researchconsultingmeasurementcommunitynews Wireless and IT market in U.S. 3rd December, 2003 송 석헌 Principal Analyst Option 2. Intro Title Page

Copyright © 2003 Agenda Wireless Market IT market overview

Copyright © 2003 Time to Panic? 0 50, , , , , % Mobile Subscribers Penetration Subscribers in Thousands 50% Adoption rate and revenue are slowing, profits are decreasing, there is a slow uptake of data services: price war, consolidation and panic. Prices continue to decline through Hard push in selling data services. ARPU is flat, churn high.

Copyright © 2003 Preview into US Wireless Market High Competition —Urban markets have as many as 7 competitors, rural areas will differ. Prepaid % is Low -Prepaid % of total subscribers is less than 10%, but this is changing. Cost to end user port will be less than $25 in steady state — Cost to carrier to do porting after initial system investment will be less than $10 per port. The cost to end user could come down to zero in a competitive market. Time to Port Expected to be Quick — Time to port a number is expected to be 2.5 hours, Carriers will tell customers 6 to 24 hours. Wireline to Wireless Substitution — Initially expected to a minimal, long term factor depends on QoS, Price, 911 Issue, data services. Estimate 1 to 10% of ILEC base away from them, in first year. Ubiquitous Wireline Rate Centers and 6 or more competitors. 50%or greater would be eligible to be ported. Porting takes a couple of days, Wireless Carrier interest. Business vs.. Consumer— Gartner End User Survey Consumers 35%say they would switch if they could keep their own phone number. Business 43% say they would switch if they could keep their own phone number.

Copyright © North American Cellular/PCS Network Evolution TDMA (circuit) 9.6k GSM (circuit) 9.6k EDGE (packet) 384 Kbps GSM GPRS (packet) 115 Kbps UMTS “WCDMA ” 2M <20 Kbps144 Kbps384 Kbps2000 Kbps iDEN 14.4k 1996 Pre Kbps AMPS 14.5 Kbps 2.5G 3G3G 2G2G CDMA IS-95 (circuit) 14.4 Kbps CDPD (packet) 19.2 Kbps CDMA 1xEVD V 5.2 Mbps CDMA 1xEVDO (packet) 600 Kbps to 2.4 Mbps CDMA 1xRTT (packet) 155Kbps

Copyright © 2003 Korea StrongModerateWeak TechnologySocial AttitudeMarket Korea Phone Korea Consumer Korea Business U.S. Phone W. Europe Phone W. Europe U.S. Pager U.S. Consumer U.S. U.S. WLAN ROW WLAN Regional Status

Copyright © 2003 North American Mobile Service Revenues In Billions

Copyright © 2003 U.S. Wireless Data Subscribers

Copyright © 2003 Regional ARPU Comparisons

Copyright © 2003 Application Are The Key to Driving Revenues (Revenue Numbers In $Millions) U.S. Wireless Data Revenues

Copyright © 2003 Telemetry Machine to Machine Communications Broadband Service Other Revenue Options

Copyright © 2003 Applications Ecosystem End UserCarrierBillingDistributorPublisherDeveloper Customer care Tira Wireless, Club Noika, Handago Jamdat, Digital Bridges, Summus EA Sports, Blast Mobile, 686 Studios, Sony Pictures Qpass, 4th Pass Sprint, T- mobile, AWS, VZ, Nextel, Cingular

Copyright © 2003TransactionsUsage Subscriptions Advertising Revenue Categories Telco revenue Adver- tising Telco revenue RevenueGenerated Call fees Kickback fees Transaction commissions Frequent One-time usage Kickback fees MarketOfferings Mobile Internet Package Carrier’s New Revenue Structure Merchan- dising Content, products & services Call center ISPPortalMobileservices Fees per ad

Copyright © 2003 Consumers will represent 70 percent to 80 percent of wireless data users; however, enterprise users will represent 70 percent to 80 percent of wireless data revenue. Enterprise users must recognize this and use it as a lever when negotiating with service providers, application vendors and device original equipment manufacturers. UsersRevenue Enterprise Users Will Enterprises Adopt Mobile Technology?

Copyright © 2003 WSP Data Strategy CONSUMER ENTERPRISE Nextel Verizon Wireless T-Mobile SprintPCS Cingular Mobitex Cingular GPRS AT&T Wireless

Copyright © Wireless Service Provider Magic Quadrant Verizon AT&TNextel T Mobile SprintPCS Cingular Western Wireless Qwest Wireless USCC Alltel Vision Execution

Copyright © 2003 Terminal Market share - North America Motorola, Nokia and Samsung, respectively, continue to hold the top three market share positions LG, thanks to a leading share position at Verizon Wireless, looks quite well-positioned to make a strong run at the No. 3 spot

Copyright © 2003 There will be winners and losers from WNP Business and Consumer Markets will act to different degrees WNP is a small factor in Churn, after implemented churn is expected to increase from.1 to.3% in urban markets. Less in Rural Markets How is Wireless Number Portability Going to Impact?

Copyright © 2003 Key Factors for Churn Wireless Number Portability Competition —The number of competitors in the market and how those competitors will compete and react in the market will be a factor in how the churn rises in a market due to WNP. Penetration of market increases stakes in zero sum game. Cost to Port Number —The cost to end user for number porting will determine how attractive a number port is. Time to Port Number — The time to port a number may provide some minor inconvenience but should not be a major factor, unless a new service or service plan is desired. Postpaid/Prepaid Ratio —The higher the percentage of postpaid customers to prepaid customers should dampen the effects of WNP due to contracts, relationship with customers, and time to react to customers request. General Customer Satisfaction —The characteristics which determine churn such as coverage, service quality, price, customer service will be the most important determinates of churn.

Copyright © 2003 Cost for Switching Service Providers Source : Gartner Research (Dec. 2003) According to our latest model, to switch 1,000 users from one service provider to the next can cost more than $300,000.

Copyright © 2003 Country Hong Kong Australia UK Italy Portugal Germany Competition High Moderate High Moderate High/Moderate Time/Cost 1-2 Days/$26 3 hours/$8 9 Days/$55 5 Days/$8 27 Days/$12 NA/$25 Churn Increase Decrease Flat Increase Decrease Source: Gartner, Inc. Churn Impact of WNP by Country

Copyright © 2003 IT Budget Growth Has Stalled IT Budget Increase Over the Previous Year (%) The average company spends about 4% of gross revenue on IT. The industries that spend the most of IT are financial services, IT and telecom- munications. The typical firm spends about $6,600 per year per employee on IT. IT headcount comprises 5% to 7% of the total employee population in the typical enterprise.

Copyright © 2003 The Current Climate of IT Market Companies want to leverage their current IT investments, and only then, buy more. IT baseline costs are significant, and rising. (Baseline makes up about 75 percent of operating budget.) Money is tight, so IT prioritization is key. Business managers are savvy about IT and want to have more control over IT decisions. IS faces threat of outsourcing. CFOs are watching/approving IT purchases. Business value of IT is finally being measured.

Copyright © 2003 IT Service Services by Region, Unit : Million USD

Copyright © 2003 U.S. IT Service Market Size and Forecast by Segment Unit : Million USD

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