Cost of Ownership: CDMA 2000 Competitive Advantage Paul Edwards Chairman Starcomms, Nigeria
Teledensity Facts & Figures > Teledensity & Internet Penetration has a direct positive impact on levels of economic power as measured by GDP numbers > Deploying affordable & cost effective voice and data services spurs economic developments for both businesses and general population > Compared to wireline telephony and DSL, wireless is significantly more cost-effective, easier, faster to deploy and more scalable > CDMA2000 1X and 1xEV-DO is particularly suited for such deployments due to high quality, high capacity with its enhanced all IPfunctionality is the most advanced mobile broadband technology commercially available today
GDP & Telecommunications Direct Relationship
Wireline vs. Wireless Bridging the Digital Divide >Wireline Networks have 3 major drawbacks Time consuming, disruptive to environment & expensive Cost of Deployment increases prices & reduces affordability Limited scalability and scope of service offerings >Wireless Technologies Dramatic increase in Teledensity in a short time Cost Effective, Higher Capacity & Scalable Quick Time-to-Market Reach Large Segments of the market >3G/Wireless Capital Advantages World Bank estimates that providing mobile coverage in one-tenth of the cost of installing a fixed-line connection Incumbent Operators use older wireless technologies CDMA 2000 is more spectrally efficient, provides voice & data and is much more economical 302m CDMA 2000 subscribers Approximately 70% of the 3G market today By 2010 it is expected that 41% of subscribers would come from CDMA/WCDMA
203 1X Commercial Networks 38 1X Deployments (to be launched) 6 1X Trials 61 1xEV-DO Commercial Networks 60 1xEV-DO Deployments 5 1xEV-DO Trials Key Wireless Requirements Critical Considerations >Voice: Reliable, Clear and Ubiquitous access to carrier-grade telephony >Broadband Data: High-Speed and Ultra High- Speed Internet Access >Coverage, Capacity & Scalability: Larger range base station, higher capacity and offers integrated voice & data >Flexibility & Capacity: Technology must support fixed wireless, local loop and full mobility in dense urban and rural areas and provide higher capacity/erlangs per BTS >Capital Costs: Reducing Total Cost of Ownership (TCO) including CapEx & OpEx and handset prices. Lower ARPUs and limited financial resources available >Clear Evolution Path: Clearly defined technology roadmap with backward compatibility (2G obsolescence) thus protecting the investment >CPE Selection: Large selection of affordable devices to address the entire market segment and not just voice >Maturity: Technology must have more than 10m subscribers to be considered proven thus ensuring capabilities to providing reliability/consistent revenues
CDMA Competitive Advantage CapEx, OpEx & ARPU > Lower Cost Reduced CapEx: deploying & maintaining CDMA 2000 network is up to 23% lower than GSM/EDGE Scalable, modular Low-cost IP network elements Reduced OpEx Lowers O&M staff can support twice the number of IP network elements than traditional networks Lower Transmission costs: up to 50% lower transport cost Less Backhaul Capacity required On-net mobile calls are handled by local IP network (lower cost & higher margins) High bit-rate TDM (64kbps) E1 transport is replaced with low bit-rate EVRC IP (8kbps) voice packets > CDMA2000 1xEV-DO has the lowest cost per bit of any 3G technology 12% of Starcomms airtime revenues come from mobile internet 16% of Starcomms revenues come from VoIP (IDD traffic) Cover same footprint as other technologies with 50% less sites
CDMA Competitive Advantage CapEx, OpEx & ARPU > ARPUs (voice & data revenue steams from same infrastructure) Voice ARPU of $28 Data ARPU of $67 (blended 1X and 1xEV-DO) 1X ARPU: $54 and Ev-Do ARPU: $92 > Spectrum Costs GSM Voice License cost: $280m (10MHz) & 3G License cost: $150m (10MHz in 1900MHz) CDMA Unified License cost (service & technology neutral): $2m one-time and $2.8m recurring annually Incumbent Operators use older wireless technologies CDMA 2000 is more spectrally efficient, provides voice & data and is much more economical 325 million CDMA 2000 subscribers Approximately 70% of the 3G market today By 2010 it is expected that 41% of Subscribers would come from CDMA/WCDMA
175 Site Count Comparison By Technology CDMA2000 requires the least number of cell sites for rural markets Assumptions: 1. Coverage area = 1,000 sq. km. 2. Subscriber density = 31 Subs/sq. km 3. Available spectrum = 5 MHz 4. Average voice traffic per sub = 200 MoU/month 5. Average data traffic per sub = 5 Mb/month 6. Wireless penetration = 50%, Carrier market share = 25% 7. Voice usage = 100%, Voice BH = 10% 8. Data usage = 100%, Data BH = 12% 9. Simultaneous Calls/Sector/Carrier: EV-DO = 44, 1X = 35, GSM/EDGE = 6, WCDMA/HSDPA = 60, WiMAX = 25 10. Physical Layer FL data throughput (kbps): EV-DO = 1280, 1X = 350, GSM/EDGE = 86, WCDMA/HSDPA = 3600, Source: WiMAX QUALCOMM, = 2300 September 2006 Less cell sites - lower total cost 75 53 27 24 WiMAX @2500 MHz GSM/EDGE @900 MHz WCDMA/HSDPA @2100 MHz 1X @800 MHz EV-DO/VoIP @800 MHz
EV-DO Rev A: Voice Capacity Advantage EV-DO Rev A offers higher voice and data delivery efficiencies > EV-DO Rev A offers the highest spectral efficiency of any existing 3G technology 10-30% more capacity than CDMA2000 Higher capacity reduces the number of cell sites when networks are capacity constrained > EV-DO Rev A (VoIP) uses an all- IP core and transport network Up to 50% transport savings Eliminates expensive circuit switched network elements (e.g., MSC s) > Higher throughput capabilities can also be used for bandwidth intensive data services, thus favorably impacting revenues Voice Capacity in Erlangs (5 MHz sector) Source: CA-CHING OR KER-PLUNK, The Dollars and Sense of 3G, Michael W. Thelander Signals Research Group, LLC
EV-DO Rev A: Total Cost of Ownership Advantage For new deployments, Rev A is a compelling solution for VoIP and broadband data services > EV-DO Rev A offers substantial CapEx/OpEx cost savings 33% lower total cost of ownership versus UMTS/HSUPA 27% lower total cost of ownership versus 1X/EV-DO Rel 0 The price premium for EV-DO Rev A base stations is more than offset by the reduced number of cell sites required > EV-DO Rev A (VoIP) significantly reduces the core network CapEx EV-DO Rev A (All-IP) Core Network CapEx is 70% lower than circuit switched implementations over a ten year period CapEx savings also translates into lower OpEx > EV-DO (All-IP) Transport OpEx is nearly 50% lower than leased lines over a ten year period Source: CA-CHING OR KER-PLUNK, The Dollars and Sense of 3G, Michael W. Thelander Signals Research Group, LLC
3G CDMA: Higher Capacity Competitive Advantage 3G CDMA Provides More Capacity Given the Same Channel Bandwidth Source: QUALCOMM, 2006
CDMA Competitive Advantage 3G means Fewer Sites Source: QUALCOMM, 2006
CDMA Competitive Advantage Cost per Megabyte Comparison Source: CDMA Development Group January 2007
3G CDMA: Device Costs The Average Selling Price (ASP) for Entry-level CDMA2000 handsets will remain competitive WCDMA Handset ASP Forecast CDMA2000 1X/EV-DO Handset ASP Forecast US$83 in 2009 US$33 in 2008 US$50 3G CDMA2000 entry-level handsets are reaching price parity with 2G handsets Yet, they provide the user with more value Source: Michael W. Thelander Signals Research Group, LLC, 2006
Conclusion 3G is cost competitive with 2G today and further economies of scale will continue to strengthen the 3G business case GSM operators are paying a premium to migrate to 3G CDMA2000 operators have a competitive advantage due to many factors including: Greater spectral efficiency Smooth and less expensive migration path to next generation technologies In-band evolution within the lower frequency bands (less base stations) Backwards compatibility Early evolution to VoIP services Lower cost handsets, etc. Declining 3G handset ASP trends and increased revenue opportunities strengthen the CDMA2000 business case New operators, including those in developing countries, should consider deploying 3G rather than 2G