1. Mobile Internet Startups predicting the next big win
Sanjay Jhawar Vice President, Wireless, cirlab!
July 2001

2. The Parent: CIR Group CIR = Compagnie Industriali Riunite
one of Italy’s most significant industrial groups, founded in 1976
publicly traded in Milan (CIRX)
FY2000 : revenues €2.52 billion, capital employed €1.05 billion, net income €86 million
controlled by the De Benedetti family
mission: create shareholder value through dynamic management of investment portfolio and taking an active role in management of operating companies
focus on media, utilities, telecom and automotive components
some major telecom and new media investments by CIR:
L’Espresso/Kataweb (49.6%)
leading Italian portal with 256 million monthly page views & 6.6m unique users (March 2001)
H3G (12.9%)
3G wireless license winner in Italy, currently building mobile network. JV with Hutchison Whampoa (who owns 78.3%)
broadband access providers : eVia and CasaWeb

3. De Benedetti Group Success Stories
(Hutchison, CIR)
recently awarded 3G-UMTS operator license in Italy
Europe’s largest wireless market with 73% penetration
(now part of Vodafone Group)
established in 1994 within Olivetti
2nd wireless operator in Italy and Europe with 10+m customers, 43% market share
largest value creation in Italy since WW II
(now owned by ENEL/Wind)
established in 1995 within Olivetti
the 2nd fixed line operator in Italy with +5MM customers
acquired by Vodafone in Mannesmann takeover, recently sold to Wind for $6.5bn Corporate Venture Capital Fund
established in 1985 to focus on emerging technologies
total investments for $200MM
29% IRR since inception, 35% IRR since 1992

4. Who is cirlab?
cirlab! is a seed and early-stage value-added venture investor founded in 1999 and funded to €30m by CIR Group, focused on
wireless Internet services, applications and software technology
digital media and broadband content
other software and services
Objectives
invest in European, US and Israeli businesses where Europe is the major market
exploit Italy’s mobile market size and our connections here and elsewhere
be active partners in building the business, spending a lot of time outside of board meetings working closely with management
Team backgrounds
seasoned entrepreneurs, technologists, marketers and finance professionals with top-level operational experience in the US and Europe in our chosen sectors
extensive personal networks in Italy, UK, US, France, Sweden, Israel and elsewhere

5. cirlab! mobile portfolio

6. Current outlook for mobile Internet 
3G delayed, slow start to GPRS
Operators with high debt and declining ARPU cutting all non-essential spending, looking to share 3G radio access networks
Nokia, Ericsson, Motorola, Siemens, Lucent, Alcatel cut earnings estimates, downsize and cut back vendor financing.
Comverse warns but so far nothing from Openwave.
Market slump causing venture investment slowdown : many startups struggling to raise money.
European wireless startup investments (data from Tornado Insider):
€171m invested in March
€227m invested in April
€127m invested in May
€92m invested in June

7. Active mobile Internet subscribers
DoCoMo 23.0m
KDDI m
J-Phone m
Shinsegi (Korea) 0.5m
Sprint PCS 1.3m
Verizon m
AT&T Wireless 0.6m
Nextel m
BT Cellnet 1.5m
France Telecom 0.7m
Telefonica 0.5m
Omnitel 0.1m
TIM 0.1m
Others m
Total m
Source: Motorola 5/01

8. Current outlook for mobile Internet 
Regular mobile Internet users in Europe growing from 2.5m in 2000 to 170m in 2004 (Forrester, 9/2000)
GPRS commercial network launches in several countries, many in soft launch
GPRS smart phones finally coming at the end of this year to Europe?
NTT DoCoMo on track for October 3G commercial launch
High hopes for XHTML (WAP/iMode convergence), Java phones, instant messaging, MMS
Killer app is still mobile – but now for enterprises. Momentum behind standardised mobile middleware from IBM, Microsoft, Oracle
2nd generation operator mobile portals rolling out
European mobile ASP’s iTouch (UK), Acotel (Italy) & Aspiro (Sweden) had successful IPOs in last 12 months.
No shortage of VC funds waiting the right mobile investment opportunity

9. Predicting the next big win
Value chains
Complete solution
partners already spending big money promoting the category – but missing the piece that unlocks the whole value chain they bet their business on
Gatekeeper position with few current competitors and with technology and other barriers to entry
Buyers
Compelling business driver buyers take risks to spend money with a startup that was budgeted elsewhere
End-users
End users actually care solves a real (not imagined) need. Structurally improves
value for money.
Technology megatrends
Go with the wind not against it
leverage long term investments made by others.
Market timing is critical.
Advanced technology is not enough

10. 2.5G operators spend money on?
Subscriber acquisition in highly penetrated markets and for newer entrants
Subscriber retention and ARPU protection for established players
Manage GPRS expectation gap – optimized applications
Avoiding SMS > GPRS revenue transition issues
Threat from internet portals – subscriber ownership
Migration of legacy architectures to Internet accessibility
Voic , IN, billing
Working with their portal partners, introduce new applications on Internet time yet integrate with an existing telecom architecture
Integration of user experience across architecture

11. 3G operators spend money on?
build brand - new technology image
rapid time to market
start generating cashflow asap to cover interest payments
new entrants must get established before incumbents can migrate legacy systems
fill bandwidth
price to stimulate demand, maximum possible proportion of data revenue
minimize costs of providing commodity voice services
capture customers from 2.5G
new entrants encourage number portability
allow users to migrate existing services with better QoS
new terminal types to support new applications
reduce costs of software upgrades
open services mode for new entrants
differentiated middleware, external apps
improve periods of under utilization

12. Other motivated buyers
MVNO’s
Service differentiation without Radio Access Network
Subscriber acquisition
Cross branding tie-ins
Well funded mobile portals and ASP’s
Especially operator owned entities eg Vizzavi etc.
Application integration with telecom services, to capture operator revenue sharing
Large enterprises
Mobile office
Mobile business process support - vertical applications

13. End-user value-for-money
special device +
Reduce airtime needs, device costs
Allocate bandwidth to higher value services
Increase dynamic personalization
Address intrusion
Careful with easy of configuration and use, intelligent design for latency etc.
personalized
dynamically context aware (relevant, appropriate)
airtime
urgent
anywhere anytime
productivity
entertainment
community
extra monthly fee
personalization
content adaptation
value
cost
difficult to configure
difficult to use
intrusion -
delay

14. Value chain location based services
Still evolving
Several pieces not yet in place
Issues not yet well addressed
cost of location sampling
push services
privacy/availability
positioning technology
location middleware
proximity detection
privacy & availability control
app platform
apps
transaction and billing
CPS Snaptrack Cellpoint
Signalsoft
Xypoint
InirU
iProx
Teltier
Personity
Phone.com
Microsoft IBM
Sun
Webraska
Akumitti
ItsAlive
GeePS
Airflash
uBmobile
Portal s/w
Geneva

15. Value chain mobile advertising
Early days
Many pieces not yet in place
Issues not yet well addressed
privacy
anti-spam
reverse billing to advertiser, or credits to users
balance between richness of media and cost of delivery
integrating multiple touch points – TV, billboards, Bluetooth, web, print
brand owners/ retailers
advertising agencies
media buyers
profile targeting
privacy control
availability control
context awareness (e.g location)
content transfor- mation
push services
Nike P&G Starbucks
McCann JWT
Initiative Media
Mediatude
Lumeria
Privada
Ayeca
Angara
Teltier
Personity
Teltier
Phone.com
IBM
Oracle
Phone.com
CMG
Ecrio
Airflash
interactivity
CMG, Hiugo, Iteru

16. Value chain mobile media distribution
Still evolving
Several pieces not yet in place
Issues not yet well addressed
billing other than for traffic
QoS
broadcast and point-to-multipoint to reduce spectrum needed for distribution
media creators
digital rights mgmnt
content transform -ation
transaction and billing
pt-to-pt, multicast, broadcast gateway
radio equipment
DSP CPU
Client software
Disney
Atomfilms
CNN
Universal
BMG
Sony
Microsoft
Real Networks Microsoft
Celltick
Fantastic
Streaming vendors
Ericsson
Nokia
Motorola
Lucent
ARM TI
Motorola
Intel
Analog Dev
Real Networks
Microsoft

17. Technology Megatrends
Signalling: telecom protocols >> Internet
Parlay
SIP
OSA
Internet megaservices – distributed component services, usable by 3rd party general internet applications
SOAP
.NET/Hailstorm
AOL IM, ICQ, Yahoo Messenger, MSN
Mobile mass storage
512MB compact flash cards
1GB CF size microdrives

18. Moore’s Law not the whole story
Processor power at constant cost
2X in 18mo
Hard disk storage
capacity at constant cost 2X in 12mo
340MB
1GB
Log(performance)
Mobile WAN bandwidth at constant cost: 2X in 30 mo
9.6kbps CSD
14kbps CSD
40kbps GPRS
144kbps UMTS CSD
384kbps UMTS packet
2Mbps UMTS low mobility, few users
Moore’s Law
Mobile WAN’s and 3G phones will be client-server NOT network computers t

19. Insights for potential startups
Critical gaps needing solutions
Cached media, overnight delivery, digital rights management
Server management of rich clients
Internet applications accessing telecom functions
Integrated voice/visual interface; billing; network presence
Quality of Service management on 2.5G
IP multicast/broadcast over 3G
Cross application megaservices
application pre-rating
proximity detection, cellular positioning and Bluetooth
mobile media distribution over multiple operators: a mobile “Akamai”
dynamic personalization bridging internet and telecom