001130

SKIP
INTRO
SMSC Business device
Steven van Zanen

Product Manager
High Performance SMSC
AUSTRALIA BRASIL CHINA CZECH REPUBLIC IRELAND THE NETHERLANDS SINGAPORE USA
CMG Telecommunications, 2000
www.cmgtelecom.com
DISCLAIMER
With respect to the information contained herein, other than information or

opinions contained in presentations made by employees of Morgan Stanley &
Co. Limited or any of its affiliates (together, MSDW), no representation is
made that such information is accurate or complete. No review, evaluation,
investigation or editing of such information or any opinions contained herein
has been undertaken by MSDW. MSDW takes no responsibility for any of such
information or opinions. Any views or opinions expressed herein other than
those expressed by employees of MSDW are solely those of the speakers and do
not necessarily reflect the views or opinions of MSDW.
www.cmgtelecom.com
CMG Credentials
Anglo-Dutch Company Operating since 1964
Over 11,000 employees World Wide
Consultancy and Telecom Products
Delivers a suite of Best of Breed products
SMS, WAP, Mobile Email, CBS & Billing
Caters for 7 out of 10 Largest GSM Operators

Leading Global Vendor
e.g 40% Share in South-America in 6 months
www.cmgtelecom.com
Highest Performing SMSC in the world
10 SM/s in 1993
40 SM/s in 1995
80 SM/s in 1996
125 SM/s in 1997
160 SM/s in Q3 1998
320 SM/s in Q2 1999
500 SM/s in Q4 1999
1000 SM/s in Q4 2000
2500+ SM/s in Q1 2001
2500
Network
Capacity
2000
1500
1000
500
0
1993 1995 1996 1997 1998 1999 2000
Staying ahead of Market demand
www.cmgtelecom.com
SMSC Market Share for Top 10 GSM Operators

Source: GSM Association June 2000
70000000
60000000
Subscribers
50000000
40000000
30000000
20000000
10000000
0
CMG
Nokia
SEMA
Logica
GSM is in more countries than McDonalds: 137 countries
It took the entire U.S. cellular industry more than 4 years to reach
as many customers as GSM has added in past 12 months
www.cmgtelecom.com
Global Subscriber base - GSM Leading the Pack

GSM
66%
336 m
50.2 m
67.9 m
TDMA
10%
47.7 m
PDC
10%
CDMA
14%
Most SMS traffic today is generated in GSM
June 2000
Source EMC
www.cmgtelecom.com
SMSC matures into a Business Critical device

1989: SMSC accepted as part of GSM specification
1999: First High Performance SMSC at Mannesmann
1999: 20 Million messages in Europe per day (Source: IDC)
2000: Doubling SMS traffic every 6 months (Source: GSM association.)
2000: ? 250 million revenue per Month globally
(assuming ? 0.10 per billable message)
2001: 82 Million messages in Europe per day alone

Where are Mobile Data revenues coming from?
www.cmgtelecom.com
Data
Traffic
growing
exponentially
...and
from
will double
3 to 15 is
to
Billion
40 Billion
messages
messages
in 2000
in...
...
2001 ...
Mobile
GSM
Lifestreams
Association
2000
Msg/Sec
5000
4500
4000
PreEnhanced
Messaging
WAP
GPRS
UMTS
3500
400% growth
in SMS in the
Netherlands
3000
2500
2000
1500
1000
500
0
Two-way SMS over TDMA hits the US

unlimited
free messaging
until
In the
UK...a ten-fold
growth within
theFebruary
last 12 months..
02
20
01
20
00
20
99
19
98
19
97
19
96
19
95
19
94
19
Algemeen Dagblad
May 4 2000
Total Telecom 19 October 2000
The Mobile Data Association December 1999
www.cmgtelecom.com
Driving the initial SMS success

Prepaid subscribers
Young people
Services over SMS
www.cmgtelecom.com
Common SMS Services
Person to person messaging

SMS for Prepaid
Corporate
Stock
Picture Messaging
Mobile E-mail
SMS chat
Home
Tamagotchi
Mass mailings
SMSC
WAP
Machine-to-machine
Entertainment
WAP over SMS
www.cmgtelecom.com
SMS services: the PUSH factor
Direction services
Joke
Insult
Tamagotochi
Dice
Quiz
Games (Casio, Black jack etc)
Ringtones
Images
Only SMS allows instant reaction to PUSH
www.cmgtelecom.com
Markets - SMS usage by age group

0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Over 55
Between 45 and 55
Between 25 and 35
Under 25
Source: Ovum 1999
Between 35 and 45
www.cmgtelecom.com
Convergence in the Mobile industry

Operators go way beyond traditional role
- Telefonica (TV & Entertainment)
- NTT DoComo (Content)
Innovative (SMS) services are crucial: Role for ASPs
Entertainment in relation to Television

- VJ tickertape, Big Brother alarming,
- Televoting, Teleshopping, Quiz, notice boards
Advertising
- Welcome notes
- Subscriptions with free (Sponsored) SMS
www.cmgtelecom.com
Application Service Providers

480 retail ASPs today
1999: $1 billion revenue
1999: North America : 65% of all ASP revenue
2004: Europe and Asia/Pacific : 55% revenue (Source: Gartner)
2004: $ 25.3 billion revenue
More sophisticated, business-user-focused applications
Greater penetration of mobile/cellular users in Europe/Asia
60% of ASPs will fail by the end of 2001 - Gartner
www.cmgtelecom.com
Global Market Prognosis SMS users

700.000.000
Total Numbers of Users
600.000.000
500.000.000
400.000.000
300.000.000
200.000.000
100.000.000
1999
2000
2001
2002
Years
2003
2004
2005
Source: Ovum and ARC
www.cmgtelecom.com
SMS applications: where is the money today?

Chat
around 50-150k SMS per day
TV based applications
at least 1 million SMS per 2 million viewers
Entertainment services
hard to estimate, but revenues expected to be
the second largest mobile revenue source

from 2003.
www.cmgtelecom.com
Interactive SMS - triggering reaction

l Individual
to individual
Mobile originated
l Machine
to machine
Telemetry
l Individuals
to Groups
Mobile originated/Chat
l Individuals
to Engine
Mobile originated Voting and Gaming
www.cmgtelecom.com
Degrees of interaction
# of possible simultaneous interactions
SMS
Pagers (EU)
Pagers (US)
Web/Email
Speed of interaction
WAP
IVR
Telephone
Panel
Fax
Letter
Penetration levels
Fast response triggers more SMS Traffic
www.cmgtelecom.com
Why interactive SMS TV?

Mass media can yield a HUGE number of SMS messages
- TV Shows will typically have 200.000 - 20.000.000 viewers
- Low threshold to participate
- On average, more than 45% of the viewers will have a GSM
- 20% to vote - between 4 - 8 SMS per person
Winners can be drawn online
- High stickiness factor

- Extremely Interesting for advertisers/Sponsors
Promotion for use of SMS

Open new markets for SMS (non youth)
- Straight into the living room
- Incentives outside the age group
www.cmgtelecom.com
SMS TV - Planning for success

SMSC Performance
Can the Operators guarantee a minimum degree of interaction?
SMS Prepaid Billing Systems

Can the Billing Systems handle real time credit checks?
User Profile
Can the data be collected, distributed and interpreted?
Network Capacity
Is there enough signalling capacity available for SMS?
Game & program logistics

Is the right Advertising, Award and explanation in place
Critical mass
Are enough operators involved?
www.cmgtelecom.com
The four Basics for Operator SMS success

SMSC must be able to handle exceptional traffic peaks
i.e Highly available, Reliable, Scalable
Prepaid Billing system must prevent fraud
Mine and combine invaluable data
Manage Network Capacity
100
90
80
70
60
50
40
30
20
10
0
monday
tuesday
wednesday
thursday
www.cmgtelecom.com
Managing and growing the revenue stream

SMSC as a Business critical device
Stimulate Cross departmental stakeholdership
Identify and Empower all Players
Strive to react to the market instantly
Dare to Market!
Congratulations
You won a trip
to the IoW for 2.
Please dial 334
and give this
number: 765A
www.cmgtelecom.com
G-Force explained
l 1G
covers Analogue (NMT Networks, etc.)
l 2G
covers Digital (GSM, TDMA, CDMA, PDC etc)
l 2.5G
covers all extensions of GSM (HSCSD, GPRS, EDGE)

Standardized by European Telecommunication Standards Institute (ETSI)
l 3G
covers
- UMTS (Migrated from GSM/TDMA/PDC) and

- CDMA2000 (Migrated from CDMA-One)
Standardized by 3rd Generation Partnership Project (3GPP)
www.cmgtelecom.com
Multi-media is now
l Enhanced
SMS Messaging (concatenated messages)
- Pictures
- Animation
- Formatted text
- Sound
l Handsets
l GPRS
l Youth
available in 2001
will help make Multimedia successful

potential
www.cmgtelecom.com
3GPP Standardised Enhanced SMS

Formatted Text
- Three font sizes (normal, large, small),
- Three Alignments (left, centre & right),
- Styles (normal, bold, underlined or strikethrough).
Pictures sizes
- Small (16*16 pixels), Large (32*32 pixels) or variable size
(Variable size pictures are multiple pictures connected together max 6 large).
- Black and white image supported.
Animations
- Predefined in the handset
- User defined animations consisting of 4 pictures which are 8*8 pixels
and the large 16*16 pixels
Embedded Sound
- Predefined in the handset up to 10 User defined melodies (iMelody format)
www.cmgtelecom.com
MultiMedia SMS: Simple, available, reliable

l 2001
: Boosting the Messaging hype even further
- Prefab Immages
- Prefab Ringtones
l In
line with strategy Handset Vendors

- Youth
availability SMS
l Will pave the way for 3G messaging
l High
7 billion greeting cards sent in the

USA value of
over $5 billion dollars
www.cmgtelecom.com
MultiMedia Messaging Service
CMG Implementation View: From SMS to MMS
www.cmgtelecom.com
Eurovision Song contest SMS voting in 2001?
500 Million Global subscribers

800 million Europeans
200 million European Mobile subscribers (mainly GSM)
128 million Prepaid subscribers in December 99
236 Million EuroVision viewers in May 2000
3 million viewers/listeners went through MSN
35% of Europeans will have Internet connection by 2002
The new frontier in Mobile Entertainment
www.cmgtelecom.com
Email: Steven.van.Zanen@cmg.nl
MultiMedia Messaging
CMG Short Message Service Centre:

up to 2500 messages per second from a single system
www.cmgtelecom.com
DISCLAIMER
With respect to the information contained herein, other than information or

opinions contained in presentations made by employees of Morgan Stanley
& Co. Limited or any of its affiliates (together, MSDW), no representation
is made that such information is accurate or complete. No review,
evaluation, investigation or editing of such information or any opinions
contained herein has been undertaken by MSDW. MSDW takes no
responsibility for any of such information or opinions. Any views or opinions
expressed herein other than those expressed by employees of MSDW are
solely those of the speakers and do not necessarily reflect the views or
opinions of MSDW.
2000 Nets AG. All rights reserved. Proprietary & Confidential. Do not distribute.
page 1
Company profile NetsAG

Nets develops and sells technology for developing
, testing, and
producing communication applications.
NetsCommunication ChainManagement (CCM) -Platform
supports quick implementation of diffe
rent communicationapplications
in large numbers.
Communication applications based on theCCM-Platform allow for
individualcommunication at thereach of mass media. They (will):
Run on all prevalent channels, devices, standards and protocols(free access);
Support all processes and automate flow (automatic goal attainment);
Adress users in real time, individually, adaptively and location dependent
(automatic personalization
).
The Dialog Solutions product and services offering of Nets is modular

and includes a licence of the CCM-Plattformplus three lines of services:
Analytical services;
Vertical applications;
(DIARY in Pharma and Healthcare, RAIDS in Media and Entertainment);
Production.
Nets products and services are available inEurope and theUSA.

Source: Nets
page 2
From application services

provision to technology provision
Nets range of products and services
Application
Services Provider
Technology
Provider
Production
Application Development
Analytical and Integration Services
Licencing and Maintenance
Source: Nets
page 3
Television game to
support brand relaunch
Goal of television show: Jede Sekunde Zhlt
Situation, Tension and Release
Situation:
Aktion Menschsuccessful
relaunch of Aktion Sorgenkind,
the leading charity lotteryin Germany;
Tension:
Name recognition still not quite at
historic levels;
Release:
Relaunch campaign supported by
new television show on leading
television station ZDF:
Jede Sekunde Zhlt.
Source: Nets
Tasks and challange
Task:
Design, test and
implement an interactive
game for the audience to
improve name recognition
in the target group of the
show;
Challenge:
Involve audience
individually, personalized
and in real time at reach
of television broadcast
page 4
Create real time dialogs

Game storyboard
Pull
Excite
Logo of
Aktion Mensch
formed by a
group of kids
Show master
explains task:
Guess number
of kids!
Source: Nets
Spectators
send their
guess by
SMS to short
number
Push
Spectators
receive
immediate
feedback by
SMS:
Too high/ too
low, please try
again!
You are right!
Win
Winners
drawn from
correct
answers
Names of
winners
displayed
on televison
page 5
New business through

convergent use of media
Roles and business relations
14all, 1way
121, 2way
Producer Show
(G.A.T.)
Station
(ZDF)
Players
(Audience)
Technology
(Nets and CMG)
Operators
(D1, D2, Viag)
Source: Nets
Sponsor Show
(Lottery)
Sponsor Game
(Motorola)
page 6
Individual communication
with reach of mass media
Summary of results
Parameter
Approx. Values
Size of audience
2.5 Million
Size of target segment*
0.8 Million
Nr. of different players

Nr. of messages received
Average Nr. of SMS per player
Total Nr. of SMS (sent/received)
Peak performance (inbound)
Average performance(inbound)
Enrollment for ReminderService
*Target segment: 14 to 49 yr. old consumers

Source: Nets
90.000
600.000
7
1.2 Million
1000 SMS/s
~ 400 SMS/s
35 %
Dialog
brings
traffic
High peak
capacity
necessary
Superior
follow up
page 7
Performance peaked at
1000 SMS/s
SMS rate inbound
NetsGateway
Gateway
Nets
LoadLoad
CMG
SMSC
Load
SMS-Center Load
Messages per Second
1200
0
20:44:53
20:52:05
20:59:17
21:06:29
21:13:41
21:20:53
Time (October 12, 2000)

Source: Nets
page 8
Multiple guesses per player

thanks to interactivity
Guess histogramm
14000
12000
Number of Players
10000
8000
6000
4000
2000
0
0
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Number of Tips
Source: Nets
page 9
Players talk to a machine

Learnings
Time to market:
Individual communicationat a mass market scale
its here today;
Role of established media:
Convergent use of established media bringsenormous traffic;
audience gluedto carrier medium;
Key traffic generator:
Push-Pull Dialogs bring traffic an order of magnitude above
Push-Style messaging-players talk to a machine;
Technical requirement:
High peak capacity keyto keep people talking;
Relationship to network operators:
Operator involvementvital;
Success:
Enrolement for further contact 15 x higher than through
traditional means;
Next steps:
Great perspective for Loyalty (Ad-$) and m-Commerce.
Source: Nets
page 10
Outlook on mobile application

landscape apparently dim ...
Situation
Applications so
far only moderately successfull:
Few applications
Pressure to
succeed
enormous:
UMTS-licences
auctioned at an
enormous
price;
no real
killers;
Applications too
Operators with
techie and yet

technically
flawed;
high investments in infrastructure;
Unfortunate
User expectations extreme

and fueled by
media hype.
pricing by
operators.
Source: Nets
page 11
Major developments
uncertain
Foreseeable and uncertain deve
lopments
Tension
Foreseeable
Plan
and
implement
Source: Nets
Uncertain
Customer base
Applications
Convenience
Acceptance
Content
Roll-out
Capacity
Revenues
Probe
and
learn
page 12
Implement, learn and manage

options
Solution: summary
User
acceptance
Provide best
information
Aktive
a
Be most
flexible
Be quickest
b
f
Many
e
h
Few
g
d
Appication
landscape
c
Portfolio
applications
Source: Nets
Passive
Know needs
best
page 13
Fill pipeline to create options

The Applications Factory
Development
Test
Rapidly
Production
Killer-applications
Industry-applications
Many
Niche-applications
Different
Recycle
Source: Nets
Flops
page 14
Market to industries with the

additional inch of expertise
Nets products and services: target customers
Vertical Segments
s
n
tio
a
ic
l
p
p
A
Telecommunications
Media and Entertainment
n
io
t
Pharma and Healthcare
ca
i
un
m
Financial Products and Services
m
o
C
r
fo
Logistics
t
e
k
ar
M
Automotive
l
a
t
n
izo
CRM and Dialog Marketing
r
o
H
Consumer Products
Source: Nets
page 15
Contacts
Nets USA, Inc.
Dr. Ingo Beinlich
Chairman and President
Nets AG
Dr. Thomas Kapsner
Dr. Gnter Schmid
Managing Directors
Nets Media & Entertainment GmbH
Michael Frost
Managing Director
Nets Healthcare GmbH
Dr. Stephan Heinz
Managing Director
555 Hamilton Avenue

Palo Alto, CA 94301
USA
Tel. +1 650 322 5665
Fax +1 650 322 1919
Nets Technology GmbH

Lars Schluckebier
Dr. Philippe Verplancke
Managing Directors
Nets Institute GmbH
Alfred Mller
Managing Director
Pettenkoferstrae35
80336 Mnchen
Germany
Tel. +49 89 544 795 0
Fax +49 89 544 795 195
www.nets-ag.de
page 16
Q&A
Press *1 to ask a question in Europe
Press 1 to ask a question in the US.
Press *2 to withdraw a question in Europe
Press # to cancel a question in the US.
www.msdw.com/waprap/
Questions:
william.farell@msdw.com
guenter.schmid@nets-ag.de
page 17
Audio Replay
Audio Replay
A replay of each weeks event will be available two hours after the presentation.
The replay number in the UK/Continental Europe is +44 (0) 1296 618 700 (id 200539)
and in the US (320) 365 3844 (id 509442).
The replay number will remain the same every week.
How to access a Present OnLine replay

Step 1 - Go to www.presentonline.com
Step 2- Click on Conference Archive, located on the PresentOnLine title bar at the top of the page.
Step 3 - Enter the owner number 10815 and click on Continue
Step 5 - Then click on the file and you will be taken to the audio replay presentation.
For a Biography of our speakers please refer to our URL: www.msdw.com/waprap/
For additional information about WAP Rap on Thursdays, or to request that specific
topics be addressed during a particular session please contact
william.farrell@msdw.com
page 18

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SKIP

SMSC Business device

Steven van Zanen

CMG Telecommunications, 2000

SMSC Business device

With respect to the information contained herein, other than information or

CMG Telecommunications, 2000

Caters for 7 out of 10 Largest GSM Operators

CMG Telecommunications, 2000

SMSC Business device

Highest Performing SMSC in the world

CMG Telecommunications, 2000

Staying ahead of Market demand

SMSC Market Share for Top 10 GSM Operators

SMSC Business device

GSM is in more countries than McDonalds: 137 countries

CMG Telecommunications, 2000

Global Subscriber base - GSM Leading the Pack

SMSC Business device

CMG Telecommunications, 2000

Most SMS traffic today is generated in GSM

SMSC matures into a Business Critical device

2000: ? 250 million revenue per Month globally

SMSC Business device

(assuming ? 0.10 per billable message)

2001: 82 Million messages in Europe per day alone

CMG Telecommunications, 2000

Two-way SMS over TDMA hits the US

CMG Telecommunications, 2000

SMSC Business device

Total Telecom 19 October 2000

The Mobile Data Association December 1999

Driving the initial SMS success

SMSC Business device

Services over SMS

CMG Telecommunications, 2000

SMSC Business device

Common SMS Services

Person to person messaging

CMG Telecommunications, 2000

SMSC Business device

SMS services: the PUSH factor

CMG Telecommunications, 2000

Markets - SMS usage by age group

CMG Telecommunications, 2000

Source: Ovum 1999

SMSC Business device

Convergence in the Mobile industry

SMSC Business device

Entertainment in relation to Television

CMG Telecommunications, 2000

Application Service Providers

Greater penetration of mobile/cellular users in Europe/Asia

60% of ASPs will fail by the end of 2001 - Gartner

CMG Telecommunications, 2000

Global Market Prognosis SMS users

SMSC Business device

Total Numbers of Users

CMG Telecommunications, 2000

Source: Ovum and ARC

SMS applications: where is the money today?

the second largest mobile revenue source

CMG Telecommunications, 2000

Interactive SMS - triggering reaction