south asia and middle east telecom infrastructure - analyst briefing

South Asia & Middle East Telecom Infrastructure: Growing in Pursuit of a Connected World

Frost & Sullivan’s Growth Consulting can assist with your growth strategies

Aandal Margabanthu

Rahul Agarwal

Information & Communication Technologies

4th August 2011

2

Today’s Presenters

Aandal Margabanthu, Research Associate,

Frost & Sullivan

Rahul Agarwal, Consultant,

Frost & Sullivan

3

Focus Points

Agenda

� Scope of the Study

� Wireless Infrastructure Market

� Market Definitions

� Key Ecosystem Participant for the Telecom Infrastructure & Broadband Market

� Drivers and Restraints for Telecom Infrastructure

� Business Models

� Explosive Growth in Mobile Subscribers

� Rising Towers in SAME

� BTS Growth fuelled by next generation technologies

� Top Trends in the Wireless Infrastructure Market

� Increase in Data Traffic

� Growing Infrastructure Sharing Practice-Pros and Cons

� Strategic Conclusions

� Broadband Market

� Market Definitions

� Drivers and Restraints for Broadband Market

� Explosive Growth in Broadband Subscribers

� Strategic Conclusions

4

Scope of the Study

The study deals with the Telecom infrastructure in India, Bangladesh, Sri Lanka, UAE, Saudi Arabia and

Egypt. The study provides an insight into the Wireless Network Infrastructure and the Broadband

Infrastructure of the region.

The wireless segment discusses about the Mobile Infrastructure assets of the region and provides an idea

about the total number of Telecom Towers and Base Transceiver Stations in each country. It discusses the

major drivers and restraints that affects the market and its impact on the industry in the forthcoming years.

The study does not cover the backhaul network or other network components like microwave links or

antennas. However the Capital Expenditure for microwave links and antennas in all the regions have been

included.

The study on broadband market focuses upon the state of broadband internet in the region along with

penetration and other key statistical inputs. The study highlights key access technologies prevalent in the

regions along with key service providers and maps the competitive landscape. Market drivers and restraints

help formulate market potential going forward and forecast the fate of access technologies and their

significance in the growing broadband market of the region. The study briefly touches upon the cable

infrastructure and does not include insights on broadband equipment installations.

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WIRELESS INFRASTRUCTURE MARKET

6

Market Definitions

Wireless Infrastructure

Passive Infrastructure

includes the non electric

components like the tower and the pylons, diesel electric

generator, battery, air

conditioners and equipment

shelter.

Backhaul is the connection between each tower’s Base

Transceiver Station (BTS)

and base station controller

(which controls multiple

BTS’s from different towers) usually through microwave

radio or optical link

Active Infrastructure

includes radio antenna, base

transceiver station (BTS),

microwave equipment,

transceiver and signal processing devices.

Passive Infrastructure Backhaul Infrastructure Active Infrastructure

Site Sharing

Sharing of the common site to

house the physical towers and

equipment like antennas and

BTS of multiple vendors

Mast Sharing

The concept of using the same

physical tower to install

antennas belonging to multiple

operators

Antenna SharingSharing the same antenna to receive and transmit radio frequencies of multiple

operators

RoamingPermitting the subscribers of other service

provider to access its own network

Radio Access Network Sharing

Sharing of Radio Access Network (RAN)

implies sharing of resources that connect

the user equipment with the Core network

of the service provider

Spectrum Sharing

Leasing or renting a part of the bandwidth held by a telecom service provider to

another service provider

7

Key Ecosystem Participant for the Telecom Infrastructure & Broadband Market

Saudi Arabia

Saudi Telecom Company

Mobily

Zain Saudi

India

Indus Tower

Reliance Infrastructure

BSNL

Bharti Infratel

Viom Networks

GTL

MTNL

Bharti Airtel

Egypt

Mobinil

Vodafone Egypt

Etisalat Misr

Telecom Egypt

Bangladesh

Grameenphone

Banglalink

Robi Axiata

Airtel Bangladesh

Banglalion

Qubee

Sri Lanka

Dialog Axiata PLC

Mobitel

Etisalat Lanka

Airtel Lanka

Sri Lanka Telecom

United Arab Emirates

Etisalat

Du

Huawei, ZTE, Alcatel Lucent, Ericcson, Nokia Siemens Networks, Cisco etc some of equipment vendors who provide end to end active

infrastructure solutions in the SAME regionSource : Frost & Sullivan

8

Drivers and Restraints for Telecom InfrastructureM

ark

et

Dri

vers

Mark

et

Res

train

ts

1-2 years 3-4 years 5-6 yearsExplosive growth in the mobile subscribers fuelled by

increasing affordability and decreasing service and

handset prices

Increase in the usage of data and value

added services

Introduction of next generation technologies like

3G,3.5G,4G

Increasing CAPEX and OPEX requirements

owing to rising fuel and material costs

Focus on quality of service for

competitive differentiation

Decreasing ARPU across the region has

affected the operators margin

Telecom Infrastructure Market: Key Market Drivers and Restraints (SAME), 2010-2017

Source: Frost & Sullivan analysis.

Infrastructure sharing practice on the increase

HighMediumMedium

MediumMediumMedium

Medium Medium High

HighHighMedium

HighMedium

HighMediumMedium

MediumHighHigh

High

9

Business Models

Operator OwnedOperator Owned Demerged EntitiesDemerged Entities

Joint AlliancesJoint Alliances Independent Tower CompaniesIndependent Tower Companies

• Supports the parent operator’s network

• Single tenant

• The entire CAPEX and OPEX has to be borne

by the operators

• Fast being replaced by the sharing models

• Example Etisalat,Saudi Telecom Company etc

• Supports the parent operator’s network

• Single tenant

• The entire CAPEX and OPEX has to be borne

by the operators

• Fast being replaced by the sharing models

• Example Etisalat,Saudi Telecom Company etc

• The parent operator hives off its tower assets

into a separate business unit

• Unlocks the potential of the tower assets

• For the incumbent,it is estimated to generate a

revenue increase of upto 15%

• Example Bharti Infratel,Reliance Telecom

Infrastructure

• The parent operator hives off its tower assets

into a separate business unit

• Unlocks the potential of the tower assets

• For the incumbent,it is estimated to generate a

revenue increase of upto 15%

• Example Bharti Infratel,Reliance Telecom

Infrastructure

• Formed as a Joint Venture between two or

more operators

• Reduction in CAPEX and OPEX is possible

• Encourages Infrastructure Sharing

• Enables the operators to concentrate on their

core functions like customer relations and

subscriber retention etc

• Example Indus Towers in India

• Formed as a Joint Venture between two or

more operators

• Reduction in CAPEX and OPEX is possible

• Encourages Infrastructure Sharing

• Enables the operators to concentrate on their

core functions like customer relations and

subscriber retention etc

• Example Indus Towers in India

• Not backed by operator; remains as the best

option for new entrants as it reduces the time to

market

• Based on the multi tenant principle,which leads

and huge CAPEX and OPEX savings

• Example GTL Infrastructure, American Tower

Company in India

• Not backed by operator; remains as the best

option for new entrants as it reduces the time to

market

• Based on the multi tenant principle,which leads

and huge CAPEX and OPEX savings

• Example GTL Infrastructure, American Tower

Company in India

Different Business models that the Tower Business follow are

Source: Frost & Sullivan

10

0

500

1000

1500

2000

2010 2017

Subscribers(mn)

India Bangladesh SriLanka UAE Saudi Arabia Egypt

Explosive Growth in Mobile Subscribers

• The South Asian and Middle Eastern markets have been witnessing an explosive growth in the subscriber base in the recent years due to increased affordability and innovative and price competitive services offered

• Another reason is the availability of cheap handsets with enhanced features like 3G support etc• Voice services still corresponds to about 80% of the operators revenues but there is an increase in data

usage• The ARPU will continue to decline in the region • There is a huge potential for growth in the region as the rural areas in countries like India, Bangladesh

and Egypt do not have a mobile penetration which is on scale with the population • A major proportion of the subscribers is expected to come from India followed by Bangladesh

972.6

1777.4CAGR: 9%

Source : Frost & Sullivan

11

Rising Towers in SAME

0.58

0.420.38

38.8

10.1

0.0

0.1

0.2

0.3

0.4

0.5

0.6

CY 09 CY 10 CY 17

Tow

ers

(mn)

0

5

10

15

20

25

30

35

40

45

Tow

er G

row

th R

ate

(%)

Tow ers(million) Tow er Grow th Rate(%)

Source: Frost & Sullivan

• Towers are expected to grow at steady CAGR of 4.8%• Increased CAPEX and OPEX requirements coupled with decreasing ARPU has resulted in the adoption

of the tenancy model wherein more number of BTS are colocated on the same tower• Infrastructure sharing practice is on the rise to curtail the network expenditures• New technological innovations in the tower industry include usage tubular towers design, intelligent

network ,fuel cells ,free cooling, etc• Alternate sources of energy like solar and wind are being used to power the installations

CAGR: 4.8%

12

BTS Growth fuelled by next generation technologies

• The BTS considered here is inclusive of 2G(GSM/CDMA),3G,3.5G and 4G BTS for the study period• Introduction of technologies like WCDMA,HSPA/HSPA+ ,WiMAX, LTE, UMTS etc has increased the

demand for BTS• Increased per user data usage and the advent of mobile broadband will drive the growth in the number of

BTS• Active infrastructure sharing may hinder the growth in BTS numbers. However there is currently not

enough support from the technological and regulatory front for BTS sharing • Overall tenancy ratio for SAME in 2010 is 1.6x and by 2017 it is expected to reach 3.3x

0.440.66

1.91

49.3

190.3

0.0

0.5

1.0

1.5

2.0

CY 09 CY 10 CY 17

BT

S(m

n)

0

50

100

150

200

BT

S G

row

th

Ra

te(%

)

Number of BTS BTS Grow th Rate(%)

CAGR: 16.4%


13

Trend #1: Increase in Data Traffic

3G and 3.5G services have been launched

in India, UAE, Saudi and these countries

will have commercial 4G launch by 2011

or 2012. The entire region will have next

gen technologies launched in the next 2

years

3G and 3.5G services have been launched

in India, UAE, Saudi and these countries

will have commercial 4G launch by 2011

or 2012. The entire region will have next

gen technologies launched in the next 2

years

• Poor fiber connectivity and high

cost of copper and optical fiber

• Mobile broadband through dongles

(EVDO) and handsets(3G) is now

the preferred medium to increase

the low internet penetration in the

region

• Poor fiber connectivity and high

cost of copper and optical fiber

• Mobile broadband through dongles

(EVDO) and handsets(3G) is now

the preferred medium to increase

the low internet penetration in the

region

Increase in Data Usage will need drive the growth

in wireless infrastructure

Increase in Data Usage will need drive the growth

in wireless infrastructure

• Intense competition has resulted in

decreased tariff in the region which has

in turn resulted in a decreased ARPU.

The focus is now on VAS and data to

bolster the ARPU

• In a high churn market, innovative data

services will help retain customers

• Intense competition has resulted in

decreased tariff in the region which has

in turn resulted in a decreased ARPU.

The focus is now on VAS and data to

bolster the ARPU

• In a high churn market, innovative data

services will help retain customers

• Availability of affordable feature rich phones in the region

• Increasing penetration of smartphones

• Availability of affordable feature rich phones in the region

• Increasing penetration of smartphones


14

Trend 2#: Growing Infrastructure Sharing Practice-Pros and Cons

Reduces the entry barriers

and the time to market for

new entrants

Reduces CAPEX and OPEX

thereby enabling network

expansion in rural areas

Helps focus on core operations like

customer relationships, subscriber

retention etc

Helps improve service offerings by

facilitating innovative and price

competitive services

Optimizes existing resources and

reduces negative environmental impact

Unbundling of resources can result in a

revenue increase of up to 15% for the

operators Reduces the growth in the

total number of towers

and affects the tower company growth

Reduced competitive

differentiation for existing

operators

Complexity involved with the

day to day operations of the

cell site

Lack of secure technological

support especially in case of

sharing Active Infrastructure components like BTS (Node B)

etc

Advantages and Disadvantages of Infrastructure Sharing


15

Strategic Conclusions

22Shift from Voice to Data Services with VAS now acting as a revenue generation and differentiation tool

Shift from Voice to Data Services with VAS now acting as a revenue generation and differentiation tool

33There will be an increase in the numbers of tenancies in the region

There will be an increase in the numbers of tenancies in the region

44Next generation Technology Deployments across the region will positively affect the network infrastructure requirement

Next generation Technology Deployments across the region will positively affect the network infrastructure requirement

55In the future, the focus will shift to improving Quality of Service

In the future, the focus will shift to improving Quality of Service

11Increasing adoption of Infrastructure Sharing in the region

Increasing adoption of Infrastructure Sharing in the region

Source: Frost & Sullivan.

16

BROADBAND MARKET

17

Market Definitions

Broadband Subscription in the region has the following access technologies considered

India ADSL, 3G, WiMAX

Bangladesh Fiber, 3G, WiMAX

Sri Lanka ADSL, Fiber, 3G, 3.5G, WiMAX

UAE ADSL, Fiber, 3G

Saudi Arabia ADSL, Fiber, HSPA, WiMAX

Egypt ADSL, 3G, HSDPA

The statistic is measured irrespective of the type of device used to access the Internet, or the method of payment.

Subscriptions and forecasts are not inclusive of LTE technology

18

Drivers and Restraints for Broadband MarketM

ark

et

Dri

vers

Mark

et

Res

train

ts

1-2 years 3-4 years 5-6 yearsGrowing Economy - Increasing access to PC and

affordable smartphones. Social awareness and Literacy

Increase in data usage and VAS

Introduction of next generation technologies

like 3G.3.5G,4G. Laying down

infrastructure to support increased usage

Low level of PC penetration in emerging

economies of South Asia

Pro active Government - Initiatives encouraging computer

and Internet use and IT and Internet-related businesses

Lack of infrastructure in emerging economies

– Expensive to lay down the infrastructure for

wired expansion

Broadband Market: Key Market Drivers and Restraints (SAME), 2010-2017

Source: Frost & Sullivan analysis.

Affordability, limited coverage and literacy rates

in rural areas of the emerging economies

HighMediumMedium

LowMediumHigh

High Medium Low

LowMediumHigh

HighMedium

HighMediumMedium

MediumHighHigh

High

19

Explosive Growth in Broadband Subscribers


0

500

2010 2017

Subscribers (MN)m

n))


30.8

340.6

CAGR: 41%

Broadband Subscriptions

• Pro active government, growing economy and increasing social awareness and literacy in the region bodes well for broadband market. Explosive growth in the mobile subscriptions along with Introduction of next generation networks will further aid the growth

• Increasing preference for mobile subscriptions over fixed line coupled with limited coverage and poor wireline infrastructure in the countries of India, Bangladesh will make wireless broadband a preferred medium

20

0

500

2010 2017

Subscribers (MN)mn))



15.9

242.2

CAGR: 47.6%


Wireless Broadband Subscriptions

0

500

2010 2017

Subscribers (MN)mn))


14.7

97.9

CAGR: 31.2%

Wireline Broadband Subscriptions

21


54.21%

54.75%

50.21%

23.92%

30.26%

16.63%

0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00%

India

Bangladesh

Sri Lanka

UAE

Saudi Arabia

Egypt

Broadband Subscriptions CAGR (2010 – 2017)

• There is a huge potential for growth in the region as countries like India, Bangladesh and Sri Lanka will grow at a CAGR close to 54% whereas the developed Middle Eastern countries of Egypt, UAE and Saudi Arabia are expected to grow at a modest CAGR close to 23 per cent


22

Strategic Conclusions

22Mobile Broadband is set for explosive growth and would be the preferred mode of broadband adoption

Mobile Broadband is set for explosive growth and would be the preferred mode of broadband adoption

33In Middle East wireline access would continue to co exist with wireless access owing to superior infrastructure

In Middle East wireline access would continue to co exist with wireless access owing to superior infrastructure

44India, Sri Lanka and Bangladesh to have mobile broadband as the preferred mode of access

India, Sri Lanka and Bangladesh to have mobile broadband as the preferred mode of access

11

Deployment of next generation networks would drive the growth in the region. India and Bangladesh await 3G while other countries are embarking on LTE

Deployment of next generation networks would drive the growth in the region. India and Bangladesh await 3G while other countries are embarking on LTE

Source: Frost & Sullivan.

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For Additional Information

Caroline Lewis

Corporate Communications

91.022.6607 2000

[email protected]

Aandal Margabanthu

Research Associate

Information & Communication Technology Practice

[email protected]

Abhishek Chauhan

Senior Consultant


[email protected]

Rahul Agarwal

Consultant


[email protected]

south asia and middle east telecom infrastructure - analyst briefing

Technology

key market drivers

growing broadband market

market potential

mobile infrastructure

key service providers

service site

bts growth

total number of telecom