Hello and welcome to the Net Insight conference call with web presentation. Throughout the call, our participants will be in listening only mode, and afterwards there will be a question and answer session. Today, I'm pleased to present Net Insight. Please begin your meeting.
Good morning, everyone, and welcome to the presentation of a fantastic collaboration we have signed with Türk Telekom. My name is Crister Fritzson, I'm CEO of Net Insight and with me this morning I have Per Lindgren, the CTO of Net Insight. We have been working with this deal for the last 18-25 months, and I'm very glad to announce this fantastic deal that we have and the collaboration with Türk Telekom. We can say that we did it again. Once again, we have proved that we can transform cutting-edge technology into attractive global product. This is of course based on our deep technology competence that we have within Net Insight and based on our core technology.
On top of everything, we also have a strong market customer understanding and we know exactly what the customer would like to have. In this particular deal, we have had Türk Telekom with us from the beginning, we have a huge insight in 5G network and a big part of the development of the product. This is the way we are working within Net Insight. Both when we bring new business offering to the market like this synchronization product, but also when we launch or bring new product within the media network like cloud and the new IP product that we are launching. Using the knowledge that we have, the technology insight, a good market and customer insight, this is the new way we are working with within Net Insight.
This time when we have signed a collaboration deal, we have signed a large order worth SEK 220 million. Out of that, SEK 25 million will be shipped of the existing product that we have and the shipments will start in Q4 this year and will continue in the first half of next year. We have a co-financing of the product development of a total of SEK 55 million. We also within this contract to handle the cash flow, we have two prepayments. The first prepayment will be in the Q2 next year of SEK 20 million and the second payment will be in Q4 this 2022 of SEK 20 million. We have signed a close collaboration with Türk Telekom, one of the biggest operator in Europe with a high knowledge of 5G.
The collaboration that we have and will have with Türk Telekom has been key to develop the technology and adapting it to mobile operating network. The market that we are entering is a huge market. It's the 5G market and if you take out the synchronization part of the 5G market, our estimate is that the future annual value will be above $1 billion. The order value of the new product that we will start to deliver in the end of 2023 is SEK 40 million. This is a volume product. Normally within Net Insight we have orders from a few million up to 25, 30 million. Units from five to 10, up to 100. In this market, this deal, this is this order is thousands of units.
The product that we are developing will be installed at site. As I said, Net Insight and Türk Telekom have worked together to bring the solution, will bring this solution to the market. Türk Telekom is a member of the GSM Standardization Organization in Europe. We have an ambition to take the solution as a standard on the GSM market. As I said, Türk Telekom is a key. They contributed with the 5G experience. Also of course have a strength even in the R&D. Net Insight will sell, distribute and support the product globally. We have produced a design, and we will of course lead and develop the product. The main development will be in Stockholm, in Solna, in our site, and we will drive that.
Of course, Türk Telekom have a huge insight in 5G and have a lot of cooperation with existing operator that will help us to bring the product to the market and will be a close partner even in the marketing and sales process. We'll have a network as a showcase for all operators to visit and see how it will work in a live environment. I will hand over to Per to talk a little bit about the product and how we will develop the product and the key features. Per, over to you.
Thanks, Crister. Good morning, everyone. Great to be here presenting this big opportunity for Net Insight. The 5G market is a very strong market. We'll go a little bit into the details of the market, the market size. When it comes to what we provide in the market is the synchronization, and there is requirement in 5G to synchronize the base station and make sure they send out the information at the same time. This is to ensure higher capacities in the network, but also ensure things like handoffs between the cell sites, et cetera. Time synchronization is the core technology for Net Insight for many years, and we use the core technology for this solution in our media networks, in our terrestrial digital terrestrial TV networks for over 15 years.
It's a very mature core technology that we use in this solution that we are optimizing for the 5G market. We are already using the core technology in over 15-20 national digital TV rollouts worldwide. Some of those, like the one in Norway, has over 1,000 nodes, so already in large installations. It also holds a very strong IPR and patent portfolio around synchronization that's been built over several years. Just last year, we have taken over 4-5 patents within the field of synchronization in IP and 5G networks. The reason why 5G becomes even more important and this opportunity opens up is that the requirements for time synchronization in 5G is increasing tremendously when going from 3G or 4G up to 5G.
It's over 20 times higher demands on accuracy and reliability in the 5G networks. It's truly mission-critical for the deployment of 5G networks. There are other solutions on the market. The most common one is to use GPS or you know, satellite synchronization. You have a GPS receiver or GNSS receiver at the cell sites, and this synchronizes the time synchronization for the cell sites. What we are seeing today, and Sweden is a good example of this, is that the 5G networks are seen as mission-critical infrastructure, and you don't wanna rely on a system you cannot control within the nation.
Therefore, for example, Sweden has claimed that to obtain a 5G license in Sweden, you cannot rely on such foreign systems, and which means you cannot rely on GPS or GNSS satellite synchronization solutions. You have to find solutions that can provide a synchronization over the network. There is also standards today to provide this over IP networks, and there's a new standard called IEEE 1588 or PTP, but that requires that every node in the network is upgraded or replaced with nodes that have hardware support to handle the standard. Of course, if you build a totally new network, you can do this. But for many countries, and even for countries that have new infrastructure, it becomes very costly to upgrade and replace all the nodes in the network.
Therefore, for example, to quickly be able to deploy in more rural areas or in countries where you just can't, you know, justify the business case to totally replace your existing networks, like in the Türk Telekom case, it's over 20,000 elements, network elements, it can be huge costs. The big benefit with our solution is that we create the synchronization overlay on top of existing infrastructure, which means you can reuse the same network elements that you already have in your networks. Both the cost of deployment goes down significantly, and the time to deploy, especially in rural areas, goes down significantly. If we take next slide, we go into the market.
As you certainly are aware, of course, the 5G market is growing very quickly, and it's estimated to grow, you know, several double-digit figures the coming years and reaching over $50 billion in just a few years. We made a study together with analyst firm A.T. Kearney roughly 12-18 months back, looking at what is the market for synchronization in the 5G networks. What was very interesting to see is, as said, with the new demands when moving from 4G to 5G, that the accuracy is nearly 20 times higher. It also the cost of synchronization in the 5G rollouts goes up significantly.
If the cost of synchronization in 4G was somewhere between a few tenths of a percent of total rollout cost, the cost of synchronization in 5G rollouts is somewhere between 3%-5% estimation by Kearney. This means that the total 5G synchronization market will grow to over $1 billion already in 2026. In addition, of course, to the 5G market, we also see opportunities outside the mobile networks, like power networks, fintech networks, blue light networks, et cetera. The focus right now with Türk Telekom is on the 5G market, but we will also look into other opportunities going forward. What are the unique advantage? I went into that.
There are other alternatives like the satellite GPS synchronization and the what's called the IEEE 1588 or PTP standard. The really big benefit with this is we can do it over existing IP networks. You don't have to forklift upgrade your full network to be able to ensure that you can handle the time synchronization. That has been a big problem with operators we're talking to that they see that they need to upgrade their core networks. It's fine to upgrade your networks in the big cities, but it's a huge cost to do this nationwide in rural areas. This is where we complement existing solutions to reach faster and more cost-effectively the full nationwide rollout. The other, of course, big benefit, as I talked about, is the GPS independence.
Even with the network wide rollouts where you do not use GPS at every node, you still typically uses GPS at many of the core sites. In this case, we can provide a totally GPS independent, or we can also use it as a backup. You still use GPS, but you use our solution for a cost-effective backup to GPS if it goes down. You have. We are talking to operators, they're really looking at both those type of options. With, of course, just seeing as a backup, it becomes more of an insurance. You can ensure the reliability and a better uptime of 5G services. When it comes to GPS, the cost of course is there to have GPS at every site.
The main thing there is the reliability and security enhancement by using our technology as a complement or as a primary synchronization reference. One other big advantage we see with this cooperation agreement with Türk Telekom is of course also the cooperation in itself. It's a huge advantage for Net Insight to both have Türk Telekom as a first big reference customer. They are well-known in the market. They are well-known for being innovators in the market, and they are very present in standardization forums for the 5G standardizations, et cetera. They will help us both with direct co-marketing and co-selling, and they will also really work together in standardizations and technology forums regarding the solution. I could say also we already also working with Türk Telekom since many years.
They are using our Nimbra equipment for all their video-assisted referee installations. They have both the first league and second league in Turkey, and we are providing all the equipment to be able to provide actually very innovative way of doing this fully remotely instead of having to have these video-assisted referees on the arena or just outside the arena. They are all sitting centralized in Istanbul. I hand over again to Crister.
Thank you, Per. Just to wrap up this before we open up for questions. Of course, we open up for a new business segment, and of course, we will invest in the front end of the operation. Sales and technical sales will be separately from the media network organization. Of course, we have now increasing the scale, and we have been talking about this previously, that we need to increase scales because we have a global distribution. We have quite high investment in product development, and we need to increase scales to be able to have higher revenue of course, but also of course profit. This will definitely take us on that direction.
We see also a possibility in synergies between the business portfolio that we have. Going forward, field synchronization is a key element for media product. We will of course have synchronization also on the product development. Partially, we will use the existing R&D organization but the majority of the new R&D will be separate. This will of course strengthen the company and it will definitely strengthen the media network segment as well. We will continue to accelerate our investment in the media business as we have done. As you know, we are moving to cloud. We are launching new IT products, and we're going from larger markets, also looking to have higher volume. We are doing that in parallel, and we have the ability and strength of doing that.
If you look at the like the R&D teams will like increase to 20 people. As we were saying, the new products will be launched in the second half or in the end of 2023. We have the existing products and we, as you know, we have a lot of proofs of concept with many operator, and we will continue doing that. This order, this contract will of course proven that our technology is very competitive, and we hopefully will see that the customer that we are in dialogue with now will be more comfortable when we have signed a contract like this.
We are showing that we continue to develop the product that we have and they will be able to install the new product at site, which increase the accuracy of the synchronization in the network. By that, I think that we have concluded the presentation, and we will open up for any questions. Welcome with question. You can send them in on the chat, and we will see them. If you're online, you can also, of course, ask the question over the air. Welcome with questions.
Thank you. If you do wish to ask a question, please press zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two to cancel. There will be a short brief pause while questions are being registered. We have no questions in our telephone conference. I hand back the word to our speakers.
I see a few questions have been coming in on the chat, actually. The first question that I see, will the current order cover all the Turkcell needs? The Türk Telekom. Turkcell is the competitor to Türk Telekom and, or could there be follow-up on the order to Türk Telekom? Yes, we haven't announced exactly the number of units that are shipping to Türk Telekom, but definitely it's an upside in volumes. They have thousands of sites that they need to have our product installed at, and we are under half of the sites that they will have when they have a full rollout or the full network that we are delivering right now. This will go all the 2026.
The rollout of the 5G in many countries will take a few years until they are ready, and they will continue that over a number of years. No, this is just the first rollout and we expect that it will come in new orders from Türk Telekom going forward. The next one. Yes, we have mentioned earlier that we have a number of Nordic operators that have been testing our product and the test and the discussion going forward. We will of course accelerate all the marketing and sales activity from now on. We have all of the resources in the market to talk to Nordic, European, and also global operator. We are doing that going forward. We need to come back on that.
We see next year that we will have sales on this product and we will also see in 2023 that we have sales. That is just the first thing. We will need to come back on the new orders, and we will do this of course, as soon as we have signed them. How much will you have in recurring revenue? On this order, we have recurring revenue. We have support, and that's a substantial number on the support. That will be over 10 million SEK per year in support. Going forward, when the systems will be larger, of course, the support part is an important income revenue stream for us, and it will go forward. That's also with this product. How should we watch out for the competitive landscape?
Should we talk a little bit about the competitive landscape?
Yeah, we can do. I think we touched upon it. Really, the competitive landscape is twofold. You have the satellite GPS GNSS type of solutions, where you set up a GPS receiver at every cell site. As said, from security and reliability reasons, most operators today want to complement that with network-based synchronization. As we also mentioned, there is a standard for that today to provide high accuracy time synchronization called PTP. Main issue with PTP, it is to ensure the accuracy for 5G. That requires, in essence, every network element to have hardware support for the new PTP standards. For most operators, this means you need to replace, upgrade a major part of your network. The big difference with our solution is you don't need to do that upgrade.
You can provide the same accuracy and the same reliability by building this synchronization overlay virtual synchronization network on top of existing IP network nodes. It significantly reduces the cost of the rollout of the 5G networks. Of course, in combination with it being GPS independent, you don't have to rely on GPS and GNSS type of solutions.
I think Türk Telekom actually saw the problem with GPS a few years ago when the GPS system was switched off in the Syrian war. That actually meant that the whole Türk Telekom network would stop working.
Yeah.
It's definitely the need for having a second solution to GPS. I think in many countries an operator understands that because it's very easy to jam a GPS system in a region or country-wise. We have a question that, "Can you please describe more about this statement? The solution can be used for synchronization on other markets, but we primarily focus if not 5G." Yes. Yeah, I mean, we have, like in the Vinnova report, and I think that we have been writing on that in Open Insight. We see other markets like power grid, like fintech and other markets that can use or need synchronization. We are involved in some of the early stage of testing in other markets.
Right now, we will focus all resources in the next coming quarters to really launch this product because that's the huge opportunity that we have. We need to do it now because it's the question of synchronization have been coming up on the operators table. If you go back, like, a year or two or three, the synchronization discussion was not too large among the operator. Now when they see the need, when they start to roll out or start to take decision and test it, they understand that synchronization is the key. We will, of course, not forego opportunity in other segments.
The key for us right now is to focus on this huge opportunity with the huge market, and we have a proof point on this, on the product on this order, so we will definitely focus on that. Of course, we have business development. As I was saying from beginning, we have a systematic way of proving, using our technology, get understanding in the market requirements and customer requirements. By that, we will continue working as we have done. We likewise work with the FI and the deal with Amazon and what we are doing right now. This is something that we will continuously doing, try to find opportunities in other business segments with the core technology that we have. We have also a question about the semiconductor shortage issue.
Yes, that is a problem in the market. We have seen that, and we have communicated that. We haven't seen that big problem, and we have handled that as we communicated in Q2 fairly well. We will be able to have forecast on semiconductors and other components that we need today. We don't see that as a huge issue right now. It is an issue in the market, and we need to keep high focus on that to make sure that we can deliver high volume in the second half of 2023.
We can say for this project with Türk Telekom, it will not be a problem as we see now. We have a forecast on when we need to deliver, and we are quite secure that we can provide those numbers.
Yes, we already now have in the contract exactly the numbers that we should deliver, so we can plan in advance. Per, do you see any other question that we should do?
What I was doing in my sense.
I think Per mentioned a little bit of the specific on the product. We see definitely regions or geographic markets that have a high need of the product like this. We already now see when we talk to the operator, and we of course, we'll steer and guide our sales people to meet the right operator and market. Should we mention anything more about that? Do we need to do that?
Geographic?
Yes.
No, I think as said, it's definitely a very strong complement into rural areas or for operators where the business case to upgrade the full network. It's the ARPU of 5G cannot motivate that. That means definitely. In perhaps countries like Sweden or Northern Europe, where you have a very strong infrastructure, lot of fiber, modern infrastructure, of course, this is less a problem. Already, as we already said, we have tests with a number of the Nordic mobile operators, and they see this as a complement to their other infrastructure upgrades they are doing. Also like a country like Sweden to which a nationwide coverage is very expensive.
This is a way our solution could be one way of reducing the cost of that by just not forcing them to upgrade areas in the network where from capacity point of view, there's no need to do it. But in other countries like in Turkey and other where I said the ARPU really can't motivate that, the business case is not there to upgrade a full network. Here we have a very strong position.
Okay. I don't see any more question coming in. I would just like to say thank you for listening to the call. We are very excited on this order, and we see it's a huge opportunity for Net Insight to take the next step. We will come back and communicate it as we go along with the product. Don't forget the call that we have next week on the Q3 report. Hopefully, you will call in to that as well. Thank you for today, and hopefully see you next week. Thank you all.