Net Insight : Open Insight #9

(Click here to read the Swedish version)

Welcome to Open Insight, our blog for investors. This is where you can find out more about our offering and market position, our progress, our challenges and our growth.

We signed a collaboration agreement of SEK 220 M with one of Europe's largest mobile operators Türk Telekom - this was a positive start of the month followed by our Q3 report, which was the strongest quarter since Q2 2019 in terms of earnings.

The agreement with Türk Telekom is our single biggest order to date and a milestone for us. Furthermore, the agreement relates to the field of synchronization where we have leading-edge expertise, as well as advanced core technology. We will now develop a product adapted for 5G that will open up a new market and a host of opportunities.

In this issue, we'll mainly be focusing on outlining the transaction and the agreement, as well as the product and its advantages and prospects. We'll also speak about our long and fruitful collaboration with Türk Telekom, but also about our continued focus on Media Networks.

Once more, we have demonstrated our ability to transform our leading-edge expertise into attractive global products, based on our high level of technological expertise and our knowledge of the market and customer needs. This permeates everything we do, regardless of whether we are launching entirely new products in 5G synchronization, or developing new solutions and functionality in Media Networks.

Agreement structure

The agreement with Türk Telekom means that we are introducing a new offering in synchronization, opening up a major new market for us. Under the agreement, which is worth SEK 220 M, we will initially receive SEK 55 M for investment in product development, as well as an initial order worth SEK 25 M for existing products with delivery starting this year. The remainder of the order relates to an entirely new product for 5G, where delivery will start towards the end of 2023 with completion scheduled for 2026. We will market and sell the new product to operators globally. According to the agreement, we will receive two advance payments, one in Q2 2022 and one in Q4 2022 of SEK 20 M each.

New 5Gproduct ensures lower costs for telecom operators

Synchronization in 5G networks requires up to 20 times more accuracy than synchronization in 3G and 4G networks. Today, this mainly occurs through satellite systems such as GPS, but relying on this type of system implies poorer security and reliability as the signals can be disrupted, intentionally or unintentionally. As part of its frequency tendering dialog, Sweden has decided that an alternative to GPS is needed, an example that has also been discussed in other countries.

Our solution confers unique advantages as it is GPS-independent and can manage time synchronization over existing networks. This means that the roll-out of 5G can take place without needing to replace or upgrade existing network nodes, which implies significantly lower costs for operators.

Annual totalmarket for 5Gsynch estimated to be worth over USD 1 Bn

According to a report from A.T. Kearney from April 2020, synchronization comprises 3-5% of the total investment for 5G roll-out, compared to 0.2-1% for 4G. We expect to see a substantial total market for 5G synchronization worth over USD 1 Bn annually by 2026. This opens up a new segment for us on a market returning strong growth.

New opportunities

The agreement implies a number of opportunities that strengthen our whole company. First and foremost, we have started the far-reaching and exciting work of creating an entirely new product adapted for 5G. We will be able to implement the product in Türk Telekom's network and are obviously very pleased that the technology has received the backing of a major telecom market operator. In the next step, we will use our core technology, knowledge and experience in synchronization on other markets, although the initial focus is on 5G.

Long and fruitful collaboration key to developing new technology

We will develop the product based on our core technology, leading-edge expertise and experience in synchronization, and adapt it for 5G use with the help of Türk Telekom's expertise. Our long and fruitful collaboration with Türk Telekom has been key to developing the technology and adapting it to mobile operator networks. The collaboration allows us to broaden our business in one of our core competencies, synchronization, and the agreement provides further confirmation of the technology. Türk Telekom is one of the largest operators in Europe, with excellent contacts, a strong technical reputation and the ability to outline how they have designed the network and used our technology.

Continued sharp focus on Media Networks

In 2021, we accelerated our product development in media networks, and are soon about to launch our solution for JPEG XS, the new standard in video compression with extremely low latency. In 2022, we are continuing to increase investments and extend our offering within IP-based products. As demand for cloud-based services increases, we are launching more IP functions that enable more flexible management of video, audio and other media flows in remote and live production.

Net Insight's longstanding North American customer The Switch launched its cloud-based service MIMiC Transmission in August, based on our product Nimbra Edge. This provides more confirmation that our market-leading Edge solution is reliable and delivers in highly demanding areas.Read more in our new case study

Last winter, Red Bee Media and Net Insight together created the world's first 100GbE IP Media Trust Boundary solution that supports workflows for industry standards such as ST 2022 and ST 2110.

Read more in our new case study

Several steps forward on our growth journey

Being part of our growth journey is incredibly exciting. Our strength in innovation and committed staff have helped us to build up the market's trust, which has now been confirmed. The transaction has been made possible as a result of our technological foundation that is the basis of our position today.

I look forward to continuing on this exciting journey!

Crister Fritzson, CEO, Net Insight