The Mobile Internet Report Key Themes*

Services Drivers for the Carriers Are Evident –
but Dilutive to Vendor Margins Early Days
1) Technology migration (2G to 3G to 4G, all IP, etc.)
2) Competence needs (network management skills, etc.)
3) Consumer focus
4) Financial pressures (FCF, dividend, etc.)
Cost savings
100
Typical Opex Savings for Carriers
10.0%
Typical Margin Profile for Vendors
80
7.5%
Operating Expenditures
60
40
20
Opex Savings = ~30% over 5 Years
Profit Margin
5.0%
2.5%
0.0%
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
0
Carrier
OPEX
Cost
Reduction
Year 1
Year 2 Year 3 Year 4 Year 5 Final
Opex
Structure
-2.5%
-5.0%
554
Source: Patrick Standaert, Morgan Stanley Research estimates.