September 2006



• Market Overview • Government regulations & policy • Advantage India and business opportunities

www.in TELECOM Market Overview • Market Overview • Government regulations & policy • Advantage India and business opportunities .imacs.

38 % • Nearly quadrupled since FY 02 • 5-6 million being added every month • Tele-Density .8 (Aug 2006) • Has doubled in 3 years • Target set for 2007 under NTP 1999 achieved during FY 2005 60 44 0 2002 2003 2004 2005 Aug-06 Revenue growth 20 15 10 $ Billion 5 0 2002 2003 2004 2005 9 20 15 CAGR . Telecom regulatory Authority of India (TRAI).5 bn (FY 2006) • CAGR (FY 2002-06) .21% 10 11 2006 Source: www. Year indicates financial year ending March .14.in TELECOM Market Overview India’s telecom market has grown rapidly in the last few years… Subscriber growth 180 164 120 CAGR .imacs.21% • Have doubled in last 3 years • Subscribers ~ 160 million (Aug 2006) • CAGR (FY 2002-06) .voicendata.com.www.38 % 76 53 98 • Revenues ~ USD 19.

in TELECOM Market Overview …and is poised to be the second largest network globally by 2008* Telecom Subscribers . subs USA 360 Japan 153 Rus 130 Ind 125 600 400 mn. subscribers 200 Germany 134 0 Expected to overtake US by 2008 * Based on excerpts from Worldwide Wireless Data Trends 2006 .Country wise December 2005 800 China 743 India .www.Nov 2006 184 mn.a mid year update. Datacomm research Source: International Telecommunications Union (ITU) .imacs.

Mobile vs Fixed 175 140 105 70 38 Mn.imacs.in TELECOM Market Overview Mobile telephony continues to be the 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 of CDMA and GSM providers • Significant share of private sector • Growing affordability • ARPUs among lowest in the world • Lower cost of ownership due to Low cost / used handsets • Success of the pre-paid format Subscriber Growth . subs) Wireless emerging as the preferred mass market format service providers focus on Internet / broadband access to improve fixed line ARPU* * Average Revenue per user 2006 figures as of Nov 2006 Source: TRAI . subs) Mobile (mn. subscribers 35 7 0 2002 143 42 13 2003 43 34 2004 52 41 2005 41 2006 Fixed (mn.www.

) Locations ~ 4900 towns out of nearly 5200 towns ~ 350.in TELECOM Market Overview Growing network coverage is triggering further market expansion Segment Urban Cellular reach (2003-04) Locations ~ 1700 of 5200 towns Negligible Population 200 million Cellular reach (End 2006 .imacs.TRAI .www.000 villages Population 300 million Rural Negligible 450 million Support from Universal Service Obligation Fund envisaged for shared network infrastructure creation in uncovered rural areas Source: Recommendations on Rural Telephony 2005 .000 out of 607.Est.

4% 2.2% 8.0% 8. Announced Plans to expand GSM footprint in North and North east Pure play GSM player in 2 circles 37.4 7.0 19. with presence in all sectors. Pure play GSM operator in 6 circles Integrated operator (along with VSNL) with presence in all segments.7% 6.7% 2.9% 2. National presence (except Mumbai and Delhi) Government owned.3 15.6 17. Plans expansion of GSM network apart from being the largest private CDMA operators.4 3.in TELECOM Market Overview V Vibrant and competitive telecom market Company Presence Subscribers Jul 06 (mn) Fixed BSNL MTNL Bharti Reliance Hutch IDEA Tata Teleservices Aircel Spice Others Total Consolidation leading to emergence of integrated pan-national service providers Source: TRAI.4 50 1.8 1.4 90 .4 Government owned. Pure play GSM operator in 11 circles.6% 2.7% 19.3% 21. Largest mobile services provider.imacs.9 2.4 3.0 4.0% 5.2% 17.www.7% 7.0 4. IMaCS research Share (%) Fixed 74.9 0. Integrated operator.7 2.6 1. Provides CDMA services in 20 circles Operates in 2 circles. Integrated operator. Has ramped up GSM services.0% Mobile 19.1% Mobile 17. Operates in Delhi and Mumbai.

Reliance have end-to-end presence in ILD. NLD and Access. Bharti. FLAG’s FALCON cable system when completed would connect 12 countries with 25 international cable landing stations • Investments in Infrastructure and • Bharti-Singtel and VSNL investments in undersea cable • Emerging as Integrated telco.both corporate and retail segments .imacs.FLAG by Reliance. positioning themselves as full service providers • Tata teleservices-VSNL.IPLCs.in TELECOM Market Overview Several Indian firms gaining a foothold in the global market • Indian service providers acquiring scale in the International Long Distance market through acquisitions… • Acquisitions . announced plans to get into ILD BSNL has • Focus on corporate connectivity . Tyco and Teleglobe by Videsh Sanchar Nigam Limited • VSNL is now the world's fifth largest carrier of voice globally • Reliance’s FLAG network connects with 28 countries. VPNs • Strong thrust on internet and broadband .www. Frame relay.

www.imacs.in TELECOM Government regulations and policy • Market Overview • Government regulations & policy • Advantage India and business opportunities .

74% 2005 Unified Licensing Regime New Telecom Policy. 1994 NTP 1999 BSNL formed 2001 Internet Telephony 2002 FDI .2002 • • • • • • • • • Licenses converted to revenue sharing Private sector share less than 5% in revenue terms Competition in NLD and ILD Licenses on Revenue share 4 mobile operators / circle Take-off 2002 onwards • • • • • Calling Party Pays CDMA launch 3-6 operators in each circle Intra-circle merger guidelines Unified Licensing 1994-1999 • • • 4 private fixed service providers with less than 1% market share 2 GSM mobile players in each circle 13 players start mobile service • National Telecom Policy (NTP) 1994 • TRAI constituted 1997 National Telecom Policy.49 % • Broadband policy 2004 • FDI .DoT per/ BSNL ILD .VSNL Partial Deregulation Further Deregulation 1999 .imacs. DTS elsewhere No mobile service NLD . 1999 .Mumbai and Delhi.in TELECOM Government Regulations and policy Reform thrust on independent regulation.www. competition and investment facilitation Pre-reform Pre-1994 • • • MTNL .

imacs.in TELECOM Government Regulations and policy Independent regulation has been a critical factor in growth 2006 Number portability Convergence TRAI’s recommendations 2005 Unified Licensing Quality of Service regulation Rural Telephony 2004 Intra-circle merger guidelines Internet / broadband penetration 2003 Calling Party Pays Regime Unified Access Licensing Reference Interconnect Order 2002 • ILD opened to competition • Internet Telephony allowed. • Reduction in License fees Mature regulatory regime and an enabling policy framework already in place .www.

imacs.www.in TELECOM Government Regulations and policy Important policy initiatives • • • • • • • • Broadband policy unveiled in 2004 .Targets 20 million broadband subscribers by 2010 Focus on making India a regional Telecom manufacturing hub FDI limit increased from 49% to 74% 100% FDI permitted under automatic route in the manufacturing sector Deregulation virtually complete and Unified Licensing regime Interconnection Usage Charge framework in place Exemption from customs duty for import of Mobile Switching Centres Comprehensive Spectrum policy and 3G policy on the anvil Creating a favourable investment climate to support growth .

imacs.www.in TELECOM Advantage India and business opportunities • Market Overview • Government regulations & policy • Advantage India and business opportunities .

76 mn.imacs. China .24 mn. more than 90 million subscribers added in the last two years • More than 5 million subscribers added 250 every month since Dec. India surpasses China at the same stage of market evolution China India • On a comparison of growth since Million Subscribers 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Year In the 11th year India .in TELECOM Advantage India and business opportunities Recent developments are indicative of the paradigm shift in wireless growth India China comparison 500 • Of the 160 million subscribers. 2005. translating into the highest growth rate in the world introduction of mobile telephony.www. Source:TRAI .

www. vibrant ecosystem of content providers / broadcasters. Lehmann brothers report.Young population (60% < 30 years) and an affinity to music and movies • Supply .in TELECOM Advantage India and business opportunities Mobile Value Added Services (VAS) set to register explosive growth* • Data and VAS contributed to 7% of revenue in 2004 • Messaging and music (ringtones.3 million visitors out of its 18 million subscribers in 2005 VAS expected to contribute 20% of revenue by 2008 and 30% by 2010 * Excerpts from Mobile Data in India. Oct 2005. declining GPRS/mp3 handset prices • Indian Idol . downloads etc) to be key contributors • VAS revenues expected to grow given • Demand .the mobile portal of Reliance Communications had 5.a popular FM radio channel receives ~ 40000-45000 SMS messages every day • R-World .imacs.aggressive pricing.a reality show on Sony Television got 55 million SMS messages in 5 months • Radio Mirchi . IMaCS research .

Internet customers • • (25% growth YoY) 1.imacs.66% share 7-fold growth in broadband connections during FY 2006 1.94 mn. Internet adoption in small towns and offerings including triple play and video-on-demand / IPTV expected to be major growth drivers internet penetration Envisages 40 million internet connections by 2010 Visualises creation of infrastructure through various access technologies Source: TRAI .38 0. subscribers 0. broadband customers (6-fold growth YoY) Incumbents (BSNL / MTNL) dominate .www.18 0 Mar-05 Mar-06 Nov-06 • Broadband Policy 2004 • Recognises the importance of • • Growing PC sales.35 mn.5 6-fold growth • Internet / Broadband market (FY 2006) • 6.00 1.75 • Mn.in TELECOM Advantage India and business opportunities Broadband and Internet connectivity on the verge of a take-off Broadband subscriber growth 2.

imacs. Executive vice president.S. But India has 1. market is high end and maybe it's only 5%in India. About 30%of the U. Motorola's personal communications sector in On the Razor's Edge:Cell Phones Morph into Hip Consumer Electronics Devices Knowledge@Wharton rise to 65% • Low tele-density relative to Asian peers • Progressive policy and regulation • Independent regulation • Consistent policy framework • Favourable Investment Climate • Rising Affordability • Declining ARPUs • Lowering cost of handsets • Growing popularity of pre-paid format . IDC estimates phones with color screens/ cameras to account for 30%of handset sales in 2005 and 62%by 2008 “People think about the Indian market as a lower tier.in TELECOM Advantage India and business opportunities Growth-driving sustainable factors in the telecom sector • Favorable Macro-Economic fundamentals and Demographics • Strong Economic Growth and rising incomes • By 2020.www. working age population to • • • • India not just a cost-sensitive mass market 300 million plus middle class population Value added service revenue expected to grow at 80% CAGR over next 5 years.1 billion people” Ron Garriques.

imacs.000 by 2006 Mobile access to all villages with population of more than 1.www.000 by 2007 Translating into an investment requirement of USD 25 bn to USD 30 bn… .45 bn telecom market by FY 2010… Telecom sector targets announced by Government of India • • • • • 250 million subscribers by 2007 500 million subscribers by 2010 20 million broadband subscribers by 2010 Mobile access to all villages with population more than 5.in TELECOM Advantage India and business opportunities India poised to be a USD 40 bn .

• Has invested in Bharti Airtel and also Network i2i is a 50:50 Joint Venture between Bharti and SingTel. an integrated service provider • Represents the largest foreign investment in the telecom services sector in India • Promotes and supports a range of telecommunications products and services in India in association with licensed operators.in TELECOM Advantage India and business opportunities A compelling destination for Telecom service providers and equipment majors • Largest pure-play GSM service provider in India • Has over 15 million subscribers • Has a 10% stake in Bharti telecom.imacs. connecting Chennai to Singapore • Nortel offers a suite of products and solutions across two broad categories • In India since 1991. Wireline Networks and Optical Networks) and Enterprise Networks. Has an R&D centre in Bangalore Carrier Networks (incorporating Wireless Networks. .www.

Integrated operator with presence in all segments Leads the mobile segment in the country • • Reliance Communications . MPLS-VPN.www. • • MTNL . CDMA mobile. Internet.in TELECOM Advantage India and business opportunities Key Indian Companies • • BSNL . Carrier service.Largest player in India in the CDMA segment Plans a GSM network • • Tata Teleservices . GSM Mobile. Broadband.Integrated operator (with VSNL) with presence in all segments Provides CDMA services in 20 circles . IN Services etc. VSAT.Incumbent service provider and World's 7th largest Telecommunications Company providing comprehensive range of telecom services in India Services include Wireline. VoIP services.State owned operator covering the cities of Mumbai an Delhi Provides both fixed and mobile services • • Bharti Airtel .imacs.

The Foundation’s primary objective is to build positive economic perceptions of India globally India Brand Equity Foundation c/o Confederation of Indian Industry 249-F Sector 18. Government of India and the Confederation of Indian Industry.67 Fax +91 124 401 3873 Email j. Haryana.org . 4060 .in TELECOM The India Brand Equity Foundation is a public-private partnership between the Ministry of Commerce & Industry.www. Udyog Vihar Phase IV Gurgaon 122015.org Web www.imacs. INDIA Tel +91 124 401 4087.bhuyan@ciionline.ibef.

the content is not to be construed in any manner whatsoever as a substitute for professional advice.www. IBEF and IMaCS neither recommend nor endorse any specific products or services that may have been mentioned in this publication and nor do they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed on this publication. wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this publication). This publication is for information purposes only. modified or in any manner communicated to any third party except with the written approval of IBEF. . All rights reserved. The same may not be reproduced. IBEF or IMaCS shall in no way. All copyright in this publication and related works are jointly owned by IBEF and IMaCS.in TELECOM ICRA Management Consulting Services Limited Disclaimer This publication has been prepared by ICRA Management Consulting Services (IMaCS) for the India Brand Equity Foundation (“IBEF”). be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any reliance placed or guidance taken from any portion of this publication. While due care has been taken during the compilation of this publication to ensure that the information is accurate to the best of knowledge and belief of IBEF and IMaCS.imacs.

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