Opportunities in the Indian Telecom Market

8/8/2019 Opportunities in the Indian Telecom Market

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CellularOp

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India

Opportunities in the IndianTelecom Market

T V RamachandranDirector General, COAI

May 9, 2002, New Delhi


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India

Achievements of the Industry


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India Affordable Tariffs

Tariffs have fallen by more than 90% in the last two and a half years

16.8

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4.22

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Apr-1999 May-1999 Dec-1999 Feb-2001

Peak Tariff Average Market Tariff

Rupees

Operators have always been offering services at tariffs lower than theceiling prescribed by the Regulator.


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India Improved Coverage

421

607

918

1116

1369

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1400

Jun-1999 Jun-2000 Nov-2000 Apr-2001 Feb-2002

Number of Cities & Towns

Renewed viability of industry post NTP 99, made it possible to extendthe services to more towns & reach out to low-end users.


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India Increased Subscriber Growth

The number of cellular subscribers all over India crossed 6.4 millionby end- March 2002.

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Million

Point of Inflexion

Point of inflexion appears to have been reached soon after NTP 99was announced and once cellular operators migrated to NTP 99.


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India

Current Status & Trends


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India Current Status

Coverage : Almost 1400 Cities & Towns

Tariffs : Approx. Rs. 2 / minute

Handset costs : Rs. 2,000+

Subscriber Growth : Almost 0.3 million / month

Subscriber base : 6.5 million by FY 2002

ARPU Around Rs. 800 / month

Minutes of use : Approx. 220 minutes / month


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India Current Trends

Growth is amongst the low-end users.

ARPUs are dropping as volumes are picking up.

Increased usage of cellphone for long distance calls as STDtariffs have crashed.

Growth in Metros continues to be aggressive as 88% YOY

growth recorded in Year 2001-02.

The B category Circles also recorded a strong growth rate of83% YOY in 2001-02.

In C Category Circles, the number of subscribers have almostdoubled in the last financial.

Prepaid segment accounts for almost 50% of the subscriberbase and 70% of the new additions.

Value added services like SMS have really caught on.


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India Customer Profile Demographics

Almost 50% of the cellphone users are below 30 years ofage.

Prepaid users are younger than post paid users 57%below the age of 30 as against 46% in the case of postpaids.

Prepaid users are relatively less educated.

Businessmen & traders form almost two-thirds of themarket segment.

Salaried class represents about 25%.

Post paid subscribers had a higher monthly income thanprepaid subscribers


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India Customer Profile Usage

In most cases, cell phones are used both for business &personal purposes.

Prepaid is a recent phenomenon. More People using the cell

phone entirely for personal use tend to go in for a prepaidservice.

Over 50% of the subscribers are prepaid subscribers.70% of thesubscriber additions are in the prepaid category.

Post paid subscribers on an average have a higher monthly billthan prepaids.

50% of the prepaid subscriber yield an ARPU of less than Rs.500 / month.

83% of the usage is in local calls, 16% in STD calls and anegligible 1% in ISD calls.

Only around 15% of the calls are mobile to mobile calls, balance

are mobile-fixed or fixed to mobile calls.


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India

Future Growth Potential


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India Market Strategies for Growth

Consolidation

Mergers & acquisitions to consolidate footprint

4 Group companies account for 67 % of the subscriber base.

M&A activity is the market response to the number of operatorsallowed as per policy.

In most European & Asia Pacific countries, the average number ofcellular operators is between 3-4.

Innovative pricing Prepaid used as an entry strategy prepaid cards are available for

as little as Rs. 300 per month.

Lower airtime & flexi tariff packages for postpaid users

Cost Efficiencies Significant reductions in operating costs per subscriber primarily

due to increased subscriber base.

Reduction in handset costs

Flourishing second-hand handset market.


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India Fall in Average Revenue Per User

1076

777

627

541505

481

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FY2001 FY2002 FY2003 FY2004 FY2005 FY2006

Rupees

Average of Estimates by Independent Analysts

Independent analysts have projected that the ARPU will continue to drop

over the next 4 years and would stabilize at around Rs. 500 per month.


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India Growth in Subscribers

3.566.2

10.32

16.37

26.17

38.27

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FY2001 FY2002 FY2003 FY2004 FY2005 FY2006

Average of Estimates by Independent Analysts

Million

On an average, analysts estimate that the number of cellularsubscribers touch around 40 million by FY 06. It may be noted that the

effect Of WLL(M) has not been factored into the projected growth.


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India What do Consumers Want

Corporate image of Service Provider.

Good Network Quality

Range of Value added services voice mail, informationservices, ease of use, etc.

Affordable Tariffs.

Free Incoming Calls.

Simple Tariff Plans

Flexible Offerings i.e. choice to consumer

Improved Customer Care not just in terms of ease of getting

through, speed of response, but also the ability of the customercare staff to resolve problems.

In the case of post-paid subscribers, the impact of the above onretention is lower than in the case of pre-paid subscribers whoare far more likely to switch service providers.


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India Cost of Cellular Communications

0.040.045Incoming Call

Charges per minute

0.040.045*Outgoing CallCharges per minute

6.005.625Monthly Rental

40+70+Handset Cost

IndiaChina

In USD

Despite China having almost double the purchasing power of India

and despite a lower cost structure due to lower government levies,

the cost of cellular communications in India is almost comparablewith the tariff structure prevailing in China.

* For the first 3 minutes only USD 0.045, but thereafter, USD 0.045 / minute.


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India Possible Pitfalls

Backdoor entry of WLL(M) as a fully competitive mobile

service.

Excessive & unhealthy market fragmentation.

Anti-competitive Behavior by SMP operators.

Inequitable interconnection arrangements.

Sub-Optimal Allocation of Spectrum.

Interminable delay in the introduction of CPP.


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India

Thank You

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Opportunities in the Indian Telecom Market

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