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MEGHA RANA NEHA SAXENA POOJA SHARMA SHIVANGI RAWAT SHIVAM SAHU
• INDIAN TELECOM INDUSTRY - AN APT EXAMPLE OF BUSINESS • ITS HISTORY & REGULATORY FRAMEWORK, • MAJOR PLAYERS AND THEIR BUSINESS SUCCESS(present status) • FUTURE PROSPECTS
MOBILE A BASIC NEED FOR ALL!
INDIAN TELECOM INDUSTRY – A LUCRATIVE OPTION
In re ce nt y ea rs, t he I nd ian te lec om i ndu stry h as witn essed p he nom en al gro wth . A c on duc iv e b usi ness en viro nme nt , f avour ab le d em og ra ph ic out loo k and th e p olitica l s ta bility enjo yed b y th e c ou ntry have c on tr ibu te d to th e gro wth of th e in du str y. I ndia achie ved th e d is tinc tio n of h av in g t he wor ld's lowe st call ra te s ( 2–3 U S c en ts) , the f aste st s ale o f milli on mob ile p ho ne s ( 1 we ek ), th e wo rld' s ch eap est mo bile hand set ( US D 19 ) an d the wor ld' s mo st afford ab le c olo ur phon e ( US D 31 ).
INDIAN TELECOM INDUSTRY – FACTS One of the fastest growing cellular markets in the world in terms of number of subscriber additions – 19.35 million in 3 months (April to June 2007) Expected to reach total subscriber base of about 500 million by 2010 (i.e., more than one phone for every household) Annual growth rate of the telecom subscribers – 47 percent (2006– 07) More GSM subscribers than fixedline subscribers Total telecom subscribers – 225.21 million (June 2007) Tele density – 19.86 percent (June 2007) Number of new mobile subscribers added every month – 7.34 million (June 2007) ARPU for GSM – USD 6.6 per month Telecom equipment market – USD 17,100 million (2006–07) Handset market – USD 4,750 million (2006–07)
INDIAN TELECOM INDUSTRY
SCENARIO IN EARLY INDIA
• India, emerging as a major player • In 1975, the Department of Telecom (DoT) was separated from P&T. DoT was responsible for telecom services in entire country until 1985 when Mahanagar Telephone Nigam Limited (MTNL) was carved out of DoT to run the telecom services of Delhi and Mumbai. • In 1990s the telecom sector was opened up by the Government for private investment as a part of
TELECO M LI BERALI ZATI ON
Liberalization started in 1981 when Prime Minister Indira Gandhi signed contracts with of France to merge with the state owned Telecom Company (ITI), in an effort to set up 5,000,000 lines per year.
non-commercial basis in Delhi. August, 1995 : GSM entered India Historic first cell phone-call was made by MobileNet-joint venture between Telstra (Australia) & B.K. Modigroup. Mobile revolution began in Kolkata.•Handset costs-40,000 & Call tariff-17 Rs/min. In the initial 5-6 years the average monthly subscribers additions were around 0.05 to 0.1 million only and the total mobile subscribers base in December 2002 stood at 10.5 millions. CDMA 1996 :Tata Tele services was the first to launch 05/08/09 7 CDMA mobile services in India with the Andhra
TH E BU BBLE BU RSTS (1997Ast ronomical growth •High investments and huge pro fits -In flated market caus ed b y t he hyp e between venture capit als a nd co mpanies -Cor rupt ed CEOs overstat ing their profit s •Overest imat ing the market and its demands and absurd pr ojections -Int ernet tr affic doubling ev ery 3 mo nths! -Level 3 digging t he earth 1 6 miles per day t o in st all new fib er pipes! •Lim it less expe ctations -Over es timating users inter ests and w hat they actually pay! -Ir ratio nal in vest ment for unusable infr as truct ure!
Over 655 networking and t elecom c ompanies filed bankr up tcy -Loss of $750 billion! Inflated stock mar ket tumbles -T he t el eco m market declined by 96 percent! -O ver all, the market lost $2 tr illion just in a few years The giant s fall one after another -WinS tar goes ban kr upt suing Lucent for $10 billion (2001) -WorldC om fil es t he largest bankr uptcy ever! -Level 3’ s sha res falls from $130 in 2000 t o $ 1. 98 in 2001! Market oversupply -Cisco repo rted 2 billion D ol la rs of unsold router s -H al f of the int ernet transmiss io n (sw it che s and rout ers) capacit y was unused -O nl y about 20 percent o f fiber pipes were led (t oday i t is 30%)
TH E BU BBLE BU RSTS(19 9920 01)
• Therefore, it became necessary to separate the Government's policy wing from its operations wing. The GOI corporatised the operations wing of DoT on October 01, 2000 and named it as Bharat Sanchar Nigam Limited (BSNL). • Many private operators, such as Reliance India Mobile, Tata Telecom, Vodafone, BPL, Bharti,
National Telecom Policy 1994 Divided into 22
Jammu & Kashmir
– 4 metros – 19 circles • Further divided into A, B and C category based on economic parameters and revenue potential • Each circle has a
Himachal Pradesh Punjab Haryana Uttar Pradesh W North Eastern States
DELHI Uttar Pradesh E Bihar Madhya Pradesh West Bengal
Maharashtra MUMBAI Andhra Pradesh Karnataka
CHENNAI Tamil Nadu Kerala
A Circles B Circles C Circles
Source :COAI 11
REGULATORY FRAMEWORK PROVIDES LEVEL PLAYING FIELD FOR ALL OPERATORS
The Department of telecommunications (Government of India) is the main governing body for the industry. Telephone Regulatory Authority of India (TRAI) assists the Government of India (GoI) to take timely decisions and introduce new technologies in the country.
Indian Telecom Industry Framework
Indian govt. bodies
They formulate various policies and pass laws to regulate the telecom industry in India.
Wireless Planning and Coordination (WPC) Department of Telecommunications Handles spectrum allocation and management DoT – Licensee and frequency management for telecom Exclusive policy making body of DoT
Handles ad hoc issues of the telecom industry
They undertake various research activities and monitor the quality of service provided in the Indian telecom industry. They also provide various recommendations to improve the status of telecom operations in India. Telecom Regulatory Authority of India (TRAI) Telecom Disputes Settlement and Appellate Tribunal (TDSAT) Independent regulatory body
Group on Telecom and IT (GoT-IT)
Telecom disputes settlement body
Various important regulations and laws have been passed in the Indian telecom industry postliberalisation era
Department of Telecommunication (DoT) is the main body formulating laws and various regulations for the Indian telecom industry.
BSNL was established by DoT
Intra-circle merger guidelines were established
Private players were allowed in Value Added Services
Independent regulator, TRAI, was established
ILD services was opened to competition
Go-ahead to the CDMA technology 2002
Calling Party Pays (CPP) was implemented
Attempted to boost Rural telephony
Number portability was proposed (pending)
1999 1997 2000
Internet telephony initiated Reduction of licence fees
National Telecom Policy (NTP) was formulated
NTP-99 led to migration from high-cost fixed license fee to low-cost revenue sharing regime
Unified Access Licensing (UASL) regime was introduced
Reference Interconnect order was issued
Broadband policy 2004 was formulated— targeting 20 million subscribers by 2010
Decision on 3G services (awaited)
FDI limit was increased from 49 to 74 percent
ILD – International Long Distance
Revenues of Indian Telecom Industry: 2002–07 (USD billion)
50 40 30 20 10 0 2002-03 2003-04 2004-05 2005-06 2006-07 ….. …. 2009-10 9 10 11 15 20
Revenues (USD billion)
FDI AND OTHER M&A ACTIVITIES INCREASING IN NUMBER
Major trends in the telecom sector is increasing M&A activity, de-regulation of telecom policies and growing interest of international investors.
Recent Deals in Telecom Sector
The Indian telecom industry has a 74 percent FDI limit in the telecom services segment. The GoI has permitted 100 percent FDI in manufacturing of telecom equipment in India.
Vodafone purchased stake in Hutch from Hong Kong's Hutchison Telecom International for USD 11.08 billion.
FDI in Telecom Sector
700 FDI (USD million) 500 300 116 100 2003–04 2004–05 2005–06 2006–07 129 680 521
Reliance Communications Limited has sold a five percent equity share capital of its subsidiary Reliance Telecom Infrastructure Limited to international investors across the US, Europe and Asia. The deal was worth USD 337.5 million.
Telekom Malaysia acquired a 49 percent stake in Spice Communications for USD 179 million.
Maxis Communications acquired a 74 percent stake in Aircel for USD 1.08 billion.
Ericsson to design, plan, deploy and manage Bharti Airtel network and facilitate their expansion in the rural areas, under a USD 2 billion contract.
The Indian telecom industry has always attracted foreign investors. In fact, the cumulative FDI inflow, during the August 1991 to March 2007 period, in the telecommunication sector amounted to USD 3,892 million. It is the third largest sector to attract FDI in India in the post-liberalisation era. FDI calculation takes into account radio paging, cellular mobile and basic telephone services in the telecommunication sector. 15
MAJOR PLAYERS IN DIFFERENT SEGMENTS OF INDIAN TELECOM INDUSTRY
BASIC SERVICES OPERATORS
BSNL Airtel MTNL Reliance TTSL Reliance BSNL Vodafone Idea
GSM SERVICES OPERATORS
INTERNET SERVICES OPERATORS
BSNL MTNL Reliance
CDMA Services Operators
TTSL TTSL BSNL Airtel
TTSL – Tata Teleservices Ltd.
SERVICE PROVIDED BY THESE PLAYERS• These players provide services according to customer needs. • The Indian telecom services can be divided predominantly into basic, “MOBILE AND INTERNET” services. It also comprises smaller segments, such as radio paging services, Very Small Aperture Terminals (VSATs), Public Mobile Radio Trunked
GSM, CDMA, 3G & WIRELESS
GSM (GLOBAL SYSTEM FOR MOBILE COMMUNICATION)
• • • •
TECHNOLOGY USED IN TELECOM SECTOR
The most popular standard for mobile phones in the world. Its promoter, the gsm association, estimates that 82% of the global mobile market uses this standard. Gsm is used by over 2 billion people across more than 212 countries Is considered a second generation (2g) mobile phone system.
TECHNOLOGY USED IN TELECOM SECTOR 2.CDMA (CO DE DIVISION MULT IPLE ACCE SS )
• One of the basic concepts in data com municat ion is the i de a o f allow ing several t ransmitt ers to send infor mation simul taneously ov er a s ingl e communication channel. This allow s several users t o sha re a bandwidth of f requencies. This concept is called multiplexing. CD MA employs spread-spectr um t echnology an d a special coding schem e (w her e each tr ansm itter is as signed a code) t o allow mult ipl e users t o b e mult iplexed ove r the same physic al channel
• • •
MARKET SHARE OF WIRELESS OPERATORS
Hutch 17% Others 8% Idea 9%
Reliance Communications 17% TTSL 9%
3G trend MT NL/ BS NL won the bidding for Spectr um f or 3G . O ther pl ay er s s till in the ro w. Launched in Delhi & India expects services M umbai. its 2G gr ow th in 3G Br and n am e ‘ Jadoo”- M TNL to replicate
TO DAY’ S INTERN ET STATU S
• Emergence of new applications – Video on demand – New Web-based applications – Music / Video downloading (MySpace, YouTube, iPods) High appetite for broadband – 50% of adults in U.S. use broadband – 52% of 8-18 year-olds have used MySpace! – More and more people get their news from the Internet and watch less TV! Socio-economic impact of the Internet – Providing greater economic opportunities (E-commerce) – Stimulating economic growth and productivity (Telecommuting) – The number of people using their mobile handsets to access the web is now over four times those using a PC that is 38 million …… still incresaing.
Urban Rural Teledensity in India
50 40 Teledensity (%) 30 20 10 0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
At Year Ending March Urban Total Rural
TELEDENSITY IN INDIA
DELHI HAS TELEDENSITY OF 109!!
250 Subscribers (in million) 200 150 100 50 0 2002–03 2003–04 2004–05 2005–06 2006–07 2007–08 (As of June 2007) 7.0 5.1 53 76 98.4 140.3 12.8 9.1 206 225.21 18.3 24 Teledensity (in percent)
19.9 20 16 12 8 4 0
Telecom Subscriber Base
• • • Delhi has teledensity of 109 Other state like Bihar, MP, Rajasthan with 25%Teledensity. Requierd teledensity of 75%.
VENTURE OUTSIDE INDIA
• • • • BHARTI AIRTEL in SRI LANKA has 2G 3G service since 2006. TATA communications has a stake of 53% with NEOTEL S. Africa. MTNL is working with Nepal communications. “ business outside land serves in sharing risk and increasing market asset”
EMERGING TREND “4G”
One standard known as IEEE 802.16e (belonging to the Mobile WiMax family) is now commercially available and is a precursor to 4G. Comprehensive IP SOLUTION on “Anytime Anywhere” basis. BSNL has license in India. To make India a leader in t elecom technology TeNet c reated CeWiT (C entre o f E xcel lence in
Wi reless T echno logy ) to do resear
ch in 4G.
WORLDWIDE INTEROPERABILITY FOR MICROWAVE ACCESS. “Wireless at maximum”
WiMAX can provide broadband wireless access (BWA) up to 30 miles (50 km). It is estimated that India will have 19 million WiMAX subscribers by 2012 (TRAI).
Aircel is the pioneer in WiMAX technology in India. The state-owned player, BSNL, aims to connect 74,000 villages through WiMAX. Bharti, Reliance and VSNL(now TATA)have acquired licenses in the 3.3GHz range to utilise the opportunities. Tata Teleservices Ltd has announced a major WiMAX deployment, including a Rs.1,968.26 crore ($500 million) investment over the next five years. The new network will cover more than 130 cities, intensifying competition across India
•Internet Protocol TV •Also called Triple play. • Currently available in Jaipur , Delhi, Mumbai Jodhpur!
ACQUIRING INDIVIDUAL SPECTRUM
• • • • Individual microwave spectrum for company. It will decrease the time for spectrum use & regulation. Will lead to freely lay down network cables. Fast services, broad band service in rural India.
VALUE-ADDED SERVICES AND RURAL TELEPHONY HOLDS LARGE MARKET POTENTIAL IN INDIA VAS
VALUE-ADDED SERVICES IN INDIA (2006–07)
Person to Application & Application to Person SMS, 15% Ringtone Dow nload, 35%
Game & Data, 7% Others (MMS etc.), 3%
Person to Person SMS, 40%
The VA S indus try was wort h US D 63 2 million in 2006– 07. The in du st ry is estimat ed to gr ow by 60% in futur e and become an USD 1,011 m il lio n opp ortunit y. •The VAS industr y is cur rently focussing on the ent ert ainm ent sector , such as th e Indian f ilm industr y and cricket; however, ther e is s cop e for growth in o ther avenues as util ity-bas ed ser vice s, such as location infor mat ion and mobile tr an sact ions .
Future servi ces for customers
• With the Department of Telecommunications approving the sale of ‘calling cards’ by telecom companies, international and domestic tariffs are set to drop further.
RURAL TELEP HO NY
• As the go ver nm ent tar gets to incr ease rur al teledensity fr om the cur rent 2 per cent to 25 per cent by 2012, rur al tel eph on y will requir e ma jor investments. T his segmen t w ill boos t the de mand f or telecom services, equipment, I nternet services and ot her value-added services; ther eby , off ering gre at market opp or tunit ies for t ele co m players .
TH ANK YOU!!
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