Prospects for 3G Mobile Communications Market and Technology

1. Prospects for 3G Mobile Communications Market and Technology • 1. 3G Mobile Market Status • 2. View on Future Evolution • A) Radio Aspect • B) Network Aspect • 3. NEC’s Activities January, 2004 NEC Corporation

2. 1. 3G Mobile Market Status

3. 90% of mobile users use Mobile Internet in Japan • Mobile users in Japan • Total Mobile users: 85M • Total Mobile internet users :74M • Ratio of 3G user : 30% 3rd Stage Mobile Internet Introduction of new servicesenabled by “fixed rate billing” （as of end Dec 04） (K) 2nd Stage Mobile Internet Photo mail supporting the improvement of Data ARPU 1st Stage Mobile Internet Rapid increase in Mobile Internet users Fixed Rate Billing start (Nov 03) Photo mail start (Nov 00) i-mode start (Feb 99) 1996 1997 1998 1999 2002 2003 2004 2000 2001 Source: TCA (Telecommunications Carriers Association) © NEC Corporation 2004 Confidential

4. New Revenue generated by Mobile Internet Service Decline in voice service revenue has been recovered by data service revenue. (e.g. NTT DoCoMo) Euro = 135 J-yen Source: NTT DoCoMo © NEC Corporation 2004 Confidential

5. Evolution of Service and Terminal Functionwith increase of Data Speed Network Data Speed 2G 2.5G 3G ~10Kbps 100Kbps ~ Wall Paper Picture Mail Movie Clip Service/ Contents Ringing Tone Real Tone Full Music Sort Text Log/Diary Novel Terminal Digital Camera Media Player Digital TV Scheduler Game © NEC Corporation 2004 Confidential

6. Mobile Subscribers in Japan Subscribers are shifting from 2G to 3G Mobile Subscribers in Japan (Accumulated) Mobile Subscribers in Japan (Monthly) 30% 3G: WCDMA, 1x/Ev-Do, 2G: PDC, cdmaOne Source: Telecommunications Carriers Association, Japan © NEC Corporation 2004 Confidential

7. W-CDMA Subscribers in Japan 3G subscriptions are increasing very rapidly (1M subs) Vodafone 0.37Mil sub. DoCoMo 8.50Mil sub. 2003 2004 Source : Telecommunications Carriers Association © NEC Corporation 2004 Confidential

8. 16 million W-CDMA subscribers in the world At the beginning of 2005, global subscription of UMTS network had already reached to 16 million on more than 60 networks.. Source: UMTS Forum 3 Sweden Japan 8.9mil 3 UK 1.8 mil. 3 Austria 3 Italy 2.0 mil. 3 Australia Source: TCA and Others. As of December 2004 © NEC Corporation 2004 Confidential

9. Flat-rate Charge Service started in Japan Japanese users enjoy rich data service since introduction of flat-rate charge Packet Traffic “Chaku-Uta Full” by au Download entire Music “EZ Channel” by au Periodic auto-delivery Contents service Interactive Game Download contents at night Enjoy contents at anytime and anywhere Set favorite contents (3 programs, max.3MB/prog) © NEC Corporation 2004 Confidential

10. HSDPAReady for commercial service within one year • Down link : W-CDMA=384kbps  HSDPA=14.4Mbps • Improvement of total throughput with dynamic far field / near field control • HSDPA specification: 3GPPRelease 5 Low Speed • Adaptive Modulation and Coding • QPSK to 16QAM, Low to High Error Correction • - Hybrid ARQ, Fast Adaptive Scheduling High Speed Far from Base Station (Low Radio Strength) Near to Base station (High Radio Strength) Packet Traffic HSDPA uses remaining carrier power for packet traffic © NEC Corporation 2004 Confidential

11. What is happening in current mobile market in Japan ? Packet traffic is increasing rapidly • Fixed Tariff for Packet traffic is becoming dominant in 3G • AU (Ev-Do): 1 Mil users now • Packet usage 30 times of ordinary users • DoCoMo (WCDMA): 1.4mil user now • Packet usage 13 times of ordinary users • Traffic on 3G network increased 1.9 times • VDF KK (WCDMA): Stared in Nov.2004 • “HSDPA” will be soon. • HSDPA is the key technology for realizing flat-rate packet communication service efficiently. • Best effort type packet traffic increases rapidly by efficient use of radio resources. Network to be prepared in advance Over 100 systems are in commercial operation © NEC Corporation 2004 Confidential

12. 100% 90% 80% 70% 60% 50% Vodafone KK :99.6% (as of Aug.2004) DoCoMo: 99.7% (as of Jun.04) :DoCoMo :Vodafone KK 3 6 9 12 3 6 9 12 3 6 2002 2003 2004 Coverage Expansion Plan ●DoCoMo Vodafone KK and networks reached to more than 99% of area coverage ratio (equivalent to 2G) ●Expanding indoor coverage for user satisfaction Outdoor Coverage in terms of population Indoor Coverage in terms of No. of sites No. of sites 5,000 4,000 3,000 2,000 1,000 0 :DoCoMo :Vodafone 3800 1670 1800 350 0 150 Mar.2003 Mar.2004 Mar.2005(plan) Source: DoCoMo/Vodafone © NEC Corporation 2004 Confidential

13. RAN Optimization • Continuous Quality Improvement & Area Management Area Patrol Coverage Design Commercial Service Drive Test W-CARD RAN Tuning RAN System Installation W-CARD © NEC Corporation 2004 Confidential

14. 2. View on Mobile Network Evolution A) Radio Aspect (Super3G)

15. Mobile Network Evolution for Future 3G 3.5G S3G 4G 384Mb/s 14Mb/s 100Mb/s 1Gb/s Data Speed WCDMA HSDPA AMC H-ARQ, etc. Enhancement MIMO OFDM, etc.. New Access Radio Aspect Network Aspect PS Only (All IP) CS + PS RAN IP-RAN IMS PS PS RAN IMS IMS CS IP-RAN © NEC Corporation 2004 Confidential

16. MIMO: Multiple Input Multiple Output Parallel Spatial transmission by multiple transmit and receive antennas increase the Frequency efficiency ■MIMO Multiplexing Parallel spatial Transmission of data signals using Multiple Transmit antennas => Increase Data rate by the number of antennas ■MIMO Diversity Transmit same data and receive them diversity combining => Improve receive performance under bad radio propagating condition Rx Tx #1 #1 #2 #2 #3 #3 #4 #4 Signal Separation & Diversity Combining Parallel Transmission © NEC Corporation 2004 Confidential

17. Down Link Access Scheme: OFDM VSF-OFCDM • OFCDM: Orthogonal Frequency & Code Division Multiplexing • Optimal Mixture of Orthogonal Frequency Division Multiplexing (OFDM）and Code Division Multiplexing (CDM) • Time and Frequency domain spreading is adopted to OFDM • Improve frequency reuse efficiency by OFDM • Frequency Diversity effect by narrow band multi-carrier • VSF: Variable Spreading Factor • Cellular Environment: Spreading factor > 1 • To reduce the affect of interference • Data Rate: 10Mbps@10MHz BW • Hot spot Environment: Spreading factor = 1 • To increase the link capacity • Data Rate: 100Mbps@10MHz BW with MIMO OFCDM Coding © NEC Corporation 2004 Confidential

18. 2. View on Mobile Network Evolution B) Network Aspect (Fixed Mobile Convergence)

19. Evolution of Radio Access Network- Flow of 2 Systems Aiming at Wireless Broadband - • Multiple new wireless technologies with high-speed, wide-band, and high mobility emerged aiming at Beyond 3G • Two systems (1) “Cellular phone technology” based on 3G or 3.5G and (2) “Wireless LAN technology” based on _WiFi are present and various kinds of regulations appeared. High Communication distance *** Mobility* （Speed km） 3/3.5G 2/2.5G High-speed, wide-area wireless technology with 4G, 802.20, etc. 2～3Km ～100 Mobile phone 100m max. HSDPA Difference between Mobile phone and Wireless LAN PHS • NW: Close - Open • Capacity: Based on voice – Data with large capacity • QoS: Complete – Basically best effort. ～10 WiMax 802.16e 802.16a Wireless LAN *Adaptability to mobile in a base station **Downlink speed ***Effective communication distance from base station Reference: Search description, ABI research 802.11a 802.11b 802.11b WiFi ～50 ～3 Low High Low Communication speed ** (Mbps) © NEC Corporation 2004 Confidential

20. FOMA N900iL FOMA N900iL FOMA N900iL FOMA N900iL Solution in Cooperation with FOMA® My Office Anywhere, In-house or outside, by one FOMA® In-house Outside Moving Public telephone network UNIVERGE WL Wireless controller FOMA Mobile telephone network Application server FOMA N900iL Access point SIP telephony server UNIVERGE SV7000 Reference to documents for meeting FOMA in office Wireless LAN ＦＯＭＡ At site At maintenance site Wireless LAN At own desk Off desk Application cooperation from FOMA outside the office Wireless extension telephone by wireless LAN (Wireless IP telephone) FOMA N900iL Can catch easily by use of presence To web meetingfrom TV telephone © NEC Corporation 2004 Confidential FOMA® is a registered trademark of NTT DoCoMo.

21. Next Generation Mobile Network MRFC: Multimedia Resource Function Controller MRFP: Multimedia Resource Function Processor CSCF: Call Session Control Function MGCF:Media Gateway Control Function PDG : Packet Data Gateway WAG :WLAN Access Gateway AAA :Authentication, Authorisation and Accounting AP :Access Point MGW:Media Gateway Function HSS :Home Subscriber Server 3GPP-AAA HSS CSCF MRFC MGCF I-CSCF PDG IMS WAG MGW AP WLAN AN SV7000 SGW MGW Enterprise WAG WLAN AN MRFP AP GGSN (aTCA/RMS) AP 3G PS CSCF 3G-AAA Proxy AP AP SGSN (aTCA) 3G CS 3G public WLAN IP-RNC (aTCA) Fixed Network VoIP PSTN 3G Authentication UMTS Residence Enterprise New PF applied BAS SV7000 BTS BTS BTS AP Mobile Network Fixed network © NEC Corporation 2004 Confidential

22. Mobile/Fixed Service Integration-Seamless Service- One Stop Subscription / Single User ID / Simple Billing Internet Residence Service Applications/ Contents ・・・ IP based Service Platform IMS Business Trip Fixed Packet Network Mobile Packet Network Wired Access 2G/3G Mobile ADSL／Fiber HSDPA/EUDCH Office Cable Hot Spots WiMAX WiFi Wireless Access Transportation © NEC Corporation 2004 Confidential

23. NEC’s Activities

24. The internet PSTN E2E solutions for mobile network NEC serves you the total solutions with the most innovative technologies and services. Terminals Infrastructures Mobile Internet Platform NB-341 Micro NB Radio Server + Remote RF Head Gateway &Proxy Basic Servers VA Servers NB-44x/88x Macro NB NEC Multimedia Platform (NEMIP) Contents GGSN Presence MRF CSCF Macro Node-B SGSN HSS SGW RNC MGCF Core Network MGW In-Building Solutions (Micro/Pico Node-B) IP Multimedia Subsystem (IMS) Semi-conductors, Electric Parts © NEC Corporation 2004 Confidential

25. 100% HSDPA prepared Indoor Solution Cafeteria Airport, Station Shopping Mall Office building NEC Solutions • Equipment Solutions • Small & High Performance Products • Professional Services Rapid and accurate Design Simulation and Optimization • High Skill, Know-how, and Experience Design, Implement, Optimisation RF Server RF Repeater Micro Node B Radio Server + Remote RF Head RS3000 BuilSke/FloSco © NEC Corporation 2004 Confidential

26. NEC/Siemens WCDMA Projects (Contract) W-CDMA Infrastructure Sales to 33Operators in 24 Countries/Regions UK Germany Norway Finland Isle of Man Europe Czech Republic Netherlands North America Asia Poland Belgium USA Luxemburg Japan France Taiwan Spain Austria Italy Greece HongKong Portugal Moonaco Malaysia S.Africa Bahrain Middle East /Africa © NEC Corporation 2004 Confidential

27. W-CDMA Base Station Vendor Share(No. of Units Commercially Deployed as of Aug.2004) NEC /Siemens enjoy Top share of Base Stations in Commercial Operation with 23,800 units(35.1%) NEC/ Siemens ３５．１％ Others 5.1% Fujitsu 5.6% Panasonic 10.6% Nokia 20.8% Ericsson 22.8% Total No. of Node-B : 67,900 Source: “Worldwide W-CDMA Cellular Base Station Market Report“ by Multimedia Research Institute (Aug. 2004) © NEC Corporation 2004 Confidential

28. Conclusion

29. Bridge for Virtual and Real= Digital Appliance = Needs of Users Materialization • Want to contact XX • Want to Watch TV, listen to music • Want to check XXWant to Memo • Want to know time • Want to shop　　　・・・・・ ISP CP Shop Digital Appliance Unexpectedly Suddenly Bank What users “want to do” not “can do” without Time and Place constraint Home © NEC Corporation 2004 Confidential

30. 10kb/s 100kb/s 1Mb/s 10Mb/s 100Mb/s 1Gb/s 2G 2.5G 3G 3.5G > S3G > 4G Mobile Network （Circuit）+Packet →ＡＬＬ　ＩＰ Circuit Circuit+（Packet） Service and Terminal Diversification corresponding to Network Evolution Application Service Wireless ＬＡＮ Infrared Ray Mobile Commerce Game ＰＩＭ Mail Roaming Storage Ringing Melody LIS ＳＭＳ Digital TV Voice Internet Picture Streaming Telephone Internet phone PC Music player Digital TV Fuel Cell Viewer GPS JAVA LAN Terminal RFID © NEC Corporation 2004 Confidential

31. © NEC Corporation 2004 Confidential