The Mobile Internet Report Key Themes*

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New Computing Cycle Characteristics Reduce Usage Friction Via Better Processing Power + Improved User Interface + Smaller Form Factor + Lower Prices + Expanded Services = 10x More Devices 1,000,000 Devices / Users (MM in Log Scale) 100,000 10,000 1000 100 10 1 Mainframe Computing Growth Drivers Over Time, 1960 – 2020E Increasing Integration Minicomputer 10MM+ Units PC 100MM+ Units Cellphone / Desktop Internet 1B+ Units / Users Mobile Consumer 10B+ Units More than Just Phones Smartphone Kindle Tablet MP3 Cell phone / PDA Car Electronics GPS, ABS, A/V Mobile Video Home Entertainment Games Wireless Home Appliances 1MM+ Units 1960 1970 1980 1990 2000 2010 2020 Note: PC installed base reached 100MM in 1993, cellphone / Internet users reached 1B in 2002 / 2005 respectively; Source: ITU, Mark Lipacis, Morgan Stanley Research. 52
User-Interface Revolutions (Overlaid on New Technologies) Can Spark Cycles Apple Spearheaded Mobile Natural User Interface w/ Multi-Touch + Accelerometer MS-DOS Mac OS Windows 3.x PC Desktop Text to Graphical (circa 1984) Telnet America Online Netscape PC Internet Text to Graphical (circa 1995) Symbian Windows Mobile iPhone Mobile Internet Graphical to Natural (circa 2007) Source: Company Reports, Morgan Stanley Research. 53
Page 1 and 2: The Mobile Internet Report Key Them
Page 3 and 4: What You are Reading - The Mobile I
Page 5 and 6: Key Mobile Internet Themes 1) Wealt
Page 7 and 8: …Key Mobile Internet Themes… 3)
Page 9 and 10: …Key Mobile Internet Themes 6) Ma
Page 11 and 12: Key Theme #1 11
Page 13 and 14: Key Theme #1 - Wealth Creation / De
Page 15 and 16: Wealth Creation / Destruction Is Ma
Page 17 and 18: Winners of Each New Cycle Often Cre
Page 19 and 20: NCR Won Big in Mainframe Era, DEC W
Page 21 and 22: Compaq + Microsoft Won Big in PC Er
Page 23 and 24: Net, New Computing Cycles Create /
Page 25 and 26: New Computing Cycle Characteristics
Page 27 and 28: 12,000,000 Mobile Internet Traffic
Page 29 and 30: Pace of company change related to m
Page 31 and 32: Rapid Pace of Corporate M&A Related
Page 33 and 34: Technology Companies Created > Weal
Page 35 and 36: Top Internet-Related Tech Wealth Cr
Page 37 and 38: We Know What Happened Over Past 15
Page 39 and 40: Mobile Internet Likely to Follow Ti
Page 41 and 42: 2009 Global Top 30 TMT Companies by
Page 43 and 44: Key Theme #2 43
Page 45 and 46: Key Theme #2 - Mobile Ramping Faste
Page 47 and 48: Apple iPhone + iTouch = Fastest new
Page 49 and 50: Mobile Internet Outpaces Desktop In
Page 51: Tech Cycles Tend to Last Ten Years
Page 55 and 56: Broad base of IP-based mobile usage
Page 57 and 58: Wireless Network Primer GPS - Glob
Page 59 and 60: Increasingly, Mobile Phone Usage is
Page 61 and 62: Mobile Devices + Infrastructure Ena
Page 63 and 64: Cloud-Based Content / App Services
Page 65 and 66: Machine to Machine (M2M) Takes on N
Page 67 and 68: Rapid growth in number / type of mo
Page 69 and 70: GPS proliferation (and related loca
Page 71 and 72: GPS = 421MM Chipsets Sold in 2008E
Page 73 and 74: WIRED Magazine - “Inside the GPS
Page 75 and 76: 3G proliferation is a big deal. 75
Page 77 and 78: 3G = Key to Enabling Internet Usage
Page 79 and 80: 3G Penetration Inflection Points Va
Page 81 and 82: 3G Growth Still Concentrated in Dev
Page 83 and 84: USA Likely to Remain Most Dynamic 3
Page 85 and 86: Wi-Fi proliferation is a big deal.
Page 87 and 88: Wi-Fi’s High Speed + Wide Availab
Page 89 and 90: 100,000 Wi-Fi Households (USA) = 20
Page 91 and 92: Bluetooth proliferation is a big de
Page 93 and 94: Bluetooth = 1.3B Chipsets Sold in 2
Page 95 and 96: What Is a ‘Smartphone’ We defi
Page 97 and 98: Smartphone of 2009 = As Powerful as
Page 99 and 100: Mobile Internet - Leveraging the Ev
Page 101 and 102: Notebook PC + Smartphone Shipments
Page 103 and 104:
Impressive / Rapid Growing Smartpho
Page 105 and 106:
Consumer Internet-Enabled Devices -
Page 107 and 108:
Significant Growth in 3G + Smartpho
Page 109 and 110:
Unified Communication (UC) Voice (~
Page 111 and 112:
If VoIP Leader Skype Were a Carrier
Page 113 and 114:
VoIP = Material Impact on Tradition
Page 115 and 116:
Google Voice Putting User in Contro
Page 117 and 118:
Social Networking - Global Phenomen
Page 119 and 120:
Facebook = Garnering Rising Share o
Page 121 and 122:
Powerful Devices (like iPhone) + Ne
Page 123 and 124:
Video = High Usage + High Bandwidth
Page 125 and 126:
Mobile Ramping Faster than Desktop
Page 127 and 128:
Key Theme #3 1) Wealth Creation / D
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Apple Leading in Mobile Innovation
Page 131 and 132:
Apple’s Impressive Share Likely M
Page 133 and 134:
iTunes App Store = Shot Heard ‘Ro
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iTunes App Store = The Killer Mobil
Page 137 and 138:
Mobile App Definition A mobile appl
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Users / Developers / Apple = Likely
Page 141 and 142:
Apple iPhone / iTouch = 2B+ App Dow
Page 143 and 144:
Most Downloaded Free iPhone Apps -
Page 145 and 146:
iPhone Apps for Nearly Everyone - L
Page 147 and 148:
Mobile Developer Mind Share / Focus
Page 149 and 150:
Powerful mobile device usage trends
Page 151 and 152:
iPhone / Android Gaining Mobile Int
Page 153 and 154:
Mobile Internet Operating System Co
Page 155 and 156:
Handset Device Price / Volume Pyram
Page 157 and 158:
High-End Quickly Becomes Low-End -
Page 159 and 160:
iPhone 3G BOM = 33% Lower than iPho
Page 161 and 162:
Apple iTunes App Revenue = Could Su
Page 163 and 164:
Apple leads race for handset profit
Page 165 and 166:
Apple + RIM = 13% Share of Handset
Page 167 and 168:
Apple / RIM - Smartphone Leaders Co
Page 169 and 170:
PC Platform Leaders (Microsoft + In
Page 171 and 172:
Apple iPhone Base Case + Upside Cas
Page 173 and 174:
Scenarios for Apple iPhone Market S
Page 175 and 176:
The Apple Tablet Potential Should N
Page 177 and 178:
Apple - Potential Long-Term Challen
Page 179 and 180:
Google Android’s Open + Low Cost
Page 181 and 182:
Apple may believe its platform mana
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In Technology, Products with Most /
Page 185 and 186:
Multitudes of Android Phones - Tens
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Android’s Conundrum Open-Source S
Page 189 and 190:
Next Generation Android Smartphones
Page 191 and 192:
Apple’s Potential Long-Term Chall
Page 193 and 194:
Native Apps Benefits Challenges For
Page 195 and 196:
Native Apps Should Always Have Perf
Page 197 and 198:
Apple = Likely Well Positioned to N
Page 199 and 200:
Do Incumbents Have Apple-Like Poten
Page 201 and 202:
Smartphones Not Relevant in Emergin
Page 203 and 204:
Retail Sales (Not Carrier Sales) -
Page 205 and 206:
Apple’s Success Has Been Proven i
Page 207 and 208:
Buddhist Phone White-Box “Shanzha
Page 209 and 210:
Don’t Expect Apple to Stand Still
Page 211 and 212:
Carrier Exclusivity Limits Apple’
Page 213 and 214:
iPhone Price Cut to $99 Would Elimi
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Ending Carrier Exclusivity = Could
Page 217 and 218:
Battery Technology Constraining iPh
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Implications of New Horizontal Busi
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Apple’s Vertical Handset Model =
Page 223 and 224:
Apple iPhone + iTouch = On Track to
Page 225 and 226:
Apple iTouch - Key Companion to iPh
Page 227 and 228:
RIM’s Vertical Handset Model = Pr
Page 229 and 230:
Threats from RIM’s Vertical Integ
Page 231 and 232:
Horizontal Handset Model Finally Em
Page 233 and 234:
Opportunities / Benefits from Horiz
Page 235 and 236:
Key Theme #4 235
Page 237 and 238:
Key Theme #4 - Game-Changing Commun
Page 239 and 240:
Facebook and Apple iPhone / iTouch
Page 241 and 242:
Facebook + Apple iPhone / iTouch =
Page 243 and 244:
Social Networks - Underpinning of I
Page 245 and 246:
Social Networking Driving Consumer
Page 247 and 248:
Social Networks - Gaining Material
Page 249 and 250:
Facebook Platform - A Hub for Commu
Page 251 and 252:
Facebook - Next Generation Portal f
Page 253 and 254:
Facebook - Largest Share Gainer of
Page 255 and 256:
Facebook / Twitter Replacing Tradit
Page 257 and 258:
Communication on Twitter Not Only C
Page 259 and 260:
Facebook Users = Heavy Content Crea
Page 261 and 262:
Top 10 Facebook Applications - Game
Page 263 and 264:
Facebook = A Platform for Advertise
Page 265 and 266:
Facebook - Opportunity for Advertis
Page 267 and 268:
Facebook - Advertiser / Vendor Succ
Page 269 and 270:
Social Networks in General = Platfo
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LinkedIn - Social Network for Profe
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Like Twitter and Facebook, Foursqua
Page 275 and 276:
Advertising Follows Eyeballs - Glob
Page 277 and 278:
Facebook - Vibrant Developer / Appl
Page 279 and 280:
Developer / Application Success on
Page 281 and 282:
China Serves as Proxy & Leads World
Page 283 and 284:
Tencent Business Model Overview - H
Page 285 and 286:
Mobile = Future of Social Networks
Page 287 and 288:
Mobile Social Networking in Japan ~
Page 289 and 290:
Facebook Symbiotic with Mobile - Sh
Page 291 and 292:
Carriers’ ‘Walled Gardens’ =
Page 293 and 294:
Apple Unshackled Developers + Consu
Page 295 and 296:
Mobile Commerce = Accelerator for O
Page 297 and 298:
15 Years for Online to Reach 4% of
Page 299 and 300:
Mobile Revolutionizing Commerce - W
Page 301 and 302:
Deep Discounts - Invitation-Only Ti
Page 303 and 304:
Traditional Retailers Using Pings t
Page 305 and 306:
Key Theme #5 305
Page 307 and 308:
Key Theme #5 Growth / Monetization
Page 309 and 310:
Japan has led world by 5-10 years i
Page 311 and 312:
ROW’s Mobile Internet Revenue Mix
Page 313 and 314:
Mobile Revenue (ex. Data Access) pe
Page 315 and 316:
3G Penetration - …Developed / Eme
Page 317 and 318:
Why Has Japan Led the World in Mobi
Page 319 and 320:
Rich Content / Apps / Services - Ja
Page 321 and 322:
Powerful / Internet-Enabled Handset
Page 323 and 324:
Japan Mobile Online Commerce / Paid
Page 325 and 326:
Japan Mobile Online Commerce / Paid
Page 327 and 328:
Japan as Proxy for Technology’s R
Page 329 and 330:
Japan mobile monetization models pr
Page 331 and 332:
Japan’s Mobile Online Commerce /
Page 333 and 334:
Mobile Online Commerce - Promising
Page 335 and 336:
Japan - Physical Products Gaining S
Page 337 and 338:
ROW Also Making Inroads into Mobile
Page 339 and 340:
ROW - Branded Mobile Apps Could Dri
Page 341 and 342:
Digital Content (Music / Video / Ap
Page 343 and 344:
Digital Content - Mobile Games / Mu
Page 345 and 346:
Tencent Business Model Overview - H
Page 347 and 348:
Japan - Virtual / Digital Goods on
Page 349 and 350:
China Serves as Proxy & Leads World
Page 351 and 352:
Developer / Application Success on
Page 353 and 354:
Japan Mobile Paid Services 5 Years
Page 355 and 356:
Rakuten Travel - Mobile Gross Hotel
Page 357 and 358:
Mobile Advertising - Personalizatio
Page 359 and 360:
Japan - Mobile Advertising - 24% CA
Page 361 and 362:
Upside to Mobile Search Advertising
Page 363 and 364:
Heavy Search / Display Advertising
Page 365 and 366:
Interactive Video Advertising Revol
Page 367 and 368:
Desktop Internet Monetization Evolu
Page 369 and 370:
…While Premium Content Revenue (U
Page 371 and 372:
At Margin, Advertising + Online Com
Page 373 and 374:
Users Often Pay for Content as Long
Page 375 and 376:
View of Paid vs. Ad-Supported Conte
Page 377 and 378:
Media Time Spent vs. Ad Spend Out o
Page 379 and 380:
History Proves That Ads Follow Eyeb
Page 381 and 382:
Global Mobile Advertising Scenario
Page 383 and 384:
Global Mobile Online Commerce / Pai
Page 385 and 386:
Global Mobile Internet Ecosystem -
Page 387 and 388:
Global Mobile Internet Ecosystem Re
Page 389 and 390:
Mobile Internet Revenue Mix Shiftin
Page 391 and 392:
Google - Internet Search Innovation
Page 393 and 394:
Amazon.com - Online Shopping Experi
Page 395 and 396:
Some companies can benefit from tec
Page 397 and 398:
How Mobile Internet Revenue May Evo
Page 399 and 400:
Key Theme #6 1) Wealth Creation / D
Page 401 and 402:
Key Theme #6 - Massive Data Growth
Page 403 and 404:
The Carriers’ Capex Conundrum…
Page 405 and 406:
Massive Data Growth Driving Carrier
Page 407 and 408:
Global Mobile Data Trends Imply Ong
Page 409 and 410:
Global Mobile Data Users - 29% CAGR
Page 411 and 412:
Global Mobile Data Users - 55% CAGR
Page 413 and 414:
Company- and Product-level Mobile D
Page 415 and 416:
AT&T = 50x Mobile Data Traffic Incr
Page 417 and 418:
Data = Increasingly Dominating Netw
Page 419 and 420:
European Market Supporting Data and
Page 421 and 422:
Smartphone Data Usage Will Rise wit
Page 423 and 424:
Near Term, Mobile Internet Usage Su
Page 425 and 426:
European Mobile Network Utilization
Page 427 and 428:
As Data Usage Becomes More Importan
Page 429 and 430:
Aggregate Mobile Data Network Suppl
Page 431 and 432:
Network Congestion in High Density
Page 433 and 434:
Total Network Capacity on a Cell Si
Page 435 and 436:
However, As Smartphone Penetration
Page 437 and 438:
Overview of a Mobile Data Network T
Page 439 and 440:
Wireless Capacity - Where Does It L
Page 441 and 442:
Network Improvement Timeline Step A
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Short-Term Network Improvements - H
Page 445 and 446:
Short-term Network Improvements - W
Page 447 and 448:
Wireless Backhaul Capacity Expected
Page 449 and 450:
Mobile Internet Implications for Wi
Page 451 and 452:
Wi-Fi Moves from Carrier Foe to Fri
Page 453 and 454:
Wi-Fi Significantly Cheaper for Car
Page 455 and 456:
Wi-Fi Network Coverage in Home and
Page 457 and 458:
~7,000 AT&T Wi-Fi Access Points at
Page 459 and 460:
Wi-Fi Case Study #2 - Boosting Valu
Page 461 and 462:
Bottom Line = Wi-Fi Offload Will Be
Page 463 and 464:
HSPA + Backhaul Upgrades Should Red
Page 465 and 466:
Long-term Network Improvements - Ne
Page 467 and 468:
Good News = Proprietary Network Opt
Page 469 and 470:
Long-term Network Improvements - Up
Page 471 and 472:
HSPA / LTE Buildout Roadmap - Succe
Page 473 and 474:
LTE = 24x Theoretical Bandwidth of
Page 475 and 476:
39 Operators in 19 Countries Alread
Page 477 and 478:
LTE Introduction Cost Should Be Low
Page 479 and 480:
New Lower Spectrum Allocations, Suc
Page 481 and 482:
Spectral Efficiency ((Bit/S)/Hz), p
Page 483 and 484:
What effect will long-term network
Page 485 and 486:
Raw Network Capacity Improvement Ca
Page 487 and 488:
Underlying Technology Improvements
Page 489 and 490:
Case Study - 2010E Capex Analysis f
Page 491 and 492:
AT&T Plans to Increase Capacity in
Page 493 and 494:
Network Sharing Is Becoming Increas
Page 495 and 496:
In the USA and W. Europe, Carrier V
Page 497 and 498:
Premium Voice + SMS Revenue Share L
Page 499 and 500:
Rapid Consumer / Business Adoption
Page 501 and 502:
VoIP International Long Distance (I
Page 503 and 504:
Mobile Texting Revenue Growth Slowi
Page 505 and 506:
Global Mobile Voice TTM Revenue of
Page 507 and 508:
Mobile Data Pricing Models in Flux
Page 509 and 510:
Flat-Rate Pricing = Necessary for U
Page 511 and 512:
Flat-Rate Wireless Data Plans - Pro
Page 513 and 514:
Flat-Rate Pricing May Also Encourag
Page 515 and 516:
Wireline Broadband Tiered Pricing C
Page 517 and 518:
KDDI Tiered Flat-Rate Pricing Cater
Page 519 and 520:
Bell Canada Combo Plans Bring Tiere
Page 521 and 522:
Base Case USA / W. Europe Carrier O
Page 523 and 524:
Key Scenario Drivers for US Wireles
Page 525 and 526:
USA Wireless Revenue Base Case Scen
Page 527 and 528:
Total ARPU Expected to Decline Slig
Page 529 and 530:
Non-Text Revenue = Key to Data Reve
Page 531 and 532:
W. Europe* Wireless Service Revenue
Page 533 and 534:
Implied W. Europe Wireless Carrier
Page 535 and 536:
Scale, Access to Spectrum and Capit
Page 537 and 538:
…10 Attributes of Winning Wireles
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Scale = Key Competitive Advantage f
Page 541 and 542:
USA Spectrum Holdings - Larger Carr
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Exclusive Devices (such as iPhone)
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But Carrying the iPhone Is Mixed Bl
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Competitive Share Gain Opportunitie
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Scenario: AT&T Loses iPhone Exclusi
Page 551 and 552:
Opportunities for Network Equipment
Page 553 and 554:
Total Wireless Equipment Revenue Ex
Page 555 and 556:
Network Services Is Now ~$80B Addre
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Mobile / 3G Subscriber Trends by Co
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…Mobile / 3G Subscriber Trends by
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…Mobile / 3G Subscriber Trends by
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Key Theme #7 563
Page 565 and 566:
Key Theme #7 - Compelling Opportuni
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Emerging Markets = Significant Long
Page 569 and 570:
Emerging Markets = Significant Long
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At Inflection Point, Long-Term EM O
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Opportunities Could Be Significant
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Over Time, Impact of Mobile Interne
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…Caused in Part by Sub-20% Fixed-
Page 579 and 580:
3G / Wireless = ‘Only Choice’ f
Page 581 and 582:
Vibrant Mobile Value-Added Services
Page 583 and 584:
Emerging Asia VAS Revenue Share Alr
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Emerging Market Carriers Adapted to
Page 587 and 588:
Bharti-Airtel = Cost Savings from O
Page 589 and 590:
Compressing Wireless Data Could Red
Page 591 and 592:
Emerging Markets - Some Near-Term 3
Page 593 and 594:
Near-Term 3G Adoption Barriers = Lo
Page 595 and 596:
Low Post-Paid Ratio + Low GDP per C
Page 597 and 598:
High Monthly Data Plan Costs = Near
Page 599 and 600:
Emerging Markets Regional Analysis
Page 601 and 602:
Regional Analysis / Forecast - Chin
Page 603 and 604:
Chinese Consumers Are Ready for 3G
Page 605 and 606:
3G Creates New Battle Ground for Ch
Page 607 and 608:
iPhone Costs Too High for Majority
Page 609 and 610:
Key Scenario Drivers for China Wire
Page 611 and 612:
China Wireless Revenue Base Case Sc
Page 613 and 614:
Data ARPU Growth Expected to Partia
Page 615 and 616:
India - Near-term Barriers to 3G Ad
Page 617 and 618:
India - Upcoming Auction to Bring 3
Page 619 and 620:
Base Case: Winning 3G Spectrum Does
Page 621 and 622:
Capex Required for 3G Network Could
Page 623 and 624:
Other Emerging Asia - Low Fixed-Lin
Page 625 and 626:
Philippines - Mobile Overtook Fixed
Page 627 and 628:
Indonesia - Mobile Could Accelerate
Page 629 and 630:
WiMAX in Emerging Asia - Still in N
Page 631 and 632:
EEMEA - Carriers Leverage Cost-Effe
Page 633 and 634:
Africa - Mobile Broadband Prolifera
Page 635 and 636:
Middle East + Africa Have the Lowes
Page 637 and 638:
Key Scenario Drivers for Russia Wir
Page 639 and 640:
Key Theme #8 639
Page 641 and 642:
Key Theme #8 - Regulators Can Help
Page 643 and 644:
Net Neutrality - Key to Decentraliz
Page 645 and 646:
In the US, FCC Has Issued a “Noti
Page 647 and 648:
Both Sides of Net Neutrality Debate
Page 649 and 650:
What Could Regulators Do to Acceler
Page 651 and 652:
Lower Mobile Data Roaming Fees = En
Page 653 and 654:
“Not in My Back Yard” (NIMBY) P
Page 655 and 656:
3G Licenses Reshape China’s Compe
Page 657 and 658:
USA Recent Developments - USA F
Page 659 and 660:
Recent Developments - China / India
Page 661 and 662:
Disclosure Section (cont.) Morgan S
Page 663 and 664:
Disclosure Section (cont.) Within t
Page 665 and 666:
Disclosure Section (cont.) Analyst
Page 667 and 668:
Disclosure Section (cont.) Stock Pr
Page 669 and 670:
Disclosure Section (cont.) Importan
Page 671:
Disclosure Section (cont.) MTN does
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