the indian telecom success story
TRANSCRIPT
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The Indian Telecom
Success Story
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Foreword
Havingemergedasthefastestgrowingtelecommarketintheworld,Indiahas
over500milliontelecomsubscribers,withmorethan120millionsubscribers
addedinthelasteightmonths.Theteledensitytoohasshownsignificantincrease
tocrossthe40percentmarkthisyear.ThesuccessoftheIndian
telecommunicationssectorhasbecomethecynosureoftheworldandhasmade
thecountryatrulyattractiveinvestmentdestination.
Thesuccessofthesectorcanbeattributedinnosmallparttothestrong
regulatorysupportprovidedbytheGovernment.Thepolicyinitiativescoupledwith
numerousgrowth-orientedstepstakenbyprivateplayersandotherstakeholders
havecreatedatrulystimulatingenvironment.
Thegrowthofthetelecommunicationsectorhasalsofueledtheinclusivegrowth
agendawiththeindustryseekingtomakeanactivecontributiontothe
developmentofthelessadvancedsectionsofsociety.Todayeveryfifthpersonin
ruralIndiaisconnected;fromwageearnerstoshopkeepers,farmersto
fishermen;mobilephonesarehelpinginincreasingtheirproductivity.
OntheoccasionofIndiaTelecom2009,the4thInternationalConferenceand
Exhibition,theDepartmentofTelecommunicationsispleasedtoreleasethis
reportontheIndiantelecomsuccessstory.CompiledbyKPMGandFICCI,it
providesanoverviewoftheIndiantelecommunicationssectorandwillserveasa
usefulreferencemanualforallstakeholdersincludingregulators,policymakers,
telecomoperatorsandthegeneralpublic.
P. J. Thomas
Secretary
DepartmentofTelecommunications&IT
GovernmentofIndia
NewDelhi
2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.
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TheFederationofIndianChambersofCommerceandIndustry(FICCI)andKPMG
areproudtopresentthisreportonIndiaTelecom2009TelecomforInclusive
Growth,inassociationwiththeDepartmentofTelecom(DoT).
ThisisanexcitingtimefortheIndiantelecommunicationsindustry.Thesectorhas
witnessedtremendousgrowthoverthelastfewyears,havingaddedmorethan
morethan120millionsubscribersineightmonthsalone.Whilethesuccesssofar
wasdrivenprimarilybyurbanareas,thenextphaseofgrowthisexpectedtohave
astrongruralflavor.Therewillbeastrongfocusonconnectingnewmarketsas
wellasexpandingcurrentmarketsthroughnon-voiceservices.Thispresents
attractiveopportunitiesforallstakeholdersoftheindustry,includingthe
Governmentandprivateplayers.
Thisreportprovidesthereaderwithanoverviewofhowtheindustryhas
developedoverthelastfewyears,withaspecialemphasisonkeytrends
impactingtheindustrytoday.Thisreportalsodiscussestheimpactthatthissector
hashadinpromotingtheagendaofinclusivegrowth.
WeareextremelygratefultotheDepartmentofTelecommunications(DoT)for
providinguswiththisopportunitytoworkwiththemfortheIndiaTelecom2009
event.
Sean Collins
GlobalChair
CommunicationsandMedia
KPMG
Romal Shetty
ExecutiveDirector
HeadofTelecom
KPMGinIndia
Amit Mitra
SecretaryGeneral
FICCI,India
2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.
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Executive Summary
Overthelastfewyears,Indiahasobservedenviablegrowthinitseconomy,even
inthefaceoftheglobalslowdown.Thestrengtheningdomesticmarketandthe
domesticnatureofinvestmentfinancinghashelpedinminimizingtheimpactof
theglobaleconomiccrisis.Thechangingdemographicsinthecountryhavealso
contributedinmakingthisanattractivemarket,thusattractingsignificant
investmentsfrombothdomesticandinternationalplayers.
Thetelecomindustryspecificallyhashadabigroletoplayintheprogressthat
hasbeenmadebythecountry.TheIndiantelecomsectorhasbeenthefastest
growingintheworldandisnowthesecondlargesttelecommarketglobally.The
eyesoftheworldarenowonIndia,andthepolicymakersandprivateplayersare
workingtogethertoensurethatthetelecomsuccessstorycontinuesatthesame
pace.
Thesuccessofthesectorhaslargelybeendrivenbywirelessservices,with
operatorsreportingtotal(wireline+wireless)additionsofapproximately15million
subscriberseverymonth.Theoverallteledensityhascrossed43.5percent,with
urbanareasapproaching100percentteledensity.1 Clearly,thefocusnowisto
increasepenetrationinruralareastodrivethenextphaseofgrowth.All
stakeholders-includingthegovernment,theregulatorandtheprivateplayers
havetakensignificantinitiativestopromoteruralpenetrationandcontributeto
inclusivegrowth.
Contributingtoalmost70percentofthepopulationandasignificantpieceof
overalldemandforgoodsandservicesinthecountry,ruralIndiahasnowcometo
theforefrontoftheindustryscollectivefocus.TheGovernmenthasintroduced
specificmeasuresandpoliciesforruralupliftment,includingenhancedprovisions
undertheNationalRuralEmploymentGuaranteeSchemeandtheBharatNirman
Program.Ofparticularinteresttothetelecomindustryaretheprovisionsunder
theUniversalServiceObligationFundwhichpromotethepenetrationoftelecom
infrastructureandservicesinruralareas.
InheraddressinJune2009,PresidentPratibhaPatilannouncedthatthe
governmentstargetswillincludearuralteledensityof40percentinthenextfive
yearsandtheexpansionofbroadbandcoveragetoeverypanchayatinthreeyears.
ShealsomentionedthattheschemeforCommonServiceCentresore-kioskswill
berepositionedsoastobeanetworkofpanchayat-levelBharatNirmanCommon
ServiceCentresprovidinggovernmentservicestoruralcitizens.2
1TRAI,November2009;DoT
2http://presidentofindia.nic.in/sp040609.html
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Ithasbeenintriguingtoobservetheimpactthatthetelecomsectorandtherural
populationhavehadoneachother.Whiletheruralareasbenefitedtheindustryby
openingupalargemarket,theindustryinturnplayedasignificantroleinthe
socialandeconomicupliftmentfortheruralpublic.Thesectorhascontributedin
generatingemployment,improvinglocalbusinessesandoverallstandardofliving
byeffectivelyintegratingwiththeeconomiclifecycleofthelocaleconomy.
Telecommanufacturingisanotherfacetofthesectorthathasemergedasahot
topicinindustrycircles.Indiaisfastemergingasahubforglobaltelecom
manufacturingandtheproductionandexportsoftelecomequipmentinthe
countryhavebeenonasteadyrise.Leadingglobalplayershavemadesignificant
investmentsinsettingupmanufacturingandR&DfacilitiesinIndia,withmany
morebeingplanned.
Whilevoiceserviceshavehistoricallybeenthekeyforcebehindtelecomgrowth,
industryobservershaveseenasteadyriseintheuptakeofvalueaddedservices
inrecenttimes.TheABCofVAS-namelyAstrology,BollywoodandCricketstill
continuestodrivetheprimeusageofvalueaddedservices.However,applications
likemobilecommerceareslowlyontheuptakeandareexpectedtogrowfurther
inthecomingyears.Theneedofthehouristodevelopmorelocallyrelevant
contentlikenewsalertsinlocallanguages,weatherupdatesandotherswhich
willdriveuptheconsumptionofVASevenfurtherinthefuture.
Theindustryisnoweagerlyawaitingsomekeyupcomingregulationsincluding
the3GandBWAauctions,scheduledforearlynextyear.Thesearelikelytohavea
significantpositiveimpactonthesectoranditsgrowthinthenextfewyears.
MobileNumberPortabilityisalsolikelytoberolledoutinthenextfewmonths
whichwillmakethemarketmorecompetitiveandoffertremendousbenefitsto
theconsumers.
Intheshortterm,themarketwillbeunderseverecompetitivepressureas
revenuesarestillprimarilydrivenbyvoice.Thelongtermlooksattractivedueto
anticipatedpotentialofVASandDataservicesaskeydifferentiatorsandrevenue
generators.
TheIndiantelecommunicationsindustryiswellsettobuildfurtheronthesuccess
ofthelastfewyears.Thepolicymakersandtheprivateplayershavesuccessfully
cometogetherwithvariousinitiativestoensurethattheindustrycontinuesto
remainashiningstarforIndia,tothebenefitofall.
2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.
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Table of contents
1 Macro-Economic View of India 01
2 Global Telecommunications Market 05
3 Indian Telecommunications Market 11
4 Connecting Rural India 19
5 Broadband Connectivity 27
6 Telecom Manufacturing 33
7 Telecom Research & Development 39
8 Value Added Services 41
9 Regulatory and Policy Environment 49
Conclusion 56
About Department of Telecommunications (DoT) 57
About Federation of Indian Chambers of Commerce
and Industry (FICCI) 57
About KPMG in India 58
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01. Macro-Economic View of India
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USA
UK
2008 2009 2010E
1.1
-3.3
1.2
Euro
Zone
0.7
3.3
1.2
0.7
-3.4
1
China
9.1
6.5
8.2
9
6.76
India
-0.7 -0.2
Japan
USA
-
-China
9.18.2
India
--
--
-6.8
6.5
Source:EIUEstimates,EstimatesforIndia:RBI,EconomicSurvey2009
Source:DIPP;*=Provisional;
3RBIEstimates
4.36.1
9.0
22.8
34.4 35.2
0
5
10
15
20
25
30
35
40
USD
Bn
CAGR: 52%
2003 - 04- 2004 - 05- 2005 - 06- 2006 - 07- 2007 - 08*- 2008 - 09*-
FDI Inflows - Driving Globilization
Slowdown in Global Growth...India still in Positive Territory
Thecountryisexpectedtoregisteragrowthrateof6
percentin2009-103.Evenattheserates,Indiasgrowthis
estimatedtobehigherwhencomparedtootherregions
globally.
Reforms have enabled sustained growth
Whileliberalizationinindustry,foreigntrade,ForeignDirect
Investments(FDI)hasledtoIndiabecomingwellintegrated
withtheglobaleconomy;structuralstrengthslikeayoung
population,skilledmanpower,largedomesticdemandand
presenceofgloballycompetitivefirmshaveattracted
significantinvestorattentioninrecentyears.
The Indian Telecom Success Story | 02
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Additionally,positiveeconomicdataandexpectationsofthe
globaleconomicdownturnbottomingoutsoonhavealso
revivedtheriskappetite.Consequently,therallyinglobal
equitymarketsthatbeganearlierthisyearhascontinued
withIndiaoutperformingotheremerginganddeveloped
markets.
Source:DIPP,Apr2008-Mar09
Sector-wise FDI Inflows
Bytheyear2025,Indiaisexpectedtoemergeasoneofthe
foremostnationsintheworldpoliticallyandeconomically.
Indiasresilienceisreflectedinitsstrongfundamentals;
namely,risingforexreserves,highsavingsrate,risein
productivitysupportedbytechnologicalup-gradationand
greaterintegrationwithglobalflowsoftrade,financeand
technology.
Rising Forex Reserves Savings rates higher and better aligned
Note:*Apr-Sep2009
Source:RBI,DGFT,EconomicSurvey2008-09Source:CSO
03 | The Indian Telecom Success Story
Forward-looking policies, skilled workforce and large domestic
demand has helped India emerge out of the global economic
turbulence unscathed
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4 CIA,www.india.gov.in
Median Age Population of Major Countries (2008)
Source:CIAWorldFactbook;USCensusBureau;UrbanPovertyReport,2009;KPMGAnalysis
Demographic dividend; encouraging demanddriver
Additionally,Indiasdemographiccompositionensuresthatit
continuestoremainanattractivemarketforinvestments.
Thehigheconomicgrowthinthepastfewyearshas
resultedinarisingnumberofIndianswithagreater
propensitytospend.Thisriseinincomelevelsacrossurban,
semi-urbanandruralhouseholdshasledtochanging
consumptionpatterns.
Necessitiessuchasfoodandapparelareexpectedto
declineinrelativeimportancetocategoriessuchas
communications,education&recreationandhealthcare
creatinggreateropportunitiesforpublicprivatepartnerships
todriveinvestmentsininfrastructure.
Further,Indiasdemographiccompositionaugursfavorably;
withnearlyone-halfofthe1.1billionpeoplebelowtheage
of25years.Thesizeoftheworkingagepopulationexceeds
thesizeofthedependentpopulationanditisestimatedthat
itwillremainsountiltheyear2025andperhaps,even
beyond4.
Theserobustmacroeconomicindicatorsclubbedwith
socio-economicdriversarelikelytohelpthecountrysustain
itsgrowthtrajectory.WhileIndiahasnotbeencompletely
insulatedformtheimpactoftheglobaldownturn;ithas
shownsizeablesignsofrecoverycomparedtoitspeers
withthehelpoffocusedGovernmentintervention.Thekey
driversofeconomicgrowth,namelyconsumptionand
investment,arelikelytoprovidefurtherimpetustoIndias
growthstory.
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02. Global Telecommunications Market
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Telecomremainsasasilverlininginthedarkcloudsof
recessionhoveringabovetheglobaleconomy.Theglobal
telecomservicesmarketispoisedtogenerateUSD1.4
trillionin20091,despitetheeconomicslowdown.Emerging
economieswillstillinvestheavilyinnetworkinfrastructure,
whilerecession-hiteconomieswilldelayupgrades.TheAsia-
Pacificregionwillexperiencethehighestgrowthrateinthe
nextfiveyears,atnearly16percent,ledbyChinaand
India2.ThetelecomsectorinLatinAmericaandthe
Caribbeanwillgrowby12percent,fueledbyemerging
economiesandtheexpansionofthemiddleclass.
Triple Play to ride on Broadband growth
Thegrowthofbroadbandaccesshasfueleddemandfor
convergedvoice,video,anddataservices-nowknownas
the"tripleplay".Togarnernewcustomers,holdontocurrent
ones,andensurerevenuegrowth,today'sprovidersmust
continuetomovetowardofferingthetripleplayasavalue-
addedservicebundle.
FranceisoneofthetopthreeEuropeancountriesinfiber
deployment.Theincreasedinvestmentinbroadband
infrastructurealongwithincreasedcompetitionandreduced
priceisdrivingconvergedservices(DualandTriplePlay)and
boostingIPTVsubscriberbase,makingFrancealeading
IPTVmarketinEurope.CableTVoperatorsinBrazil&
Mexicowiththehelpofdualplayandtripleplaypackages
arelookingforwardtodrivetheirARPUsinthetimeto
come.InKenya,anISPhasintroducedtripleplayservice
underthebrandZuku,offeringTV,InternetandVOIP
services.IntheMiddleEast,BahrainsBatelcohasrolled
outNGNtodriveconvergedservices;whileQatarsQtelhaslaunchedtripleplayunderthebrandMOSAIC.InPoland,
thefixedbroadband(ADSL,Cable)operatorsare
increasinglylookingtodouble-andtriple-playpackages,
resultinginanumberofIPTVdeployments.InRussiaalso,
tripleplayistogiveanewfilliptoIPTVdeployments.
Global Telecommunications Market
1CPIFinancials,GlobaltelecomservicesmarkettogenerateUSD1.4trillion
in2009,August2009
2InsightResearch,GlobalTelecomServicesRevenueForecast:Emerging
MarketOpportunities,2009
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Mobile Payment fostering a trend for cashlesstransactions
M-PESAisaninnovativenewmobilepaymentsolutionthat
enablescustomerstomakesimplefinancialtransactions
throughthemobilephone.TheM-PESAschemereliesonan
applicationinthemobilephoneSIMcard,whichis
authorizedbyaPINcodeanddoesnotrequireanyspecial
technology.
Currently,theserviceismainlyaimedatmobilecustomers
whodonothaveabankaccount,typicallybecausetheydonothaveaccesstoabankortheydonothavesufficient
incometojustifyabankaccount.Themoneyisheldsafely
inabankaccountrunbyM-PESAontheusersbehalfand
theuserdoesnothaveanycontactwiththebanknordoes
thebankhavetheusersdetails.TheM-PESAsystemallows
customerstodepositandwithdrawcashvialocalagents
andtransfermoneytoothermobilephoneusersviaSMS.In
acountrylikeKenyawhere90percentpeopledonothavea
bankaccount,theM-PESAservicehasseenadramatic
take-upsinceitslaunch.AsofMarch2009,theservicehad
over6.5mregisteredusers(vs.2.1minMarch2008)with
2mdailytransactionsinKenyaalone.M-PESAisdistributed
through8,650retailoutletscountrywide(2,262outletsin
March2008).Thistake-upclearlydemonstratesthedemand
foreasilyaccessible,securecashpaymentservicesin
emergingmarkets.Morerecently,commercialM-PESA
serviceshavebeenintroducedbyRoshan,theleading
mobileoperatorinAfghanistan,andbyVodacominTanzania.
Indianoperatorshavelaunchedsimilarinitiatives.Offerings
fromsomeoperatorsenableamobilephoneusertosendor
receivemoneyinstantlyusingtheirmobilephoneto
authorizethetransfer.AccordingtotheGSMAssociation,
mobilemoneyinemergingmarketscouldbring inUSD7.9bn
ofsalesforoperatorsby2012.Moneytransferservicesfor
handsetownerswithoutabankaccountmaybringin
USD5bnoftransactionfeesandtextmessage-linked
revenueby2012.Indirectrevenue,includingrevenuefrom
greatercustomerloyalty,willprobablyamounttoUSD2.9bn.
Rural Expansion to help offset urban saturationChina,theworld'slargesttelecommarket,attributesits
phenomenalgrowthtoruralareas.Thecountry'slargest
operator,ChinaMobile,creditsruralareaswithcontributing
around50percentofitsmillionsofnewsubscribers.While
goingrural,ChinaMobilemanagedtoavoidanAverage
RevenuePerUser(ARPU)fallbycreatingademandfor
high-marginvalueaddedservicessuchasSMS,music
downloadsandringtones.
However,theroadtoruralexpansionwouldhaveseveralroadblockslikelandacquisition(Lease/Purchase)forBTS,
availabilityofcheapandfastbackhaulconnectivity,costs
associatedwithsettinguptelecominfrastructure,availability
ofadequatepowersupply,higheroperational&
maintenancecostsandlowerpurchasingpowerofrural
population.TheOperatorsaretakingadequatestepsto
counterthesechallenges:
Micro Financing: GrameenPhoneinBangladesh
providesmicrofinanceoptionstosetupVillagePhone
Operators(VPO).GrameenBankprovidesaloanpackage
toselectVPOstopurchaseahandsetandoperatetheir
VPbusiness.
Developing locally relevant content: Qualcomms
FisherFriendBREWapplicationhasbeenimplemented
incoastalTamilNadu.Theapplicationworkson3G
CDMAhandsetsandgivesfishermanaccesstotimely
weatheralerts,real-timedataonfishmigration,market
pricesandupdatesonrelevantgovernmentschemes
andpoliciesinthelocallanguage.
Setting up viable distribution and collection
channels: Mobitel,SriLanka'sNationalMobileservices
provider,expandeditsruralpenetrationwithatie-upwith
theSriLankanPostalDepartment.Asperthedeal,post
officesandpostmencouldsellMobitelprepaidcardsto
ruralcustomers.
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Encouraging entrepreneurial spirit: Pakistan
TelecommunicationsAuthority'sRabtaGharinitiative
encourageruralentrepreneurstosetuplocal
telecentres.PTA,withsupportfromtelecomoperators,
providestheselocalentrepreneurswithfreeequipment,
installationandtraining.
Exploring alternate fuels: EricssonandOrangeGuinea
Conakryrecentlyannouncedthedeploymentofover100
fullysolar-poweredBTSstoprovideconnectivitytorural
Africa,whichisexpectedtoreduceenergybillsby50
percent.
Government support: TheIndiangovernmentprovides
asubsidyunderUSOFforcompaniesdevelopingrural
telecominfrastructure.Thegovernmentandtheindustry
havesetupajointinitiativeknownasProjectMOST
(MobileOperatorsSharedTowers)toidentifyruralandremoteareasnotbeingcoveredbyUSOF.
Technology and Content to drive the growthTheeffectsoftheslowingUSeconomybecamemore
predominantwithalloperatorsreportingadeclineinARPU
inthefinalquarterof2008.Howevertheprevalenceof
moresophisticatedhighendhandsetshashelpeddrive
growth.Anincreasedrelianceonmobilecontentwillbethe
definingthetrendsoftheUSmobilemarketinthenextone
yearalthoughtherangeofservicesonofferwillbeoperator
specific.Whiletheeconomyisalreadynegativelyimpacting
theinfrastructureandhandsetssegments,consumershave
notyetbeguncuttingtheiroverallmobiledataspending.The
confluenceof3G,high-enddevicesandtheevolving
applicationsecosystemwereresponsibleforthestrides
madebymobiledatain2008.
InEurope,Telefonica,whichisO2sparentcompanyhave
outperformed,attributabletothecontinuedsuccessofhigh-
enddevicessuchastheiPhonewhichitcarriesexclusively.
ThemaingrowthengineinJapan,inboththefixedand
mobilesectors,isdataservices.WhenitcomestoMobile
TV,Japanisthelargestsubscriberbaseglobally.
WAP/Internetbrowsing,ring-tonesandmusiccontributes
uptotwothirdsofJapan'sdatarevenues.
SouthAfricaontheotherhandisexpectedtowitness
strongprivateinvestmentintherun-uptothe2010FIFA
WorldCupandthiswillremainakeydriverforgrowthin
2009.Withmobilepenetrationcrossing100percent,
operatorsarelookingatalternaterevenuestreams:Mobile
broadbandcombinedwithmediacontent.Thelaunchof
3G/HSPAprovidesthemwithanopportunityofservice
differentiationbyprovidingmobilebroadband,combined
withmediacontent.InCzechRepublic,themobileoperators
arelookingatcontentandapplicationthroughHSDPAbased
mobilebroadbandandmobileadvertisementasfuture
growthoption.
07 | The Indian Telecom Success Story
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In times of RecessionMostofthetelecomcompaniesinthedevelopedand
emergingmarketshavelaunchedapoints-basedloyalty
program;whileasmallpercentageoptedfordiscounting
theirservices,withtherestchoosingdifferentpromotional
andmarketinginitiatives.Withallplayersfacingchallenges
intermsofincreasingtheirAverageRevenueperUser
(ARPU)andavoidingcustomerchurn,mostareforcedto
implementprogramsontightmargins.
Asia: The Epicenter of Telecom Growthworldwide
Asia isaboomingmarketwithcountrieslikeJapanand
SouthKoreaimplementingadvancedtechnologieswhilethe
Chinesemarketispoisedforgrowthafterrestructuringand
3Glicenseauctions.IndiaandChinacontribute31percent
ofworldssubscriberbase;yetthemobilepenetrationrates
arenotashighcomparedtoUSorotherdeveloped
economies.Needlesstomention,furthergrowthis
expectedtobewitnessedinthisregion.
Japan withover30millionbroadbandlinesinplace,isthe
thirdlargestcountryintheworldaftertheUSandChinain
termsofbroadbandusers.Muchofthesuccessof
broadbandinJapanisowedtothestunninggrowthsurge
thatoccurredbackin2003onthebackofDSLbroadband
technology.TherestructuringoftheChinese telecom
markethaschangedthecompetitivelandscapeofthe
country.Withthelargestmobileandbroadbandsubscriber
base,themarkethasstayedrelativelyinsulatedfromthe
globalmeltdown.Postrestructuringandtheawardingof3G
licensesinDecember2008,themarketispoisedforyet
anotherboost.Therestructuringwillprovidehugemarket
opportunitiestocommunicationsequipmentmanufacturers,
thusacceleratingtheall-roundupgradeoftelecomoperation
supportsystems.
China,
19%
India, 12%
USA, 7%
Others,
62%
Source:EIU
Mobile subscriber base (% share of world)
The Indian Telecom Success Story | 08
The Asia-pacific region, with India in the lead, will be the key
growth market for global telecom over the next few years
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Source:PyramidResearch,NationalBureauofStatistics,CEIC
Source:PyramidResearch,NationalBureauofStatistics,CEIC
Mobile Subscriber Data (Millions)
Fixed Line Data (Millions)
09 | The Indian Telecom Success Story
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Indian telecomcrossedthetargetof500Million(Wireless
&Wire-line)SubscriberinSeptember20094.Buoyedbythe
entryofnewtelecomplayerstheIndiantelecomindustry
clockedthehighestsubscriberadditionof15.87million
subscribersinMarch,20095.IndiaovertookUStobecome
the2ndlargestmobilegeographyafterChina.
FixedMobileSubstitution(FMS),provisionofbundled
servicesandincreasedconcentrationonwirelessbroadband
istheglobaltrendpresently.InAfrica,broadband
penetrationisincreasingduetocheapersubscriptionon
accountofnewsubmarinecablesreachingitsshoreandrolloutofwirelessbroadbandservices.InEurope,all
operatorsaretryingtoincreasetheirsharebyoffering
bundledservicesoverthewire-linenetwork.TheMiddle
Eastregionshowsabalancedapproachtowardswireless
broadbandservices.ThetelecomindustryinNorthAmerica
hastakenahitasaresultoftheeconomicmeltdownand
reducedconsumerspendingwhileinSouthAmerica,the
operatorsareconstantlylookingtoinnovatebyproviding
video-on-demandandotherbundledservicesinorderto
increasethenumberofsubscribers.Theepicenterof
telecommarketcontinuestobeAsiawhereChinaandIndia
continuetoplayakeyrole.
4TRAI,November2009
5TRAI,April-May2009
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03. Indian Telecommunications Market
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Indiahasemergedasoneofthelargestandfastgrowing
economiesoftheworld.Eveninthetimeofdownturn,
Indianeconomyhasshownconsiderableresistanceleading
togrowthacrosstheboardwhenmanyregionsoftheworld
hadshownsignificantdeclineingrowth.Thefar-reaching
measuresintroducedbytheGovernmentofIndiaoverthe
pastdecadetoliberalizetheIndianmarkethavehelpedthe
businessandregulatoryenvironmenttosuccessfullymove
towardsgreatertransparencyandefficiency.Servicessector
hasbeentheprimaryengineforthisgrowth.Telecom
industryisoneofthefastestgrowingsectorsofIndian
economywithsignificantcontributionfromtheprivatesector.
Thetelecomsectorcanbedividedintobasic(fixed),mobile
andinternetservices.Therearealsosomesmaller
segmentssuchasradiopagingservices,VerySmall
ApertureTerminals(VSATs)andPublicMobileRadioTrunked
Services(PMRTS).Indianmobilemarketiscurrentlyoneof
themostattractivetelecommarketacrosstheworld.
OverallteledensityinIndiahasrisentothelevelsof
approximately43.5percent1.Withalargepopulationyetto
haveaccesstotelecommunicationmarketthepotentialfor
thesectorremainslargeespeciallyinnon-urbanareas
wherewirelineandinternetservicesareyettomake
significantin-roads.Wirelineservicesinparticularareyetto
reachthevastmajoritywithalowteledensityof3.19
percentand1percent2 inurbanandruralregions
respectively.Eventhemobileservicesspace,whichhas
seenexponentialgrowthinurbanareas,hasnotreached
thevastmajorityinruralareaswithatotalwireless
teledensityofapproximately40.31percent
3
indicatingalargeuntappedpotentialforthesector.
Thenumberofinternet/broadbandsubscribershavealso
grownatafastrate;therewere14.05milliontotalinternet
subscribersasofJune,2009and6.62millionbroadband
subscribers.Thesectorhaspotentialforlargegrowthinthe
future.4
1 TelecomServicesPerformanceIndicatorsAprilJune2009,October2009
2 TRAI,November2009
3 TRAI,TheIndianTelecomServicesPerformanceIndicatorsAprilJune
2009,October2009,TRAI,November2009
4 TRAIQuarterlyReportsonTelecomServicesPerformanceIndicators
Indian Telecommunications Market
2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.
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5TRAI,November2009
611 28
47
75
142
229
347
427
0
50
100
150
200
250
300
350
400
450
2001 2002 2003 2004 2005 2006 2007 2008 H1'09
Subscriberbaseinmn
Source:TRAIAnnualReportandQuarterlyReportsonTelecomServicesPerformanceIndicators
Mobile ServicesTheIndianmobilitymarketcanbecharacterizedasone
withaverylargesubscriberbase(~427millionasofJune
2009),highgrowth(additionof10Mn+subscribersevery
month),lowARPUs(~INR165permonth)andsignificant
churnrates.5
TheGovernmentofIndiaopenedupmobileservicesto
privateparticipationin1994-95byinvitingbidsforproviding
servicesinthefourmetropolitancitiesand18non-metro
circles.Serviceswereintroducedin1995withthehightariffsresultinginpoordemand.TheNationalTelecomPolicy
1999,movedtheindustrytoarevenuesharemodelfrom
thefixedlicensefeeandthelowertariffsresultedinthe
additionof~12millionsubscribersinthe1999-03period
ascomparedtolessthanamillionsubscribersaddedinthe
1995-99period.Theperiodwascharacterizedbysettingup
ofTelecomRegulatoryAuthorityofIndia(TRAI)in1997.
Growth of Wireless Subscriber Base (year end numbers)
China,
19%
India, 12%
USA, 7%
Others,
62%
Mobile Subscribers (share of the world)
Source:EIUEstimates
The Indian Telecom Success Story | 12
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TelecomDisputeSettlementandAppellateTribunal(TDSAT)
wassetupin2000inordertoadjudicatedisputesarising
betweenlicensorandlicensee;andtohearappealsagainst
anydecisionororderofTRAI.TheCallingPartyPaysregime
wasintroducedin2003-04whichmadeincomingcallsfree.
TelecomcirclesinIndiahavebeenclassifiedinto4
categoriesviz.Metros,CategoryA,BandC.With
penetrationratesinmetrosapproaching100percentthe
markethereisnearlysaturated.However,thereisstill
immensepotentialinothercirclecategoriesparticularlyB
andC.
Gujarat25.8 mn
44%
UP (W)21.5 mn
UP (E)30.2 mn
Rajasthan
26 mn38%
MP22.7 mn
24%
17.4 mn
HP3.6 mn54%
Bihar24 mn19%
Orissa10 mn25%
J&K4.1 mn36%
Haryana11 mn43%
UP (E+W)25 %
+ Mumbai48%
Delhi
23 mn
133%
Maharashtra
33.5 mn
Andhra Pradesh
33 mn
40%Karnataka25.5 mn
44%
Punjab
15.6 mn
55%
Tamil Nadu
40 mn
59%
Kolkata
12.4 mn
Gujarat
25.8 mn
44%
UP (W)
21.5 mn
UP (E)30.2 mn
Rajasthan
26 mn38%
MP
22.7 mn
24%
West Bengal
17.4 mn
HP
3.6 mn
54%
Bihar24 mn
19%
Orissa
10 mn
25%
Assam
6.4 mn21%
North East
3.8 mn
30%
J&K
4.1 mn
36%
UP (E+W)
25 %
WB + kolkata
33%
Maharashtra + Mumbai
48%
Haryana
11 mn
43%
Kerela
18 mn
53%
Metros
Circle A
Circle B
Circle C
Mumbai
20.4 mn
110%
Source:TRAI,TheIndianTelecomServicesPerformanceIndicatorsAprilJune2009,October2009,KPMGAnalysis
Subscriber Base and Teledensity across Telecom Circles
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Thesubscriberbaseof494.06Million(asofAugust,2009)
iscomprisedof343.24Millionurbansubscribers
(teledensityof98.70percent)and150.82Millionrural
subscribers(teledensityof~18.37percent)6.Themarketis
highlycompetitivewitheachtelecomcirclehaving7-8
operators.Inaddition,thereareseveralnewlicensees
whichareintheprocessofrollingoutservices.Competitive
intensityinthemarketcontributedtoreductionintariffsand
launchofinnovativeschemeslikelifetimeprepaidandlow
costhandsetbundlingwhichreducedtheentrycostfora
newsubscriber.WithreducingARPUs,changingeconomic
profileofsubscribersandtheneedtomeettheaggressive
roll-outtargets,theoperatorshavebeenundertremendous
pressuretobringinoperationalefficiencies.Operatorshave
beenrealizingefficienciesthroughextensiveoutsourcing
acrossthetelecomvaluechain.Thishasresultedinlarge
scaleopportunityforplayersbelongingtoallthecategories
withinthetelecomecosystem.Someoftheprominent
categoriesincludenetworkequipmentvendors,tower
infrastructurecompanies,telecomimplementationvendors,
ITvendors.
Ithasbeenobservedthatthepastsubscribergrowthhas
beenskewedinfavorofurban.Thelargeruralpopulation
baseandlowteledensityindicatesthatthereisstilllarge
untappedopportunityintheIndianmarket.Withurban
marketsnearingsaturation,operatorshavebeenactively
seekinggrowthinruralIndia.
Wireline Services
Thetotalnumber7 offixedservicesconnectionsinIndia
increasedfrom5.81Millionin1991-92to40.8Millionin
2006-07.During1999-2000to2001-02,approximately5-6
Millioncustomerswereaddedtofixed-lineserviceseach
year.However,withthedropinmobiletariffsandincrease
incoverageofmobileservices,netadditionsinfixed-line
subscribersstartedslowingdownfrom2.5Millionin2002-
03goingdownto0.5Millionin2004-05.Duetomobile
substitutionandlowertariffsfromtheyearsfrom2006-07
to2008-09haveseenadecreasein3.5Millionfixed
connections.However,thepotentialforwirelineservices
remainslargeduetoverylowpenetrationinthewireline
industry.Newplayersinthetelecomspacehadhitherto
concentratedonwirelessspaceleadingtolowcompetition
andpromotionofwirelineservices.Greaterpan-India
expansionbyprivateplayerscansignificantlyleadtogrowth
ofwirelineservices.Inaddition,withcombinedofferingof
internet/broadbandandalliedservicesshowingpromising
potential,thesectorcanbouncebackinthefuture.
33
3841 41 41 42 41 39
38
0
5
10
15
20
25
30
35
40
45
Mar'01 Mar'02 Mar'03 Mar'04 Mar'05 Mar'06 Mar'07 Mar'08 Mar'09
SubscribersinMn
Source:TRAIAnnualReportandQuarterlyReportsonTelecomServicesPerformanceIndicators,CrisilResearch
Wireline Subscriber Base
6 DepartmentofTelecommunications,TRAI,TheIndianTelecomServicesPerformanceIndicatorsAprilJune2009,October2009
7 CrisilResearch,Stateofthe Industry,October2007
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Internet ServicesInternetsubscriberbaseinIndia(dialupandbroadband),
thoughcurrentlyatalowlevelisexperiencingsignificant
growthforthelast2-3years.Thisgrowthisbeingdrivenby
growingpopularityofbroadband,increasingusercomfort
withusageofinternetapplications,continuousfallinPC
prices,cheaperaccessplans.
Thisgrowthhasbeenaccompaniedbyanassociated
increaseinthenumberofinternetuserswhichcanbe
attributedtogrowthofpublicinternetcafesandmultiplemembersofahouseholdaccessinginternet.
ThegovernmentofIndiahassettargetsof20Millionfor
broadbandfor2010,fromthecurrentfiguresof7.22Million
(September,2009),whichrequiresrelookattechnologies
usedinforbroadbandaccess.Whilethereanumberof
technologiesbeingusedbyserviceproviderstoprovide
broadbandservices,DSLcontinuestobethemost
preferredtechnologyandconstitutesnearly87percentof
totalbroadbandsubscribers8.Cablemodemtechnology
followswith7.4percentconnections9.Focusonincreasing
wirelineaccessaswellgreaterfocusontechnologieswhich
canberolledoutfaster(e.g3GandBWA)orhavesignificant
penetration(cableTVandDTH)cansignificantlyenhancethe
adoptionofbroadbandinIndia.
Source:TRAIAnnualReportandQuarterlyReportsonTelecomServicesPerformanceIndicators
Internet Subscriber Base
8 TRAIQuarterlyReportsonTelecomServicesPerformanceIndicators
9 TRAIQuarterlyReportsonTelecomServicesPerformanceIndicators
15 | The Indian Telecom Success Story
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Source:Industryconsensusestimates,KPMGanalysis
Growth of VAS Revenues
CRBT
45%
GPRS/WAP
Products
9%
P2A SMS & Alerts
18%
Voice Portals
20%
Others
8%
Source:IndustryEstimates,InformationInterviews
Priorto2008,majorityofVASrevenueswereattributableto
SMSandthattooPerson-to-Person.Itisinterestingtonote
thatoverthelast1-2years,non-SMSVAShasbeengaining
importanceandislikelytobecomeadominantcontributor
toVASrevenueoverthenextfewyears.In2009,non-P2P
SMSVASaccountedforbetween5and6percentof
operatorrevenues.Industryprotagonistsenvisagethis
sharetoincreasetoaround8percentoverthenexttwo
years.Theaddressablemarketfornon-P2PSMSVAShas
historicallybeendominatedbyringtonesandcallerringback
tones(CRBT)whichaccountforaround45percentof
revenues.
Market Split for VAS
Value Added ServicesCurrently,VASmarketisworthINR91Billionwhich
translatesintoapproximately8percentofwirelessindustry
revenues.TheshareofVASinwirelessrevenueislikelyto
increaseto11percentby2011.Thisgrowthwouldbedriven
byincreasedoperatorfocusonVASduetocontinuousfallin
voicetariffs,featurerichhandsets,vernacularcontentand
alsowithincreaseduseradoptionofVASapplications.
The Indian Telecom Success Story | 16
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New Frontiers for Growth
3G Technology
Whilethelast5yearshavebeentransformationalforIndian
telecomindustry,thenextfewyearslookevenmore
exciting.Oneofthekeyfrontierswhichwouldmakejourney
incomingyearsexcitingisthelaunchof3Gtechnology.
Inthenearfuture,Indiangovernmentwillbeauctioning
spectrumforthirdgenerationwirelessservicesforwhicha
numberofincumbentsandnewentrantsareexpectedtobe
intherace.Eachtelecomcirclehasadesignatednumberof
spectrumblocksoutofwhich1blockisreservedforthe
staterunoperators.
Withthelaunchof3Gservicestheoperatorswouldbeable
toproviderichdataservicestoHNIs,workingprofessionals,
enterprisecustomersandyouth.Theywouldbespecifically
targetingcurrentusersof2.5Gand/orownersof3G
enabledhandsets.Atthesametimeoperatorswouldbe
activelylookingatproviding3Gservicestootherincome
groupsasthiswillhelpspreadinginvestmentintechnology/
licenseoverawidersubscriberbase.
Telecom Infrastructure Services
Infrastructuresharinghasbeenarelativelynewsegment,
whichwitnessedsignificantinvestmentandinterestfrom
theinvestorcommunityinthepasttwoyears.
Thekeytriggerforinfrastructuresharinghasbeenthe
MobileOperatorSharedTower(MoST)initiative
implementedbytheDepartmentofTelecom,underwhich
pilotsharedtowerswererolledoutatdifferentlocationsin
NewDelhiin2006.Throughthisinitiative,thebusinesscase
fortowersharingwaslaidoutclearly,andthisresultedin
significantinterestinadoptionofthetowercompany
businessmodel.
17 | The Indian Telecom Success Story
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Thebusinesscaseforthetowercompanywasquickly
establishedaroundthefollowingbenefits,whichmade
strongeconomicsenseforOperatorCompanies(OpCos)to
hiveofftowerassetsintotowercompanies.
Buildandleasepassiveinfrastructure
Lowercapitalandoperatingexpensesforcarriers
throughassetsharing
Accesstolow-profitabilityruralareaswithoutCapex
Monetisingtowerassetsasaneasierrouteofraising
capitaltofundcoreoperations.
Thetowerandtelecominfrastructureecosystemisfurther
evolvingwiththeDOTsassenttorecommendationson
activeinfrastructuresharinginMarch2008.Underthese
recommendations,sharingofinfrastructureamongstservice
providersbasedonthemutualagreementshasbeen
initiated.Infrastructuresharingisnowalsoallowedfor
antenna,feedercable,NodeB,RadioAccessNetwork
(RAN)andtransmissionsystems.Thishasalreadyledto
towercompaniesofferingend-to-endtowerinfrastructureto
thenewtelecomoperatorsinclusiveofbackhaulservices,
whichhithertohadbeenasignificantchallengedueto
inadequatefibreandmicrowavebackhaulcapacityexisting
attowerlocations.Weexpectsignificantfurtheractionand
innovationinthisspacewiththetowercompanieslooking
toofferenhancedportfolioofservicestotelecomoperators.
The Indian Telecom Success Story | 18
Strong regulatory support, domestic demand and enterprise of
private sector telecom providers have been the key drivers for the
growth of the Indian telecom industry
2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.
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04. Connecting Rural India
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1 Credit Suisse, India MarketSt rategy,June17,2009
2 CreditSuisse,IndiaTelecomsSector,February23,2009
3 CIATheWorldFactbook,2008
4 TRAI,DraftrecommendationsonAnApproachtoRuralTelephony
SuggestedMeasuresforanAcceleratedGrowth,March04,2009
Connecting Rural India
Whilemarketsallacrosstheglobewitnessedasignificant
reductioninconsumerspending,theruralIndianconsumer
managedtoremainanattractiveproposition,especiallyin
thedemandforconsumergoodsandtelecomservices.
Leadingcompaniesacrossindustrysectors,appreciatingthe
enormouspotentialofthismarket,havedevelopeda
focusedstrategytotargetruralIndia.
RuralIndiaisbelievedtocontributealmost45percentofthe
countrysGDP1.Thesegmentreportedlyalsoaccountsfora
significantchunkofdemandformanyconsumergoodsand
servicescompanies.Whilethepercapitaruralconsumption
spendremainsatnearlyhalfoftheurbancounterpart2,itis
believedtobegrowingatafasterrate.Ruralareashouse
nearly71percent3 ofthecountryspopulationandthus
representanenormousconsumerbase.Perhapsevenmore
importantly,ruralIndiacontributestoroughly56percentof
incomeand64percentofthecountrysexpenditure4.
Clearly,theruralmarketcannotbeignoredanylongerand
nowfiguresasanonnegotiablesuccessfactorinmany
corporatestrategies.
2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.
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100 percent = 1.17 billion
Urban
29%
Rural
71%
Urban
43%
Rural
57%
Source:CIAWorldFactbook,KPMGAnalysis Source:CIAWorldFactbook,KPMGAnalysis
5 Credit Suisse, India MarketSt rategy,June17,2009
Rural vs. Urban Population Rural vs. Urban Consumption
Key Government Initiatives for RuralDevelopment
Asignificantportionoftheruralpopulationisengagedin
agricultureandagriculture-relatedemploymentactivities.The
impactofanyapplicableregulatoryinitiativesoranynatural
phenomenonlikethedelayedmonsoonisthusfeltbyalarge
sectionofthepopulation.
TheGovernmenthastakenastronginterestinthegrowth
anddevelopmentofruralareas.The2009-10budget,announcedinthebackdropoftheeconomicslowdown,
includedspecificmeasuresforthesocialandeconomic
upliftmentofthissegment,clearlyhighlightingtheintentof
thegovernmenttoworkforthebettermentofthecommon
man.
Inthelastthreeyears,duetoanumberofregulatoryand
non-regulatoryfactors,ruralIndiahasexperiencedhigh
incomegrowthofapproximately12percentperannum.
Theappealoftheruralsegmenthasincreasedwithmore
companieslookingatruralexpansionasaviablemeansto
overcometheimpactoftheslowdown.
Cultivators
40%
Other Workers
23%
Agricultural
Labourers
33%
Household
Industry
4%
Source:Census,CreditSuisse
Rural Employment
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ThegovernmentsNationalRuralEmploymentGuarantee
Scheme(NREGS),forinstance,providesajobguaranteefor
adultworkers.Thisinitiativehashelpedover3crore
householdimprovetheirstandardoflivingandhavemore
moneyattheirdisposal6.
ThegovernmenthadalsoinitiatedtheBharatNirman
Programin2005asatime-boundprogramtoupgraderural
infrastructure.Thisincluded,amongotherthings,provisions
toimproveruralwatersupply,electrificationandtelecom
connectivity.Forthetelecomsector,thisprogramhas
providedanimpetustosetupmoretelecomtowersand
improveruralpenetration.
Initiatedin2003,theUniversalServiceObligationFund
(USOF)wasestablishedtofulfilltheUniversalService
Obligationbypromotingthesettingupofinfrastructureto
promoteruralconnectivity.Thefund,managedbytheUSOF
Administrator,providessubsidiestoprivateplayers
establishingruraltelecominfrastructure7.
Telecommunications and Rural India
ThetremendousgrowthwitnessedbytheIndiantelecom
sectorhasbeendriveninalargepartbytheimmense
demandoriginatingfromurbanareas.Urbansectorsalone
havecontributedtoover17millionsubscribersbeingadded
everyquarter8.Despitehousingonly30percentofthe
countryspopulation,urbanareasaccountfornearly69
percentoftelecomsubscribers9.Withalargenumberof
playersineverycircleandtheteledensityapproaching100
percent,theurbanmarketisclosetosaturation.
6 EnamSecurities,BudgetStrategy2009-10,July06,2009;PressSearch;
NREGAwebsite
7 TRAI,MeasurestoimprovetelecompenetrationinruralIndia-Thenext100
million subscriber s,Decembe r16,20 08
8 TRAI;MinistryofUrbanDevelopment
9DepartmentofTelecommunications
Key Statistics
TotalTelecomSubscribers 494.07mill ion
UrbanSubscribers 343.24million
RuralSubscribers 150.83million
OverallTeledensity 42.27percent
UrbanTeledensity 98.70percent
RuralTeledensity 18.37percent
RuralWirelineSubscribers 10.20mill ion
RuralWirelessSubscribers 140.63million
Note:AsofAugust,2009
Source:DepartmentofTelecommunications
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Thetelecomsectorhasalsoobservedawideningrural-urban
divide.Urbantelecomadoptionhasfaroutpaceditsrural
counterpart.Thishasleadtoanincreasingawarenessamong
allstakeholdersabouttheimmensegrowthpotentialthat
ruralmarketscanoffer.
Telecomadoption,historically,hadimpliedtheadoptionof
wirelineservices.Thistrend,however,hasmovedtowards
anever-growingadoptionofwirelessservicesoverthelast
fewyears.Anincreasingnumberofprivateoperatorsare
alsomakingaconcentratedefforttodriveupwireless
adoption.
1.7% 1.7% 1.9%5.8%
9.3%
14.8%
21.3%26.2%
38.0%
47.2%
63.7%
88.7%
7.6% 9.1%12.7%
18.2%
25.6%
37.0%
Mar'04 Mar'05 Mar'06 Mar'07 Mar'08 Mar'09
Rural Urban Overall
Source:TRAIPerformanceIndicators,July13,2009;TRAI,DraftRecommendationson'AnApproachtoRuralTelephony-SuggestedMeasuresforan
AcceleratedGrowth',March04,2009
Rural VS. Urban Teledensity
Rural Wireless vs. Wireline
73% 75% 79% 82% 84% 86% 89% 90% 91%
27% 25%21% 18%
16% 14%11% 10% 9%
Mar'07 Jun'07 Sep'07 Dec'07 Mar'08 Jun'08 Sep'08 Dec'08 Mar'09
Wireless Wireline
Source:TRAIPerformanceIndicatorReports(2007-2009)
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Rural Telecommunications and the InclusiveGrowth Agenda
Urbandevelopmentalonecannothelpacountryprogressat
aquickpace.Theruralagendathusbecomesincreasingly
importanttoachieveawell-rounded,sustainablegrowth.The
Indiangovernmenthasbeenfullyappreciativeofthisand
hasestablishedastrongagendaforinclusivity.
Withaviewtobridgingtheurban-ruraldivideandimproving
theeconomicstrengthofruralIndia,thegovernmenthas
broughtinclusivegrowthforallsectionsofsocietyontothe
mainplatform.Telecommunicationsisacriticallynchpinin
thisendeavorandislikelytobeasuccessfulpartofthis
agenda.Thegovernmentisstronglypromotingthiseffort
throughvariouslarge-sizedbudgetaryallocationsandthe
telecommunicationsindustryalsohasaclearagendaofrural
expansion.
Mobile Banking and Mobile Commerce
Indiahasoneofthemostexpansivebankingsystemsinthe
world.Acombinationofscheduledcommercialbanks,
regionalruralbanksandspecializedfinancialinstitutions
coveralargesectionofsocietyinIndia.Despitethese
focusedefforts,itisestimatedthatcloseto65percentof
thecountryspopulationstillfallsintheunbanked
categoryduetovariousreasons,includinggeographical
isolationandlackofbasicinfrastructure10.
Publicsectorbanks,privatebanksandotherfinancial
institutionshaveconstantlypushedthelimitsoftechnology
toreachouttoeverypartofsocietyaswellasmakingtheir
businesssystemsandprocessesmoreefficientfromacost
andtransactionprocessingperspective.However,despite
nearly76,518branches 11 ofscheduledcommercialbanks,
thereisstillalongwaytogo.Corebankingsystemshave
helpedbankstocomputerizetheirrecordsaswellasprovide
seamlessservicessuchasinternetbanking.Mobilebanking
representsthenextleveloftechnologicalevolutioninthe
bankingindustry.Thisevolutionmakesbankinganyplace
anytimeserviceandrelievestheexistingpressuresonthe
branchexpansion.
Inrecognitionofitsmanybenefits,theReserveBankof
Indiaissuedanoperatingguidelineonmobilebanking
transactionsinOctober2008.Thisguidelineprimarily
addressessecurityovermobilebankingtransfers;however,
RBIbelievesthatthiscouldbeafeasibleandalternate
channelfordeliveryofbankingservices.Thisservedasan
indicatorthatmobilebankinghasanimportantparttoplayin
expandingbankingservicestoall.
Thesuccessofruralmobilebankinginitiativesinother
countriesbodeswellforIndiasaspirationstomakeita
successinthecountrysruralareas.M-PesaandG-Cashare
twouniversallyknownmobilebankinginitiativesundertaken
inKenyaandPhilippinesrespectively.Boththesenations
haveinfrastructure,bankingandtechnologyconstraintsdue
towhichlargesectionsofthecountrywereunbankedand
basicbutsafemeanstotransfermoneybetweenindividuals
wasabsent.Usingsimplemobilephonetechnologyand
SMS,individualscouldtransfermoneyinstantaneouslyand
atfractionofstandardmoneytransfercosts.Money
transferscanbemadeacrossthecountryinstantaneouslyat
lessthan1percentofthetransactionvalue12.In2008,1.6
millionKenyanshadtransactedoverUSD145millionusing
theM-Pesasystemusing1,500intermediarieswhoare
typicallycornershops13.Suchabankingsystemislikelyto
workinIndiaaswellgiventhecurrenttelecommunication
networkandavailabilityofneighborhoodshopkeeperor
localagents.
Itisimperativethatmobilebankingstandardsarecarrier
agnosticandinteroperabilityismaintained,toensurethe
lowestpossiblecostoftransactions.Thecostoftransactions
canhavealargeimpactoftheeffectivenessofvarious
developmentprojects.Mediareportshavesuggestedthata
mobilepaymentmechanismforNREGAisduetostartin
variousstates14.Thiscouldbeaneffectiveprovingground
formobilebankingandaidsocialinfrastructuredevelopment.
10 Mediareports,KPMGanalysis
11 ReportonTrendandProgressofBankinginIndia,2007-08
12 www.safaricom.co.ke
13 ReportoftheThirdAnnualJointRoundtableonCommunicationsPolicy
2008AspenInstituteIndia
14 http://www.financialexpress.com/news/delhi-firm-in-talks-with-govt-to-
digitise-nrega-payments/514077/
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15 http://www.bhoomi.kar.nic.in/Bhoomi/Home.htm
Mobile Governance
Beingtheworldslargestdemocracymeansthatthepeople,
theexecutivebranchandthelegislativebranchofthe
governmentneedtoworkcloselytoensurethatthepeoples
mandateiseffectivelycarriedoutconsistentlyandwithinthe
frameworkofourconstitution.Thisleadstoastrong
requirementforaneffectiveandsafemeansofexchanging
information,especiallyoverthelargegeographicspreadof
thecountry.Mobilegovernancecanplayacriticalpartin
maintainingconstantdialoguebetweenthepeopleandthe
government.
Today,variousgovernmentagenciessuchasthepassport
issuingauthorityenableapplicantstochecktheprogressof
theirapplicationusingasimpleSMScode.Thishas
significantlyincreasedtheleveloftransparencyinthetime
takenforsuchprocesses,whichwasconsideredtobe
tediouspreviously.Suchmechanismscombinedwiththe
greateruseoftheinternetwillenablecompanies,
organizationsandthecommoncitizentoperformother
routinetaskssuchasfilingvariousdirectandindirecttax
returnswithgreaterefficiencyandtransparency.
Governmentinstitutionsareconstantlytryingtoincrease
theircoverageandreachoftheirmandatedservices,and
withtheuseoftelecommunicationsthesecansolvetheir
deficienciesaroundlastmileconnectivitywithcitizens.
Variousstategovernmentshaveinitiatedpilote-governance
projects.SomeoftheseincludetheBhoomiprojectandthe
eSevaproject.IntheBhoomiproject,20millionlandrecords
of6.7millionlandownersweremadeintoelectronic
information15.
Anothersignificantareaofgovernancethatcangohandin
handwithtelecommunicationsistheRighttoInformation
Act(RTI)of2005.Thisactprovidestherighttocitizensto
querycentralandstategovernments.Further,theact
requiresthegovernmenttocomputerizesignificantamount
ofinformationmakingitaccessibletothecommonman.
Abilitytoaccessthisinformationthroughtheinternetgives
Indiatheabilitytotrackandreviewvariousaspectsof
governmentorinstitutionaldevelopmentwork,fromremote
locationswithoutthehurdlesofbureaucraticprocesses.This
Actandtheabilitytopursueiteffectivelywillgivea
significantboosttoourruraldevelopmentefforts.
Telecommunications for Rural Employment
Thetelecommunicationsindustry,duetoverynature,
requiresparticipationfromalargenumberofpeopleto
ensuresmoothoperation.Fromtheactualsettingupof
physicalinfrastructure,totheservicebeingprovidedtothe
endconsumer,thetelecomsectorinitsentiretyisabig
employerofpeopleresources:
InfrastructureSetup:Thetaskofidentifyingappropriate
sites,obtainingrequisitepermissions,layingthe
foundation,settinguptelecomtowers,andothersuch
activitieshavelargemanpowerrequirements
SalesandDistribution:Thisincludesactivitiesforthesale
oftelecomhandsetsaswellasconnections.Thiswould
alsoincludebilldistributionandrentcollection
OtherAssociatedServices:Thisincludessupport
activitiesrangingfromtransportationoftelecom
equipment,securityforphysicalinfrastructure,
maintenanceservicesandothers.Telecomcallcentres
alsogenerateadditionalemploymentopportunities
Forthedualpurposeofincreasingruralpenetrationaswell
astoachievecosteffectiveness,manycompaniesare
lookingtoexpandtheirruralsetups.
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16 3Gand BWAThenextFrontier,FICCI ,Januar y2009
Thispresentsagoodprospectfortheruralpopulationin
termsoftheemploymentopportunitiesgenerated.Another
advantageisthattheseopportunitiescanbenefitthe
educatedaswellastheuneducatedpeopleduetotherange
ofskillrequirements.Telecomcompaniesalsoofferdifferent
internaltrainingprogramstoensurethataruralemployees
skillsareatparwithhisurbancounterpart.
Indiahasalsoseentelecommanufacturingcomingupina
bigway.Manyinternationalplayersaresettinguptheir
manufacturingaswellasR&Dfacilitiesinthecountry.
Significantinvestmentshavebeenearmarkedfortheseinitiativesandcompaniesarelookingtohirelocaltalentto
bringtheseplanstoasuccessfulconclusion.
Anotherinitiativethathasbeenimmenselysuccessfulin
generatingemployment,speciallyforruralwomen,isthatof
theVillagePublicTelephones(VPT).Inmanyvillages,rural
womenhavetakenontheentrepreneurialresponsibilityand
operatelocalVPTs.Notonlydoesthisbenefitthelocality,it
alsobringsinadditionalincomefortheVPToperators
household.
Telecom in Education
UrbanIndiahasalreadywitnessedthebenefitsoftelecom
connectivityinpromotingeducation.Largeuniversitiesoffer
distancelearningcoursestostudents,especiallyforhigher
educationcourseslikeMBAs.
Theaspirationwouldbetoreplicatethesuccessoflarge
universitiesinurbanareas,totheremoteareasinruralIndia.
Thefirstprioritywouldremaintheprovisionofprimary
educationtoallchildreninthecountry,irrespectiveof
geographicalremoteness.
TheIndiraGandhiNationalOpenUniversity(IGNOU)has
forayedintothisbyworkingtowardsdevelopingrelevant
distancelearningprogramsforstudentsandproviding
assistanceinfinancialsupportandgrants.
Key Challenges in Going Rural16
Despitetheinherentattractivenessoftheruralmarket,many
operatorshavefacedsignificantchallengesinpenetrating
themarket.
Acquisition of Customers
Duetothemanydifferencesexistingbetweentheurbanand
ruralmarkets,itisimpossibletoapplyurbanlearningsand
businessmodelsinaruralsetup.Ruralareascomewitha
completelydifferentsetofconstraintsandissueswhichthe
operatorsneedtoaddressinordertoattractthisfreshpool
ofcustomers.Operatorsfaceanumberofchallengeswhen
itcomestotheacquisitionofruralcustomers.
Affordabilityoftelecomservicescontinuestobeakey
concerninruralmarkets.Althoughthecostofowningand
usingtelecomequipmentandserviceshascomedown
considerablyinthelastfewyears,thetypicalruralconsumer
findsithardtoputasidemoneyforwhatisstillbelievedto
beadiscretionaryspend.Microfinancingcouldprovidea
possiblesolutionforthisproblem.Tie-upswithstate-owned
bankscouldenabletheruralconsumerstopurchasetelecom
equipmentandservicesataffordablerates.
Operatorshavealsofoundthatamongtheruralcustomers
whoareabletoaffordtelecomservices,theAverage
RevenuePerUser(ARPU)remainsquitelow,especially
whencomparedtotheurbancounterparts.Thus,thelow-
subscriber,low-volumemarketdoesnotprovideenough
incentivesfortheplayerstoventureintotheregionswiththe
revenuesnotjustifyingthecosts.TheruralARPUarenotexpectedtobedrivenupsolelythroughvoiceservices.Itis
believedthattheavailabilityofdataserviceswillhavea
positiveimpactontheruralARPUs.
25 | The Indian Telecom Success Story
The largely untapped rural market will
drive the next phase of telecom growth in
the country, supported by an enablingenvironment and focused initiatives by
telecom players
2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.
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17 "WhatWorks:GrameenTelecom'sVillagePhones",June2001;KPMG
Currently,thelackoflocallyrelevantcontentisanother
challengethatrestrictstelecompenetration.Toincrease
adoption,itisessentialtodevelopserviceslikenewsinlocal
languages,weatheralertsforfishermen,comparativemandi
ratesforfarmers,andsuchothers.
Anotherfactorthatimpactstheadoptionoftelecomservices
(especiallybroadband),istheprevalentliteracylevels.To
derivemaximumbenefitsfromtheseservices,itisessential
fortheconsumerstohavebasicreadingandwritingskillsin
place.
Infrastructure-Related Challenges
Inadditiontoacquisitionofcustomers,telecomplayersalso
facesomeinfrastructure-relatedroadblockswhilesettingup
theirruralinfrastructure.Theseleadtoasteepescalationin
coststherebyreducingthefinancialattractivenessofthe
ruralmarket.
Thetelecomsetuprequireslargeamountsoflandforsetting
upinfrastructureelementsliketheBaseTransceiverStations
(BTS).Inmanycases,thelandisownedbyGovernment
bodiesorGramPanchayats,andtheprocessofleasingor
purchasingthelandisarduousandexpensive.Similar
problemsariseduetoRightofWayissues.Layingofcable
orfibreinruralareasoftengoesacrossmultiplejurisdictions.
Thisinvolvesobtainingtherequisiteapprovalsand
permissionsfrommultipleauthoritieswhichcouldbecome
laborious.
Oncesetup,thetelecominfrastructureinvolvesimmense
operatingandmaintenanceexpenditures,considerably
higherascomparedtourbanareas.Anumberoffactors
contributetothisincludingthelimitedavailabilityofskilled
workforceaswellaspoorroadconnectivity,amongothers.Theissueofirregularpowersupplyalsoremainsakey
concern.Currently,anumberofvillagesinIndiaeitherdonot
haveanelectricityconnection,orfacelimitedpower
availability.Abatterybackupisnotasustainablesolution
sincethebatteryneedstobechargedregularly.Asaresult,
otherbackupsintheformofdiesel-poweredgenerators
needtobemaintainedtopowertheBaseTransceiver
Stations.Itisestimatedthatover35percentofaruralcell
sitesnetworkoperatingexpensesareduetothecosts
associatedwithelectricityanddiesel.Theprovisionsunder
theBharatNirmanProgramareexpectedtoaddressthis
concernbyprovidingaregularsupplyofelectricityacross
thecountry.Onealternativewaytoaddresstheconcernof
powersupplycouldbetoexploretheviabilityofalternate
sourcesoffuel,includingsolarenergy,windpowerandbio-
fuels.Theseprovideacleanandeffectivewayofharnessing
naturalenergy,whilekeepingtheequipmentmaintenance
costatsignificantlylowerlevels.
Theconcernofhighcostsassociatedwithsettingupofrural
infrastructurecanbewelladdressedthroughinfrastructure
sharingbetweenthetelecomplayers.Thismodelhasbeen
fairlysuccessfulinurbanareas,butisyettopickuptraction
inruralareas.
Thelackofefficientandlow-costbackhaulconnectivity
continuestohavealimitingeffectontelecompenetration.
Theoptionofdeploymentofopticalfibreisbeingexplored
andislikelytobeabletoresolvethisissue.
GrameenPhone17
GrameenPhoneinBangladeshisasuccessfulexampleof
ruralpenetration.Theirapproachincludes:
ProvidingmicrofinanceoptionstosetupVillagePhone
Operators(VPO).GrameenBankprovidesaloan
packagetoselectVPOstopurchaseahandsetand
operatetheirVPbusiness
Solicitingheavyinvolvementfromlocals(especially
women)insettingupVillagePhoneoperationsbypitchingitasanadditionalincomesource
Subsidizingcallchargestoallowlocal operatorsto
earnahealthyprofitmargin
Providingrecommendedratecardstoensurethatthe
localoperatorstayscompetitive
Trainingsonusage,callrates,collectionsand other
tariffschemes
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05. Broadband Connectivity
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Broadband Connectivity
Broadbandisdefinedasanalwaysondataconnection
thatisabletosupportinteractiveservices,includinginternet
accessandhasthecapabilityofminimumdownloadspeed
of256kilobitspersecond(kbps)toanindividualsubscriber.
Variousstudieshaveindicatedthatbroadbandconnectivity
hassignificanteconomicimpact.Thisisprimarilydueto
improvedgrowthinliteracyandvocationalskillsduetoe-
initiatives,increasedemploymentofruralyouthdueto
accessibilityandteleworking,higherlaborproductivity,real-
timehealthcare,speedygovernmentclearancesandsuch.
Realizingthesebenefits,DepartmentofTelecomissued
BroadbandPolicy2004,on29thApril2004,inabidto
encouragehighspeedinternetgrowthinthecountryand
addressthedemandofapplicationsenablingeconomic
growth.Thepolicyalsosetanambitiousgrowthpathfor
broadbandgrowthinIndiabyfixingstifftargetstobe
achievedtill2010.
Source:TRAI,BroadbandSubscribers,2009
Targets for broadband subscribers as set by the Broadband Policy, 2004
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28.5%
25.8%
23.6%22.4%
7.8%7.2%
0.6%
0%
5%
10%
15%
20%
25%
30%
UK USA Japan OECD Turkey Mexico India
GlobalBroadband
penetration
Source:OECD,BroadbandStatistics,2008
Broadband penetration in India vs. other countries, 2008
Thesurgeinbroadbandpenetrationisexpectedtobeone
ofthekeydriversfornextphaseoftelecommunications
growthinthecountry,andbroadbandgrowthseemsto
havealreadybegunwiththefirstvisiblesignofrisein
subscriberbase.During2008,thebroadbandbasehas
grownby2.7million,whichismorethantwoandahalf
timesthe1.0millionbroadbandsubscribersaddedduring
20071.Suchtrendisexpectedtoonlyimprovewith
broadbandwirelessaccessalleviatinglast-mileconnectivity
concerns,PCpenetrationlikelytoincreaseandbroadband
servicesanticipatedtobecomemoreaffordable.
Challenges in adoption of broadband
Poorwirelineinfrastructure:Incontrasttodevelopedworld,
Indiahasfavoredwirelesstelephonyoverwireline
telephony.InCY08,wirelinesubscribersdeclinedto~38.0
millionandwirelineteledensityreducedto~3.4percent.
Thislackofanddeclineofwirelineposesalastmile
accesschallengeforbroadband,whichispresentlyprovided
mainlybyDSLtechnologywhichinturnreliesonthe
availabilityofcopperloopinlocalnetwork(iewireline
network).Tocompoundmattersfurther,majorityofavailable
copperlocalloopsarenotsuitabletosupportbroadband
connectionsduetolonglengthofcablelocalloop,qualityof
cableandmaintenanceconstraints.
Actualbroadbandsubscriberbasehasfallenshortofset
targetswithAugust2009subscriberbaseat7.0millionas
againstanenvisaged9millionby2007!In2007,Indiahad
oneofthelowestbroadbandpenetrationintheworldof
~0.3percent.Whilstthepenetrationhasdoubledsince,
Indiacontinuestobeoneoftheleastpenetratedregions
withcurrentpenetrationof~0.6percent.PCpenetration
continuestobeverylow,andlimitedwirelineinfrastructure
includingRoWchallenges,hightariffsandlackofquality
webcontentinlocallanguage,havefurtherconstrainedthe
growthofbroadband.
1 TRAI,BroadbandSubscribers,2009
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41 4038
4245
49
0
10
20
30
40
50
60
FY07 FY08 FY09 FY10E FY11E FY12E
Subscribers(Million)
Wireline
Source:TRAI,KPMGAnalysis
Wireline subscribers in India (FY07-FY12E)
Inaddition,thefactthatIndiaisavastcountryimpliesthat
itisnotpossibletorolloutwirelineaccessnetworkto
supportbroadbandinacosteffectiveandaffordablemanner.
Whilstsomeprivateplayershavebeenrollingoutwireline
networkstoprovidebroadbandconnectivity,suchinitiatives
arelargelyrestrictedtourbanareas.Thegovernment
realizingtheserealitiesissupportingincreasedpenetration
ofwirelineandbroadbandconnectivityinruralandremote
areasthroughitsUniversalServiceObligationFund(USOF)
activities.InJanuary,2009,itsignedanagreementwith
BSNLtoprovide8,61,459wirelinebroadbandconnections
toindividualusersandgovernmentinstitutionsoveraperiod
ofnext5-years.
Right of Way (RoW) procedures: RoWisoneofthemajor
impedimentsinlayingwirelineinfrastructure.Beforelaying
thecablesoperatorshavetoapproachmunicipalities/local
authoritiesforobtainingRoW,whichnotonlydelaysthe
rolloutplansoftheserviceprovidersbutalsoincreasestheir
cost.Moreoverthechargesthatmunicipalities/local
authoritieslevyforgrantingRoWarenotuniformacrossthe
country.
Low PC penetration, increased regulation of internet
cafes: WhilstPCpenetrationinIndiaisincreasing,only3
percenthouseholdsinIndiahaveaPC.Thisposesamajor
challengetouptakeofinternet/broadband.Toovercome
thischallenge,thekeyliesinmassmarketingofaproduct
thatiscosteffective,powerefficientandresilienttothe
harshrealitiesoftheIndianenvironment(hightemperature,
dust).Variousinitiativeshavebeenlaunchedinthisrespect
(e.g.SimputerwithanestimatedcostofINR9,000afterit
hasachievedsalesofmorethan100,000units2,Microsofts
IQPCthatwaslaunchedin2007withanestimatedpriceof
INR20,0003),howeverthesehavenotbeensuccessfulin
creatingamassmarket.Further,duetotightenedsecurity
measuresandthinmargins4 thegrowthofcybercafes(the
mostpopularaccessmedium)hascomedownfromc.60
percentin2004,2005toc.20percentin2008anditis
estimatedthattherearearound180,000cafesinIndia5.
2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwiss
cooperative.Allrightsreserved.
2 Simputer.org
3 Zdnet.com
4 Mediareports
5 Siliconindia.com
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Affordability: Whilebroadbandtariffshavebeendecreasing
overthepastfewmonthsasprivateoperatorsexpandtheir
services,thetariffscontinuetoremainhighwhencompared
totariffsformobileservices.Thisispartlyreflectiveoflow
volumesandhighcostofprovisioningofbroadband
services.Thisseemstobeabigchallengeandthereisa
needforcostefficientmeansofbroadbandaccess.
GovernmentagenciessuchasTRAIhavetakenseveral
stepstoensurelowerinternetandbroadbandprices(eg:cut
inInternationalPrivateLeasedCircuitprices).The
Government,underUSOF,isalsoconsideringaproposalto
providesubsidysupportforbroadbandconnectivityinrural
andremoteareasofthecountrybyutilizingexistingpassive
andcoreinfrastructureavailablewithbothwirelineand
wirelessserviceproviders.
Lack of quality web content in local languages:While
businessusersseemtobetheimmediatebeneficiariesof
broadband,stakesforruralIndiaareevenhighergiventhe
unparalleledbenefitsthatbroadbandenabledapplications
suchastelemedicine,e-commerce,e-educationande-
governancecanunleash.Forthistohappen,theavailability
ofcontentthatcaterstotheneedsoftheruralpopulationis
critical.Thecurrentlackoflocallanguagecontentcould
provetobeamajorstumblingblockintheuptakeofinternet
amongsttheruralmasses.
Source:EconomicTimes,InternetimproveslivesofwomeninHimachal
Pradesh,September2009
Benefit of quality content in local language
Peoplefromremoteareasseemtobeincreasinglyusing
theinternet,luredbyitsabilitytoprovideinformation
crucialtotheirlives,inalanguagetheyunderstand.For
example,womenofKangraMahilaSabha(KMS),aself-
helpgroupforwomeninmountaincommunitiesof
HimachalPradesh,makealivingexportingpineneedle
hats,coastersandbaskets,whentheydiscoveredonthe
internetthatpeopleinMexicoandCanadamake
handicraftitemswithpineneedle.Thiswasenabled
throughcontentthatwasavailableinlocallanguage.
Likewise,inGujaratsAnanddistrict,YashodaBen,an
Englishilliteratemotheroftwodaughters,frequentsa
localinternetkiosktoaccessinformation,inGujarati,on
differentcollegesandcourses,downloadapplication
formsandfindoutabouteducationloansforherteenager
kids
The Indian Telecom Success Story | 30
Broadband connectivity at the gram-panchayat level will provide
rural citizens access to services like mobile banking, e-governance
applications, e-education and telemedicine
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6FICCI- BDAReport,BusinessModels,ProjectionsandImperatives,
January2009
7TRAI,RecommendationsonGrowthofBroadband,January2008
8 TRAI,RecommendationsonGrowthofBroadband,January2008
9 Mediareports,KPMGanalysis
10Mediareports
Enablers of broadband growthBroadbandsubscribersinIndiaareexpectedtogrowto~46
millionby2013atacompoundedannualgrowthrateof~70
percent.6 TheGovernmenthasidentifiedavailabilityof3G
andbroadbandwirelessaccessservices(BWA)and
streamliningRightofWay(RoW)proceduresaskeyenablers
toboostdeploymentofbroadband.7 Theseenablerswould
addressconcernsofwirelineaccess,PCpenetrationand
affordability.
3G and BWA services: TheGovernmentisexpectedtoauction3Gandbroadbandwirelessaccess(BWA)licenses
inthenearfuture.Withtheopeningofaccessnetworkto
thesewirelesstechnologies,itisanticipatedthatwireless
broadbandwill,inashorttimeframe,provideawider
coverageandovercomeconstraintsofwireline.
GiventhelowlevelofPCpenetrationintheconsumer
segmentinIndia,3GandBWAdefinitelyholdsthepromise
toprovidethefirstexperienceofbroadbandtomillionsof
usersinIndia.Thiscouldbethroughawidearrayofdevices
includingconnectedcomputingdevices,lowcostportable
internetdevices,affordablemininotebooks,andcheap
mobilehandsets..As3Gsubscriberbaseexpandsfurther,
handsetpricesareexpectedtodeclineovercomingthe
constraintsofaffordabilityofbroadbandaccessdevices.
Right of Way (RoW): Inordertoencourageservice
providersforrollingoutnewinfrastructureandproviding
advancedbroadbandservicesinatimelymannerTRAIhas
recommendedthatacommitteebeformedatdistrictlevel
tostudyRoWrequirement,anditshouldevolveaduct-
sharingmechanismamongserviceproviders.TheCentral
Governmentshouldalsoconsidermandatingthestate
governmentstoadoptuniformRoWproceduresand
streamline/rationalizeRoWcost,whichmayprimarilybe
limitedtocostofre-instatement8.However,implementinga
uniformRoWframeworkmayrequireaconsensual
approach,whichcouldbealongdrawnprocess.
Applications of broadbandTherearevariousapplicationsthatwouldbesupportedby
broadbandandcoulddriveinclusivegrowth:
Mobile banking: Broadbandaccessthroughwirelesswould
enablemobilebanking,forwhichthegreatestopportunity
liesinservingtheneedsoftheunbanked,whichismore
than65percentofthepopulation9 (vis--vismobiledensity
ofc.42percentandrisingeachyear).Thereareseveral
initiativesbeingtakenbythegovernment,serviceproviders,
andthelike,toenhancetheofferingandextenditsreach.Accordingtoaglobalconsultancyfirm,mobilebankingin
Indiahaswitnessed94percentgrowthsince2002and
Indiaisbecomingapromisingnationforsuchservices.The
firmexpectsthepenetrationofIndia'smobilebankingactive
userbasetoreach2percent(2.5crore)by2012,upfrom
thecurrent0.2percent10.
Tele-education: InIndia,schoolsandlibrariesinruralor
remoteareaswithoutwiredinfrastructureorbroadband
servicescanbecosteffectivelyconnectedtobroadband
usingwirelessaccess.Extensiveandreliablebroadband
internetcanhelpinternet-basedqualitydistanceeducation
reachmorepeopleacrossthenation.TheIndiraGandhi
NationalOpenUniversity(IGNOU)isalreadyencouraging
stategovernmentsandconventionaluniversitiestoestablish
distancelearningprograms,providingfinancialsupportand
grantsforprogramsandfacilitatingdevelopmentof
multimediamaterialsfordeliverythroughdistancelearning
programs.
31 | The Indian Telecom Success Story
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E-governance: Indiaisalreadyrunninge-Governancepilot
programsaimedatbringinglocalgovernmentservicesto
peoplethroughinternetaccess.E-sevaisonesuchinitiative,
createdbytheAndhraPradeshgovernmenttoprovideits
citizenswithonlineservicessuchasobtainingbirth
certificatesandvariouslicenses,paymentofutilitybillsand
taxes,ticketreservationsfortransportationservices,and
listingsofgovernmentordersandpolicies.Similarinitiatives
havebeentakenbyotherstategovernments.TheCentral
Governmentisalsocreatinganenvironmentfor
establishmentofCommonServiceCentres(CSCs)that
wouldprovidehighqualityandcost-effectivevideo,voice
anddatacontentandservicesintheareasofe-governance,
education,health,telemedicine,entertainmentaswellas
otherprivateservices.
Telemedicine: InIndia,around1millionpeopledieeach
yearbecauseofalackofbasichealthcare.Doctorscanuse
real-timevideoconferencingtodiscusspatientsymptoms
withfarawayexperts,thusprovidingfasterandbettercare
tothepatients.Oneoftheleadinghospitalsinthecountry
havesetuparound45RuralTelemedicineCentresacross
differentlocationsinthecountry,workingwithdifferent
kindsofentitiesinthehealthcareindustrytoprovide
healthcaretoruralmasses.
Others: Broadbandaccesshasotherinclusivegrowth
benefits.Forexample,high-resolutionpicturesorreal-time
imagesofcropdiseasescanbetransmittedtoagricultural
expertsinadifferentgeographiclocationforimmediate
expertadvice,thuscontainingthecropdiseasesfaster.
Therearemanysocialadvantagesofbroadbandsuchas
telecastingofentertainmentprogramsandinfotainment
service.Suchentertainmentdeliveredviabroadbandcould
beaneventforsocialgatheringsinisolatedvillages.
Toconclude,broadbandcansupportvariousapplications
thatcoulddriveeconomicgrowthinruralandremoteareas.
Whiletheseapplicationsseemtoholdhugepotential,and
havebeensuccessfullypilotedinsomecases,greater
accesstobroadbandserviceswouldprovidethenecessary
triggertoachievewidercoverageandachieveinclusivegrowth.
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06. Telecom Manufacturing
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Telecom Manufacturing
1iDatePressReleaseonPRLog.com,TelecomEquipment:AMarketin
Transiti on,March 11,200 9
2 iDatePressReleaseonPRLog.com,TelecomEquipment:AMarketin
Transiti on,March 11,200 9
3 TRAI,November2009
4 TEPC,Policyrecommendationstoincreasedomestictelecomgrowthin
exportsoftelecomequipmentandservices
Despitetheeconomicslowdowntheglobal
telecommunicationsequipmentmarketgrewnearly5
percentin2008.Thismoderaterateofgrowthwaslargely
duetocontributionsmadebythehandsetcomponentsand
infrastructurehardwareverticals.Thispavedthewayforrise
ofAsianmanufacturerswhoaccountedfortwo-thirdsofthis
increase.
WhileAsiarepresentedslightlyover40percentshareofthe
totalmarket,asignificantportionoftheAsiangrowthcould
beattributedtoChinaandIndiawhichtogetheraccounted
fornearly20percentofthisglobalpie 1.
Fromabroaderperspective,Asia-Pacificregions
contributiontoglobalspendingontelecomnetworks
increasedbyfourpercentagepointsduringthattime,while
thatofWesternEuropeandNorthAmericalostsixandfive
percentagepoints,respectively2.
Indiaisaddingaround14millionnewwirelesssubscriptions
monthonmonth,withSeptember2009aloneseeingan
additionof~15millionsubscribers.AsofSeptember2009,
totalsubscriberbasecatapultedto509.03millionwitha
tele-densityof43.5percent.3 Giventhisgrowth,
Governmentstargetofover1.1billionsubscriptionsby2015
seemsmorethanachievable4.
Thisboominthetelecomsectorhasslowlyandsteadily
pavedthewayforanotherindustry;thetelecomequipment
manufacturingindustry.
The telecom manufacturing sector ispoised for growth due to the impetus
provided by telecom services, with
India having the potential to emerge
as a global hub for telecom
manufacturing
2009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.
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144,000 140,000160,900
178,330
236,560
412,700
518,000
-
100,000
200,000
300,000
400,000
500,000
600,000
(INRMillion)
2002 - 03 2003 - 04 2004 - 05 2005 - 06 2006 - 07 2007 - 08 2008 - 09
Source:TEPC
Telecom Equipment Production
In2003-04,thetelecomequipmentmanufacturingindustry
postedanegativegrowthrateof3percent(YoY)whereas
by2008-09,theindustryhadgrowntoboastapositive
growthrateof26percent(YoY).Invaluetermsthe
productionoftelecomequipmentsmanufacturedincreasedfromINR144,000millionin2002-03toINR518,000million
in2008-09.
Thisgrowthinthetelecomequipmentmanufacturing
industryislargelyattributabletotherapidlygrowingtelecom
sector.Otherfavorablefactorssuchaspolicymovestaken
bytheIndiangovernment,incentivesoffered,largetalent
poolintheresearchanddevelopment(R&D)spaceandlow
laborcostsarefurtherprovidinganimpetustothisindustry.
Key milestones in the sector
Thefoundationsofdevelopingthetelecomequipment
manufacturingindustryinIndiawerelaidin1999.
1999: Openingupoftheindustrytoprivatesector
participation
2005:
- FDIceilingintelecomserviceswasraisedfromthe
existing49percentto74percent
- TheUnionMinistryofCommunicationsand
InformationTechnologybegantopromoteIndiaasa
viableoptionforsettingupmanufacturingplants.This
wasstronglysupportedbyitsfastgrowingtelecom
market,itstalentpoolandthesuccessofthe
BusinessProcessOutsourcing(BPO)industry.
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110,000
81,310
18,98015,000
4,0002,5004,020
-
20,000
60,000
80,000
100,000
120,000
2002 - 03 2003 - 04 2004 - 05 2005 - 06 2006 - 07 2007 - 08 2008 - 09
(INRMillion)
40,000
Source:TEPC
5 ELCINA-AVISTA,EnvisagingtheNextWaveofICTEManufacturinginIndia,
February2009
Telecom Equipment Exports
2006: Policyreformsandgovernmentinitiativessuchas
100percentForeignDirectInvestment(FDI)inthe
sectorthroughtheautomaticroute
2008:Allowingserviceproviderstoshareactive
infrastructure
Suchgovernmentinitiatives,coupledwiththegrowth
prospectsofferedbyasurgingdomestictelecomsector
haveattractedglobaltelecomequipmentvendorstosetup
theirmanufacturingbaseinIndia.
In2003-04,exportsoftelecomequipmentsmanufacturedin
Indiareportedanegativegrowthof38percent(YoY).By
2008-09,theexportsmarketreportedapositivegrowthof
35percent(YoY).Invalueterms,exportsincreasedfrom
INR4,020millionin2002-03toINR110,000millionin2008-
09accountingfor21percentofthetotalequipment
producedinthatyear.
Until2007-08,significanttelecomequipmentneedswere
stillbeingmetthroughimports.AccordingtoGlobalSMT
andPackaging,over80percentoftheelectronic
componentsusedforproductionoftelecomequipm