How mobile is at the centre of this revolution, the role of tablets and new hybrid devices and how operators intend to charge for their usage.

1. Making the Right Connections in the New Mobile World
Technology, Tablets and Tariffs
Shaun Collins
shaun.collins@ccsinsight.com
Twitter: @shauncollins

2. This is not the world we planned for
• Introduction
• Market disruptions are immense and unpredictable
• New behaviour, new devices, new entrants
• Personal and professional cloud
• Technology, Tariffs and Tablets
• Q&A
© CCS Insight 2

3. Massive Disruptions in an Unpredictable Market
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4. Operators are managing change in a tough trading environment
Revenue (£M) Revenue Split, 1Q12
4,000 50%
48% 3
2,000 10.3% Vodafone
46% 27.8%
Data
44% 9.8% Data
26.8%
O2 Data
42% 28.3% 29.8%
2,000
Data
40%
33.7%
4,000 38%
1Q11 2Q11 3Q11 4Q11 1Q12 Everything
Everywhere
Data Voice % Data 33.6%
Note: data refers to share of total for four main operators.
Non-Voice Services as % of Total Revenue Subscriber Split, 1Q12
50%
3
45% 10.8% Vodafone
25.2%
40% Post-paid
11.8%
35% Post-paid
26.4%
O2 Post-paid
30% 29.3% 28.6%
Post-paid
25% 33.2%
20% Everything
1Q11 2Q11 3Q11 4Q11 1Q12 Everywhere
34.8%
Vodafone Everything Everywhere O2 3
Note: data refers to share of total for four main operators.
© CCS Insight 4

5. Post-Pay Jungle - June 2012 - UK
iPhone 4
Samsung
Galaxy S3
HTC One Nokia
X 808 PureView
Samsung Motorola Nokia
Galaxy Note RAZR Samsung N9 RIM 9900
MAXX Omnia 7
HTC One Nokia Lumia
S 900
HTC
Motorola
Titan
HTC Sony RAZR
Sensation Samsung
Huawei Xperia S Nokia Lumia RIM
XL Galaxy S II
Ascend 800 9800
P1
Sony
Xperia P
HTC
Radar
Samsung
HTC
HTC Galaxy S Advance
Trophy ZTE Tania
Desire S LG
Samsung Samsung
HTC L7 Galaxy W RIM
Galaxy
Motorola One V 9360
Ace 2 Nokia Lumia
Defy Plus Curve Samsung
710
LG Sony Nokia Lumia Galaxy 551
Optimus 7 Xperia U Nokia RIM
610 9300
C6
Curve
Alcatel LG RIM RIM
HTC Huawei
OT-995 L5 9380 Curve 9320
Wildfire S Ascend G300
Samsung Curve
Alcatel
Huawei Galaxy Mini 2
OT-990
Blaze LG Nokia
L3 302 Asha
SOURCE: CCS Insight
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6. Blurring Hardware Categories
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7. How are users thinking about their mobile/tablet usage?
CCS Insight presentation to KPN March 29th 2012 8

8. Two Megatrends – Smartphones and Tablets
Tablets
 Worldwide tablet shipments in 2011 - 65m
 Worldwide PC shipments in 2011 - 414m
 Our main scenario - tablets take us into a “Post-PC” era
– Long term annual sales potential - 700-800m / year
Source: CCS Insight, various, Apr 2012
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9. Two Megatrends – Smartphones and Tablets
 There is still work to do to realise the full value of smartphone growth
– Smartphones are available at <€100
– The next wave depends on affordability of pre-pay data tariffs
Source: CCS Insight, various, Apr 2012
 Parallel story with tablets and multi-device tariffs
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10. Who’s Buying Tablets?
Tablet Ownership by Age Group - Europe
35%  65:35 male to female
30%
25%  Tablet ownership is
20% concentrated in older age
15% Apple iPad groups
10% Other
5%
0%  Maps broadly onto wealth
13-17 18-24 25-34 35-44 45-54 Over distribution in Europe
55 Sample4500
 Demographics are likely to
broaden as lower priced
devices become available
– E.g. Amazon Kindle Fire
CCS Insight Tablet User Survey: October 2011, EU5
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11. What Is A Tablet?
What Would You Say A Tablet Is?  Nearly half think of tablets as
a genuine new category
0% 10% 20% 30% 40% 50%
Exactly what it is, a tablet  One third think of them in
computing terms in Europe
Simple easy to use computer
– 40-50% in Asia,
A laptop but with a smaller screen
 Comparisons with mobile
Super duper smartphone
phones have much lower
Other
weight
A mobile phone but with a bigger
– 85% of users do not think of
Other
screen tablets as a “mobile” devices
Apple iPad
Portable TV with a smaller screen – This has big implications
Sample 4500
CCS Insight Tablet User Survey – Oct 2011, EU5  But the mobile market
complicates the purchase
with the 3G option
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12. New Categories Emerge
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13. Data consumption by users on mobile
 Video is a “wrecking ball”
for networks
 And it’s everywhere
– Social use
– Work use
Source: FT, 4th May 2012
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14. Data consumption by users on mobile is growing faster than supply
Worldwide mobile data traffic vs. voice
Data traffic shows astonishing growth
 18% sequential growth of total in 3Q11
 60% y-o-y growth of mobile data users
 300% smartphone traffic growth 2011
Data
 Total traffic doubled every 4-5 quarters
through 2010 / 2011
We have not reached the half-way point
Voice
with smartphones yet
 ~1bn mobile broadband SIMs so far
Source: Ericsson Traffic and Market Data Report, November 2011
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15. Tariffs are beginning to recognise this new behaviour
 Long signalled but significant restructuring of tariffs in USA
– Apply up to 10 devices onto a tariff (at various costs)
– Then add limits of data – all with unlimited voice and text (wi-fi not included)
 Long term caps off the voice and text data streams and seeks to capitalise on data
 Unlimited tariffs will gradually disappear
 Some anomalies here (Tablets $10/ Netbooks $20)
 On average this is seen as ARPU accretive for Verizon
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16. Verizon’s Initial LTE Services Messaging Was Unremarkable
 Verizon’s initial marketing of 4G LTE services offered nothing that was not available
on 3G
 Other than a vague promise of better speed – “become a high octane version of you”
 This has now evolved, but only slightly
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17. Network coverage and capacity – 4G
The need for 4G
 3G coverage is hampered by high frequency spectrum bands
– However, operators deserve some criticism here
 In some urban areas 3G networks are suffering congestion
 The benefit of 4G will depend on the frequency band
– Higher frequencies – urban coverage and capacity
– Lower frequencies – mainly coverage
The result of 4G
 The mobile industry does not fully appreciate how good 4G is
 An “Experience Good”
– The result is that people will use more data
 Operators try to use 4G as a way of raising prices?
 4G coverage will take years to build
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18. So What?
• Massive, unpredictable changes in mobile right now
– Fragmentation and complexity is now the standard
– Data moves to the centre of the decision making process
– More to come – technology and applications
• Cloud computing is capturing the imagination of the user
– iCloud and Facebook are creating an expectation around use cases
– Desire for connectivity will increase exponentially
• 4G will be crucial to the multiplier
– Applications decisions are made on mobile first then desktop
– Device decisions and technology play a large role
• Tablets and smartphones replace desktops and laptops
– Cloud and applications will drive an improved experience
– Access and response times will improve dramatically
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19. Q&A
@ccsinsight
@shauncollins
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