India - A Potential 3G Market A Feasibility Study
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Transcript of India - A Potential 3G Market A Feasibility Study
India - A Potential 3G Market
A Feasibility Study
Arnab SinhaSudipta Ray
Indian Institute of Technology, Kharagpur
ServicePromotion
3G SERVICES & INDIAN MARKET
Market Trends
Existing MarketCompetition
Business BaseEvaluation of Policies
CostStructure
Technology Requirements
ServicePromotion
3G SERVICES & INDIAN MARKET
Market Trends
Existing MarketCompetition
Business BaseEvaluation of Policies
CostStructure
Technology Requirements
PROJECTED SUBSCRIBER POPULATION
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bscri
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subscriber population (millions) Poly. (subscriber population (millions))
394350 350394
469
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PU(R
s/m
onth
)
Expected Usage in 2007:111 million
(from CAGR of 94%)
Market Trends
Cheaper Infrastructure
Cost
ServicePromotion
3G SERVICES & INDIAN MARKET
Market Trends
Existing MarketCompetition
Business BaseEvaluation of Policies
CostStructure
Technology Requirements
Existing Market Competition
Stake in Existing Market :Technology relied upon :
Total Investment :
Analyzing the predicted Market Revenue Trends, expected Break Even Period for Vodafone
BHARTI (10%)GSM (Larger service
range in India)1.5 billion USD
Our Target Break Even before
February 2008
Vodafone Break Even
ServicePromotion
3G SERVICES & INDIAN MARKET
Market Trends
Existing MarketCompetition
Business BaseEvaluationof Policies
CostStructure
Technology Requirements
Business Base
Current Position of Reliance in market- 20.3 % of the subscriber population- Largest CDMA provider in India
- 54% of the population is below the age of 241
- Estimated youth’s annual spending US$10.5 billion1
Population Count in 2006(millions)
10%
20%
11%
10%16%
13%
9%
4%7%
0-4
5to14
15-19
20-24
25-34
35-44
45-54
55-59
60&above
Collaboration with Reliance!
Targeting the Youth Section!Launching the service on Valentine’s Day!
Customer Base
ServicePromotion
3G SERVICES & INDIAN MARKET
Market Trends
Existing MarketCompetition
Business BaseEvaluationof Policies
CostStructure
Technology Requirements
• Increased talk time• Superior Power Control • Lowest radiation level• Hi-Speed Internet Access
– India has less than 0.4% penetration CDMA1x handsets (140 kbps)
• Most successful 3G Tech– CDMA2000 controls 85% of the World’s 3G market – Adds 15 million new users per quarter Worldwide
• Better Voice & Consistent Quality• Advanced platform supporting innovative
applications• GSM 3G evolution relies on CDMA
Technology Requirements
Hence CDMA – choice for the 3rd generation!
ServicePromotion
3G SERVICES & INDIAN MARKET
Market Trends
Existing MarketCompetition
Business BaseEvaluation of Policies
CostStructure
Technology Requirements
Cost Structure
Total RelianceRevenue =
Normal Revenue + 3G RevenueYoung Reliance
CustomersReliance SubscriberAccessing Internet
Estd. Avg Packet Consumption
per month (APC)Charge (C)Packet wiseBilling
Cost Structure
50p for each 128
Bytes packet
Billing Structure
Following Japan’s estimate5
APC=8192(1MB)
Reliance Customer Base 20.3% of
38.5 Mn6= 7.82 Mn
Target 54%1 Young Customer= 4.22 million
Total RelianceRevenue =
Normal Revenue + 3G Revenue
Young Reliance CustomersReliance Subscriber
Accessing InternetEstd. Avg Packet Consumption
per month (APC)Charge (C)Packet wisebilling
07 07
06 06
( ) ( ). 0.36 ( ).Dec Dec
Feb Feb
ARPU t pop t dt C APC pop t dt
Target Break even December 2007
COMPUTATION STEPS
Estimated Breakup of Expenses
Estimated cost for infrastructure, planning services, site civil works (based on other countries’ statistics)14
106.4 billion INR Licensing fees, sales and marketing cost
(26%15 of the acquired revenue) 7.49 billion INR
Total Expense (Approx) 115 billion INR
Feb, 2006 Dec, 2007
Estd. Revenue Earned143 billion
Large Profit Margin
ServicePromotion
3G SERVICES & INDIAN MARKET
Market Trends
Existing MarketCompetition
Business BaseEvaluation of Policies
CostStructure
Technology Requirements
Service Promotion
Attractive RateUtilities as per demand Handset Cost
Communication
Entertainment
Information Services
Agro-business
Optional CommercialServices
Communication
Entertainment
Information Services
Agro-business
Optional CommercialServices
Average HandsetPrice
19, 448 INR
Average HandsetPrice
19, 448 INR
ARPU 1475 INR only
ARPU 1475 INR only
Advertisement
ServicePromotion
3G SERVICES & INDIAN MARKET
Market Trends
Existing MarketCompetition
Business BaseEvaluation of Policies
CostStructure
Technology Requirements
Largest CDMA Provider
Defeat VodafoneLucrative Offers
after Dec’07
Appeasementof
Government
Adaptive to Market Forces
Evaluation of Policies
Reliance
Target Break Even – Dec’07
Survival of Competition
Early Start
BeneficialUtilities
Wider Estd.Profit margin
Thank You!
ServicePromotion
Market Trends
Existing Market
Competition
Business Base
Evaluation of Policies
CostStructure
Technology Requirements
References
1. Statistical Outline of India 2002-032. http://www.indiadaily.com/editorial/5826.asp,Dec 7, 2005 Media Release3. http://www.stylusinc.com/internet_potential_india.htm4. http://www.hardwaresecrets.com/article/1515. http://ojr.org/japan/wireless/1084495929.php6. http://www.indiadaily.com/editorial/5826.asp,Dec 7, 2005 Media Release7. http://shopping.yahoo.com.au/8. http://www.umtsworld.com/umts/faq.htm#f39. http://blogs.zdnet.com/ITFacts/?p=906510. http://www.w2forum.com/item/us_wireless_market_reach_neartotal _saturation_200911. http://www.mouthshut.com/review/GSM_Mobile_Technology_Vs_ CDMA_Mobile_Technology-34613-1.html13. http://www.businessworldindia.com/sep2004/news08.asp14. http://www.umtsworld.com/umts/faq.htm#f3615. www.auspi.org/presentation/AUSPI-press-conference.ppt
Backup Slides
World-Market Share
Samsung11%
Motorola15%
SonyEricsson
5%
NOKIA34%
others27%
siemens8%
₤178-570
$990 ₤190-279
₤215-420
The Average International Market Price of 3G mobile Handsets =
World market sharei x Avg. handset cost x conversion factori
= 19,448 INR
Source: Gartner, 2003
Back
Computation Steps under Packet-Wise Billing Current Internet User Count=38.5million2
Reliance Subscriber Count=20.3%of 38.5=7.82million Targeted Youth Population=54%of 7.82=4.22million Customer Base for Reliance=11.65million(data
provided) Ratio for Target Customer for 3G= 4.22/11.65 = 0.36
Considering this ratio remaining constant, Revenue earned within the breakeven period limits::
Revenue earned by telephony Revenue earned by internet usage
Computation Steps cont..• Revenue earned by telephony:
∫ ARPU(t)xsub.population(t) = Area under the Revenue
Curve
= 1485.76 billion INR
• Revenue earned by internet usage:=Charge per packet ( C ) x Avg.Packetconsumption (APC) x Ratio of Target Customers x ∫Sub.population(t)= 0.5x8192x0.36x{Area under the Subscriber Poplulation Curve}
=5558.501 billion INR
• Total Revenue =7044.26billionINR
Plot Depicting [ARPU(t) x population(t)]
22572.2620574.68
38951.5
75572
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mill
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Plot Depicting
Subcriber Popluation(t)
57.2952.22
111.29
215.92
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Computation Steps cont.
• Total Revenue = 7044.26 billion
• Total Reliance Revenue = 20.3% of 7044.26 = 1429.99 billion
If acquired a 10% stake,• Returns to the company = 10%
of 1429.99 • ≈ 143 billion >> 115 billion
(investment cost)
07 07
06 06
( ) ( ). 0.36 ( ).Dec Dec
Feb Feb
ARPU t pop t dt C APC pop t dt
Back
Vodafone’s Returns: Computation steps for the Breakeven
833.5
1617.24
483.04
440.3481.9
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Voda
fone
's re
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ns IN
R)
Vodafone's returns 481.85717 440.29815 483.04636 833.5621 1617.2408
12/1/04 3/1/05 6/1/05 6/1/06 6/1/07
• Based on the PlotReturns(t) = Area Under the Plot= 10667.93 +89.71 t2 +833.56 t
(billions)
• Returns till Breakeven period = 1.5 billion USD= 63000 million INR*
• Solving for t:t =19.95 months ≈ 20 months By February 2008.*Exchange rate =Rs 42/- Back
Aiming the technologyAiming the technology Source: CDG, AUSPI, TelecomWatch,COAI, TRAI
Wireless Technology trends
39
64
71
79
84
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25
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44
2001
2002
2003
2004
2005
No. of networks.
CDMA
GSM
Tariff fall and teledensity increase
43.5
21.5
1
0.5 12.8
4.66.5
012345
2001 2002 2003 2004 2005
Tarif
f(Rs/m
in)
0
2
4
6
8
Teled
ensit
y(%)
Tariff(Rs/min) Teledensity(percentage)
Wireless growth after introduction of CDMA4:Subscriber growth in GSM: CAGR of 74%*
Subscriber growth in CDMA: CAGR of 205%*
Increase in Teledensity: 6%*
Decrease in tariff: 75%*
Indian MarketIndian Market FeasibilityFeasibility
Indian Market Feasibility
239 236
287
93
33 32
12
8
0
5
10
15
20
25
30
35
Australia Singapore China India
AR
PU
(U
S$)
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Min
ute
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f U
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MOU per month ARPU($)
TARGETED CUSTOMER : THE YOUTH?TARGETED CUSTOMER : THE YOUTH?Population Count in 2006(millions)
10%
20%
11%
10%16%
13%
9%
4%7%
0-4
5to14
15-19
20-24
25-34
35-44
45-54
55-59
60&above• 54% of the population is below the age of 24• Estimated youth’s annual spending US$10.5bn with growth
rate of 12%1
• 55% of young India opts for career in web related activities3
• Demand for internet access (38.5 Mn currently) may shoot up to 100 Mn in 2 years.
Trends in population
190.8
120.8122.4105108.5 117.490.2
156.6170.6
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2001 2005 2010
Popu
latio
n(m
illion
s)
15to19 20-24 25-34