Communication for All A Rural Business Model Ericsson

Communication for All A Rural Business Model ”Ericsson believes in an all communicating world where telecommunication is affordable for all” Thomas Sonesson Country Manager Botswana VP, Ericsson Sub saharan Africa 1

Market Situation GSM World population 6. 4 B Population in GSM markets without coverage Population within GSM coverage, but with no subscription GSM Subscribers Non-GSM Markets Rural areas with: -Low spending users 2, 200 and/or Low population density 2, 400 1, 600 200 Sources: EMC and UN Q 1 2005 3

Market Situation USD/ month 10 mobile spend Potential subscribers 2005 2008 6, 7 5 3, 5 0 500 1 000 1 500 2 000 Current penetration 4 2 500 3 000 3 500 Millions of users 4 000

Rural Telecom Market characteristics Traffic based. . . § Voice § Cash economies § Willing to share subscription (or pay per use) § Lack of basic utility and communication infrastructure § Mobile/Wireless And subscriber based “Business is good for development and development is good for business” Ian Johnson, World Bank, Vice President Sustainable Development. 5

Reasons for not building rural coverage Operators don’t build Rural mobile coverage due too a bad business case based on a traditional business model i. e § High requirement on return on investment § Limited number of potential customers § High Opex in rural areas (power, Transmission etc) § Limitation in financing of CAPEX 6

Communication for all Offering All with a focus on reduced total cost of ownership Business model Expander Reducing risks, capex and opex Cost-efficient expansion into new geographical areas Managed Capacity and coverage when and where needed 7

Ericsson Rural Business model § World Bank takes the credit risk § Ericsson takes the operational risk § The Operator only needs to take the Market risk § SIDA pays for the Technical training of local engineers § Pay-as-you-grow, the Operator only pays for the Coverage and Capacity needed. § Operators Share network and sites via a neutral Special Purpose Company ( SPC). All of these components contributes to lowering the total Cost of ownership and enables a good business case for all involved stakeholders. 8

EXPANDER -minimize number of sites Antenna height 30 m 95 % coverage 900 MHz Capacity mode 4 TRX per antenna Coverage mode 2 TRX per antenna Supreme coverage Transmitter Coherent Combining + 4 RX diversity 25 16 100% 9 158% Expander 11 219% # sites [10, 000 km 2] Coverage/site

Managed Capacity § The operator will access the capacity and coverage needed in accordance with forecasted demand. § The model provides substantial cash-flow improvements compared to traditional purchase of infrastructure. § Ericsson runs the network and the operator can concentrate on core issues such as Marketing & Sales. § Managed capacity combined with a long term financing improves several key financial ratios compared to traditional purchase of infrastructure. 10

User Applications 4 priority areas identified B 2 B trading § pricing / market info § hiring Mobile banking Healthcare § money transfer § information § campaigns § treatment § mobile wallet Education § information sharing § Internet access Facilitated by Ericsson Mobility World 11

Example from Africa 12

Pilot Project: Tanzania Lindi/Mtwara in south Tanzania Transmission Network § § RBS 2106 outdoor cabinet Aggregation 4 – 8 Mb Mw Backhaul to Lindi 1 X 34 Mb Mw Lindi to Dar Es Salaam 2 X 34 Mb Mw § Traffic Engineering: – Interconnect to Home Network in Dar Es Salaam 13

Coverage simulations for Lindi, Tanzania. Totally 46 sites with configuration: • 35 sites RBS 2206 (2/2/2) (BTS Power 45. 5) • 11 sites RBS 2206 (4/4/4) (BTS Power 42) 14

Operational Set-up Infrastructure owner and License holder Roll-out and Manage Capacity SPC Special purpose Company Network Stakeholders Ericsson Initial phase 20% Swefund 25% World Bank 20% Local investors 35% ü Nico ( Mutual fund) ü Tan. Soft ü Kasbian Commercial Bank(s) Barclays Standard Chartered Bank Operator 1 Operator 2 Operator 3 Technical training and application support Consumers Sida 15

Putting all the pieces together … Ericsson contribution § Takes overall responsibility and arranges financing – World Bank (IFC)/ SIDA/Local Banks § Dimensions and provides the Shared Network – Radio Network (Sites and Access transmission), Core Network (MSC, SGSN and Mediation), Network roll-out, . . . § Operates the Shared Network – Manage roll-out of Coverage and Capacity based on KPIs – Executes Operation and Maintenance via OSS – Runs Hosting center for applications § Manages Mediation to Operators – Provides billing information based on traffic volume Managed Capacity 16

Putting all the pieces together … SIDA contribution § Facilitate education of locals working as O&M and Service personnel – Sponsoring of Dar es Salaam Institute of Technology § Assist in finding out how ICT (via the mobile network) can help the poor people in rural communities – Health, education, safety, micro payment, business data, … § Encourage Local Application Development – Similar arrangement as for Open Source SW in Swahili Encourage Local Engagement 17

Putting all the pieces together … Operator contribution § Manage Business Operations to gain market share – Marketing, Sales, Distribution, Refill, Customer service, . . . § Provide Application Portal – Local Applications (plus own applications for differentiation) § Provide Low Cost Terminals – Voice and SMS Communication for the mass population – Affordable EDGE cards for IT-kiosks, schools, hospitals etc. Services for All 18

Putting all the pieces together … Regulator contribution § Allow establishment of a Special Purpose Company (SPC) § Regulate site sharing § Money transfers from abroad to Tanzania - Allows relatives to transfer money to locals in rural areas § Land road access for sites § License for the SPC limited for providing wholesale access only Remove any hurdles 19

Expander references Customers all over the world are using Expander functionality to build cost-efficient networks DCC/astelit, Ukraine K-Cell, Kazakhstan Bharti, India Telcel, Mexico Colombia Telecom. Colombia Celtel, ETC, Uganda Ethiopia Mobitel, Sri Lanka Digitel, Philippines Nucleo, Paraguay Claro, Brazil Telstra, Australia Telecom Personal, Argentina 20

Communication for All key issues § Create wealth and opportunities for people in developing economies by providing affordable high quality telecom services using innovative business models § Generate return on capital invested for all the involved business partners § Lower the entry hurdle for operators and subscribers, thus encouraging rapid expansion and positive cash flow “ The contribution of a telephone to GDP is greater the lower the GDP per capita is ” 21

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