TMNG Global Develops Compelling Business Case for Wireless Broadband Technology

Challenge

Our client, a leading broadband provider, was building wireless base stations and terminals employing an advanced wireless access technology that could dramatically improve both the services provided by the network and the financial results for that network. When the project began, the company was heavily focused on technology evolution and had a wide range of loose, undefined concepts about applications for the technology. Furthermore, the client did not have a clear vision for commercializing its technology, its potential customer base, and whether its product would be complementary to, or a substitute for, other broadband technologies. The client had already attempted a Series B fund-raising without success, as potential investors did not find the business case clear and compelling.

A new CEO had just started, and he brought in TMNG Global to provide strategic focus for the business and to support the financing effort through a solid business plan. He needed a lucid and well-supported message to potential funding sources which would convey the value of the technology and the advantages its use could provide in a volatile telecom marketplace.

Initial trials had already been carried out with some large incumbent carriers, and there was an early commercial order from such a carrier. There was also an OEM interested in partnering opportunities. The client asked us to assess the market for services that the new technology could enable, to determine where the market focus should be, and to build a business plan around those services in those markets. We were also charged with creating a compelling document that showed the strength of the technology, the service advantages it offered, the current solid position of the client, and the likely path to market and financial viability.

TMNG Global Solution

Our team believed that it was essential to target customer needs that could be identified and that were not easily met by existing or imminent technologies. As companies adopt productivity and communications tools that require higher speeds and increased bandwidth, there is a corresponding drive to make these applications accessible remotely. These two trends – need for higher bandwidth and need for remote access – had already led to rapid development of various high-speed access formats. The costs of the client’s technology were such that it was too expensive for customers with relatively modest bandwidth demands but extremely cost-effective for customers needing really high speeds across a significant geographical range.

Despite the many developing broadband access approaches, TMNG Global found that none combined both very high speeds and very broad coverage; that is, there was no available option that offered both high speed and ubiquity.

In addition, every platform currently available struggled in the marketplace with quality, coverage, or pricing issues. The economic models for these businesses had been problematic, because funding reimbursement typically required anywhere from three to five years. With capital markets increasingly focused on profitability, it was difficult to get financing for these endeavors. As a result, some technologies were reaching the market far more slowly than anticipated. In particular, 3G mobile deployments had largely been placed on hold, in favor of 2.5G networks that offered far lower speeds. We felt that it would be difficult for service providers who were as yet unable to deploy 3G even to consider a more advanced technology, at least for the next few years.

In the light of the market situation, our team developed a segmentation approach that stressed immediate needs as well as longer term opportunities. Very high speed mobile applications were deemed to be too far off to serve as the basis for the current business plan. On the other hand, in many parts of the world the communications infrastructure is poorly developed, leaving business users with high-capacity needs unable to meet them and limiting local economic development severely as a result. A fixed wireless broadband access technology capable of supporting high speeds over any spectrum assignment could serve these needs quickly and cost-effectively. TMNG Global recommended that the client focus initially on incumbent service providers in areas with poor wired infrastructure such as China, India, and much of Latin America. As it happened, the client had excellent commercial relationships in China already and was able to embrace this strategy at once.

In addition, we believed that there was a role for the company’s approach in the developed world in the edge areas (such as suburban and rural locations) where wired capacity might be limited but business requirements for broadband would still be present. Therefore, we also recommended as offering service in areas poorly served by DSL and cable modem as a secondary market segment focus.

Once the market targets had been clearly defined, it was possible to build a sound business case, taking into consideration the market limitations of the product and the economic and demographic elements of the targets. The business case focused on two distinct revenue opportunities: wireless broadband access for small/medium enterprises (SME) in developing and “edge” developed markets, and the portable and mobile wireless broadband market in the longer term. These markets together were expected to produce $9 billion in annual addressable revenues in the next three years.

TMNG Global developed clear descriptive materials to show the technological advantages of this OFDM-based approach and spelled out in detail the financial implications. As part of this process, we delivered a full-scale competitive analysis, comparing the offerings of other vendors with those of the client in terms of service capabilities (throughput, quality, etc.), end-user pricing, capex payback, and other economic variables. The comparisons included both wireline and wireless data options, and the financials were built on existing TMNG Global analyses done for clients using these other approaches. Working closely with the client’s financial team, our consultants developed an overall market forecast and supported the client’s financial model. This model yielded income, balance sheet and cash flow statements that were used in presentations to potential funding parties.

Benefits to the Client

TMNG Global developed the go-to-market strategy for this engineering-driven company, enabling it to focus on specific market segments and to consider specific partnering options that would facilitate its achievement of business goals. Using detailed market analysis and realistic projections for revenues, we developed costs and margin estimates, leading to a solid business plan that could be shared with potential investors. Due to the strategic and focused work performed by the TMNG Global team, the client launched its approach to funding sources in the six months following the consulting engagement.