700MHz awards and approaches in the region

700MHz awards and approaches in the region 2nd Annual Latin America Spectrum Management Conference Richard Marsden Senior Vice President, NERA Economic Consulting

698 704 710 716 722 728 734 740 746 756 757 763 776 777 787 793 806 CAN USA APT 700MHz - a beautiful band plan Efficient Global 2x45 MHz configuration with only 10 MHz duplex gap World s largest low frequency mobile band with 9 paired lots New European 700 MHz band is compatible 700 710 720 730 740 750 760 770 780 790 800 APT 700MHz Uplink (45 MHz) Guard Band Downlink (45 MHz) Lower Duplexer Upper Duplexer CEPT 700MHz Uplink (30MHz) Guard band Downlink (30 MHz) Compare to the ugly 700 MHz band plan in USA and Canada Lower Band Upper Band A B C D E A B C C D Public safety C D Public safety A B C D E A B C C1 C2 C1 C2 30 MHz duplex gap between uplink & downlink 31 MHz duplex gap between uplink & downlink Paired spectrum Unpaired spectrum Other paired spectrum (primarily reserved for public safety) 1

East Asia / Pacific region has led the way FDD band already in use in pioneer countries, including Australia, Japan, New Zealand & Taiwan Many other leading East Asian economies will follow: South Korea - Auction scheduled for 2015 Singapore Auction scheduled for 2016 India Auctioned proposed for 2016 but may be pushed back Brunei, Indonesia and Malaysia also committed to APT band plan in June 2013 Australia (2013) Allocated by auction. Upper 2x15MHz went unsold. Telstra and Optus have both launched LTE networks Japan (2012) - 2x30MHz split by administrative allocation between three operators Taiwan (2013) Competitive auction split spectrum between 3 of the 5 incumbent operators Papua New Guinea (2013) Digicel has launched LTE using 700MHz New Zealand (2013) All 2x45 MHz sold in auction shared amongst the three incumbent operators Thailand, Vietnam expected to follow However, China plans to use TDD configuration of APT plan = APT 700MHz commercially launched = APT 700MHz allocated = Committed = US 700MHz band plan 2

Current state of 700MHz in Latin America & Caribbean Almost all countries in Latin America have either allocated or committed to allocating APT 700MHz spectrum Mexico - Single Wholesale Network planned Brazil (2014) Controversy over costs imposed on bidders for reallocation of spectrum from broadcasters. Oi did not participate, with the result that a 2x10 MHz national lot went unsold In Latin America & Caribbean, LTE has been licensed in 6 countries: Argentina, Brazil, Chile, Ecuador, Mexico, Panama Bahamas, Jamaica Amongst these, commercial network launches in at least four countries to date: Panama, Ecuador, Jamaica and Bahamas Amongst the others, Colombia and Peru both planning auctions Panama (2013/2014) Administrative process with licenses issued to 2 operators Ecuador (2012/2015) State owned CNC received the spectrum more than 2 years ahead of private MNOs Chile (2014) First competitive (beauty contest) process for 700MHz with low but asymmetric prices = APT 700MHz commercially launched Argentina (2015) 2x35 sold to incumbents and 2x10 new entrant set aside successfully sold = APT 700MHz committed = APT 700MHz allocated = US 700MHz band plan 3

Diversity in approaches across the region To date, Latin America countries have adopted very different approaches to challenge of allocating 700MHz spectrum Example: Mexico 700 MHz wholesaler Brazil auction Clear market leader Telcel with c.70% market share Entire 2x45MHz band to be allocated to new national wholesaler Tender to establish wholesaler not yet scheduled Government hopes that new wholesaler will make it easier for smaller networks and new operators to compete with Telcel (but downside is use of spectrum may be delayed) Four major MNOs with substantial market shares Opted for auction process to allocate 700MHz spectrum Three largest operators each secured 2x10 MHz, raising 5.85 billion real However, Oi did not participate, resulting in 2x10 MHz national lot going unsold 4

Beach front property selling cheaply? Prices outside Canada and USA not very high *Auction prices converted to USD using current market exchange rates and adjusted for inflation Australia and Brazil sold at reserve price with spectrum going unsold Does bigger, better band mean lower prices owing to reduced scarcity? Has 700 MHz release sated demand for low frequency spectrum? Is this temporary or are operators shifting focus to mid-band and other frequencies (focus on capacity rather than coverage)? 5

Other issues for discussion How quickly will the 700MHz ecosystem emerge? Handset availability is currently relatively low 76 smartphones are compatible with LTE 700 (compared to ~900 smartphones for LTE1800) Is the lower duplexer more valuable than upper duplexer, owing to alignment with Europe? Will this affect handset availability? Should governments prioritize: access to large bandwidths e.g. 2x20 MHz to maximize broadband speed?; or ensuring 3 or more operators have access to the spectrum? How should governments price the 700 MHz band? Should some 700 MHz spectrum be reserved for PPDR? 6