Mobiles in Europe Didier Pouillot Head of IDATE’s Industrial Analyses Department Europe Is moving on… Does Europe still have the Wireless lead?

2 The European mobile market today: Ahead of the rest of the world by a hair’s breadth A penetration rate of 76% mid-2002 (world average 18%, the USA 47% and Japan 56%) However an ARPU below 30 € (over 50 € in the US, nearing 75 € in Japan) European market position vs rest of the World Cellular subscriber base Mobile service revenues 1.03 billion subscribers worldwide 390 billion € estimated for 2002 Source: IDATE

3 The European mobile market today: From now on the N°1 segment in the telecoms services sector The cellular subscriber base being significantly greater than the number of fixed lines Revenues which in certain countries (in Italy particularly), represent over half of total telecoms revenues … Recent trends in the West European market Source: IDATE

4 The European mobile market today: Consolidation under way The 3 leading European Operators (Vodafone, Orange, T-Mobile) together hold almost half the cellular subscriber base in the region Operations still in the pipe-line (Telia-Sonera merger, Ben’s takeover by T-Mobile, negociations in progress over Cegetel/SFR…) Distribution of major operators’ subscribers in Western Europe (mid 2002) Source: IDATE

5 The European mobile market tomorrow: Many flies in the ointment (1) Clear slow-down in subscriber growth since 2001 Difficulties in reversing the downward trend in ARPU The share of pre-paid still remains high, despite operators’ efforts Recent trends in national cellular subscriber bases Source: IDATE

6 The European mobile market tomorrow: Many flies in the ointment (2) Operators’ with healthy operational results (the majority with positive EBIT) … … however, others somewhat financially shaky (concerning debt levels) and still unsure over their ability to finance 3G investments (illustration communiquée mardi prochain) EBITDA/revenues Source: IDATE

7 The European mobile market tomorrow: Many flies in the ointment (3) Revenues threatened by potential decisions which Regulators could take, in particular to control the tarification of call termination charges (accounting for around 20% of European operators’ revenues in 2001) along with international roaming. Termination revenue as % of total cellular operators’ revenue Nota: data are not exhaustive Source: IDATE

8 Mobile networking market Two incompatible 3G standards UMTS and CDMA 2000 roadmaps are the only IMT 2000 compliant 3G technologies CDMA 1xRTT appears to be more succesful than GPRS in most of the countries where it has been deployed as at the end of year 2002… Source: IDATE

9 Mobile handset market Dominated by the development of electronics consumer markets Market is willing to standardize its OS: Symbian OS Microsoft mobile PPC 2002 suite edition 3G handset market will be dominated by multiple classes of handsets, designed and integrated by consumer electronics companies Some network operators can pilot by their own the development of their own handsets (Orange SPV)

10 The European mobile market tomorrow: However, development prospects also remain (1) Businesses’ demand for mobile services should enable operators to deploy in a sector which, up till now, was not greatly in demand Trials with a view to combining different wireless technologies, notably cellulaire/Wifi Source: IDATE

11 The European mobile market tomorrow: However, development prospects also remain (2) Mobile Data Services may also serve more broadly as growth relays for operators, in the same lines as the developments noted in Japan and Korea. Revenues generated by mobile data services, in Western Europe (2000–2007) Source: IDATE

12 Key Questions The huge investments in UMTS: Will it be profitable in the end? Consolidation (national versus European): Will only pan- European mobile players survive? The Ericsson and Nokia success story: What about the future market share of the mobile networks & handset for the european suppliers? Which new mobile applications will gain 30% of the revenues beyond voice services…? CDMA1X versus W-CDMA… Wi-Fi impact… Mobile market fully controlled by network operators versus MVNO’s expansion… …