POSDATA: the mobile

WiMAX challenger

23 November 2007

Suran Seong

www.ovum.com
Table of Contents................................................................................................................1
POSDATA: the mobile WiMAX challenger..........................................................................2
Ovum view........................................................................................................................2
Company overview...........................................................................................................3
SWOT analysis.................................................................................................................3
Product lines.....................................................................................................................4
Performance so far...........................................................................................................8
Business strategy .............................................................................................................9

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POSDATA: the mobile WiMAX

challenger
Ovum view
POSDATA is one of a few mobile WiMAX vendors that have commercially available
mobile WiMAX products currently. It is also among a handful of vendors that
provide end-to-end mobile WIMAX solutions, from chipsets and devices to system
products. The government-driven early development of WiBro technology in Korea
has enticed the IT company to invest in the emerging technology by taking it as
one of its future growth engines. However, the uptake of WiBro services has been
modest in the highly competitive Korean telecoms market and operators have been
cautious about executing their planned investments, which has given little
opportunity to POSDATA in its domestic market. To overcome this sluggish
progress in its domestic market, POSDATA has been aggressively developing
overseas business opportunities.

POSDATA is new to telecoms equipment vendor society. It is a tough job for a

newcomer to compete with global players, which have built up sound relationships
with operators for years in the global market. To seize its time-to-market
advantage of current Wave 1 products, POSDATA has to accelerate the
development of Wave 2 products. Having higher throughput and wider coverage,
mobile WiMAX Wave 2 is actually what potential mobile WiMAX service providers
are keen to deploy. As Sprint is expected to start to deploying the first mobile
WiMAX Wave 2 products in late 2007, the major mobile WiMAX deployments
worldwide will be based on Wave 2 products and some competitors are claiming
that they already offer Wave 2 ready products. POSDATA is expected to introduce
commercial Wave 2 products in early 2008. Enhancing its marketing activities and
raising brand recognition is one thing the vendor has to focus on. Developing broad
partnerships with global players, which have strong brand affinity, will be one
approach to consider in addition to its current scatter-gun approach to potential
spectrum holders.

We believe the development of mobile WiMAX based enterprise solutions will give
POSDATA a competitive edge over its competitors. Having higher data capacity and
price competitiveness, mobile WiMAX fits the demands of enterprise clients well. In
many countries, the enterprise market has not been fully developed, and
POSDATA’s long experience in systems integration and network engineering will
bring substantial advantages in the development of such enterprise solutions.

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Company overview
Systems integrator subsidiary of steel giant POSCO
POSDATA is an IT company based in Korea, with global offices in China, India and
the US. Established in 1989 as a subsidiary of POSCO, the world-class steel
producer, POSDATA provides products and services to the telecommunications and
IT services sector. In 2006, POSDATA reported revenues of W338 billion ($375
million), most of which came from its existing systems integration (SI) and
systems management (SM) businesses.

Mobile WiMAX in its corporate strategy

SI is a tough business with low margins. As a way to diversify its businesses,
POSDATA considered developing mobile WiMAX technology, which it believes has
substantial global market potential and synergy with its existing businesses.
POSDATA had tested the water before it committed to the development of mobile
WiMAX through co-operation with other partners, and has developed mobile
WiMAX core technologies in-house since 2004.

Currently, a quarter of its 1,200 employees are dedicated to its WiMAX business.
According to local media, its accumulated investment in WiMAX reached W100
billion ($111 million) in 2007 and we expect aggressive investment will continue
with strong financial backing from its parent company, POSCO. POSDATA aims to
develop its new business portfolio, in which wireless solutions such as WiMAX
account for half of its total revenues by 2010, in addition to its existing outsourcing
and IT service focused portfolio.

SWOT analysis
Strengths
Commercially available products. Time-to market advantage is one of the
obvious strengths of POSDATA. Having completed the development of a prototype
2.3GHz base station system in 2005, POSDATA has expanded its product portfolio
by embracing other mobile WiMAX profiles and enhancing its products’ features
and performance.

A full end-to-end WiMAX solution provider. Having developed WiMAX-enabled

devices, POSDATA has equipped itself with its own infrastructure system products,
chipsets and devices.

Stable financial status. POSDATA is relatively free from financial burdens, as it

has a stable cash cow business and full support from its parent company.

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Weaknesses
Lack of brand recognition. New to the vendor society, POSDATA has to convince
its potential clients of the credibility of its products and company.

Lack of established business relationships with operators. Competing with

global players that have already established long-term relationships with operators
is challenging. This limits the operator’s manoeuvres.

Lack of presence abroad. In order to roll out networks in overseas markets it

needs local staff and channels, which it has to develop.

Opportunities
Mobile WiMAX as a member of IMT-2000 technologies. In October 2007, at
the ITU Radiocommunication Assembly, mobile WiMAX officially became an IMT-
2000 3G technology, which will bring more credibility and opportunities for the
technology. In particular, it will open up opportunities for 2.5GHz band products.

Combine mobile WiMAX capability with its IT expertise. Having developed

SI/SM businesses, POSDATA has the potential to provide innovative IT solutions,
which might differentiate it from other vendors.

Threats
Sluggish domestic market development. The domestic WiMAX equipment
market remains subject to operators’ deployment schedules, which is limiting
POSDATA in terms of capturing domestic opportunities.

Increasing competitive pressures. While competitors are quickly building up

their product lines, POSDATA has to strive to maintain its time-to-market
advantage.

Fragmented mobile WiMAX spectrum around the globe. Several mobile

WiMAX profiles of different spectrum and bandwidth are making it necessary for
POSDATA to re-engineer its existing products to enter different markets with
different spectrum allocations.

Product lines
System product – FLYVO
Under its brand name FLYVO, POSDATA provides Radio Access Station (RAS) (a
mobile WiMAX base station), Access Service Network Gateway (a RAS controller)
and Element Management System (EMS). As one of the early mobile WiMAX
pioneers, POSDATA claims that its FLYVO mobile WiMAX system is fully compliant
with the 802.16e-2005 standard and is ready for commercial deployment. While
the certification process for mobile WiMAX is expected to be delayed until 2008,
POSDATA has participated in numerous interoperability tests with other vendors,

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including all four WiMAX Forum Plugfests. It has claimed that higher throughput
and low-latency handover are FLYVO’s competitive edges, along with its reliable
performance demonstrated in the Plugfests. Also, having been developing in-house
mobile WiMAX core technology, POSDATA claims to hold around 100 intellectual
properties in mobile WiMAX.

Table 1 summarises the POSDATA’s current WiMAX base station products.

Table 1 FLYVO Base Stations

FLYVO RAS 3000 FLYVO RAS 6000

Type Carrier grade macro coverage Universal, macro/micro,

Indoor/outdoor
Wall/pole mountable

Frequency 2.3GHz, 2.5GHz, (3.5GHz) 2.3GHz, 2.5GHz, (3.5GHz)

Capacity One carrier per sector; three Three carriers per sector; three sectors per
sectors per RAS RAS

Bandwidth (7MHz), 8.75MHz, 10MHz (7MHz),8.75MHz, 10MHz

Note: the products for 3.5GHz frequency and 7MHz bandwidth are under
development.

Source: POSDATA

FLYVO RAS 6000 supports a flexible structure by providing a separated main

subsystem (digital part) and remote subsystem (Rf part). Key features include
2Tx/2Rx MIMO support, QoS support and IPv4/IPv6 dual support. FLYVO base
stations are controlled by AGW 64000, which supports multiple routing protocol
such as ISI, OSPF and BGPv4/v4+.

In addition, POSDATA has invested in the development of mobile WiMAX chipsets.

Devices
POSDATA has seen an opportunity in new user experiences through multimedia
mobile WiMAX devices and has heavily invested in developing mobile WiMAX
specialised handheld devices. To enhance its device and application strategy,
POSDATA acquired a 51% equity share of POSBRO, a mobile WiMAX device
vendor, for W3.1 billion ($3.4 million) in January 2007. POSBRO is currently
focusing on the development of multimedia mobile WiMAX handheld devices.

As of today, two mobile WiMAX compatible devices have been unveiled by

POSDATA, as shown in Figure 1.

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Figure 1 POSDATA mobile WiMAX devices

U100 G100

Source: POSDATA

Its first mobile WiMAX device, U100, was introduced in early 2007. With a 45
degree rotation hinge and status indication LED, this small mobile WiMAX USB
modem is focused on improving user convenience. In September 2007, POSDATA
made an agreement with KT to co-operate in marketing its mobile WiMAX devices.
U100 will be provided through KT from late 2007.

In September 2007, at WiMAX World USA 2007, POSDATA showcased its mobile
WiMAX enabled game device, the G100, which was developed by POSBRO.
Incorporating a four-inch WVGA TFT-LCD touch-screen display and a sliding style
game pad, the device enables users to enjoy online games and access the Internet
through the high-capacity mobile WiMAX network. With a 3D graphics accelerator
and 4GB NAND flash storage, the G100 is a dedicated gaming device. In terms of
network capability, in addition to mobile WiMAX, the device supports WiFi
(802.11g) and Bluetooth 2.0. POSDATA announced that it has secured more than
ten game titles optimised for the G100 in co-operation with domestic game
developers. The G100 is expected to be commercially available around the end of
2007. POSDATA’s future device portfolio is illustrated in Figure 2.

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Figure 2 POSDATA mobile WiMAX devices portfolio

Source: POSDATA

Future development plan

Figure 3 shows POSDATA’s product roadmap. In a couple of years, POSDATA will
focus on the provision of advanced product lines that enhance the system
capability and form factors. It expects to develop next-generation mobile WiMAX
products that are based on the 802.16m standard or other forms of 802.16e
evolution.

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Figure 3 POSDATA mobile WiMAX products roadmap

Source: POSDATA

Performance so far
While strong domestic competitor Samsung has been the sole supplier for two
domestic mobile WiMAX operators, KT and SKT, sluggish uptake of the service in
the domestic market has limited POSDATA’s performance in the Korean market to
date. However, POSDATA has worked closely with KT, and was one of the vendors
that passed KT’s initial benchmarking test in 2005. We believe that POSDATA is
one of the vendors that will have a good opportunity to be selected by KT when the
operator decides to further expand its coverage.

Given the limited domestic market opportunity, POSDATA has actively sought
market opportunities in overseas markets. POSDATA has conducted dozens of
trials in North America and Asia since 2005. By demonstrating the stability of its
products and actual deployment capabilities, POSDATA has signed a nationwide
commercial deployment contract with one operator in South East Asia and is
expected to release more commercial contract announcements before the end of
2007. We believe that through the announcements of commercial contracts, the
vendor will gain toeholds to extend its presence in overseas markets.

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Business strategy
R&D strategy
POSDATA has built up partnerships to help its own R&D. For example, in July 2005
it made an agreement with ArrayComm to incorporate ArrayComm’s smart
antenna solution into POSDATA base stations.

In addition, POSDATA is actively contributing to the development of WiMAX Forum

initiatives and IEEE 802.16 standards:
• being one of the five most active technical comment contributors to the IEEE
802.16 Cor2 project, with a focus on the development of conformance and
interoperability specifications
• chairing three technical documentation subgroups of the current WiMAX Forum
Technical Working Group, which aims to develop technical product specification
and certification test suites
• leading the WiMAX Real-world Traffic Benchmark team of the Application
Business Task Group, which deals with application class definition, performance
guides, traffic model design and automation tool development.

Marketing strategy
Practically, POSDATA’s primary targets are operators in countries with
underdeveloped wired infrastructure or developed countries with a strong
government drive for mobile society. Rather than competing with global vendors
directly, it has targeted new start-up operators that also seek new opportunities
through breakthrough technology. Currently, due to the geographical proximity
and active spectrum allocation in Asian countries, POSDATA has focused on the
Asian market. We expect it will expand its business to America and Europe
gradually. We believe mobile WiMAX has a bigger window of opportunity in
emerging markets, as indicated by the struggling WiBro service development in the
Korean market.

In terms of device business, distribution via operators is the primary business

model that POSDATA is currently focusing on. However, POSDATA may consider
developing an open distribution channel when the market matures.

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