Raul Lucido, ZTE Corporation

1
Telecom MarketAnalysis September 2005by
Raul Lucido
2
Global Telecom Trends
3
Mexican Telecommunications MarketGlobal trends

• Fixed-Mobile convergence
• Consolidation
• Technological convergence
• Less regulations
• Mobile growth
• Broad Band services
• New technologies

4
Mexican Telecommunications MarketGlobal trends

• Fixed Mobile Convergence
• BT Bluephone initiative in 1H05
• Motorola CN 620 1st Wi-Fi and Mobile phone in
  July 2004
• In July 2004, six leading carriers formed the
  Fixed Mobile Convergence Alliance to develop
  standards for integrated BB-Mobile networks
• In September 2004, a group of 14 operators and
  vendors released Unlicensed Mobile Access (UMA)
  specs. for roaming and handoff between cellular
  and other wireless nets.

5
Mexican Telecommunications MarketGlobal trends

• Fixed Mobile Convergence
• SBC will offer in 2006, consumer phones that
  automatically switch calls between Cingulars GSM
  and SBCs Wi-Fi networks
• SBC will use Wi-Fi as part of a consumer VoIP
  service in 2005
• Net2Phone release a Wi-Fi handset (XJ100) for its
  VoiceLine IP service to be sold for 160 USD
• Bell Canada announced an agreement with
  BridgePort Networks to develop and trial IP
  technology that integrates fixed and mobile
  voice services in 1H05

6
Mexican Telecommunications MarketGlobal trends

• Fixed Mobile Convergence
• Telecom Italia (TI) offered to re-buy Telecom
  Italia Mobile (TIM) shares for 14.5 bn
• Objectives of the transaction are
• A group structure better positioned to capture
  the benefits of fixed-wireless platform
  integration in the telecoms sector
• Free cash flow and EPS accretive transaction from
  year 1
• An efficient and rebalanced capital structure for
  the Group, consistent with a stable credit
  profile
• A transparent and market-friendly transaction for
  all shareholders

SourceTelecom Italia web site January 2005
7
Mexican Telecommunications MarketGlobal trends

• Fixed Mobile Convergence
• Telecom Italia (TI) offered to re-buy Internet
  division of Telecom Italia Media (TME.MI) shares
  for 950 millions
• Objectives of the transaction are that TME.MI
• To focus now on its television business
• To invest 250 millions during next three years

SourceTelecom Italia web site January 2005
8
Mexican Telecommunications MarketGlobal trends

• Consolidation
• BT moving again to offer mobile services with
  Vodafone
• BT Group PLC purchased US-based Infonet Services
• BT acquires Skynet to drive growth in UK LAN
  solutions market
• Alltel Corp. agreed to purchase Western Wireless
  for about 4.4 BUSD 1.5 BUSD of debt
• Alltel will become the 5th wireless operator

Source WSJ January 24, 2005
9
Mexican Telecommunications MarketGlobal trends

• Consolidation
• FT last year purchased the minority stakes it
  didnt already own in mobile operator Orange and
  Wanadoo
• FT to buy rest of Equant for 564 M
• FT buys Spanish Mobile Amena for 12.8 BUSD
• Qualcomm bought Flarion for 600 MUSD
• DT KPN tried to buy O2
• Intelsat buys PanAmSat for 3.2 BUSD

Source WSJ January 24, 2005
10
Mexican Telecommunications MarketGlobal trends

• Consolidation
• Telefonica bought BellSouth LatAm mobile
  companies in 5.85 BUSD
• Telefonica bought 100 of CTC in 1.25 BUSD
• Telefonica will join with Terra Networks
• Cingular acquired ATT Wireless in 41 BUSD
• Sprint PCS and Nextel joined forces in a 35.5
  millions subscribers company with a 35 BUSD deal
• SBC acquired ATT Corp in 16.5 BUSD.
• Verizon agrees to buy MCI for 7.5 BUSD.
• Alcatel to cooperate with ZTE on CDMA Technology
• Time Warner and Comcast acquiring Adelphia for
  17.6 BUSD

11
Mexican Telecommunications MarketGlobal trends

• Technological convergence
• Comcast plans major rollout of phone service over
  cable
• Internet-based phone services to 15 millions
  homes end of 2005
• 40 millions homes in 18 months
• 39.95 per month for unlimited domestic service,
  for customers who also buy Cable and High Speed
  Internet services
• Only phone 59.95
• Time Warner had signed up 200,000 internet
  subscribers at end 2004
• US Cable TV companies have invested 60 BUSD to
  upgrade their networks in late 1990s

12
Mexican Telecommunications MarketGlobal trends

• Regulatory changes
• October 14, 2004
• FCC draw back unbundling local loop for FTTH,
  FTTC
• Relieves incumbents from unbundling requirements
  for fiber-to-the-curb (FTTC) loops
• The FCC found that those obligations discouraged
  incumbent carriers investment in FTTH broadband
  facilities
• FCC encourage deployment of fiber optic broadband
  networks capable of delivering advanced data,
  video and voice service to the mass market by
  incumbent local telephone companies

13
Mexican Telecommunications MarketGlobal trends

• Regulatory changes
• October 14, 2004
• FCC adopted changes to Part 15 of its rules to
  encourage the development of Access Broadband
  over Power Line (Access BPL) to promote access to
  broadband services and to encourage new
  facilities-based broadband platforms
• FCC allocated the 1710-1755 MHz (1.7 GHz) and
  2110-2155 MHz (2.1 GHz) bands for AWS

14
Mexican Telecommunications MarketGlobal trends

• Comments about Regulation
• There are now eight players in UK market,
  making it the most competitive in Europe. This is
  good for customers and better, by far, than
  unnecessary regulation. We believe that
  competition, not regulation, should be the driver
  in our market
• Peter Erskine, CEO mmO2 Annual Report 2004

15
Mexican Telecommunications MarketGlobal trends

• Factors contributing to the industrys
  increasingly competitive market for Telecom
  operators
• Regulatory changes
• Product substitution
• Technological advances
• Excess network capacity
• Entrance of new competitors
• Consolidation of players

16
Mexican Telecommunications MarketGlobal trends

• Wireline replacement in term of voice minutes
• Europe, one third is originated in mobile
  networks
• Broadband and VoIP could stop wireline
  replacement
• New mobile applications
• Messaging and email
• PC connections
• Web browsing
• Photos, ringtones,
• Music and video streaming
• Location base services and mobile commerce

17
Mexican Telecommunications MarketGlobal trends

• Issues to think
• Competence Commissions need to understand the new
  market configuration
• Frequencies should be available for any operator
  without restrictions
• New services will demand bandwidth
• Frequencies per se are not a factor for
  dominance, investments are the differentiated
  factor
• Frequencies should be available at low cost

18

• Conclusions
• Fixed operators are moving to the wireless world
  because is the only way in which they will
  survive
• Consolidation of technologies will create
  economies of scale to success
• Consolidation of operators will challenge
  traditional economic competence theory
• Technological convergence must be allowed by
  regulators to bring more services and massive
  deployment
• Telecommunications is a Big League game, only the
  strongest will remain

19
Thanks

• Raul Lucido
• President CEO
• ZTE Corporation Mexico, S. de R.L de C.V.