mobile world congress thoughtpiece

Trends in Mobile Communications and Technology

March 2012

Evercore - Confidential

� Relentless migration of data and entertainment consumption to mobile

– Mobile data volumes have grown 33-fold in the last five years, and are projected to grow 18-fold in the next five years

– Video traffic, which is now 50% of mobile traffic and will be 70% by 2016 has surged due to the proliferation of OTT and time/device

shifts in content viewing habits, forcing over 40% of traffic off traditional wireless networks to WiFi networks

– WiFi is delivering almost twice as much mobile data to users as the AT&T and Verizon cellular networks combined

� Relentless migration of mobile devices to smartphones

– Smartphone penetration in North America has grown from 26% in 2009 to 75% expected by 2013, while global penetration has grown from 15% in 2009 to 42% expected in 2012

– 2012 sales of tablets and laptops in the U.S. is estimated to total $33.2bn vs. $33.7bn for smartphones

� Increasing wireless bandwidth constraints

– Despite this traffic growth, delays in spectrum allocation and carrier uncertainty regarding data intensive business models have contributed to a lack of increase in carrier capex

– Carriers outside the US, Japan and Korea have been slow to deploy new LTE networks

– Big winners have been tower, DAS, Wi-Fi and “small cell” related companies

� High-end smartphone duopoly squeezing carrier margins through subsidies

– In the U.S., subsidies now exceed annual capex; this trend is not likely sustainable, and may force carriers towards lower cost solutions

– Subsidies paid by AT&T and Verizon have doubled in 2 years: from ~$10.3bn in 2009 to an expected ~$21.2bn in 2012

– In five short years the profit pool in the handset area has seen a dramatic shift, with Apple now garnering 79% of profits and Nokia having

gone from a 60% profit share to zero; Apple gets a higher subsidy than all other products, hence a dependency on the status quo

– Most of the future growth will come from low end smartphones (under $150)

– Given that Asia and Africa have smartphone penetration below the global average, as well as the need for new web entrants (e.g., Facebook

and Amazon) to penetrate those territories with affordable products, future low cost disruption is possible through Android and HTML5-based ecosystems

1

Executive Summary


� Driven by accelerating take-up of smartphones, adoption of mobile broadband and shifts in consumer usage behavior (i.e. strong appetite for streaming video and social networking sites)

The Unprecedented Surge in Mobile Traffic is Expected to Continue

2

Sources: Jefferies research report “WiFi: Revenge of the Fixed Line Network,” dated January 25, 2012 and Cisco Visual Networking Index Forecasts dated February 14, 2012

Per Device Usage (MB per month): 2011 to 2016

Global Mobile Data Traffic, 2007-2010 (MB per month)

-

1,000

2,000

3,000

2007 2008 2009 2010

0.6 1.32.4

4.2

6.9

10.8

0

5

10

15

2011 2012 2013 2014 2015 2016

Global Mobile Data Traffic, 2011-2016 (EB per month)� Global mobile data traffic is expected to increase 18-fold

between 2011 and 2016

� According to Cisco, average mobile network connection speeds will increase 9-fold by 2016, due to 4G, a similar improvement as what occurred in the 3G transition

� Mobile video content will generate much of the mobile traffic data growth through 2016― This trend in mobile video will still leave carriers looking for

ways to offload the traffic congesting their networks

� Global mobile data traffic grew 33-fold between 2007 and 2010

� Much of the rise was due to the rapid deployment of 3G, which increased network speeds ~10-fold over 2G (e.g. 270 kbps for GSM to 2Mbps for WCDMA)

� Growth in tablets and cellular enabled laptops have been driving usage

� The average traffic per device is expected to increase rapidly― The average smartphone will generate 2.6 GB of traffic per

month in 2016, a 17-fold increase over the 2011 average of 150 MB per month

4.3 150 517 2,131 108

2,576

4,223

6,942

0

2,000

4,000

6,000

8,000

Basic/FeaturePhone

Smartphone Tablet Laptop and netbook

2011 2016

“The Obvious”


� Unlicensed WiFi spectrum accounted for 39% of data delivered to mobile devices, up from 32% two months earlier

� WiFi is delivering almost twice as much mobile data to users as the AT&T and Verizon cellular networks combined

� “The bullish view on WiFi substitution sometimes argues that WiFi is a way for operators to “save” capex. We do not subscribe to this view. Wifi is a safety valve relieving pressure on mobile networks as mobile data traffic grows exponentially.” – Jefferies, “WiFi: Revenge of the Fixed Line Network” (1/12/12)

– Carriers have already begun to rely on offloading, and this trend is only expected to grow

� The prevalence of data consumption indoors has enabled offloading – WiFi becomes a viable substitute to the mobile network in many instances

− Cisco projects that mobile offload as a percent of total mobile data traffic from all mobile-connected devices (not just handsets) will increase from 11% in 2011 to 22% in 2016

Sources: Jefferies research report “WiFi: Revenge of the Fixed Line Network,” dated January 25, 2012 and Cisco Visual Networking Index Forecasts dated February 14, 2012

WiFi Offloading is Critical to Meet Growing Traffic Needs

Consumers are using more applications that are suited to being relatively stationary (i.e. reading a web page, watching video clip) as opposed to truly mobile; but they want this access from “portable” devices

Wireless Data Usage is Moving Indoors. . .

US Wireless Usage by Data Session Location

. . . Due to Evolution of Device Portfolio

US WiFi Usage by Device Type

Mobile35%

Indoor65%

February 2011

Laptops 65%

Smartphones & Tablets

35%

June 2010

Mobile43%

Indoor57%

January 2010

Laptops 37%

Smartphones & Tablets

63%

June 2011

3

Help from WiFi


WiFi Substitution Has Been Driven by a Confluence of Developments

� Public WiFi hotspots are expected to grow nearly 500% worldwide

Proliferation of WiFi Hotspots, Especially Public Greater Penetration of WiFi in Households

Global # of public hotspots (mm) Global # of private hotspots (mm)

Source: Jefferies research report “WiFi: Revenge of the Fixed Line Network,” dated January 25, 2012, Cisco Visual Networking Index Forecast dated February 14, 2012

US Households with WiFi

with WiFi5%

No WiFi95%

2003

with WiFi34%

No WiFi66%

2011

0.5 0.81.3

2.1

3.3

4.5

5.8

0.0

2.0

4.0

6.0

8.0

2009 2010 2011 2012 2013 2014 2015

233282

345416

492571

646

0

200

400

600

800

2009 2010 2011 2012 2013 2014 2015

� In the US, more than one in three homes have WiFi today and this number is expected to roughly double over the next 2-4 years

4

Rise in Mobile Video

� In 2011, over 50% of all mobile data traffic was due to video consumption; by 2016 it will be 70%

Video '11-'15 CAGR 90.0%

Total '11-'15 CAGR 78.4%

PB per M

onth

WiFi27%

CMRS Networks

73%

March 2010

WiFi39%

CMRS Networks

61%

November 2011

� Wireless users are accessing the Internet via WiFi in ever greater numbers

Leading to Growing Usage of WiFi by Consumers

Wireless Access by Network Platform

Problems Find Solutions


The majority of smartphone growth is projected to come from the low-end segment, particularly in emerging markets; while the largest value segment of the market remains the high end

81 120 146 170 286481 624 750 849 927

9161,032 1,051 1,020

1,069

1,0531,006

949901 866

0

500

1,000

1,500

2,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Smartphone Basic and Feature Phones

$1 $4 $5 $8 $15 $23 $37 $7 $22 $33 $54

$71 $77

$78

$50 $69

$116

$139

$149 $161

$170

$0

$50

$100

$150

$200

$250

$300

2009 2010 2011E 2012E 2013E 2014E 2015E

Low End (<$150) Mid End ($150-$250) High End (>$250)

Source: BAML Global Wireless Matrix 4Q11, Morgan Stanley Internet Media and eCommerce deck dated January 18, 2012, Credit Suisse Smartphones report dated June 21, 2011

Global Handset Sales by Type (mm)

Global Smartphone Dollar Volumes by Price Point ($bn)

Global Smartphone Penetration

15%

26%

17%12%

42%

75%

54%

40%

0%

10%

20%

30%

40%

50%

60%

70%

80%

WW NA Europe Asia

2009 2010 2011E 2012E 2013E

Smartphone '11-'15 CAGR: 17.8%

Total Market '11-'15 CAGR: 4.0%

Low End '11-'15 CAGR 62.9%Mid End '11-'15 CAGR 23.6%High End '11-'15 CAGR 10.0%

5

Global Smartphone Unit Sales by Price Point (mm)

9 33 42 62 113 198

316

35 103 156

252 338

370

371

126

162

285

341

368

400

426

0

200

400

600

800

1,000

1,200

2009 2010 2011E 2012E 2013E 2014E 2015E

Low End (<$150) Mid End ($150-$250) High End (>$250)

Low End '11-'15 CAGR 65.6%Mid End '11-'15 CAGR 24.2%High End '11-'15 CAGR 10.6%

Saturated

Powerful New Trend: Low End Smartphones


Data Has Been the Growth Engine for Wireless Operators…

“At the FCC, we’ve recognized that for mobile carriers, like other businesses, matching price to cost can yield efficiency and other benefits. ... We recognize that investment won’t occur without revenue and without returns on investment — and that is why we haven’t prohibited usage-based pricing.“ -- Julius Genachowski, Mobile World Congress in Barcelona, February 29, 2012

� In the U.S., non-voice (including text) reached 31% of US wireless revenues in 2010, up from 7% in 2005

� In Western Europe, data revenue including SMS has been growing at a stable 10-13% annual growth rate over the last 2 years and non-SMS revenues have been growing at ~20%, driven by rising smartphone penetration

U.S. Mobile Non-Voice Revenue ($bn)

� But threats are looming

− “Dumb pipe” phenomenon as SMS revenues are dis-intermediated by “bring your own” messaging (e.g. iMessage)

− Pricing pressure or substitution due to WiFi

− Voice apps (Skype, Vonage, Google) accelerate mobile voice revenue declines

− Who owns the hotspot, and who ultimately is the initiator of the offload session could influence whether WiFi is a complement or a substitute for mobile operator networks. At the moment WiFi appears to be more of a necessity for mobile operators than a significant threat

Western Europe Data Revenue Growth

$4.6 $8.6

$15.2

$23.2

$32.2

$41.3

$50.1

2004 2005 2006 2007 2008 2009 2010

(10.0%)

(5.0%)

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q10

SMS Data Non-SMS Data Total Data

Source: Jefferies TMT Mobility research report dated September 7, 2011

6

How will revenue models evolve with UBP, data caps, RCS (rich communication services), QoS, etc.?

How Will Operators Reinvent the Data Revenue Stream?


0

1

2

3

4

5

6

7

8

9

10

Subscribers (B

illions)

1G 2G 3G 4G

� 2G technologies, now more than 20 years old, will not peak until this year

� 3G technologies are not expected to peak for another 5 years. By 2020, the vast majority (56%) of subscribers will still be 3G

� LTE is in its infancy today. Only 35 operators have launched LTE networks with about 6-7 million subscribers (vs. 5 billion users world wide). By the end of 2012, it is estimated that there will be 100 LTE networks with ~60M subscribers

Build-outs of LTE/4G May Not Be Sufficient to Handle Bandwidth Growth, Unless Accelerated

Global Subscribers by Network Technology, 1985 – 2020E

Sources: Evercore Technology and Telecom Equipment research report dated November 20, 2011 and Jefferies TMT Mobility research report dated September 7, 2011

2G subs exceed 1G

subs more than 10

years after

inception of

industry

Growth of 2G

peaks more than 20

years after it was

first introduced

1G2G

3G

4G

7

Share of Operator RAN Investments

2G 3G 4G

North America 18% 59% 23%

Latin America 40% 60% 0%

N. Europe / C. Asia 38% 57% 5%

W. and C. Europe 33% 67% 0%

Mediterranean 29% 71% 0%

Sub-Sahara Africa 67% 33% 0%

Middle East 35% 60% 5%

India 56% 44% 0%

South East Asia 40% 60% 0%

China & NE Asia 41% 52% 7%

To meet demand, we need more spectrum and more “small cell” technologies

Adoption of New Technology Takes a Decade


� As operators deliver higher speeds via 4G/LTE, networks will requires a combination of more sites and/or more spectrum. But with limited spectrum, increased cell site density becomes increasingly expensive unless spectrum becomes more abundant than it is today

� On February 17, 2012, the US House and Senate passed long-awaited spectrum legislation that authorizes the FCC to conduct voluntary incentive auctions of 100+ MHz of broadcast spectrum in the 700MHz and other bands

– However, missing from this piece of legislation is the reallocation of 25MHz of spectrum by the Department of Defense, what was viewed as a key target of wireless carriers. In general, many industry participants are skeptical

– In addition, a recent revival of over-the-air-TV (pitched to consumers as a way of complementing online video) has the potential to undercut part of the FCC’s rationale for selling off this broadcast spectrum to free up spectrum for wireless carriers

– Further, broadcast spectrum sales are voluntary and expected to happen over 5-10 years; in other words, little new spectrum will be available in the US in the near term

� Currently there is a global spectrum shortage, making further LTE roll-outs difficult

� “The biggest concern facing many operators now is the squeeze on available spectrum” (ABI Research)

In the U.S., There is a Clear Spectrum Shortage

8

Technology Improvements Provide Only Part of the Solution


� Carriers have a handful of tools at their disposal to limit the growing congestion on their networks: 1) utilizing more spectrum, 2) upgrading core network technology (i.e. LTE/4G), 3) employing offloading technologies, and 4) adding more cell sites

� In addition to WiFi offloading, carriers will rely on network upgrades and adding tower cell sites to ease congestion

� Another topology is the use of distributed antenna systems (“DAS”) which is a solution for spectral capacity issues

9

Cell Splitting Provides Part of the Solution

Towers, DAS, Wi-Fi and “Small Cell” Related Companies Are the Big Winners

U.S. Tower and Cell Site Forecast

104,922

107,306

110,844

116,610

117,600

120,000

122,400

125,400

128,400

131,400

183,689

195,613

213,299

242,130

247,081

259,081

271,081

286,081

301,081

316,081

1.751.82 1.92

2.082.10

2.16

2.212.28

2.342.41

1.50

1.60

1.70

1.80

1.90

2.00

2.10

2.20

2.30

2.40

2.50

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Towers Cell Sites Cell Sites/Tower

CAGR

2005-2011 2011-2014

Towers 2.7% 2.4%

Cell Sites 11.2% 7.5%

Cell Sites/Tower 4.0% 2.9%

3/6/09 10/9/09 5/19/10 12/24/10 8/1/11 3/8/1250%

100%

150%

200%

250%

300%

252.68

Tower Index

Tower Share Price Performance

The Physics of 4G Require Significant Incremental Cell Sites

Technology Year # of

Antennae # of Cell Sites (K) Height

Analog 1994 3 130–140 200

Digital 2G 1996 6 50 150

GSM / CDMA 2.5 2001 9–12 165–175 120

3G 2006 12 250 100

4G 2011 8–14 365 80


Subsidy % of

revenues

10% 12% 15% 15% 15%

Subsidy /

Gross Add

$242.16 $312.28 $387.04

$5,182

$7,178

$9,260 $10,117 $10,190

5,928

9,136 9,759

10,570 10,722

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

2009 2010 2011 2012 2013

Subsidy % of

revenues

8% 9% 13% 15% 15%

Subsidy /

Gross Add

$245.76 $258.97 $414.04

$5,093 $5,536

$9,054

$11,100 $11,900

$6,935

$8,140

$8,973 $9,601 $9,793

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

2009 2010 2011 2012 2013

Despite Network Constraints, Carriers Are Spending More on Subsidies Than Capex

AT&T Total Subsidy Cost vs. Wireless Capex Verizon Total Subsidy Cost vs. Wireless Capex

Source: Oppenheimer Capex and Wireless Outlook dated February 2, 2012, JP Morgan Wireless Smartphone Update dated January 31, 2012 and Morgan Stanley research models

Subsidy Wireless Capex

� Subsidies paid by AT&T and Verizon have almost doubled in the last two years. Verizon’s total subsidy cost in 2011 was greater than its total wireless capex spending, and AT&T’s subsidy cost was almost equal to its wireless capex spend

– Apple has benefited disproportionately from these subsidies ($450 per device) versus other high end vendors ($350 per device)

� Analysts are projecting that smartphone subsidies as a % of total wireless revenues are peaking this year, at 15%

� Verizon has transitioned 50% of its android base to its LTE network freeing up CDMA capacity

– When the iPhone 5 (LTE) comes out (in September?) Verizon will have 270mm POPs covered vs. 120-150mm for AT&T

– Verizon started 2011 with 27.4mm CDMA smartphone subscribers and ended with 38.1mm; LTE subs grew to 4.8mm by the end of the year

– Meanwhile AT&T started 2011 with 29.1mm HSPA/3G smartphone subscribers and ended with 39.4mm; AT&T had to build out 3G legacy

capacity to meet demand; AT&T released its first LTE handsets in November 2011

10

% of Smartphones on LTE

Q1 Q2 Q3 Q4

Android Smartphones 6.6% 16.6% 21.4% 47.1%

Total Smartphones 4.7% 10.6% 13.1% 18.7%

iPhone introduced

# of Subscribers (mm)

2009 2010 2011

Android Smartphones 7.3 7.9 13.3

Apple Smartphones 11.6 21.1 26.0

Value Is Shifting from Networks to Devices

iPhone has driven the

subsidy/gross add

significantly higher

($mm) ($mm)


As Subsidies Have Driven Down Margins for Carriers

AT&T % EBITDA Margin (Service Revenue Only) Verizon % EBITDA Margin (Service Revenue Only)

44%43%

35%

38%

43%

40%

40%41%

45%

43%

38%

38%

39%

41%

44%

29%

25%

30%

35%

40%

45%

50%

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

45%

46%

44%

47%

46%

46%46%

45%

46%

47%47%47%

44%

45%

48%

42%

25%

30%

35%

40%

45%

50%

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

Q4’11: iPhone

4S (Oct. ’11)Q2’10: iPhone

4 (June ’10)Q2’09: iPhone

3GS (June ’09)

Q3’08: iPhone

3G (July ’08)

Q1’11: iPhone 4 (Feb. ’11) Q4’11: iPhone

4S (Oct. ’11)

� Carrier margins are impacted by the introduction of new devices as these subsidies are expensed in the quarter of the upgrade; thus what appears to be a “one-time” effect, is actually a recurring effect

� Note: Wireless carriers’ accounting policy requires that handset costs be expensed in the period in which they are sold, and notamortized over the life of a subscriber

Other VZ smartphone releases:

Samsung Galaxy S2: May 2011

Motorola Droid RAZR: Nov. 2011

HTC Rezound: Nov. 2011

Source: Company filings and Morgan Stanley research models

11

Carrier Business Models Remain Challenged

2008 2009 2010 2011

Wireless EBITDA $17,644 $19,886 $21,754 $21,631

% Growth 12.7% 9.4% (0.6%)

2008 2009 2010 2011

Wireless EBITDA $22,090 $23,668 $26,080 $26,489

% Growth 7.1% 10.2% 1.6%

Aggregate EBITDA

continues to grow, but at

declining rates (AT&T

declined in 2011)


From a Profit Perspective, the Smartphone Handset Market has Become a Duopoly

Source: Asymco research, Gartner Mobile Communication Devices Forecast, Bernstein research dated February 24, 2012

12

Apple and Samsung command ~90% of the operating profit in the global smartphone market

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Nokia Motorola Samsung Sony-Ericsson LG RIM Apple HTC

Nokia is struggling to reinvent itself and depending on Windows Phone to regain share and relevance

0%

20%

40%

60%

80%

100%

2009A 2010A 2011A 2012E 2013E 2014E 2015E

Android BlackBerry OS Symbian iOS Windows Others

Worldwide Smartphone OS

Market Share

� In 5 years, the industry has shifted from Nokia having 60% of profits, to Apple having 79% and Nokia having zero

– Margins have declined despite an estimated 35% drop in the industry’s combined R&D spend over the last five years

� Qualcomm’s operating profit has gone from $2.9bn to $5.3bn, and with MediaTek ($0.4bn in operating profit) a distant “number 2” baseband supplier

Manufacturers are increasingly dependent on flagship products

Galaxy S6%

iPhone24%

Other70%

Galaxy S10%

iPhone43%

Other47%

Galaxy S8%

iPhone79%

Other13%

Smartphone Unit Share Smartphone Value Share Smartphone Operating Profit Share

Global Profit Share

Device Manufacturers May Have a Challenged Future


Combination of Handset Duopoly and High Subsidies Make the Market Ripe for Disruption

� This situation has created an opportunity for low cost Android handset vendors to storm the US market with the blessing of carriers, in exchange for very limited subsidies

� Carriers may also try to regain margins by creating potential new revenue streams from app developers and rolling off unlimited data plans

� Apple has the most to lose in any disruptive scenario, given its focus on the high end segment that is heavily reliant on subsidies, but we are not predicting Apple’s demise

– Apple’s industry leading customer stickiness statistics suggest more subscription-like profits, and thus more resiliency against negative macro forces; further, the anticipated iPhone5 (LTE) will drive a massive upgrade cycle

– While risking some cannibalization, Apple could pivot and enter the low-end market, and launch a smaller, cheaper phone to protect its share if needed

– Additionally, Apple has meaningful share expansion opportunity through new carriers (China Mobile, Docomo, T-Mobile, etc.)

� As the market is moving towards low-end smartphones, a new competitor is emerging – Chinese OEMs

81%

46% 43% 45%24%

17%

43%36% 29%

52%

2% 11% 21% 26% 24%

0%

20%

40%

60%

80%

100%

Apple HTC Blackberry Nokia All Others

Will buy again Unsure Will Switch

While Repurchase Intentions are the Highest for Apple…

Source: Bernstein research on AAPL dated February 6, 2012; BMO research dated February 24, 2012, Strategy Analytics research

13

Historically There has been a 10-Year Life Cycle for a Smartphone OS…

…And Chinese OEMs Now Lead in Low-End Smartphones

41%

0%

20%

40%

60%

80%

100%

1Q09A 2Q09A 3Q09A 4Q09A 1Q10A 2Q10A 3Q10A 4Q10A 1Q11A 2Q11A 3Q11A 4Q11A

Nokia RIM Chinese OEMs Samsung Other

0%

10%

20%

30%

40%

50%

Year 1 Year 5 Year 10

Symbian Apple Palm Microsoft Android Blackberry OSNorth American M

arket Share

The Only Constant in the Device Business is Periodic Disruption


2011A YoY Total

FB Growth Smart Smart Penetration

Users in FB Handset Phone Phones Smart(mm) Users ASP ASP (mm) Phone FB

MEA 56 91.0% $87 $265 30 2% 4%

APAC 197 87.6% $104 338 184 5% 5%

Latin America 148 105.0% $103 242 34 6% 25%

Europe 223 37.8% $150 270 117 14% 27%

North America 175 17.1% $209 302 107 31% 50%

Should Google and Apple be Wary of Facebook? Low Cost Devices With Android or HTML5-Based Ecosystem Could Abruptly Democratize the Global Market

14

Source: Gartner, BAML HTML5 report dated February 17, 2012, Internet World Stats research

0

400

800

1,200

1,600

2,000

2010 2011 2012 2013 2014 2015 2016

Global H

andset Units (m

n)

HTML5 capable handsets Total Global handsets

85%77%

69%

60%

42%

21%7%

Handsets with HTML5 Compatible Browsers

� While Facebook is the most successful/downloaded app on Android/iOS, they also have exponential growth in under-penetrated markets, APAC, MEA and Latin America

� Facebook could fill the gap between the handset ASP and smartphone ASP in developing markets with a lower-cost device

– Users could spend even more time within Facebook’s walled garden, which is a direct threat to Google’s search/ad business

� Facebook could offer a viable alternative for differentiated and desirable devices with deep social integration, without the “Apple tax” on carriers in the form of subsidies

– Can the North America and European market continue supporting

the latest iPhone models, effectively subsidizing older models for

the rest of the world?

– A low-cost phone conceptually similar to a Chromebook, with a

browser-based OS and HTML-based app platform, could cause

substitution away from generic, low-end Android phones

� Regardless of Facebook’s support, an HTML5-based ecosystem could shift both economics and control away from Apple and Google

– Microsoft, Amazon and RIM also stand to gain from the creation of a cross platform HTML5-based ecosystem

– Opportunities for new entrants offering tools for content creation,

advertising and analytics

� Mozilla has recently announced its own efforts for an open HTML-5

based app store, potentially leading to this disruption

Facebook Potential Market Opportunity

With lower cost smartphones, Facebook could materially increase its penetration

Disruptive Forces May Have Powerful “New Entrant” Friends


The Growth in Apple’s Revenue Share Has Boosted Its Stock; Google is Investing in Android With A View Towards Monetizing Mobile Search Revenue

Relative Share Price Performance vs. Market Share

15

Index

ed Share Price

Perform

ance

Source: FactSet, Gartner research, Oppenheimer research dated November 13, 2011, Bernstein research dated February 24, 2012

27.7%

31.8%

43.0%

2.5%

16.1%

38.0%

Dec-09 Dec-10 Dec-11

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0539%

102%

AAPL Stock Price

iPhone Market Share - by revenue

GOOG Stock Price

Android Smartphone Market Share - by installed base

Global Smartphone Installed Base Market Share

3%12%

19%14%16% 15% 17%

8%

38%

17%12%

3%

50%

19%8% 6%

54%

20%

7% 12%

0%

20%

40%

60%

80%

100%

Android iPhone OS BlackBerry OS Windows Mobile

2009A 2010A 2011A 2012E 2013E

� Apple’s disproportionate revenue share versus its units share has been reflected in its stock price trajectory

� Google’s unit share growth has not yet translated to material mobile-based revenue, which is reflected in its stock price

Win-Mo displaces RIM as “3rd” ecosystem. . . for now

Two Different Strategies by the Leaders: Profit Now vs. Market Share Now

Jan-09


16

Google Has Acted Preemptively to Protect its Search Share from the Smartphone Tsunami

Source: Bernstein research dated February 10, 2012, Gartner research, eMarketer research, Evercore research dated March 5, 2012(1) Chart excludes queries from tablets

� Google is poised to capture share shift as queries shift from the desktop to mobile devices along with improvement in mobile CPCs

– The 2011 U.S. average revenue per search user was $63 for the desktop and $13 for mobile; they are both expected to converge to approximately $70 by 2017

– Commercial search queries (e.g. local restaurants, comparison shopping of a bar coded item) will migrate faster towards mobile devices

– Google has agreed to generous revenue share arrangements with carriers, browsers and online portals to protect its share in search

● According to rumors: Verizon received ~80% of ad revenues from DROID, Mozilla (the leader in mobile HTML5 adoption) received ~$100mm per year to keep Google as its default search engine, and recently renewed this deal to receive ~$300mm per year; Apple received ~90% of Google search revenues generated on iOS devices

� Google’s early strategic moves have effectively relegated Microsoft/Bing to a distant second place

– Google holds ~65% share of the US desktop search queries, but ~95% of the US mobile search revenue

– A substantial proportion of its queries come from iOS devices

● Android provides Google with a hedge if (WHEN!) Apple leverages its own assets (e.g. Siri) to dampen Google’s rise or switches its default search to Bing

� Google has already recognized its next point of vulnerability – vertical-specific search apps – leading to its acquisitions like Zagat and ITA, and the launch of Google Offers

� The HTML5 “promise” potentially enables Google to provide a single cross-platform search app that bypasses control by carriers and OEMs

� Google’s strategy is to expand ARPU after gaining market share; mobile is expected to steadily contribute an increasing proportion of Google’s search revenue

Total U.S. Mobile Ad Spend ($mm)

$1,451 $2,611

$4,309

$6,463

$8,660

$10,825

$0

$4,000

$8,000

$12,000

2011A 2012E 2013E 2014E 2015E 2016E

Google’s O/S Market Share Will Lead to Future Mobile Search Profits

Mobile as % of Google’s U.S. Search RevenueGlobal Fixed vs. Mobile Search Queries(1)

30% 37% 43% 49% 54% 59%

70% 63% 57% 51% 46% 41%

0%

20%

40%

60%

80%

100%

2011A 2012E 2013E 2014E 2015E 2016E

Global mobile queries Global desktop queries

$15.3 $17.5

$20.0 $22.5

$25.2

$28.3

$31.7

$0.0

$5.0

$10.0

$15.0

$20.0

$25.0

$30.0

$35.0

2011A 2012E 2013E 2014E 2015E 2016E 2017E

US Desktop Search Revenue US Mobile Search Revenue

7.3%

33.4%

Total US Sea

rch Reven

ue ($bn)

Mobile search is driving Google’s growth


� Disrupting established ecosystems is difficult – all the players in the value chain are intertwined and bound together

� HTML5 still has a ways to go to before it generates user “pull”

– User experience is still superior on native apps

– Users still prefer to store at least some data locally for use when they don’t have an internet connection

� Amongst all the potential champions of HTML5, Facebook is in a unique position because it exerts tremendous user pull on its own, and can negotiate its way into a new ecosystem by providing preferred access to its user base, or withholding accessto the same

– An HTML5-based ecosystem would strengthen Facebook’s negotiating position vis-a-vis hardware and OS vendors

– A smartphone optimized for Facebook could be subsidized by Facebook itself to attract carrier interest

� Google is also building a multi-layered strategy so it can pivot to whichever way the market ultimately moves

– Android if native prevails, or a Chromebook-like smartphone if HTML5 prevails

– Google’s ownership of MMI gives it a “stick” to ensure that Android OEMs minimize fragmentation and continue to innovate on the hardware front

● Assuming Android fragmentation persists, Google could potentially execute a “Kindle Fire-like” disruptive strategy in the smartphone market, essentially pursuing a low-price (potentially subsidized)approach to handsets, just as Amazon is believed to be doing with tablets. Moreover, this approach could be justified by what's at stake in its core search business, should Android continue to fragment or prove to have less platform leverage than that held by the device provider or carrier

17

But Disruption is Not Easy

A Successful Ecosystem Needs Hardware, Software, Network and User “Pull”


� The only constant in the handset market has been periodic disruption

– Just as no retailer has been dominant from one generation to the next, no handset manufacturer or OS has commanded leading market share for more than a decade; the mobile market is still young, with much innovation and “integration” (M2M) to occur

– How will handset providers, already hurting from “forced standards” (other than Apple) and commoditized offerings reinvent the delivery of their value add?

– Carriers will welcome handset disruption to break the subsidy model, and they can strongly promote new ecosystems (e.g., as Verizon did with Droid)

– Will Android “catch up” with Apple technologically; will Apple offer lower cost models that reduce their dependence on subsidies; what will the impact of lower cost models be on Apple’s GM’s over time?

– How will HTML5 or Android empower “an” Amazon or “a” Facebook to disrupt the current ecosystems?

– Microsoft is still a “new” entrant; if WinMo fails to gain “sufficient” scale via Nokia, what will Microsoft do next?

� With Google as Apple’s true competitor, and Google’s monetization of mobile coming through Search, will Apple enter search (through Siri)?

– Ultimately, Apple’s goal is to marginalize Google’s source of strength – its search dominance – in any way possible; Apple does not need to build its own search engine, but can simply promote other forms of search by default, or siphon off Google’s search economics as they are currently doing

– Apple could monetize commercial queries through a “70/30” style revenue share with the best of breed vertical search platforms that it leverages (e.g. Yelp), rather than following Google’s model of directly targeting ads to search users

– What will be Google’s next moves to protect search share?

– What will be Apple’s next moves to protect device price points and its gross margins?

18

So, What Does This All Mean?


� The growing importance of WiFi has led to changes in data consumption patterns, proliferation of urban hotspots, and innovation in longer range WiFi technology

– In the U.S., will cable deploy WiFi more ubiquitously? How will other small cell technologies be employed?

– Providers of cable pipes and WiFi hardware will be the beneficiaries of WiFi substitution

� How will carrier business models evolve with the pending threats of VoLTE, “bring your own messaging” (e.g. Apple’s iMessage, Samsung’s ChatON), and ever increasing subsides?

– Lower cost handsets will mitigate the subsidy cost

– But, how soon will usage-based pricing/data caps, Rich Communication Services (e.g, QoS, low latency services, bandwidth on demand) drive incremental revenue sources?

19

So, What Does This All Mean?

NET, NET: The Status Quo is Unlikely to be Preserved

Appendix: OTT Update


Cable Growth Driven by WiFi Proliferation and Emergence of OTT

Growth in Over-the-Top Households

Netflix Has More Subscribers than Pay-TV

� In 2011, Netflix revenues were $3.2bn compared to HBO’s of $5.0bn

� Netflix’s 24mm subscribers have overtaken Comcast’s (22.5mm), leading Comcast to offer its Xfinity streaming video-service and TV Everywhere

� YouTube accounts for 18.2% of peak period traffic on North America's mobile access networks (behind only HTTP and Facebook)

Source: Gartner, Wall Street research

0

5

10

15

20

25

30

Netflix ComcastDirecTV Dish TimeWarnerCable

Charter Verizon AT&TCablevision

Curren

t US video

su

bscribers

(Units in millions, unless otherwise noted)

� Pay TV growth stalled as household formation stalled� But OTT has helped extend cable’s lead in broadband,

and will help usher in usage-based pricing and data caps

92.5 94.0 96.0 96.6 96.8 96.9

0.0%

1.0%

2.0%

3.0%

70

80

90

100

2007 2008 2009 2010 2011 2012Video Subscribers y/y % growth

Video Subscriber Trends

(1,000)

(500)

0

500

1,000

1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11E 4Q11E

Cable Satellite Telecom

Cable, Satellite, and Telecom Video Net Adds (000s)

2.5

4.56.6

8.610.4

12.1

0.0%

5.0%

10.0%

15.0%

0

5

10

15

2010 2011E 2012E 2013E 2014E 2015E

% of Total Households

Number of OTT

Substitute H

ousehlds

Total OTT Households % of Total Occupied Households

20

While OTT Has Grown Rapidly, the Pay-TV Market Has Not Lost Subscribers

OTT Landscape Cable Landscape

OTT Is Not a Threat to Multi-Channel Ecosystem


Fears of Cord Cutting Are Overblown

� As global smartphone and broadband penetration increases, communication spending by households is expected to increase as well

� Device proliferation has led to increasing video consumption

� This trend favors OTT providers, who benefit from increasingly fast streaming speeds and overall penetration

� However, two key factors indicate that fears of cord cutting are overblown…

Source: JP Morgan Telecom Industry report dated January 10, 2012, Morgan Stanley Media & Cable Survey dated May 15, 2011, Deutsche Bank Media Spotlight report dated August 23, 2010, SNL Kagan industry data

Communications Spend as % of Household Budgets

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

5.00%

1/80 1/83 1/86 1/89 1/92 1/95 1/98 1/01 1/04 1/07 1/10 1/13 1/16

Telephone AgeCellular phone /

InternetBroadband Age

Evolution of mobile

1. Access to live sports remains a high priority

– ~60% of TV viewers watch ESPN at least once in 3 days

– These viewers are willing to pay a premium for live sports, as ESPN charges the highest per-household subscription fee of any cable channel (~$4.70 per month, up 42% since 2006)

2. There is a meaningful proportion of OTT users that

simultaneously keep their Pay-TV subscriptions

– Survey data has shown that NFLX subscribers spend more time watching movies, and approximately the same time watching TV than non-NFLX subscribers through Pay-TV subscriptions

Viewership of ESPNWillingness to Pay

(per Month for ESPN)

41%

19%

11%

3%

11%

16%

0% 10% 20% 30% 40% 50%

Daily

Once in 3 Days

Once per Week

Once in 15 Days

Once in a Month

Never

36%

13%

10%

9%

6%

3%

4%

19%

0% 10% 20% 30% 40%

$2.00

$4.00

$6.00

$8.00

$12.00

$20.00

$30.00

Others

0 5 10 15 20 25

TV

Computer

Tablet

Smartphone

All Platforms

0 5 10 15 20

TV

Computer

Tablet

Smartphone

All Platforms

Mean Weekly Hours Spent Watching TV Shows

Mean Weekly Hours Spent Watching Movies

21

“Traditional Video”, Driving By Sports, Is Still Demanded by Consumers


Operators are Responding to Over-the-Top

22

� Operators are keenly focused on the OTT threat and have a formidable collection of tools at their disposal to combat and profit from it, including:

– Business innovations such as TV Everywhere, which offers ubiquitous subscriber access to programming (now deployed in limited regions by Comcast, Time Warner Cable and Verizon) and UltraViolet (cloud-based ecosystem)

– Control of standards such as Enhanced Binary Interchange Format (EBIF) for advanced advertising (now deployed on most digital set-top boxes), which offers advertisers and consumers internet-like interactive (and, eventually, targeting) capabilities

– Control of subsidized STBs, which many outsiders have acknowledged as presenting a formidable obstacle to disruptive replacement technologies, as many unsuccessful manufacturer forays have demonstrated

– Ownership and control of the largest ISP operations, which are essential to the OTT model, along with lobbying power and a political climate inclined to oppose any new net neutrality actions that might limit their ability to leverage control of this infrastructure to their

advantage

– Partnerships with OTTs, which are beneficial to both parties (i.e., Google TV / Dish Network)

– Usage-based pricing

Source: Gartner

Recent Operator Initiatives

Distributor Product Offering

Operator

Initiatives

Comcast Xfinity Streampix streaming-video service, TV Everywhere partnership with Time Warner, 75k on-demand shows and movies on TV or streaming online, viewing capability on iPhone and iPad and manage DVR from smartphone devices

Verizon Redbox partnership to offer Netflix-like content streaming, 35k on-demand titles monthly, multi-room DVR functionality, ability to stream on Xbox

AT&T Manage DVR from smartphone devices, ability to stream on Xbox

Dish Network Partnership with Google TV to promote OTT offerings, 3D on-demand content, search functionality of online content

DirecTV Ad sales partnership with Google, multi-room start/stop DVR capability, manage DVR from smartphone devices, viewing ability to on iPhone and iPad

Time Warner Cable 10k on-demand shows and movies, manage DVR from smartphone devices (TV Everywhere)

Charter 10k on-demand shows and movies

Cablevision 3D on-demand content, manage DVR online; TV Everywhere

Broadband Benefits from New Offerings


Too Little Attention has been Focused on the Vulnerability of Existing Pay TV Models to a Decline in the Consumer’s Purchasing Power

“Liberty Media Corp. Chief Executive Greg Maffei described the

rising cost of ESPN as a "tax on every American household." He

said the cost increases create an opportunity for alternative TV

offerings that could undercut the way cable channels are packaged—

as bundles of different programming…. ESPN charges the highest

per-household subscription fee of any cable channel, according to

SNL Kagan, which estimates its monthly per-subscriber fees for the

flagship channel have risen 42% to $4.69 since 2006. The average

cable channel fee rose 24% over that same period to 26 cents a

month.” – Wall Street Journal

Pay TV ARPU from 2005 to 2010 (1)Average Expenditure on Cable and Satellite TV Services as a Percentage of Disposable Income

$59.82

$64.27

$67.48

$71.53

$73.75

$77.43

$50

$55

$60

$65

$70

$75

$80

2005 2006 2007 2008 2009 2010

Source: Bernstein Research report dated May 2011, “U.S. Telecommunications and Cable & Satellite: The Poverty Problem”(1) Weighted average of data from Comcast, Time Warner Cable, Cablevision, DirecTV, and Dish Network

3.7%

1.9%

1.3%

1.0%

0.6%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

Lowest Quintile Quintile 2 Quintile 3 Quintile 4 Quintile 5

Expenditure on Cable and Satellite

TV Services as a Percen

tage of

Post-T

ax Inco

me

Lowest Quintile: Expenditure Breakdown of Income (2009)

Lowest Quintile: Expenditures as % of Total

Housing(ex-telecom)

38%

Food16%

Transportation13%

Healthcare8%

Entertainment5%

Education3%

Other17%

$9,956

$2,855

$1,628

$3,501

$8,290

($6,318)

($8,000)

($4,000)

$0

$4,000

$8,000

$12,000

Post-tax inco

me

Food

Housing (ex

-teleco

m)

Transp

ortation

Hea

lthca

re

Rem

ainder

� While food and shelter alone exceed available income, leaving the bottom quintile to dip into savings, entertainment still comprises almost 5% of total spending

23

Escalating Sports Costs May Price Some Consumers Out of MCC Market


DBS Providers

TV Stations

DVD Retailers/DVD Rentailers

Broadcast Networks

Next-Gen Ad Agencies

Data Equipment Vendors

Cable Networks

MSOs

TV/Film Studios

24

� DBS Providers

– Lack of broadband as a defensive strategy

� TV Stations

– Migration online will reduce CPMs as overall traditional viewer base declines

� DVD Retailers / Rentailers

– Proliferation of web-based video and content delivery (e.g., Netflix via Samsung or PlayStation)

– Consumer patterns show that DVD rental growth is far outpacing DVD sales

� Cable Networks

– Extension of brands (CNN, MSNBC and Fox News, Weather Channel, ESPN)

– Monetization remains difficult (sizable presence but low portion of revenues)

� Telcos

– Where plant is adequate to support bandwidth, will be successful

– Higher programming costs than cable but they remain a small part of the overall costs relative to cable

– Need a ‘device shifting’ strategy

� Cable

– Usage-based pricing and models would mitigate cord cutting

– Might be better off even if relegated to dumb pipe


– Regulatory risk given future broadband pricing uncertainty

� Broadcast Networks

– Sites like Hulu may offer a digital strategy that generates incremental revenue

� Apple, Netflix, Amazon

– Strategies allow for monetization of professionally produced content

– Need bundled content to be a game changer

� TV and Film Studios

– Flexibility to adjust business models

� Google/YouTube?

� New Content and Aggregation Entrants

– Most of these will fail, but some will succeed and previously there was essentially little value in even trying

� Next-Gen Advertisers

– More eyeballs/discretionary income = higher CPMs, more clicks and more $

� Data Equipment Vendors

– IP video is the biggest driver for network equipment spending

Losers TBD Winners

Preliminary Winners and Losers: OTT Evolution (Evercore View: Summer 2010)


DBS Providers

TV Stations

DVD Retailers/DVD Rentailers

Broadcast Networks

Next-Gen Ad Agencies

Data Equipment Vendors

Cable Networks

MSOs

TV/Film Studios

25

� DBS Providers

– Lack of broadband as a defensive strategy

– Reinvention with wireless?

� TV Stations

– Migration online will reduce CPMs as overall traditional viewer base declines

� DVD Retailers / Rentailers

– Proliferation of web-based video and content delivery (e.g., Netflix via Samsung or PlayStation)

– Consumer patterns show that DVD rental growth is far outpacing DVD sales

� Cable Networks

– “Live” shows (CNN, MSNBC and Fox News, Weather Channel, ESPN) have a distinct advantage

– But will revenues keep pace with (sports costs)?

� Broadcast Networks

– Sites like Hulu may offer a digital strategy that generates incremental revenue

� TV and Film Studios

– Flexibility to adjust business models

– Film is still a “VC” business

� Netflix

� Wireless Telcos

– Where plant is adequate to support bandwidth, will be successful

– Higher programming costs than cable but they remain a small part of the overall costs relative to cable


– Need new data revenue streams

� New Content and Aggregation Entrants

– Most of these will fail, but some will succeed and previously there was essentially little value in even trying

� Next-Gen Advertisers

– More eyeballs/discretionary income = higher CPMs, more clicks and more $

� Data Equipment Vendors

– IP video is the biggest driver for network equipment spending

� Cable

– Usage-based pricing provides upside

– Potentially better FCF if relegated to dumb pipe

– Need a ‘device shifting’ and out of home strategy

– Regulatory risk given future broadband pricing uncertainty

� Apple

– If they continue to innovate, protect their gross margins, and the carriers accept the status quo of subsidies

� Google/YouTube

� Facebook

� Sports Rights

– When will the public revolt?

� Specialized Wi-Fi Companies

– E.g. Boingo

Losers TBD Winners

Preliminary Winners and Losers: OTT Evolution (Evercore View: Today)


Description

AT&T

� Significantly ahead of its competitors in using WiFi offload as a network management solution

� Has the largest WiFi network deployed at key locations that already help manage data traffic and optimize the customer experience

– Almost 30,000 WiFi hotspots including the development of entire “hot zones” in congested outdoor urban areas

� Have encouraged customers to move their traffic to AT&T’s own WiFi network or some other WiFi. Due in part to aggressive WiFi build, network performance as measured by statistics such as dropped calls has improved materially over the last several quarters

� Consideration: Customers have avoided moving up to higher tier data plans by utilizing WiFi. It could become more difficult for AT&T and other mobile carriers to move customers into higher usage tiers

Verizon

� Offers free Wi-Fi to its residential broadband customers (FiOS and DSL) and will soon expand offering to wireless customers (according to CTO). Has traditionally made limited use of Wi-Fi, preferring to focus on its cellular network

� Currently does not have any Wi-Fi hotspots of its own, primarily offering Wi-Fi services to broadband customers through a resale agreement with Boingo

� Has indicated plans to implement Wi-Fi strategically in high-traffic locations for 3G and 4G offload

Cable (all)

� Cablevision, Time Warner Cable and Comcast have been deploying WiFi hotspots in shopping centers, restaurants, cafes train stations, marinas, malls and sports fields

� Cablevision and Time Warner Cable in particular have been extremely aggressive in deploying their WiFi network in the densely populated New York metro area, available to broadband customers for free

� The three companies allow each other’s subscribers to freely roam on their WiFI networks without any incremental charge

Cablevision

� Has been granted a patent for a technology that could allow it to offers its Optimum subscribers access to a WiFi-based mobile phone service

� Will rely on its extensive WiFi network in the New York metropolitan area to carry mobile phone traffic, and roaming agreements with other carriers in areas that aren’t covered by WiFi

� Consideration: Challenge of obtaining handsets it could offer to subscribers, and striking roaming deals with carriers

Service Providers are Focused on WiFi Strategies

26


Description

BT

� Aggressive WiFi buildout, including partnership with WiFi-sharing platform FON, enables BT to monetize incremental revenue streams without fear of cannibalization (unlike mobile operators)

� Can differentiate its fixed-line broadband products by bundling widespread WiFi access into offers

Iliad � Installed base of ~4 million WiFi access points supports its greenfield mobile project

� WiFi fill-in is particularly valuable to Iliad as it is facing a lack of digital dividend spectrum and relies heavily on national roaming

Boingo

� Leading provider of Wi-Fi services, with > 400,000 global hotspots, 257,000 subscribers, 21mm network connections and partnerships with > 125 network operators including Verizon, BT, China Telecom, KT Corp, France Telecom, and T-Mobile

� Boingo’s wholesale services (46% of revenue) include roaming, platform services (i.e. resale), DAS infrastructure, and turn-key solutions for venue partners. Boingo is Verizon’s key Wi-Fi partner and is T-Mobile’s key Wi-Fi roaming partner

� Boingo’s strategy is to continue to expand its network into international airports, QSRs, arenas and malls, which allows it to offer subscribers and wholesale customers a more ubiquitous offering

– Added 2 airports in Rome and 10 in Portugal, increasing number of managed airport networks to over 60 globally. Boingo has also announced shopping center deals with 3 partners, increasing the number of managed shopping centers to 33

Other

� Republic Wireless: In November 2011, this start-up company began offering a smartphone that searches for a WiFi network first. It uses a cellular network (via wholesale agreement with Sprint) as back-up only where a WiFi connection cannot be obtained. Service costs $19/month for unlimited talk, text and data. “Republic’s bet is that ultimately WiFi networks will be nearly ubiquitous, and that, as a result, cellular usage by its community will ultimately be manageable” (Jefferies)

� Alcatel/Lucent: Announced in February 2012 the lightRadio product. It seamlessly finds and connects end users (smartphones/tablets etc.) with the best available wireless network, while helping carriers extend their reach by integrating Wi-Fi directly into their service offerings

Service Providers are Focused on WiFi Strategies (Cont’d)

27

Evercore - ConfidentialEvercore: One of the Most Active M&A Advisors in the Technology Sector

2011

Advised

on its successful defense from

2011

Advised

on its $333 million

acquisition of

2011

Advised

on its$230 million sale to

2011

Advising

on its pending $860 million sale to

2011

Advised

on its acquisition of

2011

Advising

on its review of strategic

alternatives

2011

Advised

on its sale to

2011

Advised

on its sale to

2011

Advised

on its $1.15 billion acquisition of

2011

Advised

on its $367 million sale to

2011

Advised


2011

Advised

on its sale to

2011

Advised

on its sale to

2012

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on its sale to

2011

Advised

on their $2.0 billion acquisition of

and

on its $30 million equity investment

from

2012

Advised

on its pending acquisition of

2012

Advising

on its pending $300 million acquisition of

2012

Advising

28


� Breadth of experience in Technology Sector

� Strong track record in Wireless/Telecom Sector

� Deep experience in IPR and Mobile Computing


2010

Advised


Advised

2005

on its $1.4 billion acquisition of the Wireless Solutions Business of

Advised

2010

on its $200 million sale of its wireless modem business to

and on its intellectual property rights negotiation with

Advised

2010 and 2008

on its $367 millionsale to

2011

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2011

Advised

and

on their $2.0 billion acquisition of

Advised

2011

on its pending $860 millionsale to

2011

Advising

on its sale to

2011

Advised

on its $196 millionequity investment into

Advised

2009

on its $2.8 billionsale to

Advised

20082010

on its$22.4 billion merger with

Advised

on its acquisitions of

Advising/Advised

2004/2005/2006

now

on its $8.3 billion sale to

Advised

2009


Advised

2008


Advised

2011

Note: Red box denotes a 2011 announced transaction

on its $29.0 billionsale to

Advised

2007

on its $1.15 billionacquisition of

2011

Advising

now

on its

acquisitions of

2003-2011

Advised

� One of the most active M&A advisors in Technology Sector in 2011

Breadth of Technology Expertise


2011

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29


on their $3.0 billionacquisition of


Advised

2007

30

$306.4 million IPOCo-Manager

Advised

2011

2011

$750.0 million Senior NotesSenior Co-Manager

Advised

on its $4.1 billion merger with

Advised

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in connection with $7.5 billionPut Right to Sprint (Nextel)

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2009

on its attempted $39.0 billion acquisition of

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2007

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Note: Red box denotes a 2010/2011 announced transaction

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Evercore: One of the Most Active M&A Advisors in All Telecom Sub-Sector

mobile world congress thoughtpiece

Documents

film studios

red box denotes

consumer patterns

outpacing

rich communication

dvd rental

fixed line

household