The European way to think the Digital World Mobile Services Vincent Poulbère IDATE - Head of mobile service team

IDATE © Winning Services 3: Mobile Services 20 Nov New stakes for mature mobile markets Low net growth of customer bases in mature markets : the retention of existing customers is the key – rather than gaining new ones The market for mobile voice telephony is now growing slowly due to a still decrasing voice ARPU… … however revenues from mobile data services (mostly SMS) now manage to stabilize ARPU in several European markets From now on, mobile market growth in Europe is almost entirely based on data service growth Western Europe mobile revenues (Billion EUR) Data Voice 112 Billion EUR 119 Billion EUR Data: +27% Voice +3% Growth 137 Billion EUR 14% 17% 26% Source: IDATE

IDATE © Winning Services 3: Mobile Services 20 Nov Mobile data service market: preparing the "after SMS"… 2002 revenues from the Western Europe mobile data service market reached 15.6 billion EUR… … with 87% of revenues coming from SMS services "TOP-FIVE" revenue-generating services in Western Europe Rank Services Revenues 2002 Person-to-person text messaging (SMS) 3.4 EUR/month per subscriber Turnover 2002: 12 billion EUR 3.4 EUR/month per subscriber Turnover 2002: 12 billion EUR Handset customisation services Ringtones, logos, … Handset customisation services Ringtones, logos, … Leading mobile content service Turnover 2002: from 0.5 to 1 billion EUR Leading mobile content service Turnover 2002: from 0.5 to 1 billion EUR Mobile communities services Chats, forums, FriendFinder, … Mobile communities services Chats, forums, FriendFinder, … Turnover 2002: from 50 to 100 million EUR 4 4 SMS Premium voting services during « real TV » shows Turnover 2002: 50 million EUR 5 5 Interactive SMS games Examples: "Trivial Pursuit", "who wants to be a millionaire?" Interactive SMS games Examples: "Trivial Pursuit", "who wants to be a millionaire?" Turnover 2002: several tens million EUR -The growth of the SMS market is now slowing down and the future potential is expected in GPRS-based applications -First positive signs in 2003 of the penetration of GPRS multimedia handsets and services Source: IDATE

IDATE © Winning Services 3: Mobile Services 20 Nov … to tap in the potential mobile multimedia revenues Revenues generated by mobile data services, in Western Europe ( ) Mobile portals, MMS and corporate mobile services could constitute the growth relays beyond the success of SMS services. Source: IDATE

IDATE © Winning Services 3: Mobile Services 20 Nov Is the European mobile industry at a crossroad between a messaging-based industry and a content-based industry? Europe is still largely dominated by interpersonal messaging revenues, due to the huge success of SMS… … while Japan is now largely dominated by revenues generated from browsing and content services, 4 years after the launch of i-mode As the European mobile market matures, will it get progressively dominated by content-based services? Source: IDATE estimates 2006/2007 evolution? Source: IDATE

IDATE © Winning Services 3: Mobile Services 20 Nov key areas driving the development of future mobile services … with different challenges for the industry Examples Main challenges Person-to-person (P2P) messaging Content services Corporate services SMS MMS Instant messaging push-to-talk Premium SMS WAP/i-mode portals Content-based MMS Java application downloads Mobile office Field/Sales Force Automation Mobile CRM, Fleet management M2M Manage the diversification of interpersonal messaging applications: what impacts of new IP-based messaging services on SMS and voice revenues? Achieve interoperability ! Define attractive content payment models, in addition to traffic, which will foster the creation of services by third parties Push customers to buy the right handsets for rich-content services Underexploited market for corporate mobile data solutions, compared to voice Difficulties to meet corporate customers requirements in terms of tariff plans, security, application reliability, data rates, ROI M-payments Micro-payments: parking, logos/ringtones, transport tickets Macro-payments Prepay top-ups Overcome the complexity of the value chain by establishing key partnerships between telecoms players and finance players Legal constraints, still to be accurately defined Build interoperable payment applications

IDATE © Winning Services 3: Mobile Services 20 Nov Key questions to feed the debate Question mark on photo messaging prospects: photo cameras boost the sales of mobile handsets but does it boost in the same proportion traffic revenues for operators ? SMS revenues are jeopardized by the introduction of other messaging services (e.g. or instant messaging). How will operators manage the diversification of messaging services? Various Premium content access services based on reverse billing have been introduced: from the supermarket to the commercial gallery, which will be the winning models ? Wi-Fi: what is the size of the Wi-Fi hot spots niche market ? and what is the impact of the implementation of Wi-Fi hot spot networks on the 3G business model ? What service migration strategies should be implemented for 3G ? Strong control of the value chain by mobile operators, with the development of kiosks… but with which durability ?