Telecom Sector in India

Telecom Sector in India

Anjana Rao, Prachi Joshi, Puneet Taneja, Sandeep Sreenivasa

Business Environment Domain Study Presentation20th Nov 2009

S. P. Jain Institute of Management & ResearchPost Graduate Program in Management

Information Management2009

AgendaHistory, Facts

GoI, Regulatory Bodies

Spectrum Action

India Advantage

VAS

Industry Updates, Trends

Future Technologies

Conclusion

BE - Domain Study - Telecom 2

History, Facts


Spectrum Action

India Advantage

VAS

Industry Updates

Future Technologies

Conclusion


History of Telecom in India- I


1851 1881 1883 1923 1932 1947

First Military Landline from Fort William to Lalbazaar

(Calcutta ) by the British Govt

First Civil landline service introduced for the British Viceroy and his team

Merger with the Postal service Merger of ETC &IRT to form (IRCC) Indian Radio Telegraph Cable Company

Formation of Posts Telephone & Telegraphs under Ministry of Communication

Formation of Indian Radio Telegraph Company (IRT)

History of Telecom in India- II


1985 1986 1995 1997 1999 2000 2009

DOT established separate from Postal system

DOT spilt into 3 :• MTNL (metros) • DOT (others) • VSNL (International)

TRAI created(Telecom Regulatory Authority of India)

DOT becomes a corporation = BSNL

For 3 months in a row India beats China for the maximum subs added every month

• Cellular service launched.

• New Telecom Policy(NTP) is adopted

• 1st call on Mobile phone

• Telecom Minister Sukh Ram(Delhi) to Jyoti Basu (Calcutta)

Quick Facts


Total telecom subscribers : 509 million (Sep 2009)

Wireless subscribers : 471.7 million

Wire line subscribers : 37.3 million

Tele density : 43.50 per cent

India’s service providers revenue in Q1 (2009): $8.2 billion

India’s Rural Mobile Phone Users : 100 Million

Source: TRAI report – Nov 2009

Growing Numbers


2002-03

2003-04

2004-05

2005-06

2006-07

2008-09

2009-10(forec

asted

)

9 10 1115

20

32

43

Revenue(US$ billion)Revenue(US$ billion)

Telecom Companies ?


Nokia,Motorola,Samsung,

LG, Sony Ericson

Infinera, Cisco,Alcatel Lucent, Nokia

Siemens, Huawei

Bharti-Airtel,Vodafone, Idea,

Reliance, Tata Teleservices

IBM, Wipro, Aricent,

Tech Mahindra

ARM,Texas Instruments,

Qualcomm, Infineon

Symbian, Google

WTTIL, Tata teleservices tower, QTIL

Market Share


As on 30th Sep ‘09

Net additions in Sep 09Tata (26.74%) > Bharti (16.78%)

23%

18%

18%

12%

11%

10%

5% 1% 1%Service Provider Market

Bharti AirtelReliance CommunicationsVodafone EssarBSNLIdea CellularTata TeleservicesAircelMTNLOthers(Loop, MTS)

Handset market


59%

8%

7%

6%

5% 15%

India

NokiaSonySamsungMotorolaLGOthers

37%

5%

22%5%

11%

20%

Worldwide

NokiaSonySamsungMotorolaLGOthers

Source: IDC Press Release

Growth Avenues


Growth Avenues

Enterprise Telecom Services

RuralTelephony

Value Added Services

Virtual Private Network

Managed Services

Infrastructure Sharing

WiMax

3G

Urban-Rural Telephony


Rural India

Population Contributio

n

15-20%

72%

Subscription

Contribution

80-85%

28%

History, Introduction, Facts


Spectrum Action

India Advantage

VAS

Industry Updates

Future Technologies

Conclusion


Strategic Flow

ClearPolicy

Cheap tariff

regime

Competition

So How all this happened?

500 Mn Mobile and Wire line subscribers in India today Rs. 40,000 Crore quarterly revenue figures for this industry

TRAI functions


Consumer Protection

Ensure Quality of Service

Ensure Affordable Tariff

Regulate Interconnections

Regulation, Directions, Orders

Recommendations

AgendaHistory, Introduction, Facts


Spectrum Auction

India Advantage

VAS

Industry Updates

Future Technologies

Conclusion


Spectrum Allocation

Need for Spectrum Allocation

• Spectrum auctions ensure the efficient use of spectrum by allocating it to those entities that value it most, while also generating revenues for governments.

• In order to allocate spectrum amongst competing service providers, regulatory agencies often use auctions.

• The key challenge before regulatory agencies is to design auctions in such a way as to foster competition while at the same time ensuring that bidders can effectively use the spectrum for their business.

Spectrum Allocation in Indiao o

Circles•In India, telecom licences were auctioned for basic and cellular services from 1991 by the Department of Telecom (DoT).•The entire country was divided into roughly 20 circles, categorized as A, B, or C depending upon their revenue potential.

GSM&WLL

•Required to seek Foreign partners.•For cellular licences, Global System for Mobile Communications (GSM) was the chosen technology and for basic services, a combination of fiber optic and wireless in the local loop (WLL) was selected.



Spectrum Auction

India Advantage

VAS

Industry Updates

Future Technologies

Conclusion


India’s Competitive Advantage


1. Fastest growing free market democracy2. Cost advantage in product development and back office processing3. Stable economic outlook – Decade long reforms4. Huge market potential – one of the largest consumer markets5. Large talent pool

Source: www.telenor.com

Porter’s Diamond Model


Factor ConditionsFactor Conditions

Related and supporting industries

Related and supporting industries

Demand conditionsDemand conditions

Firm strategy structure and rivalry.

Firm strategy structure and rivalry.

ChanceChance

GovernmentGovernment

- Presence of skilled labour pool.- Rapidly developing robust

telecom infrastructure.- Increasing disposable income

of consumers.- Increasing demand due to

changing lifestyles and growing attraction for mobiles with new features.

- Presence of skilled labour pool.- Rapidly developing robust

telecom infrastructure.- Increasing disposable income

of consumers.- Increasing demand due to

changing lifestyles and growing attraction for mobiles with new features.

-The government extends full support to industry through reform processes.

- Policies are in place to safeguard the interests of service providers, as well as those of consumers.

-The government extends full support to industry through reform processes.

- Policies are in place to safeguard the interests of service providers, as well as those of consumers.

- Intensive competition in the country has made it possible for service providers to offer the services with lowers fare in the world, profitability,

- Many new handset have been launched.

- Intensive competition in the country has made it possible for service providers to offer the services with lowers fare in the world, profitability,

- Many new handset have been launched.

- India has a large middle class of 300 million,

- Growing affordability and lifetime free schemes have care a market at the bottom of the pyramid.

- Teledensity (~43.5%) offers huge future potential.

- India has a large middle class of 300 million,

- Growing affordability and lifetime free schemes have care a market at the bottom of the pyramid.

- Teledensity (~43.5%) offers huge future potential.

- Competent handset manufacturers have produced the lowest priced handsets for the Indian market.

- Handset players are setting up manufacturing bases in India for better operation management.

- Many telecom and equipment and software companies are based in India.

- Competent handset manufacturers have produced the lowest priced handsets for the Indian market.

- Handset players are setting up manufacturing bases in India for better operation management.

- Many telecom and equipment and software companies are based in India.

Source: IBEF Report

FDI in Telecom Sector


2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

116

129

680

521

1275.65

2345.38

FDI in Telecommunication Sector (US$ million)

Third largest sector to attract FDI in India

Source: IBEF Report



Spectrum Auction

India Advantage

VAS (Value Added Services)

Industry Updates

Future Technologies

Conclusion


VAS (Value Added Services)

SMSVAS services, Bulk Messaging, B2B and B2C

Voice IVRMobile Radio, Voice chat, English Learning, Devotional and Astrology, Music on Demand

Content downloadsMobile WAP PortalConsumer Applications Enterprise solutions : Mobile CRM, Mobile SFA

CRBT (Caller ring back tones)

USSDMessage along with *141#Flash alerts

VAS offerings


VAS market in India


VAS: Not a form of basic service but adds value to the total service offering

Contributes to 10% of total revenue from telecom operators

The corresponding figure in developed nations is ~25%

Present Segments


Population of India – 1,130 mn

Mobile Subscriber Base – 509 mn

GPRS Enabled – 70 mn

GPRS Activated – 17 mn

GPRS Users – 10 mn

Source: IAMAI Report

Why mobile VAS ?Decrease in ARPU for telecom operators

Very low operating margins

Decreasing call rates: Lowest in the world @ 1p/sec

Increase in number of operators in each circle

Saturation in metro market: Over 100% tele-density in 4 metros


VAS value chain

Content GeneratorsEg. Music Companies,

Website portals

Content Aggregators Eg. Spice Digital, Hungama.com,

Mauj.com

Telecom Operators Eg. Airtel, Vodafone,

Idea, BS


Rural VAS

Only 12% tele-density in rural areas as compared to 72% in urban areas

• Local Mandi Rates• Weather forecasts• Health and job related information• Train services

Huge market potential

Sachet model of VAS promotion

Localization content




Spectrum Auction

India Advantage

VAS

Industry Updates

Future Technologies

Conclusion


Industry UpdatesIdea Cellular’s Acquisition of Spice Telecom

• Idea acquired 40.8% stake of Spice Communications at Rs 77.30 a share for Rs 2,716 crore. There was a share swap in which Spice shareholders got 49 Idea shares for every 100 Spice shares held.

Vodafone’s entry into India

• Vodafone paid a discounted price of $10.9 billion in cash for acquiring the 52% stake held by Hutchison Telecom International (HTIL)

Telenor-Unitech Deal

• Telenor is in the process of acquiring controlling stake of 67.25% in Unitech wireless via equity infusion

TTSL – DoCoMo Deal.

• Japanese carrier NTT DoCoMo acquired 26 per cent stake in Tata Teleservices (TTSL).


Bharti-MTN deal

To create a $61-billion transnational telecom

goliath.

•Combined revenues of $20 billion •Over 200 million subscribers across Africa, Asia and Middle East.

Takeaways for Bharti

•Access to new geographies with high growth potential.•Greenfield project, time-consuming and capital intensive.

Reasons for failure -Dual listing

•Indian rupee is not fully convertible•Not possible to go in for dual listing of shares.•which allows people to buy shares in the stock exchanges of one country and sell in the bourses of the other country


India 3G Story

BE - Domain Study - Telecom

In India, 3G mainly for voice?Indiatimes - Sep 8 2008

India 3G kicks off; but at what cost?CIOL - Jan 16 2009

India 3G News: BSNL flips the switchProduct Reviews - Mar 5 2009

DoT looking to hike the reserve price for the auctions of the pan-India 3G spectrum

TopNews - Jun 12 2009 India 3G auction may happen sooner than expectedTelecoms.com - Aug 27 2009

SK C&C, Reliance team on India 3G roll outEE Times India - Oct 20 2009

34Source: Google Trends

http://infotech.indiatimes.com/News/In_India_3G_mainly_for_voice/articleshow/3459332.cms

http://infotech.indiatimes.com/News/In_India_3G_mainly_for_voice/articleshow/3459332.cms

http://www.ciol.com/Technology/Mobility/Feature/India-3G-kicks-off;-but-at-what-cost/16109114892/0/

http://www.product-reviews.net/2009/03/05/india-3g-news-bsnl-flips-the-switch/

http://www.topnews.in/dot-looking-hike-reserve-price-auctions-panindia-3g-spectrum-2176966



http://www.telecoms.com/14038/india-3g-auction-may-happen-sooner-than-expected

http://www.eetindia.co.in/ART_8800587243_1800005_NT_1cafed2e.HTM

• 3G – Rs 35 bn• WiMax – Rs 17.5 bn• EVDO – Rs 8.25 bn

Reserve Price

• 2-3 times the reserve prices - to total at least Rs65bn–Rs120bn.Expected Bid

• with no current presence in India have to pay an additional Rs 16.50bn for 2G spectrum.Foreign players

• relaxing the normal US$500m limit on external commercial borrowingsECB

Jan 14th 2010




Spectrum Auction

India Advantage

VAS

Industry Updates

Future Technologies

Conclusion


Mobile Number Portability(MNP)


The InhibitorsHuge Costs Infrastructure Upgrade

Customer Retention/Increased Competition

Cost Recovery and Bill Reconciliation/Query Processing

Source: Voice and Data

Mobile Virtual Network Operator• Operator or company which does not own a licensed spectrum

and generally with out own networking infrastructureWhat ?

• MVNOs resell wireless services under their brand name, using regular telecom operator's network.How ?

• Deploy their own mobile Intelligent Network (IN) infrastructure in order to facilitate the means to offer value-added services.

• The goal is to differentiate versus the incumbent mobile operator, allowing for customer acquisition.

Differentiation

• MVNO's have full control over the SIM card, branding, marketing, billing, and customer care operations.Marketing

• MVNOs have not been regulated in any country. • ITU has received several requests to study the issueRegulation


Wimax v/s 3G


3G WiMax Result

Spectrum Price To be auctioned DoT has recommended 25% of reserve price of 3G spectrum

Advantage WiMax

Spectrum Allocation Simultaneous Simultaneous Neutral

For Voice services Best technology Evolving technology

Advantage 3G

Equipment/Standard Evolved over the years New technology Advantage 3G

Data download speeds (fixed)

15 Mbps 70 Mbps Advantage WiMax

Data download speeds (mobile)

15 Mbps 20 MBPS Advantage WiMax

Source: Business Standard

Generations


2gDATA RATE14.4

3G600KBPS TO 2MBPS

4G10MBPS TO 20 MBPS

• Worldwide Interoperability for Microwave Access

• IEEE 802.16e STANDARDS• BROADBAND EVOLUTION

• Long term evolution• 3GPP• 80%• MOLILE EVOLUTION

Wi Max(e not d)

•MIMO (multiple input multiple output) smart antenna•OFDM•10 To 80mbps•Sprint, Clearwire, Comcast, •Motorola / Lucent •Rev m is the future•Small investment

LTE

•MIMO•OFDM•20 to 100mbps•Revision 8 future is rev 10•Vodafone/A&T/France Tele•Nokia & Ericsson •Large investment

4G




Spectrum Auction

India Advantage

VAS

Industry Updates

Future Technologies

Conclusion


SURFING AGAINST


Top Ten Challenges Sustenance of same EBITDA

Competitive tariffs

VAS applications on Device

Spectrum management

Broadband expansion in Rural

Transition to NGN

Content Regulation of Data

Ecosystem to facilitate M&A

Reduce Circles to relax Roaming

Alternate Technologies (Solar/Wind

for power back-up)

THE TIDE

Road Ahead


China India USA Indonesia Brazil Pakistan

720510

271140 165 96

604

661

3691 25 71

54.4%43.6%

88.4%60.5% 86.6% 57.6%

People with and without mobile connections (in millions)

Connected Not Connected

Highest Number Not Connected

People

References1. Trai – Quaterly Report (Nov 2009).2. IBEF report 2007-08 : Telecommunication - MARKET & OPPORTUNITIES.3. Cellular Statistics – Cellular Operator Association of India 4. IAMAI & eTechnology Group@IMRB: MOBILE VALUE ADDED SERVICES IN

INDIA- A Report.5. Telenor Entering India: Investment Update6. Voice and Data(May 2009): Mobile Number Portability - Poaching with

Portability.7. Business India : Telecom Takeover, Bharti-MTN deal


Thank You for Your Attention !

http://www.coai.com/index.php

Telecom Sector in India

Business

Transcript of Telecom Sector in India