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INSTIGATING A PARADIGM SHIFT IN THE FIBER OPTIC INDUSTRY

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

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

2 KEY FIGURES 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

3 FUTURE PROBLEM AND MARKET
На графике изображена тенденция количества пользователей, имеющих ШПД по той или иной технологии, в Великобритании * Jerome Tassel, TV architecture & Security Director of BT at BBWF 2014

4 FUTURE PROBLEM AND MARKET
На графике изображена тенденция количества пользователей, имеющих ШПД по той или иной технологии, в Великобритании * Jerome Tassel, TV architecture & Security Director of BT at BBWF 2014

5 Here you can mention about how many developing countries are moving from copper/metal-based wires to fiber optic networks

6 Представляете, насколько это точная оборудование

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

8 TRACTION

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

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

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 0,03 0,02 Dimension, WxDxH mm, Volume 110x140x76 (1170 см3) 159x231x104 (3820 см3) 121x162x57 (1117 см3) 140x179x87 (2180 см3) 125x105x11 3 (1483 см3) Weight, g (with battery) 860 1 600 776 1 200 1 480 835 Battery capacity, cycles splice+heat 100 70 140 120 150 Price, Russia, th. rub N/A1 240 170 1602 1902 One splice cost, rub/splice 2,21 1,95 2,01 2,23 1,53 1 Haven’t entered russian market yet 2 Kit price (splicer plus several related instruments)

12 (*VTB Capital prediction)
MARKET OPPORTUNITY 2020* (*VTB Capital prediction) $1 bln 2013 $467 mln** 2009 $300 mln** ** ElectroniCast Fiber Optic Fusion Splice Equipment Global Consumption Market Forecast (link)

13 Main priority is to accelerate deployment of fiber optic last miles
RUSSIAN MARKET Main priority is to accelerate deployment of fiber optic last miles 3Q 2013 – 3,5 mln abonents; 2016 – 33 mln households to be connected via fiber optic networks Reduce CapEX costs: 2-3% by 2016 1 RTC Strategy 2013 (link)

14 Technology for automatic optical fiber splicing
PREVIOUS INVESTMENTS 2012 2013 2014 $ 3M capitalization Technology for automatic optical fiber splicing AFS-10 Prototype Pre-production model

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

16 Prototype development of AFS-30
DEVELOPMENT PLANS 2015 Prototype development of AFS-30

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

18 Nikolai Ivanov CEO at MaxTelCom +7 (906) 081-56-63
Ready for collaboration

19 PARTNERSHIP

20 Extended version

21 INSTIGATING A PARADIGM SHIFT IN THE FIBER OPTIC INDUSTRY

22 More bandwidth and less loss
Global problems More bandwidth and less loss Metal wires are widely replaced by optical fibers ISSUES China Telecom : “… encourage technology innovations to reduce the cost of equipment…” Tele.net.in: “… most fibre-related issues result from improper installation and fibre handling practices…” 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.…” Chunghwa Telecom: “…difficulty is the fiber installation on the customer side…” EXFO: “…fast return on investment … in any new deployment … requires the hiring of many new technicians who have little to no experience…” PT. Telekomunikasi Indonesia: “… Skilled Workforce for massive FTTH deployment…” Sources: ;

23 Problem Niche: handheld fusion splicers with cladding alignment
High TCO Existing splicers costs $ $7 5001 One splice cost starts from 4 cents1 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 kg3 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/splice1 Hence it takes 5 hours5 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 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 $4 800 5 Assuming 300 splices daily

24 Our solution: AFS-10 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 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 * 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). **** GPON technology. Development in Russia and the world (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) ** По данным исследования Fiber Optic Fusion Splice Global Market Forecast & Analysis (February 2014) (link) ***По данным исследования NewsWireToday (link)

27 Industry leaders’ results
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 * Sumitomo Annual Report 2013 (link)

28 Industry leaders’ results
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 * Furukawa (Fitel) Annual Report 2014 (link)

29 Industry leaders’ results
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 * Fujikura Annual Report 2014 (link)

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)

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)

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)

34 Leaders’ distribution models
Region Europe North America Asia Subsidiary Fujikura Europe Ltd AFL Japan China Official distributor1 2BLighting Technologies Graybar Electric Co. Fujikura Ltd Fujikura (China) Co., Ltd Region Europe North America Asia Subsidiary Furukawa El. Europe Ltd OFS Fitel Hong Kong Singapore Japan Official distributor2 Blue Helix Graybar Electric Co. Furukawa El. Hong Kong Ltd Furukawa El. Singapore Pte. Furukawa El. CO., Ltd Region North America Latin & South America Official distributor3 BORDER STATES ELECTRIC FIS Soluciones 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 1Total 78 official distributors worldwide 2Total more than 100 official distributors worldwide 3Total 29 official distributors worldwide

35 European development projects
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 2015. 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.***** * European Investment Bank supports Reggefiber roll-out in 50 Dutch municipalities (link); Dutch FTTH market shows penetration stable in 2013 (link) ** Operators Invest 750 Million in Fiber (link) *** The Light Age magazine (link) **** Nexans’ official site (link) ***** European Comission Press Release Database (link)

36 Russian market Russian fiber optic market size:
Broadband penetration on Russian market exceeded 50%1 Russian optical fiber network will soon achieve km2 Number of GPON “Rostelecom” subscribers has increased by 50% last year3 By the year of 2018, 97% of the population will be able to have a broadband connection4 There is no reliable data on Russian fusion splicer market size and growth 1 Central R&D Institute of Communications(link) 2 Newspaper “Vechernaya Moskva”(link) 3 Newspaper “Vedomosti”(link) 4 Ferra.ru (link)

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

38 Competitors 1,53 Parameter Sumitomo Quantum Type- QH201e-VS
FITEL S123Cv2 Fujikura 12S SWIFT F3 Jilong KL- 500 MTC AFS- 10 Splice loss, dB (SM) 0,05 0,03 0,02 Dimension, WxDxH mm, Volume 110x140x76 (1170 см3) 159x231x104 (3820 см3) 121x162x5 7 (1117 см3) 140x179x 87 (2180 см3) 125x105x 113 (1483 см3) 121x162x 57 (1117 см3) Weight, g (with battery) 860 1 600 776 1 200 1 480 835 Battery capacity, cycles splice+heat 100 70 140 120 150 Price, Russia, th. rub N/A1 240 170 1602 1902 One splice cost, rub/splice 2,21 1,95 2,01 2,23 1,53 1 Haven’t entered russian market yet 2 Kit price (splicer plus several related instruments)

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

40 Proven management team
15-years work experience in telecom industry 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

41 Proven technical team Hardware electronics engineer
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 Milestones -2015 Test batch release: April 2015
Strategic investor deal: June 2015 AFS-10 mass production: September 2015 European market entrance: Fall 2015 Breakeven: 2017

43 Investment scenarios 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

44 Investment scenarios 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

45 Investment scenarios 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

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

47 AFS-10 production cost Element Supplier Price, $ Case NAMI 2 400
toughened glass BrandPrint 14 fan Chinese supplier 6 Display 58 Replaceble heater Shanghai Shenglongpan Electric CO.,LTD 20,5 Protection shell Invent 3D 100 Battery case - Self-manufacturing Optical-mechanics element Varioptics, Antech Electronic 12 Cartridge Holder Total 2 600

48 Nikolai Ivanov CEO at MaxTelCom +7 (906) 081-56-63
Ready for collaboration

49 Competitors (extended)
Parameter Sumitomo Quantum Type-QH201e-VS FITEL S123Cv2 FITEL S153Av2 FITEL S178Av2 Fujikura 12S SWIFT F3 INNO IFS- 15H Jilong KL- 500 DVP-740 MTC AFS- 10 Splice loss, dB (SM) 0,05 0,04 0,02 0,03 (Splice + heat) duration, sec 41 ( ) 44 ( ) 42 ( ) 40 (9 + 31) 45 ( ) 27 (7 + 20) (7 + 35) 39 (9 + 30) 35 (heat only)1 Dimension, WxDxH mm, Volume 110x140x76 (1170 см3) 159x231x104 (3820 см3) 159x231x130 121x162x57 (1117 см3) 140x179x87 (2180 см3) 130x155x13 7 (2761 см3) 125x105x11 3 (1483 см3) 122x142x1 38 (2391 см3) Weight, g (with battery) 860 1 600 2 100 2 3002 776 1 200 1 820 1 480 1 950 835 Battery capacity, cycles splice+heat 100 70 2002 140 160 (one cycle – 26,7 mAh, battery 4 200 mAh) 120 150 SOC No Yes Touchscreen; diag Yes; 3,5’’ No; 3,5’’ No; 4,47’’ No; 4,3’’ Yes; 4,3’’ Cleave length, mm 10 5 to 10 or 16 5 to 16 5 to 13 8 8 to 16 8 to 22 3,5 Price, Russia, th rub N/A 240 270 305 170 1604 2454 1904 1504 One splice cost, rub/splice N/A3 2,21 2,44 2,70 1,95 2,01 2,65 2,23 1,63 1,53 Electrode life, number of splices 3000 2500 500 Commencement of sales March 2014 2013 2012 February 2013 2015 1 Untrustworthy specification data (link) 2 Two batteries 3 Haven’t entered russian market yet 4 Kit price (splicer plus several related instruments)


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