INDIAN TELECOM SECTOR

DEBMALYA KHAN

Key Facts and Figures

• Fifth largest network in the world, global standards

• Contributor of 2% of India’s GDP• Second largest in the emerging economies of

Asia( more than a 110 million subscribers)• 40% growth in subscriber base in 2005,

expected to reach 280 million by end of 2008• Wireless subscriber growth aims to surpass

2.5 million subscribers by 2008• Industrial output growth slipped to 8.6% in

2008 as compared to 11.6% in 2006-07

Key Facts and Figures ( contd )

Currently used wireless Technologies ( CDMA and GSM )Increased Indian tele-density to 12

• Current Value of the Indian Telecom Market- $100b

• Market leaders: Bharti Airtel ( 27% ) and Reliance Communications( 20% )

• Projected to reach $54b in 2012 as compared to $31B in 2008

Major Players

Bharat Sanchar Nigam Limited( BSNL) India’s largest telecommunications

company with largest public sector undertaking

Expanded its network in line with the tenth Five year plan ( 1992-97 )

Planning to overtake Bharati as the largest operator of GSM

23% of the entire subscriber base in the internet market

MAJOR MARKET TRENDS

• Embracing mobile technology in a big way • 4 million subscribers added every month in

the past six months• Wireless subscriber base has increased 75%

CAGR from 2001 to 2007 as compared to negligible wire line growth

• 18% of the mobile users willing to change their mobile handsets

• Great prospect for value added services.• Issues pertaining to bith 2G and 3G markets

needs to be evolved

Comparative Market shares( GSM ) Airtel ,a market share with 32.16% GSM

market share Vodafone , closely behind with 22% of

the market share BSNL , Third place 18.79% market share Idea, 12.45% market share Aircel , 5.51% market share

Segmental Performance

Telephone Segment: MOBILE SERVICES

Wireless subscriber base experiencing strong growth, added 95.96m subscribers in FY08

Bharti airtel, Reliance, Vodafone, Idea, BSNL, tata tele services in decreasing order

GSM Subscriber base reached 192.70M in the

quarter ending March 2008( growth of 11.89% ) Bharti remains the biggest GSM operator,

followed by Vodafone ( 44.13M ),BSNL ( 36.21M ), Idea ( 21M )

Segmental Performance( contd )

Segmental Performance( contd )

Segmental Performance( contd )

Segmental Performance( contd )

Market share of Top 5 ISP

ISP Subscriber base share in %

BSNL 5640191 50.82

MTNL 1899747 17.12

Bharti Airtel Ltd. 815360 7.35

Reliance Communications ltd 696440 6.28

sify technologies 576047 5.19

Inter-Firm Comparison

Telecom service providers Operational Performance

In terms of Sale value, Airtel is the market leader ( 52.39% growth )

MTNL showed decline of sales Tata teleservices and tata communications showed

considerable growth ( 21.47% and 9.10% respectively )

Telecom equipment Manufacturers Tata communications major loser with 30.16% loss

in returns Reliance and Tata Teleservices saw 15% decline in

market cap

Increasing Subscriber Base

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Effective charge (in Rs. Per min) Subscriber Base (in mn)

3rd & 4th Cellular Operator

CPP Introduced

Lowering of ADC from 30% to 10% of sector

revenueNTP'99

The per subscriber mE usage has increased from 12-15 mE per subscriber in 1999 to ~30 mE per subscriber in 2005.The minutes of usage per month per subscriber has also increased from 114 minutes in 1999 to 367 minutes in 2005

Problems in Telecom Sector

Levies and Duties: Has one of the highest levies and duties

attached to it( 17-26%)adversely affecting availability of funds for network expansion

Return on capital for mobile services is 7.8%

Regulatory charges % age of revenue

Service tax, GST 10% + GST

License Fee 5 – 10%

Spectrum Charge 2 ~ 6%*

USO Included in license fees

Total Regulatory charges

17%~26% + GST Source: TRAI

Problems in Telecom Sector( contd)

Connecting Rural India: Contribution from Rural India stands at a mere

20% Mobile and wireless services not penetrated

rural areas Infrastructure sharing and Clearing issues:

duplication of infrastructure a colossal waste Enormous delays in obtaining Right of way from

different agencies like NHAI, pollution board Low ARPU- Cause of concern

Problems in Telecom Sector( contd)

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• Global average ARPU – USD 21• Indian Average ARPU – USD 8

The New Business Strategy: From Services to Business Ecosystem

18

Legacy Telecom

Fixed Line

Wireless

DiversifiedTelecom

Solutions

Wireless

Applications

E/M Payment

NewTelecom BusinessEcosystem

Telecom Service Focused Business

Telecom Service Blended with Emerging Areas like VAS & Mobile Applications Transform to be Telecom

Ecosystem Enabler

Early Vertical Specific programs

Mobile Wallets and Payment

Third-party consumer and early enterprise

Access and early applications

Historic

Transition

Future

Radio Paging

Fixed Line

The New Telecom Ecosystem – Feeder Model

19

NewTelecom BusinessEcosystem

Wireless Service Provider

Fixed Line Service Provider

Telecom Handset Manufacturers

Telecom Network Equipment Manufacturers

Telecom Transmission Equipment Manufacturers

Application & Content Providers

Active & Passive Infrastructure Providers

Drive Indian Economy Towards the 10% Economy Growth Target

What the New Ecosystem Will do ?

20

If the new ecosystem is established to meet the target of 250 million subscribers, then the

• Increase in tele-density will increase the rate of growth of GDP

– A 1% increase in tele-density results in 3% increase in rate of GDP growth rate

• Current 5 million jobs generated by this sector can increase to 12 million

• Proper facilitation to various sub-sectors in the ecosystem can increase revenues generated by

the telecom industry for the government

– Mobile services industry’s annual contribution of INR 32,000 crores can increase beyond INR

50,000 crores

– Annual revenues contributed mobile industry can increase from INR 15,000 crores to INR 65,000

crores

Objective of FICCI telecom committee• Identifying major areas of growth in the sector

• Identifying the competitiveness & potential areas for synergy in the global market

• To organize interactive meetings among the members for taking up the challenges and working towards the opportunities

• Conducting Workshops/ Seminars/ Conferences/ Training Programmes for promotion and better understanding of the sector and taking up the issues and challenges and working towards the opportunities

• Organized an international Conference & Exhibition 'India Telecom 2006- Mapping the Road Ahead'

Challenges faced by Indian Equipment Manufacturers Industry Current – Demand supply Mismatch

Needs to add capacity in tunes of 150 million lines to achieve 250 million subscribers by 2008

Required to import requisite telecom equipment

Inverted Duty structure hampering the industry Imported telecom equipment are levied 5%

customs duty

Recommendations

Govt. should encourage the vendors to manufacture handsets rather than just reducing import duty

• Infrastructure sharing be mandated by the

government

• A single window clearance system should be

put in place to expedite all clearance related

issues