S. P.

Jain Institute of Management & Research Post Graduate Program in Management Information Management 2009

Telecom Sector in India

Business Environment Domain Study Presentation

20th Nov 2009

Anjana Rao, Prachi Joshi, Puneet Taneja, Sandeep Sreenivasa

Agenda
History, Facts

GoI, Regulatory Bodies

Spectrum Action India Advantage VAS Industry Updates, Trends Future Technologies

Conclusion
BE - Domain Study - Telecom 2

History, Facts

GoI, Regulatory Bodies

Spectrum Action India Advantage VAS Industry Updates Future Technologies Conclusion
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History of Telecom in India- I

First Military Landline from Fort William to Lalbazaar (Calcutta ) by the British Govt Merger with the Postal service Merger of ETC &IRT to form (IRCC) Indian Radio Telegraph Cable Company

1851

1881

1883

1923

1932

1947

First Civil landline service introduced for the British Viceroy and his team

Formation of Indian Radio Telegraph Company (IRT)

Formation of Posts Telephone & Telegraphs under Ministry of Communication

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History of Telecom in India- II

DOT established separate from Postal system 1st call on Mobile phone Telecom Minister Sukh Ram(Delhi) to Jyoti Basu (Calcutta) Cellular service launched. New Telecom Policy(NTP) is adopted For 3 months in a row India beats China for the maximum subs added every month

1985

1986

1995

1997

1999

2000

2009

DOT spilt into 3 : MTNL (metros) DOT (others) VSNL (International)

TRAI created (Telecom Regulatory Authority of India)

DOT becomes a corporation = BSNL

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Quick Facts
Total telecom subscribers : 509 million (Sep 2009)

Wireless subscribers :
Wire line subscribers : Tele density :

471.7 million
37.3 million 43.50 per cent

Indias service providers revenue in Q1 (2009): $8.2 billion Indias Rural Mobile Phone Users : 100 Million

Source: TRAI report Nov 2009

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Growing Numbers
Revenue(US$ billion)
Revenue(US$ billion) 43 32

20 15 9 10 11

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Telecom Companies ?
Nokia, Motorola, Samsung, LG, Sony Ericson WTTIL, Tata teleservices tower, QTIL

Bharti-Airtel, Vodafone, Idea, Reliance, Tata Teleservices

ARM, Texas Instruments, Qualcomm, Infineon Symbian, Google

IBM, Wipro, Aricent, Tech Mahindra

Infinera, Cisco, Alcatel Lucent, Nokia Siemens, Huawei

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Market Share
Service Provider Market
1% 5% 1% 10% 23% 11% 13% 18% 18%
Bharti Airtel
Reliance Communications Vodafone Essar BSNL Idea Cellular Tata Teleservices Aircel MTNL Others(Loop, MTS)

As on 30th Sep 09

Net additions in Sep 09 Tata (26.74%) > Bharti (16.78%)

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Handset market
India
5% 6% 7% 8% 60% 15% Nokia Sony Samsung Motorola LG Others

Worldwide
20% 11% 22% 5% 5% Source: IDC Press Release
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Nokia 37% Sony Samsung Motorola LG Others

Growth Avenues
Enterprise Telecom Services 3G

Rural Telephony

Growth Avenues

WiMax

Value Added Services

Infrastructure Sharing

Virtual Private Network

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Managed Services

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Urban-Rural Telephony
Population Contribution Subscription Contribution

15-20% Urban India

80-85%

72%

Rural India

28%

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History, Introduction, Facts

GoI, Regulatory Bodies

Spectrum Action India Advantage VAS Industry Updates Future Technologies Conclusion
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Strategic Flow
500 Mn Mobile and Wire line subscribers in India today Rs. 40,000 Crore quarterly revenue figures for this industry

Clear Policy

So How all this happened?

Competition

Cheap tariff regime

TRAI functions
Consumer Protection Ensure Quality of Service

Ensure Affordable Tariff

Regulate Interconnections Regulation, Directions, Orders Recommendations
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Agenda
History, Introduction, Facts

GoI, Regulatory Bodies

Spectrum Auction India Advantage VAS Industry Updates Future Technologies Conclusion
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Spectrum Allocation
Need for Spectrum Allocation
Spectrum auctions ensure the efficient use of spectrum by allocating it to those entities that value it most, while also generating revenues for governments. In order to allocate spectrum amongst competing service providers, regulatory agencies often use auctions.
The key challenge before regulatory agencies is to design auctions in such a way as to foster competition while at the same time ensuring that bidders can effectively use the spectrum for their business.

Spectrum Allocation in India

o

o
In India, telecom licences were auctioned for basic and cellular services from 1991 by the Department of Telecom (DoT). The entire country was divided into roughly 20 circles, categorized as A, B, or C depending upon their revenue potential.

Circles

GSM&WLL

Required to seek Foreign partners. For cellular licences, Global System for Mobile Communications (GSM) was the chosen technology and for basic services, a combination of fiber optic and wireless in the local loop (WLL) was selected.

Agenda
History, Introduction, Facts

GoI, Regulatory Bodies

Spectrum Auction India Advantage VAS Industry Updates Future Technologies Conclusion
BE - Domain Study - Telecom 19

Indias Competitive Advantage

1. 2. 3. 4. 5.

Fastest growing free market democracy Cost advantage in product development and back office processing Stable economic outlook Decade long reforms Huge market potential one of the largest consumer markets Large talent pool

Source: www.telenor.com

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-Intensive competition in the country has made it possible for service providers to offer the services with lowers fare in the world, profitability, -Many new handset have been launched.

Porters Diamond Model

Firm strategy structure and rivalry.

-India has a large middle class of 300 million, -Growing affordability and lifetime free schemes have care a market at the bottom of the pyramid. -Teledensity (~43.5%) offers huge future potential.

Chance

Factor Conditions

Demand conditions

-The government extends full support to industry through reform processes. -Presence of skilled labour pool. -Rapidly developing robust telecom infrastructure. -Increasing disposable income of consumers. -Increasing demand due to changing lifestyles and growing attraction for mobiles with new features. - Policies are in place to safeguard the interests of service providers, as well as those of consumers.
Government

Related and supporting industries

-Competent handset manufacturers have produced the lowest priced handsets for the Indian market. -Handset players are setting up manufacturing bases in India for better operation management. -Many telecom and equipment and software companies are based in India. BE - Domain Study - Telecom 21

Source: IBEF Report

FDI in Telecom Sector

Third largest sector to attract FDI in India
FDI in Telecommunication Sector (US$ million)

2008-09

2345.38

2007-08

1275.65

2006-07

521

2005-06

680

2004-05

129

2003-04

116

Source: IBEF Report

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Agenda
History, Introduction, Facts

GoI, Regulatory Bodies

Spectrum Auction India Advantage VAS (Value Added Services) Industry Updates Future Technologies Conclusion
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VAS (Value Added Services)

SMS
VAS services, Bulk Messaging, B2B and B2C

Voice IVR
Mobile Radio, Voice chat, English Learning, Devotional and Astrology, Music on Demand

Content downloads Mobile WAP Portal

Consumer Applications Enterprise solutions : Mobile CRM, Mobile SFA CRBT (Caller ring back tones)

USSD Message along with *141# Flash alerts

VAS offerings

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VAS market in India

VAS: Not a form of basic service but adds value to the total service offering Contributes to 10% of total revenue from telecom operators

The corresponding figure in developed nations is ~25%

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Present Segments
Population of India 1,130 mn

Mobile Subscriber Base 509 mn

GPRS Enabled 70 mn

GPRS Activated 17 mn

GPRS Users 10 mn

Source: IAMAI Report

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Why mobile VAS ?

Decrease in ARPU for telecom operators
Very low operating margins Decreasing call rates: Lowest in the world @ 1p/sec Increase in number of operators in each circle Saturation in metro market: Over 100% tele-density in 4 metros

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VAS value chain

Content Generators Eg. Music Companies, Website portals

Content Aggregators Eg. Spice Digital, Hungama.com, Mauj.com

Telecom Operators Eg. Airtel, Vodafone, Idea, BS

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Rural VAS
Only 12% tele-density in rural areas as compared to 72% in urban areas Huge market potential Sachet model of VAS promotion Localization content
Local Mandi Rates Weather forecasts Health and job related information Train services

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Agenda
History, Introduction, Facts

GoI, Regulatory Bodies

Spectrum Auction India Advantage VAS Industry Updates Future Technologies Conclusion
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Industry Updates
Idea Cellulars Acquisition of Spice Telecom Idea acquired 40.8% stake of Spice Communications at Rs 77.30 a share for Rs 2,716 crore. There was a share swap in which Spice shareholders got 49 Idea shares for every 100 Spice shares held. Vodafones entry into India Vodafone paid a discounted price of $10.9 billion in cash for acquiring the 52% stake held by Hutchison Telecom International (HTIL) Telenor-Unitech Deal Telenor is in the process of acquiring controlling stake of 67.25% in Unitech wireless via equity infusion

TTSL DoCoMo Deal.

Japanese carrier NTT DoCoMo acquired 26 per cent stake in Tata Teleservices (TTSL).

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Bharti-MTN deal
To create a $61-billion transnational telecom goliath. Combined revenues of $20 billion Over 200 million subscribers across Africa, Asia and Middle East. Takeaways for Bharti Access to new geographies with high growth potential. Greenfield project, time-consuming and capital intensive. Reasons for failure Dual listing Indian rupee is not fully convertible Not possible to go in for dual listing of shares. which allows people to buy shares in the stock exchanges of one country and sell in the bourses of the other country

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India 3G Story

In India, 3G mainly for voice? Indiatimes - Sep 8 2008 India 3G kicks off; but at what cost? CIOL - Jan 16 2009 India 3G News: BSNL flips the switch Product Reviews - Mar 5 2009
Source: Google Trends

DoT looking to hike the reserve price for the auctions of the pan-India 3G spectrum TopNews - Jun 12 2009 India 3G auction may happen sooner than expected Telecoms.com - Aug 27 2009 SK C&C, Reliance team on India 3G roll out EE Times India - Oct 20 2009
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Jan 14th 2010

Reserve Price
3G Rs 35 bn WiMax Rs 17.5 bn EVDO Rs 8.25 bn 2-3 times the reserve prices - to total at least Rs65bnRs120bn. with no current presence in India have to pay an additional Rs 16.50bn for 2G spectrum. relaxing the normal US$500m limit on external commercial borrowings
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Expected Bid

Foreign players

ECB

Agenda
History, Introduction, Facts

GoI, Regulatory Bodies

Spectrum Auction India Advantage VAS Industry Updates Future Technologies Conclusion
BE - Domain Study - Telecom 36

Mobile Number Portability(MNP)

The Inhibitors
Huge Costs
Customer Retention/Increased Competition

Infrastructure Upgrade
Cost Recovery and Bill Reconciliation/Query Processing

Source: Voice and Data

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Mobile Virtual Network Operator

What ? Operator or company which does not own a licensed spectrum and generally with out own networking infrastructure

How ?

MVNOs resell wireless services under their brand name, using regular telecom operator's network. Deploy their own mobile Intelligent Network (IN) infrastructure in order to facilitate the means to offer value-added services. The goal is to differentiate versus the incumbent mobile operator, allowing for customer acquisition. MVNO's have full control over the SIM card, branding, marketing, billing, and customer care operations.

Differentiation

Marketing

Regulation

MVNOs have not been regulated in any country. ITU has received several requests to study the issue

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Wimax v/s 3G
3G Spectrum Price To be auctioned WiMax DoT has recommended 25% of reserve price of 3G spectrum Result Advantage WiMax

Spectrum Allocation
For Voice services Equipment/Standard Data download speeds (fixed) Data download speeds (mobile)

Simultaneous
Best technology Evolved over the years 15 Mbps 15 Mbps

Simultaneous
Evolving technology New technology 70 Mbps 20 MBPS

Neutral
Advantage 3G Advantage 3G Advantage WiMax Advantage WiMax

Source: Business Standard

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Generations

4G 3G 10MBPS TO 20 MBPS

600KBPS TO 2MBPS
2g DATA RATE 14.4
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4G
Wi Max (e not d)
Worldwide Interoperability for Microwave Access IEEE 802.16e STANDARDS BROADBAND EVOLUTION MIMO (multiple input multiple output) smart antenna OFDM 10 To 80mbps Sprint, Clearwire, Comcast, Motorola / Lucent Rev m is the future Small investment

LTE

Long term evolution 3GPP 80% MOLILE EVOLUTION

MIMO OFDM 20 to 100mbps Revision 8 future is rev 10 Vodafone/A&T/France Tele Nokia & Ericsson Large investment

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Agenda
History, Introduction, Facts

GoI, Regulatory Bodies

Spectrum Auction India Advantage VAS Industry Updates Future Technologies Conclusion
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SURFING AGAINST
Top Ten Challenges
Sustenance of same EBITDA Competitive tariffs VAS applications on Device Spectrum management

Broadband expansion in Rural

Transition to NGN Content Regulation of Data Ecosystem to facilitate M&A Reduce Circles to relax Roaming Alternate Technologies (Solar/Wind for power back-up)
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Road Ahead
People with and without mobile connections (in millions)
Connected Not Connected

604 661

Highest Number Not Connected People

720
510

36 271 91 140 25 165 71 96

China
54.4%

India
43.6%

USA
88.4%

Indonesia
60.5%

Brazil
86.6%

Pakistan
57.6%

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References
1. 2. 3. 4. 5. 6. 7. Trai Quaterly Report (Nov 2009). IBEF report 2007-08 : Telecommunication - MARKET & OPPORTUNITIES. Cellular Statistics Cellular Operator Association of India IAMAI & eTechnology Group@IMRB: MOBILE VALUE ADDED SERVICES IN INDIA- A Report. Telenor Entering India: Investment Update Voice and Data(May 2009): Mobile Number Portability - Poaching with Portability. Business India : Telecom Takeover, Bharti-MTN deal

Thank You for Your Attention !

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