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IITTUU // BBDDTT workshopLLjjuubblljjaannaa, Slovenia,

11-3, December 2003

IIMMTT 22000000

LLeeccttuurree3.3.2

EEccoonnoommiiccaall EEvvaalluuaattiioonn ooff22GG ttoo 33GG MMiiggrraattiioonn aannddTTooooll bbaasseedd ccaassee ssttuuddyy

Oscar Gonzlez Soto

ITU Consultant Expert

Strategic Planning and Assessment

December 1 -3 ITU/BDT Economical Evaluation - O.G.S. Lecture NP - 3.3.2 - slide 1

EEccoonnoommiiccaall EEvvaalluuaattiioonn ffoorr22GG ttoo 33GG

CCoonntteenntt

Factors in the 2G to 3G evolutionKey economical issues

Migration steps and architectures

Techno-Economical and Business modeling

Demand, services and revenuesNetwork Resources and sharing factors

Tool based case studySTEM tool summary

Case study demo and results


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KKeeyyEconomical Factors

Evolution for unitary costs and revenues

Cost per

port/customerDominant Infrastructure

component

Revenues

Take-up rate with

diffusion law

Dominant Ports/traffic

dependent cost

Launching Expanding Maturity Time


Grow for


NNeettwwoorrkkEvolution steps

Bandwidh

Capacity &

Services

GSM/EDGE

UMTS

GSMGSM/GPRS

Time for Geo-coverage and Deployment

Migration strategy is strongly dependent on country Geo-

structure and has to be customized


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MMooddeelleedd aarrcchhiitteeccttuurreess

BTS

HLR

SS7

Network

Applications

RNC MSC SGSN GGSN

PSTN/IP/NGN

Network

GPRS

BTSGWs

NMC



CCoonnssiiddeerreedd SSeerrvviicceess

Technology

GSM

GPRS/EDGE

UMTS

Services

Voice

Data/circuit 9.6Kbps

Data/circuit up to 64Kbps

Data/packet up to 144Kbps

Voice

Data/circuit up to 384Kbps

Data/packet up to 2Mbps

Revenues

Time function

Subscription/Time function

Subscription/Time functionSubscription/Message/

Information volume function

Time function

Subscription/Time function

Subscription/Message/Bandwidth/Informationvolume function


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IInnffrraassttrruuccttuurree SShhaarriinngg SScceennaarriiooss

Sharing Levels (new sites)

A) No sharing

B) Site and Tower

C) Site, Tower and BST

D) Full access segment

Leasing Levels (existing)

Renting space/towers to others

Leasing space to others

Both Renting and Leasing

None


EEccoonnoommiiccaall EEvvaalluuaattiioonn ffoorr22GG ttoo 33GGNNeettwwoorrkk SSyysstteemmss MMooddeelliinngg

Customer Segments (business, residential) and Services (Voice and

Data low/medium/high speed)

Sites and Base Stations at Urban, Suburban, Rural and Hot spots

Backhaul per geo-scenario

Core Network with the specific network elements in the architecture

Transport for voice, circuit mode data and packet mode data

Interconnection for voice and data


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SSTTEEMM ttooooll ssuummmmaarryy

Business

Planning

Objective : STEM by Analysys

(in Cambridge) is a business decision

making support tool that enables the

analysis of business models and cost

assignment for Telecommunication

Networks and services over a period

of time.

The Analysys STEM network investment modelling tool is aproduct of Analysys Consulting Ltd, Cambridge, UK

contact: [email protected]



SSTTEEMM ttooooll ssuummmmaarryy

Capabilities

Service Demand Projection

Evaluation of network resources and associated investment (CAPEX)

Evaluation of revenues for given tariffs and installation rate

Modeling multiple resource lifetimes

Modeling multiple time periodsModeling of demand elasticity

Interrelation between network growth and operational cost (OPEX)

Cost assignment as a function of utilization rates

Produces automatically the standard financial results like Cash Flow,

Profit & Loss, Balance Sheet and many others

Interfacing to other MS Windows applications like Excel, Word,....

mailto:[email protected]:[email protected]:[email protected]

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ResourceDepreciation &

Decommissioning

Incremental

Demand

for service

Tariff

andRevenue

TTool activity flow

Replacementof Resources

Demand

Parameters

Resources Costs

(And trends)

Total

Incremental

Demand forResources

IncrementalResource

Supply

Production& Costing

of Resources

Service

costs &

charges

Input data

Tariff

Policy

Others costs

(Admin/mkt)Phase ofcalculation



MMacroscopic and microscopic approach to

mmooddeelllliinngg

Examples:

Macro-

scopic

Intermediate

approach

One Resource used to model all

BTSs in a mobile network

BTSs grouped by area type,

e.g.urban/suburban/rural/highways

Microscopic BTSs modelled one by one


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EExxaammppllee ooffttooooll rreessuullttss ffoorrbbuussiinneessss aannaallyyssiiss



EExxaammppllee ooffttooooll rreessuullttss ffoorrbbuussiinneessss aannaallyyssiiss


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RNC GGSN SGSN

GGSN min to SGSN min tocover cover

subscribers subscribersvoice Bus Voice

bandwidth

low Bus GPRS low Bus GPRS hispd ps spd ps

CCaassee ssttuuddyy:: SScceennaarriioo MMooddeelliinngg

min RNC forcoverage

totalbandwidth

SGSN-GGSNSTM-1 installed

units

RNC-MSC STM-1s

installed units

site sharing for

new roll-out

Bus GSM voice

Bus GSM voiceerlang B

Bus UMTSvoice erlang B

Bus GSM

customers

Bus GSMspd cs

None site only site &

basestation

site sharing fornew roll-out

Full

Inputs specified through Excel

Detailed model of network

functions

Shared BS site suburbanUMTS BS

rural UMTS BS RNC Backhaul E3(shared)

Scenarios for different levels

of sharing



CCaassee ssttuuddyy:: RReessoouurrcceess mmooddeelliinngg

Network resourcesare associated to Network elements per type

Resources modeled by capacity, utilization, physical lifetime and

depreciation policy

Capital cost structure modeled with trends over time

Operational costs modeled for: Maintenance, Churn,

Decommissioning, Connection, Rental, Usage and Operation

costs

Models keeps track and history for all these capital and

operational costs components for later reverse cost allocation


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Bus GSM

Bus GSM


CCaassee ssttuuddyy:: EEccoonnoommiiccaall mmooddeelliinngg

Tariffs for connection, rental and usage

Modeled demand elasticity to the three tariffs

Differentiated physical and economical lifetimes

Cost allocation per service and customer segment as a function of

consumed resources

Models and calculates all standard economical and financial values

with more than 100 pre-programmed functions including:

service revenues and costs, service cash-flows, market segment revenues andcosts, resource incremental units, resource operating costs, network revenue and

expenditure, network operating profit, network NPV, network IRR, network

depreciation and amortization, network assets, network balance sheet, etc.



CCaassee ssttuuddyy:: LLiiffee-Demo and results

None site only site &basestation

Full

site sharing for

new roll-out voice

Bus GSM voiceerlang B

Bus UMTSvoice erlang B

Shared BS site suburbanUMTS BS

rural UMTS BS RNC Backhaul E3(shared)

voice Bus Voicecustomers bandwidth

Bus GSM lowspd cs

Bus GPRS lowspd ps

Bus GPRS hispd ps


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7e+06

6e+06

5e+06

4e+06

3e+06

2e+06

C 1e+06

0e+06

Service Demand - Connectionsumts: Working Model, Connections

6e+08

Network Capital Expenditureumts, Network, Capital Expenditure

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 site only/Offer

Year

Con GSM voice Con UMTS voice

E

5e+08

4e+08

3e+08

2e+08

1e+08

own GSM sites

site &basestation/Offer

own GSM sites

Full/Offer own

GSM sites

None/Offer own

GSM sites

0e+082000 2002 2004 2006 2008 2010

Year




14.000

Resource Unit Utilisationumts: site only/Rent space on other GSM sites, GSM base stations

12.000

10.000

Redundant Units

8.000

n 6.000

Planned Units

Deployment Units

Utilisation Units

Used Units

4.000

2.000

02000 2001 2002 2003 200 4 2005 2006 2007 2008 2009 2010

Year


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Resource Unit Utilisationumts: Working Model, RNC-MSC STM-1s

90

80

70

60 Redundant Units

Planned Units

50

Deployment Units

40 Utilisation Units

nUsed Units

30

20

10

0

200 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Year




4.000.000

Resource Unit Utilisationumts: site only/Rent space on other GSM sites, internet connection charge

3.500.000

3.000.000

2.500.000

2.000.000

U1.500.000

Redundant Units

Planned Units

Deployment Units

Utilisation Units

Used Units

1.000.000

500.000

0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Year


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Function Operating Costsumts: site only/Rent space on other GSM sites, suburban UMTS BS function

14e+06

12e+06

10e+06

8e+06

E 6e+06

Churn Cost

Maintenance Cost

Operations Cost

Operating Costs

4e+06

2e+06

0e+062000 2001 200 2 200 3 2004 2005 2006 2007 2008 2009 2010

Year




18e+08

Service Cashflowsumts: site only/Rent space on other GSM sites, GSM services

16e+08

14e+08

12e+08

10e+08

8e+08

E 6e+08

Cashflow

from

Operations

Cashflow

before

Financing

4e+08

2e+08

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100e+08

-2e+08

Year


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25e+09

Network NPV and Terminal Valuesumts: site only/Rent space on other GSM sites, Network

20e+09

15e+09

E10e+09

NPV(Zero

Terminal

Value)

NPV

(EBITDA

Multiplier)

NPV

(Perpetuity

Rate)

5e+09

0e+09

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Year



AAccttiioonnss ffoorrpprrooffiittaabbiilliittyy

!! Joint Techno-economical evaluation at all phases !!

Cost per

port/customerDecrease unitary costs by

Infrastructure sharing

Promotional law

Revenues

Increase ARPU with

new services

Increase cash -flow with

high take-up rate through

marketing actions

Diffusion law

Launching Expanding Maturity Time


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EEccoonnoommiiccaall EEvvaalluuaattiioonn ffoorr22GG ttoo 33GGCCoonncclluussiioonnss

Key economical factors have to be considered with

dynamic models and validated

High impact ofsharing factors and take-up rate in the

profitability

High number ofcountry and technology scenarios to beanalyzed

Powerful support tools needed


Documents

3.3.2_Soto