Exhibit II (A): Diagram of the mobile phone industry

Exhibit II (A): Diagram of the mobile phone industry

Exhibit II (B) 1 – Part A: Level 1 Analysis for Handset Manufacturer Industry

Threat of rivalry – Handset manufacturer

Factors Underlying Rivalry	Response	Effect on Industry	Strength	Rank	Weight	Reasoning
Are Entry Barriers High?	No	Moderately Unfavorable	4	6	5%	Outsourcing of handset manufacturing and mostly software based proprietary technology
Are Exit Barriers High?	Yes	Moderately Unfavorable	4	8	10%	The handset market leaders like Nokia, RIM, and Palm are primarily focused on handsets
Is Demand High?	Somewhat	Moderately Favorable	2	4	15%	The low end handset market is reasonably saturated in US and Europe, but high demand for smartphones driven by handset replacement in US and Europe. New subscribers in emerging markets for low end handsets
Is Product Differentiation High?	Yes	Moderately Favorable	2	1	20%	Although there is very little differentiation based on basic functionalities, there is increased space for differentiation based on style and user interface, especially in the high end handset segment
Is the diversity of Competitors Low?	Yes	Moderately Unfavorable	4	9	5%	Manufacturers provide similar basic product offerings and are all in the telecommunication industry
Is Capacity Added in Large Increments?	Somewhat	Moderately Unfavorable	4	7	5%	Reduces handset costs and helps attain economies of scale, especially in the low end handset segment
Is Industry Growth Rate High?	Somewhat	Moderately Unfavorable	4	2	15%	In US and Europe driven by replacement of handsets, while in emerging markets driven by market penetration
Is Number of Competitors High?	Yes	Moderately Unfavorable	4	3	15%	CR3 for FY06 is 67%cxxx. Although there are few top players in the overall handset industry, there are numerous smaller players in the high end handset segment of this industry
Are Fixed Costs higher versus the variable costs	Yes	Unfavorable	5	5	10%	The R&D costs and manufacturing costs (even with outsourcing) are comparatively higher to variable costs
OVERALL RIVALRY LEVEL		Moderately Unfavorable	3.4

Barriers to entry – Handset manufacturers

Factors Underlying Barriers to Entry	Response	Effect on Industry	Strength	Rank	Weight	Reasoning
Are there Economies of Scale?	Yes	Moderately Unfavorable	4	4	20%	Reduces the cost of handsets, increases the volume and creates a barrier to entry at basic handset level
Is Product Differentiation High?	Yes	Moderately Favorable	2	3	20%	Although there is very little differentiation based on basic functionalities, there is increased space for differentiation based on style and user interface, especially in the high end handset segment,
Is there Cost Advantage Independent of Scale?	No	Moderately Favorable	2	2	5%	No proprietary technology access
Are Capital Requirements High?	No	Moderately Favorable	2	6	8%	Outsourcing of parts reduces the capital requirement
Is there Access to Distribution Channels?	Yes	Moderately Unfavorable	4	5	20%	Exclusive contracts with wireless service providers
Is there a High Change of Competitor Retaliation?	Yes	Unfavorable	5	1	25%	Competitive landscape of competitors
Governmental Barriers to Entry?	No	Moderately Favorable	2	7	2.5%	No specific restrictions in handset manufacturing
OVERALL BARRIERS TO ENTRY LEVEL		Moderately Unfavorable	3.6

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