telecom_customer landscape

© 2011 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc. www.sutherlandglobal.comApril 23, 2023 1

Customer Landscape

Customer Landscape


VAS market in India

• The client is a leading technology services provider rendering services for the telecom sector

Client

• Assessing the mobile VAS (Value Added Services) market to identify market opportunities in India and to suggest marketing strategy for the same.

• The research involved insights on the following the mobile telecom market in India, vas market in India, opportunities and constraints as well as strategy formulation

Client Ask

• SGS incorporated a comprehensive study approach for the client• For the market scanning, SGS conducted market and consumer analysis, competitive landscape study as well as studied the

regulatory and technology trends• For identifying opportunity, SGS identified and shortlisted key segments and did a segment evaluation and prioritizing exercise• For strategy formulation, SGS identified and prioritized potential partners in each short-listed segment, evaluated the partnership

structure and formulated marketing strategies by mapping market landscape and alliance capabilities in the segment

Sutherland’s Solution

• Details on potential segments across the mobile VAS value chain based on market needs and service constraints• Evaluation of key players catering to potential segments • Recommendation of partnership or alliance• Designing of marketing strategy with respect to the service, geography, price, promotion

Benefits to the Client

VAS market in India


India’s mobile penetration is rising swiftly

0

50

100

150

200

2003 2004 2005 2006 200702468101214

Subscribers (in millions) LHS Revenue (in $ bn)

• In 2007, India ranked fifth across the globe in terms of subscriber base; behind China, US, Japan and Russia

• According to TRAI, the subscriber base in India is expected to grow to 500 million by the end of 2010, which would make India the second largest country in terms of subscriber base after China

• India’s cellular market penetration stood at 14.7% in 2007 and is expected to increase to 38.6% by 2011. Consequently, revenues from mobile connections are expected to grow at CAGR of 23.4% over the same period

High Growth in Mobile Subscribers and Revenues

Source: COAI, AUSPI

Swift Increase in Mobile Penetration

Source: COAI, AUSPI

CAGR:Subscriber Base – 89%Revenue – 48%

1.2%3.1%

4.8%8.1%

14.7%

0%

5%

10%

15%

20%

2003 2004 2005 2006 2007

Mobile Teledensity


Growing per capita income and declining tariffs are the primary drivers

0

1

2

3

4

2003 2004 2005 2006 2007

Per Minute Call Tariff (in US cents)

74%

22%

11%

9%

0% 20% 40% 60% 80%

Metros

Circle A

Circle B

Circle C

Mobile penetration

High Income Levels Drive Mobile Penetration Affordability Rises as Tariffs Fall

• Faster growth in per capita income and continuously falling tariff have enabled growth in mobile penetration.

• Given that penetration is driven by income levels, there is still significant scope for further increase in mobile penetration in India.

• India has the one of the lowest call tariff rates in the world at 2.3 US cents/minute

• With the increased penetration in metros and urban areas, future growth for mobile services would be driven by semi-urban and rural areas in different circles*

CAGR -11.85%

Source: TRAI, RBI, Adventity Research Source: TRAI, COAI, Adventity Research

Rural Demand to Drive Mobile Services Growth in Future

* Indicates group of states depending on size of markets. A represents larger and affluent markets, B medium sized, C smallest size markets as recognized by the government

Source: TRAI, Adventity Research

India

Bhutan

France

MexicoChina

Brazil

ItalyAustralia

US

0%

20%

40%

60%

80%

100%

0 20000 40000 60000Per Capita GDP (in $ PPP)

Mob

ile T

eled

ensi

ty


Steady rise in competitive intensity in an oligopoly market

0.56

0.320.26

0.21 0.19

0.00

0.10

0.20

0.30

0.40

0.50

0.60

2003 2004 2005 2006 2007

HHI

Rising Competitive Intensity as Indicated by HHI Top Five Players Account for 80%+ Market

24% 19% 21% 22% 22%

4% 22% 20% 19% 17%17%15% 15% 17% 16%

18%16% 19% 20% 19%1%2% 2% 5% 10%

10%8% 10% 8% 8%27% 17% 13% 9% 8%

0%

20%

40%

60%

80%

100%

2003 2004 2005 2006 2007

Bharti Reliance VodafoneBSNL Tata Teleservices IdeaOthers

Source: COAI, TRAI, Adventity ResearchSource: TRAI, Adventity Research

• The market shares of CDMA players like Reliance and Tata Teleservices have increased from 4% and 1% respectively in 2003 to 17% and 10% respectively in 2007, primarily driven by their competitive service offerings

• In cellular GSM space, Bharti with 37.1 million subscribers leads the market. In CDMA, Reliance with 24.6 million subscribers leads the market. Airtel, Vodafone and Reliance added the highest number of new subscribers in 2007; 2.0 million, 1.6 million and 1.5 million respectively

• As indicated by the HHI index, the increased competition has resulted in operators providing tailor-made services to the subscribers at affordable rates. Regulatory changes like removal of cap on number of operators per circle has added to competitive intensity


0.00.10.20.30.40.50.60.70.8

2003 2004 2005 2006 20070246810121416

VAS ARPU (in $) LHS Voice ARPU (in $)

Actual CAGR: 57.3% Forecasted CAGR: 44.0%

Indian mobile VAS market is expected to grow at a CAGR of 44%

12.0%

9.0%8.0%

7.0%8.0%6.0%

5.0%

0

500

1,000

1,500

2,000

2,500

3,000

2004 2005 2006 2007 2008E 2009E 2010E0%

2%

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14%

Revenues (in $ mn) LHS V.A.S. as proportion of Revenue

Contribution of VAS in Total Revenues to Rise Steadily

• Mobile VAS contributed around 7% of the total telecom revenue for Indian operators in 2007. VAS revenue is likely to grow at a CAGR of 44% during 2007 to 2010 resulting in increased contribution of VAS revenues to 12% of total mobile services revenues by 2010

• Due to highly competitive environment, operators have constantly offered cheaper schemes and reduced call rates. The voice ARPU’s have thus dropped considerably, increasing the operators’ focus on VAS revenues

• Investment required in offering VAS is marginal compared the revenues generated. Hence, VAS is an attractive solution for mobile operators to counter the problem of falling Voice ARPU’s and increase operating margins

Source: TRAI, BDA Connect, Adventity Research

Operators Focus on Enhancing VAS Revenues with Falling Voice Revenues

Source: TRAI, Adventity Research * ARPU: Average Revenue Per User

*


70.0%40.0% 30.0% 19.8%

9.6%

15.0%13.0%

7.9%

13.2%35.0%

35.0%

18.8%

17.8%

22.8%

12.9%9.0%

5.0%3.6% 5.0%8.0%3.5%2.5%

0%

20%

40%

60%

80%

100%

2005 2006 2007 2010ESMS (P2P) SMS(A2P P2A) Ringtones Voice Data & E-Mail Games & Others

SMS, ring-tones, voice VAS and data services to remain the most preferred VAS segments among consumers

Revenue Contribution of VAS Segments to Become Broad-based Going Forward

The revenue growth in non-voice segment was driven by SMS (including P2P, A2P, P2A), contributing over 43% of the total revenues in 2007. Growth in SMS was direct result of lower SMS cost compared with call tariffs in the past

Call tariffs having declined significantly, share of SMS has come down from 70% in 2005 to 43% in 2007. Overall SMS volumes will continue to grow with P2P volumes growing on account of discounted SMS bundles offered by operators in the mid term. Revenues from SMS are expected to grow relatively slower than other VAS segments at a CAGR of 26%, resulting in decline in its contribution to 27% of total VAS revenue by 2010

Mobile Music in the form of ringtones and CRBT followed by voice-based VAS services are identified to be the major revenue generators with likely contribution of over 26% of VAS revenues by 2010. Data and E-Mail services are estimated to form around 23% of VAS revenue in 2010 compared to 5% in 2007

Source: TRAI, BDA Connect, Adventity Research * P2P: Person-to-Person; A2P: Application-to-Person; P2A: Person-to-Application


Pay subscription charges for VAS to

Operators

Mobile operators retain major chunk of the total VAS revenues pie

Content Copyright Owners

Customized Content Creators

Content Aggregators

Mobile Network Operators

End User

Develops or owns copyright content and applications

Generate customizedcontent for users through their own portals

Aggregates content and applications for owners. Manages IVR, accounting of aggregated content

Provide transport andSupport mechanism for mobile content delivery

Players: On Mobile, Bharti Telesoft, Webaroo

Exclusive ownership of content

Content catering to different languages and forms

Content sourcing and aggregation

Have access to end users for providing VAS services

Retain 60-70%Receive 15-25%Receive 10-15%Receive 10-15%

Content flow Revenue flow

USP: Provide technological platforms for enabling services e.g. short code services

Players

Role

Technology Enablers*

Saregama, Yash Raj,Sony, Zee

Mauj, One 97,Hungama Mobile

Indiatimes, HungamaMobile

Airtel, Reliance Hutch, Idea, Vodafone

USP

Role: Provide Technology platforms for MVAS Interface

* Technology enablers are paid a fixed amount by telecom operators for offering technology platforms, these players do not feature in the content flow or revenue sharing model

MVAS Players Revenue Share

Content providers and aggregators

70%

Network Operators 30%

Revenue Sharing in Developed MVAS Markets

The revenue share of mobile content VAS players in India is to rise gradually


Advertisers

Advertisers

Mobile User’s Awareness of VAS

Mobile User’s Awareness of VAS

Mobile User’s Financial Condition

Mobile User’s Financial Condition

Mobile Users’ Need for Diversity

Mobile Users’ Need for Diversity

Mobile User’s Social Environment

Mobile User’s Social Environment

Mobile User’s Technology Exposure

Mobile User’s Technology Exposure

Dem

and Side Forces

Handset Manufacturers

Technology Enablers

Content Providers and Creators

Regulations

Regulatory Bodies

Foreign Entrants

Supp

ly S

ide

Forc

es



Technology Enablers

Technology Enablers



RegulationsRegulations

Regulatory BodiesRegulatory Bodies

Foreign Entrants

Foreign Entrants

Supp

ly S

ide

Forc

esSu

pply

Sid

e Fo

rces

Mobile VAS market outlook looks promising as demand-supply forces align

Outlook for Mobile VAS looks promising as supply and demand forces align themselves, offering range of growth opportunities for players well positioned in the market

Users demand uniformity and clarity in VAS transactions

Users Demand Transparency—Regulators Oblige

Advertisers continuing to look for new avenues to target niche audiences

Increase in awareness of Mobile VAS amongst mobile users

Demand for variety of applications/ services from mobile users

Increasing importance of time and convenience amongst consumers

Advertisers and Operators Look for Alternates

Supp

ly S

ide

Forc

es

Demand Side Forces

Technology enablers develop new products/services for smoother/faster processing

Content owners and creators work on developing exclusive content

Operators continue to look at alternate revenue streams

Established rules and regulations shape industry mechanics

Handset manufacturers develop technologically advanced products

Current Market State

Future Market State

Users’ Modernize—Suppliers’ Innovate

telecom_customer landscape

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