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Indian Telecom Sector
Abhijeet Sangle 9300Vaibhav Sancheti 9300Pravin Gondhale 9355
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• India is the second largest telecom market in the world.• Fastest growing market in the world (in terms of new users addition).• Growth opportunities driven by strong growth fundamentals, increasing
urbanisation, rising income levels and favourable demographics. • The majority of new customers likely to come from the rural areas with
inadequate basic infrastructure and limited or no connectivity.• Fiercely competitive market.• Tariffs rates offered are one of the cheapest in the world.
Introduction
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U.S6%
China16%
India13%Others
65%
Mobile subscribers (share of the world)
Source: India Telecom 2010, KPMG
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Services Offered
Services
Telephony
Wire line (Landline) Wireless
GSM CDMA/WLL
DTH IPTV High Speed Data Access
Broadband
Wireless Access (BWA)
Wired Access
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The Urban consumer demands • high speed internet connectivity, • audio video streaming, • navigation and location maps, • music downloads, • gaming, • m-commerce, • IPTV and mobile TV
The Rural consumer demands • lower tariffs for voice calls, • value added services like information
about market and commodity prices, • weather updates
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Year March 2006 March 2007 March 2008 March 2009 March 2010 October 2010
Broadband Users 1.35 2.34 3.90 6.22 8.75 10.52
Wire line Users 41.54 40.75 39.42 37.96 36.96 35.43
Wireless Users 98.78 165.11 261.09 391.76 584.32 706.69
(Users in Millions)Source: TRAI Press Releases
User Base
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March 2006
March 2007
March 2008
March 2009
March 2010
October 2010
32.00
34.00
36.00
38.00
40.00
42.00
44.00
-6%
-5%
-4%
-3%
-2%
-1%
0%
41.54 40.75
39.42
37.96 36.96
35.43
-2%
-3%-4%
-3%
-5%
Wireline Users (in Mn.) Wireline Y-O-Y Growth
Growth/Contraction in Services
March 2006
March 2007
March 2008
March 2009
March 2010
October 2010
0.00
100.00
200.00
300.00
400.00
500.00
600.00
700.00
800.00
0%
10%
20%
30%
40%
50%
60%
70%
80%
98.78 165.11
261.09
391.76
584.32
706.69 67%
58%
50% 49%45%
Wireless Users (in Mn.) Wireless Y-O-Y Growth
March 2006
March 2007
March 2008
March 2009
March 2010
October 2010
0.00
2.00
4.00
6.00
8.00
10.00
12.00
0%
10%
20%
30%
40%
50%
60%
70%
80%
1.35 2.34
3.90
6.22
8.75
10.52 73%
67%
59%
41% 42%
Broadband Users (in Mn.) Broadband Y-O-Y Growth
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Growth/Contraction in Services
March 2006 March 2007 March 2008 March 2009 March 2010 Septemeber 2010
0
20
40
60
80
100
120
140
12.818.31
26.2236.98
52.7462.51
1.90 5.80 9.3014.80
24.31 28.42
38.0047.20
63.70
88.70
119.45
137.25
Overall Rural Urban
Teledensity1 (%)
March 2006 March 2007 March 2008 March 2009 March 2010 September 2010
70
120
170
220
270
320
370
340
272
241
179
121104
366
298
264
205
131110
256
202
159
9976 73
APRU2 (Rs./User/Month)
Overall GSM CDMA
Source:1: KMPG India Telecom Report, 20102: TRAI, The Indian Telecom Services Performance Indicators Quarterly Reports
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U.S UK
Australi
a
France
German
yIta
lyJap
an
Netherla
nds
South
Africa
IndiaChina
Philippines
Brazil
IndonesiaRussi
a
49
3340
47
21
29
54
46
14
310
4
12
48
ARPU (in US $)
Global wireless ARPU comparison (2009)
Source: India Telecom 2010, KPMG
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Regulatory Environment
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Key Players
Mobile Service Providers• Vodafone, Idea, Bharti Airtel, Reliance, Tata/DOCOMO, BSNL/MTNL, Aircel, Uninor/Spice, • Others (Loop, HFCL, Sistema (MTS), Stel, Videocon, Etisalat)
Wireline Telephone Service Provider• BSNL/MTNL• Bharti Airtel• Reliance, Tata
DTH• DishTV, Tata Sky• Airtel, • Reliance ADAG• Videocon, Sun Network• Prasar Bharti
IPTV*• MTNL (Delhi)• Airtel (Chandigarth)• (On Experimental Basis)
Broadband Wireless Access (BWA)• BSNL/MTNL• Reliance Ind. Ltd.• MTS, Airtel
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Strengths Weaknesses
•Volatile regulatory environment.•Fiercely Competitive Environment.•Hence low tariff rates Low profitability
Opportunities Threats•Untapped Landscape• National teledensity at ~ 53% with• Rural teledensity at ~ 24%;
•New Technologies and Paradigms• 3G and BWA• Triple Play services with IPTV and DTH platforms.• Digital Media Exchange (DMX) for the 4th screen –
Cinema• Value Added Services (VAS)
•Global Economic Environment•Increased Competition•Corruption
SWOT Analysis of Indian Telecom Sector
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Bharti Airtel Ltd.
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Sr. No. OperatorYear
March 2008 March 2009 March 2010 October 2010
1 Bharti Airtel 23.74% 23.97% 21.84% 20.70%
2 Reliance 17.54% 18.55% 17.53% 16.89%
3 Vodafone 16.90% 17.55% 17.26% 16.70%
4 BSNL + MTNL 16.98% 14.45% 12.76% 12.18%
5 Tata 9.32% 8.97% 11.29% 11.44%
6 Idea 9.19% 9.93% 10.92% 10.76%
7 Others 6.33% 6.58% 8.41% 11.33%
Total 100.00% 100.00% 100.00% 100.00%
Market Share of Cellular Operators
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• Mobile Service• Telemedia Services
– Under telemedia services, Bharti Airtel provides broadband, data and fixed line telephone.
• Digital TV Services• Enterprise Services• Passive Infrastructure Services
Business Segments
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Revenue Spilt by Offerings (in Rs. Millions)2009-10 2008-09 2007-08
Mobile Services 3,25,717 3,04,188 2,18,697
Tele-media Services (Incl. DTH) 34,194 33,426 28,615 Enterprise Services 84,386 83,417 57,683 Passive Infrastructure Services 70,082 50,913 6,023
63%7%
16%
14%
2009-10
64%7%
18%
11%
2008-09
Business Segments
70%
9%
19%
2%
2007-08
Mobile Telemedia ServicesEnterprise Services Passive Infrastructure Services
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Business Model
Customer Acquisition
and Retention
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Business Model
Network operations and management
• Ericcson (in 14 license service areas)
• Nokia Siemens (in 7 license service areas)
• a 3-year $724 million contract.
IT Management• IT infrastructure
management,• Operational Support
Services (OSS), • Billing Support Services
(BSS), • implementation,
deployment of new IT services.
• $750 million in a 10-year contract with IBM
Customer Relationship Management
• IBM-Daksh• EDS-Mphasis
Strategic Outsourcing Model
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3G and BWA
3G:• Secured licenses for 13 circles for a total consideration of about Rs. 12,000
Cr. (Appox.)BWA:• have acquired spectrum in four circles - Karnataka, Punjab, Kolkata and
Maharasthra for a total consideration of just over Rs. 3,000 Cr.
Financing:– Debt Rs. 8000 Cr. (Approx.)– Rest Internal Cash
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Zain Africa Acquisition and its Impact
What Bharti Gets?
Pros:• Reach to 15 African Countries.• Zein Africa is No.1 in 10 markets, ranking 2nd in another four.• Added 42 millions of subscriber base. Combined user base over 180 million.• 7th largest mobile company in the world by user base. • One of the fastest growing region for telecom sector in the world.
Cons:• Zain’s African operations have posted a loss of $111 million in nine months ended
September 2009.• Loss making markets like Uganda and disputed assets of Nigeria (for which Bharti is
yet to pay.)• Direct competition with African Biggie ‘MTN’.
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Zain Africa Acquisition and its Impact
8.7
1.7
0.7
Upfront Payment by BhartiDebts on Books of Zein AfricaPayments for Nigeria Assets to be made a year later
(Amounts in Billion USD)
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• Debt raised from a consortium of foreign banks and State Bank of India.– Lead-arranger and lead-advisor Standard Chartered Bank committing
the highest amount -- $1.3 billion.– Followed by $0.9 billion by Barclays.– The rest of the co-advisors -- ANZ, BNP, Bank of America-Merrill Lynch,
Credit Agricole CIB, DBS, HSBC, Bank of Tokyo-Mitsubishi UFJ and Sumitomo Mitsui Banking Corporation -- have allocated $600 million each.
– SBI has given Loan of around $ 1 billion in Rupees.• Loan Tenure 6 Years• Interest Rate: (Floating) LIBOR + 195 basis points (Approx. 2.5% )• Debt/Equity Ratio raised to 1.3 (Q2 2010 Consolidated Results) from
earlier 0.3.
Zain Africa Acquisition Financing
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Financials
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Thank You