assessment of economic impact of wireless broadband in india
TRANSCRIPT
Report for GSMA
Assessment of Economic Impact of Wireless Broadband in IndiaDi i D tDiscussion Document
November 2010
1
The development of wireless broadband can bring significant benefits for the Indian economybenefits for the Indian economy
• Key findings: • These surveys, however, have emphasised th d t t ICT ‘ t ’ tIncrease in broadband penetration of 1% will
contribute INR 162 bn, or 0.11% to Indian GDP in 2015
Allocation of additional 5 MHz of 3G
the need to create an ICT ‘eco-system’ to realise significant and wide-reaching productivity gains
• The Indian government has developed clear spectrum will increase BB penetration by 3.3% of population and enhance GDP by INR 538 bn in 2015
• Analysys Mason has prepared this report for
g pobjectives in its National Broadband consultation paper2 in line with policies established in developed and emerging economies
GSMA to assess the direct and indirect economic impact of wireless broadband in India
• Broadband connectivity is being increasingly
economiesTarget of 100 million broadband connections by 2014
• The Indian demographics with a large rural Broadband connectivity is being increasingly seen as an integral driver of improved socio-economic performance
• Recent econometric studies have quantified
population suggests that the development of a robust wireless broadband ecosystem will be key to meet government’s objectives
• Addressing the latent demand forthe direct impact on productivity and economic growth suggesting that an increase in broadband penetration of 1% could result in 0.1% productivity gain1
Addressing the latent demand for broadband services will also support the development of strong Indian players across the value chain
ConfidentialNote: 1. Based on World Bank report; 2. Consultation Paper on National Broadband Plan – 10th June 2010 - TRAI
p y g
2
Definitions of key terms used in this presentation
Terms DefinitionsWireline Lines of copper / cable / fiber deployed underground or overhead for voice / internet services
Fixed Broadband – Wireline Data connection (>=256 Kbps download or upload speed) over wireline infrastructure
Fixed Broadband – Wireless Data connection (>=256 Kbps download or upload speed) over wireless transmission accessed from a fixed location primarily using WiMAX 802 16-2004 / 802 16 d technologylocation, primarily using WiMAX 802.16-2004 / 802.16.d technology
Wireless Broadband Data connection (>=256 Kbps download or upload speed) over wireless transmission primarily using WCDMA, HSPA, LTE, CDMA EV-DO, TD-SCDMA and WiMAX 802.16.e technologies
Internet Users Unique users accessing internet from private / shared / corporate connection
Wireless Broadband Users Unique users accessing wireless broadband services from private / shared / corporate connection
Consumers Individuals accessing broadband services from residential premises or SOHO (Small Office, Home Office) & unorganized sector (whose activities / data collection is not regulated under any legal provision) businesses
Includes large businesses and SMEs in the organized sector (for which statistics are available from budgetEnterprises Includes large businesses and SMEs in the organized sector (for which statistics are available from budget documents or reports, or whose activities or data collection are regulated under a legal provision)
Direct Impact Consumer and enterprise spend on devices and services for accessing wireless broadband
Ecosystem Impact Revenues generated by the telecom and adjacent industries from value added services / other services Ecosystem Impact enabled by wireless broadband access
Second Order Impact Increase in economic productivity of the work force as a result of access to wireless broadband services
Confidential
3
Increase of 1% in wireless broadband penetration will contribute 0 11% (INR 162 bn) to Indian GDP in 2015contribute 0.11% (INR 162 bn) to Indian GDP in 2015
Spare Spectrum Availability Based onImpact on GDP by 1% Increase in Wireless Spare Spectrum Availability Based on Existing Spectrum Allocation2
Impact on GDP by 1% Increase in Wireless Broadband Penetration (INR bn, 2015)
51%41%
0 02%
0.03%
%
21%
93
29
40 162
2013 2014 2015
0.06%
0.02%
0.11%
-34%
-7%93 2010 2011 2012
Direct Ecosystem SecondOrder
Total
Spend on Spend on Productivity
Assumptions2010 2011 2012 2013 2014 2015
-56%
pServices and
Devices
pecosystem
elements using wireless BB
yand efficiency gains among
corporate employees
Bandwidth per user1 (Kbps) 383 570 916 1,414 1,978 2,476
Allocated bandwidth (MHz) 5.0 5.0 5.0 5.0 5.0 5.0
ConfidentialSource: Analysys Mason
Note: 1. Average subscribed bandwidth per user; 2. Estimated 7.5 Mbps capacity available for data per 3G cell site, after adjustment for allocation of voice
4
Allocation of additional 5 MHz will increase BB penetration and enhance GDP by INR 538 bn in 2015and enhance GDP by INR 538 bn in 2015
Key Metrics for Scenarios of SpectrumTotal Impact on GDP by Scenarios of
Scenarios Allocated B d idth1
Wireless BB P t ti 2
Wireless Broadband
Key Metrics for Scenarios of Spectrum Allocation (2015)
Total Impact on GDP by Scenarios of Spectrum Allocation (INR bn, 2015)
(1.9% of GDP) Scenarios Bandwidth1 Penetration2 Broadband
Users3
Low (Existing 5 MHz 9.2% 117 mn
1,0342,190
2,771o G )
INR 538 b
INR 581 bn(1.2%
of GDP)
(1.5% of GDP)
( st gallocation)
Base413
515
615757
8881,652INR 538 bn
Base(Additional
5 MHz)410 Mhz 12.5% 158 mn
482787
1122413
Low Base High
(E i i (Additi l (Additi l High(Additional 15 MHz)4
20 MHz 16.1% 204 mn
Direct Ecosystem Second Order
(Existing Allocation)
(Additional 5 MHz)4
(Additional 15 MHz)4
ConfidentialSource: Analysys Mason
Note: 1. Total bandwidth allocation for each existing 3G license holder; 2. Based on spectrum allocation, penetration reflects the number of users that can be supported by data cell sites; 3. Includes residential and corporate users separately; 4. Additional spectrum over existing scenario (Low case) for each 3G licensee
5
Contents
Executive Summary
Overview of Broadband Services in India
Impact of Wireless Broadband on GDP
Direct Impact: Industry Revenues and GDPDirect Impact: Industry Revenues and GDP
Ecosystem Revenues and GDP
Stakeholder Imperatives
Second Order Impact / Externalities: Socio Economic Metrics and GDP
Confidential
6
India lags in broadband penetration among BRIC nations due to affordability issues and an under-developed wireline baseto affordability issues and an under-developed wireline base
BRIC Countries & Indonesia: Broadband and
Exec Summary
• India has a significantly lower wireline penetration as compared to other emerging countries, implying a weak infrastructure b f i li b d b db d
BRIC Countries & Indonesia: Broadband and Wireline Penetration by Access Technology (2009)1
32%
base for wireline based broadband deployment
• Lower GDP per capita results in service and d i ff d bilit i th li iti
23% 22%
15%8% 8% device affordability issues, thus limiting
penetration to the consumer, professionals segments and student population through direct / shared access3%
15%
12%
1%
5%
0 1%
4%
6%
1%
8%
1%
• Overall low broadband penetration has resulted in the absence of an ecosystem (content, applications, service models and
GDP per Capita (USD) 8,214 8,675 1,111 3,678 2,247
1%0.1% 1%
Brazil Russia India China Indonesia
device categories), which can address the mass market requirement
Wireline Wireless BroadbandFixed Broadband - Wireline Fixed Broadband - Wireless
ConfidentialSource: Analysys Mason, TeleGeography, Wireless Intelligence, EIU
Note: 1. Penetration as % of population; 2. Wireless broadband includes WCDMA, HSPA, CDMA EV-DO and TD-SCDMA
7
The TCO for broadband services requires a significant percentage of consumer spend on communicationspercentage of consumer spend on communications
Consumer Spend on Communications &
Exec Summary
Broadband / Internet TCO1 % f C it
Consumption Pattern
Consumer Spend on Communications & Broadband in India (2009) • While each connected consumer (at
teledensity of 48%) spent an average ~ INR 2,000 in 2009 on communications, the minimum cost of using a fixed broadbandTCO1 as % of per Capita
Consumption
Total Consumer Spend:INR 44,786 billion
Per Capita Consumption:INR 30,291
minimum cost of using a fixed broadband connection was ~ INR 6,000
• The high TCO is a result of the high device cost as % of consumer wallet
3% Other
Education L i
1%
6%13%
20% cost as % of consumer wallet
• Indian broadband service ARPU is comparable with other countries while the per capita incomes are much lowerLeisure
CommunicationTransport
Healthcare
Housing & Utilities
12% 14%
Dial up Fixed
per capita incomes are much lower
The average monthly household income of a regular online Indian is 3.2 times higher than the national average
2009
gApparelFood
Dial-upInternet
FixedBroadband -
Wireline
Device TCO Service TCO
Broadband ARPU for India is USD 12 (INR 600), China USD 8 and Russia USD 15
ConfidentialSource: Analysys Mason, TRAI, Euromonitor, JuxtConsult, Compay websites
Note: 1. Annual Total Cost of Ownership: includes depreciated entry-level cost of PC & modem and entry level service charges
8
Further, the utility of residential internet is limited due to demand side issues with office / shared usage picking updemand side issues, with office / shared usage picking up
Exec Summary
100%
9.3 mn 11.4 mn 13.6 mn
PC Unit Sales Mix Across Segments Internet Access Points for Urban Users1
2% 2% 2% 5%100%
32 mn 46 mn 50 mn 63 mnUnit
Sales :Internet
Users:
18% 18% 18%
36% 34% 34%75%
100%
22% 25% 27% 30%
6% 7% 8% 5%2% 2% 2% 5%
75%
100%
34% 36% 36%
12% 12% 12%
18% 18% 18%
25%
50%
31% 30% 26% 23%
39% 36% 37% 37%
25%
50%
0%2008 2009 2010
Residential Institutional
26% 23%
0%2006 2007 2008 2009
Home Cyber CaféOffice School / College2Large Businesses SMB & SOHO
• Residential PC sales have remained stagnant at around 30%, with laptop sales picking up marginally
gOther
• Internet access from home is declining due to limited PC base and affordability / utility issues
2
ConfidentialSource: Analysys Mason, IDC, IMRB
marginally
Note: 1. Includes claimed internet users – individuals to have used internet at any point in the past; 2. SMB: Small & Medium Businesses, SOHO: Small Office Home Office
9
Deployment of new access lines for fixed broadband services is time consuming and yields unattractive returnsis time consuming and yields unattractive returns
Comparative Evaluation of Deploying
Exec Summary
Comparative Evaluation of Deploying Broadband Technologies in India • Deployment of new FTTx lines for offering
broadband services to individual homes does not make viable business case due to Technology Time to Deploy Capex per Sub
high cost of getting Right of Way (RoW) permission and execution
• The Capex gets rationalized only for FTTB
DSL (FTTN)Existing Line Low USD 799
DSL (FTTN)New Line High USD 2,200 The Capex gets rationalized only for FTTB
deployments for MDUs2 at a triple play ARPU level, but number of MDUs remain limited
e e
FTTH High USD 2,540
FTTB Medium USD 1 390
• Existing DSL connections are concentrated in urban areas, with top 20 cities accounting for 70% of current wireline broadband
FTTB Medium USD 1,390
WiMAX (802.16.e)1 Low USD 133
for 70% of current wireline broadband connectionsHSPA1 Low USD 125
ConfidentialSource: Analysys Mason, Industry Inputs
Note: 1. Does not include cost of spectrum; 2. Multi Dwelling Units
10
Wireless broadband deployment is scalable as compared to fixed line technologies such as xDSL Cable and Fibrefixed line technologies such as xDSL, Cable and Fibre
Broadband Lines in India Split by Technologies 8 77 mn (Mar’10)
Exec Summary
Broadband Lines in India Split by Technologies, 8.77 mn (Mar 10)
• Only upto 15 mn lines of the existing 37.0 mn fixed lines can be upgraded to DSL due to loop length & copper quality issues
7.598.77 • Fragmented business limits scalability• Cable plant up-gradation cost significant
• No scalability constraint, except spectrumNo scalability constraint, except spectrum • Lowest Capex and rollout time
• High cost associated with fibre deployment per subscriber
0.10 0.420.61
0.05
Total DSL Cable Wireless Fibre OthersTotal DSL Cable Wireless Fibre Others
Capex / Sub USD 2,2001 USD 930 USD 1252 USD 1,4003
ConfidentialSource: Analysys Mason, TRAI
Note: 1. DSL Capex per sub comprises of cost for FTTN New Copper line while for existing line Capex per sub is USD 800; 2. Wireless Capex per sub includes HSPA capex per sub; 3. Capex per sub for Fibre comprises of FTTB connection
11
However, with severe spectrum congestion in voice services, carriers find it difficult to spare capacity for wireless datacarriers find it difficult to spare capacity for wireless data
Subscribers per MHz for GSM Carriers in
Exec Summary
1 2
Subscribers per MHz for GSM Carriers inMetro and Category A Circle1
QE-Mar 2010• Almost all major GSM carriers are already
facing spectrum congestion in the metro areas for offering basic voice services, and
1.12
0.99
0 8
1.0
1.2
(mn)
do not have network capacity to offer EDGE based data services
• With the allocation of 3G and BWA
0.43 0.460.510.6
0.8
riber
s pe
r MH
z (
0.5
With the allocation of 3G and BWA spectrum, some of the voice congestion will get relieved, and operators will have spare capacity to offer data services
0.28
0.2
0.4
Sub
sc
0.2• However, 3G spectrum allocation is only 5
MHz and will only be able to support limited number of wireless broadband users as
0.0Metro Category A Circle
Airtel Vodafone Idea
number of wireless broadband users as some will be used to solve the voice congestion issues
ConfidentialSource: Analysys Mason, TRAI
Note: 1. Dotted line indicates DoT Criteria for maximum number of subscribers per MHz (at 10 MHz spectrum for GSM and 5 MHz for CDMA)
12
With economies of scale, wireless broadband offering will become more affordable for the mass market consumersbecome more affordable for the mass market consumers
Broadband / Internet TCO1 as % of per Assumptions for TCO Calculations: Entry
Exec Summary
Per Capita Consumption: INR 52,134 (2015)
Broadband / Internet TCO as % of per Capita Consumption (2015)
Wireline Broadband
Wireless BB -Data Only2
Wireless BB – Mobile2
Assumptions for TCO Calculations: Entry Level Device and Service Pricing (INR, 2015)
3.2% 3.4%
10.2% 9.8%
4 5%
Device Type Desktop Embedded Netbook Smartphone
Device Cost (INR) 8,000 10,000 5,000
7.0% 6.4%3.8%
0.7%4.5%
Device Lifetime (years) 3 3 2.5
Modem Cost (INR) 2,000 - -
WirelineBroadband
WirelessBroadband -Data Only
WirelessBroadband -
Mobile
Device TCO Service TCO
Modem Lifetime (years) 2 - -
Monthly Service Charge – Entry Level (INR / month)
125 150 3011
2 2
Level (INR / month)
• Entry level service pricing is expected to be slightly higher for wireless broadband offerings, which is expected to reduce further with higher adoption and competition among operators
• Device cost for fixed and wireless broadband offerings will be similar by 2015
Confidential
• Device cost for fixed and wireless broadband offerings will be similar by 2015Note: 1. Annual Total Cost of Ownership: includes depreciated entry-level cost of PC & modem and entry level service charges for
data usage; 2. Data only wireless broadband usage refers to access over a PC, while mobile usage refers to that over a mobile phone, with a WCDMA connection bundled with voice services
Source: Analysys Mason, Industry Inputs, Company Websites
13
The service delivery ecosystem is developing rapidly to address the opportunity from wireless broadband servicesaddress the opportunity from wireless broadband services
Exec Summary
Service Providers• Telecom operators and ISPs have made total investment of ~ INR 1,000 bn (USD 23 bn)
for 3G and BWA spectrum, and are entering into ecosystem partnerships for delivery of data-intensive services
Device OEMs • Device vendors are launching mass market access devices such as INR 7,000 (USD 150) smartphones and INR 14,000 (USD 300) netbooks, and partnering with operators to bundle video capable handsets
Delivery & Enabling Platform Providers
• Technology vendors, both Indian and global, are developing platforms such as SDPs1 for integrated and seamless multi-screen experience, ODPs2 for easy discovery and activation, and enabling platforms (such as advertising, relevance, content management and commerce) for enhanced experience and ease of use
Product / Application Providers
• Data-focused as well as mass market product and application platforms offering services such as mobile / broadband TV, online gaming and rural VAS are being developed by various local vendors
Content Aggregators / Developers
• Content providers are aggregating and developing both popular entertainment content such as music / videos, and mass market content such as utility applications and educational content, customized for the small screen
ConfidentialNote: 1. SDPs: Service Delivery Platforms; 2. ODPs: On Device Portals
Source: Analysys Mason, Industry Inputs, Company Websites
14
Our estimates suggest that wireless broadband will have an overall impact of USD 51 bn in 2015 comprising 1 5% of GDPoverall impact of USD 51 bn in 2015, comprising 1.5% of GDP
Total Impact on GDP by Wireless
Exec Summary
• Based on our assessment of latent demand, the specific socio-economic pattern of India and international comparison, the contribution of wireless broadband industry
Total Impact on GDP by Wireless Broadband in 2015 (INR bn)
All calculations assume ‘Base’ scenario with allocation of total 10 MHz spectrum to all 3G
t contribution of wireless broadband industry in India could reach USD 51 billion in 2015, equivalent to 1.5% of GDP
With increase in 10% wireless broadband t ti i t l f INR
893 2,194
operators
penetration, an incremental revenue of INR 1,622 bn (1.1% of GDP) is generated
Other studies such as by World Bank in 2009 estimate an economic growth impact of 1.21% of GDP for developed countries and 1 38% of
0.6%515
of GDP for developed countries and 1.38% of GDP for developing countries for 10% increase in broadband penetration
• Nominal GDP of India is expected to grow at CAGR f 14% f 2010 t 2015
0.6%
0.4% 1.5%787
a CAGR of 14% from 2010 to 2015
• With the ecosystem maturity, wireless broadband penetration will increase from 0.8% in 2010 to 12.5 % in 2015
Direct Ecosystem SecondOrder
Total
ConfidentialSource: Analysys Mason, Industry Inputs
15
Increase in broadband penetration will have a direct revenue impact of INR 787 bn (0 55% of GDP) in 2015impact of INR 787 bn (0.55% of GDP) in 2015
Direct Impact Key Metrics – Direct Impact of Wireless
Exec SummaryDirect Impact
Direct Impact
Parameter 2010 2015
Key Metrics Direct Impact of Wireless Broadband Penetration
2010 2015
s
CAGR:60% Parameter 2010 2015
Wireless broadband users (million) 10 158
INR 62 bnUSD 1.3 bn
0.08% of GDP
INR 650 bnUSD 15.2 bn
0.46% of GDP
Serv
ices 60%
Penetration of population 0.8% 12.5%
Wireless broadband service 523 343evic
es INR 18 bnUSD 0.4 bn
0 02% f GDP
INR 136 bnUSD 3.2 bn
0 10% f GDP
CAGR:50%
ARPU (INR / month) 523 343
Households with wireless broadband connection (million)1
6 72
De 0.02% of GDP 0.10% of GDP
CAGR:Businesses with wireless broadband connection (million)1
1.4 4.0INR 80 bnUSD 1.7 bn
0.11% of GDP
INR 787 bnUSD 18.4 bn
0.55% of GDPTota
l 58%
ConfidentialSource: Analysys Mason, Industry Inputs
Note: 1. Includes households and businesses with multiple connections and users
16
The growth in wireless broadband services spend will bedriven by increase in consumer base & enterprise penetrationdriven by increase in consumer base & enterprise penetration
Projections for Consumer and Enterprise
Exec SummaryServices1
Projections for Consumer and Enterprise Spend on Wireless Broadband Services
(INR billion)• Global industry trends show the growing
importance of non-voice services including content and entertainment, financial services
d d ti i2015: 2010: CAGR 60% and advertising
• Share of non-voice revenues has the potential to reach ~30% of operator revenues by 2015650
0.46% of GDP0.08% of GDP CAGR: 60%
revenues by 2015In 2009, non-voice revenues comprised only 9% of total telecom revenues, of which voice-based VAS / CRBT and SMS had 87% share
3394650.24%
• Wireless broadband user base has the potential to grow at a CAGR of 74% to comprise 86% share of broadband users by 2015162
238311
5686
141
227
62105
183
303
0.22%2015
In 2009, only 19% of broadband users were accessing applications from a wireless system
21 49 97162
4156
2010 2011 2012 2013 2014 2015
Consumer Enterprise
ConfidentialSource: Analysys Mason
17
The market for wireless devices will be driven by consumer-centric devices and will see local vendors expanding globallycentric devices and will see local vendors expanding globally
Projections for Consumer and Enterprise
Exec SummaryDevices2
Projections for Consumer and Enterprise Spend on Wireless Broadband Devices
(INR billion)• Global trends in mobile handsets, tablets
and eBooks suggest increasing use of wireless for online content consumption
2015: 2010: CAGR 50%Share of these devices in global electronic device shipments is expected to increase from 32% share in 2010 to 39% in 2012
• The size of the Indian device market will29114
136
0.02%
0.10% of GDP0.02% of GDP CAGR: 50%
• The size of the Indian device market will allow the emergence of global players
• Indian brands such as Micromax, Spice and Videocon have an increasing share of the
16
22
56
85
0.02%
Videocon have an increasing share of the mobile handsets market – 22% in QE-Mar2010 from 7% in QE-Mar2009
• These players are expected to increase2546
7092
107
7
8
11
18
33
560.08%
These players are expected to increase investments in local manufacturing and expand their markets globally
11257
2010 2011 2012 2013 2014 2015
Consumer Enterprise
ConfidentialSource: Analysys Mason
18
Increasing penetration of wireless broadband will have a significant impact on the broadband ecosystem revenues
Wireless BB Description1 Drivers in India Wireless BB Revenue
significant impact on the broadband ecosystem revenuesExec SummaryEcosystem Impact
Ecosystem Description1 Drivers in India (INR bn)
Consumer / Retail
• It includes:M-CommerceM-Entertainment
– M-contentM gaming
• Larger reach of mobile medium compared to PC / laptops is the key driver for growth of retail consumption on mobile in India
• Availability of devices such as smartphones and to chscreen phones at affordable price point
9
187
2010
2015
182%
Retail – M-gaming– M-app
M-Advertising
touchscreen phones at affordable price point• Lack of capacity on 2G network for data intensive
entertainment content such as Mobile videos
Financial• It consists of M-
B ki d
• Banking penetration in India remains concentrated in urban areas enabling players such as Fino, Eko to provide
m-Advertising m-Entertainment m-Commerce
1620102 67%
Financial Service
Banking and remittances using wireless BB
g p y , pbanking solution based on mobile to rural market
• Poor user experience for financial services on 2G network through SMS / voice / GPRS access
• It includes services • Tech enabled social service market in India is currently very
2052015
m-Banking
3 101%
Social Services
t c udes se cessuch as learning, healthcare and governance accessed on wireless mode
ec e ab ed soc a se ce a et d a s cu e t y e yunderpenetrated with no strong player
• Emerging innovations in both hardware and software to drive adoption
• Easy access to time consuming processes such as Passport form submission
2
63
2010
2015
m-Learning m-Health m-Government
3 101%
Corporate / Verticals
• Use of wireless BB for farming, utilities such as M2M and for enterprise solutions
• Enterprise spending priorities are shifting from cost optimization to supporting business growth
• Farmers are depending on online applications for significant costs savings & to generate additional revenues
• Lack of capacity on 2G network resulting in poor user experience
6
60
2010
2015
m-Farming m-Enterprise m-Utilities
460%
Confidential
experience m Farming m Enterprise m Utilities
Source: Analysys Mason, Industry Inputs
CAGRNote: 1. ‘m’ refers to wireless broadband enabled services accessed through wireless broadband connection over mobile handsets or PCs
19
Larger reach of mobile compared to PC / laptops is the key driver for growth of retail consumption on mobile in Indiadriver for growth of retail consumption on mobile in India
Wireless Broadband Ecosystem Revenues
Exec SummaryRetail1
Wireless Broadband Ecosystem Revenues from Retail (INR billion) • m-Advertising: The nascent mobile advertising
market in India will benefit from the increasing role of ecosystem players
2015: 2010: CAGR 82% • m-Content: Increasing carrier focus on VAS content promotion and emergence of experimental business models by D2C players are key drivers for wireless content in India187
0.13% of GDP0.01% of GDP CAGR: 82%
• m-Gaming: The Indian digital gaming market is still nascent but has significant growth potential owing to the recent initiatives by players such as inno ati e pricing models
20
5
7
23
31
133 < 0.01%
0.02%
0.01%
innovative pricing models
• m-Apps: With the launch of operator app stores, there is significant potential for Indian app developers to achieve global scale23
42
70
1018
13
2
3
5
7
14
921
44
82
41
0.07%
developers to achieve global scale
• m-Commerce: m-Commerce market in India is expected to grow as the focus from banks and carriers increases, with mobile reach
1 3 8 14 22 287 13
239 20
11 3
2010 2011 2012 2013 2014 2015m-Advertising m-Content m-Gamingm-Apps m-Commerce
0.02%
ConfidentialSource: Analysys Mason
pp
Note: 1. ‘m’ refers to wireless broadband enabled services accessed through wireless broadband connection over mobile handsets or PCs
20
Financial services have the potential to generate INR 205 bn in revenues for the wireless broadband ecosystemrevenues for the wireless broadband ecosystem
Wireless Broadband Ecosystem Revenues
Exec SummaryFin. Service2
Wireless Broadband Ecosystem Revenues from Financial Services (INR billion) • Users of mobile banking and related
services, globally, is forecasted to grow at a CAGR of 59.2 % to reach 894 million users i 2015
2015: 2010: CAGR 67% in 2015
• Inward overseas remittance in India is expected to dominate the remittance market
ith h f 55% f th t t l k t i205
0.14% of GDP0.02% of GDP CAGR: 67%
with a share of 55% of the total market in 2013
• Regulations in India currently permits only b k t b k d PO t PO t f
124
172
bank to bank and PO to PO transfers
Bank account to bank account remittance through mobile or online has no transaction fees as compared to Post office remittance16
38
75
p
Use of mobile banking services for cross border inward and outward transfers is strictly prohibited
16
2010 2011 2012 2013 2014 2015
ConfidentialSource: Analysys Mason
21
Tech enabled social service market in India is currently very underpenetrated with no strong playerunderpenetrated with no strong player
Wireless Broadband Ecosystem Revenues
Exec SummarySoc. Service3
Wireless Broadband Ecosystem Revenues from Social Services (INR billion)
2015: 2010: CAGR 101%
• m-Learning: The technology enabled education market in India is currently at a very nascent, but is expected to grow significantly with the initiatives taken by government such as National Knowledge
0.04% of GDP< 0.01 % of GDP CAGR: 101%
63
taken by government such as National Knowledge Network. Emerging innovations in hardware and software will further fuel the growth of mobile learning
H lth
11
19
40
0.01% • m-Health: In India, operators have launched basic health services, and government bodies in partnership with private players are using mobile primarily for health data collection and provide treatment support
1218
9
16
26
7
11
512
23
4 0.01%
0.02% treatment support
• m-Government: Government of India have launched a National e-Governance Plan to provide governance services as part of 27 Mission Mode
2 4 712
142
12
2010 2011 2012 2013 2014 2015
m-Learning m-Health m-Government
0 0 %Projects (MMPs) and 8 components online. Government IT spend is estimated to constitute 1% of the total state budget expenditure
ConfidentialSource: Analysys Mason
Note: 1. ‘m’ refers to wireless broadband enabled services accessed through wireless broadband connection over mobile handsets or PCs
22
Mobile corporate service helps enterprises and users to enhance productivity connectivity and competitive advantageenhance productivity, connectivity and competitive advantage
Wireless Broadband Ecosystem Revenues
Exec SummaryCorp. Service4
Wireless Broadband Ecosystem Revenues from Corporate Services (INR billion)
2015: 2010: CAGR 60%
• m-Farming: Utility will drive adoption of m-farming services in India as the existing users claim to achieve cost savings and increase revenues
0.04% of GDP0.01% of GDP CAGR: 60%
60
• m-Enterprise: Emergence of system integrators coupled with better device / smartphone and data ecosystem will drive Indian enterprise mobility apps market
15
1943
0.01%• m-Utilities: In India M2M utility applications such
as smart meters and remote video surveillance have seen major adoption
Power utility companies such as Reliance
15
24
3510
69
16
27
52
0.02%
Power utility companies such as Reliance Infrastructure and Tata Power are deploying CDMA-enabled smart meters
With high speed 3G HSPA connectivity combined with the latest compression technologies, CCTV
1 2 4 65 6 1012
2010 2011 2012 2013 2014 2015
m-Farming m-Enterprise m-Utilities
< 0.01% solution companies can provide rapid access to good quality recordings from any location strengthening the nations security
ConfidentialSource: Analysys Mason
Note: 1. ‘m’ refers to wireless broadband enabled services accessed through wireless broadband connection over mobile handsets or PCs
23
Wireless broadband will have an industry productivity impact of INR 888 bn (0 62% of GDP) in 2015of INR 888 bn (0.62% of GDP) in 2015
Estimation of Impact on Productivity due to Industry-wise Impact on Productivity due to
Exec Summary2nd Order Impact
Estimation of Impact on Productivity due to Wireless Broadband
Industry Industry Share of Increase
Industry wise Impact on Productivity due to Wireless Broadband (2015)
Working Population with Wireless Broadband Connectivity1 Industry
Vertical
yContribution to
GDP in 2015in Productivity in
2015
Manufacturing, Mining & Industry 17% 11%
5 mn
2010 2015
27 mn
Connectivity1
CAGR:
Government & PSUs 3% 1%
Services (excluding IT / 57% 75%
5 mn 27 mn39%
( gITeS)
IT / ITeS 11% 11%Increase in Industry Productivity in 2015
Agriculture 12% 2%
Total 100%(INR 143 trillion)
100%(INR 0.89 trillion)
INR 888 bn(USD 21 bn)
0.62% of GDP
ConfidentialSource: Analysys Mason, EIU, Euromonitor, NASSCOM, CII-PWC Report on IT/ITeS Industry
Note: 1. Includes retail wireless broadband connections used for official / business purpose and corporate connections
24
The service industry including IT/ITes will benefit the most from wireless broadband services
Industry Vertical
Penetration of Wireless Broadband and User Base (in Parentheses) Productivity Gain in 2015 (INR bn)
from wireless broadband servicesExec Summary2nd Order Impact
Vertical and User Base (in Parentheses)
Manufacturing, Mining & Industry
(0.6 mn users)1
(3.0 mn users)1
(0.4% of industry revenues in 2015)
5%
21%
2010
2015
932015
Government & PSUs
(0.7 mn users)
(3.1 mn users)(0.3% of industry revenues in 2015)
4%
20%
2010
2015
132015
Services (excluding IT /
ITeS)
(1.9 mn users)1
(9.2 mn users)1
(0.8% of industry revenues in 2015)
9%
39%
2010
2015
6632015
IT / ITeS(1.9 mn users)
(11.3 mn users)(0.6% of industry revenues in 2015)
21%
40%
2010
2015
1022015
Agriculture(0.0 mn users)
(3.7 mn users)(0.1% of industry revenues in 2015)
0%
2%
2010
2015
172015
Confidential
Note: 1. Comprises organized sector employees only (employees with enterprises for which statistics are available from budget documents or reports, or whose activities or data collection are regulated under legal provision)
Source: Analysys Mason, EIU, Euromonitor, NASSCOM, CII-PWC Report on IT/ITeS Industry
25
However, the lack of spectrum will be a formidable constraint to realizing the broadband potentialto realizing the broadband potential
Spare Spectrum Availability Based on
Exec Summary
• The current spectrum allocation will not support the projected number of broadband users
Spare Spectrum Availability Based on Existing Spectrum Allocation2
51%41%
• A high level analysis based on projected demand per user, available spectrum and current network coverage indicates that the
%
21%
current network coverage indicates that the operators will not be able to serve more than ~80 million subscribers without significant additional investments in sites
-34%
-7%
The associated investments for smaller cell size and more dense coverage is unlikely to make the take-up of broadband in suburban and rural
Assumptions2010 2011 2012 2013 2014 2015
-56%
areas economically viableBandwidth per user1 (Kbps) 383 570 916 1,414 1,978 2,476
Allocated bandwidth (MHz) 5.0 5.0 5.0 5.0 5.0 5.0
ConfidentialSource: Analysys Mason
Note: 1. Average subscribed bandwidth per user; 2. Estimated 7.5 Mbps capacity available for data per 3G cell site, after adjustment for allocation of voice
26
Additionally, lack of backbone infrastructure severely restricts deployment of broadband servicesrestricts deployment of broadband services
Number of Cities Covered with Fibre
Exec Summary
• All the service providers have extensive coverage of fibre backbone in metros / tier I cities1 (top 8 cities)
Number of Cities Covered with Fibre Backbone by Service Providers in India
• With the exception of BSNL (which covers all the 700 cities) and Railtel, all the other service providers have extremely low coverage in other cities
700
600
• Rural areas have extremely poor coverage, with only BSNL and Railtel covering a few thousand gram panchayats2200 g p y
BSNL covers about 28,000 gram panchayats out of a total 265,0003
130 11060 44
BSNL R ilT l GAILTEL Ai t l P G id T t R li All mid-sized / small villages currently remain uncovered by any service provider
BSNL RailTel GAILTEL Airtel PowerGrid Tata Reliance
ConfidentialSource: Analysys Mason, Company Websites
Note: 1. Includes top 8 cities with population > 4 mn and total income > INR 100 bn; 2. Gram panchayats are local governments at the village or small town level in India with minimum population of 300; 3. 2002 estimate for total gram panchayats
27
A clear policy roadmap for allocation of additional spectrum is required to help achieve this growth potentialrequired to help achieve this growth potential
Frequency Bands & Key Issues
Exec Summary
3.3GHz Existing Allocation and Availability
Future Roadmap1 / Satellite
• Future Roadmap: Future allocation of various frequency bands is not clear making it difficult for carriers to plan network rollout and establish their technology roadmap for
Frequency Bands & Key Issues
2.5GHz Future Roadmap / Satellite Interference
2.3GHz Capacity Constraint2
Capacit Constraint / F t re
and establish their technology roadmap for services
• Digital Dividend: Lower frequency bands such as 450 MHz and 700 MHz are best suited for providing rural broadband services2.1GHz Capacity Constraint / Future
Roadmap
1800MHz Capacity Constraint
suited for providing rural broadband services and can substantially reduce roll-out cost
• Existing Allocation & Availability: Better coordination between different Govt d t t t ki h / h h900MHz Capacity Constraint
800MHz Capacity Constraint
departments tracking where / how much spectrum is being used, and thus support re-farming to increase total capacity available and allow more efficient allocations
700 MHz Future Roadmap Digital Dividend Spectrum450MHz Future Roadmap
• In addition, there are other policy constraints such as Right of way, active infrastructure sharing, mandate provision of fiber capacity and inclusion of Microwave for backhaul
ConfidentialSource: Analysys Mason
Note: 1. Future Roadmap refers to frequency band with no existing allocation for commercial usage and can be used for offering wireless broadband services; 2. Capacity constraint refers to frequency band already allocated and with no spare capacity available
28
Contents
Executive Summary
Overview of Broadband Services in India
Macroeconomic Overview of India
Demand Side Analysis
Th Wi l B db d E t
Supply Side Analysis
The Wireless Broadband Ecosystem
Socio-economic Impact of Wireless Broadband
Imperatives for Stakeholders in the Indian Wireless Broadband Industry
Confidential
29
The macroeconomic conditions are improving the prospects for broadband adoption in Indiafor broadband adoption in India
• Indian economy has experienced a high growth rate despite the global economic downturn, and is t d t t i t GDP th i th t t M i d i f hi h th t fexpected to sustain a strong GDP growth in the next ten years. Main drivers of higher growth rate of
economy are improving demographics, structural reforms and globalization• India is highly populated country with population density of 387 persons per sq km. India’s
population has crossed 1 billion mark and is growing at a rate of 1.4% every yearThis growth mainly comes from rural areas. More than 70% of Indian population are in rural areas, which has major concerns such as poor infrastructure, lower income level and illiteracy to address for better broadband penetrationThe low literacy rate in India remains a medium-term constraint for the broadband market due to limited
l f t t d l k f l k l drelevance of content and lack of language knowledgeDemographics of India population, however, is favorable for the adoption of broadband and data services. 35% of population is between 15 to 35 years of age and this group has the maximum internet users
• With the sustained growth of economy and favorable demographics, the income level of households ill i di th iddl l t Thi ill l d t li lih d h twill increase, expanding the middle class segment. This will lead to livelihood enhancement,
increase in consumption and further growth of economy• Service sector contribution to GDP is increasing substantially with rapid urbanization, expansion of
public sector, awareness and adoption of ICT and increased demand for consumer services such as healthcare and education
• With increase in income levels and population growth, the consumption per household also increases. Share of communication in consumption spent per household is expected to increase with a CAGR of 6%
Confidential
with a CAGR of 6%
30
India has seen a sustained economic growth and is expected to outpace China’s GDP growth by 2013-15to outpace China s GDP growth by 2013-15
BRIC Countries: Nominal GDP PPP
Macroeco
8%
12%
BRIC Countries: Nominal GDP, PPP Growth Rate • Indian economy has been growing at high
rate, reaching about 8.8% nominal GDP growth in the last quarter
-4%
0%
4%
2008 2009 2010 2011 2012 2013 2014 2015
• This level of growth is expected to be sustained for the next few years, with improving demographics, rising income levels structural reforms and
-8%
Brazil Russia India China
BRIC Countries: Nominal GDP, PPP, USD billi (2009)
levels, structural reforms and globalization
It is expected that India’s GDP will accelerate to a sustainable rate of 9 to 10%
USD billion (2009)
3 766
9,244by 2013 - 2015, exceeding the average growth rate of 7.3% over the past 10 years
India's GDP is expected to quadruple over the next ten years and the country is likely
2,014 2,1103,766
Brazil Russia India China
the next ten years and the country is likely to become a USD 4 trillion economy by 2020
ConfidentialSource: Analysys Mason, Reserve Bank of India, EIU, Industry Inputs
31
India’s population of 1 billion is growing at 1.5%, although population density varies significantly across statespopulation density varies significantly across states
Population Density by States in India BRIC C t i % P l ti G th
Macroeco
Population Density by States in India (Population per Sq Km)
1.8%
BRIC Countries: % Population Growth
Jamm KashmirJamm Kashmir
0.0%
0.6%
1.2%
Uttaranchal
Himachal Pradesh
Jammu Kashmir
Sikkim
Arunachal Pradesh
AssamDelhiHaryana
PunjabUttaranchal
Himachal Pradesh
Jammu Kashmir
Sikkim
Arunachal Pradesh
AssamDelhiHaryana
Punjab
-0.6%
0.0%2008 2009 2010 2011 2012 2013 2014 2015
Brazil Russia India ChinaManipur
Orissa
Gujarat
Uttar Pradesh
Chhattisgarh
JharkhandWest Bengal
Bihar
Sikkim
Tripura
Mizoram
Kolkata
RajasthanNagaland
Madhya Pradesh
MeghalayaManipur
Orissa
Gujarat
Uttar Pradesh
Chhattisgarh
JharkhandWest Bengal
Bihar
Sikkim
Tripura
Mizoram
Kolkata
RajasthanNagaland
Madhya Pradesh
Meghalaya
Above 1000 persons per sq km
Between 600 to 1000 persons per sq km
• India has 17% of the world's population, which is growing at the rate of 1.5%, as compared to China (0.5%), Russia (~ -0.1%) and Brazil (1.3%%) from 2010 to 2015
Karnataka
Andhra Pradesh
MaharashtraMumbai
Karnataka
Andhra Pradesh
MaharashtraMumbai
Between 600 to 1000 persons per sq km
Between 400 to 600 persons per sq km
Between 200 to 400 persons per sq km
Between 100 to 200 persons per sq km
Below 100 persons per sq km
• The low population density of 387 persons per sq km makes serving rural areas a challenge for the broadband industry
KeralaTamil Nadu
ChennaiKeralaTamil Nadu
Chennai
ConfidentialSource: Analysys Mason, EIU
32
Population mix remains skewed in favor of rural population –challenging the economics of broadbandchallenging the economics of broadband
BRIC Countries: % Share of Urban and
Macroeco
• Rural population has lower income level, and hence the affordability of broadband service becomes an issue
BRIC Countries: % Share of Urban and Rural Population
On an average, nominal urban earnings are 40% more than rural earnings
About 42% of population in India is below the poverty line1
14%27%
57%71% the poverty line
• Rural areas have poor infrastructure and accessibility, making it difficult to increase wireline based broadband penetration
86%73%
p
Out of total 9 million broadband subscribers at the end of April 2010, only 5% are in the rural areas
30%43%
Brazil Russia India China There has been improvement in rural road connectivity, increasing from about 40% in 2004 to about 70% at the end of 2008
Brazil Russia India China
Urban Population Rural Population
ConfidentialSource: Analysys Mason, TRAI, Euromonitor
Note: 1. Below Poverty Line households are defined as those earning less than USD 1.25 per day
33
Although literacy levels are improving with government initiatives yet India is significantly behind its peersinitiatives, yet India is significantly behind its peers
BRIC Countries: Adult Literacy Rate1
Macroeco
• Government in India is taking initiatives to improve literacy in India
Karnataka state government launched `S k h Bh S h ' i
BRIC Countries: Adult Literacy Rate
88%
96%
`Saakshar Bharat Scheme' to improve literacy rate in Karnataka from the present 66.6% to 80% by 2012
Illiteracy rate has been reduced with the f64%
72%
80%
88%
help of national educational schemes such as “National Literacy Mission” and “Sarva Shiksha Abhiyan"
• Computer literacy also remains low and BRIC Countries: Literate Population (Mn)
64%2006 2007 2008 2009
Brazil Indonesia India China
language constraint limit the relevance of content currently available
English literate population is only 91 million and the total computer literates are only 87
p ( )
1,038
544 and the total computer literates are only 87 million
Only 1.8% of all Indians (20 million) prefer to read in English
155 134
China India Indonesia Brazil
ConfidentialSource: Analysys Mason, Euromonitor
Note: 1. Literacy rate taken as percentage of literate adults in populations of age above 15 years
34
However, increasing share of youth population, is expected to significantly drive utility and relevance of broadbandsignificantly drive utility and relevance of broadband
BRIC Countries: Share of Population by Age Distribution of Regular Internet Users
Macroeco
BRIC Countries: Share of Population by Age Segment in the Year 2009
7% 13% 5% 10%
Age Distribution of Regular Internet Users in India, 2009
38%44%
33%35%
29%
46%
13% %
2%
10%4% 2%
35%
37% 28%
35%
2%
13-18 yrs 19-24 yrs 25-35 yrs 36-45 yrs 46-55 yrs Above 55yrs
26%15%
31%17%
Brazil Russia India China
• Adoption of technologies and services is high among the youth segment, as most of the internet content is focused on the age group of 18-35 years
Internet is primarily used by the youth segment for
Population % for 0-14 yrs Population % for 15-34 yrs
Population % for 35 - 64 yrs Population % for 65+ yrs
entertainment (downloading videos & music), social networking, micro-blogging and consumption of user generated content
ConfidentialSource: Analysys Mason, Euromonitor, JuxtConsult India Online Report: 2009
35
Average real household income in India is expected to triple from 2005 to 2025 encouraging higher consumptionfrom 2005 to 2025, encouraging higher consumption
I L l f H h ld i I di 1
Macroeco
• With the growth of economy, the income level of households also increases
Average real household disposable income
Income Level of Households in India1
(No. of Households, millions)
207 244 280 e age ea ouse o d d sposab e co eis set to grow from 113,744 Indian rupees in 2005 to 318,896 Indian rupees by 2025 at a CAGR of 5.3%
44%
5%
23%
34%
1% 2%12%3%1% 1%
• Growth in Indian incomes and consumption will deliver substantial societal benefits, with further increase in service consumption, declines in poverty
43%
34%
33% p , p yand the growth of a large group of middle income households
49%
30%18%
2005 2015 2025
<90 90-200 200-500 500-1,000 >1,000
Annual Household Income, INR thousand
ConfidentialSource: Analysys Mason, McKinsey Global Institute
Note: 1. Low income segment includes HH earning less than INR 200,000 in a year, middle Income segment includes HH earning between INR 200,00 to INR1,000,000 per year, and high income segments include HH earning above INR 1,000,000
36
With higher productivity and sustained economic growth of India the disposable income will increaseIndia, the disposable income will increase
BRIC Countries: Personal Disposable
Macroeco
BRIC Countries: Personal Disposable Income - Nominal (USD billion), 2009
2,166
• Income growth is dependent on the overall economic growth in coming years
Main drivers for the increase in income 1,016
7561,082
a d e s o e c ease co elevels include sustained growth of the Indian economy, favorable demographic trends, and stable foreign exchange rates
BRIC Countries: Growth in Personal Disposable Income (Real Terms)
Brazil Russia India China • Conducive business environment backed by structural reforms and globalization have led to increase in productivity and income levels
4%
8%
12%
0%2008 2009 2010 2011 2012 2013 2014
Brazil Russia India China
ConfidentialSource: Analysys Mason, RBI, EIU
37
Economic development will be supported by an increase in contribution of services to the GDPcontribution of services to the GDP
% Share of Agriculture Industry and
Macroeco
• With the limited scope of growth in the agriculture and industry segment, growth in GDP will be driven by the services
t
% Share of Agriculture, Industry and Services Sector in Indian GDP
(Nominal, INR Bn)
36 345 73 256 142 779 sector
Growth in agriculture and industry sector is declining, and the GDP growth momentum is coming from services sector which is
36,345 73,256 142,779
ggrowing at ~15% per annum
• Main reasons behind the growth of services include rapid urbanization and
61% 65% 71%
increased demand for intermediate and final consumer services
ICT services have increased their share in service sector GDP from 6% in 2001 to 10%
18% 16% 12%
21% 19%17%
service sector GDP from 6% in 2001 to 10% in 20082006 2010 2015
Agriculture Industry Services
ConfidentialSource: Analysys Mason, RBI
38
With improved income level of households, spent on communication and other services is expected to go upcommunication and other services is expected to go up
% Share of Different Spend Segments in
Macroeco
% Share of Different Spend Segments in Annual Consumption for Indian Consumer • Main drivers for increased consumption
are rising incomes, population growth and substantial savings
4% 4% 3%
15% 15% 16%
3% 4% 4%2% 2% 2%2% 3% 3%
13% 14% 16% • The increased purchasing power enables consumer to spend higher on services such as healthcare, personal products
40% 38% 38%
5% 4% 3%
16% 16% 16%3%
Spent on Food & beverages is constant, and its share to consumption decreases
Communications accounts for around 2% of
2006 2010 2015
Food Apparel
Communications accounts for around 2% of spending currently and is expected to witness fastest CAGR of over 6%
Housing & Utilities HealthcareTransport CommunicationLeisure Education Other
ConfidentialSource: Analysys Mason, RBI, Euromonitor
39
Contents
Executive Summary
Overview of Broadband Services in India
Macroeconomics of India
Demand Side AnalysisDemand Side Analysis
Supply Side Analysis
The Wireless Broadband Ecosystem
Socio-economic Impact of Wireless Broadband
Imperatives for Stakeholders in the Indian Wireless Broadband Industry
Confidential
40
Affordability of broadband remains limited due to high device costs – the industry to focus in increasing utility of servicescosts – the industry to focus in increasing utility of services
• Rural areas are under-penetrated with ~30% share of total wireline / wireless voice connections• Number of fixed internet users is further limited in rural areas, while it is growing rapidly in tier III / IV
cities, driven by the youth segment accessing primarily through cyber cafes• Broadband services as percentage of per capita income is high compared to other countries, though
ARPU is similar indicating concentration of broadband connectivity among high income urbanARPU is similar, indicating concentration of broadband connectivity among high-income urban areas
• Mobile handsets have a strong potential to drive broadband penetration owing to lower cost of ownership as compared to PC-based access as well much higher device penetration
• Current usage of internet is focused on mails, SNC, information search and entertainment, with lack of localized online content as another constraint to broadband utility for the masses
• Internet usage for utilities such as financial transactions is extremely limited with significant impact t ti lpotential
• Broadband has a significant role to play in extending the reach of education and healthcare facilities to the masses, as well as enhancing labor productivity through enablement of tele-working at home or during commuteg
• Governance is another major area currently challenged with consumer inconvenience, high processing timelines and Government overheads which can be significantly reduced through technology-enablement
Confidential
41
This macroeconomic context results in a low affordability and utility of broadband services which impacts adoptionutility of broadband services, which impacts adoption
BRIC Countries: % Penetration of Internet
Demand
BRIC Countries: % Penetration of Internet and Broadband Service
41%
• Currently, the broadband penetration is just 0.74% compared to overall teledensity of 52.74% (QE-Mar’10)
• Affordability issues
High TCO as % of overall per capita spend
14%
23% – High device pricing
• Relevance and Utility issues
Lit i5.8% 6.4%
0.5%
6.0%9% Literacy issues
Lack of content in regional languages
Lack of relevant mass market contentBrazil Russia India China
Broadband Penetration Internet Penetration
ConfidentialSource: Analysys Mason, RBI
42
The spend on broadband services as % of per capita income is high compared to other countries though ARPU is similaris high compared to other countries, though ARPU is similar
Affordability
BRIC Countries: ARPU (USD) and
Demand
BRIC Countries: ARPU (USD) and ARPU as a % of GDP per Capita
20 15%
• Broadband ARPU in India is estimated at ~ INR 600 (USD 12), which is similar to some of the other countries in Asia
13.3%
14.716.9
12.315
20
10%
15%
• The high ARPU to GDP ratio is a result of the high income disparity between urban and rural areas
7.8%
3 1%
9.610
5%
10% and rural areas
• Most of the broadband users are concentrated in urban centers with much higher income levels as compared to
2.3%
3.1%
0
5
0%
higher income levels as compared to other areas
India China Russia Indonesia
ARPU / GDP per Capita ARPU (USD)
ConfidentialSource: Analysys Mason, RBI
43
TCO for broadband services currently has significant share of consumer wallet though this will come down by 2015consumer wallet, though this will come down by 2015
Affordability
Entry-level TCO1 as % of Overall per Capita
Demand
Assumptions for TCO Calculations: Entry
2015
Entry level TCO as % of Overall per Capita Consumption (2009 and 2015)
2009Per Capita Consumption: Per Capita Consumption:
Wireline B db d
Wireless BB -D t O l 2
Wireless BB M bil 2
Assumptions for TCO Calculations: Entry Level Device and Service Pricing (INR, 2015)
Per Capita Consumption:INR 30,291
20%
Per Capita Consumption: INR 52,134 (2015)
Broadband Data Only2 – Mobile2
Device Type Desktop Embedded Netbook Smartphone
Device Cost (INR) 8,000 10,000 5,000
1%
6%
13%
3.2% 3.4%
10.2% 9.8%
( ) , , ,
Device Lifetime (years) 3 3 2.5
Modem Cost (INR) 2,000 - -
12%14%
7.0% 6.4%3.8%0.7%4.5%
Wi li Wi l Wi l
Modem Lifetime (years) 2 - -
Monthly Service Charge – Entry 125 150 30
Dial-upInternet
Fixed BB -Wireline
WirelineBB
WirelessBB - Data
Only
WirelessBB -
Mobile
Device TCO Service TCO
Charge – Entry Level (INR / month)
125 150 30
ConfidentialSource: Analysys Mason, Company websites
Note: 1. Annual Total Cost of Ownership: includes depreciated entry-level cost of PC & modem and entry level service charges fordata usage; 2. Data only wireless broadband usage refers to access over a PC, while mobile usage refers to that over a mobile phone, with a WCDMA connection bundled with voice services
44
With a much higher base of data-enabled devices, handsets have a strong potential to drive broadband penetrationhave a strong potential to drive broadband penetration
Affordability
Device base of PCs data cards and data
Demand
• Residential PC (desktops & laptops) penetration stands at only 6% of total households, while internet connections as % of PC base is about 60%
Device base of PCs, data cards and data enabled mobile handsets (mn) and their penetration as % of total handset base
% of PC base is about 60%
• Wireless data cards are currently used primarily by businesses and serve primarily as a back up connectivity option
Items 2008 2009
Residential Desktops 8.3 9.9
primarily as a back-up connectivity option in the absence of fixed internet connectivity
Residential Laptops 1.7 2.5
Wireless Data 2 1 3 5Cards1 2.1 3.5
Data Enabled Handsets 1011 1491
GPRS Active Subs 30 44
ConfidentialSource: Analysys Mason, TRAI, IMRB, Industry Inputs
Note: 1. Includes enterprise connections
45
The current usage pattern of internet is very entertainment centric and does not address key mass market applicationscentric and does not address key mass market applications
Utility
Internet Usage Pattern for Consumers in
Demand
• The current usage pattern is focused on communication and entertainment and is similar to the global usage pattern
Internet Usage Pattern for Consumers in Emerging Markets
4% 1%2% 4% 3% 2% 1% 2% • This is due to the high end user segment accessing the internet today, as well as lack of spectrum / bandwidth to drive applications
10%17% 11%
6% 5%13% 12% 13%16%
6% 10%5% 5% 8%3% 2% 3%5% 5% 6% 4% 4% 1%2% 4% 3% 2% 1% 2%
pp
• Key applications which can significantly scale with 3G and BWA include
Vernacular websites and content165%
57% 59%
81% 80%
42%
Online financial transactions
Healthcare services for remote areas
Distance education and e-learning
2
3
4
34%
Indonesia India Phlippines Pakistan Thailand USA
Tele-working and commute working
Enterprise mobility applications
Tech-enabled Government services
5
6
7
Communication EntertainmentInformation Search EmailEducation eCommerce
ConfidentialSource: Analysys Mason, RBI
46
Availability of local online content remains limited, but can help in expanding the reach of internet to the mass markethelp in expanding the reach of internet to the mass market
Status of Local Language Internet Users Indian Language Websites (2008)
UtilityVernacular1
Status of Local Language Internet Users(Share of Total Internet Users)
87%
Indian Language Websites (2008)
713
13%
Online Indianspreferring to read in
English
Online Indianspreferring to read local
Indian languagesEnglish Indian languages
58%42%
153117 97
34384057
Online Indians visitingEnglish websites only
Online Indians visitinglocal languagewebsites also
Hin
di
Tam
il
Tele
gu
Ben
gali
Guj
rati
Kan
nada
Pun
jabi
Mar
athi
• While 87% Indians prefer to browse in local languages, only 42% visit any local language websites due to lack of relevant content in regional languages
• Limited number of local language sites reflects the lack of localized online content to which is relevant for the mass market consumers
ConfidentialSource: Industry Inputs, Analysys Mason
47
Use of internet for financial transactions and banking is extremely limited but has a significant impact potentialextremely limited, but has a significant impact potential
Status of Banked Population and Net Usage of Internet for Commerce /
UtilityTransactions2
Status of Banked Population and Net Banking Users (2009)1
Usage of Internet for Commerce / Transactions (2009)
Total (mn) Share Online Retail as % of Total Retail Sales in India and US
Online Tickets as % of Total Rail Reservations
Total Bank Accounts 361
31%(of Total
Population)
Net Banking Users 23 6%(of Bank Accounts)
34%
Retail Sales in India and USTotal Rail Reservations
6.00%
(of Bank Accounts)
Urban Adults with Bank Account 60% of Urban Adults
Rural Adults with 0.06%Rural Adults with Bank Account 39% of Rural Adults
• Broadband offers a significant opportunity to enable financial inclusion to address the unbanked
• Currently online transactions in India are restricted primarily to travel reservations
India India US
financial inclusion to address the unbanked population in India
• Wireless broadband will be the key to virtual accounts and money transfer for the unbanked poor
primarily to travel reservations
• Online retail transactions are extremely low and broadband penetration can play a significant role in e-enabling retail in India
ConfidentialSource: Industry Inputs, Analysys Mason
Note: 1. Estimates based on 2007 numbers
48
Tele-medicine based initiatives have a significant role to play in addressing the poor state of healthcare infrastructurein addressing the poor state of healthcare infrastructure
Key Challenges in Healthcare Delivery in India
UtilityHealthcare3
VillageSemi-UrbanUrban
250 Kms
10 – 15 Kms
Key Challenges in Healthcare Delivery in India • Increased reach to rural & remote areas
Telemedicine: remote diagnosis, monitoring and treatment of patients in rural / remote
Kms Kms
Village DispensaryPrimary Heath Centre & Sub-Centre
Hospital
areas at the Sub-Centre and PHC level
Access to specialist consultation to supplement advice from PHC
• High cost of private healthcare, resource limitation and sub optimum utilization
Only 0 7 hospital beds
• Limited resources and inadequate man-power & infrastructure
1 PHC1 for 30K
• No access to quality healthcare at a village level, requiring long travel times
• Timely access to critical information
Emergency support and guidance to health workers and medical officers
Only 0.7 hospital beds per 1,000 population
Only 5-6 Docs per 10K population
Very high cost of private healthcare for mass market
1 PHC for 30K population
PHC has only 4-6 patient beds; 1 Medical Officer
1 PHC for 6 Sub-Centers
Large distances in rural and remote areas
Access to only 1.4 dispensaries for 100K villagers
Only 0 36 hospital beds
• Increased efficiency for medical practitioners
Electronic Medical Records (EMR) and mass market customers
70% of hospitals and 40% of hospital beds are in private sector
Centers
1 Sub-Centre for 5K population
Sub-Centers have only 2 health workers
Only 0.36 hospital beds per 100K villagers
Very basic care available
Unaffordable cost of private care in towns
Hospital Information Systems (HIS) enable real time documentation and information sharing
ConfidentialSource: Analysys Mason
Note 1: PHC – Primary Health Centre
49
Extending the reach of education services to the mass market requires technology as the key driverrequires technology as the key driver
Distance Education and E-learning Markets State of Vocational Training in India
UtilityEducation4
Distance Education and E learning Markets (2009)
State of Vocational Training in India
Total students enrolled in higher ed cation 13 mn
96%85% 86% 88%
Share of labor force receiving vocational training
education
Total students enrolled in distance learning programs 3.5 mn
Potential Revenue from distance l i USD 850 mn
85% 86% 88%
learning USD 850 mn
% Share of online in distance learning 3.5%
Addressable market opportunity for USD 30 mn
8%
25%
• The growing distance learning market will benefit from e-enablement offering convenience and
• India’s fast growing services sector is expected to create large employment opportunities
domestic e-learning USD 30 mn
India Korea Japan Germany Canada Mexico
from e enablement, offering convenience and mobility to the end user
• IGNOU and other universities are already experimenting with some of these models
create large employment opportunities
Meeting this requirement will involve extending the reach of vocational training to the mass market by leveraging broadband
ConfidentialSource: Industry Inputs, ILO, Analysys Mason
50
Broadband enabled applications such as tele-working can have a significant impact on labor productivityhave a significant impact on labor productivity
Potential for Tele-workers / Home Workers Global Comparison for Commute Time
UtilityTele-working5
Potential for Tele workers / Home Workers Global Comparison for Commute Time
Workforce requirement by IT-BPO Sector (mn)
60% in Tier-I Cities
Average Commute Time(mins)
Commuters with over 90 mins Commute Time
10.0
90% in Tier-I Cities
40
29 20%
26%
2.5
2009 2020
GlobalAverage
IndiaAverage
Global India
• The expanding IT and ITeS industry in India is facing a shortage of skilled workforce, increase in infrastructure costs and travel time
• India has high commute time, primarily in the Metros, with increasing emergence of sub-urban areas for residential use
2009 2020
infrastructure costs and travel time
• Broadband penetration can address these constraints by supporting tele-workers / home workers
areas for residential use
• High-speed wireless broadband connectivity can help consumption of multiple broadband based services in a mobile environment
ConfidentialSource: Industry Inputs, NASSCOM, Analysys Mason
51
Indian SMBs have a low ICT spend currently, and a large latent potential for broadband enabled cloud computing playlatent potential for broadband enabled cloud computing play
Enterprise ICT Spend as Percentage of Total ICT Spend by Indian Enterprises
UtilitySMBs6
Enterprise ICT Spend as Percentage of Nominal GDP (PPP, 2009)
Total ICT Spend by Indian Enterprises(2009, USD mn)
1.8%1 6% 14,251
0 8%
1.6% ,
7,674
0.6%
0.8%0.7%
L SMB
• India has low ICT spend by enterprises as • Current ICT spend is driven primarily by
India Brazil Russia China Malaysia
Large SMBs
Number of businesses:
2,500 7 mn
India has low ICT spend by enterprises as compared to its peers
Current ICT spend is driven primarily by large enterprises (~3,000 in number) against ~ 7 mn SMBs
ConfidentialSource: Industry Inputs, Gartner, EIU, Analysys Mason
52
E-enabled governance will impact consumer convenience and processing timelines and reduce Government overheadsprocessing timelines, and reduce Government overheads
Demand Drivers Description Supporting Statistics
UtilityGovernment7
Demand Drivers Description Supporting Statistics
Convenient access and lower cost for
• E-enabling Government processes result in significant reduction in direct as well as indirect cost to citizen
Number of trips to Government offices
8 0and lower cost for citizens / businesses Direct cost savings for citizens is in the range of INR
50 – 100 per transaction
Processing time for registering a deed
2.0
8.0
Manual Online
Reduction in processing time of
requests
• Computerization of departments enable faster access to the data thus reducing processing time for the service delivery
Waiting time at government offices decreases to 20% 40% d t l t
g g g(days)
15.0Same day
- 40% as compared to manual system
Rural empowerment and reduction in
• E-enabling processes such as identity verification and payment disbursement to rural workers can empower the
% NREGA funds misused or diverted1
Manual Online
and reduction in overheads for
schemes such as NREGA
p y ppoor as well as reduce leakage of funds
With ~INR 40,000 Cr being allocated annually for NREGA, huge amounts can be saved from leakage
Manual Online - Potential
30% - 60%<10%
ConfidentialSource: Industry Inputs, News Articles, Analysys Mason
Note: 1. Based on survey by Outlook in two Indian states, and report by V V Giri National Labour Institute
53
Contents
Executive Summary
Overview of Broadband Services in India
Macroeconomics of India
Demand Side AnalysisDemand Side Analysis
Supply Side Analysis
The Wireless Broadband Ecosystem
Socio-economic Impact of Wireless Broadband
Imperatives for Stakeholders in the Indian Wireless Broadband Industry
Confidential
54
Due to inherent barriers in the fixed segment, mobile broadband will drive broadband growthbroadband will drive broadband growth
• At the moment broadband penetration is low and remains concentrated in urban areas
• DSL currently dominates the existing BB market but in future it will lose its dominant positions. Fixed line penetration is low (37 million lines in 2009) and the quality of copper is too low to upgrade it to provide DSL services
C bl BB i t i d t th b d ill i i h t h l C bl k t i• Cable BB is contained to the urban areas and will remain a niche technology. Cable market is highly fragmented. Lack of scale makes business case for rural deployment very weak. In addition to that, cable operators have no incentives to upgrade their networks due to existing revenue share framework
• Fixed wireless services, such as WiMAX, are concentrated in urban areas and target high ARPU clientele such as corporate sector. High cost of rural roll out and spectrum capacity limitations hindered the growth so far. However, the recent BWA spectrum allocations are likely to boost the growthgrowth
• Mobile broadband already contributes a significant proportion of total broadband connections. With the recent 3G auction and given the constraints in the fixed broadband segment, mobile broadband is likely to drive broadband growth
• The government needs to resolve a number of issues, such as spectrum policy, to further stimulate broadband growth. In addition to that, it launched a number of programs to accelerate broadband penetration in rural areas
Confidential
55
Summary: Supply Side
Broadband Technology
HSPA WIMAX EVDO DSL FTTB CABLE
Capex per S bSub
USD 1251 USD 1331 USD 1231 ~USD 2,2002 ~USD 1,390 ~USD 930
Time to Rollout Spectrum Spectrum
Easy up-gradation of existing CDMASpectrum
AvailabilitySpectrum Availability
of existing CDMA sites RoW Issues RoW Issues LCO Unwillingness
Realizable throughput
10 8 Mb Sit 30 Mb Sit 4 5 Mb Sit 16 Mb Li 20 Mb Li 50 Mb Li10.8 Mbps per Site 30 Mbps per Site 4.5 Mbps per Site 16 Mbps per Line 20 Mbps per Line 50 Mbps per Line
ARPU potential
Bundling Possibility
Broadband & Voice bundling
possibleOnly Broadband offering possible
Only Broadband offering possible
Triple Play offering possible
Triple Play offering possible
Triple Play offering possible
ConfidentialSource: Industry Inputs, Analysys Mason
Note: 1. Does not include cost of spectrum; 2. Capex per sub taken for new line, for existing line the cost is USD 800 including cost of up-gradation of backhaul from central office to node
Favorability of parameter: High Low
56
The broadband market is currently dominated by DSL, but this is not scalable due to copper quality and loop length issuesis not scalable due to copper quality and loop length issues
SupplyDSL
Broadband Lines Split by Upgradeable DSL Lines and RequiredBroadband Lines Split by Technologies, mn (Mar ’10)
Upgradeable DSL Lines and Required Investments (USD mn): BSNL and MTNL
8.8 7.6Items MTNL
DelhiMTNL
MumbaiBSNL (Rural)
BSNL (Urban)Delhi Mumbai (Rural) (Urban)
Total Lines (mn) 1.51 2.04 10.32 18.47
Total 1 21 1 63 10 32 16 62
0.00.00.00.6
0.10.4
Households 1.21 1.63 10.32 16.62
Upgradeable Lines (mn) 0.85 1.14 4.13 8.31
• DSL accounted for 87% of all fixed broadband • Of the existing 32 mn BSNL/MTNL’s fixed lines,
Tota
l
DS
L
Cab
le
Eth
erne
t
FWA
Fibr
e
Leas
edLi
nes
Oth
er Lines Already Upgraded 0.561 0.521 0.00 5.812
DSL accounted for 87% of all fixed broadband connections in 2009
• Cable is a niche service targeting mainly urban areas
Of the existing 32 mn BSNL/MTNL s fixed lines, only 15 mn lines can be upgraded to DSL due to poor copper quality and other infrastructure issues
ConfidentialSource: Analysys Mason
57
Cable industry is likely to remain focused on offering video service due to significant operational and investment issuesservice due to significant operational and investment issues
SupplyCable
Fragmented • Over 7,000 MSOs and 60,000 LCOs in
590485
750
%
15%1
Fragmented cable
industry and absence of
players with scale
Over 7,000 MSOs and 60,000 LCOs in cable industry
• Top 7 MSOs account for only 30% of overall TV households
• 70% of cable households served by t d LCO
340
250
500
5%
10%scale non-aggregated LCOs
• The existing regulatory framework on revenue share does not incentivize cable operators to upgrade their networks
0Dec-07 Dec-08 Dec-09
0% 2LCOs have
no incentive to upgrade the network
networks
• Currently cable operators under-report about 75-80% of their revenues thus reducing the base subject to revenue sharing
Cable BB Cable BB as % of Total BB
• Cable TV which usually drives cable BB adoption
• Network upgrade implies that their share of revenues will drop from the current 70-75% to 20% and will have to pay more to MSOs and broadcasters
High costsCable TV, which usually drives cable BB adoption, is already lags behind due to competition and head start by DTH, which strengthened its positions in digital TV segment
3
High costs associated with cable
network up-grade
(DOCSIS)
• For the existing DOCSIS technology, capex per sub for upgrading network to provide BB services remains as high as USD 900
Confidential
( OCS S)
Source: Analysys Mason
58
Current WiMAX offerings are not to serve the retail segment, but LTE deployments are expected to address this marketbut LTE deployments are expected to address this market
WiMAX Subscribers in 2009 (Thousand)
SupplyWiMAX
• High capex per sub and LOS requirement does not make a strong business case for service providers to target lower ARPU
WiMAX Subscribers in 2009 (Thousand)
29 retail customer (CPE for current FDD 802.16d WiMAX deployment costs ~ INR 10 000 and requires physical installation
f t l t ith li f
29
6
23
RCOM Tata Othersof external antenna with near line of sight)
• However, TD-LTE deployment will take
WiMAX Subscribers (Thousand)
Provider Market Position
• WiMAX network covers ten citiestime (~1 year) as the ecosystem is not mature for large scale deployments
RCOM
• WiMAX network covers ten cities• Plans to continue to expand the network
based on the spectrum received in the recent BWA auction
• Was the first operator to launch WiMAX services in May 2007
Tata
services in May 2007• Its WiMAX network covers ten cities• At launch Tata set a target of launching
WiMAX BB targeted at corporate segment in 115 cities and residential – in 15 cities
ConfidentialSource: Analysys Mason
59
Currently 3G data services market is dominated by CDMA EVDO operatorsEVDO operators
Carrier Data ServicesMobile BB 3G Data Cards in 2009
SupplyEVDO
Carrier Data Services
R li
• EVDO data cards offerings in top 35 cities
• Bundles EVDO data cards with netbooks
Mobile BB 3G Data Cards in 2009 (Thousand)
1100990
1,200
Reliance with 2 year lock-in period
• ARPU ~ INR 700 (Oct ’09)
990
600
900
Tata
• High speed EVDO based data services in limited to 8 cities
• Bundles EVDO data cards with HP Pavilion Notebooks
10100
300
600
• ARPU ranges between INR 600 – 700
• EVDO-based MBlaze mobile broadband
100
RCOM Tata MTS BSNL/MTNL
• In addition to the 3G (WCDMA and CDMA 1x EV-
MTS
O based a e ob e b oadba dservice is available in 19 cities
• The operator offers bundles of EVDO data cards with HP Pavilion notebooks
In addition to the 3G (WCDMA and CDMA 1x EVDO) datacards, approximately 1.3 million 2G (GPRS) datacards are used in India indicating a latent demand for data services
ConfidentialSource: Analysys Mason, Industry Inputs
60
Contents
Executive Summary
Overview of Broadband Services in India
Impact of Wireless Broadband on GDP
Direct Impact: Industry Revenues and GDP
Second Order Impact: Ecosystem Revenues and GDP
Stakeholder Imperatives
Third Order Impact / Externalities: Socio Economic Metrics and GDP
p
Confidential
61
We have assessed the broader impact of the industry
Demand-side Analysis Supply-side Analysisy pp y y
Wireless Broadband EcosystemMobile Service
DeliveryConsumers /
RetailFinancial Services
Social Services
Corporate / Verticals
Revenue Impact Revenue Impact1 2
Socio-economic Impact3
Employment Productivity Gains / Social Benefits
Contribution to Economic Growth
Confidential
Social Benefits Economic Growth
Source: Analysys Mason
62
The availability of wireless access for broadband will change the nature of the industrythe nature of the industry
Direct Impact
I 2009 thi d f th b db d bBroadband Users (million) • In 2009, a third of the broadband base consisted of corporate customers
• The residential market, however, will be th k d i f th ith d
Broadband Users (million)
97
142183
100
150
200
the key driver of growth with a compound annual growth rate (CAGR) of over 50% in the next five years
I 2009 l 20% f th b db d
26 3861
0
50
100
2010 2011 2012 2013 2014 2015• In 2009, only 20% of the broadband users
were accessing applications from a wireless system
S l id t i t h k
Broadband Users (million)Residential Corporate
183200 • Supply-side constraints, however, make wireless a more compelling access system
• Th b db d b i i26 3861
97
142
50
100
150
• The broadband base accessing services through a wireless system are projected to increase by more than 70% CAGR over the next five years
26
0
50
2010 2011 2012 2013 2014 2015
Fixed Mobile
ConfidentialSource: Analysys Mason
63
The wider availability of wireless systems will lower the cost of entry and enable a strong take-up of broadbandof entry and enable a strong take-up of broadband
Direct Impact
P i t th t ti th hBroadband Spend • Prior to the spectrum auctions, the share of wireless system was below that of international peers
L t f h d t d i ill
Broadband Spend
20
30
40
billi
on 40%
60%
• Lower costs of handsets and services will significantly lower the entry cost and the average revenue per user (ARPU) for wireless broadband systems
0
10
20
2010 2011 2012 2013 2014 2015
US
D
0%
20%
• By 2015, the majority of the broadband market will be provided by wireless access systems
Wireless Broadband Spend (USD billion) and Nominal ARPU (USD)
Services Equiment Share of Wireless
• The total spend on wireless access systems will be in excess of USD 18 billion by 2015 – with ~17% in equipment
5
10
15
20
US
D b
illio
n
4681012
US
D / M
on
and devices0
5
2010 2011 2012 2013 2014 2015
U
02
nthServices Equiment ARPU
ConfidentialSource: Analysys Mason
64
We have assessed the broader impact of the industry
Demand-side Analysis Supply-side Analysisy pp y y
Wireless Broadband EcosystemMobile Service
DeliveryConsumers /
RetailFinancial Services
Social Services
Corporate / Verticals
Revenue Impact Revenue Impact1 2
Socio-economic Impact3
Employment Productivity Gains / Social Benefits
Contribution to Economic Growth
Confidential
Social Benefits Economic Growth
Source: Analysys Mason
65
The service delivery ecosystem is developing rapidly to address the opportunity from wireless broadband servicesaddress the opportunity from wireless broadband services
Ecosystem
Service Providers• Telecom operators and ISPs have made total investment of ~ INR 1,000 bn (USD 23 bn)
for 3G and BWA spectrum, and are entering into ecosystem partnerships for delivery of data-intensive services
Device OEMs • Device vendors are launching mass market access devices such as INR 7,000 (USD 150) smartphones and INR 14,000 (USD 300) netbooks, and partnering with operators to bundle video capable handsets
Delivery & Enabling Platform Providers
• Technology vendors, both Indian and global, are developing platforms such as SDPs1 for integrated and seamless multi-screen experience, ODPs2 for easy discovery and activation, and enabling platforms (such as advertising, relevance, content management and commerce) for enhanced experience and ease of use
Product / Application Providers
• Data-focused as well as mass market product and application platforms offering services such as mobile / broadband TV, online gaming and rural VAS are being developed by various local vendors
Content Aggregators / Developers
• Content providers are aggregating and developing both popular entertainment content such as music / videos, and mass market content such as utility applications and educational content, customized for the small screen
ConfidentialNote: 1. SDP: Service Delivery Platforms; 2. On-Device Portals
Source: Analysys Mason, Industry Inputs
66
The development of a wireless broadband ecosystem will have a significant direct revenue impacthave a significant direct revenue impact
Wireless Broadband Ecosystem
Mobile Service Delivery
Consumers / Retail
Financial Services
Social Services
Corporate / Verticals
1 7 10
m- devices
m-commerce m-banking m-learning m- enterprise
m-content m-health m-farming
m- access1
2
6 7
8
10
11
m-government m-utilities
m-apps
m-gaming3
4
9 12
m-advertising5
INR 787 bn
INR 187 bn
INR 205 bn
INR 63 bn
INR 60 bn
2015 2015 2015 2015 2015
ConfidentialSource: Analysys Mason
0.55% of GDP 0.13% of GDP 0.14% of GDP 0.04% of GDP 0.04% of GDPNote: 1. ‘m’ refers to wireless broadband enabled services accessed through wireless broadband connection over mobile
handsets or PCs
67
Mobile coupons, social media, customer service are the top mobile commerce trends that retailers are focusing on in 2010mobile commerce trends that retailers are focusing on in 2010
Ecosystemm-commerce (1/3)1
M-commerce Solutions in Taiwan M bil k t i tl tM commerce Solutions in Taiwan • Mobile coupons market is currently most advanced in Japan and Korea
Mobile coupons will be used by nearly 200 mn mobile subscribers globally by 2013Developed nations of the Far East, North America and Western Europe are forecast to account for the major part of the market by 2013
• Pay-Buy-Mobile is MNO led GSMA initiative for using mobile phones to make fast, secure payments in a retail environment using Near Field
Pay-Buy-Mobile
gCommunications (NFC)/ contactless technology
34 of the world’s largest MNOs such as AT&T China Mobile NTT DoCoMo O2
Touch to Pay Goods Purchased
Input PINto Authorize
AT&T, China Mobile, NTT DoCoMo, O2, SMART are serving more than 1.3 billion customers with Pay-Buy-Mobile initiative, to create & define a global approach to enable NFC payment services on mobile phones
ConfidentialSource: Analysys Mason
68
There are multiple existing players in the mobile payments value chain in India who can scale up with BB servicesvalue chain in India who can scale up with BB services launch
Mobile Payment Value Chain and Economics1
Ecosystemm-commerce (2/3)1
Banks / ElectronicCard Payment Gateway M-commerce
Carrier
Banks
Mobile
Online Merchants
Access ChannelDistribution Partner
-1%
Enablers / Stored Value Providers
Solution Provider Merchants
D2C
Online
Retail
Merchants
M-commerce Platform
1% - 2% 1% - 18%
0%
80% - 99%
• Banks / Credit card companies integrating with m-commerce
• M-commerce platform provider that does the end to end integration across all the entities
• Application / solution distribution entities, e.g. Airtel
• Usage channel for mobile payment, e.g. payment using mobile
• Merchants accepting mobile number as payment
Rol
e
platform • Provides payment gateway or mobile mall functionalities
is distributing mChek
number for online shopping
instrument
• SBI • mChek • Airtel • mChek: SMS based • Utility companies
R
SBI• HDFC• VISA• MasterCard• Itz Cash
mChek• Paymate• Oxicash• Ngpay• ItzCash
• Airtel• HDFC Bank• IRCTC• ngpay
• mChek: SMS based• Paymate: can be
used at retail outlets and uses IVR for confirmation
• Utility companies• Airline companies• Retail stores• Online mallsPl
ayer
s
Confidential
Note: 1. For mobile payment gateway providers, the merchants give 1-2% of the transaction value. However mobile malls such as ngpay gets retail margins depending on the product (~20% for flowers and ~5% for airlines ticketing)
Source: Analysys Mason, Industry Inputs
69
m-commerce can be a INR 31 bn value chain opportunity contributing to about 0 02% of GDP by 2015contributing to about 0.02% of GDP by 2015
m-commerce Value Chain Revenue through Market Growth Drivers
Ecosystemm-commerce (3/3)1
m commerce Value Chain Revenue through Wireless Broadband (INR bn) • Reach: Larger reach of mobile medium
compared to PC / laptops (635 mn mobile subs vs. 16 mn internet subscribers in 2015: 2010: CAGR 111%
Market Growth Drivers
31
FY 2010)
• Convenience: Ability to perform transactions anytime, anyplace is a major
0.02% of GDP<0.01% of GDP CAGR: 111%
14
23
y , yp jreason that is likely to drive m-commerce
• Telecom Carrier Interest: Carriers are exploring m-commerce as a new VAS
13
7
p grevenue stream
• RBI Guidelines: Regularization of mobile banking & payments sector has enabled
1
2010 2011 2012 2013 2014 2015
g p ythe development of an ecosystem
ConfidentialSource: Analysys Mason, Industry Inputs
Note: 1. ‘m’ refers to wireless broadband enabled services accessed through wireless broadband connection over mobile handsets or PCs
70
Content producers are extending their franchises and now play a larger role in the broadband value chainplay a larger role in the broadband value chain
Ecosystemm-content (1/4)2
Mobile FormatMobile Games
Mobile Feeds and Interactive
Mobile Sky Sports
Family Guy
TV / Film ContentMobile BBC iPlayer
Avatar
Family Guy
CNN Big Brother
• The importance of multiplatform content has led to content producers adopting a 360-commissioning model, adapting content for the Internet, the mobile, social media and gaming
• However, producers face increasing complexity and costs in creating and managing multiple versions of content for consumption on several platforms and a growing number of devices
ConfidentialSource: Analysys Mason, Industry Inputs
71
Consumer applications revenue in Europe will grow from EUR 4 2 bn to EUR 6 8 bn with games as the main growth driver4.2 bn to EUR 6.8 bn, with games as the main growth driver
Consumer applications revenue
Ecosystemm-content (2/4)2
• Traditional personalization content is giving way to games and other rich content services.
• Personalization revenue will decline from EUR2 2 billion in 2009 to EUR1 9 billion in 2015
Consumer applications revenueEurope, 2009–2015
6 6 6.87.5
EUR2.2 billion in 2009 to EUR1.9 billion in 2015. The market for ringtones and wallpapers is in semi-terminal decline because of the increasing availability of free content through the mobile web and the repurposing of MP3 files.4.2
4.65.2
5.86.2
6.6
4 5
6.0
billi
on)
• Games’ share of consumer applications revenue will grow from 18% to 28% over the forecast period.
Video’s share will increase from 5% in 2009
3.0
4.5
Rev
enue
(Eur
• Video’s share will increase from 5% in 2009 to 9% in 2015, its revenue increasing from EUR200 million to almost EUR600 million.
• The increasing popularity of streamed music b i ti i h S tif ill d i
0.0
1.5
2009 2010 2011 2012 2013 2014 2015subscription services, such as Spotify, will drive an increase in music services’ share of revenue, from 3% to 9% over the forecast period. Music revenue will grow from EUR100 million in 2009 to EUR600 million in 2015
Financial Gambling GamesMusic Other Paid informationPersonalisation TV and video
ConfidentialSource: Analysys Mason, Industry Inputs
72
There are multiple existing players in the mobile content space in India who can scale up with broadband adoptionspace in India who can scale up with broadband adoption
Ecosystemm-content (3/4)2
Content Developers
ContentAggregators
CarriersVAS Product / Application Developer
D2C
Carrier Billing
Voice SMS WAP
WAPSMS1
Online
Voice
• Hold content rights and produce
• Aggregate different types of
• VAS technology platform such as music on
• Multiple content delivery channels, each suitable for
• IN platforms and postpaid billing systems of
• Owns the consumer
• Billing
Technology Platform Enablers
hain
variety of content
content, can have exclusive tie ups with content developers
demand which is plugged into existing core platforms e.g. IVR, Voice and CRBT
different types of content or used across bearer channels
carriers
• A negligible number of D2C providers also have non carrier billing options
Billing
le in
Val
ue C
h
de e ope s CRBT billing options
• Enable the software platforms on which different services / applications can be hosted
• Rajshri • Airtel• Airtel• Hungama • Spice Digital
Rol
j
• Indiatimes • Vodafone
• RCom
• Idea
• Vodafone
• Apple
• Indiatimes
g
• OnMobile
• One97
p g
• Comviva
• Phoneytunes
Play
ers
ConfidentialSource: Analysys Mason, Industry Inputs
Note: 1. Includes STK / UTK
73
m-content can be INR 101 bn value chain opportunity contributing to about 0 07% of GDPcontributing to about 0.07% of GDP
Ecosystemm-content (4/4)
m-content Revenue Realization on Wireless Market Growth Drivers
2
m content Revenue Realization on Wireless Broadband (INR bn) Services
• Increasing focus on VAS promotion by carriers, especially new entrants
2015: 2010: CAGR 71%
Market Growth Drivers
101
• Due to absence of any emerging “killer application”, carriers will maintain their focus on basic, popular, network dependent VAS such as CRBT/RBT
DeviceC f 3G
0.07% of GDP0.01% of GDP CAGR: 71%
70
42
• Consumers lack awareness of 3G enabled devices and services and are unlikely to discover value proposition of 3G, unless OEMs invest in ATL promotions
Business Models42
23
137
us ess ode s• D2C models may emerge to bypass carrier billing
but scalability will be an issue
• Mobile ad based models will continue to remain in an experimental stage and will not emerge as a
7
2010 2011 2012 2013 2014 2015
significant alternate monetization model
Demand Side• Challenges around consumer awareness &
discovery of content, lack of availability of regional d l l t t ill ti
ConfidentialSource: Analysys Mason, Industry Inputs
and local content will continue
Note: 1. ‘m’ refers to wireless broadband enabled services accessed through wireless broadband connection over mobile handsets or PCs
74
Global online and mobile gaming market stands at ~ USD 20 billion and is growing at a significant ratebillion and is growing at a significant rate
Global Video Game Market
Ecosystemm-gaming (1/3)3
• Smartphones and touchscreen phones will realize the potential market for more sophisticated mobile games
Global Video Game Market (USD billion)
16%45 18%
• End users are prepared to pay for games
~ 50% of the top-10 iPhone App Store downloads in Jan 2010 were games11
12
14%15% 15% 15%
27
36
on
12%
15%
downloads in Jan 2010 were games
• In-game monetization is more developed on fixed platforms, but the same t h i ill b li d f bil21
257
8
10
11
18
27
US
D b
illio
6%
9%
techniques will be applied for mobile
The most basic form of in-game monetization is the freemium proposition, where the initial gaming is available without
12 1417
21
0
9
2009 2010 2011 2012 20130%
3%
where the initial gaming is available without cost, user pay for advanced features in the game
Online Games Wireless Games
Share of Wireless
ConfidentialSource: PWC
75
The Indian digital gaming market is still nascent but has significant growth potential owing to the recent initiativessignificant growth potential owing to the recent initiatives
Challenges Initiatives by Indian Games Publishers and Operators Examples
Ecosystemm-gaming (2/3)3
Challenges Initiatives by Indian Games Publishers and Operators Examples
Affordability• Offering ad supported free games• Innovative pricing models e.g. pay per play model, try and buy
for INR 10 etc
Ad Based Games
Consumer
• Developing rich game content (e.g. 3D games) • Customizing games for low end handsets and for easy download
on slow speed 2.5G network• Developing games for various available technology platforms
Exclusive Rights
Experience • Developing games for various available technology platforms e.g. Java, BREW, Symbian, Flash
• International partnerships to offer a variety of popular Hollywood and action games
Off i di d i l h iContent Discovery & Availability
• Offering easy to discover and navigate game catalogues on their WAP portals and websites
• Allowing side loading of games to mobile phones through their websites
Side Loading from Websites
• Currently only ~ 10 mn users download games on their mobile handsets in India
• This number can grow significantly with better user data experience for the capability to download richer gaming content as well as to play multi-player games
ConfidentialSource: Analysys Mason
richer gaming content as well as to play multi player games
76
m-gaming can be INR 20 bn value chain opportunity contribution to about 0 01% of GDPcontribution to about 0.01% of GDP
Ecosystemm-gaming (3/3)3
m-gaming Revenue Realization on Wirelessm gaming Revenue Realization on Wireless Broadband (INR bn)
2015: 2010: CAGR 112%
• Better capabilities of 3G enabled handsets will allow game publishers to create high quality games thus
20
0. 01% of GDP<0.01% of GDP CAGR: 112% generating more interest for mobile games
• Introduction of a variety of pricing models
8
13
y p gand micro transactions will further drive the growth in user base
• Operator and D2C app stores by content
2
4
8 Operator and D2C app stores by content aggregators and publishers will enable easy content discovery and delivery
0
2010 2011 2012 2013 2014 2015
ConfidentialSource: Analysys Mason, Industry Inputs
Note: 1. ‘m’ refers to wireless broadband enabled services accessed through wireless broadband connection over mobile handsets or PCs
77
Mobile advertising is expected to grow significantly across major international marketsmajor international markets
Global Online Advertising Revenues
Ecosystemm-advertising (1/3)4
• The mix of mobile advertising is likely to change, as larger-screened mobile devices facilitate more search-related
Global Online Advertising Revenues by Platform
100 8%
advertising revenue
• Mobile advertising achieves much higher click-through rates than the 1–2% from60
80
on
6%
click-through rates than the 1–2% from most online ads
• Although advertising revenues should 40
60
US
D b
illio
2%
4%
continue to grow, increasing fragmentation of audiences present a challenge to service providers, leading to increasing use of pay models
0
20
2009 2010 2011 2012 2013 20140%
increasing use of pay-models
Fixed Mobile Share of Mobile
ConfidentialSource: PWC, 2009
78
The nascent mobile advertising market in India will benefit from the development of a robust ecosystemfrom the development of a robust ecosystem
Ad Server / Mobile
Ecosystemm-advertising (2/3)4
Advertiser Ad Agency Ad Network Ad Server / Platform
Mobile Publisher Operator
• Initiates the demand through promotion, sales and lead generation
• Assists advertisers with their media buying strategy
• Develop creative
• Ad aggregation
• Ad inventory management
• Offer consumer profiling & targeting engine
• Perform ad response
• Content delivery platforms
• Enables ad insertion
• Ad delivery over different bearer channels
• Owns subscriber data
ditio
nal R
ole
Valu
e C
hain
for ads monitoring
Trad in V
• Will use mobile advertising for b d & d t
• Evolution of performance b d t i
• Building up of in-house, dedicated
l t f
• Enhanced targeting and
d ti
• Building large user database th t b
• Enabling rich media based ads b d ti f 3Gle
s
brand & product promotions, CRM and couponing
based metrics sales teams for handling branded inventory
recommendation capabilities across various bearer channels and platforms
that can be profiled & targeted
by adoption of 3G
• Seamless sharing of subscriber database across th l h i
Evol
ving
Rol
the value chain
Wireless broadband will enable delivery of rich media based ads, and enhance the role of the advertising ecosystem in addressing the growing opportunity as well as shift to better revenue shares from the operator
ConfidentialSource: Analysys Mason, Industry Inputs
from the operator
79
m-advertising can be INR 28 bn value chain opportunity contributing to about 0 02% of GDPcontributing to about 0.02% of GDP
m-advertising Revenue Realization on
Ecosystemm-advertising (3/3)4
• With increasing number of mobile data active users, WAP inventory (page views per month) is likely to grow from 5 bn in
m advertising Revenue Realization on Wireless Broadband (INR bn)
2015: 2010: CAGR 94%2010 to over 40 bn by 2015, with over 70% contribution of 3G subscribers
• With better profiling information available28
0. 02% of GDP<0.01% of GDP CAGR: 94%
With better profiling information available with telcos ecosystem participants through deployment of profiling platforms will enhance CPMs (cost per thousand 14
22
impressions)
• Growth in demand for infotainment content and corresponding growth in ad-1
3
8
content and corresponding growth in ad-subsidies will further enhance the mobile advertising market
1
2010 2011 2012 2013 2014 2015
ConfidentialSource: Analysys Mason, Industry Inputs
Note: 1. ‘m’ refers to wireless broadband enabled services accessed through wireless broadband connection over mobile handsets or PCs
80
The global mobile apps market is already a billion-dollar industry and is expected to grow significantlyindustry, and is expected to grow significantly
Ecosystemm-apps (1/3)5
Global App Store Revenues• The global apps market is growing rapidly
• Estimates for total app store revenues in f S S29 479
35,000
Global App Store Revenues
2009 range from USD2 billion to USD9 billion
• Apple accounts for ~95% of the market,
25,000
29,479
21,000
28,000
milli
on)
ppdemonstrating that consumers are willing to pay for mobile apps
• Currently apps are offered primarily by9,000
6,770
14,000
Rev
enue
(USD
• Currently, apps are offered primarily by smartphone OEM and OS vendor app stores, who retain 30% of the revenues and transfer the rest to developers
4,237
2,8063420
7,000
2008 2009 2010 2011 2012 2013 2014 2015 p
Juniper (Global) Gartner (Global)
AdMob (Global) Yankee (US Only)
ConfidentialSource: Analysys Mason
81
With the launch of operator app stores, there is significant potential for Indian app developers to achieve scalepotential for Indian app developers to achieve scale
Operator App / Platform # A
Ecosystemm-apps (2/3)5
Operator App Store
App / Platform Providers # Apps
71,000 (July 2010)
• Currently, the Indian mobile apps market is estimated at less than 1% of the global market, limited primarily by penetration of
t h d d t i( y )
800(March 2010)
smartphones, and poor data experience for users
• Launch of app stores by Indian operators i t d t d i d ti f ilit t d
~70,000
(April 2010)
is expected to drive adoption, facilitated by launch of 3G services
• This will provide opportunity for the large and fragmented local app developer
14 Services across 7 Categories (July 2010)
and fragmented local app developer community to develop India specific apps for the mass market and grow to the scale of global players( y )
-
• This will also help Indian platform providers such as Spice and Infosys to address the global mobile apps market
ConfidentialSource: Analysys Mason, Industry Inputs
82
m-apps can be INR 6.6 bn value chain opportunity for domestic market contributing to less than 0 01% of GDPdomestic market, contributing to less than 0.01% of GDP
m-apps Revenue Realization on Wireless
Ecosystemm-apps (3/3)5
m apps Revenue Realization on Wireless Broadband (INR bn)
2015: 2010: CAGR 102%
• With launch of high speed 3G data services by private operators by 2010 end, user experience is expected to i i ifi tl d th d i
6.6
<0.01% of GDP<0.01% of GDP CAGR: 102% improve significantly and thus drive adoption of rich video based applications
• With increasing penetration of t h & f t h t k f
3.3
5.1smartphones & feature phones, uptake of apps will increase
• Moreover, availability of free apps are expected to facilitate customer
0 20.6
1.7
expected to facilitate customer experimentation and eventually lead to regular usage of app store, thus increase data service adoption
0.2
2010 2011 2012 2013 2014 2015
ConfidentialSource: Analysys Mason, Industry Inputs
Note: 1. ‘m’ refers to wireless broadband enabled services accessed through wireless broadband connection over mobile handsets or PCs
83
Users of mobile banking and related services is forecasted to grow at a CAGR of 59 2 % to reach 894 million users in 2015grow at a CAGR of 59.2 % to reach 894 million users in 2015
Ecosystemm-banking (1/3)6
Initiatives Around the World wrt Mobile Banking
ConfidentialSource: Analysys Mason
84
Smaller player will benefit with enhanced broadband coverage for transaction authentication in the rural areascoverage for transaction authentication in the rural areas
Financial Inclusion Value Chain and Revenue Share1
Ecosystemm-banking (2/3)6
B k Banking
Business Correspondent
Customer
7%
Banks Banking Solution Provider
• Indian Banks expanding • Banking solutions for the • The BC is an agent of a • Outlets to provide
Micro Finance Institute
CustomerService Point
Per txn. fees
Rol
e
p gto the unbanked population
gunbanked consumer; additional capabilities such as mobile payment, money transfer may be
gspecified bank and is authorized to undertake transactions on behalf of the bank
MFI id l t
pvarious kinds of transaction services such as cash deposit, cash withdrawal, transfer of money andtransfer may be
supported• MFI provides loans to
the unbanked population
transfer of money and payment of utility bills
yers • Government banks • Eko
• Fino• Retail Outlets• India Post
Maj
or P
lay Fino
• A little world• India Post• SKS Microfinance
• India Post
Confidential
Note: 1. Mobile banking model is emerging. Currently Eko offers mobile banking for the unbanked. Banks pay 7% commission on the deposits. The arrangement between banks and BC varies on a case by case basis
Source: Analysys Mason
85
m-remittance can be INR 205 bn value chain opportunity for domestic market contributing to about 0 14% of GDPdomestic market, contributing to about 0.14% of GDP
Service Description
Ecosystemm-banking (3/3)6
m-banking & remittance on Wireless Service Description
• Domestic and overseas remittance service from/ to mobile
• Can be transfers to and from linked bank t dit / d bit d id d
m banking & remittance on Wireless Broadband (INR bn)
2015: 2010: CAGR 67%
Remittance
accounts, credit / debit cards, prepaid cards, stored value wallets, or at retail outlets e.g. Obopay
• Unofficial channel also used for small transaction values by overseas worker due205
0.14% of GDP0.02% of GDP CAGR: 67%
transaction values by overseas worker due to convenience; for smaller transaction values, mobile remittance will be preferred
• Banking penetration remains concentrated in urban areas124
172
Financial Inclusion
Only 41% of bank branches are located in rural areas though 65% of population is rural
• Banks are offering mobile banking to profitably serve rural areas in partnership
16
38
75
with business correspondents (BC)
Eko as SBI BC has launched banking services; mobile number is treated as account number and money can be deposited / withdrawn from an Eko cash-point
16
2010 2011 2012 2013 2014 2015
Confidential
p
Source: Analysys Mason
Note: 1. ‘m’ refers to wireless broadband enabled services accessed through wireless broadband connection over mobile handsets or PCs
86
Increased adoption of mobile devices will help mLearning to gain popularity within the learning education segmentsgain popularity within the learning education segments
Ecosystemm-learning (1/3)7
Target Users of Mobile LearningDrivers for Mobile Learning
• Collaborative projects and fieldwork
• Organization-wide policies proceduresService and fieldwork
• Podcastingpolicies, procedures
• Compliance trainings• Sales material
Corporate Education
Service Suppliers
Large Growing
• Literacy initiatives• Training on new
arms & weapon for defence
Defense NGO / RuralBuyer Demographic
Powerful Internet Connected Convergent
Mass Market
Content Distribution
Channel Mobile
• The growth of mobile learning is being driven by
Convergent Devices
New Mobile Learning Dev Tools & Delivery
Explosion of New Learning Apps &
Learning Adoption
• The growth of mobile learning is being driven by emerging innovations in both hardware and software as well as by changes occurring in the training field, such as reorganizing training to fit mobile abilities and managing the resulting virtual teams
Content Suppliers
Technology Suppliers
Dev Tools & Delivery Platforms
Content
Confidential
g g g
Source: TCS White Paper
87
Companies offering online learning can scale with increased benefits to massesbenefits to masses
Preliminary EstimatesTech Enabled Learning Value Chain and Revenue Share1
Ecosystemm-learning (2/3)7
Content Providers / Aggregators
ContentR i / A th i
PortalsLearning Management Systems / Delivery and
Infrastructure12%
Tech Enabled Learning Value Chain and Revenue Share
Aggregators Repurposing / Authoring
Services2
• Distribution and
• Delivering, tracking & managing education systems range from
• Create and package content customized by device to create
• Provide the backend content for courses
y yCollaborative Tools
40% 10% 3%
25%20%
Rol
e
and delivery channel for content
education systems – range from managing content to distributing courses & offering features for online collaboration
customized by device to create e-learning modules (online and/or mobile)
content for courses
• Provides consulting technical and support services
• Govt. UniversitiesIGNOUSNDT
• Elicitus• authorGen• Educomp
• 24x7Learning • EnableM• Educomp
• Carriers• Institutions• Handsetrs
• Provides consulting, technical and support services
• EnableM
• Private UniversitiesAmity
• Training InstitutionsNIIT
Educomp Educomp Handset OEM
• D2C portalsPlay
e
Confidential
Note: 1. Infrastructure includes both hardware and software solutions and support2. Services refers to hosting and managed services, consulting and other technical support services
Source: Analysys Mason
88
m-learning can be INR 18 bn value chain opportunity for domestic market contributing to about 0 01% of GDPdomestic market, contributing to about 0.01% of GDP
Preliminary Estimates
Ecosystemm-learning (3/3)7
m-learning Revenue Realization on Wireless Market Growth Driversm learning Revenue Realization on Wireless Broadband (INR bn)
2015: 2010: CAGR 107%
Government Focus:
• Increasing spend on ICT1 and other t h l bl d i iti ti h
Market Growth Drivers
18
0.01% of GDP<0.01% of GDP CAGR: 107% technology enabled initiatives such as the National Knowledge Network
Educational Institutes:
12
7
• Educational institutions increasingly moving towards online courses and multimedia aids in teaching
7
4
2
• Market is currently very underpenetrated
User Convenience:
• End user flexibility in terms of time0
2010 2011 2012 2013 2014 2015
• End user flexibility in terms of time, duration and location of study
• Multimedia enabled teaching makes learning more interesting for kids
ConfidentialSource: Analysys Mason
Note: 1. ICT: Information and Communication Technology; 2. ‘m’ refers to wireless broadband enabled services accessed through mobile handsets or dongles
learning more interesting for kids
89
m-health applications vary from remote data collection to clinical applications in healthcare managementclinical applications in healthcare management
Ecosystemm-health (1/3)8
Global m-health Market ProjectionsGlobal m health Market Projections(USD billion) • There are many m-health applications but
they can be grouped as follows:
remote data collection and disease monitoring –li ti th t l i f ti ( h
6
e.g. applications that relay information (such as vital indicators) from patients’ monitoring devices to a central server via a mobile network
treatment compliance – e.g. SMS-based applications to remind patients to take drugs
4
applications to remind patients to take drugs
diagnostic and treatment support – e.g. consultations over mobile phone; this application targets rural areas in developing countries with lack of access to medical
2
countries with lack of access to medical services
education and awareness – e.g. SMS-based applications to dissemination information re health
02009 2010 2011 2012 2013 2014
clinical applications – e.g. those which assist in healthcare management, e.g. Vodafone’s SMS for Life in Tanzania service – a mobile stock ordering system that ensures supplies of anti-
ABI Research ON WorldCSMG Parks ResearchJuniper Research
ConfidentialSource: Analysys Mason
malaria drugs at rural healthcares centres
90
In India, operators have launched basic services, and government bodies are using mobile primarily for health datagovernment bodies are using mobile primarily for health data collection & treatment support Ecosystemm-health (2/3)8
Area Provider Service Offerings Monetization Partner Description
• Doctor on Call
• Transaction (Reliance subscribers - INR 15/min, • HealthcareMagic • Provides consultation on
acute chronic andO2
C
• Doctor-on-Call ,Tata Indicom subscribers –INR 9/min )
g.com acute, chronic and
emergency cases
• Virtual Blood Bank S i • Blood Banks
B2
O2
C
Service
• VacciDate (Vaccination Alert System)
• Freeood a s
such as Jeevan
• Hospitals
• Toll free number to get information on blood bankG
2O
2
• Open source software application on PDA to collect medical and demographic data
• Funded• Dimagi, Inc
• AIIMS
• System currently records and manages data from over 70,000 patients G
2B
2C
• Jiva Institute -TeleDoc
• Prescription and treatment to patients in remote villages through the use of mobile phone
• Funded
• INR 70 per consultation• Soros
Foundation • More than 1,500 patients
B2B
2C
ConfidentialSource: Analysys Mason, News Articles, Industry Inputs
91
m-health can be INR 26 bn value chain opportunity for domestic market contributing to about 0 02% of GDPdomestic market, contributing to about 0.02% of GDP
Ecosystemm-health (3/3)8
m-health Revenue Realization on Wirelessm health Revenue Realization on Wireless Broadband (INR bn)
2015: 2010: CAGR 125%
• It was estimated that out 828 million of rural population only 27% is using mobile services in 2010 generating a 225 million
dd bl k t f t t t t
26
0.02% of GDP<0.01% of GDP CAGR: 125% addressable market for treatment support m-health applications
• Wireless remote monitoring services remain restricted due to high cost of
16
remain restricted due to high cost of device and service charges, making it affordable to very high income end-users only
9
4
1
Biotronik, a home monitoring system for patients with Biotronik implantable cardiac devices was recently launched in India. Only CardioMessenger device alone costs
0
2010 2011 2012 2013 2014 2015
INR 150,000 (USD3000) and there are also additional services charges
ConfidentialSource: Analysys Mason; (1) http://openmed.nic.in/1265/01/skm12.pdf
Note: 1. ‘m’ refers to wireless broadband enabled services accessed through wireless broadband connection over mobile handsets or PCs
92
m-government services offer a plethora of applications
Transactions
Ecosystemm-govt (1/3)9
• Norway and Sweden – the respective tax authorities introduced a service that
• Estonia – in December 2008, the parliament passed the bill which
• Singapore – SMS alerts for a variety of e-services such as: renewal of road tax,
• UK – a number of towns and cities are adopting the pay-by-phone scheme
Communication Transactions and Payments Public Sector Operations Citizen Participation
introduced a service that allows taxpayers to file tax returns by SMS. Tax Authority personnel fills the forms and send them to taxpayers for confirmation;
passed the bill which enabled electorate to vote via mobile phones in national elections in 2011.
as: renewal of road tax, medical examinations for domestic workers, passport renewal notifications, season parking reminders, and parliament notices and
pay by phone scheme when motorists can pay for parking via SMS
• Oman – Municipality of Muscat introduced m-parking services in 2007 tax payers can confirm by
SMS, which the authority counts as filing electronically.
• Philippines – PAYBIR
alerts
• Dubai (UAE) - Dubai Public Prosecution offers an SMS service that allows clients, including the transacting
parking services in 2007
• Johanessburg (South Africa) - Motorists can find out if they have outstanding traffic fines, summonses or warrants of arrests through service allows a taxpayer to
file income tax returns by SMS. Taxpayers can also pay tax of up to R10,000 via SMS
public, lawyers and prosecutors, to inquire about cases, times of sessions, resolutions, and the status of proposals and
t d ft d b th
warrants of arrests through SMS.
requests drafted by the Public Prosecution.
ConfidentialSource: Analysys Mason
93
The Indian government is focusing on e-governance & mobile enablement is only a small element of the project roadmapenablement is only a small element of the project roadmap
Banking
Ecosystemm-govt (2/3)9
• Government of India have launched a National e-Governance Pl t id
Income Tax
Central Excise & Customs
InsurancePlan to provide governance services as part of 27 Mission Mode Projects (MMPs)
Central MMPs Passport, Immigration, Visa
MCA21
National Citizen Database (NCD)
Agriculture
e-Districts
Commercial Taxes
+ j ( )and 8 components
• However, from the 27 MMPs only agriculture-
E-Governanc State
MMPs+
Pension
e-OfficeLand Records
Employment Exchange
Municipalities+
related MMP include elements of m-governance
CSC
Integrated
e-Biz
e MMPs MMPs
e-Courts
Panchayats
Police
Property RegistrationIntegrated
MMPs e-Procurement
EDI
NSDG
Road Transport
Treasuries
+
ConfidentialSource: Analysys Mason
India Portal
94
m-government can be INR 19 bn value chain opportunity for domestic market contributing to about 0 01% of GDPdomestic market, contributing to about 0.01% of GDP
Ecosystemm-govt (3/3)9
m-govt Revenue Realization on Wirelessm govt Revenue Realization on Wireless Broadband (INR bn)
2015: 2010: CAGR 82%
• M-government segment is a subset of e-government market and the letter is a part of the total government IT spend.
19
0.01% of GDP<0.01% of GDP CAGR: 82% • The government IT spend is estimated to constitute 1% of the total state budget expenditure
An annual IT spend per capita is INR 110
11
9 An annual IT spend per capita is INR 110 (USD 2.4) in 2010
• Currently, m-government applications contribute a miniscule amount of total IT spend As discussed previously the
24
7
spend. As discussed previously, the government focuses more on the e-government than m-government applications
1
2010 2011 2012 2013 2014 2015
• However, we expect that the situation is set to change and more transaction and information related mobile applications will be adopted in India
ConfidentialSource: Analysys Mason
be adopted in India
Note: 1. ‘m’ refers to wireless broadband enabled services accessed through wireless broadband connection over mobile handsets or PCs
95
The global enterprise applications market is huge and is shifting fast towards network technologiesshifting fast towards network technologies
Global Enterprise Application Software
Ecosystemm-enterprise (1/3)10
• Enterprise spending priorities are shifting from cost optimization to supporting business growth led by emerging
Global Enterprise Application Software Market (USD billion)
112economies
• Growth is driven by innovation in applications like telephony, messaging
10599
938986
and conferencing based on fast-moving networking technologies (such as SIP) that will facilitate UC and enhance business processesbusiness processes
• The market structure is increasingly being influenced by market-disrupting i fl f S S l d b dinfluences of SaaS, cloud-based services, open-source software and Web 2.0 technologies
2009 2010 2011 2012 2013 2014
ConfidentialSource: Analysys Mason
96
Emergence of system integrators & device capabilities will drive Indian enterprise mobility apps marketdrive Indian enterprise mobility apps market
Ecosystemm-enterprise (2/3)10
Sys
tem
In
tegr
ator
s • System integrators are emerging in India to help guide enterprise organizations on the integration of mobile and workflow
System integrators are partnering with industry specific mobile app developers & network providers to offer customized mobility applications to enterprises
Agno
stic
at
ions
• Platform agnostic applications solve the issues on interoperability and allow the enterprise to choose the operator, vendor and the type of handset
• Nokia & Microsoft, tied up in March 2008 to provide Silverlight* on S60 and
Pla
tform
AAp
plic
a Nokia & Microsoft, tied up in March 2008 to provide Silverlight on S60 and S40 enabled devices
Silverlight is a cross-browser, cross-platform plug-in for delivering next-generation rich interactive applications
Current EMA Implementation by Enterprises in India
• Productivity applications such as SFA and CRM have the potential to drive substantial growth, as h i hi h d i51%
79%
they constitute higher spend per enterprise• Emergence of system integrators coupled with
better device / smartphone and data ecosystem will help grow these segments
28%16% 21% 19%
51%
ConfidentialSource: Analysys Mason, Industry Inputs
p g gRAN ERP CRM SFA E-Mail Messaging
97
m-enterprise can be INR 35 bn value chain opportunity for domestic market contributing to about 0 02% of GDPdomestic market, contributing to about 0.02% of GDP
Ecosystemm-enterprise (3/3)10
m-enterprise Revenue Realization on• Productivity: Enterprise focus on
productivity will drive investment in various systems and tools
m enterprise Revenue Realization on Wireless Broadband (INR bn)
2015: 2010: CAGR 49%
• Connectivity: Employers are also on the lookout for better ways to keep them connected to their workplace
35
0.02% of GDP0.01% of GDP CAGR: 49%
• Competitive advantage: With increasing competition, companies are looking for ways to improve their
24
execution speeds and customer response times
Currently under-penetrated applications
15
106
5
such as CRM and ERP will benefit from this trend and enhance overall market growth2010 2011 2012 2013 2014 2015
ConfidentialSource: Analysys Mason, Industry Inputs
Note: 1. ‘m’ refers to wireless broadband enabled services accessed through wireless broadband connection over mobile handsets or PCs
98
m-farming applications are increasingly popular in many countriescountries
SENEGAL PHILIPPINES
Ecosystemm-farming (1/3)11
S G
• Manobi and a mobile operator Sonatel launched an SMS-based service that provides market price and meteorological information to farmers and fishermen.
• It was extended to include geolocation and GPS mapping
S
• The Department of Agriculture launched the PRESYO & PANAHON to provide farmers and fishermen with a five-day weather forecast and information on prices of basic commodities in the Manila metro area
It was extended to include geolocation and GPS mapping services, for example, fleet vehicle tracking, search and rescue services.
• The service costs around USD5 per month, plus the cost of SMS. The company claims its overall monthly ARPU is around USD30 f hi h USD12 t M bi d USD18 t S t l
• The Department also funded a Nutrient Manager tool which allows to get farming advice and recommendations on the types and amounts of fertilizer needed. The services is based on IVR and generates an automated SMS with the relevant information.
USD30, of which USD12 go to Manobi and USD18 to Sonatel.
KENYA UGANDA
• SMS Sokoni project provides commodity price information via SMS for a fee. The project is run by the Kenya Agricultural Commodities Exchange(KACE), a private firm, in partnership with mobile operator Safaricom
• DrumNet - Transaction platform linking small holder farmers to
• Google Trader - A user-generated trading bulletin that via SMS matches buyers and sellers of agricultural produce and commodities as well as other products. Developed by MTN Uganda and AppLab.
• RATIN SMS - Commodity prices from various terminal p gmarkets, finance and information.
y pmarkets within East Africa visa SMS. Currently, it is available in Kenya, Uganda and Tanzania but will soon be available in Rwanda and Burundi too.
• INFOTRADE Mobile - Up-to-date agricultural prices via SMS
ConfidentialSource: Analysys Mason
99
Multiple types of m-farming apps are being introduced and are gaining adoptiongaining adoption
Service Description
Ecosystemm-farming (2/3)11
Service Description
Reuters - Market Light
• ‘Reuters Market Light’, a mobile information service for Indian farmers, offers commodity pricing information for nearby markets, news and weather updates; It had 0.25 mn subs in 12 000 villages in Dec 09 in 13 states, including Maharashtra, Punjab and Haryana
Rcom Commodity • ‘Commodity Quotes ’ an application that provides information on commodities across CommodityRcom - Commodity Quotes
• Commodity Quotes, an application that provides information on commodities across Commodity exchanges and ‘mandis’ in India
HFCL Infotel -Mandi Bhav
• Provide commodity rates such as vegetables, fruits, food grains, pulses and spices from 12 major wholesale markets across Punjab. Available to both landline and mobile users
Tata Indicom –Mandi Bhav
• Provides details on trading platform, weather information and expert advice to rural consumers; offers information collated from around 3,000 local commodity markets in India on around 500 products; it delivers information in 9 languages including Hindi, English and Marathi
Lifelines India
• Voice based service, provides information on various farming needs such as seeds, fertilizers etc; Offers expert advice to farmers on ways of improving input efficiency by encouraging Integrated Pest Management (IPM) methods; it is implemented in 700 villages across 4 states in India and is used by 100 000 farmers; on average, it receives 450 calls per day
IKSL provided by Airtel and IFFCO
• Provides information on farming techniques, weather forecasts, dairy farming, animal husbandry, rural health initiatives and fertilizer availability etc.
• Sends 5 voice based sms/day related to mandi prices; 48,000 farmers enrolled for the service as of April 08
ConfidentialSource: Analysys Mason
100
m-farming can be INR 6 bn value chain opportunity for domestic market contributing to less than 0 01% of GDPdomestic market, contributing to less than 0.01% of GDP
Ecosystemm-farming (3/3)11
m-farming Revenue Realization on Wirelessm farming Revenue Realization on Wireless Broadband (INR bn)
2015: 2010: CAGR 209%
• In India, 68% of total households depends on farming for their livelihood
• Our estimates show that at least 300,000 farmers used m-farming applications in
6
<0.01% of GDP<0.01% of GDP CAGR: 209% farmers used m farming applications in India at the end of 2009
This implies that 0.2% of households dependant on farming, and where at least one member of the household was
4
one member of the household was consuming mobile services, were using m-farming applications
• Users of m-farming applications claim to hi i ifi t t i d t
2
1
achieve significant costs savings and to generate additional revenues as a direct result of using the applications
• Utility will drive the adoption. We expect100
2010 2011 2012 2013 2014 2015
Utility will drive the adoption. We expect that 31 million farmers will use m-farming services by 2015, bringing the total market value to INR 6.3 billion (USD 0.15 billion)
ConfidentialSource: Analysys Mason
Note: 1. ‘m’ refers to wireless broadband enabled services accessed through wireless broadband connection over mobile handsets or PCs
101
m-utilities market segment is dominated by such applications as smart meters and telemetricsas smart meters and telemetrics
Cellular M2M Market Size
Ecosystemm-utilities (1/3)12
• The M2M market is diverse and consists of many technologies and applications that enable machines and other traditionally non-computing remote devices and sensors to interconnect with back end IT infrastructure
Cellular M2M Market Size
2.0
2.5
3.0
EU
R b
illio
n)
120
150
180 M2M
SI interconnect with back-end IT infrastructure
in a largely automated fashion• Statistics quoting the size of the M2M
market vary hugely owing partially at least to variations in the definition of M2M The
0.0
0.5
1.0
1.5
Mar
ket v
alue
(E
0
30
60
90
Ms (m
illion)
variations in the definition of M2M. The revenue calculations traditionally include M2M hardware, M2M communications and M2M services
• In Europe M2M deployments werePotential Market Size by M2M Deployment
Type (Total Units in Europe 2008 )
2009 2010 2011 2012 2013
Market Value M2M SIM Module
• In Europe, M2M deployments were dominated by energy meters and telematics applications
• IDATE reports that cellular M2M market stood at EUR14 billion in 2009 and will grow
Type (Total Units in Europe, 2008 )56%
36%
stood at EUR14 billion in 2009 and will grow at a CAGR of 23% to reach EUR32 billion in 2014
M2M SIMs are forecast to represent 2.5% of all mobile SIMs in 2014
5% 1% 1% 0.50%
EnergyMeters
PassengerCars
CommercialVehicles
MonitoredAlarm
Systems
POSTerminals
Parking andVendingMachines
ConfidentialSource: IDATE (2009); Analysys Mason
102
In India such M2M applications as smart meters and remote video surveillance have seen some adoptionvideo surveillance have seen some adoption
Ecosystemm-utilities (2/3)12
• Power utility companies such as Reliance Infrastructure and Tata Power are deploying CDMA-enabled smart meters
• In India, most of the current CCTV installations are being carried out in urban areas and within a premise such as shopping mall, commercial complex,
These companies are expected to deploy such meters for high usage industrial and commercial subscribers
As of June 09 Reliance Infra has deployed
pp g , p ,business establishments and schools
• To strengthen the security of the metropolis after the 26/11 terror attacks, Maharashtra
As of June 09, Reliance Infra has deployed CDMA-based modems, serially attached to digital meters for 4,916 substations / distribution transformers, 2,687 streetlights, 12 590 high-value customers and 57
Government is considering to install 5,000 CCTV cameras across Mumbai
• Using high speed 3G HSUPA connectivity combined ith the latest compression 12,590 high-value customers and 57
receiving stations / grid stations
• In Delhi, Grinpal Energy Management is deploying smart meters and advanced
combined with the latest compression technologies, CCTV solution companies can provide rapid access to good quality recordings from any location deploying smart meters and advanced
metering infrastructure. It aims to have 500,000 meters installed in the Tata region by the end of 2010
MEL Secure Systems, one of the leading developer of CCTV surveillance and security solutions, has launched a new range of 3G rapid deployment CCTV cameras
Confidential
y
Source: Analysys Mason
103
m-utilities can be INR 19 bn value chain opportunity for domestic market contributing to about 0 01% of GDPdomestic market, contributing to about 0.01% of GDP
Ecosystemm-utilities (3/3)12
m-utilities Revenue Realization on Wirelessm utilities Revenue Realization on Wireless Broadband (INR bn)
2015: 2010: CAGR 85%
• We expect that for every mobile service user (voice and data), there will be 1.3 SIM cards by 2015
19
0.01% of GDP<0.01% of GDP CAGR: 85% • M2M SIMs in India are expected to contribute 2.3% of all SIMs by 2015, which is in line with the global estimate of 2.5% in 2014
15
10
• The growth will be primarily driven by applications such as smart meters, video surveillance and such telemetry
5
2
yapplications as vehicle tracking
• We expect that by 2015 the Indian market for M2M applications will grow to INR 19
1
2010 2011 2012 2013 2014 2015
pp gbillion (USD 0.43 billion)
ConfidentialSource: Analysys Mason
Note: 1. ‘m’ refers to wireless broadband enabled services accessed through wireless broadband connection over mobile handsets or PCs
104
In summary, mobile access will remain the main source of revenue for operators – VAS will be a key differentiatorrevenue for operators – VAS will be a key differentiator
Ecosystemm-access
3)
Mobile Data
Messaging
• Operators are diversifying their non-voice portfolio
• Voice and messaging services will
re o
f Val
ue (2
01
VoiceMobile
Banking
Voice and messaging services will continue to account for a majority of revenue, however, mobile data access services will enable a host of new
Ope
rato
r Sha
r
Media Content & Entertainment Mobile TV
applications
• Global industry trends show the growing importance of non-voice services
20% 30% 80%
Mobile AdvertisingDevice Sales
Applicationsimportance of non voice services including content and entertainment, financial services and advertising
-20% 30% 80%
CAGR 09–13
ConfidentialSource: Analysys Mason
105
The development of a wireless broadband ecosystem will have a significant revenue impacthave a significant revenue impact
Wireless Broadband Ecosystem
Mobile Service Delivery
Consumers / Retail
Financial Services
Social Services
Corporate / Verticals
1 7 10
m- devices
m-commerce m-banking m-learning m- enterprise
m-content m-health m-farming
m- access1
2
6 7
8
10
11
m-government m-utilities
m-apps
m-gaming3
4
9 12
m-advertising5
INR 787 bn
INR 187 bn
INR 205 bn
INR 63 bn
INR 60 bn
2015 2015 2015 2015 2015
ConfidentialSource: Analysys Mason
0.55% of GDP 0.13% of GDP 0.14% of GDP 0.04% of GDP 0.04% of GDPNote: 1. ‘m’ refers to wireless broadband enabled services accessed through wireless broadband connection over mobile
handsets or PCs
106
We have assessed the broader impact of the industry
Demand-side Analysis Supply-side Analysisy pp y y
Wireless Broadband EcosystemMobile Service
DeliveryConsumers /
RetailFinancial Services
Social Services
Corporate / Verticals
Revenue Impact Revenue Impact1 2
Socio-economic Impact3
Employment Productivity Gains / Social Benefits
Contribution to Economic Growth
Confidential
Social Benefits Economic Growth
Source: Analysys Mason
107
Contents
Executive Summary
Overview of Broadband Services in IndiaOverview of Broadband Services in India
The Wireless Broadband Ecosystem
Socio-economic Impact of Wireless Broadband
Imperatives for Stakeholders in the Indian Wireless Broadband Industry
Confidential
108
Wireless broadband will have an industry productivity impact of INR 888 bn (0 62% of GDP) in 2015of INR 888 bn (0.62% of GDP) in 2015
Estimation of Impact on Productivity due to Industry-wise Impact on Productivity due to
2nd Order Impact
Estimation of Impact on Productivity due to Wireless Broadband
Industry Industry Share of Increase
Industry wise Impact on Productivity due to Wireless Broadband (2015)
Working population with wireless broadband connectivity1 Industry
Vertical
yContribution to
GDP in 2015in Productivity in
2015
Manufacturing, Mining & Industry 17% 11%
5 mn
2010 2015
27 mn
connectivity1
CAGR:Government & PSUs 3% 1%
Services (excluding IT / ITeS)
57% 75%
5 mn 27 mn39%
ITeS)
IT / ITeS 11% 11%
Agriculture 12% 2%
Increase in industry productivity in 2015
g
Total 100%(INR 143 trillion)
100%(INR 0.89 trillion)
INR 888 bn(USD 21 bn)
0.62% of GDP
ConfidentialSource: Analysys Mason, EIU, Euromonitor, Frost & Sullivan, NASSCOM, CII-PWC Report on IT/ITeS Industry
Note: 1. Includes retail wireless broadband connections used for official / business purpose and corporate connections
109
The service industry including IT/ITes will benefit the most from wireless broadband services
Industry Vertical
Penetration of Wireless Broadband and User Base (in Parentheses) Productivity Gain in 2015 (INR bn)
from wireless broadband services2nd Order Impact
Vertical and User Base (in Parentheses)
Manufacturing, Mining & Industry
(0.6 mn users)1
(3.0 mn users)1
(0.4% of industry revenues in 2015)
5%
21%
2010
2015
932015
Government & PSUs
(0.7 mn users)
(3.1 mn users)(0.3% of industry revenues in 2015)
4%
20%
2010
2015
132015
Services (excluding IT /
ITeS)
(1.9 mn users)1
(9.2 mn users)1
(0.8% of industry revenues in 2015)
9%
39%
2010
2015
6632015
IT / ITeS(1.9 mn users)
(11.3 mn users)(0.6% of industry revenues in 2015)
21%
40%
2010
2015
1022015
Agriculture(0.0 mn users)
(3.7 mn users)(0.1% of industry revenues in 2015)
0%
2%
2010
2015
172015
ConfidentialSource: Analysys Mason, EIU, Euromonitor, Frost & Sullivan, NASSCOM, CII-PWC Report on IT/ITeS Industry
Note: 1. Comprises organized sector employees only (employees with enterprises for which statistics are available from budget documents or reports, or whose activities or data collection are regulated under legal provision)
110
Wireless access system will be significant contributors to India economic growthIndia economic growth
• Incremental broadband spend on wireless systems is expected to reach ~USD 20 billion in 2015 growing at a CAGR of 82% over the next 5 years.
• Incremental revenue for the broader wireless ecosystem is projected to exceed USD 12 billion by y p j y2015
• 120,000 to 140,000 new employment opportunities are expected to be created by the telecom industry (service providers handset vendors equipment vendors and VAS value chain players) byindustry (service providers, handset vendors, equipment vendors and VAS value chain players) by 2015
• The overall contribution of the wireless broadband industry will reach 2.3% of GDP over the next five years with an incremental contribution close to 1%
• The indirect contribution to economic growth through productivity increase will reach close to USD 80 billion
• The projected impact cannot be fulfilled with the current spectrum allocation – operators will experience capacity constraints by 2013
Confidential
111
Contents
Executive Summary
Overview of Broadband Services in India
The Wireless Broadband Ecosystem
S i i I t f Wi l B db dSocio-economic Impact of Wireless Broadband
Imperatives for Stakeholders in the Indian Wireless Broadband Industry
Confidential
112
The contribution of wireless broadband is in line with international experienceinternational experience
• Recent economic surveys have assessed the impact of the broadband industry on the economy
• Based on the literature reviewed, the wireless broadband industry will have an impact of over USD100 billion over the next five years or 0.8% of GDP
Broadband Penetration Country Type Economic Growth (GDP) Source
10-percentage-point increase in High income economy 1.21%World Bank 2009broadband penetration World Bank 2009
Medium-low income economy 1.38%
Broadband-related growth in 2006 in European countries
Less-developed knowledge societies 0.47%
European CommissionQuickly developing countries 0.63% European Commission 2008
y p g
Large industries 0.70%
Advanced knowledge societies 0.89%
70% h h ld t ti 1%70% household penetration15 EU countries
1%TRA 2008
90% household penetration 1.6%
10-percentage-point increase in mobile penetration India 1.2% ICRIER, 2009
Confidential
mobile penetration
113
Indirect benefits will be significant as broadband is a key driver of change for productivity improvementsdriver of change for productivity improvements
• The broadband market has a multiplier effect on the overall economy, as presented below
• Based on the literature reviewed, the wireless broadband industry could deliver productivity increase in the order of USD 80 billion over the next five years
Broadband Penetration Country Type Increase in Productivity Source
1-percentage-point increase in M di hi h ICT 0 1% LECG 20091 percentage point increase in broadband penetration Medium or high ICT 0.1% LECG, 2009
10% increase in broadband penetration US 0.46% Crandall, Jackson - “Net
Impact Study” 2008penetration Impact Study , 2008
Confidential
114
However, the lack of spectrum will be a formidable constraint to realizing the broadband potentialto realizing the broadband potential
Spare Spectrum Availability Based on• The current spectrum allocation will not
support the projected number of broadband users
Spare Spectrum Availability Based on Existing Spectrum Allocation2
51%41%
• A high level analysis based on projected demand per user, available spectrum and current network coverage indicates that the
%
21%
current network coverage indicates that the operators will not be able to serve more than ~65 million subscribers without significant additional investments in sites
-34%
-7%
The associated investments for smaller cell size and more dense coverage is unlikely to make the take-up of broadband in suburban and rural
Assumptions2010 2011 2012 2013 2014 2015
-56%
areas economically viableBandwidth per user1 (Kbps) 383 570 916 1,414 1,978 2,476
Allocated bandwidth (MHz) 5.0 5.0 5.0 5.0 5.0 5.0
ConfidentialSource: Analysys Mason
Note: 1. Average subscribed bandwidth per user; 2. Estimated 7.5 Mbps capacity available for data per 3G cell site, after adjustment for allocation of voice
115
Additionally, lack of backbone infrastructure severely restricts deployment of broadband servicesrestricts deployment of broadband services
Number of Cities Covered with Fibre• All the service providers have extensive
coverage of fibre backbone in metros / tier I cities1 (top 8 cities)
Number of Cities Covered with Fibre Backbone by Service Providers in India
• With the exception of BSNL (which covers all the 700 cities) and Railtel, all the other service providers have extremely low coverage in other cities
700
600
• Rural areas have extremely poor coverage, with only BSNL and Railtel covering a few thousand gram panchayats2200 g p y
BSNL covers about 28,000 gram panchayats out of a total 265,0003
130 11060 44
BSNL R ilT l GAILTEL Ai t l P G id T t R li All mid-sized / small villages currently remain uncovered by any service provider
BSNL RailTel GAILTEL Airtel PowerGrid Tata Reliance
ConfidentialSource: Analysys Mason, Company Websites
Note: 1. Includes top 8 cities with population > 4 mn and total income > INR 100 bn; 2. Gram panchayats are local governments at the village or small town level in India with minimum population of 300; 3. 2002 estimate for total gram panchayats
116
A clear policy roadmap for allocation of additional spectrum is required to help achieve this growth potentialrequired to help achieve this growth potential
Frequency Bands & Key Issues
3.3GHz Existing Allocation and Availability
Future Roadmap1 / Satellite
• Future Roadmap: Future allocation of various frequency bands is not clear making it difficult for carriers to plan network rollout and establish their technology roadmap for
Frequency Bands & Key Issues
2.5GHz Future Roadmap / Satellite Interference
2.3GHz Capacity Constraint2
Capacit Constraint / F t re
and establish their technology roadmap for services
• Digital Dividend: Lower frequency bands such as 450 MHz and 700 MHz are best suited for providing rural broadband services2.1GHz Capacity Constraint / Future
Roadmap
1800MHz Capacity Constraint
suited for providing rural broadband services and can substantially reduce roll-out cost
• Existing Allocation & Availability: Better coordination between different Govt d t t t ki h / h h900MHz Capacity Constraint
800MHz Capacity Constraint
departments tracking where / how much spectrum is being used, and thus support re-farming to increase total capacity available and allow more efficient allocations
700 MHz Future Roadmap Digital Dividend Spectrum450MHz Future Roadmap
• In addition, there are other policy constraints such as Right of way, active infrastructure sharing, mandate provision of fiber capacity and inclusion of Microwave for backhaul
ConfidentialSource: Analysys Mason
Note: 1. Future Roadmap refers to frequency band with no existing allocation for commercial usage and can be used for offering wireless broadband services; 2. Capacity constraint refers to frequency band already allocated and with no spare capacity available
117
Analysys Mason Limitedy y
BD - 4th Floor, Big Jo's Tower
Netaji Subhash Place, Pitampura
N D lhi 110034New Delhi 110034
India
Tel: +91 11 4700 3100
Fax: +91 11 4700 3102
www.analysysmason.com
Confidential