The Mobile Internet Report Key Themes*

10 Attributes of Winning Wireless Carriers in Mobile Internet Era…
1) Spectrum - Wireless spectrum is a scarce commodity, particularly in most attractive parts of frequency
bands. We believe that those carriers that have ample spectrum are best positioned to succeed long-term.
4G networks are likely to need significant spectrum assets to maximize capacity and speeds. It also
matters: 1) where spectrum is; 2) whether spectrum is compatible with global standards; 3) whether
frequency penetrates buildings. WiMAX is being built out at 2.5/3.5Ghz with attractive spectrum allocations,
but questions about propagation remain.
2) Capital - Wireless is a capital intensive business dominated by large well financed operators. New entrants
are challenged, particularly in these capital constrained times. Several cable operators in USA and Canada
have recently acquired spectrum but have held back from building out networks in part because of the
associated near-term dilution to earnings.
3) Scale - Incumbent operators have significant advantages related to scale. Brand, distribution, capital and
operating productivity are all enhanced with scale. Typically the largest operators have the highest margins.
This should give those operators advantages in the move to 4G. Network mergers, such as TMO / ORA / 3
in the UK, will become increasingly important to marginal players if they are to compete in the long term on
mobile Internet access.
4) Technology - While LTE has emerged as the global standard next generation wireless network (with 30+
carriers already committed to rolling it out over the next five years), WiMAX is seeing significant rollouts
particularly in emerging markets, but also in the US with Clearwire. In near-term, many GSM operators will
continue to introduce higher-speed versions of HSPA offering up to 42 Megabits per second. Development
of a robust 4G ecosystem with attractive handsets and low infrastructure prices is very important to the long
term business model.
5) Market Structure - One of the key determinants of success is the number of players in a market and relative
market shares. Concentrated markets like Canada have relatively high margin structures. Within a given
market, margins typically track relative market shares quite closely.
Source: Simon Flannery, Nick Delfas, Morgan Stanley Research. 536