Huawei Technologies

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1 Huawei Technologies

2 Mr. Masayoshi Son, founder, President and CEO of Japan SoftBank Corp., is regarded as a visionary and a leader in the PC Internet industry. Having invested in over 800 IT companies, including Yahoo! and Alibaba, SoftBank has an exemplary profit record. Based on his belief in the coming mobile Internet revolution, Son confidently tapped into the mobile telecom world in 2006 by acquiring Vodafone Japan with a 20 billion dollars cash payment. Again, he reaped rewarding benefits. At the 2009 GSMA Mobile Asia Congress, Son passionately described his philosophy regarding the mobile Internet revolution. SoftBank PC Internet giant hits hard with mobile Internet By Masayoshi Son 17

3 Tao of Business The reason why we spent 20 billion dollars in cash to acquire Vodafone Japan was not because that I wanted to start a voice communication company. In the next several years, the voice ARPU is going down. Unless we can grow data ARPU, our future is nothing. Telecom amateur creates miracle W hen we entered the market, everybody said that SoftBank is an Internet company and an amateur for mobile telecommunications. But we did in our way. When we acquired Vodafone Japan three years ago, almost everybody said it was the end of SoftBank. We spent 20 billion dollars cash to acquire the company. This was the second largest cash acquisition in human history. It was the riskier route, but we knew success would give us a higher return. Today, we re extremely happy we took the risk as we turned the company around to the surprise of the Japanese people. SoftBank Mobile s subscriber base reached 21.4 million in 2009 compared with Vodafone Japan s 15.2 million in In terms of incremental subscribers, SoftBank has ranked first for 30 consecutive months, except for one month, and we seized 45% of new adds in Regarding data ARPU, Japan possibly generates the highest level in the world, and we re leading this trend. For us, data ARPU is the key to growth. Across the globe, data ARPU is decreasing for most operators and the increase in traffic is a pressing business issue for all. But, for SoftBank, we bottomed out and then began increasing ARPU on the back of data; in fact, we re possibly increasing data ARPU faster than any other enterprise. Catching the wave of mobile Internet revolution The reason why we spent 20 billion dollars in cash to acquire Vodafone Japan was not because that I wanted to start a voice communication company. In the next several years, the voice ARPU is going down. Unless we can grow data ARPU, our future is nothing. The majority of Internet access is going to start from the mobile Internet. Mobile Internet is going to be the key to future growth. Mobile Internet: the 2nd IT revolution In human history, we can see two waves in the IT industry revolution. The first was PC Internet. The second is mobile Internet. I believe that we re now at the beginning of the second IT revolution. During the first, the PC flourished, and the Internet grew at the same pace. I come from both the PC and Internet industries. We ve grown with this trend and witnessed how the PC Internet changes people s lives. Ten years ago, people were still going to the library and today people go to Google; ten years ago, we were doing most of our shopping in stores, and now we go to Amazon and ebay. What s the second IT revolution? Though almost 297 million PCs are shipped each year, around 1.2 billion mobile phones are shipped. People use PCs for one or two hours a day, but they have their mobile phones with them 24 hours a day. So, obviously mobile phones have a deeper penetration rate than PCs in terms of both units sold and also the number of hours people use them for. If you multiply the two, mobile Internet is much bigger. The appearance of the iphone shows us the trend. In just one year in Japan, the ratio of PC Internet usage against mobile Internet usage has By Wang totally Kening changed. & Ling Mobile Yun 18

4 Tao of Business A Joint Innovation Lab was founded by China Mobile, Verizon, Vodafone, and SoftBank. We aim to create a single platform for all the applications and content that we can share with each other. We d like to invite companies who are interested to join us in protecting our future. Internet usage increased from 25% to 51% of total Internet use. In my case, it s already 95% mobile Internet. I am a PC Internet man; after the iphone came out, my PC Internet usage decreased by 95%, but my Internet usage frequency tripled in just a year. PC Internet day has gone. Forget it! As a PC Internet guy, this is a strong statement. Mobile Internet: an informative world I ve counted the number of transistors in a single chip and the rate at which this number is growing. I estimated the time when the number of transistors would exceed the number of human brain cells. I calculated this 20 years ago, and I estimated A couple of years ago, I recalculated and ended up with exactly the same year. In nine years, the number of transistors will exceed the number of brain cells in a human. So, our handset devices are becoming smarter and smarter. If you calculate how much memory you will have in your handset in 15 years, it would be 1,000 times more than it is today. Now, the iphone has 32GB. In 15 years, this kind of smart phone will have 32TB. What does 32TB mean? It means 8 million songs in your hand, which is all of the songs that exist in the world today; it means 120 years of TV programs in your hand; and it also means 72,000 years of newspaper in your hand. The mobile phone is going to have a massive, massive storage capacity. Even if you have all of the songs in the world or all the newspapers for 72,000 years in your hand, you still need faster speeds, because so much new information comes out every day, at every moment. I would say there s no end. We need faster speeds and more storage, and we need more communication. we have a mobile content market already worth USD14 billion. There are 30,000 mobile websites and over 75 million mobile Internet users in Japan. In terms of data ARPU, Japan not only has the highest proportion in the world, but also generates the highest value at USD19.3. This is growing very quickly, and the growth of data ARPU has already compensated for the decline in voice ARPU. We know what will happen to data communications when it becomes mobile and what people s behavior will be after the mobile Internet has higher speeds. For example, in Japan most new handsets have digital broadcasting, which enables the simulcast of terrestrial TV programs. But that s not enough, as it only means one direction. What we need are two-directional videos and rich content. So, speed is a never ending need and the key to mobile Internet. As of March 2009, Japan led 3G network penetration, and 90% of total mobile usage was 3G. Many other countries are migrating from 2G to 3G; we re already evolving from 3G to 3.5G. We re reducing sales of new 3G Endless pursuit of speed Japan is leading the mobile Internet trend. In Japan, 19

5 handsets, we no longer sell new 2G handsets, and we re decommissioning our 2G network in March So, in less than six months, we re discontinuing our 2G network and migrating everything to 3G, or rather 3.5G. But, 3.5G is still not fast enough. 3G or 4G is the way to achieve blanket coverage. But we ve found that 50% of data traffic comes from homes and that the peak time of data traffic is between 9 and 10 o clock in the evening. Meanwhile, smart phones generate about 10 times more data traffic than ordinary phones, which means our network capacity will be used up. To improve user experience in terms of videos and richer content, we need Wi-Fi. I believe that mobile phones are going to become Wi-Fi, and Wi-Fi is going to become mobile. Recently, we introduced our winter 2009 series, which comprises 8 models of handsets that support Wi-Fi. We also have Wi-Fi oriented content such as mobile movies and movie previews, mobile magazines, and electronic video rentals. Aiming for the top I accept No.3 in accumulative subscriber number in Japan but I want to be No.1 in the world. So I called my friends to gather together, the US No.1, Chinese No.1 and Europe No.1. Together we have 1 billion users today. The SoftBank group aims to be the best at everything we do. We re number one in all the fields we ve touched in Japan software distribution, Internet searches, portals, online security, online games, online videos, auctions, and ADSL; and I m extending our reach to cover the whole of Asia. Ten years ago, Americans made up 50% of the Internet population, and Asia only accounted for 19%. But, in 2015, Americans will only form 12% of the Internet population, while Asians will make up 50%. In the past, if one wanted to dominate any segment of the Internet industry, it had to be part of an American company. In the future, one must be part of an Asian company. That is the trend. I m aiming to be the Asian Internet number one and the mobile Internet number one. Actually, we re already number one for B2B in Asia with alibaba.com; we re already number one for B2C and C2C in Asia with taobao.com; and we re already number one for SNS in Asia through kaixin.com and renren.com. Now, I m getting into mobile Internet. Although SoftBank is growing at the quickest rate in Japan, in terms of cumulative subscriber numbers, we re still number three. I accept number three in Japan, but I want to be number one in the world. So, I called my friends together: the number one in America, the number one in China, and the number one in Europe. There are 4 billion mobile phone users in the world and put together we would have 1 billion subscribers. The world is set to be full of mobile Internet applications: movies, music, photos, news, SNS, games, blogs, finance, auctions and shopping. So, now we have to face new kinds of competitors who are entering the mobile industry. What is our strategy? We ve founded a Joint Innovation Lab with China Mobile, Verizon, Vodafone, and SoftBank to come together and create a new platform. We aim to create a single platform for all the applications and content that we can share with each other. This is just the beginning of the development process, and it s too early to say too many details, but we re starting something very exciting. And we d like to invite many of the companies who are interested to join us in protecting our future. Editor: Fan Ruijuan joyce_fan@huawei.com 20

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