UMTS 2002 Barcelona, "Lets Play", Jean Barrette, Speaker

1. Opportunities for Venture Capital in 3G:
Let’s Play!
Jean Barrette
General Manager
Bell Mobility Investments
October 2001

2. Agenda
A word about Bell Mobility Investments
Current Venture Capital Investment climate
Gaming & Entertainment opportunity
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3. Bell Mobility Investments
Created on February 1st, 2001
Corporate Venturing vehicle for Bell Mobility
Purpose is to create strategic value for Bell Mobility,
Canada’s wireless Leader
Focus is mainly on wireless Internet
Targeting North American companies
BMI brings funding but also operating knowledge
from its wireless operation
Vehicles are
R&D accelerator for early stages
Equity for later stages
International Services
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4. Bell Mobility
Part of the BCE group of companies
3C convergence: Commerce, Content,
Connectivity
Over 22 million customer contact points
$18.1B CDN in 2000
Canada’s leading wireless provider
National network
Diverse wireless service portfolio
Over 3.8 million subscribers
Annual revenue over $1.5 Billion CDN
A recognized leader in Wireless Internet
20% owned by SBC (Cingular WSP within
SBC group)
First in NA to: First in Canada to:
•Launch CDMA Internet Browser & •Trial Location Based Services
Instant Messaging •Offer wireless internet banking and online
•Personalize content services shopping
•Integrate wireless ecare •Launch Digital Data-to-Go
•Offer wireless conference call service •Mobilize your business by bringing SAP,
•Trial 1XRTT Siebel, GroupWise, Exchange and Lotus
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5. Venture Investment Climate
Unless you have been VC Funding and Avg. Funding
living on Mars... tough 120 20
climate 100
15
80
Economic slowdown 60 10
Fewer companies being 40
5
20
funded with smaller average 0 0
deal size
90
91
92
93
94
95
96
97
98
99
0
01 H1
Funding to VCs is going
mostly to well established Total Inv. ($BUS) Av. Inv. ($BUS)
funds and is down from 2000
but still in line to be 3rd # Companies funded by VCs
largest since 1969
8000
However, estimated that $45 7000
billion still not allocated 6000
5000
Fewer, larger IPOs with very 4000
3000
little in high tech 2000
M&A activities up but at much 1000
0
lower valuations
90
91
92
93
94
95
96
97
98
99
0
01 H1
-5- Source: NVCA, Venture Economics

6. Venture Investment Climate
Summary
Uncertainty in the economy
Stock market downturn
VCs focused on “fixing” existing portfolio
versus new deals
IPO for High Tech not there
M&A picking up to compensate
Valuations slashed
P2P (Path to Profitability) is key
…Back to Fundamentals...
Strategic investment partnerships in wireless Internet, such as
with Bell Mobility Investments, are even more beneficial when
investment climate is challenging.
-6- Source: NVCA, Venture Economics

7. Wireless Entertainment
Wireless entertainment is a broad term
It can be defined as slack time management (i.e.
what can I do when I am not working!)
Games
casino, action, classic, sports, trivia, multiplayer, etc.
Gambling
Images
Video
Music
Short burst of content (comedy, astrology, etc.)
Dating
Currently, because of limitations on network speeds
and device capability, gaming is leading the way.
We will therefore focus on gaming
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8. Market Analysis - Revenue
Most analysts agree that
entertainment and gaming
is compelling enough for
customers to pay for the
services
Yankee Group forecasts
that Wireless
Entertainment revenue for
the US to be just below
$1.2Bn in 2005
Datamonitor forecasts that
European and American
wireless games industry to
reach $6Bn in 2005
Revenue Prospects are significant
Gaming seen as largest mobile entertainment revenue generator
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9. Market Analysis - Size
Datamonitor predicts 200
million European and US
users of mobile games by
2005
Arc group predicts 775M
users worldwide for
mobile entertainment
Yankee group estimates
that 55M of the 185M US
wireless subscribers will
be game players by 2005
Approximately 30% of Wireless Subscribers in US will play
games by 2005
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10. Bell Mobility’s Experience
In August 2001, Wireless Entertainment accounted for 38% of all hits
on the Bell Mobility Mobile Browser
Bell Mobility Wireless Internet Usage
m-Commerce
2%
The entertainment
Other section is an
5%
expanding area for all
Financial
North American
8%
mobile browsers
Entertainment
Gaming is the leading
38% Info Services
14% attraction by far
This confirms the
study done by the
Yankee Group
Communications
33%
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11. Enablers and Inhibitors
Inhibitors of Change
Key Enablers
Higher bandwidth services such as Slow network speeds are not
GPRS or 1XRTT sufficient for full-motion
Higher performance client and better games and heavy graphics
user interface
Network latency
Java and/or Brew enabled devices
Handsets’ lack of sufficient
Availability and affordability of
memory and effective
terminals
cooling devices to support
Location Based Services to leverage complex graphics
mobility
Lack of compelling pricing
Continuity of experience, multi-
model
platform
Multi-player interaction
Billing flexibility
Use of promotional offers
Higher bandwidth is key specifically in areas such as video and music
Java enabled terminals, slated for shipment in mid-2001, will offer
flexibility and device independence
There are more opportunity in Europe for mobile games because of US
standards and pricing structures
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12. Value Chain:
Analyzing Investment Opportunities
Technology Infrastructure Application Mobile Mobile
Technology Infrastructure Application Mobile Mobile
Application Content Content Mobile Service Handset
Application Content Content Mobile Service Handset Customer
Platform & Equipment Platform Portal Network
Platform & Equipment Platform Portal Network
Developers Providers Aggregators Providers Vendors
Developers Providers Aggregators Providers Vendors
Vendors Vendors Vendors Providers Operators
Vendors Vendors Vendors Providers Operators
Wireless gaming is a complex space with many players
complementing or competing
Investment opportunities depend on who you are and what
your strategy is
It is key to use a structured approach to focus in on
investment opportunity
Value chain analysis is useful as it
Structures the different players
Assists in targeting sub-segment you show focus on and those you
should not
Provide elegant way to view how the different players may
operationalize their strategy
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13. Value Chain:
Analyzing Investment Opportunities
Technology Infrastructure Application Mobile Mobile
Technology Infrastructure Application Mobile Mobile
Application Content Content Mobile Service Handset
Application Content Content Mobile Service Handset Customer
Platform & Equipment Platform Portal Network
Platform & Equipment Platform Portal Network
Developers Providers Aggregators Providers Vendors
Developers Providers Aggregators Providers Vendors
Vendors Vendors Vendors Providers Operators
Vendors Vendors Vendors Providers Operators
Bell Mobility, as a Network Operator, is less interested in
the last 2 and first 2 sub-segments.
Therefore, relevant value chain segments that can be
vertically integrated from a Network operator point of
view:
Application Platform Vendors
Application Developers
Content Providers
Content Aggregators
Mobile Portal Providers
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14. Value Chain:
Analyzing Investment Opportunities
Application Mobile
Application Mobile
Application Content Content
Application Content Content
Platform Portal
Platform Portal
Developers Providers Aggregators
Developers Providers Aggregators
Developers Providers
Developers Providers
Application Platform Developers develop a platform (hardware
and software) that allows “Application Developers” to simply
create applications for wireless devices
Examples of Platforms
Nokia MEP
Digital Bridges Unity
nGame GDK
Application Developers use in-house or third party platforms
to develop compelling applications such as games for
“Content Providers” and “Content Aggregators” that can be
accessed from wireless devices
Many players in this sub-segment with low-barriers to entry
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15. Value Chain:
Analyzing Investment Opportunities
Sony, Sega Yahoo!
Application
Application Application Content
Application Content
Platform Mattel, Hasbro T-Motion
Platform T-Motion
Developers Aggregators
Developers Aggregators
Developers
Developers Pure Play Bolt
Content Providers create premium information or well known
brands that apply to wireless gaming and entertainment and
can be transformed into compelling games
Content Aggregators create exclusive or preferred
relationships with selected content providers and/or
application developers and add value by bundling and
packaging the offering. They sell either directly, through
mobile portals, or mobile service providers
Mobile Portal Providers create an ‘electronic’ window that
fosters a sense of community for consumers as well as
provides them with the opportunity to exchange and share
information
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16. Value Chain:
Analyzing Investment Opportunities
Technology Infrastructure Application Mobile Mobile
Technology Infrastructure Application Mobile Mobile
Application Content Content Mobile Service Handset
Application Content Content Mobile Service Handset Customer
Platform & Equipment Platform Portal Network
Platform & Equipment Platform Portal Network
Developers Providers Aggregators Providers Vendors
Developers Providers Aggregators Providers Vendors
Vendors Vendors Vendors Providers Operators
Vendors Vendors Vendors Providers Operators
Platform Vendors want to position themselves as the “de facto” platform for
developers. Highly likely that more than one platform will survive even after the
industry consolidation
Application Developers are focused on forming partnerships with network
operators. Alternatively, seeking a high-profile portal or aggregators is an option
Content Providers (brand names), such as Mattel and Hasbro, will try to
monetize their brands into wireless either through Application Developers and
Content Aggregators or through in-house development targeting Operators
directly
Content Aggregators are competing with mobile portals (operator led or not) to
acquire strong brand names. Operator portals prefer to have the option of
dealing with content providers directly. Pure Aggregators may try to create
their own brands but this is costly
Large Portals such as Yahoo carry games from Application Developers such as
nGame
Big Players like Sony, Sega, and Nintendo want to position themselves in the
first 3 segments (move from the Content Provider space then expand down to
Application Developers and Application Platform Vendors)
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17. Investment Opportunity
Summary
Gaming & Entertainment is a good sector for investments
Revenue prospects are significant
Market size potential is also significant
Youth segment is important but can also have mass appeal
Bell Mobility’s experience shows a strong interest in Gaming
Big players such as Sony showing interest
Risks are
Ability to generate significant revenue based on consumer desire
to pay
Impact of inhibitors such as delay in 2.5G and 3G, LBS, Java,
affordable more powerful clients
Impact of current economic climate on consumers
Investments in gaming should encapsulate the 5 major value
chain segments either by one company or with complementary
companies in order to de-risk the investment
The Application Platform Vendors segment is considered risky
since there is no standardization yet for a gaming platform and
many platforms may emerge as winners
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18. Investment Opportunity
Summary
Consolidation will occur and may have already started
Based on the material presented above as well as other
analysis, Bell Mobility Investments is monitoring the activities
of the following companies:
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19. Opportunities for Venture Capital in 3G: Let’s Play!
Jean Barrette
General Manager
Bell Mobility Investments
October 2001
Web Site: www.bellmobility.ca/bmi
e-mail: jbarrett@mobility.com