TELECOMwww.imacs.in
• Market Overview
• Government regulations & policy
• Advantage India and business opportunities
Contents
TELECOMwww.imacs.in
Market Overview• Market Overview
• Government regulations & policy
• Advantage India and business opportunities
TELECOMwww.imacs.in
India’s telecom market has grown rapidly in the last few years…
• Revenues ~ USD 19.5 bn (FY 2006) • CAGR (FY 2002-06) - 21%• Have doubled in last 3 years
• Subscribers ~ 160 million (Aug 2006)• CAGR (FY 2002-06) - 38 %• Nearly quadrupled since FY 02• 5-6 million being added every month
• Tele-Density - 14.8 (Aug 2006)• Has doubled in 3 years• Target set for 2007 under NTP 1999
achieved during FY 2005
Revenue growth20
15
1110
9
0
5
10
15
20
2002 2003 2004 2005 2006
$ Billion
CAGR - 21%
Subscriber growth 164
98
7653
44
0
60
120
180
2002 2003 2004 2005 Aug-06
CAGR - 38 %
Source: www.voicendata.com, Telecom regulatory Authority of India (TRAI), Year indicates financial year ending March
Market Overview
TELECOMwww.imacs.in
…and is poised to be the second largest network globally by 2008*
Source: International Telecommunications Union (ITU)
Telecom Subscribers - Country wise December 2005China743
USA360
Ind125
Rus130
Germany134
Japan 153
0
200
400
600
800
mn. subscribers
India - Nov 2006
184 mn. subs
Expected to overtake US by 2008
* Based on excerpts from Worldwide Wireless Data Trends 2006 - a mid year update. Datacomm research
Market Overview
TELECOMwww.imacs.in
Mobile telephony continues to be the key growth driver…• Progressive regulation
• Migration to revenue sharing• Calling Party Pays (CPP) regime• Unified access licensing• Intra-circle merger guidelines
• Intensifying competition• 3 to 6 players per circle• Presence of CDMA and GSM providers• Significant share of private sector
Subscriber Growth - Mobile vs Fixed
4141
434238
143
52
7 13 34
0
35
70
105
140
175
2002 2003 2004 2005 2006
Mn. subscribers
Fixed (mn. subs) Mobile (mn. subs)
Wireless emerging as the preferred mass market format service providers focus on Internet / broadband access to
improve fixed line ARPU*
• Growing affordability• ARPUs among lowest in the world• Lower cost of ownership due to Low cost /
used handsets• Success of the pre-paid format
Source: TRAI
* Average Revenue per user2006 figures as of Nov 2006
Market Overview
TELECOMwww.imacs.in
Growing network coverage is triggering further market expansion
Support from Universal Service Obligation Fund envisaged for shared network infrastructure creation in uncovered rural areas
Segment Cellular reach (2003-04) Cellular reach (End 2006 - Est.)
Locations Population Locations Population
Urban ~ 1700 of 5200 towns
200 million ~ 4900 towns out of nearly 5200 towns
300 million
Rural Negligible Negligible ~ 350,000 out of 607,000
villages
450 million
Source: Recommendations on Rural Telephony 2005 - TRAI
Market Overview
TELECOMwww.imacs.in
Vibrant and competitive telecom market
Source: TRAI, IMaCS research
Consolidation leading to emergence of integrated pan-national service providers
Company Presence
Subscribers Jul 06 (mn)
Share (%)
Fixed Mobile Fixed Mobile
BSNLGovernment owned. Has ramped up GSM services. National presence (except Mumbai and Delhi)
37.4 17.7 74.7% 19.6%
MTNL Government owned. Operates in Delhi and Mumbai. 3.8 2.0 7.7% 2.3%
BhartiIntegrated operator, with presence in all sectors. Largest mobile services provider.
1.4 19.6 2.7% 21.7%
RelianceIntegrated operator. Plans expansion of GSM network apart from being the largest private CDMA operators.
3.0 17.3 6.0% 19.2%
Hutch Pure play GSM operator in 11 circles. 15.4 17.0%
IDEA Pure play GSM operator in 6 circles 7.4 8.2%
Tata Teleservices
Integrated operator (along with VSNL) with presence in all segments. Provides CDMA services in 20 circles
4.0 4.9 8.0% 5.4%
AircelOperates in 2 circles. Announced Plans to expand GSM footprint in North and North east
2.6 2.9%
Spice Pure play GSM player in 2 circles 1.9 2.1%
Others 0.4 1.4
Total 50 90
Market Overview
TELECOMwww.imacs.in
Several Indian firms gaining a foothold in the global market• Indian service providers acquiring scale in the International Long Distance market through
acquisitions…
• Acquisitions - FLAG by Reliance, Tyco and Teleglobe by Videsh Sanchar Nigam Limited
• VSNL is now the world's fifth largest carrier of voice globally
• Reliance’s FLAG network connects with 28 countries. FLAG’s FALCON cable system when completed would connect 12 countries with 25 international cable landing stations
• Investments in Infrastructure and
• Bharti-Singtel and VSNL investments in undersea cable
• Emerging as Integrated telco, positioning themselves as full service providers
• Tata teleservices-VSNL, Bharti, Reliance have end-to-end presence in ILD, NLD and Access; BSNL has announced plans to get into ILD
• Focus on corporate connectivity - IPLCs, Frame relay, VPNs
• Strong thrust on internet and broadband - both corporate and retail segments
Market Overview
TELECOMwww.imacs.in
Government regulations and policy • Market Overview
• Government regulations & policy
• Advantage India and business opportunities
TELECOMwww.imacs.in
Reform thrust on independent regulation, competition and investment facilitationPre-reform Partial Deregulation Further Deregulation
Pre-1994 1994-1999 1999 - 2002
• MTNL - Mumbai and Delhi; DTS elsewhere
• No mobile service
• NLD - DoT per/ BSNL ILD - VSNL
• 4 private fixed service providers with less than 1% market share
• 2 GSM mobile players in each circle
• 13 players start mobile service
• Licenses converted to revenue sharing
• Private sector share less than 5% in revenue terms
• Competition in NLD and ILD
• Licenses on Revenue share
• 4 mobile operators / circle
• NTP 1999
• BSNL formed 2001
• Internet Telephony 2002
• FDI - 49 %
• National Telecom Policy (NTP) 1994
• TRAI constituted 1997
• Calling Party Pays
• CDMA launch
• 3-6 operators in each circle
• Intra-circle merger guidelines
• Unified Licensing
Take-off
2002 onwards
• Broadband policy 2004
• FDI - 74% 2005
National Telecom Policy, 1994
New Telecom Policy, 1999
Unified Licensing Regime
Government Regulations and policy
TELECOMwww.imacs.in
Independent regulation has been a critical factor in growth
2002
• ILD opened to competition
• Internet Telephony allowed.
• Reduction in License fees
2003
Calling Party Pays Regime
Unified Access Licensing
Reference Interconnect Order
2004Intra-circle merger guidelinesInternet / broadband penetration
Mature regulatory regime and an enabling policy framework already in place
2005 Unified LicensingQuality of Service regulationRural Telephony
2006 Number portabilityConvergence
TRAI’s recommendations
Government Regulations and policy
TELECOMwww.imacs.in
Important policy initiatives
Creating a favourable investment climate to support growth
• Broadband policy unveiled in 2004 - Targets 20 million broadband subscribers by 2010
• Focus on making India a regional Telecom manufacturing hub
• FDI limit increased from 49% to 74%
• 100% FDI permitted under automatic route in the manufacturing sector
• Deregulation virtually complete and Unified Licensing regime
• Interconnection Usage Charge framework in place
• Exemption from customs duty for import of Mobile Switching Centres
• Comprehensive Spectrum policy and 3G policy on the anvil
Government Regulations and policy
TELECOMwww.imacs.in
Advantage India and business opportunities • Market Overview
• Government regulations & policy
• Advantage India and business opportunities
TELECOMwww.imacs.in
Recent developments are indicative of the paradigm shift in wireless growth
• Of the 160 million subscribers, more than 90 million subscribers added in the last two years
• More than 5 million subscribers added every month since Dec. 2005, translating into the highest growth rate in the world
• On a comparison of growth since introduction of mobile telephony, India surpasses China at the same stage of market evolution
India China comparison
0
250
500
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Year
Million Subscribers
China
India
In the 11th year India - 76 mn. China - 24 mn.
Source:TRAI
Advantage India and business opportunities
TELECOMwww.imacs.in
Mobile Value Added Services (VAS) set to register explosive growth*
• Indian Idol - a reality show on Sony Television got 55 million SMS messages in 5 months
• Radio Mirchi - a popular FM radio channel receives ~ 40000-45000 SMS messages every day
• R-World - the mobile portal of Reliance Communications had 5.3 million visitors out of its 18 million subscribers in 2005
• Data and VAS contributed to 7% of revenue in 2004
• Messaging and music (ringtones, downloads etc) to be key contributors
• VAS revenues expected to grow given
• Demand - Young population (60% < 30 years) and an affinity to music and movies
• Supply - aggressive pricing, vibrant ecosystem of content providers /
broadcasters, declining GPRS/mp3 handset prices
VAS expected to contribute 20% of revenue by 2008 and 30% by 2010
* Excerpts from Mobile Data in India. Lehmann brothers report. Oct 2005. IMaCS research
Advantage India and business opportunities
TELECOMwww.imacs.in
Broadband and Internet connectivity on the verge of a take-off
• Internet / Broadband market (FY 2006)• 6.94 mn.Internet customers
(25% growth YoY)• 1.35 mn. broadband customers
(6-fold growth YoY)• Incumbents (BSNL / MTNL)
dominate - 66% share• 7-fold growth in broadband
connections during FY 2006
• Broadband Policy 2004• Recognises the importance of
internet penetration• Envisages 40 million internet
connections by 2010• Visualises creation of
infrastructure through various access technologies
Broadband subscriber growth2.00
1.38
0.18
0
0.75
1.5
Mar-05 Mar-06 Nov-06
Mn. subscribers
6-fold growth
Growing PC sales, Internet adoption in
small towns and offerings including triple
play and video-on-demand / IPTV
expected to be major growth drivers
Source: TRAI
Advantage India and business opportunities
TELECOMwww.imacs.in
Growth-driving sustainable factors in the telecom sector
• Favorable Macro-Economic fundamentals and Demographics• Strong Economic Growth and rising
incomes• By 2020, working age population to
rise to 65%• Low tele-density relative to Asian peers
• Progressive policy and regulation• Independent regulation• Consistent policy framework• Favourable Investment Climate
• Rising Affordability• Declining ARPUs • Lowering cost of handsets • Growing popularity of pre-paid format
• India not just a cost-sensitive mass market
• 300 million plus middle class population
• Value added service revenue expected to
grow at 80% CAGR over next 5 years.
• IDC estimates phones with color screens/
cameras to account for 30%of handset
sales in 2005 and 62%by 2008
“People think about the Indian market as a lower tier. About 30%of the U.S. market is high end and maybe it's only 5%in India. But India has 1.1 billion people”
Ron Garriques. Executive vice president, Motorola's personal communications sector in On the Razor's Edge:Cell Phones Morph into Hip Consumer Electronics Devices Knowledge@Wharton
Advantage India and business opportunities
TELECOMwww.imacs.in
India poised to be a USD 40 bn - 45 bn telecom market by FY 2010…Telecom sector targets announced by Government of India
• 250 million subscribers by 2007
• 500 million subscribers by 2010
• 20 million broadband subscribers by 2010
• Mobile access to all villages with population more than 5,000 by 2006
• Mobile access to all villages with population of more than 1,000 by 2007
Translating into an investment requirement of USD 25 bn to USD 30 Translating into an investment requirement of USD 25 bn to USD 30
bn…bn…
Advantage India and business opportunities
TELECOMwww.imacs.in
• Nortel offers a suite of products and solutions across two broad categories Carrier Networks (incorporating Wireless Networks, Wireline Networks and Optical Networks) and Enterprise Networks.
• In India since 1991. Has an R&D centre in Bangalore
• Promotes and supports a range of telecommunications products and services in India in association with licensed operators.
• Has invested in Bharti Airtel and also Network i2i is a 50:50 Joint Venture between Bharti and SingTel, connecting Chennai to Singapore
• Largest pure-play GSM service provider in India
• Has over 15 million subscribers
• Has a 10% stake in Bharti telecom, an integrated service provider
• Represents the largest foreign investment in the telecom services
sector in India
A compelling destination for Telecom service providers and equipment majors
Advantage India and business opportunities
TELECOMwww.imacs.in
• BSNL - Incumbent service provider and World's 7th largest Telecommunications Company providing comprehensive range of telecom services in India
• Services include Wireline, CDMA mobile, GSM Mobile, Internet, Broadband, Carrier service, MPLS-VPN, VSAT, VoIP services, IN Services etc.
• MTNL - State owned operator covering the cities of Mumbai an Delhi
• Provides both fixed and mobile services
• Bharti Airtel - Integrated operator with presence in all segments
• Leads the mobile segment in the country
• Reliance Communications - Largest player in India in the CDMA segment
• Plans a GSM network
• Tata Teleservices - Integrated operator (with VSNL) with presence in all segments
• Provides CDMA services in 20 circles
Advantage India and business opportunities
Key Indian Companies
TELECOMwww.imacs.in
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