Presented at the 4G World China Conference in Beijing, May 20, 2011.

1. Economics of 4G Introduction in Growth Markets.4G World China 2011, Beijing, 20th May 2011. Dr. Kim Kyllesbech Larsen, Technology EconomicsTechnology, Deutsche Telekom.

3. 2010 Net Revenue EUR 62bn. & EBITDA of EUR 20bn.

4. Ca. 250 thsdemployees.

5. Ca. 100m mobile subscribers.

6. 100+ thsdradio nodes.

7. 2G: GSM, GPRS, EDGE.

8. 3G: UMTS, HSPA & HSPA+.

9. LTE:@ 800 and 1800 MHz.

10. 2 major network sharing deals (UK & PL), more to follow.

11. Spectrum bands covers from 800 MHz up-to 2.6 GHz.

12. Ca. 2m IPTV subscriptions.

13. Ca. 36m fixed network lines.

14. Ca. 17mbroadband lines.Netherlands Netherlands Poland Poland Germany Germany (mother-ship) Czech Czech Republic Republic Slovakia Slovakia Hungary Hungary Austria Austria Romania Romania Croatia Croatia Bosnia - Bosnia - Serbia Serbia Herzegovina Herzegovina Bulgaria Bulgaria Montenegro Montenegro Macedoni Macedoni a a Albania Albania Greece Greece 2 Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing

15. A bygone time … not so long ago ...When 1 + 1 was close to 2. Blablabla ... Bla … Mobile Network We talked (a lot) Rarely did we use the (mobile) web. We SMS’ed (even more) 3 Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing

16. A new paradigm … 1 + 1 is no longer “just” 2 ... Applications have “taken over” the communications. 1 User 1 Device Many applications User & application initiated bandwidth demand. Device & application (IP addr, keep alive, …) driven signaling resources. Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing 4

17. Technology progress (LOGARITMIC SCALE in peak Downlink Mbps) Future mobile growth will be media and data centric. Today - 2014 Fuelled by: Today Appealing Terminals CDMA OFDM 1 TDMA New Usages Devices’ Data Usage (in MB normalized to handset usage (=100%), Dec. 2010) Broadband & Ubiquity 1 DL is OFDM, UL is SC-FDMA. 5 Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing

18. The smartphone decade just started. Socialize Smartphone sales 1 (Western Europe) 500+m Facebook users of which 250+m mobile. 160+m RenRenusers 250+m Twitter accounts Digitize 5 bn. mobile phone users 2.0+ bn. internet users 50+ Tbgenerated / day. 3+ bnphoto uploads/month. Mobile OS share of sales 1 (Western Europe) Individualize 10+ bn apps downloads. 400+ mdifferentsmartphones. 700+ m on social networks. NoteAll statistics provided are estimates of year end 2010 statistics or most recently available. 6 Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing

19. Uncontrolled data growth ... Smartphone traffic tsunami. Smartphone indicators ×7 Data signaling Problems! May – June 2010 (Netherlands). “iPhone overload T-Mobile (NL) network” (Volkskrant, May 2010). “T-Mobile (NL) gives compensation”. (2 month no data charge & iPhone users gets €30.) “T-Mobile (NL) admits not able to handle data growth in its mobile network“ (Tweakers.net). ×6 Smartphones ×4 Throughput ×5 Volume December 2008 to December 2010 7 Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing

20. Uncontrolled data growth ... All you can eat … network indigestion... June 2007 AT&T Inc. and Apple® today announced three simple, affordable service plans for iPhone™ which start at just $59.99 per month. All three plans include unlimiteddata. June 2010 “AT&T wireless chief Ralph de la Vega has said the carrier is battling congestion in New York and San Francisco as a surge in smartphone use has clogged its network. “ (Bloomberg). June 2009 De La Vega (AT&T) said that just three percentof smartphone users are eating up 40 percent of available capacity, and that most of it is thanks to high-bandwidth video streaming apps. June 2009 AT&T announces unlimited data plans for all smartphones for $30 monthly charge. June 2010AT&T Inc “will cut wireless data-plan prices for most users next week and stop offering unlimited data plans to manage soaring demand for data-hungry devices like Apple Inc.’s iPhone.”(Bloomberg) September 2009 “Customers Angered as iphonesOverload AT&T.” (The New York Times) 8 Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing

22. LTE deployment will be accelerated.

23. Home off-loading to WiFi and Femto.HSPA only - No LTE HSPA, with LTE deployment HSPA+LTE, 50% off - load 2010 2012 2014 2016 2018 2020 Illustration 9 Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing

24. The smartphone … The “killer” device and its “killer” applications… 10 Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing

26. Freq. span 700 MHz-> 2.6 GHz.

27. Higher speeds (×2 – ×3).

28. Higher spectral efficiency (>30%).

29. Much lower latency (<10ms).

30. Lower signalling levels 2 (ca. 60%).

31. Flat IP architecture (less nodes).LTE 20 MHz 1.4 MHz HSPA n x 5 MHz CELL_DCH Connected Handover CELL_FACH Reselection CELL_PCHURA_PCH Reselection The QoS and policy control in LTE are much richer and flexible. Idle Idle Reselection 5 HSPA 2 LTE LTE is much better optimized for short packet transmission. 1 Single sided, i.e., UL or DL, 2 For data handling. 11 Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing

32. LTE deployment requires “free” spectrum. 900 MHz (2G some 3G) 400 MHz 700 MHz (LTE) 800 MHz (LTE) UL (35MHz) DL UL DL UL DL UL (30MHz) DL 1,800 MHz (2G) 1,500 MHz (MSS L-band) UL (75 MHz) DL TDD UL (58 MHz) DL TDD (20 MHz) 2,100 MHz (MSS S-band) 2,100 MHz (3G) 2,300 – 2,400+ MHz DL UL (60 MHz) TDD (100 MHz) DL 3G TDD part TDD (mainly APAC) 3G TDD UL (20 MHz) 2,600 1 MHz (4G & LTE) 3,400 – 3,500+ MHz UL (70 MHz) TDD (50 MHz) DL part TDD This band provides interesting backhaul P2P options in some Greenfield scenarios 1 The shown structure consistent with European band plan. In USA this band is held by Clearwire and primarily used for TDD WiMax. 12 Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing

34. Low absolute price compared to GDP.

36. No (real) demand.

37. Government push for new entrant.0.01 India 3 Min FI Large area, low pop density, very low GDP US 700 MHz auction 2008, German 800 MHZ – 2.6 GHz auction 2010 Indian 3G / BWA 2.3GHz auction 2010. Dutch 2.6 GHz auction 2010. Austrian 2.6 GHz auction 2010. NL4 0.001 0.5 1.0 1.5 2.0 2.5 3.0 Auctioned spectrum in GHz 13 Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing

38. Spectrum re-farming … a very complex process...Additional spectrum provides control & mitigate risks. Today situation E.g., GSM 3G Ready for re-farm Complex & Difficult to control Time 2G Add “new” spectrum Migrate Traffic E.g., LTE Illustration 14 Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing

39. Spectrum benchmarking.2.6 GHz requires least 9×the site density to match 800MHz. 800 MHz DL power UL power (typical limitation for coverage) 2.6 GHZ Large Very small Coverage area ×9 ×1 ×6 ×4.5 2.1 GHz 2.6 GHz 1.8 GHz 900 MHz – 800 MHz (digital dividend) 2×35 MHz 2×30 MHz 2×60 MHz 2×75 MHz 190 MHz Low High Available bandwidth for LTE Illustration 15 Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing

40. LTE deployment models.Availability of a wide range of frequencies will be essential for economical network deployment. Throughput / Capacity Hot- Spots 2.3 to 2.6 GHz 2.3 - 2.6 GHz Femto-cells Rural Fixed-like LTE connectivity Urban – Suburban: Up-to 2100 MHz Rural / Nation-wide: up-to 900 MHz Illustration 16 Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing

41. Backhaul will force you to re-think network design.LTE’s extremely power-full air-interface, i.e., 100+ Mbps, will require extensive backhaul fiber deployment. LTE air-interface 30mean to 100+peak Mbps (per sector) DWDM DWDM Evolved Packet Core 100 Gbps DWDM eNode 100 GbE DWDM DWDM FTTS1 100+ Mbps 32:1 320:1 eNodesper element 3200:1 BH Throughput 3+ 32+ 320+ In Gbps Illustration 17 Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing

42. The backhaul challenge … macro vs micro.Distribute mobile broadband traffic differently. Illustration LTE provides up-to 100Mbps per sector AP (e.g., WiFi / Femto,..) Node FTTS1 100+ Mbps 100+ to 40 Mbps 300 – 7,000 active devices per macro-cellular node (dense-urban / urban) 100+ Mbps shared with up to 7,000 devices. Home Environment with ca. 2.3 people per Home 1 connected to Fiber, Cable or VDSL. Up-to 100+ Mbps shared by 2+ people. 1 Average for Western Europe. 18 Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing

44. 2011+ Ramp-up LTE deployment.

45. 2015 620 mio mobile subs …10% LTE.

47. Before 2015 limited LTE deployment.

48. 2017 4.0 bn mobile subs …10%+ LTE.

49. 2020 4.5 bn mobile subs … 60%+ LTE.1 Pyramid Research (April 2011) until 2015. After 2015 technology diffusion model applied to technology development favoring LTE as main conversion technology. 2 China, India, Indonesia, Malaysia, Pakistan, Philippines, Taiwan, Thailand, Vietnam. 19 Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing

51. Sync with modernization cycle.

52. Sharing opportunities.

54. Fiber backhaul invest (not incl. above).

55. LTE grid mismatch with legacy grid.

56. High legacy capacity investments.NOTE The above is an illustration of the average mobile operator. Depending on country and specific operator variations to the above should be expected. Though variations are lot less dramatic as compared to growth markets. 20 Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing

58. +165+ m 3G subs

59. + US$100+ Bn revenue.

60. Average margin 46%

61. >90% prepaid<18% Ca. 10% (lower band) 2004 (<20%) 2010 (70%) 2015 (>100%) Mobile penetration Grow 1.5+ bn mobile data customers NOTE The are some very wild swings from country to country as well as in the country. Working with averages is only meaning full as an illustration. 21 Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing

62. Key challenges.What we need to be passionate about. Backhaul -> Gbps will be needed -> Think Fiber and off-loading. Radio nodes-> multi-mode SDR capabilities to mitigate uncertainty . Spectrum -> acquisition and re-purposing of legacy bands. Prepare for early LTE deployment -> might be needed sooner than later. 22 Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing

63. Thank you for your interest! Contact: kim.larsen@t-mobile.nl Mobile: +31 6 2409 5202 http://nl.linkedin.com/in/kimklarsen Acknowledgement: I am indebted to my fantastic team for always being patient with my data requests, for their great suggestions and support in creating this presentation.