Economics and Timing of Migration to IMT-2000 Michael H Callendar C.Eng. M.I.E.E (Past Chairman of ITU-R Task Group 8/1)

Mobile Generations First mobile generation was analogue Second mobile generation is digital Third generation offers multi-media communication capabilities, at higher bit rates, with improved spectrum efficiency IMT-2000 is the ITU definition of 3G Mobile has overtaken fixed users and represents the best option for improving global telecommunications access.

Mobile Generations Source ITU (actual) and Deutche Bank (forecast)

IMT-2000 for Mature Markets Most developed mobile markets are close to saturation, so most future subscriber growth will be in developing regions IMT-2000 multi-media services can enable increasing operator revenues, even when almost everyone has a mobile phone Improved spectrum efficiency, and/or additional spectrum, needed for higher bit rate multi-media services

Business Drivers in Mature Markets Voice services ARPU falling and must be offset by increasing data service revenues Cell sizes are already approaching the practical minimum size in some urban areas, so operators require improved spectrum efficiency and/or additional spectrum Business case for IMT-2000 in mature markets driven primarily by potential future multi-media service revenues.

Impact of Data Revenues

Orange World Traffic Forecast

IMT-2000 for Growth Markets Improved spectrum efficiency and global standards help to reduce costs New “Smart” Speech Codecs, e.g. AMR and SMV, allow operators to adapt voice coding to local economic needs Flexible evolution of mobile networks to IMT-2000, i.e. at an appropriate time for each specific market, minimizes operator investment requirements

Business Drivers in Growth Markets Voice services are the major revenue provider Service and handset costs are the primary considerations in most growth markets Often significant barriers to increased data service usage, e.g. computer literacy and availability, plus more expensive handsets Improved voice service transmission efficiency will be the primary business driver for migration to IMT-2000 in growth markets

Migration to IMT-2000 IMT-2000 offers various options to facilitate smooth migration from 2G Some options allow upgrade to 3G within an operator’s existing spectrum, others require additional spectrum for IMT-2000 Migration options generally build upon existing 2G core networks, e.g. GSM/IS-41

IMT-2000 Radio Options UMTS FDD CDMA2000 TD-SCDMA UMTS TDD EDGE DECT

Migration to IMT-2000

IMT-2000 Technology Forecast Source Deutche Bank (May 2003)

Spectrum for IMT-2000 IMT-2000 defined by ITU technical specifications NOT by the frequency band Most existing cellular bands identified for IMT-2000. Any “Mobile” band can also be used, e.g. 450 MHz NMT band Multi-band/Multi-mode handsets can facilitate evolution from 2G to IMT-2000

Spectrum for Mobile Services Source ITU

Profitability of Mobile Services Most operator revenue from voice services SMS the major data revenue component Prepaid services can be profitable (AMPU) MMS should create significant revenues Mature markets focus on new services Growth markets focus on cost reduction IMT-2000 can address both requirements

Profitability of Mobile Services Source GSA

Regional Mobile Growth

Middle Eastern Mobile Subscribers September 2003

Outlook for the Middle East Middle East represents approximately 2% of the global mobile market Rapid growth is forecast for the region Wide range of different market conditions Some markets still only have one operator IMT-2000 already deployed in some areas IMT-2000 offers benefits to most markets

Conclusions IMT-2000 provides economic benefits for both mature and growth markets, e.g. improved voice transmission efficiency as well as new higher speed data services Timing differs for specific mobile markets IMT-2000 standards are evolving rapidly to offer greater efficiencies and capabilities IMT-2000 will predominate by 2010