Need, Love and then Taken for Granted…
Source: Analysis based on The Boston Consulting Group Report on “The Internet Economy in the G-20”, March 2012.
0%
10%
20%
30%
40%
0% 25% 50% 75% 100%
Perceived Value of Internet(relative to GDP per Capita)
Taken for granted!
Internet Penetration
The perceived value of internet drops as internet becomes a commodityThe perceived value of internet drops as internet becomes a commodity
!
Dr. Kim Kyllesbech Larsen, Telco 2020, Telecom World ME 2012, Dubai | 2nd October 2012 | 13
The success of smartphones and mobile data ...Acceleration towards spectrum shortage.
Lots of Hz per customer. Higher speed. Great Quality of Experience.
Happy beginning … plenty of quality.
“Exponential” growth. Dramatic drop in Hz per customer. Demand more for efficient access. Demand for more capacity.
Tougher future … growth limitations.
Dr. Kim Kyllesbech Larsen, Telco 2020, Telecom World ME 2012, Dubai | 2nd October 2012 | 14
10 20 40 60 85 120 120 120 120 120 120
0
5
10
15
2010 2012 2014 2016 2018 2020
Total spectrum in use for mobile data
Inc
rea
se
ove
r 2
01
0
Spectral Efficiency (*)
Spectral demand (limited)
Spectral demand (unlimited)
When data demand exceeds spectral efficiency gains.”Houston, we have had a problem”.
Illustration of a European market
(*) “realWireless” report for Ofcom,: “4G Capacity Gains”, Final Report, January 2011.
3G LTE LTE-asubstitution
A lot more Complexity &Higher Capex & Opex demand.
A lot more Complexity &Higher Capex & Opex demand.
NOTGOODAT ALL
Spectral demand could exceed spectral efficiency
between 2016 - 2020.
Spectral demand could exceed spectral efficiency
between 2016 - 2020.
Leapfrog network capacity, e.g.,
Small cells topologies
Smart antennas
Early LTE deployment
Off-loading via Femto incl. WiFi
Price, Control & Policy.
More spectrum.
Leapfrog network capacity, e.g.,
Small cells topologies
Smart antennas
Early LTE deployment
Off-loading via Femto incl. WiFi
Price, Control & Policy.
More spectrum.
Mitigating “spectrum crunch”.
Dr. Kim Kyllesbech Larsen, Telco 2020, Telecom World ME 2012, Dubai | 2nd October 2012 | 15
2020Between a rock & a hard place!
Dr. Kim Kyllesbech Larsen, Telco 2020, Telecom World ME 2012, Dubai | 2nd October 2012 | 16
… The answer may be
Note: The reference to 42 comes from “Hitchhiker's Guide to the Galaxy” as being “the answer to Life, the Universe and Everything” it should not be taken more serious than the 1,000x.
Source: Qualcomm
×3 ×56×6
×1000+
Dr. Kim Kyllesbech Larsen, Telco 2020, Telecom World ME 2012, Dubai | 2nd October 2012 | 17
?
?
Leapfrog cellular network capacity by 2020 (illustration).
𝐂𝐚𝐩𝐚𝐜𝐢𝐭𝐲=𝐁𝐚𝐧𝐝𝐰𝐢𝐝𝐭𝐡 ×𝐒𝐩𝐞𝐜𝐭𝐫𝐚𝐥𝐄𝐟𝐟𝐢𝐜𝐢𝐞𝐧𝐜𝐲 ×𝐍𝐮𝐦𝐛𝐞𝐫 𝐨𝐟 𝐂𝐞𝐥𝐥𝐬In MHz In Mbps per MHz per Cell #
10×10 MHz@ 2.1GHz
HSPA+ 42 DCDL 0.97 / UL 0.34
Urban “hot” zone1,000 Macro Cells1DL ca. 10 Gbps
UL ca. 3 Gbps
LTE LTE LTE
20×20 MHz@ 1.8GHz20x20 MHz@ 2.6GHz
LTE 2x2 (cat. 3)DL 1.45 / UL 0.86
Urban “hot” zoneUp-to 2,500 Cells 2
+1,500 on-topof macro
DL 100 GbpsUL 30 Gbps
Supplied (max)
Demand
@ 2011
@ 2020
CAGR ca. 35% 2 Small cells required!!!Femto cell off-load!!!
1 Urban “hot” zone cell is defined as a cell with a range less than 500 meter, 2 Assuming 70% load as design rule.
×4 ×1.5 ×2.5×15
Dr. Kim Kyllesbech Larsen, Telco 2020, Telecom World ME 2012, Dubai | 2nd October 2012 | 18
Distribute mobile broadband traffic differentlyNatural convergence of fixed & mobile by 2020.
eNode-B
Up-to 7,000 active devicesper macro-cellular node
(i.e., urban hot zone)
100+ Mbpsshared with
up to 7,000 devices.
FTTS 100+ Mbps
Home Environmentwith ca. 2.3 people per Home
in-home backhaul Cable, VDSL or Fiber.
Up-to 100+ Mbpsshared by
2+ people.
LTE provides up-to 100 Mbpsper sector
100+ to40 Mbps
Illustration
AP (Femto: Cellular or WiFi)
Dr. Kim Kyllesbech Larsen, Telco 2020, Telecom World ME 2012, Dubai | 2nd October 2012 | 19
DWDM
DWDM
DWDM
DWDM
100 GbpsDWDM
EvolvedPacketCore
LTE Backhaul requirements will pressure the Economics.
FTTS1 100+ Mbps
LTE air-interface30mean to 100+peak Mbps
eNode
100GbE
Illustration
Dr. Kim Kyllesbech Larsen, Telco 2020, Telecom World ME 2012, Dubai | 2nd October 2012 | 20
• Regulatory support (& drive).
• Spectrum sharing (demand for efficiency).
• Vehicle for multi-party sharing.
• Regulatory support (& drive).
• Spectrum sharing (demand for efficiency).
• Vehicle for multi-party sharing.
Quantum leap in network efficiency … Cloud & virtualization and all that Jazz …
Drivers
Network business model 2020
PrivateCloud:
ProvidesMobile Core
NetworkFunctionalities
NetworkCorporation
Content & ServicesCloud
BSS & OSSCloud:
ProvidesMobile Core
NetworkFunctionalities Access
off the shelf OSS& BSS-light due
to wholesalebusinessmodel
New business model
• Data-only + VoIP QoS-transparent network.
• Dedicated OTT network services.
• New partnership business models.
• Data-only + VoIP QoS-transparent network.
• Dedicated OTT network services.
• New partnership business models.
Ultra-efficient network factory.
3rd parties delivers BSS / OSS cloud(off-the-shelf) services
3rd party, media companies, MNO/MVNO CDN & SDNs.
3rd parties delivers core network functionality.(i.e., HSS, PCRF, etc..)
Dr. Kim Kyllesbech Larsen, Telco 2020, Telecom World ME 2012, Dubai | 2nd October 2012 | 21
Rollout PhaseUK: 3G T-Mobile – 3 UK
Steady StateUK. T-Mobile UK – Orange JV (EE Ltd).
Stages of sharing benefits.The best sharing strategy depends on the business cycle and technology age.
High Capex prevention. Opex prevention. Cash optimized startup. Best network.
Little Capex benefits. Opex savings. Significant write-off. High re-structuring cost. Extended coverage.
High Capex prevention. Opex savings. Minor write-off. Re-structuring cost. Instant cell split. Better network.
< 5 years 5+ years
UMTS - GSM LTE
> 5+ years
UMTS
Passive sharing: Site Lease & Civil Works,Mast/Tower sharing, Ancillary & Rack sharing, and Backhaul Sharing.
Active sharing: e.g., Frequencies, TRXs, PAs, Baseband, CPU, ports, ….
ModernizationPoland: PTC – Orange incl. LTE
GSM – UMTS(LTE piggybacking)
Illustration
Dr. Kim Kyllesbech Larsen, Telco 2020, Telecom World ME 2012, Dubai | 2nd October 2012 | 22
Frequency(MHz)
Site(acq. + build)
Radio(electronics)
Backhaul(transport)
Backbone(transport)
Core(switch & control)
BSS(bill & care)
Capex prevention
Efficiency enabler 40%-60% < 35% up-to 50% up-to 50% Partly
possible Less likely
Opex prevention
Efficiency enabler < 35% ca. 35% scale
discountscale
discountPartly
possible Less likely
Regulatory complexity HIGH LOW LOWER LOWER LOWER HIGH HIGH
Network Sharing can provide better economics, improved market timing, and a much better network.
BTS & NODE-B
eNodeBBSS
BSS
MNO 1Core
MNO 2Core
plmn 1
plmn 2
plmn 1 + plmn 2(optional)
Dr. Kim Kyllesbech Larsen, Telco 2020, Telecom World ME 2012, Dubai | 2nd October 2012 | 23
2020 Western Europe.
2 mobile network infrastructures(per country) connected to
1 Fiber or DOCSISx network.(Only 1 GSM infrastructure per country)
2 mobile network infrastructures(per country) connected to
1 Fiber or DOCSISx network.(Only 1 GSM infrastructure per country)
Prediction 1
Most mobile devices will bethin-client based.
(more than 50% mobile data traffic being
off-loaded to fixed, cloud storage/computing)
Most mobile devices will bethin-client based.
(more than 50% mobile data traffic being
off-loaded to fixed, cloud storage/computing)
Prediction 3
Tier-2, 3 (& 4) MNOs have spun-offtheir mobile networks.
(mobile-fixed-media JVs, sharing partnerships
and mergers).
Tier-2, 3 (& 4) MNOs have spun-offtheir mobile networks.
(mobile-fixed-media JVs, sharing partnerships
and mergers).
Prediction 2
Application-orientedbusiness models rules across all
platforms & channels.(dominated by GSPs, i.e., Amazon, Google, Apple, ..)
Application-orientedbusiness models rules across all
platforms & channels.(dominated by GSPs, i.e., Amazon, Google, Apple, ..)
Prediction 4
How to manage spend
Vis-à-vis profitability
New partnership models
Monetize social media
Internet of Things
Revenue Decline
Profitability Squeeze
Business model
Breakdown
Data Tsunami
Spectrum
Crunch
TransformBusiness Model
Thank you for your interest!
Acknowledgement: Dr. Larsen acknowledge the Qtel Group’s support and interest in developing this presentation. I am indebted to my wife Eva Varadi for her great support and understanding during the creation process.
For further interest or contact please check out:http://nl.linkedin.com/in/kimklarsenhttp://www.slideshare.net/KimKyllesbechLarsenhttp://techneconomyblog.com/