Leveraging 4G to thrive in new market conditions 
Marcelo Abdo 
Strategic Planning Manager 
November 5th, 2014
Index 
•New Trends are reshaping our market 
•Several challenges arise from these trends 
•How the world is addressing the...
New Trends are reshaping our market
CHANGING 
The world is 
Pope Benedict XVI 
2005 
Pope Francis I 
2013
Smarts (phones, grid, wearables, toys) will PREVAIL 
Shifting voice and SMS paradigm to drive data traffic growth 
Source:...
Source: Ericsson Mobility Report 
29% 
53% 
> 50% of traffic will come from video 
Video traffic will grow 13X in the next...
Mobile data traffic will EXPLODE 
Networks will be under pressure across the world 
Source: Ericsson Mobility Report 
2013...
Several challenges arise from these trends
Revenue growth rate is DECELERATING 
Traditional pricing strategies no longer suffice 
Customer Revenues 
Traffic Volume 
...
Networks demand different solutions 
Simultaneous users are expected to increase 
X2 
2013 2014 2015 2016 2017 
Projected ...
Therefore, we need to LEVERAGE LTE 
It will allow us to offer the required bandwidth controlling costs 
Source: Booz&co, L...
How the world is addressing these challenges
Traffic growth DIFFERS among markets 
North American data consumption is soaring 
119% 
54% 
North America 
Western Europe...
Consumer HABITS differ significantly 
Americans consume more data traffic than Europeans 
Source: Cisco, Visual Networking...
Asymmetrical STIMULI to MBB growth 
American environment stimulate operators to invest in 4G 
Source: Financial Times, Dig...
Changing technological evolution PACE 
55% 
% of US mobile traffic in 4G 
in 2013 
% of European mobile traffic in 4G in 2...
Why Brazilian specificities pose additional difficulties
Deployment started with 2,5 GHz 
The 700 MHz is crucial to maximize CapEx efficiency 
0 
2 
4 
6 
8 
10 
5.800 
2.100 
850...
Low FBB penetration, continental country 
MBB will be predominantly substitutive to FBB, adding pressure on NW 
36% 
62% 
...
Price-sensitive, lower value customers 
Making more challenging the return on invested capital 
Source: BofA Merryl Lynch,...
A huge base remaining in 2G 
Increased migration efforts to 3G and 4G 
Source: Anatel; McKinsey, Connecting Brazil to the ...
And a starting point with fewer sites 
The major cities are lagging regarding base stations 
3G Equipments/inhabitant¹ 
1,...
Technology: embedded in our strategy
Focus on high-value to speed up evolution 
The highest ARPU in the market benefits us 
Source: 2Q14 Operator Reports 
R$ 2...
We are broadening our 4G spectrum 
The 700 MHz acquisition will allow us to: 
Source: Teleco 
Increase indoor 4G signal qu...
We will INVEST to meet growing demand 
We will build more sites and connect them with fiber 
Total Base Stations 
Source: ...
We need to DIVERSIFY our solutions… 
It is important to address local challenges at a micro level 
Source: Telefônica’s St...
… COUNTING on technology evolution 
Helping us to sell more 4G devices and conceptualize our NGN 
•Affordable and compatib...
Thank you! 
marcelo.andrade@telefonica.com
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Leveraging LTE to thrive in new market conditions

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II International Workshop on Challenges and Trends on Broadband Wireless Mobile Access Networks – Beyond LTE-A

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Leveraging LTE to thrive in new market conditions

  1. 1. Leveraging 4G to thrive in new market conditions Marcelo Abdo Strategic Planning Manager November 5th, 2014
  2. 2. Index •New Trends are reshaping our market •Several challenges arise from these trends •How the world is addressing these challenges •Why Brazilian specificities pose additional difficulties •Technology: embedded in our strategy
  3. 3. New Trends are reshaping our market
  4. 4. CHANGING The world is Pope Benedict XVI 2005 Pope Francis I 2013
  5. 5. Smarts (phones, grid, wearables, toys) will PREVAIL Shifting voice and SMS paradigm to drive data traffic growth Source: Ericsson Mobility Report 2011 2012 2013 2014 2015 2016 Featurephones Smartphones 15% 52% 85% 48%
  6. 6. Source: Ericsson Mobility Report 29% 53% > 50% of traffic will come from video Video traffic will grow 13X in the next few years Video traffic’s share of total traffic 2011 2019
  7. 7. Mobile data traffic will EXPLODE Networks will be under pressure across the world Source: Ericsson Mobility Report 2013 2014 2015 2016 2017 2018 2019 Mobile PC/ Router/ Tablet Smartphones 2 EB/m 20 EB/m ~50%
  8. 8. Several challenges arise from these trends
  9. 9. Revenue growth rate is DECELERATING Traditional pricing strategies no longer suffice Customer Revenues Traffic Volume Decoupled
  10. 10. Networks demand different solutions Simultaneous users are expected to increase X2 2013 2014 2015 2016 2017 Projected simultaneous users evolution
  11. 11. Therefore, we need to LEVERAGE LTE It will allow us to offer the required bandwidth controlling costs Source: Booz&co, LTE: Delivering the future of Wireless 1: Total Cost of ownership 100% 14% 3% 2G 3G 4G Relative Cost¹ per Mbps
  12. 12. How the world is addressing these challenges
  13. 13. Traffic growth DIFFERS among markets North American data consumption is soaring 119% 54% North America Western Europe Source: Analysis Mason, Wireless network traffic worldwide forecasts Mobile Data Traffic Growth 2012-13
  14. 14. Consumer HABITS differ significantly Americans consume more data traffic than Europeans Source: Cisco, Visual Networking Index Mobile Forecast Highlights, 2013 - 2018 1.2 GB 0.5 GB Monthly data traffic per smartphone, 2013
  15. 15. Asymmetrical STIMULI to MBB growth American environment stimulate operators to invest in 4G Source: Financial Times, Digital divide exacerbates US inequality; BofA Merryl Lynch, Global Wireless Matrix and Analysis Mason, Wireless network traffic worldwide forecasts 1: Fixed Broadband 2: Removed in 2003 Consumption occasion On the go At home FBB¹ Penetration (%) 73% 88% ARPU (USD/m) 49 18 Monthly Mobile Churn (%) 1,7% 1,9% Spectrum Cap No2 Yes
  16. 16. Changing technological evolution PACE 55% % of US mobile traffic in 4G in 2013 % of European mobile traffic in 4G in 2013 11% Few Vodafone’s European customers use a 4G capable device The bulk of AT&T’s postpaid smartphone customers use a 4G capable device Source: Cisco, Visual Networking Index Mobile Forecast Highlights; 2013 – 2018; AT&T Annual Report, 2013; Vodafone 4G Webinar US subscribers are embracing 4G faster than Europeans
  17. 17. Why Brazilian specificities pose additional difficulties
  18. 18. Deployment started with 2,5 GHz The 700 MHz is crucial to maximize CapEx efficiency 0 2 4 6 8 10 5.800 2.100 850 700 <700 MHz Cell Radius (km) Source: GSMA, Mobile Broadband Spectrum Roadmap 10 1 Cells Required
  19. 19. Low FBB penetration, continental country MBB will be predominantly substitutive to FBB, adding pressure on NW 36% 62% 59% 68% 76% Source: TIC Domicílios e usuários 2013 73% 88%
  20. 20. Price-sensitive, lower value customers Making more challenging the return on invested capital Source: BofA Merryl Lynch, Global Wireless Matrix * 48 country average 9 49 26 Brazil US USD/m USD/m USD/m*
  21. 21. A huge base remaining in 2G Increased migration efforts to 3G and 4G Source: Anatel; McKinsey, Connecting Brazil to the world: A path to inclusive growth; Ericcson Mobility Report and AppleStore 2013 Technological Mix 32% 27% 62% 40% 70% 28% 37% 3% 1% North America Western Europe Brazil 2G 3G 4G iPhone 5S Price (USD) 549 871 GDP per Head (USD) 54,920 10,860
  22. 22. And a starting point with fewer sites The major cities are lagging regarding base stations 3G Equipments/inhabitant¹ 1,00 0,91 0,26 0,38 London Berlin Sao Paulo Rio de Janeiro 1: Normalized to London
  23. 23. Technology: embedded in our strategy
  24. 24. Focus on high-value to speed up evolution The highest ARPU in the market benefits us Source: 2Q14 Operator Reports R$ 23 R$ 18 Vivo 2nd Highest ARPU +32%
  25. 25. We are broadening our 4G spectrum The 700 MHz acquisition will allow us to: Source: Teleco Increase indoor 4G signal quality Increase network capacity saving costs Offer cutting edge products like VoLTE and IoT
  26. 26. We will INVEST to meet growing demand We will build more sites and connect them with fiber Total Base Stations Source: Telefônica’s Strategic Plan 2013 2014 2015 2016 2017 ~x2
  27. 27. We need to DIVERSIFY our solutions… It is important to address local challenges at a micro level Source: Telefônica’s Strategic Plan ...will require tailor- made network strategies encompassing: Demand differences among geographies... •Wi-Fi offload •Small Cells •4G acceleration in largest cities
  28. 28. … COUNTING on technology evolution Helping us to sell more 4G devices and conceptualize our NGN •Affordable and compatible 4G devices •Flawless HetNet deployment •IP transformation •Convergent network elements •SON, SDN, NFV, 5G, etc... •Deliver superior return to shareholders •Enhance users’ Quality of Experience •Increase spectrum efficiency What we want How you can help
  29. 29. Thank you! marcelo.andrade@telefonica.com

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