Telecom 2006 IBEF

8/8/2019 Telecom 2006 IBEF

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TelecomSeptember 2006

www.imacs.in


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TELECOMwww.imacs.in

Market Overview

Government regulations & policy Advantage Indiaand business

opportunities

Contents


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MarketOverview Market Overview

Government regulations& policy

Advantage Indiaand businessopportunities


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Indias telecom market has grownrapidly in the last few years

Revenues~ USD 19.5 bn (FY 2006)

CAGR(FY 2002-06) - 21% Have doubled in last 3 years

Subscribers~ 160 million (Aug 2006)

CAGR(FY 2002-06) - 38 %

Nearly quadrupled since FY 02

5-6 million being added every month

Tele-Density - 14.8 (Aug 2006)

Has doubled in 3 years Target set for 2007 under NTP 1999

achieved during FY 2005

Revenue growth 20

15

1110

9

0

5

10

15

20

2002 2003 2004 2005 2006

$Billio

CAGR- 21%

Subscriber growth

164

98

76

5344

0

60

120

180

2002 2003 2004 2005 Aug-06

CAGR- 38 %

Source:www.voicendata.com, Telecom regulatory Authority of India (TRAI),Year indicates financial year ending March

Market Overview


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TELECOMwww.imacs.in

and is poised to be the secondlargest networkglobally by 2008*

Source: International Telecommunications Union (ITU)

Telecom Subscribers - Country wise December 2005

China

743

USA

360

Ind

125

Rus

130

Germany

134

Japan

153

0

200

400

600

800

mn.subscribers

India - Nov2006

184 mn. subs

Expected to overtake US by 2008

* Based on excerpts from Worldwide Wireless Data Trends 2006 - a mid year update. Datacomm research

Market Overview


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Mobile telephony continues to bethe key growth driver

Progressive regulation

Migration to revenue sharing

Calling Party Pays (CPP) regime

Unified access licensing

Intra-circle merger guidelines

Intensifying competition

3 to 6 players per circle

Presence ofCDMAand GSM providers

Significant share of private sector

Subscrber Gr h M bile vs Fixed

4141

434238

143

52

7 13 34

0

35

70

105

140

175

2002 2003 2004 2005 2006

Mn.subscribers

Fixed (mn. subs) Mobile (mn. subs)

Wireless emerging as the preferred mass market format service

providers focus on Internet / broadband access to improve fixed

line ARPU*

Growing affordability ARPUsamong lowest in the world

Lower cost of ownership due to Low cost / used

handsets

Success of the pre-paid format

Source: TRAI

* Average Revenue per user2006 figuresas of Nov 2006

Market Overview


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Growing networkcoverage istriggering further market expansion

Support from Universal Service ObligationFund envisaged forsharednetworkinfrastructure creation

in uncovered rural areas

Segment Cellular reach (2003-04) Cellular reach (End 2006 - Est.)

Locations Population Locations Population

Urban ~ 1700 of 5200towns

200 million ~ 4900 towns outofnearly 5200

towns

300 million

Rural Negligible Negligible ~ 350,000 out of607,000 villages

450 million

Source: Recommendations onRural Telephony 2005 - TRAI

Market Overview


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Vibrant and competitive telecom market

Source: TRAI, IMaCS research

Consolidation leading to emergence of integrated pan-national service providers

Company Presence

Subscri bers Jul06 (mn)

Share (%)

Fixed Mobile Fixed Mobile

BSNLGovernment owned. Hasramped up GSMservices. Nationalpresence (except Mumbai and Delhi)

37.4 17.7 74.7% 19.6%

MTNL Government owned. Operates in Delhi and Mumbai. 3.8 2.0 7.7% 2.3%

BhartiIntegrated operator, with presence inall sectors. Largestmobile services provider.

1.4 19.6 2.7% 21.7%

RelianceIntegrated operator. Plans expansion of GSMnetworkapartfrom being the largest private CDMA operators.

3.0 17.3 6.0% 19.2%

Hutch Pure play GSM operator in 11 circles. 15.4 17.0%

IDEA Pure play GSM operator in 6 circles 7.4 8.2%

Tata

Teleservices

Integrated operator (along with VSNL) with presence inall

segments. ProvidesCDMAservices in 20 circles 4.0 4.9 8.0% 5.4%

AircelOperates in 2 circles. Announced Plans to expand GSMfootprint inNorth and North east

2.6 2.9%

Spice Pure play GSM player in 2 circles 1.9 2.1%

Others 0.4 1.4

Total 50 90

Market Overview


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TELECOMwww.imacs.in

Several Indian firms gaining afoothold in the global market

Indianservice providersacquiring scale in the International Long Distance market through acquisitions

Acquisitions - FLAG byReliance, Tyco and Teleglobe byVidesh SancharNigam Limited

VSNL isnow the world's fifth largest carrierof voice globally

ReliancesFLAG networkconnects with 28 countries. FLAGs FALCON cable system when completed

would connect 12 countrieswith 25 international cable landing stations

Investments in Infrastructure and

Bharti-Singteland VSNL investments in undersea cable

Emergingas Integrated telco, positioning themselvesas full service providers

Tata teleservices-VSNL, Bharti,Reliance have end-to-end presence in ILD, NLD and Access; BSNL has

announced plans to get into ILD

Focus on corporate connectivity - IPLCs, Frame relay, VPNs

Strong thrust on internet and broadband - both corporate and retail segments

Market Overview


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Governmentregulationsand policy Market Overview




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Independent regulation has beenacritical factor in growth

2002

ILD opened to competition

Internet Telephonyallowed.

Reduction in License fees

2003

Calling Party PaysRegimeUnified Access Licensing

Reference Interconnect Order

2004

Intra-circle merger guidelines

Internet / broadband penetration

Mature regulatoryregime and an enabling policy

frameworkalready in place

2005

Unified Licensing

Quality of Service regulation

Rural Telephony

2006

Number portability

Convergence

TRAIsrecommendations

GovernmentRegulationsand policy


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Important policy initiatives

Creating a favourable investment climate to support growth

Broadband policy unveiled in 2004 - Targets20 million broadband subscribersby 2010

Focus on making Indiaaregional Telecom manufacturing hub

FDI limit increased from 49% to 74%

100% FDI permitted underautomatic route in the manufacturing sector

Deregulationvirtually complete and Unified Licensing regime

InterconnectionUsage Charge frameworkin place

Exemption from customs duty for import ofMobile Switching Centres

Comprehensive Spectrum policyand 3G policy on the anvil

GovernmentRegulationsand policy


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Advantage Indiaandbusiness opportunities

Market Overview




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Recent developmentsareindicative of the paradigm shift inwireless growth

Of the 160 millionsubscribers, more than

90 millionsubscribersadded in the last

two years

More than 5 millionsubscribersadded

every month since Dec. 2005, translating

into the highest growth rate in the world

Ona comparison of growth since

introductionof mobile telephony, IndiasurpassesChinaat the same stage of

market evolution

India ina comparison

0

250

500

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Yea

illion

ubscribers

h na

Ind a

In the 11thyearIndia - 76 mn.China - 24 mn.

Source:TRAI



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Mobile Value Added Services (VAS)set to register explosive growth*

Indian Idol - arealityshow on Sony Televisiongot 55 million SMS

messages in 5 months

RadioMirchi - a popular FMradio channel receives~

40000-45000 SMS messages every day

R-World - the mobile portal ofRelianceCommunications

had 5.3 million visitorsout of its 18 millionsubscribers in 2005

Dataand VAS contributed to 7% ofrevenue in 2004

Messaging and music (ringtones, downloads etc) to be key contributors VAS revenues expected to grow given

Demand - Young population (60% < 30 years) and anaffinity to music and movies

Supply - aggressive pricing, vibrant ecosystem of content providers /

broadcasters, declining GPRS/mp3 handset prices

VAS expected to contribute 20% of revenue by2008 and 30% by2010

* Excerpts from Mobile Data in India. Lehmannbrothersreport. Oct 2005. IMaCS research



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TELECOMwww.imacs.in

Broadband and Internet connectivityon the verge ofa take-off

Internet / Broadband market (FY 2006)

6.94 mn.Internet customers(25% growth YoY)

1.35 mn. broadband customers(6-fold growth YoY)

Incumbents (BSNL / MTNL)dominate - 66% share

7-fold growth in broadbandconnectionsduring FY 2006

Broadband Policy 2004

Recognises the importance ofinternet penetration

Envisages40 million internetconnectionsby 2010

Visualises creation of infrastructurethrough variousaccess technologies

Broadband subscriber growth

2.00

1.38

0.18

0

0.75

1.5

Mar-05 Mar-06 Nov-06

Mn.subscribers

6-foldgrowth

Growing PCsales, Internet adoption insmall

townsand offerings including triple playand

video-on-demand / IPTV expected to be major

growth drivers

Source: TRAI



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Growth-driving sustainable factorsin the telecom sector

FavorableMacro-Economic fundamentalsandDemographics

StrongEconomic Growth and rising incomes

By 2020, working age population to

rise to 65%

Low tele-densityrelative to Asianpeers

Progressive policyand regulation

Independent regulation

Consistent policy framework

Favourable Investment Climate

Rising Affordability

Declining ARPUs

Lowering cost of handsets

Growing popularity of pre-paid format

Indianotjust a cost-sensitive mass market

300 millionplus middle class population Value added service revenue expected to growat

80% CAGRovernext 5 years.

IDC estimates phones with colorscreens/

cameras to account for 30%of handset sales in

2005 and 62%by 2008

People thinkabout the Indian market as a lower tier.

About 30%of the U.S. market is high endand maybeit's only5%inIndia. But Indiahas 1.1 billion people

Ron Garriques.Executive vice president,

Motorola's personal communicationssector in

On the Razor'sEdge:Cell PhonesMorph into Hip

ConsumerElectronics Devices Knowledge@Wharton



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India poised to be a USD 40 bn - 45bn telecom market by FY 2010

Telecom sector targets announced byGovernment ofIndia

250 millionsubscribers by 2007

500 millionsubscribers by 2010

20 million broadband subscribers by 2010

Mobile access to all villages with population more than 5,000 by 2006

Mobile access to all villages with population of more than 1,000 by 2007

Translating into an investment requirement of USD 25 bn to USD 30 bnTranslating into an investment requirement of USD 25 bn to USD 30 bn



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TELECOMwww.imacs.in

Nortel offersasuite of productsand solutionsacross two broad categoriesCarrier Networks (incorporating Wireless Networks, Wireline NetworksandOptical Networks) and Enterprise Networks.

In Indiasince 1991. HasanR&D centre in Bangalore

Promotesand supportsarange of telecommunicationsproductsand services inIndia inassociationwith licensed operators.

Has invested inBharti Airtel and also Networki2i isa 50:50 Joint Venturebetween Bharti and SingTel, connecting Chennai to Singapore

Largest pure-play GSMservice provider in India

Has over 15 millionsubscribers

Hasa 10% stake in Bharti telecom, an integrated service provider

Represents the largest foreign investment in the telecom services

sector in India

A compelling destination forTelecom service providersandequipment majors



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BSNL - Incumbent service providerand World's 7th largest TelecommunicationsCompanyproviding comprehensive range of telecom services in India

Services include Wireline, CDMA mobile, GSMMobile, Internet, Broadband, Carrierservice,

MPLS-V

PN,V

SAT,V

oIP services, IN Services etc.

MTNL- State owned operator covering the cities ofMumbai an Delhi

Provides both fixed and mobile services

BhartiAirtel - Integrated operator with presence inall segments

Leads the mobile segment in the country

Reliance Communications - Largest player in India in the CDMAsegment

Plansa GSMnetwork

TataTeleservices - Integrated operator (withVSNL) with presence inall segments

ProvidesCDMAservices in 20 circles


Key IndianCompanies


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between the Ministry ofCommerce & Industry, Government of India

and the Confederationof Indian Industry. The Foundationsprimary

objective is to build positive economic perceptionsof India globally

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Telecom 2006 IBEF

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