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European Summit 2013: Enabling innovation, driving profitability © Analysys Mason Limited 2013

Building a profitable wireless network to deliver an exceptional customer experience

European Summit 2013:

Enabling innovation, driving profitability

10 October 2013

EVENT PARTNER:

Building a profitable wireless

network to deliver an exceptional

customer experience

Chris Nicoll, Principal Analyst, Wireless Networks

Franck Chevalier, Manager, Operational Consulting


Building a profitable wireless network to deliver an exceptional customer experience 2

Operators embracing LTE on a global scale

LTE technology advances service options

Key factors to consider for LTE network deployment

Total cost of ownership analysis

Conclusions



LTE is spreading around the world, thanks to flexible spectrum utilisation, and mobile broadband services

3

USA 57.6% South

Korea 21.5%

Japan 12.7%

Nordics 2.4%

Australia 2.1%

Germany 2.0%

Russia 1.0%

Saudi Arabia 0.4% Italy

0.2%

UAE 0.1%

There were more than 200 million

LTE connections worldwide,

accounting for just 3% of mobile

connections, by the end of 2013.

Total LTE connections will reach

1.5 billion by 2018.

Emerging Asia–Pacific is set to

become the dominant world LTE

market, with its 420 million

connections accounting for 27% of

LTE connections worldwide by 2018.

Only 11% of that region’s

connections will have migrated to

LTE, as so there will still be

considerable untapped potential for

further take-up of LTE in that region.

2013



LTE is spreading around the world, thanks to flexible spectrum utilisation, and mobile broadband services

4

USA 30%

China 24%

Japan 12%

India 5%

Germany 5%

Russia 5%

South Korea

5%

France 5%

UK 5%

Brazil 4%

There were more than 200 million

LTE connections worldwide,

accounting for just 3% of mobile

connections, by the end of 2013.

Total LTE connections will reach

1.5 billion by 2018.

Emerging Asia–Pacific is set to

become the dominant world LTE

market, with its 420 million

connections accounting for 27% of

LTE connections worldwide by 2018.

Only 11% of that region’s

connections will have migrated to

LTE, as so there will still be

considerable untapped potential for

further take-up of LTE in that region.

2018



LTE trials show progress in both emerging and developed regions

The largest number of LTE network trials

are in Central and Eastern Europe (26),

Emerging Asia–Pacific (24) and Western

Europe (20) regions.

Trials in CEE and EMAP in particular

are driven by the adoption of the

technology by regional operators such

as Bharti Airtel, China Mobile, Reliance

Infotel and SoftBank.

Infrastructure vendors including

Huawei, Ericsson and NSN, Samsung

and ZTE demonstrate network upgrade

and transition options.

5

CEE 26%

EMAP 24% WE

20%

SSA 10%

MENA 9%

DVAP 5%

LATAM 3% NA

3%

For further details see the Analysys Mason’s Wireless networks

tracker. Available at: www.analysysmason.com/WNT.



Today’s FD-LTE deployments and planned networks will provide near-global coverage by 2015

6

FD-LTE planned network

deployments or trials in progress

FD-LTE operational network

Key



LTE’s spectrum fractionalisation: more myth than reality

The market has focused on five

bands for FD-LTE and four for

TD-LTE.

Devices are able to support about

six bands, thus providing room to

support both ‘local’ bands as well as

the more commonly used ‘global’

bands.

TD-LTE is rapidly appearing as an

adjunct to FD-LTE networks using

unpaired spectrum in the

2.3–3.5GHz range.

Samsung’s Galaxy S4 dual-mode

LTE variants support both TD- and

FD-LTE.

7

FD LTE Number of

networks

Countries or regions

(examples)

2600 67 South America, China,

MENA

1800 83 Europe, South Korea,

Australia, MENA

800 21 Europe, Japan, South

Korea, MENA

700 22 Japan, USA, Australia

AWS (1.7/2.1) 13 USA

TD LTE Number of

networks

Dual TD-/FD-LTE

networks

3.5 1

2.6 4 4

2.5 3

2.3 10 5



North America remains at odds with the rest of the world, and Africa is likely to join the APT700 plan

8

APT700 Plan adopted

APT700 Plan recommended

Key

NAM700 Plan adopted

The USA is the single-largest

700MHz market in the world, and is

incompatible with most of the rest of

the world, making it an ‘LTE island’.







Conclusions



The LTE-A Releases 10–12 will change the way operators use and manage spectrum for mobile services

10

Release 11 (available 2014)

Gigabit download speeds and improved automated management functions

Release 10 – initial LTE-A release (available in 2013)

CA , Improved network performance and HetNets

Release 12 (available about 2015)

Improved operations benefits and technology upgrades

LTE-A core features:

Carrier Aggregation

HetNet

SON



150Mbps LTE service is here, and 300Mbps mobile broadband is within sight

SK Telecom and LG Uplus launched

LTE-A CA services in 2013.

SK Telecom: largest commercial

launch initiated with 150Mbps

speeds and about 250 000

subscribers at September 2013

Telstra: trialled 900MHz and

1800MHz in July 2013, but will use

will use larger blocks of 700MHz

and 1.8GHz spectrum to deliver

300Mbps download speeds for

commercial launch in 2015

Philippines operator Smart

Communications’ trials showing

speeds of over 210Mbps.

11

Country Operator Maximum download

speeds (Mbps)

Australia Telstra 300 (expected)

Austria A1 Telekom Austria 580 (trial)

China China Mobile 233 (TD-LTE)

Japan DoCoMo 300 (expected)

Philippines Smart 210

Portugal Optimus 300

Russia Yota 300

South Africa Telkom Mobile (8ta) 210 (TD-LTE)

South Korea SK Telecom

LG Uplus

150

150

Turkey Turkcell 900 (lab)

150

USA AT&T, T-Mobile,

Verizon 150 (expected)



VoLTE has limited market penetration in 2013, hampered by slow network deployments, and technical concerns

12

Date Event

Feb 2011 Verizon Wireless completes first VoLTE Call

Aug 2012 SK Telecom deploys first HD VoLTE service

LG Uplus launches VoLTE service

Aug 2012 MetroPCS (US) launches limited VoLTE service

Oct 2012 Korea Telecom launches VoLTE

Apr 2013 EE (UK) announces network upgrades to provide support for new

services, including VoLTE

May 2013 Mobily (Saudi Arabia) completes VoLTE trials

Jul 2013 Bharti Airtel (India) requests permission to trial VoLTE

1Q 2014 O2 Germany to demo VoLTE

4Q 2014 China Mobile to launch VoLTE



LTE is the optimal technology to combine the multiple spectrum positions many operators hold

45% of operators worldwide hold

more than one spectrum band. 42%

holding two or more LTE bands.

They are planning multi-spectrum

LTE networks, pairing ‘coverage’

spectrum with ‘capacity’ spectrum.

TeliaSonera used 2.6GHz with

laptop USB modems. It will add

800MHz as smartphone

penetration increases.

US networks launched in reverse

– AT&T and Verizon in the

800MHz band, but Verizon now

holds AWS (1.7/2.1GHz) spectrum

while AT&T also holds AWS as

well as 2.3GHz spectrum.

13

55%

17%

16%

9%

2% 1%

1 2 3 4 5 6

Number of spectrum bands per operator:







Conclusions



When implementing an LTE network, mobile network operators have two key deployment strategy choices …

As demonstrated in the first part of the presentation, LTE is becoming the

technology of choice to provide mobile broadband.

Before deploying LTE, operators have to formulate a commercial and technical

strategy that aims to maximise revenues and minimise costs as well as meeting

subscribers’ performance expectations.

Typically an established mobile operator has multiple access networks (for

example, 2G and 3G) and needs to take a holistic view of its legacy multi-

technology network to exploit all synergies to identify the optimum LTE

deployment solution.

There are two key network strategies to consider when introducing LTE:

LTE overlay

single radio access network (SRAN).

15



.. LTE overlay or single RAN

16

An LTE overlay requires deploying a

separate LTE radio access network

(RAN) in addition to any legacy 2G

and 3G RAN and core networks.

An SRAN strategy involves installing

a single base station unit that

provides both the functionality of a

new LTE base station and replaces

legacy 2G and 3G base stations.

SRAN is rapidly becoming the

norm – for example, 51% of

Vodafone’s European sites have

already been upgraded to SRAN

(as of March 2013), increasing to

80% of the sites by 2015.1

1 XX Santander Banking & Markets TMT Conference, Anthony Hamilton, Madrid, 19–20 June 2013.

Overlay LTE deployment

GSM

Base station

UMTS

Node B

LTE eNodeB

Existing New

New

Single RAN

Base station (GSM+UMTS+LTE)

Single RAN deployment



LTE MNOs still require 2G/3G legacy networks to provide voice services

17

The technology required to provide

voice services for LTE subscribers is

either voice over LTE (VoLTE) –either

native LTE voice or circuit-switched

fallback (CSFB).

VoLTE requires a VoLTE-capable IP

Multimedia Subsystem (IMS) and

VoLTE terminals.

VoLTE technology is not yet mature

and only a few MNOs use it.

CSFB uses established 2G and 3G

networks to provide voice services.

CSFB is a transitional solution that

most operators adopt to use

existing 2G/3G infrastructure.

Circuit-switched fallback signal flow for voice

eNodeB

NodeB/

BTS

MME

MSC/VLR

HLR

RNC/BSC

2 1

3

4 5

6 7

8

9

Fallback

to 2G/3G

network

Lo

ca

tio

n u

pd

ate

LTE network

2G/3G network



The life cycle of the 2G network plays an important part in determining the optimum LTE deployment strategy

18

Many legacy 2G RANs are at

end-of-life and vendors no longer

support them commercially.

Maintaining legacy a 2G RAN

typically involves a tailored vendor

maintenance contract, which can

be very expensive.

Operators typically hold spares

stock for legacy 2G networks, but

these become depleted over time.

Additional spare parts are available

on the grey market, but the quality

and volumes cannot be assured.

Reasons why 2G will still exist for several years

Terminal is affordable

Is well-suited to low-end users

Is required to support roamers

Is well-suited to M2M applications

In Europe, the GSM switch-off will

occur between 2019 and 2025,

depending on country and operator

strategy, for the reasons cited above.

However, there is a requirement to

extend the lifetime of 2G networks

to provide voice service support

for LTE networks.



Re-farming 900MHz spectrum for 3G data coverage should also be considered for an LTE strategy

19

Main barriers to mobile broadband:

availability of 3G network (HSDPA)

prohibitive pricing.

Re-farmed 900MHz spectrum can

provide cost-effective ubiquitous 3G

data coverage and a high penetration

of 900MHz 3G terminals reduces

customer take-up cost.

Deploying a 900MHz 3G overlay

network may not be commercially

viable as the return on investment is

uncertain.

The network solution needs to

be flexible to support multiple

technologies.

Evolution of HSDPA versus LTE speeds

0

50

100

150

200

250

300

350

2005

2007

2009

2012

2014

2014

2016

2018

Dow

nlo

ad p

eak r

ate

s (

Mbps)

HSDPA

LTE

Peak cell rate:

HSPDA LTE



The benefits of LTE overlay versus SRAN are well documented, but there is little regarding cost implications

LTE overlay Single RAN

Operational benefits

Fast time to market

Low network disruption

Single access network to manage

Cell site simplification

2G and 3G life extended

Technology flexibility

Operational challenges

Multiple access network to manage

Single vendor dependence

Significant implementation risk

Cost benefits Lower capex? Lower opex?

Analysys Mason has developed TCO models to quantify the capex and opex

associated with each solution







Conclusions



We consider three different scenarios to compare the TCO of LTE overlay vs Single RAN deployment

A European incumbent fixed and mobile operator with significant 2G, 3G and fixed

broadband coverage needed to understand the TCO associated with different

LTE deployment strategies in order to make an informed investment decision.

To compare the TCO associated with different LTE deployment strategies, we

considered three different LTE deployment scenarios.

22

Description 2G 3G 2G/3G core

Base case Overlay LTE Keep legacy

2G RAN

Keep legacy

3G RAN Keep 2G/3G core

Scenario 1 Overlay LTE

and 2G refresh New 2G RAN

Keep legacy

3G RAN Keep 2G/3G core

Scenario 2 Single RAN New 2G New 3G New core



We analyse the capex and opex associated with both new LTE networks and existing 2G/3G networks

23

Capital expenditure Operational expenditure

RAN equipment (LTE, 2G, 3G) Existing network vendor maintenance

(2G, 3G)

Core equipment LTE network vendor maintenance

Backhaul network Existing infrastructure running costs

(such as power, site rental and

operational personnel)

Support services (such as installation,

optimisation and so on)

Incremental infrastructure running costs

(such as power, site rental and

operational personnel)

Cost of change (such as additional staff

required for implementation of LTE)

Other opex



The capex associated with an SRAN is lower than an equivalent solution that requires a new 2G network …

24

Capex associated with:

scenario 1 is 40% higher than the

base case because of the refresh

of the 2G RAN network.

scenario 2 is 31% higher than the

base case because of the refresh

of 2G and 3G RANs as well as the

replacement of 2G/3G core network.

Deploying a 3G network using an

SRAN solution is very cost effective.

Installation and integration services

associated with single RAN solution

are less expensive than service

associated with LTE overlay solution

because less integration is required.

Capex comparison

30% 28% 27%

29%

9%

13%24%

23% 34%21%

28% 17%17%

23%

13%

7%

11%

17%

0%

20%

40%

60%

80%

100%

120%

140%

Base case:overlay LTE

Scenario 1:overlay LTEand 2G RAN

Scenario 2:SRAN

Pe

rce

nta

ge

of

ba

se

ca

se

ca

pe

x

LTE RAN 2G RAN

3G RAN Core network

RAN services Core services

Cost of change



52% 55%

34%

16%16%

14%

9%10%

5%

23%25%

18%

0%

20%

40%

60%

80%

100%

120%



Scenario 2:SRAN

Pe

rce

nta

ge

of

ba

se

ca

se

op

ex

Vendor maintenance Site rental

Power consumption Support staff

… however, the opex associated with SRAN is 32% lower than that associated with an overlay solution1…

25

Opex associated with scenario 2 is

32% lower than for scenario 1, and

28% lower than for the base case.

Main opex savings are associated

with vendor maintenance contracts.

More cost-effective to have a single

maintenance contract for an SRAN.

SRAN removes the requirement for

premium-priced legacy 2G and 3G

maintenance contracts.

Second opex saving: support staff.

Fewer staff needed to operate and

maintain an SRAN than individual

2G, 3G and LTE networks.

1 Assuming a refresh of the 2G network.

5-year opex comparison

28% 32%



32%

45% 41%

68%

72%

49%

0%

20%

40%

60%

80%

100%

120%



Scenario 2:SRAN

Pe

rce

nta

ge

of

ba

se

ca

se

TC

O

Capex Opex

… resulting in an SRAN TCO that is 21% lower than that of an equivalent overlay solution1

26

TCO for scenario 2 is 21% lower

than that for scenario 1, and 10%

lower than base case.

Opex savings offset additional

capex required to deploy the new

2G and 3G networks over 5 years.

Opex savings for the SRAN are

mainly driven by:

single rather than multiple

maintenance contracts

no need for premium-priced

support of end-of-life equipment

reduction in the number of

support staff.

1 Assuming a refresh of the 2G network.

5-year TCO comparison

10% 21%







Conclusions



Conclusion

An SRAN solution with full swap of 2G/3G RAN and core network attracted the

lowest TCO for the considered mobile network operator.

An SRAN provides the required flexibility regarding the network strategy,

allowing the operator to defer its decision to switch off its 2G/3G network.

However, for cost savings to materialise, SRAN solutions have to be implemented

in a ‘big bang’ approach, which can be challenging for operational teams.

However, each operator will have a unique starting point and cost base

that may dictate a different LTE strategy.

28

AM specialises in LTE commercial and technical strategies and would be

delighted to assist you identify the optimum LTE strategy for you



Uniquely positioned to offer consulting and research to telecoms, media and technology (TMT) sectors

29

Exclusive focus on the telecoms, media

and technology (TMT) sectors

Advising on investments, regulatory

issues, spectrum acquisition and

management, operational performance,

business planning and strategy

Rigorous methodologies developed over

25 years that deliver tangible results for

clients around the world

Analysis, tracking and forecasts of the

different services accessed by

consumers and enterprises, as well as

the software, infrastructure and

technology delivering those services

Specialised and bespoke projects for

clients undertaken by our Custom

Research team

RESEARCH

CONSULTING

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