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Nikolai Ivanov CEO INSTIGATING A PARADIGM SHIFT IN THE FIBER OPTIC INDUSTRY.

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Presentation on theme: "Nikolai Ivanov CEO INSTIGATING A PARADIGM SHIFT IN THE FIBER OPTIC INDUSTRY."— Presentation transcript:

1 Nikolai Ivanov CEO INSTIGATING A PARADIGM SHIFT IN THE FIBER OPTIC INDUSTRY

2 Created pilot device 50 industry companies interested in Beta testing Attained $2 million in investments Large-scale production planned for August‘15 Revenues of $20 million expected by 2016 KEY FIGURES

3 * Jerome Tassel, TV architecture & Security Director of BT at BBWF 2014 FUTURE PROBLEM AND MARKET

4 * Jerome Tassel, TV architecture & Security Director of BT at BBWF 2014 FUTURE PROBLEM AND MARKET

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7 TEAM 15 years work experience in the fiber optic industry Maxim Gladilov Previously, the technical officer of a major producer of passive equipment for fiber optic networks (SvyazPromOptica) Mikhail Kolosyanko Founded service center network for fiber optic installation devices

8 TRACTION

9 Fiber Holders Easy to handle Touchscreen TFT 4,3" screen Function keys User friendly interface Rubber cover Proper protection Fast heater 60 mm protective sleeve heater OUR PRODUCT Replaceable fusion cartridges No regular maintenance needed

10 BUSINESS MODEL Parts manufacturing OperatorsConstruction organizations Maintenance services Assembling Devices + components

11 COMPETITORS Parameter Sumitomo Quantum Type- QH201e-VS FITEL S123Cv2 Fujikura 12S SWIFT F3 Jilong KL-500 MTC AFS-10 Splice loss, dB (SM) 0,05 0,030,020,05 Dimension, WxDxH mm, Volume 110x140x76 (1170 см 3 ) 159x231x104 (3820 см 3 ) 121x162x57 (1117 см 3 ) 140x179x87 (2180 см 3 ) 125x105x11 3 (1483 см 3 ) 121x162x57 (1117 см 3 ) Weight, g (with battery) Battery capacity, cycles splice+heat Price, Russia, th. rub N/A One splice cost, rub/splice N/A 1 2,211,952,012,23 1,53 1 Haven’t entered russian market yet 2 Kit price (splicer plus several related instruments)

12 MARKET OPPORTUNITY $300 mln** $467 mln** $1 bln 2020* (*VTB Capital prediction) ** ElectroniCast Fiber Optic Fusion Splice Equipment Global Consumption Market Forecast (link)link

13 3Q 2013 – 3,5 mln abonents; 2016 – 33 mln households to be connected via fiber optic networks Reduce CapEX costs: 2-3% by RTC Strategy 2013 (link)link RUSSIAN MARKET Main priority is to accelerate deployment of fiber optic last miles

14 PREVIOUS INVESTMENTS Technology for automatic optical fiber splicing AFS-10 Prototype Pre-production model $ 3M capitalization

15 DEVELOPMENT PLANS DEC 2014JAN - FEB 2015 AUG 2015 Small-scale manufacturing Sales Beta testing Medium-scale production

16 DEVELOPMENT PLANS 2015 Prototype development of AFS-30

17 Investments: $ (15,5% share) Target: Beta-test acceleration INVESTMENT PROPOSAL MAR 2015 AUG 2015 Exit: Strategic investor buys a share

18 Nikolai Ivanov CEO at MaxTelCom +7 (906) Ready for collaboration

19 PARTNERSHIP

20 Extended version

21 INSTIGATING A PARADIGM SHIFT IN THE FIBER OPTIC INDUSTRY

22 Global problems Sources: ; Tele.net.in: “… most fibre- related issues result from improper installation and fibre handling practices…” China Telecom : “… encourage technology innovations to reduce the cost of equipment…” Chunghwa Telecom: “…difficulty is the fiber installation on the customer side…” PT. Telekomunikasi Indonesia: “… Skilled Workforce for massive FTTH deployment…” EXFO: “…fast return on investment … in any new deployment … requires the hiring of many new technicians who have little to no experience…” The Globe and Mail: “… The primary reason for not building FTTH networks in Canada’s big provinces is cost. FTTH installation costs per subscriber are typically in the $1,000 to $1,500 range.…” More bandwidth and less loss Metal wires are widely replaced by optical fibers ISSUES

23 Problem High TCO Existing splicers costs $ $ One splice cost starts from 4 cents 1 without labor costs and services Annually $ cost per one working team only because of splicer maintenance High skill requirement Devices are designed to use by professionals Need high skill for maintenance Difficult to effectively scale optical networks deployment Now annually $ cost per one working team Large size and weight Existing splicers weight up to 2,3 kg 3 Don’t fit in the hands Hence it’s difficult to work effectively in hard-to-get places (e.g. underground utility vaults or transmission towers) Long duration of splicing The fastest speed now is 27 sec/splice 1 Hence it takes 5 hours 5 a day for continuous splices without any delay Low automation level More than 50% of splicing processes are manual Lack of Russian producers Some segments in Russia can use only Russian equipment Latent demand Niche: handheld fusion splicers with cladding alignment 1 see “Competitors” slide 2 assuming 10 splicers per team with each making 300 splices daily 3 FITEL S178A v2 4 Assuming 10 workers per team everyone having monthly salary $ Assuming 300 splices daily

24 Our solution: AFS-10 Moreover: Increased operability in dirty and wet circumstances due to water- and dust- protecting housing. Lower personnel qualification requirements due to automated splicing process and intuitive controls. Intuitive interface. Button and touchscreen controls are available. Ease of maintenance due to remote services provided. Extended memory due to support of SD cards Replacement fusion cartridges* innovative technology Resource of one cartridge – more than 500 splices Compactness and lightness Size parameters: 121(W) х 162(L) х 57(H) mm. Weight: 835 gr. Changeable accumulators Capacity: 6000/12000 mA*h No regular maintenance needed Electrodes are easy to change - mechanics hasn't to be adjusted and cartridges can be easily replaced like Gillette razors. No need for additional personnel training Easy to use in hard-to-get places Autonomy of work Large number (150) of splice/heat cycles via one battery * Cartridges contain high-voltage electrodes, mirrors and optical fiber basing elements

25 World fiber optics development Households connected directly to fiber and apartment connected via basement fiber termination (FTTB): European households have a stable growth tendency ( fact and prediction).*** Russia has rather good household optic fiber penetration but FTTH/FTTB ratio is very unbalanced. **** *** European FTTH Forecast : Behind The Numbers (link).link **** GPON technology. Development in Russia and the world (link).link

26 World fusion splicer market World fiber splicer market has grown 1,5 times (from $300 million to $467 million) in 4 years. It should grow almost a quarter more in a year (up to $550 million)* average annual growth is expected about 10%** * По данным исследования ElectroniCast Fiber Optic Fusion Splice Equipment Global Consumption Market Forecast (link)link ** По данным исследования Fiber Optic Fusion Splice Global Market Forecast & Analysis (February 2014) (link)link ***По данным исследования NewsWireToday (link)link

27 Industry leaders’ results * Sumitomo Annual Report 2013 (link)link Department restructuring has been launched in the opto- electronic devices business, with the principal policies to restore profitability being an accelerated shift to overseas production, consolidation and closure of some production bases in Japan, and withdrawal from unprofitable businesses accompanied by a renewed focus on development themes. At the same time, company have been shifting personnel to other units within the Group to increase efficiency. As part of these initiatives, Sumitomo integrated and transferred optical device development and manufacturing operations carried out at the Osaka plant of our subsidiary Sumitomo Electric Device Innovations, Inc. (SEDI) to Sumitomo Electric Photo-Electronics Components (Suzhou), Ltd., and folded production of the mother factory into SEDI’s Yamanashi plant. At the end of June 2013, company closed the SEDI Osaka plant* As we can see on the chart, net sales have fallen but the Optical & Electronic Devices segment is stable

28 * Furukawa (Fitel) Annual Report 2014 (link)link Japan: Company have achieved effects from structural reforms by merging production bases. Europe and United States: Cuts to fixed costs during the second half of FY2014 made a full contribution and the market is continues to move towards recovery. Brazil: LAN solutions and fiber optic business expanded. Demand for new products (ITLA/ integrated signal light sources) to supply next-generation high-speed telecommunications (digital coherent telecommunications) expanded. As we can see on the chart, net sales are stable. There was an operating income fall in , but company forecasts growth in the future Industry leaders’ results

29 * Fujikura Annual Report 2014 (link)link Company plans to complete business restructuring by the end of FY2014. At the same time, company is identifying core technologies and businesses to narrow the focus. Overseas, Fujikura will engage more closely with local partners in emerging countries to build Infrastructure businesses. Two major overseas bases are Indonesia and Brazil, where company will continue to invest time and resources. Fujikura intends to introduce new products and features in wavelength selective switches, fiber lasers, and fusion splicer. Fujikura demonstrates sustainable growth in power & telecommunication division Industry leaders’ results

30 Leaders’ distribution models Fujikura has 4 own sales offices (USA, UK, Singapore, China) and 78 official distributors worldwide. 37 of them are situated in Europe. Fitel has a head office in Japan. 4 corporate offices are situated in USA, Europe, Asia and Singapore. Each of then has it’s own sales offices. Sumitomo has 29 distributors worldwide. Much of them (17) are situated in the US. The rest are spread throughout the world. It is important to notice these companies’ product are sold throughout the world by hundreds of ‘unofficial’ distributors and resellers. These sales point surely are not mentioned on the official sites, but they make a serious contribution to the overall sales volume

31 Leaders’ R&D expenditures Fujikura spends almost the same amount of money on R&D each year. Their prior research directions are technologies to protect Earth, technologies connecting the World (including fusion splicers), technologies creating the future.* * Fujikura Annual Report 2014 (link)link

32 Leaders’ R&D expenditures Fitel also spends almost equal sums each year. They have three big R&D centers in different countries. Furukawa Electric formulated its "long term Vision" for research and development, focusing on the theme of "using technology acquired through our material capabilities to help realize a society that is comfortable for living." By maximizing the potential of three materials (metal, polymer and photonics) of the Furukawa Group, they have selected four areas - energy-saving; environmental materials; new alloys; and optical, wireless and high frequency - in which we can contribute to society. * Fitel official site (link)link

33 Leaders’ R&D expenditures Sumitomo. In R&D activities, the company and Hokkaido Electric PowerCo., Inc., commenced a demonstration project of a large-scale energy storage system employing redox flow batteries in Moreover, our magnesium alloy sheets were adopted by Toshiba Corporation for its notebook computers. Looking ahead, we intend to focus on developing and commercializing concentrator photovoltaic devices, superconducting products, molten salt electrolyte batteries, ballast water treatment systems, and large- capacity wiring materials for data centers.* * Sumitomo annual report (link)link

34 Leaders’ distribution models It is important to notice these companies’ product are sold throughout the world by hundreds of ‘unofficial’ distributors and resellers. These sales point surely are not mentioned on the official sites, but they make a serious contribution to the overall sales volume Fujikura Ltd Japan Fujikura (China) Co., Ltd China Fujikura Europe Ltd EuropeNorth America AFL 2BLighting Technologies Region Subsidiary Official distributor 1 1 Total 78 official distributors worldwide 2 Total more than 100 official distributors worldwide 3 Total 29 official distributors worldwide Graybar Electric Co. Asia Furukawa El. Europe Ltd EuropeNorth America OFS Fitel Blue Helix Region Subsidiary Official distributor 2 Graybar Electric Co. Asia Hong Kong Singapore Japan Furukawa El. Hong Kong Ltd Furukawa El. Singapore Pte. Furukawa El. CO., Ltd North America BORDER STATES ELECTRIC Region Official distributor 3 Latin & South America FIS Soluciones

35 European development projects * European Investment Bank supports Reggefiber roll-out in 50 Dutch municipalities (link); Dutch FTTH market shows penetration stable in 2013 (link)link ** Operators Invest 750 Million in Fiber (link)link *** The Light Age magazine (link)link **** Nexans’ official site (link)link ***** European Comission Press Release Database (link)link Reggefiber, the Netherlands. It is one of the first companies in Europe to manage a large scale roll-out of FttH networks. This project will increase broadband Internet speeds and coverage in the Netherlands and the roll-out to these specific 50 municipalities is expected to be completed by In 2010 the European Investment Bank provided EUR 142.5m for the initial roll out of Reggefiber services to 33 Dutch municipalities as part of a total facility of EUR 285m. The Dutch FTTH market expanded to 1.94 million homes passed at the end of 2013 (+34%).* Portugal. Within three years, Portugal will have one of the best and most dense broadband network in the world if operators realize the investments of more than € 750 million that have been announced. "In 2016, Portugal will be in the top positions of the ranking in terms of households penetration in Europe," predicts Charles Barroqueiro, president of CBE and board member of FTTH - Fiber to the Home Council Europe, an industry organization with a mission to accelerate the adoption of fiber optics.** Stokab, Sweden. Investment in Stockholm’s fiber network has delivered benefits worth three times as much. Stokab’s investment in the network, up to the completion point of the study, was SEK5.4 billion. An infrastructure for society (more than 600 million euros), whereas the economic gain to the region was around SEK16 billion (around 1.9 billion euros). The cost of leasing fiber in Stockholm is less than half that (sometimes much less) in other capitals around the world.*** Nexans, France. Company will supply over 1,000 km of URC-1 unrepeatered fiber optic subsea cables for high profile projects in Norway and Scotland. This major contract covers the supply of around 1,050 km of Nexans URC-1 unrepeatered fibre optic cable – since this type of cable typically comprises between 24 to 48 individual fibers that is enough optical fibers when laid end to end to span the globe.**** Jazztel, Spain. EIB lends EUR 150 million to Jazztel for investment in its fiber optic network. This project will consist of rolling out a fiber optic network from the backbone infrastructure to three million homes. The loan will also finance the expansion of the network and IT systems to cover all of Spain’s major cities, including Madrid and Barcelona.*****

36 Russian fiber optic market size: Broadband penetration on Russian market exceeded 50% 1 Russian optical fiber network will soon achieve km 2 Number of GPON “Rostelecom” subscribers has increased by 50% last year 3 By the year of 2018, 97% of the population will be able to have a broadband connection 4 There is no reliable data on Russian fusion splicer market size and growth 1 Central R&D Institute of Communications(link)link 2 Newspaper “Vechernaya Moskva”(link)link 3 Newspaper “Vedomosti”(link)link 4 Ferra.ru (link)link Russian market

37 Cost StructureRevenue Streams Key PartnersKey Activities Key Resources Value PropositionCustomer Relationship Channels Customer Segments Chinese manufactures Distributors Engineering companies R’n’D Producing some parts Assembling Designers R’n’D Producing some parts Assembling Designers IP Team Connections with big partners IP Team Connections with big partners Small-size device Easier-to-use Lightweighter High-quality connection of fibers Small-size device Easier-to-use Lightweighter High-quality connection of fibers Operational profits Can be serviced by simple system administrator without assistance Easy-to-service (less time, money expenses + no need for specific skills) Operational profits Can be serviced by simple system administrator without assistance Easy-to-service (less time, money expenses + no need for specific skills) Telecom- operators Construction- organizations Simple system administrators (IT-specialists in organizations) Telecom- operators Construction- organizations Simple system administrators (IT-specialists in organizations) Exhibitions Professional journals and forums in Internet Opinion-leader Webinars Regular payments VIP-manager Exhibitions Professional journals and forums in Internet Opinion-leader Webinars Regular payments VIP-manager Devices’ selling Distributors Direct sales to the biggest customers Distributors Direct sales to the biggest customers Manufacturing Logistic (produce parts in Asia) Manufacturing Logistic (produce parts in Asia) R’n’D Replaceable cartridges (like Gillett razors) Business model

38 Competitors Parameter Sumitomo Quantum Type- QH201e-VS FITEL S123Cv2 Fujikura 12S SWIFT F3 Jilong KL- 500 MTC AFS- 10 Splice loss, dB (SM)0,05 0,030,020,05 Dimension, WxDxH mm, Volume 110x140x76 (1170 см 3 ) 159x231x104 (3820 см 3 ) 121x162x5 7 (1117 см 3 ) 140x179x 87 (2180 см 3 ) 125x105x 113 (1483 см 3 ) 121x162x 57 (1117 см 3 ) Weight, g (with battery) Battery capacity, cycles splice+heat Price, Russia, th. rubN/A One splice cost, rub/splice N/A 1 2,211,952,012,23 1,53 1 Haven’t entered russian market yet 2 Kit price (splicer plus several related instruments)

39 Customers interested and ready for testing (more than 50 industry companies) Preproduction model is done Patents obtained: 2 (Russian and PCT) Patents pending: 3 (Russian and PCT) Status & Traction

40 Proven management team Nikolai Ivanov  CEO  Develops strategic company vision, recruiting  Graduated from MIPT (degree in technological entrepreneurship)  Winner of Intel Global Challenge, Berkeley Maxim Gladilov  CTO, founder  Develops strategic technical vision, leads all aspects of the company’s technological development  Previously, the technical officer of a major producer of passive equipment for fiber optic networks (SvyazPromOptica) Anton Marko  Senior business-developer  Developing business strategy, business analysis, market research, financial planning  Implemented innovative cross-sales system in Probusinessbank  Reorganized strategic planning and KPI monitoring systems in Probusinessbank 15-years work experience in telecom industry

41 Proven technical team Michael Kolosyanko  Chief design engineer, head of experimental design department  management of detailed design and engineering procedures, technical specifications,  Founded service center network for fiber optic installation devices Roman Davydov  Hardware electronics engineer  Leading of electronics engineering process  Lots of successful project in Telecom & Broadcom industry already manufactured by Rinom Ltd. (Ekaterinburg), NPO "SparK" (St- Petersburg) Andrey Pokidko  Lead programmer  Developing software  Winner of All-russian competiotion “Engineer of year”  Laureate of President Grant  Developed telemetric systems using satellite and GSM communications Alexander Larin  Head designer  Modelling and drafting using SolidWorks  Previously, constructor at optical and laser R&D center “Astrophysics”;  Developed optical devices for mass- production

42 Test batch release: April 2015 Strategic investor deal: June 2015 AFS-10 mass production: September 2015 European market entrance: Fall 2015 Breakeven: 2017 Milestones -2015

43 Scenario 1: Venture fund investment schedule: March 2015: Rub. April 2015: Rub. May 2015: Rub. Venture fund’s company share (may): 8% June 2015: Strategic investor buys up to 30% share By the end of 2015: Strategic investor buys up to 55% share Investment scenarios

44 Scenario 2: No venture investor December: Skolkovo mini-grant ( rubles) February 2015: Strategic investor buys up to 30% share June 2015: Strategic investor buys up to 55% share Investment scenarios

45 Scenario 3: No venture investor December: Skolkovo mini-grant ( rubles) February: Skolkovo grant (up to rubles) June 2015: Strategic investor buys up to 30% share By the end of 2015: Strategic investor buys up to 55% share Investment scenarios

46 1.Fusion splicer manufacturers (Fujikura, Furukawa, Corning etc.). 2.Telecom and construction companies (Beeline, MTS, Rostelecom etc.). 3.Electronic devices distributors (Eltex, Svyazkomplekt etc.). 4.Generic electronic manufacturers (factories and plants) Strategic investor profiles

47 AFS-10 production cost ElementSupplierPrice, $ CaseNAMI2 400 toughened glassBrandPrint14 fanChinese supplier6 DisplayChinese supplier58 Replaceble heaterShanghai Shenglongpan Electric CO.,LTD20,5 Protection shellInvent 3D100 Battery case-Self-manufacturing Optical-mechanics elementVarioptics, Antech Electronic12 Cartridge- Self-manufacturing Holder-Self-manufacturing Total2 600

48 Nikolai Ivanov CEO at MaxTelCom +7 (906) Ready for collaboration

49 Competitors (extended) Parameter Sumitomo Quantum Type-QH201e-VS FITEL S123Cv2FITEL S153Av2FITEL S178Av2Fujikura 12SSWIFT F3 INNO IFS- 15H Jilong KL- 500 DVP-740 MTC AFS- 10 Splice loss, dB (SM)0,05 0,040,020,050,030,02 0,05 (Splice + heat) duration, sec 41 ( ) 44 ( ) 42 ( ) 40 (9 + 31) 45 ( ) 27 (7 + 20) 42 (7 + 35) 39 (9 + 30) 35 (heat only) 1 45 ( ) Dimension, WxDxH mm, Volume 110x140x76 (1170 см 3 ) 159x231x104 (3820 см 3 ) 159x231x130 (3820 см 3 ) 159x231x130 (3820 см 3 ) 121x162x57 (1117 см 3 ) 140x179x87 (2180 см 3 ) 130x155x13 7 (2761 см 3 ) 125x105x11 3 (1483 см 3 ) 122x142x1 38 (2391 см 3 ) 121x162x57 (1117 см 3 ) Weight, g (with battery) Battery capacity, cycles splice+heat (one cycle – 26,7 mAh, battery mAh) SOCNoYes NoYes NoYes Touchscreen; diagYes; 3,5’’No; 3,5’’ No; 4,47’’No; 3,5’’No; 4,3’’No; 3,5’’No; 4,3’’Yes; 4,3’’ Cleave length, mm105 to 10 or 165 to 16 5 to 1388 to 16 8 to 223,5 Price, Russia, th rubN/A One splice cost, rub/spliceN/A 3 2,212,442,701,952,012,652,231,631,53 Electrode life, number of splices 3000 N/A N/A 500 Commencement of salesMarch February N/A2013N/A Untrustworthy specification data (link)link 2 Two batteries 3 Haven’t entered russian market yet 4 Kit price (splicer plus several related instruments)


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