1. The European way to think the Digital World www.idate.org Mobile services IDATE International Conference Montpellier (France), 23 November 2005 Frédéric Pujol Head of the mobile services division, IDATE f.pujol@idate.org

2. IDATE © 2005 www.idate.org 2 3G, when media meets mobile 23 November 2005 Mobile services in Western Europe  Mobile subscribers and distribution  2 billion mobile subscribers worldwide of which 1.4 billion using GSM technology  Western Europe mature market seeking new revenue streams  EU15 + Norway & Switzerland Source : IDATE (in « 3G economics » report)

3. IDATE © 2005 www.idate.org 3 3G, when media meets mobile 23 November 2005 ARPU (Average Revenue Per User) Western European: total ARPU Close to 85% of data ARPU= SMS & MMS in 2005 Non messaging data ARPU Non messaging data ARPU will grow from 15% of total ARPU in 2004 to 35% in 2010 Voice represented 83% of the total ARPU in 2004 and will account for 71% in 2010 Source : IDATE (in « 3G economics » report)

4. IDATE © 2005 www.idate.org 4 3G, when media meets mobile 23 November 2005 Western Europe  Differences between European mobile markets MoU (Minutes of Usage) reflect price levels Source : IDATE (in « 3G economics » report)

5. IDATE © 2005 www.idate.org 5 3G, when media meets mobile 23 November 2005 ARPU - Trends  Western Europe (€)  USA (2004)  €42 Cingular, T-Mobile  €51.6 Sprint PCS  €56.7 Nextel  €46.7 Q2 2005  South Korea  €33.5 (Q2 2005- Merill Lynch)  €36.5 (SKT Q3 2005) Germany Italy France UKSweden Source : IDATE (in « 3G economics » report)

6. IDATE © 2005 www.idate.org 6 3G, when media meets mobile 23 November 2005 ARPU - Japan  Average ARPU 2004: €52 (DoCoMo & au)  3G ARPU: FOMA/DoCoMo: €70 – 34% data KDDI: €53 – 26% data Vodafone: €44 – 22% data

7. IDATE © 2005 www.idate.org 7 3G, when media meets mobile 23 November 2005 3G development  3G growing faster than GSM in the early 90s  100 WCDMA networks launched worldwide (11/2005) Hutchison is the first 3G operator Major mobile operators have launched 3G 3G represents 4% of mobile subscribers in Western Europe 3G expected to reach 25 million subscribers at end 2005 Source : IDATE (in « 3G economics » report)

8. IDATE © 2005 www.idate.org 8 3G, when media meets mobile 23 November 2005 3G issues  Real launch of 3G by major players in Western Europe -3G brings higher data rates, capacity (and unlimited packages for voice)  Flat-rate tariffing for data: -KDDI : € 30 A trend in Western Europe – which tariff ?

9. IDATE © 2005 www.idate.org 9 3G, when media meets mobile 23 November 2005 Mobile operators: M&A - Financial results  USA: Cingular/AT&T Wireless, SPRINT/Nextel  Recent M&A in Western Europe:  Financial results:  EBITDA margins generally in the 30-50% range  Cash available for 3G investments

10. IDATE © 2005 www.idate.org 10 3G, when media meets mobile 23 November 2005 Mobile VoIP  New technologies now enable end-to-end mobile IP communications (UMTS TDD, UMTS FDD: release 6, CDMA 2000 EV-DO rev.a, Flash-OFDM, I-Burst, WiMAX)  A real threat: -New technology enablers -Dual-mode terminals -FMC -Existing services  Wireless VoIP network technologies and availability:  Impact on voice ARPU likely  Western European mobile operators seem reluctant to introduce dual-mode handsets

11. IDATE © 2005 www.idate.org 11 3G, when media meets mobile 23 November 2005 Mobile data services. Future growth generators ?

12. IDATE © 2005 www.idate.org 12 3G, when media meets mobile 23 November 2005 New mobile services: music  Music -From ringtones to full track downloading -Mobile music value chain:  Main questions -DRM (Digital Rights Management) -Which business model ? -Player and memory also included in the terminal is there a risk for a camera phone effect ?

13. IDATE © 2005 www.idate.org 13 3G, when media meets mobile 23 November 2005 New mobile services: mobile TV  Mobile TV -Streaming TV on 3G is attractive but is not a medium-term solution  Requires too much bandwidth on 3G networks  Broadcast mode is necessary  New frequency bands are necessary -A host of experiments being conducted -Choice of the technology (DVB-H, T-DMB, S-DMB, MediaFlow, MBMS)?  DVB-H and T-DMB in Western Europe -Content? Dedicated or not? -Which business model?  Relationship between the mobile sector and the media sector for broadcasting?

14. IDATE © 2005 www.idate.org 14 3G, when media meets mobile 23 November 2005 Japan 1/3  General situation -Penetration rate of 69% in May 2005 – 37% are 3G subscribers -Decreasing ARPU levels: ARPU to move into Yen 6000 (€ 43.5) range -Increasing competition with more pressure from KDDI and potential new entrants -Number portability’s expected impact on churn  Situation of DoCoMo:  The first WCDMA (UMTS) operator  Still controls 56% of mobile subscribers in Japan  Revenues and profits down  i-mode: transition from 2G to 3G and the impact for data flat rate  Felica Networks (JV with Sony)  Retention strategy ?  From wallet-type to credit card functionality  Interest from KDDI & Vodafone

15. IDATE © 2005 www.idate.org 15 3G, when media meets mobile 23 November 2005 Japan 2/3  KDDI’s impact  Controls 27% of mobile subscribers in Japan  Very aggressive on data pricing (flat-rate) and 3G growth with CDMA 2000 1X/ EV-DO  Services  Games (« EZ Game Street »)  Music downloading (« Chaku-uta full »)  Mobile auctions  Blogs  Analogue TV €30

16. IDATE © 2005 www.idate.org 16 3G, when media meets mobile 23 November 2005 Japan 3/3  New entrants -2 new mobile licenses in the 1.7 GHz band (paired spectrum):  Softbank BB  eAccess These two players are already in the DSL business in Japan -one new mobile license in the 2 GHz frequency band (unpaired spectrum: TDD technology likely – IMT 2000 mandatory?):  IP Mobile (TD-CDMA tests) Willcom (evolution of the PHS network) Livedoor (iBurst technology from ArrayCom) Yozan will open a commercial WiMAX service at 5 GHz before end 2005  Licenses awarded to Softbank, eAccess and IP Mobile in November 2005

17. IDATE © 2005 www.idate.org 17 3G, when media meets mobile 23 November 2005 Key questions Impact of FMC, data flat rate & mobile VoIP? 123 Which role for Internet players: Google, MSN, eBay...? Mobile broadband: which applications/cost for HSDPA? Regulatory environment?  MVNOs, newcomers in the mobile sector  Termination rates, SMS 45 Impact of new mobile services (TV, music...) on ARPU?