Striving for innovation and Service leadership in CEE

1
Striving for innovation and Service leadership in
CEE

• Platform competition from stand-alone to hybrid

Arthur D. Little Austria GmbH Kärntner Ring
6 A-1010 Wien Tel. [phone] Fax 43 1
51541-23 www.adlittle.at
Contact Person Dr. Karim Taga Managing Director
2
Contents
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Operators in CEE countries are quickly adopting
new telecom technologies, some are being very
successful and some are even world leaders
1 Competing platforms Outstanding achievements
DVB-H
CDMAHSDPA
IPTV
CDMA 800
M-Payment
Hybrid TV
IPTV
CDMA 450
CDMA 450
CDMA 450
FTTH
CDMA 450
Flash-OFDM
FTTH
IPTV o. naked DSL
5 DTH Ops
CDMA 450
FTTH
DVB-H
IPTV o. WiMAX
national WiFi mesh
HSUPA
HSUPA
HSUPA
M-Payment
HR Croatia, BiH Bosnia and Herzegowina, SCG
Serbia and Montenegro
first in the world
very successful
first in CEE
4
Digital TV is evolving on a fast pace in the CEE
countries, with only a few white spots
1 Competing platforms Digital TV developments
IPTV
IPTV
DTH
IPTV
Hybrid TV
IPTV
DVB-H
IPTV
DTH
DTH
IPTV
IPTV o. naked DSL
IPTV
DTH
DTH
IPTV
IPTV
IPTV
DVB-H
IPTV
IPTV o. WiMAX
IPTV
IPTV
DTH
DTH
HR Croatia, BiH Bosnia and Herzegowina, SCG
Serbia and Montenegro
first in the world
very successful
first in CEE
5
Operators in CEE are employing different MBWA
standards, some even combine both to achieve
higher population coverage
1 Competing platforms Mobile broadband roll-outs
CDMA450
20 Ops
CDMA
CDMA450
HSDPA
HSDPA
CDMA 450
CDMAHSDPA
CDMA 450
HSDPA/IPW
CDMA 450
CDMA 450
CDMA 450
Flash-OFDM
HSDPA
HSDPA
CDMA 450
HSDPA
HSDPA
HSDPA
HSUPA
HSUPA
HSDPA
HR Croatia, BiH Bosnia and Herzegowina, SCG
Serbia and Montenegro
first in the world
very successful
first in CEE
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Contents
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There are at least three standard-families next
to proprietary developments competing for
dominance in MBWA
1
2
3
2 MBWA Evolution of the 3GPP, 3GPP2 and Wimax
Standards Environment for (Mobile) Broadband
Wireless Access
Mass-production
Pilots
Concept
Family
Body
Production
3GPP
EDGE Ph1/2
HSPA
GSM
GPRS
UMTS/HSDPA 1
LTE/SAE
EdgeEvolution
1
Regional technology organizations
3GPP2
CDMA 1x EV-DO
CDMAIS-95A
CDMA 2000 1xRTT
CDMA 1x Rev. A
CDMA Rev. B
CDMA Rev. C
2
802.11
802.11g
802.11b
802.11a
IEEE
802.16
3
802.16d (2004)
WiBro
802.16e
802.16g
PreWimax
802.16a
802.20
802.20
Proprie-tary
MC-CDMA / Navini
Flash OFDM / Flarion
TDMA/FDMA/HC-SDMA / iBurst
Standard(s) family
) 3GPP ARIB, ATIS, CCSA, ETSI, TTA, TTC
8
All three dominating standards (3GPP, 3GPP2,
Wimax) show high improvements in uplink and
downlink peak data rates in the next years
1
2
3
2 MBWA Evolution of the 3GPP, 3GPP2 and Wimax
2006
2007
2008
2009
2010
2011
3 GPP GSM EDGE Radio Access Network Evolution
EDGE
Enhanced EDGE
DL 474 kbps UL 474 kbps
DL 1.3 Mbps UL 653 kbps
3 GPP UMTS Radio Access Network Evolution
3GPP
HSDPA
HSDPA/HSUPA
HSPA Evolution
1
DL 14.4 Mbps UL 384 kbps In 5 MHz
DL 14.4 Mbps UL 5.76 Mbps In 5 MHz
DL 28-40 Mbps UL 11.5 Mbps In 5/10 MHz
3 GPP Long Term Evolution
LTE/SAE
DL 100 Mbps UL 50 Mbps In 20 MHz
CDMA2000 Evolution
3GPP2
EVDO Rev C
EVDO Rev 0
EVDO Rev A
EVDO Rev B
2
DL 100 Mbps UL 50 Mbps In 20 MHz
DL 2,4 Mbps UL 153 kbps In 1.25 MHz
DL 3.1 Mbps UL 1.8 Mbps In 1.25 MHz
DL 14.7 Mbps UL 9.4 kbps In 5 MHz
Mobile Wimax Evolution
Wimax
Phase 2
Phase 1
3
DL 46 Mbps UL 4 Mbps 10 MHz 31 TDD
DL 32 Mbps UL 4 Mbps 10 MHz 31 TDD
Fixed Wimax
Note throughput rates are peak network rates
9
Downlink spectral efficiency will converge with
all platforms to ca. 1,8 bits/Hz/ sector thanks
to the evolution of each standard
1
2
3
2 MBWA Evolution of the 3GPP, 3GPP2 and Wimax
Comparison of Downlink Spectral Efficiency
Spectral Efficiency (bps/Hz/sector)
2.0
1.9
1.8
1.7
LTE, 2X2 MIMO
1.6
Future Wimax
1.5
1.4
EV-DO Rev C, 2X2 MMO
1.3
1.2
HSDPA, 2X2 MMO
Wimax Phase 2 2X2 MMO
1.1
1.0
0.9
0.8
EV-DO Rev B, MRxD
HSDPA, MRxD, MMSE
0.7
0.6
HSDPA, MRxD
EV-DO Rev A, MRxD
0.5
HSDPA, MMSE
0.4
EV-DO Rev A
Wimax Phase 1 MRxD
0.3
HSDPA
0.2
EV-DO Rev 0
0.1
UMTS R 99
0.0
1
2
3
UMTS to LTE
CDMA2000
IEEE 802.16e
Source Rysavy
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The frequency of operation has a significant
impact on the deployment cost of a broadband
wireless network
1
2
3
2 MBWA Propagation and Frequency usage
Propagation characteristics
Comments

• Typically, as frequency increases, the network
  costs increases and the BTS coverage decreases
• Prices for spectrum bellow 3 GHz are expensive
  because of the good propagation capabilities of
  the signal
• Capex and Opex per square km increases with the
  frequency as a result for a more dense network
  and additional backhauling costs to feed the
  higher number of base stations
• Up to 8 times more bases stations are required
  for a 3,5 GHz band than for a 900 MHz

Source Vodafonek
11
The average cost per square km deploying an HSPA
infrastructure grows from 2 20 k in a range of
450 MHz to 5 GHz
1
2
3
2 MBWA Propagation and Frequency usage

Cell radius vs. frequency HSDPA
Average cost per area (k/ km2)
Cell radius (km)
GHz
Source Arthur D. Little analysis, Note Total
site cost estimated at 190 k of covered area
5 in urban, 60 in suburban, 35 in rural
12
More than 200 EV-DO and HSDPA devices have been
commercially introduced, including PC Cards,
notebooks with embedded modems, USB modems,
smartphones and feature phones
1
2
3
2 MBWA Evolution of the 3GPP family
1
Dell Latitude D620 / D820 Embedded EV-DO
HP Compaq nc6140 -6320 Embedded EV-DO
Lenovo Thinkpad T60 / Z60 Embedded EV-DO
Fujitsu Lifebook Q2010 Embedded HSDPA
Franklin Wireless CDU-550 USB Modem 21 grams,
EV-DO
LG CU500 HSDPA, Bluetooth
Motorola Q Windows Mobile 5 Smartphone Edition
EV-DO
ZTE MF330 WCDMA / HSDPA
Samsung SGH-ZV50 2 MP camera, AAC/MP3, HSDPA
Casio W21CA 2.6 inch WQVGA,2 MP Camera, EV-DO
Novatel WirelessMerlin S720 EV-DO Rev. A
Source 3Gtoday.com
13
There are already many world mode devices
available for both standards -CDMA and UMTS
1
2
3
2 MBWA Dual handets DO and GSM/GPRS
World Mode Devices
2
EV-DO GPRS
Samsung SCH-i819
Samsung SCH-A790/W109/A795/IP-A790
LGE W800
Samsung SCH-i830 EV-DO
LGE KW-9200 EV-DO
Amoi CMA8301 EV-DO
Samsung SCH-W399
Motorola A840/A860
Yulong Telecom Coolpad 728
LGE W810
Samsung SCH-W379
UTStarCom T66
Samsung SCH-W219
Amoi V810
Source CDG
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Telefonica O2 CZ was the first operator in the
world to deploy a CDMA2000 network. Additionally
it offers HSDPA to its customers, thus
effectively employing both standards
2 MBWA Case studies O2 CZ
Case Study
Overview
CDMA coverage

• EV-DO Rel. 0 coverage
• EV-DO Rev. A coverage (up to 30 of the
  population until 2007 are planned)

• Technical information
• 3G Network CDMA2000 (1X EV-DO). EV-DO rel.0
  commercial launch in August 2004, rev. A in
  November 2007.
• It further holds a UMTS license and offers HSDPA
  services in Prague and Brno. A 50 population
  coverage is planned by end of 2007
• Operating Frequency 450 MHz (CDMA) and 2100 MHz
  (UMTS)
• Infrastructure Vendor Nortel (CMDA), Nokia
  (UMTS)
• Other
• Czech Republic was the first country in the world
  to deploy CDMA2000
• Through the upgrade of the network from rel.0 to
  rev. A, O2 hopes to offer new services such as
  music downloads, VoIP and high quality PTT

Source Company information, Arthur D. Little
analysis
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Mobile broadband services are marketed under
single brand the customer selects a modem and a
tariff to receive the relevant services
2 MBWA Case studies O2 CZ
Case Study
Products
Devices offered (non exhaustive)

• Basic information
• Voice services are offered over GSM/UMTS
• Data services are offered over CDMA/HSDPA/EDGE/GPR
  S/WAP
• 3G data products are marketed under single brand
  customer chooses a modem type
• There is also a bundle of fixed and mobile called
  Internet Komplet ADSLCDMA package, however it
  does not provide a converged solution
• Products are offered to both residential and
  business subscribers
• No VoIP services are offered over CDMA so far
• Broadband prices/month
• Internet mobil 256kbit (CDMA) 15 (fair use
  600mb/7 days)
• Internet mobil plus 512kbit (CDMA, HSDPA) 26,6
  (2,8GB fair use)
• Internet Komplet 2mbit ADSL / 512kbit CDMA
  30,4 (10GB/2,8GB respective fair use)

Hybrid modem CDMA/HSDPA
Source Company information, Arthur D. Little
analysis ) excl. VAT
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Sferia is the only provider in Poland offering
fixed and nomadic telephony, as well as broadband
in the CDMA standard. It activities are however
limited to Warsaw and suburbs
2 MBWA Case studies Sferia
Case Study
Company overview
Services and prices

• Fixed and Nomadic telephone (0.05 PLN /min)
• Internet (EV-DO up to 3.1 mbit)
• Connection via USB
• Activation fee as low as 1PLN
• Subscription fees start from 41PLN (600MB cap)
• Fax/Voice messaging
• Additional services

• Technical information
• Network CDMA2000 1X
• Type Of System WLL
• Operating Frequency 850 MHz
• 3G Network 1xEV-DO Rel. 0 Commercial launch
  date March 1, 2007. 1xEV-DO Rev. A Commercial
  launch date October 2007
• Infrastructure Vendor Alcatel-Lucent
• Other
• Sferia offers services in Warsaw and the suburbs
• Offers fixed and nomadic telephony, which is a
  novelty on the Polish market
• The recipients of services are small and medium
  sized companies and individual clients.
• As of late 2007 it had over 40,000 customers
• 60 base stations provide a 93 voice coverage and
  70 Internet coverage in Warsaw area

Devices offered
nomadic internet fixed terminal
Source Company Information, Arthur D. Little
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Nordisk Poland has acquired a CDMA 450 license
and plans a country wide roll-out until 2009,
offering broad services for both residential and
business
2 MBWA Case studies Nordisk mobiltelefon
Case Study
Company overview
Planned coverage in Poland

• Basic information
• Nordisk Mobiltelefon AB was established with the
  objective to deploy and operate premium grade
  mobile telecommunications networks
• CDMA2000 3G technology with radio transmission on
  the low frequency 450MHz and 410MHz bands
• Nordisk Poland has acquired a license in the
  410MHz band, issued until 2020
• Planned commercial launch in Poland 2008
• Services portfolio
• Mobile broadband EV-DO Rev. A (3.1/1.8 mbit
  DL/UL)
• 3G mobile telephony
• Fixed wireless telephony
• Machine-to-Machine remote device control

Coverage end 2007
2007 79 base stations
Planned 2009 coverage
2009e 750 base stations
Source Company information, Arthur D. Little
analysis
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Although xDSL is the most spread technology, MBWA
is quickly becoming a competing technology,
threatening the fixed broadband business
2 MBWA Case studies MWBA in Slovakia
market snapshot

Broadband connections by technology
Comments

• Broadband technology is developing quickly in
  Slovakia
• 70 of all accesses in the mid 2007 account for 2
  competing technologies xDSL and MBWA
• MBWA was launched in late 2006 and quickly became
  a success with over 150k subscribers in mid 2007,
  with 2 access technologies
• HSDPA (Orange, T-Mobile)
• Flash OFDM (T-Mobile)

Connection (in tsd.)
CAGR 85
Source Ministry of Telecommunication, Arthur D.
Little, note for most part Wi-Fi
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Mobile internet access is becoming extremely
popular and might pose a threat on the
development of the fixed line internet access
business
2 MBWA Case studies Internet connectivity growth
Slovak internet subscribers (fixed vs. mobile)
Comments

• Internet usage in Slovakia has shown strong
  growth since 2002, with the strongest risen
  annual growth registered in 2006
• Growth drivers include the variety of ISPs
  offerings services, the countrys relatively high
  PC penetration (second amongst the CEE countries)
  and increasing economic wealth
• Internet penetration is growingoffering chances
  for growthHowever, mobile being thedriver

Penetration ( of population)
Subscribers (in Tsd.)
Source Ministry of Telecommunication, Arthur D.
Little
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With today's high performance of BWA systems a
variety of applications in the fixed and mobile
environment can be supported with the same
platform
2 MBWA Case studies Mobile and Fixed platforms
Segment of broadband wireless access technologies
Mobile Broadband wireless access
Fixed Broadband wireless access
HSxPA, CDMA-EVDO, iBurst, UMTS TDD, FLASH
OFDM, MC-CDMA, Wimax (802.16e)
HSxPA, Wimax (802.16e), iBurst, FLASH OFDM, UMTS
TDD, CDMA EV-DO, MC-CDMA
) Technological standards supporting the 450 MHz
band being currently tendered in many markets
together with the 3,5 GHz licenses
21
Fixed Wireless Access offer bundling Mobile Data
and PSTN including 1Gb for 20,- started by One
in Austria
2 MBWA Case studies Austria One fixed and mobile
Case studies

H.U.I)
H.U.I Talk (only available with H.U.I)
H.U.I. Talk Slogan 0 Cent for calls in the fixed
network while surfing with several PCs or Laptops
in the internet

• The mobile Broadband offer of ONE
• Emotional positioning with 4 key statements
• Very fast 100x faster than 56k modem
• very easy to use just connect PCMCIA or USB
  modem and get started
• Very cheap 3 Gigabytes for 20,-
• Full cost control fixed rates w/o additional
  costs
• reduction of Download speed to 56 Kbit/s
• Refill Option 5 for the whole download volume
  (for H.U.I 5 for an additional 3 GB)

• ONEs Mobile Broadband product line H.U.I. has
  been extended with H.U.I Talk
• compatible with old fixed line telephones (plug
  and phone)
• possibility to surf in the internet with several
  PCs while phoning
• possibility of fixed line number porting
• ONEs FMS offering benchmarked with Telekom
  Austria Tik Tak Privat (the basic fixed line
  voice product of the incumbent)

0 Cent into fixed network up to 1.100 Min/month
above that limit 0,20/minute
Prices significantly lower than fixed line
incumbent Telekom Austria
Source Company Page, Arthur D. Little
Analysis) Incumbents lowest offer (price
without subscription, just ADSL)
H.U.I. Höllisch Utraschnelles Internet is a
wording and a new brand meaning ultra
fast internet connectivity in German
22
UFon, a Czech Republic telecommunication
start-up, is rolling out CDMA network to offer
inexpensive data and voice services
2 MBWA Case studies Czech Republic U-fon fixed
and mobile
Case Study
UFon Czech Republic CDMA Offering May 2007
CDMA Data Packages
Selected CDMA Devices
Integrated modem and wireless phone
USB-Modem
CDMA Coverage
CDMA EVDO rev A andCDMA 2000 1xRTT
Source Arthur D. Little analysis FUP applied
if monthly limit is used
23
H3G while partnering with well known web players
and handset manufacturers is drastically
stimulating the usage of broadband services
leading to substantial bandwidth requirements
2 MBWA Case studies Partnerships

Partnering with well established international
brands
and providing an integrated offer on the mobile
device
leads to a totally new user experience and much
higher bandwidth consumption
Source H3G Austria
24
H3G launched innovative FMC offer mobile data
content bundle with a substantially subsidized
Playstation 3
2 MBWA Case studies Bundles
Product promotion
Comments

• H3G Austria effectively addresses its primary
  target group with an innovative FMC product
  bundle
• First bundle of games console with broadband
  contract
• When bought with a 24 moth contract of H3G Data
  fair (15GB 24/month) and a WLAN router for 49
  the Playstation3 comes for 149,- instead of 399,-
• H3G Data Fair is the cheapest mobile BB tariff in
  Austria (in terms of GB/monthly base fee)
• Free TV is included in H3G Data Fair

People under 27 get a 20 discount on top!
Source Company page, Arthur D. Little Analysis
25
Telstra launch of mobile broadband increased
traffic by 600 in less than 12 months
2 MBWA Case studies Metro vs Rural
Wireless data traffic
National
Metro vs. Rural
Next GTM network
Country
Data Traffic Volume (BH Mbps)
Data Traffic Volume (BH Mbps)
EV-DO
Country
Metro
0
2G and others
Metro
Oct 06
Dec 06
Feb 07
Apr 07
Jun 07
Aug 07
CDMA Packet Data
Next G Packet Data

• Next GTM growth curve strong
• Rural areas are generating significant data
  volume

26
There are six forward TV distribution
possibilities and a much higher number of options
for digital interactive TV using hybrid solutions
for the backward channel, operators have started
to use in the Forward and Backward channels a
combination of options
2 TV Case studies Competitive platforms
Possibilities for Interactive Digital TV
Backward channel for iTV
Forward TV-signal distribution
Dial up, DSL, WiMAX, 3G (IP/iMHP)
SAT (DVB-S)
1
Dial up, DSL, WiMAX, 3G (IP/iMHP)
Terrestrial (DVB-T)
2
Cable(IP/EuroDOCSIS)
Cable (CVB-C)
3
DSL, FTTH (IP-TV)
4
DSL, FTTH (IP)
Air Wireless (IP/EuroDOCSIS)
Air Wireless (DVB-T)
5
DSL Terrestrial
6
DSL (IP)
UMTS/HxPA, CDMA Rev A/B,
27
It is important to understand the competitive
forces driving the TV market and the movements of
all stakeholders in considering a content strategy
2 TV Case studies Competitive environment
1. Customer segments
2. Telecommunication sector
3. Regulatory

• Moving away from PC
• Video offers emerging
• Mobile and Fixed services

Content Distributors
Online Portals

• PVR / time-shifting
• Broadband deployment
• Quadruple-play
• IPTV-like offers

Telco's
Incumbent Telco's
Content Owners
Device Oriented Players
Alternative Telco's

• MVNOs
• Broadband deployment

• Plug-and-play offers

4. Technology platforms
28
All three models could be accompanied by web
services for customers, allowing them to share,
store and interact on multiple devices and CPEs
2 TV Case studies New entrants
Example
Comment

• Provide overarching connectivity for seamless
  media access across TV, Computer and mobile
  device (Phone, Mediaplayer etc.)
• Premium content is only one aspect of the future
  media set free- and user generated (own) content
  will become part of the equation
• The user will be able to create, store, edit and
  share content via Mail, Communities or UGC sites
• Additional web-services are a key lever to
  increase retention rates (e.g. eMail address,
  online storage space)

Content store
UGC / Community
Television
Phone / mobile device
Computer
Set-Top Box
Online services
29
DTH and IPTV differ in the way the content is
encoded, delivered and broadcasted. When looking
for supplementing partnering options, there are
different options to look at
2 TV Case studies DTH vs IPTV
Illustrative
Content flow from origination to viewer
Uplink
1
Satellite
IPTV
2
Editing/ Programming
Broadcasting/Multicasting
Production
Encoding
Delivery
Reception
Content aggregation and Distribution (typically
DTH/Sat Op.)
Content Production/Aggregation
Content production, aggregation and Distribution
(typically DTH/ Sat Op.)
Third party content providers
Incumbent / Altnet operating IPTV
30
The relative young DTH market is already
relatively crowded
2 TV Case studies DTH in Romania
market snapshot
Comments

• First DTH services in Romania were offered at the
  end of 2004
• Only 2 years later there were already 5 DTH
  operators, resulting in aggressive pricing
• Being the last entrant, Romtelecoms Dolce TV in
  just 4 months managed to become the second
  largest operator
• 6th DTH operator is rumored to enter in September
  2008

Source Informa, Company websites, DTH Romania 1)
for Romtelecom voice subscribers, else 5 2)
Installation, antenna, receiver, activation 3)
estimated consumer by end 07 are 400.000
31
Despite a crowded DTH market, Dolce TV has sold
400k subscriptions in only a year after its launch
2 TV Case studies DTH competition in Romania
Dolce TV
Case Study
Dolce TV Overview
Subscribers

• DTH provider launched by the incumbent Romtelecom
• Started operations in November 2006
• Within 6 months sold 232k subscriptions
• As of March 2007, managed to become the second
  largest DTH provider in Romania
• Romtelecom invested 15 million into DTH
• Will also start IPTV trials late 2007, and launch
  operations 2008
• Base Offer
• Base package provides 45 channels for 5/month
  (and only 1,95 for Romtelecom voice customers)
• Full package includes broadcast package plus up
  to 25 additional channels (theme channels like
  sports, children, science, news, film and music)
• Installation is for free, customer just pays ca.
  90 for the antenna and activation fee
• Does not offer any Internet services yet (planned
  in 08)
• Premium Offer
• Premium packages for HBO, MTV and other
  channelsavailable in Hungarian and English
  language
• Monthly fee (on top of base offer) 0.8 3.9 EUR
  / month

Subscriber in Tsd.
growth 1233
Market assessment

• Informa projected a 18 growth for the DTH market
  between 2006-2007, assuming an organic growth of
  the subscriber base
• However, Dolce TV has increased its subscriber
  base almost eightfold in just half a year, and
  more than tenfold in just a year

Source Company Information, OTE, Broadband TV
news, Arthur D. Little
32
Contents
33
The success stories are based on 5 key success
factors
3 Conclusion
Key learnings

• Limited broadband competitive environment in high
  performing fixed infrastructures
• Demand for broadband and entertainment

Market conditions
1

• It is not about a religious standard debate, it
  is about having a working infrastructure in
  place, network elements and multiple devices
  available from multiple suppliers (e.g. mobile
  handsets, data cards, STB )

Availability of a technology
2

• Provide services where consumers need them it
• Leverage existing legacy systems
  (backbone/transport, backhaul, sites,
  interconnections links etc.)

Coverage
3

• Mobile broadband is directly competing with fixed
  broadband services
• Tariff plans fit multiple customer segment needs,
  trade off between speed, capacity and usage
  patterns (e.g. prepaid mobile BB, DVB-H in
  Albania ..., DTH in Rumania )

Attractive and innovative pricing
4

• Attractive packaging, clear and simple
  communication and
• Strong mobilization of all existing and new
  distribution channels were the key components for
  the success

Leverage the brand - Creation of a need and
ability to sell it
5
Source Arthur D. Little
34

• Interesting future
• high impact
• high uncertainty