tmt india predictions 2012

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Technology, Media &Telecommunications IndiaPredictions 2012

TMT India Predictions 2012

www.deloitte.com/in


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Contents

Foreword 5

Technology 6

A glance at the Technology Industry in India 7

Ascent o the cloud: Adoption o cloud computing to accelerate 8

Banking the unbanked: Mobile banking set to gain momentum 10

e-commerce 2.0: Theme-based specialists to drive the next wave 12

Medical Industry: Technology providers to act as the anchoror collaboration 14

Beyond the digital curtain: Emergence o tier 2 cities 15

Media 16

A glance at the Media Industry in India 17

Print media: The regional trend 18

Radio: A resurgence journey 19

Television: The star o the show 20

Digital media: Dawn o the internet economy 21

Telecommunications 22

A glance at the Telecom Industry in India 23

The $100 Smartphone to go mass market 25

Low cost tablets war begins and accelerates 27

Low cost (devices & data plans) to induce data explosion 29

m-Health, m-Learning, m-Banking: No longer a pipe dream 30

Endnotes 33

Contacts 34

Technology, Media & Telecommunications India Predictions 2012 | 3


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5/36Technology, Media & Telecommunications India Predictions 2012 | 5

Foreword

We are pleased to present the second edition o

Deloittes Technology, Media and Telecommunications

(TMT) Predictions or India.

This report is released in conjunction with Deloittes

global TMT Predictions report and presents our view

o the key developments over the next 12-18 months

that are likely to have signicant medium- to long-term

impacts or companies in TMT and other industries

in India. We would like to stress that latter point this

year - across every global industry, knowing what will

come next in TMT trends has become a key competitive

dierentiator.

As in 2011, this years report is published as a single

report rather than separate ones or each o the sectors.

Deloittes view is that developments in each sector

are now so inter-linked and interdependent that TMT

executives need to be cognizant o key trends across

all the sectors. The goal o our report is to catalyze

discussions around signicant developments that mayrequire companies or government to respond. We

provide a view on what we think will happen, what

will occur as a consequence, and what the implications

are or various types o companies. We never however

presume that ours is the last word on any given topic -

our intent is to kindle the debate.

Our methodology which is reviewed and updated every

year is predicated on:

Rigorous Research: We use both primary and

secondary sources, using both quantitative and

qualitative analysis, based on in-depth discussions,

polling o individuals and reading o hundreds o

articles.

Robust Testing: Globally, we test out the emerging

hypothesis with Deloittes clients, analysts and at

conerences throughout the year.

Innovation: We publish only perspectives that we

think are new or counter to existing consensus.

Accountability: Our aim is to provide clear

endpoints so that our accuracy can be evaluated

annually.

Today, the TMT industry is one o the most dynamic

industries in India. Advances in technology have resulted

in disruptive changes in the way businesses unction.

From colossal changes caused by digital convergence to

a rapidly changing mass media landscape, companies inthe TMT sector conront a switly changing marketplace.

We hope you and your colleagues nd this years

Predictions relevant, and our analyses insightul. We

thank you or your interest and as always, welcome your

eedback.


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Technology



A glance at the TechnologyIndustry in India

IT-BPO services hallmark o technology industry

The Inormation Technology-Business Process

Outsourcing (IT-BPO) industry has become the hallmark

o the Indian technology sector. For over a decade,

the IT-BPO services sector has been a major engine or

economic growth in India, contributing directly through

rapid growth in revenue, oreign exchange earnings and

employment, as well as indirectly as a key driver odevelopment o urban inrastructure beyond existing city

limits in key hubs across the country.

The report, IT-BPO Sector in India: Strategic Review

2011, published by the National Association o Sotware

and Service Companies (NASSCOM), states that

the IT-BPO industry in India crossed USD 88 billion in

revenues in FY2011 (ending March 31, 2011), with

IT sotware and services contributing USD 76.1 billion

and hardware accounting or the balance. Direct

employment reached about 2.5 million in FY2011,

an addition o 240,000 employees, while indirect jobcreation was estimated at 8.3 million. As a proportion

o national GDP, the sector revenues have grown rom

1.2 per cent in FY1998 to an estimated 6.4 per cent in

FY2011. The share o IT-BPO industry in the total Indian

exports (merchandise plus services) increased rom less

than 4 per cent in FY1998 to 26 per cent in FY20111.

For FY2012 (ending March 31, 2012), NASSCOM

expects the industry to grow by 15-18 per cent, with

sotware and services export revenues expected to

grow by 16-18 per cent and domestic revenues to grow

by 15-17 per cent2,3. Despite the steep appreciation

o the dollar during the second hal o 2011, which

will downplay the FY2012 numbers or the domestic

market (when translated to dollars), the optimistic (albeit

cautious) business outlook or the industry should see its

revenue aggregate cross the USD 100 billion milestone

in the subsequent quarters in 2012. The industry isprojected to hire about 300,000 proessionals over the

next year4.

Gartner Inc. expects global IT spending to increase in

2012 by a modest 3.8 per cent over the projected IT

related spending o USD 3.7 trillion in 20115. The U.S.

market, which accounts or over hal o the revenues o

the Indian IT industry, is expected to grow moderately.

Management at leading Indian outsourcers have

indicated that while client IT budgets are fattish or

lower, oshore spends are l ikely to increase.

Domestic market spends are expected to report a steady

growth, despite the recent concerns about slower

economic growth. Outsourcing and managed services

will continue to be a key growth driver. According to

IDC, the India Data Center Services (Third Party) market

is estimated to reach USD 671 million by the end o

2012, registering an annual growth o around 37 per

cent6.

The Inormation Technology (IT) industry is one o theastest growing industries across the globe. For over adecade, India has gained a special position and made

signifcant advances in the IT sector with the advantage ostrong demand and multi-service delivery capability.


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Ascent o the cloud: Adoption ocloud computing to accelerate

Deloitte predicts that the adoption o cloud

computing environments and applications

will accelerate over 2012-15, which would be

dominated by large enterprises.

Cloud computing has become a subject o interest or a

ew years now, but user adoption in India is yet nascent.

This is expected to change over the next 2-3 years,

driven by increasing uptake across a broad base o large

enterprise, Small and Medium Businesses (SMB) as well

as individual (non-corporate) technology users7.

In a study undertaken with NASSCOM in 2011, Deloitte

estimates that cloud computing in India could become

a USD15-18B market by 2020 more than 30 times its

current size8.

Large enterprises likely growth accelerators

Large enterprises are expected to lead this growth, with

an increasing share o their computing resources being

sourced o to a cloud. It is estimated that by 2020,20-40 per cent o corporate IT workloads will migrate to

a cloud-based model. Telecom, nancial services, media

and organised retail will be the key vertical markets

driving this trend. Each o these sectors is characterised

by a large, distributed consumer-base and/or a complex

supply chain; and multiple interactions/transaction

activities that generate signicant amounts o data9.

As early adopters o technology, large enterprises in

these sectors are already leveraging IT to drive process

eciency. However, many are still in the growth phase

o their technology investment cycle and need to

continue investing. Cloud-based models oer themgreater fexibility and cost-eciency in scaling-up their

computing resources.

The government is also expected to be a signicant

adopter o cloud computing in India10. The 27 mission-

mode projects being developed under the National

eGovernance Plan (NeGP), aim to deliver a wide range

o citizen services over a technology backbone. All the

projects require large scale technology inrastructure to

be available across the country. Cloud computing will

enable greater fexibility in provisioning and sharing o

this inrastructure.

Key end users o cloud computing

Both large enterprises and the government have

indicated a strong preerence or private-cloud models

primarily citing concerns about security and reliability

in a public-cloud approach. While private-cloud

deployments will continue to garner a leading share in

the near-term, large enterprises will also explore hybrid

strategies in a meaningul way as the public cloud

supplier base matures.

The Indian media and entertainment sector is a

signicant cloud opportunity, expected to unold over

the next 2-3 years. India has more than 600 television

channels, 100 million pay-television households, 70,000

newspapers and produces more than 1,000 lms

annually across 20+ key languages11. While much

o the distribution currently relies on the analog cable

channel, the penetration o digital distribution systems

is increasing rapidly. In act, digital subscribers are

expected to surpass the analog subscribers by 2013.

Consequently, all content and platorms are being

oriented towards virtual hosting and delivery. Published

content (newspapers, magazines, etc.) has alreadymoved online in a big way. Online hosting and

delivery o video content (television as well as movie)

is also being explored. While broad-based delivery is

a challenge, due to limited broadband penetration,

content producers are exploring alternative means to

increase their reach12. While most TVs in the country

need an external device (set-top box) to access online

content, and internet ready TVs are still a ew years

away rom hitting noticeable scale, the mobile-

subscriber base in the country is a comparably large

segment that is hungry or video content. Cloud-based

technology architecture will orm the core o thisevolution.

Other sectors such as healthcare and utilities also

oer signicant potential or cloud adoption. Indian

healthcare has a relatively poor IT legacy. However,

the recent thrust on improving healthcare services and

coverage in India by the government as well as the

private sector is driving rapid IT investment in healthcare.

Investments are being made in hospital management

systems, disease and drug record analysis and reporting,

patient medical record management, and so on. Along

with delivering the benets o cost and fexibility, a

cloud-based approach can help drive standards as

well as research based improvements in the industry

in a more ocused manner. Similarly, the adoption o



technology to isolate and plug leakages in the utilities

industry by transitioning to smart-grids is another

potentially large application or cloud computing in

India.

Historically, Indian SMBs have been relatively slower in

technology adoption. This has been largely attributed

to the high upront capital costs, which is a signicant

barrier to IT adoption. The on-tap nature o cloud-

based models squarely addresses this issue, and SMB

adoption is growing on the cloud.

Indian SMB cloud services market overview

The Indian SMB cloud services market, which includes

hosted inrastructure and web presence services, is

estimated at INR 5.5Billion (USD 123mn) in 201113.

O this total, hosted inrastructure has the largest share,

with INR 4.3Billion (USD 97mn), and web presence has

the remaining INR 1.2Billion (USD 26mn). While these

numbers are not very large in absolute terms, they

highlight that SMB adoption is growing and SMB spendsnow account or 20-25 per cent o the total cloud

market in India.

Currently only eight per cent o Indian SMBs

have hosted the business e-mail setup; they are

predominantly using ree e-mail services. This actor

presents a signicant scope or the large SMB segment

to benet rom transitioning to hosted business email.

We expect a growing number o SMBs to graduate to

hosted PBX systems and online applications.

Key segments o SMB users with noticeable traction on

the cloud include manuacturing and a wide range o

internet based businesses. Other SMB segments with

signicant untapped cloud computing potential include

the education sector and independent proessionals

(lawyers, CAs, consultants, etc.). In contrast to the trend

in large enterprises, SMB users are more likely to explore

public-cloud strategies.

Public cloud usage is also expected to become

more pervasive on the back o an increasing base o

individual (non-corporate) internet users. The total

number o internet users in India has crossed 100M14.

While connectivity is still not ubiquitous, the large and

growing mobile subscriber-base in India coupled with

the prolieration o internet ready devices (at decliningprice-points) and increased operator emphasis on data

services is driving rapid growth. Over the next 3 years,

the number o internet users in India is projected to

cross 300M, with over 100M accessing the internet on

their mobile phones15.

Bottom line

Cloud computing adoption in India is poised or an accelerated growth. While there is broad-based

potential in the near term, it would be the large enterprises that will dominate this growth segment or

some time at least.

Customers have a growing number o options to choose rom, allowing them to match the complexity

o their cloud solutions with their own IT maturity/comort levels. It will help to have strong internal

champions who understand the business needs as well as the strengths and weaknesses o the cloud

solutions oered to drive an efcient transition.

Cloud vendors need to demonstrate reliability and sustainable economics o their cloud oerings, to

reinorce the decisions made by early adopters and convert skeptics. Vendors will also need to adopt a

consultative approach while working with customers exploring the cloud, to guide them through

the process.


10/3610

Banking the unbanked: Mobilebanking set to gain momentum

India aims at achieving its goal o development by

banking the unbanked to address gaps in social

participation.

The Reserve Bank o India (RBI) has accorded top priority

to banking the unbanked, stipulating all banks to

allocate at least 25 per cent o the total branches that

they plan to open during a year to unbanked rural areas

in the country16. Despite all the eorts, over 50 per cent

o Indian households still do not have bank accounts17.

On the other hand, the total mobile subscriber base in

India is approaching 900 million (o a total population o

1.25 billion), with over 300 million subscribers rom rural

areas18.Combining the two, we expect the drive towards

nancial inclusion o the unbanked populace to leverage

upon Indias mobile telephony inrastructure.

Online banking sae in India

Online banking has served as a precursor to mobile

banking in India, demonstrating the benets o virtual/

remote banking. However, its impact and growth hasbeen constrained by low levels o computer literacy,

access to a PC and internet penetration. Mobile

telephony is much more pervasive and oers a scaled

platorm to drive wider access to banking services

across the country. Telecom operators have successully

established a dealer network to drive customer

acquisition, activation and service (charging/recharging)

in a cost eective manner. Further, key security

procedures in the customer enrollment process can also

be aligned (KYC) without signicant additional costs.

Similarly, billing and collection could also be aligned with

mobile-wallet deposits, without signicant changes tothe existing system.

Till recently, the potential has been capped by the

regulations governing banking in India. India has

adopted a bank-led approach to mobile banking

that requires the bank to be the core provider o the

services, in conjunction with the telecom operators. To

encourage greater usage, the RBI has also relaxed the

operative guidelines or mobile banking in India. These

include:

Increased transaction limits

Removal o the daily cap o INR 50,000 per customer

or both unds transer and transactions involving

purchase o goods/services. However, it has been let

to the banks to place per transaction limits based on

their own risk perception with the approval o their

Board.

Rationalising technology and security standards

Transactions up to INR 5,000 (enhanced rom INR

1,000 to INR 5,000) can be acilitated by banks

without end-to-end encryption. The risk aspects

involved in such transactions may be addressed by

banks through adequate security measures.

Easing o procedures related to transer o unds or

disbursement in cash

Liberalising the cash pay-out arrangements or

amounts being transerred out o bank accounts

to beneciaries not having a bank account and

enhancing the transaction cap rom the existing limit

o INR 5,000 to INR 10,000 subject to an overall

monthly cap o INR 25,000 per beneciary.

Enabling walk in customers not having bank

accounts (or instance migrant workers) to transer

unds to bank accounts (o say amily members or

others) subject to a transaction limit o INR 5,000

and a monthly cap o INR 25,000 per remitter.

Enabling transer o unds among domestic debit/credit/pre-paid cards subject to the same transaction/

monthly cap as at the previous point mentioned

above.

Mobile banking to gear up in rural areas

Most major banks operating in India have also

stepped-up their mobile banking services. While early

adoption has been slow, increased customer education

and promotions by the banks are expected to help drive

greater adoption o these services.

However, these eorts are more likely to infuenceurban demand or mobile services. The real potential

o mobile banking in India lies in driving access to

nancial services across the rural landscape. Several

ventures have emerged which include ventures by large

corporations like Bharti-SBI and the Vodaone-ICICI JV.

Other platorms/initiatives spearheaded by certain banks

include mobile-enabled Kisan Credit Card promoted

by several Indian banks and initiatives by various

micronance institutions (MFI). But alongside have

also emerged certain other players in the ecosystem,

providing technology platorms and managed services

suited to the needs o rural mobile banking. These

companies include Atyati that enables branchless

expansion o banks and also mobile based micro credit

delivery. EkGaon Technologies uses image and voice

recognition to authorise transactions whereas A Little

World uses Near Field Communications (NFC) or



banking transactions. The handset makers along with

the corresponding application developers would also

play a role in creating a conducive ecosystem.

It is projected that mobile banking usage in India will

grow rom 10 million active users in 2009 to over 53

million active users in 2013, representing a compound

annual growth rate o 51.8 per cent19. Once this reaches

the tipping point, it could urther accelerate to span

the ~ 900 million mobile subscribers in the country.

According to a recent study by BCG, it is estimated

that by 2020, 29 per cent o all Indian adults could be

users o mobile nancial services; thereby reducing the

unbanked in India by 12 per cent. While the current

nancial inclusion rate o 45 per cent should gradually

increase to 53 per cent by 2020, driven by overall

development and economic growth, the additional 12

per cent inclusion rom MFS means nancial inclusion in

the country could instead reach 65 per cent by that year.

With wider MFS adoption, the number o people with

ormal savings accounts could increase by 142 million

by 2020, increasing transaction volume by 32 per cent.

In addition, 123 million can be added to the number o

people using ormal bill payment products, increasing

payment transaction volume by 31 per cent20.

Bottom line

Strong undamentals and a supportive regulatory environment have set the stage or wider adoption o mobile banking in India.

Innovative technology applications will help urther accelerate adoption and drive access to fnancial services to the unbanked rural

population in the country. The relatively slow take o o the concept has been primarily due to the lack o clarity on which party in

the value chain would act as the hub. With the coming together o many o the large banks and large telecom service providers, we

believe that India is at the cusp o a growth in Mobile Banking services.


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e-commerce 2.0: Theme-basedspecialists to drive the next wave

Deloitte predicts that theme-based specialists will

lead the next wave o e-commerce growth in India.

In an eerily reminiscent optimism that held the markets

captive in the early 2000s, a second wave o consumer

ocussed internet companies have invaded the shores o

the Indian market. The message that they give is loud

and clear. There is a vast territory o uncharted water

in the Indian consumption story that technology is yet

to touch, and these companies are ready to exploit this

gap. The Indian consumers on the other hand, especially

in the urban areas, have become hungry or being

serviced better and being judicious at the same time.

The undamentals or e-commerce success include:

It has a value or money proposition

It ensures a good customer interace and pre- and

post-sales service

e-commerce deploys unerring logistics

E-commerce vendors, however, will need to contendwith high benchmarks, a discerning and ckle customer

base that could shit loyalties at the click o a button.

Nonetheless, vendors are equipping themselves

both technically and unctionally to ace the global

competition.

Coupon and deal sites avourable investments

so ar

Direct e-tailing and Coupon/Deal sites are two

e-commerce segments with re-engineered models

that have been successul in the west and are being

customised or the Indian market.

Coupon and deal sites have seen signicant nancial

investments in the past one year, and the condence

has to an extent been well corroborated by the

growing surge in trac in these sites. As per a leading

internet research agency, the top three sites together

have attracted around 3.5 million visitors in June

2011. Hence, an increased competition or generating

inventory and a cut-throat price war or wooing the

consumer. The only dierentiators so ar in a deal site,

valued by the consumers, are the quantum o deal/

discount and the nature o inventory.

Many deal sites in India like their counterparts in the

world have started bleeding heavily though theircustomer base has been rising. This is primarily owing

to the strategy o acquiring customers in the midst o a

raging price war that aects the bottom line.



In the near term, we can expect many such sites to go

through a ew levels o step changes in their business

model. The rst as already witnessed is a wave o more

exclusive deal sites; sites that were into fash deals,

moving onto a more generic deals or everyone

model. The next level would be that the dierence

between standalone deal sites and group deal sites is

blurred as they move into each others territory. The

third would be deals only sites moving into the space o

aggregation or pure e-tailing.

The e-tailing success story

In the last three years, the number o e-tailing sites has

grown exponentially in India. Most o these companies

either provide a wide range o products (clothes,

electronics, books etc., at one site), or cater to specic

niche products (leather accessories, books), or ocus on

specic segments like childcare, liestyle, etc.

Historically, Indian sites with broad-based product

portolios have been relatively more successul againsttheir global contemporaries. This may be attributed to

the act that the online buying comort index can yet be

best described as fedgling; the consumer tends to stick

to a select ew sites or their purchases, which in turn

impedes trac to product specic sites vis--vis their

broader counterparts.

The segment specic websites are trying to blend

the best o both and develop a loyal customer base.

Given that shopping is oten centred around a specic

theme where the shopper tends to buy a set o related

items, a segment based shopping arcade has a lot o

appeal. Such an approach would also address the issue

o redundancy in the broad based sites. A segment

ocussed site is more likely to attract such customers

who have a set o connected needs. We expect many

new companies to emerge addressing such specic

customer segments or those which have a broader

portolio, adopt the concept o shop within a shop and

venture in segment specic e-tailing. Many product

specic e-tailing stores would also try to get into this

logical extension o their business.

Bottom line

E-commerce 2.0 in India is set to become bigger and better. In the Deal/Coupon segment, we expect

transormational changes to happen among the ones which can survive the intense price war. While

dierence between exclusive deals, standalone deals and group deal sites will disappear, most o the

survivors would evolve to become sites oering direct e-tailing along with the deals. Competition will

drive consolidation among players in the broad based segments. The product specifc players would have

to fnd a niche where scale, recurrence o transaction and customer loyalty can be achieved. The theme

based players would strike a balance between the two existing models presenting customers with a more

eective online shopping experience and, hence, would be dominant amongst the new set o players.


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Medical Industry: Technologyproviders to be anchor or

collaborationIn 2012, Deloitte believes that the medical devices

technology industry can play the role o a disruptive

innovator both in terms o product and service

delivery and become the anchor to create an

appropriate ecosystem.

There is tremendous scope in the healthcare sector

in India. Basic medical care is still to reach the rural

populace due to several actors; among them are dearth

o medical proessionals and high cost o medical

equipment.

Investments in the sector have been sporadic and

geographically skewed or both the investor and the

consumer. It has not been able to reach the scale that

would have made a visible dierence in healthcare

acilities even in the remotest corner o the city.

Trends in Indian medical sector

The concept o Telemedicine in India should have taken

o soon ater the Telecom revolution. Unortunately,evolution in this space has been conned to the concept

o consultation over video, and its actual reach in itsel

has been abysmally low.

Similarly, though we have witnessed signicant private

sector investments in specialty hospitals, specialised

diagnostic centres and to a certain extent in medical

devices segment as well most o these investments

have so ar been limited to a ew urban pockets. The

government has also been instrumental in investing in

the healthcare sector especially in rural areas through

the National Rural Health Mission. However, we believethat its real impact is still a ew years away by when

demand would already outstrip the capacity added. This

is not only a cause or concern rom the perspective

o social inclusion, but is also a signicant loss o

opportunity or maniold growth in the business o

service/technology provider.

We believe that the medical devices technology industry

can play the role o a disruptive innovator both in terms

o product and service delivery and become the anchor

to create an appropriate ecosystem. Two areas where

medical devices companies can play a key role are:

promoting rugal innovation or perorming signicant

re-engineering on high cost product to come up with

a low-rill version. We have seen the phenomena

happening in consumer electronics sector and we

believe that both big MNCs and local companies

would oster such development. In its quest or rugal

innovation, especially in areas like diagnostics and

patient monitoring, the industry will signicantly borrow

rom or collaborate with their counterparts in consumer

electronics segment which incidentally have been able

to access and service the same masses more eciently.

Need o a viable business model

The second aspect that we believe would be ostered

by the medical technology rms would be to usher in a

dierent business model wherein they would no longer

conne themselves as a standalone technology provider.

Instead, they would collaborate with the hospitals,

telecom and internet service providers, diagnostic

centres, local pharmacies and the government to

provide a managed services model in which a network

o their devices would play a central role. This would

signicantly reduce the cost o inrastructure acquisitionby the smaller and semi-urban/rural-hospitals and

diagnostic centres and would also oer their urban

and richer peers to reach out to a larger set o patients

without the need to signicantly invest in additional

capital. Under this model a greater number o the

rural population can gain access to quality medical

care. Most importantly, it will leave the management

o technology and inrastructure to those who know

them the best (namely, device manuacturers and

communications service providers) and would leave the

medical proessionals to ocus on their core competence

in providing quality healthcare to all.

Bottom line

There is a dire need or greater access to

healthcare and given that Telemedicine and

Remote Diagnostics as concepts have a

compelling case. We have proven technology

capability in building and delivering the

technology inrastructure to promote such

concepts. Further, the government also looks

supportive o initiatives that aim at providing

quality healthcare to the masses by being both

aordable and accessible. With all the key pieces

alling in place, the technology providers arepoised to act as the key acilitators to transorm

this sector.



Beyond the digital curtain:Emergence o tier 2 cities

One o the striking insights that emerged rom the

Deloitte Technology Fast 50 programme 2011 or

India is the emergence o tier 2 cities. O the 50 top

ranking companies, about 7 were rom non-metro

cities or cities that have a limited presence in

technology landscape. We believe that this is not a

one o phenomenon, but an indicator to a larger

trend that we have already witnessed in the global

technology industry.

I outsourcing was the reason or shrinking distance

between Santa Clara and Bangalore, there are a number

o reasons that led to the same between Bangalore and

Guwahati. The reasons that compelled a number o

technology companies to outsource to India are not the

only ones that are driving business to the tier 2 cities in

India.

Why tier 2 cities

Jobs that brought companies or delivery centres rom

tier 2 cities in the reckoning were the ones which wereat the lower end o the value spectrum. Specically in

the ITeS segment, a signicant amount o data entry,

collections and basic accounting work are getting

moved to tier 2 cities and this trend will continue in

the coming years. From the supply side perspective,

a growing pool o undergraduates who could be

employed at a signicantly lower cost than their tier 1

counterparts, combined with the increasing availability

o quality inrastructure to deliver these processes, has

added to the attractiveness o these locations. The

traditional IT hubs are witnessing a scramble to retain

talent across many sectors. Thus IT and ITeS, which hadtill date ruled the roost in terms o capturing talent at

a mass scale, are competing with other burgeoning

sectors like Retail, Telecom and Financial Services in the

tier 1 cities. This is compelling them to look towards the

hinterland or talent sourcing.

However, its not the supply side actor alone that has

contributed to this surge. Post the 2008-09 downturn

in the global economy, many Indian service providers

especially in the ITeS segment looked homeward

or getting new business. Domestic ITeS business is

becoming an increasingly signicant component o

many providers revenue mix. For domestic clients,

accent neutralisation is not an issue; instead fuency

in regional languages is a big plus. Also, like many

companies in the western countries, a number o

customers preer near-shoring as the customer

representatives have the knowledge o the local

culture and business. Such actors will, in act, make it

imperative or many service providers to deliver their

services out o regional hubs.

Technology segment ollows the suit

The core technology segment is also mirroring this

trend, but at a slower pace than their ITeS peers. These

companies are ounded on the basis o unctional

and vertical knowledge and the spirit o innovation.

Consequently, the quality and experience level o the

talent required is higher or this segment. Such talent

oten gravitates towards the larger cities.

For the technology segment, the model is relatively

straightorward wherein the ounders with a vision or

their rm build a practice around their area o expertise.

In the services space, these companies primarily thrive

by sourcing piecemeal IT development and maintenance

work rom domestic enterprises or engineering services

work rom captive centres o various MNCs; severalcompanies are also engaged in application development

and maintenance or domestic enterprises. This set

o companies need to invest more in innovating their

oerings, making their services more process ecient

and accruing enough marketing repower to target

international clients. Without such a strategy, growth

would be limited or such companies, at least in the

short term.

Bottom line

What makes the overall trend o emergence o Tier 2 cities more heart-

ening is the act that it is not only the existing players based in tier 1cities who are pushing work to their business units or subcontractors in

tier 2 locations, but as Deloitte Technology Fast 50 pointed out, there are

many homegrown companies who directly work with the end customer/

enterprise clients. This trend has been accentuated by the return o the

Indian diaspora to their home location. In the IT bastions o Bangalore,

Pune and Gurgaon, a substantial section o the knowledge workers come

rom other parts o the country. The hunger to replicate the success o

Indias IT hubs in other regional hubs is pretty evident among a new wave

o techpreneurs. The fnancial investment community has also started

evincing interest in nurturing such ventures or hand-holding them to

generate the required unding or their business. Though so ar we have

not seen many organised fnancial investment houses tapping onto thisopportunity, but we can perceive a growing sense o excitement among

them to do so. We eel that with the growth o the supporting ecosystem,

the IT/ITeS industry in tier 2 cities will receive a urther boost to

their growth.


16/3616

Media



A glance at the Media Industryin India

The Media industry in India is a multi-dimensional anddiverse industry that predominantly ollows the globaltrends o digitisation and convergence. With the world

moving towards usage o digital devices, this industry haskept pace with the advent o technology and change inconsumer tastes.

With an estimated size o USD 2.7 billion 21,it is clearly

an industry that can be considered a ront runner in

any economy. In act, some o the creative campaigns

produced in the country are considered masterpieces

and have been developed into case studies o brand

emergence.

The advertising industry in India continues to evolve

rom what once was recognised as a small-scale

business to an important contributor to the Indian

economy.

It is not just the advertising eld, but even mainstream

cinema that has catapulted to the world stage. A

number o bollywood movies have been nominated or

the Oscars or at other international lm estivals.

Presently, the sub-sectors in the industry are more

than a handul, with the digital platorm taking moredominance in the recent years.

Among the mediums, the print industry retains its

stronghold despite the global trend towards digitisation.

In India, the print industry still continues to hold sway

as the medium o communication with the masses.

The number o newspapers launched in the country

(4853 during the year 2010-11)22 may have reduced

over the years, but newer publications continue to hit

the newsstands doing decent numbers o circulation.

Furthermore, increased regionalisation o content is a

new trend that has picked up over the past ew years.

As satellite television -- better known as DTH (Direct

to Home) -- makes inroads to the remotest corners o

the country, television has become the daily staple or

Indians across the country. Expectedly, the uture o this

sector is bright with the medium being looked upon asa vehicle to launch new channels or to promote new

products in terms o programmes.

Radio is the new-old kid on the block. Traditionally,

radio, through the medium wave band, was the device

to listen to and know what was happening in the

country and in the world. As transistors gave way to

the television, the radio set was sidelined. With the

advent o the Frequency Modulation (FM) band, the

ears are back to the speakers. The government will soon

be announcing the next wave o auction o licenses or

transmission on the FM band. These will be or the tier2 and 3 cities in the country. The growth in this age old

medium is once again set to peak with more than 800

new channels23 expected to clutter the airwaves.

With many other subsets o the Media and

Entertainment industry in India, including Bollywood,

that at times churns out more successul lms than

Hollywood, the prospects or this sector are more than

bright. Double digit growth gures will be the norm,

and progress o the country will be mirrored in every

channel o business in this medium.


18/3618

Print media: The regionaltrend

In 2012, Deloitte predicts that the traditional print

media in India will still hold strong, and newspapers

will continue to be broadly consumed and highly

regarded as reliable sources o inormation,

entertainment and other general content.

Newspapers rate at par with television in terms o

overall advertising infuence, and are considered a top

infuencer o web site trac (along with search engine

results and television advertising).

Newspapers still going strong

Unlike in the western countries and in some o the other

Asian countries, the newspaper in India is still eagerly

awaited every morning and is consumed with the

morning cup o tea! People o all ages have preerences

as regards newspapers and discussion topics at social

gatherings still involve articles or advertisements

in newspapers. The sheer size o the small scale

businesses in India ensures that the classieds and other

pages o the newspaper are never short o matter.Advertisements will remain the dominant source o

revenue or the newspaper and a powerul tool or

businesses, as ad copy is almost sure to be seen by the

target audiences either in the mass English language

newspaper or in one o the numerous regional language

ones.

The growth rate o newspapers in India (new

newspapers being published) during 2010-11 is around

6%24, and the trend is expected to continue in the

coming years with a regional thrust.

A similar trend can be expected in the coming year/s.

This trend will however have more regional ocus. There

could be more regional newspapers being launched as

opposed to National dailies. This has more to do with

the cost involved, but regional preerences o readers

also result in decisions being taken to go more regional

than national. Regional newspapers are planning

multiple editions within the region or state to cater to

the semi-urban population. The next step is to build

the brand and launch urther editions in neighbouring

regions/states and expand its reach. It is interesting to

see how regional newspapers which have small/mediumlevels o circulation bring out multi-town editions on a

daily basis. The share o regional newspapers is around

46%25 in India. The advent o the broadband and

technologies is no doubt helping this happen. There is

still time and space or more such newspapers in India,

spoiling the reader or choice, until the other digital

mediums take their share o the readership pie.

Even though digital mediums like the tablet could be

the next piece o hardware to replace the eel o paper

in ones hands, its prohibitive cost ensures that i t will be

several years beore this becomes a reality. At present,less than 10% o the population has access to e-papers

and even here the preerence is or the print version

over the online one.

Bottom line

The newspaper business remains viable as

readership is sustained and growth is based

on brand and acceptance. What is expected is

increased regionalisation o this media, with ocus

on regional content and regional editions.

The digitisation o daily news although evident

is preerred only in niche pockets o the urban

populace and the scenario is likely to remain

the same until related devices like hardware

and connectivity become more eective and

aordable to provide an enriched experience.



Radio: A resurgence journey

In 2012, Deloitte predicts that regulatory reorms by

way o replacement o fxed license ee regime with

a revenue-sharing regime, transparency in allotment

o licenses by way o auctions etc., will help in the

resurgence o the radio.

The radio segment in India has taken approximately 50

years to grow rom inancy to adolescence. In 2010, the

total size o the radio sector was estimated to be about

USD 0.22 billion. It is expected to grow at a CAGR o

about 20% to USD 0.44 billion26.

The expected Phase-III o radio licenses, which are

planned to be auctioned, would open up newer markets

or private FM players. The tier 2 and 3 cities in India

have huge potential or such players. More than 800

new stations could hit the airwaves ollowing the

roll out o new licenses in the near uture. The sheer

number o newer stations that have come up gives an

idea o the potential reach o the medium. The ad and

marketing world will need to rethink strategies whilenalising campaigns or their clients. The new stations

will have newer audiences and newer opportunities

await all the broadcasters and all the businesses which

operate in these regions.

The Phase-III policy involves extending FM radio services

to about 227 new cities, in addition to the present 86

cities, with a total o 839 new FM radio channels in 294

cities. The private FM broadcasters will need unding or

the expansion or launch and can now look at attracting

oreign capital. Liberalisation o the cap on oreign

holding, in the orm o Foreign Direct Investment (FDI)

and investments by Foreign Institutional Investors (FII),

has been enhanced to 26% rom the previous 20%.

With the advent o the radio chip on the mobile phones,

the penetration o the radio has increased rom 59%

in 2007 to 77% in 2011 in the our metro cities o

Mumbai, Delhi, Kolkata and Chennai. FM listenership

averages more than 60%27 in the mega cities, and this

phenomenon could well be repeated in the semi-urban

areas. Since India has one o the astest growing mobile

handset market in the world, listening to the radio on

the mobile is a new and popular method or the youth.

With expansion on the anvil, the ad spends too should

rise. However, the trend o the earlier years will continue

and no drastic upswing in spending is expected. The

ad spends using this medium will grow around 20%

annually. This again depends on the general state

o the countrys economy. Given the FMs inherent

transmission limitations, the regional favour to ads willpredominate.

Bottom line

Just as new players explore dierent and unique felds o doing business

in the media world, the new age o radio will most certainly attract them.

The established broadcasters have an opportunity to expand their reach and

business when the new FM channels will ride the airwaves. Growth or the

broadcasters could be in the region o 10-15% on an annual basis, depending

upon the business model and availability o unds with the players.


20/3620

Television: The star o the show

In 2012, Deloitte believes that television will

continue to dominate as a media source. It will still

remain the most popular way to consume videos,

television content and flms in spite o the content

being increasingly available on other mediums like

tablets and smartphones.

The television industry in India has gained momentum

due to liberalisation and enhanced enthusiasm o the

broadcasters who are increasingly looking at innovative

ways to cash on the success o the entertainment and

media sub-sectors. The television industry is projected to

grow at a CAGR o 16% to USD 13.9 billion by 2015 28.

Television digitised with new distribution technologies.

Television digitized with new distribution

technologies

There are nearly 138 million households in India who

own a television. Cable penetration has reached 80%

with the help o the Direct to Home (DTH) platorm. The

DTH segment itsel comprises 28 million homes29. Digitaltelevision with pay channels will soon outdo the analog

and become the platorm to stay.

New distribution technologies like DTH, Conditional

Access System (CAS) and IPTV hold the uture o this

industry as increasing digitisation will radically alter the

way in which consumers receive channels. Also, these

distribution platorms will give broadcasters direct

access to consumers providing not just routine content

but also customised value added services (like video on

demand). As a result, the average revenue per user may

increase signicantly.

The other stream o revenue or broadcasters, namely,

ad revenue may see some stagnation as compared to

the past couple o years. This is more due to the general

health o the Indian economy and nancial climate. As

the cost o borrowing increases, it aects the general

sentiment; in such situations, it is advertisement spends

on television that is rst axed, as it is an expensive

medium. By an estimate, the television advertisement

segment will be the third largest in Asia by 2016, ater

Japan and China30, with the growth o ad spends on

television expected to be in the range o 12-16%.

With cricket still dominating the sports in India, the

business o telecasting these events still has some value

in it though the same has declined in the past ew

months due to the recent perormances o the home

team. Telecasts o cricket matches will continue to be

popular with the masses and will ring-in the revenues

or the channels.

HD broadcast the uture beckons

The advance in technology by way o telecasts in High

Denition (HD) has given a boost to the distribution

segment, including DTH. As broadcasters move more

and more channels on the HD platorm, a case o

derived demand is set to be played out once more.

Given that fat screen television is the recognised name

or hardware now, cashing in on HD broadcast seems

likely in the next ew years. 3D television is still like a

new born babe, yet to take its rst step.

As with the print medium, regional television channels

are also on the upswing. Given our cultural and regional

diversity, the content o these channels is just as diverse,

ranging rom news to music to general entertainment.

Another development among broadcasters is packagingchannels to target niche audience like teenagers.

The success o such channels remains to be seen

as all viewers are spoilt or choice with more than

150 channels available on each set on an average.

Language diversity helps monetise content. Producers

and distributors are garnering more revenue by dubbing

content into regional languages; thereby, ensuring that

the product has a wider audience base, and an enduring

appeal, especially i it is content rich.

Bottom lineWhen watching television the viewer is passive, and smartly produced

marketing content works well to create a demand. The more the repetition,

the more the desire that builds up in the mind o this passive viewer. It is an

established act that advertising only on the television cannot help in the

success o the product or service. A well devised campaign which considers

the digital platorm and outdoors amongst other mediums is what is required

in which the commercial spot o television will be one o the most aective.

The broadcasters will continue to be spoilt or content, with general

entertainment and flms taking the major portion o the schedules. Sports

will be close behind and content in HD will be sought ater. There may still be

some more time to rethink the investments planned or the 3D segment as

it is a wait-and-watch game here. The television manuacturers will continue

to have steady growth fgures with increased sales in semi urban and rural

markets as the television set moves rom occupying bulky space on the

urniture to a sleek hang on the wall.



In 2012, Deloitte predicts that the internet boom in

India is likely to continue its growth run. Ecommerce

will also continue to be the primary benefciary o

the internet.

As mobile connectivity by way o the roll out o 3G

services reaches the semi urban and rural areas, the

internet story and all the related sub-sectors will witness

the growth which they have dreamt o.

The internet economy growing with increasing users

The internet in India has taken more than 15 years to

cross the 100 million user mark. Now, it is at the cusp

o a giant leap. Industry associations like the Internet

and Mobile Association o India (IAMAI) to global

consultancies like Boston Consulting Group (BCG) in

their various reports herald the dawn o the internet

economy in India. They also mention a user base o 300

million in the next three years. Another indicator o

growth is that close to USD350 million were poured into

57 internet startups in the last one year31.

The e-commerce platorms in India have growth gures

which can envy any traditional business setup. A case

in point is the portal or booking railway tickets on-line.

The Indian Railway Catering and Tourism Corporation

(IRCTC) launched its portal or booking railway tickets

anywhere in India in the year 2002. On the rst day o

launch only 27 tickets were booked using the portal.

In 2011, on an average 400,000 tickets were booked

on any given day. Clearly, the success o this on-line

e-commerce platorm has been phenomenal and

outweighs other such success stories. For example,during the month o June 2011 alone, the number o

successul bookings done on the site was in excess o

10 million32. This trend o growth in e-commerce is

expected to grow in the coming year with e-platorms

recording a growth o at least 10% in the number o

transactions in a year.

Social media popular and trendy

Emailing, networking and chatting with riends is

predominantly the activity that the youth engage in on

their increasingly sophisticated smart phones. These

trends are eagerly watched by the internet businesses

that supply and transmit content or these ever hungry

users.

Internet and social media have become synonymous. In

the social media domain, Facebook is an icon itsel. The

number o users rom India which are on Facebook and

the numbers who join on a daily basis are nothing but

astronomical. Facebook alone has recorded a growth o

132% in India and has around 46 million active users33.

The potential which these on-line users have and the

potential which can be tapped by the businesses using

the platorm can be anybodys guess. With signicant

adoption across all age cohorts in recent years, social

networking is well established as an entertainment and

social medium. Since, this platorm is on-line and in realtime, the inormation on products, advertisements or

services is transmitted at lightening speeds and is also

proving to be a medium to push website trac. In short,

the power o the internet is predicted to personiy in the

social network. It will be a medium in which millions can

be reached in nano-seconds.

Digital media: Dawn o theinternet economy

Bottom line

Businesses and industries cannot ignore the

power o the internet, the e-commerce platorm

and the social network. All these three are the

backbone o any successul enterprise. Theinternet is proving to be the platorm where

all the concerned the supplier, the user, the

customer, the regulator and even the competitor

is on-line and watching every move o the

business.


22/3622

Telecommunications



A glance at the Telecom Industryin India

The telecommunications sector in India has been one othe astest growing industries since the last decade and islikely to continue to be on the growth path in the coming

years. An important characteristic o the telecom industryin India is its relative high penetration into urban areasversus rural areas. The delta spells opportunities or bothtelecom operators and regulators to capitalise on the trulytransormational potential o the telecom sector.

Wireless subscriber base grew by more than 27% in

2011 in urban India34. With tele-density reaching over

166% in the urban markets, the telecom industry is noweyeing to tap the rural market. The tele-density in rural

India is less than 36%. Wireless data subscribers showed

a growth rate o 116% in 201035 while only 36% last

year.34 The net broadband addition per month was

just around 0.2 million in contrast to around 7 million

mobile connections per month. The high level o growth

in the Indian wireless telecom sector, due to low rural

penetration, would continue to drive huge investments

in building the telecom inrastructure.

Telecommunications as a means o social change

The lack o physical inrastructure and skilled specialistsin social sectors like healthcare, banking and education

in rural areas makes the need or mobile based solutions

all the more attractive. These sectors can be made

accessible to the rural areas through telecom enabled

mobile services such as m-Health, m-Commerce and

m-Learning, respectively. Thereore, telecom can

be a major enabler o economic growth and social

modernisation in rural India. These possibilities bring to

light the importance o building a modern and robust

telecom inrastructure in a vast country like India.

The vision o National Telecom Policy (NTP) 2011

Using the power o telecommunication networks

and inrastructure, the drat NTP 2011 envisages

empowering citizens and businesses alike in an attempt

to create an equitable and an inclusive growth o the

nation. The policys ocus on broadband could be

catalytic in integrating rural and urban India. This will

help place India in a leadership position not merely in

the telecom sector, but also in other sectors that relyon it.

Lag in technology development

Although India has made good headway on the

telecom ront, it signicantly lags behind in technology

development. Most o the equipment required or

expansion o the telecom network is imported by

telecom operators rom other countries. This has led

to an outfow o oreign currency to other countries

and, consequently, aects the Indian economy rom

utilising the ull benet rom telecommunications. With

3G services being rolled out and 4G on the anvil o,the demand or telecom equipment is already a clear

need. As per IT Task Force, Indias demand or electronic

products will be USD 400 billion36 by 2020. Some o the

major electronics such as smartphones, tablets are part

o the telecom umbrella.

Diminishing taris would push operators to seek

new revenue streams rom services

Presently, there are about 12-14 licensees in each service

area compared to the earlier average o 6-7 service

providers in one licensed area. There is a compelling

need or consolidation in the telecom space to create

a sustainable ecosystem or operators in line with the

global trend o 4-5 operators. Private operators hold

88% o the wireless market shares where as BSNL and

MTNL, two PSU operators, dominate the wire line

market with 81%34 share. A reverse trend in cellular


24/3624

taris is shaping up whereby leading operators are

raising voice taris -- worn out by price wars over the

last 2 years, reducing margins and high 3G and BWA

spectrum costs.

India has predominantly been a voice market with the

lowest tari rates in the world. Reducing revenues

rom voice services is orcing operators to concentrate

on data services or better margins. At present, data

services in the country account or an approximate o

15%37 o wireless revenue; thereby creating enough

room or expansion. The next wave o telecom growth

is likely to emerge rom rural India where 3G enabled

VAS services could be the biggest contributor. Operators

would increasingly use the voice platorm as well as

localised content to ensure relevance and widespread

adoption in the rural zones. Operators could gain

alternative revenue streams and dierentiate themselves

through VAS services as voice has become signicantly

commoditised.



The $100 Smartphone to gomass market

Deloitte predicts that by the end o year 2012, over

500 million smartphones with a retail price o $100

or less will be in use worldwide and signifcantly

high proportion o it will come rom India.

Indias share o the total mobile market is expected to

grow, and it should enjoy solid increases in shipments.

The denition o a smartphone or this prediction is

based on consumer perceptions o what a smartphone

is, rather than the standard industry denition, which

pivots on the type o operating system (OS) used. Many

consumers, particularly middle majority adopters, are

likely to consider phones as smart i they have touch

screens or ull keyboards and not based upon what sort

o an intangible OS is under the hood. Consumers may

regard $100 smartphones as superior to eature phones

rom the same manuacturer, even though the two orm

actors might well share many components.

According to IBEF38, handset volumes in India reached

210 million last year o which low cost handsetsdominated with 75 per cent and smartphones

accounted or only 6 per cent o the sales. Global

players such as Nokia, Sony Ericsson, Samsung,

Motorola and LG have dominated the Indian mobile

handset market or several years. But in the recent years,

home-grown mobile brands such as Micromax, Spice,

Lava, Zen and Fly, amongst others, have established a

notable ootprint in the entry level handsets. Not to be

let behind, oreign multinationals are also launching

low cost handsets and regaining their market share,

leveraging on the brand loyalty. The $100 smartphone is

likely to appeal to many dierent market segments andits share is set to increase in the overall handset market.

Smartphones to fnd demand as an alternative to

existing phones and computers

The $100 smartphone could be considered an

alternative to the Personal Computer (PC) in certain

segments (browsing, gaming, email, etc.) and could

serve the needs o millions o ind ividuals who do not

actually own a computer. Consumers in smaller cities

and rural areas may consider the $100 smartphone

as their rst trade-up, having previously owned a

eature phone. The largest segment o people may

also be attracted towards $100 smartphone as a status

symbol. Since penetration o personal computers and

home Internet access is very low and with demand or

communication and inormation rising everywhere, the

$100 smartphone may oer the easiest, most aordable

way to satisy these needs.

Smartphones will keep evolving in eatures to

accommodate more data usage patterns

As or connectivity, most $100 smartphones that are

expected to be sold in 2012 are likely to have GPRS

and 3G. A key upgrade in the $100 smartphone

between 2011 and 2012 will be the incorporation o

Wi-Fi and/or 3G as a standard part o the eature set.

This is due to the unsatisactory user experience on 2G

network or data usage and hence less data subscribers.

Furthermore, telecom operators will continue launching

their own 3G smartphones bundling with data plans at

aordable rates to boost penetration o 3G data

services and internet in the country. Major share o the

$100 smartphone will be o Android amily (Samsung,

Huawei, LG, Sony Ericsson, Motorola, HTC, etc.).

These devices are likely to support e-mail and instant

messaging (IM) services and eature a selection opre-loaded apps and widgets including a Web browser

that works best with, but is not restricted to, mobile

specic sites and apps. In many $100 smartphones, the


26/3626

OS may be closed, curtailing the abili ty to download

apps; however, this may not matter to customers

interested in low-end smartphones. What is possible on

these devices is still ar superior to what most eature

phones oer. The $100 smartphone will also likely

include a basic camera with at a minimum 2 megapixel

resolution that is just about enough or basic snapshots

in natural light and ad hoc videos.

Likely eatures o $100 smartphone

Due to the lack o widespread 3G data network

coverage in some target areas, $100 smartphones will

oten come preloaded with a suite o apps around

astrology, bollywood, cricket, stock prices, devotional

content that a typical Indian user would be most likely

to use and value. Mapping and navigation eatures

may also be included to drive sales, but weaker digital

mapping data may l imit utility.

Bottom line

Handset vendors are likely to continuously revise their $100 smartphone oering; a specifcation that was perceived as market leading

at the start o 2012 may well be considered market trailing by year-end. The price o many components is steadily alling or example

the cost o touch screens has dropped by about 30 per cent annually in the recent past. This will enable the specifcations/eatures o

the $100 smartphone to continue to rise in coming years.

App developers should note that $100 smartphone users might not download a lot o content and may be even less likely to pay or

it. Some users will have less technical ability than existing smartphone owners and could fnd downloading apps over the air more

mystiying than magical. And some may not have data network access. In addition, app developers may need to create variants o their

apps that are suitable or lower priced smartphones that come with relatively low-powered processors and localised regional content.

Growing sales o $100 smartphones are likely to cause downward pressure on prices or the whole supply chain. Component

manuacturers may come under growing pressure to lower their prices; this could give component suppliers an opportunity to break

into the smartphone market.

e-mail

Touchscreen Bluetooth 3G / Wi-Fi MP3 player FM Radio

Instant

messaging

Web

browser

Social

media appsCamera



Low cost tablets war begins andaccelerates

Deloitte predicts that in 2012 consumer demand or

tablets is orecast to be strong; however, enterprise

demand is likely to grow even aster, albeit rom a

lower base.

Most common low and mid-range tablets39

The low-cost tablet category that has products

priced between INR 5,000 and INR 15,000 has been

dominated mostly by homegrown companies such as

Reliance, Olive, Spice, HCL InoSystems and S Mobility,

many o them resh entrants in the personal computing

industry.

But o late there has been a spurt in the number

o lower priced tablets with even leading telecom

operators like Reliance, Bharti (Beetel TeleTech) plunging

into this space. However the enterprise users have been

enticed by high end tablets rom Samsung, Apple, and

HTC. Apple iPad 2, Samsung Galaxy Tab and HTC Flyer

are the market leaders in high-end tablet segment in

India. Such multi-media tablets present a variety o new

opportunities or enterprise users in terms o content

consumption, while supplementing traditional uses o

laptops and smartphones or content creation.

High end tablets popular in India39

Competition in the low-cost tablet space is set to

intensiy even urther in the next ew months, as global

brands such as Lenovo, Huawei, etc., also introduceinexpensive models priced at as low as `10000.

New entrants in the tablet markets will have to

prove worth o the product quality over price value

Consumers may preer established brands over local

ones considering that the specications are identical

with the same price point, making it tougher or new

companies to sell their products. Mostly all the tablets

in low cost price range, run on operating system (OS)

Android, have a seven-inch screen and support 3G and/

or Wi-Fi connectivity. Drivers o tablets in 2012 could be

greater penetration o 3G services, likely launch o 4G,usage o email, availability o inormation on the go,

useul apps, etc.

Indian consumers are price sensitive but at the same

time they look or value or money. The dening line

or the success o any tablet in the cluttered market will

depend not only on the price point that it oers, but

also on the services and applications that come along

with the device. Another important success actor or

the success o any low cost tablet will be the usability

and the user experience. For example, although the

Aakash40 tablet secured -heavy orders, but the user

Apple Samsung HTC Blackberry Motorola

iPad 2`39500

Galaxy Tab`24000

Flyer`37999

PlayBook`37990

Xoom`32990

Aakash (UbiSlate) Datawind`2999

Magiq Beetel Teletech

`9999

Stamp AllGo Embedded Systems

`5000

Spice Mi-720 Spice

`11990

mTab Mercury

`9499

IdeaPad Lenovo

`10990

ME HCL Inosystems

`10490

Reliance 3G Tab Reliance

`12999

MiTab S Mobility

`13990

Enjoy 7 MSI

`13999

iBall Best IT World

`13995Binatone HomeSur

`8999


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experience does not appear to be worthwhile. Tablet

makers should aim at a set o eatures and applications

or the target audience; a bulk o eatures/applications

usually results in poor user experience due to limitations

o the low-cost hardware and hardly any customisation

o the underlying OS.

As with other consumer markets, key success actors or

tablets in India will be extendable memory support, USB

connectivity and a considerably long battery lie.

Companies need to achieve a ne balance between cost

and eatures o the tablets and educate the consumer

about the availability o the same.

Common eatures available in most o the tablets

3G adoption to work as an impetus or tablet

demand in urban markets

3G enabled tablets might see a greater adoption in

urban and semi-urban areas due to the availability o 3Gservices in these areas and bundled data plans available

rom leading telecom operators. This will likely lead to a

price war as leading telecom operators gear up to oer

cheaper data plans bundled with tablets or building

long term relationship. On the positive side, these

bundling oers could drive sales o tablets in India as

telecom operators subsidise the hardware costs.

In India, where PC penetration41 is very low, cost

eective tablets might be a good solution to connect

people to internet and in turn increase internet and

broadband penetration. The only way o taking a step

orward in this direction is by putting in India specic

content, including local language newspapers, music,

astrology, health books, etc.

Although enterprises in India are exploring to adopt the

(bring your own device) BYOD model, it is extremely

unlikely to pick up in 2012. This will likely aect the

adoption o tablets in enterprise domain and hence

tablets will continue to work alongside computers and

smartphones.

Three main actors are driving tablet adoption in the

enterprise market:

The most apparent actor driving tablet adoption is

that many consumers initially buy tablet computers aspersonal media devices, but quickly discover they are

also useul or work.

Second, certain industry verticals seem poised to start

using tablets in airly large numbers over the course

o the year; in act, trials are already underway. The

education, retail, manuacturing, and healthcare

industries are considered the most likely early adopters,

primarily owing to the tablets ease o use, long battery

lie, lack o moving parts, minimal need or training and

rapid application development environment.

Third, the tablet orm actor itsel is driving adoption inthe boardroom and in the industries like healthcare and

retail. Unlike laptops and smartphones, both o which

create an obvious physical barrier between the user

and others in the room, a tablet can be placed fat on a

conerence table and accessed unobtrusively.

Bottom line

The revolution in android tablet market will continue in 2012 as many Indian and global companies will

compete to produce cheaper tablets. Vendors should ensure that applications and whole ecosystems help

increase the overall user experience on the tablet or increasing the market size.

The high-end tablet market will continue to be dominated by the global leaders and might also see

reduction in tablet price or higher adoption among the niche customer base in 2012.

7-inch

display

USB

ports

Android 2.3

OS

1.2 GHz

processor

Front &

rear camera

TFT WVGA touch

display

512MB

RAM

Expandable

memory4GB internal

memory

3G Wi-Fi Bluetooth



Low cost (devices & data plans) toinduce data explosion

In 2012, Deloitte predicts that data consumption

would go up substantially aided by competition,

technological advancement and reduction in per

gigabyte prices.

Drivers that promote data usage

There are several actors that will push the data usage to

extraordinary levels in 2012:

First, there has been a steady increase in the number

and type o mobile devices such as smartphones,

tablets, eReaders and high capacity dongles.

Smartphones sale in India shows three digit growth

rate42. Wireless broadband trac is growing exponen-

tially with prolieration o a new and powerul genera-

tion o mobile and multimedia handheld devices with

several competing operating systems. Opportunity

to connect more devices is boosting the number o

subscribers and devices connected to internet.

Secondly, the availability o 3G services in all likelihood

will become more widespread in 2012, covering most othe tier 2 and 3 cities, and possibly, 4G services would

see the light o day at aordable prices in 2012.

The third driver is the alling prices o mobile devices

like smartphones, tablets, etc., and rapid launch o low

cost devices. Smartphone and tablet prices are reducing

due to increasing competition in the low cost device

space and launch o 3G services. The modern age

smartphones with attractive eatures at aordable prices

have grabbed the attention o the young generation.

This is increasing the opportunity or youth and upper

middle class users to use interactive applications like BBmessenger, GTalk, Skype, etc., and social networking

applications like Facebook, Twitter, LinkedIn, and others,

beyond video and voice.

Fourth, the growing demand on mobile devices or

bandwidth rich appl ications such as HDTV, video-on-

demand, video-telephony, gaming, etc. The adoption o

these multimedia applications o voice, video, and data

is dramatically increasing per-user bandwidth.

Fith, the soaring need o upwardly mobile citizens to be

always online and access data on the move. There was

a speedy increase in wireless data subscribers at 34%

year-on-year (Sept 2010 Sept 2011) growth rate43.

Wireless network in need o scaling up to keep pace

with demand

On account o the above, the wireless networks need

to be scaled up to handle higher capacity in the uture.

However, most o the operators are yet to convert the

investment in 3G into a protable story and are being

orced to compete or ever-shrinking prot margins.

They are acing the challenge to invest in inrastructure

to handle the increased demand, as well as to provide

innovative regional applications and services to increase

revenue rom data services and to attract users rom

smaller cities. However, the business driver is the

increased revenue expected rom 3G services due to

growing middle and upper class wireless customers

willing to pay more or the new mobile services.

Internet access through data cards and USB dongles

compared to smartphones is unique in India. Due to

relatively lower speed on wireline broadband, people

increasingly use USB dongles to connect to internet.

These dongles not only provide users with high speeddata access but also ull the need o mobility. Deloitte

predicts that the use o these dongles will continue to

rise in 2012 due to expanding 3G services and possible

launch o 4G services initially on these dongles (since

currently Indian regulations do not allow transmitting

voice on data networks).

Operators should consider how best to ease these

customers into using data. With voice service, there is

a relatively simple relationship between time spent and

cost, but with data the bill or watching a ew minutes

o video could deliver a bill shock to a new data user causing them to shy away rom all uture data services.

Bottom line

Service providers will continue aggressively bundling devices with subscriptions

or a ew ree months o data access as they push 3G data services across an

increasing number o cities and towns. These bundling oers (low cost smart-

phones/dongles with ree data usage or ew months) might turn out to be

the primary motivator or customers towards data usage initially and later the

low cost data plans will drive the usage o data exponentially. The introduction

o LTE networks as well as the on-going launch o 3G networks will boost the

speeds available or cellular broadband. The ocus and attention o operators,

manuacturers and others in the value chain might strengthen ater the release

o NTP 2011 rom urban to rural-centric. Governments ocus on the develop-

ment o the rural broadband inrastructure, through optic fbre and wireless,

will continue. However, Deloitte believes the explosion o data will most likely

happen in the urban markets at least in 2012.


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m-Health, m-Learning,m-Banking: No longer a

pipe dreamIn 2012, Deloitte believes that eorts rom industry

verticals like healthcare, banking, and education

will intensiy to adopt mobile as a service delivery

mechanism in the remote areas.

Rural India to be the next growth hotbed

Although the Indian telecom industry was not severely

aected by the economic downturn, service providers

are increasingly concerned about the eroding prot

margins in the light o intense competition. The

increased pressure on protability is orcing operators

to ocus on reducing internal costs to strengthen their

market position and to dierentiate constantly through

value added services. Some o the biggest challenges

aced by service providers include:

Rock-bottom voice ARPUs

Disparity between data trac and data revenue

increasing rapidly

Extreme competition

Security and data protection requirements

Massive investment required to increase the networkcapacity

Uncertain regulatory environment

Continuously evolving technology

Given the rapid increase in the number o telecom

subscribers and tele-density, the industry presents

huge growth potential or players to expand network

coverage and telecom services. There is a huge market

opportunity to cater to the rural areas where the

tele-density is 36.444.

Opportune time or partnership between telecomand telecom dependent industry sectors

Most players in the value chain o industry sectors such

as healthcare, banking, education nd it dicult to

incur the high costs to serve the rural areas. It makes

perect business sense or these business sectors to

orm strategic partnerships with the telecom operators

and work out win-win business models. Also ollowing

developments indicate that mobile usage is likely to

grow urther in 2012:

Younger generation has a healthy appetite or

mobile services and are tech-savvy (65% o countrys

population is still below the age o 30)

Increased mobile internet usage

Smartphone ownership has room to grow

Native apps and aster data speeds drive higher

volume

NFC-enabled phones are slowly entering the market

Open sotware platorms are becoming common

Leading IT companies, mobile device manuacturers,

telecom service providers, and government have

acknowledged education, healthcare and banking as the

priority sectors. Recognising that technology would be a

pivotal enabler in enhancing access to these sectors, the

companies are looking to update product compatibility

with a tablet and smartphone based solutions, e.g.,

smartphone ultrasound device45.

The NTP 201146 envisages connecting all the village

panchayats with high speed broadband through optical

bre network. The undamental need or realisingtele-diagnosis, tele-consultancy and tele-education is

this high speed broadband. It could empower the rural

beneciaries by expanding their use o e-government.

Healthcare

Around 80% o Indias medical specialists cater to 20%

o the population. This leaves about 750 million Indians

in semi-urban and rural India without direct access

to specialist care47. Technology would aid delivery o

healthcare services at the patients doorstep in remote

rural areas.

Mobile phone manuacturers are now keen to power

their glossy gadgets to deliver healthcare solutions. The

clarity in voice and video can make a huge dierence

while providing healthcare consultancy over mobile.

With more than 850 million mobile users, healthcare

applications are also becoming popular in the

application stores. There are around 17,000 health apps

available on smartphones, but how many are useul and

are actually downloaded is questionable.

Healthcare

providers

Medical

insurance

Telecom

service

providers

Technology

providers

Mobile

device

manufacturers

Network

device

manufacturers

Government


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technology, electronication o payments would augur

well or the mobile money payment.

The mobile payments market has gained traction in

recent years, owing to higher penetration o handsets

in comparison to coverage o population with banking

services and benign regulatory environments.

The acceleration o mobile remittance services alongside

new mobile payment49 scenarios highlights the range

o opportunities or the mobile phone to redene the

movement o money by lowering costs, increasing

convenience and reducing raud through Business

Correspondent model.

Education

India has the third largest education system globally,

with a network o 1 million schools and 18,000 higher

education institutes.50 Yet these are not enough to meet

tmt india predictions 2012

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