Snapshot of Telecom in India

(prepared in Feb 04)

‡ Below 25% villages (1. ‡ Value-added services opened in 1992 (cellular mobile.8% teledensity ± far below world average of 10% and other neighbouring countries. radio paging.) ‡ Resource gap of Rs 23. ‡ Tendering process for selection of private players for Basic and Cellular services. etc.7 lakhs) covered. National Telecom Policy 1994 announced.5 mn. 2 . email. ‡ Plan targets revised to have telephone on demand and all villages covered. ‡ Telecom a national priority for increased economic development.000 cr to meet the revised targets necessitated private sector participation.Reforms (liberalisation) started in telecom Status in 1994 ‡ 0. ‡ All services available internationally to be available in India by 1996. ‡ Total phones: 8 mn with a waiting list of 2.

1991-96 : Pre-privatisation scenario 16 14 12 10 8 6 4 2 0 1991 1992 1993 1994 1995 1996 3 Supply Demand .

± 34 GSM licenses in 18 state circles ± 6 Basic Service Licenses in 6 state circles ‡ Results not satisfactory due to: ± Actual revenue realisations far short of projections leading to operators being unable to arrange finance for their projects and complete rollouts.Introduction of Privatisation ‡ Licenses awarded (in 1995-97) after tendering and bidding process: ± 8 GSM licenses in 4 metros (no bidding ± beauty parade). ‡ Government appreciates the concern of the operators and allows for mid-course corrections. 4 .

‡ High speed data and multi-media capability using technology including ISDN to all towns with a population greater than 200. ‡ Universal Service Obligation defined to provide voice and low speed data services to all uncovered villages.NTP 99 .000 by 2002. Targets revised: ‡ Telephone on demand by 2002 ± teledensity of 7% by 2005 and 15% by 2010. ‡ Encourage development of telecom in rural areas with suitable affordable tariff structure ± to raise rural teledensity from 0.new telecom policy Focus on creating an environment which enables continued attraction of investment in the sector and allows creation of communication infrastructure by leveraging on technological development. 5 .4% to 4% by 2010. ‡ Internet access in all District Headquarters (DHQs) by 2000.

Role of private sector in the early years 45 40 36 02 40 23 37 29 35 35 30 19 32 44 28 39 23 57 20 51 22 79 18 68 14 88 14 54 17 8 21 59 26 51 34 73 35 30 25 20 15 10 5 0 34 0 88 12 1 88 17 44 3 58 55 0 1997 1998 1999 2000 2001 D c-01 De and To a S ob e W e ne 6 .

Rollout Obligations to cover Urban / Semi-Urban / Rural areas in equal proportion. GSM Mobile (17).2mn ± US$ 45mn ‡ ‡ ‡ ‡ License fee (revenue share) reduced from provisional 15% to 12%. New licenses awarded in Jul .5mn (+ Bank Guarantees = 4 times entry fee for rollout obligations) ± GSM Mobile Services (4th Operator bid): US$ 0. Limited Mobility allowed to Basic Services (CDMA spectrum allotted to BSOs). 10% & 8%.2mn ± US$ 25.2001: the turning point ‡ ‡ Policy announced for additional licenses in Basic and Mobile Services (Jan 2001). Entry fee: ± Basic Services: US$ 0. 7 .Sep 2001 : Basic (25).

1 6 4 2 0 Mar '01 0.23 ‡ CDMA WLL(M) launched in limited manner in few circles. ‡ Tariff for GSM cellular mobiles reduced. 8 0.58 10.15 0.53 6.further tariff reductions.05 0.8 3. 8 .08 8. Sep '01 Mar '02 Sep '02 Dec '02 GSM Mobile WLL(M) ‡ Newly licensed BSOs roll out networks for WLL(M) on CDMA.53 ‡ Existing Operators expand service coverage.2001: Mobile revolution triggered 12 10 0. ‡ 3rd & 4th GSM Operator networks rollout .43 4.

‡ Interconnection Usage Charges established on the principles of ³work done´ ± termination charges introduced. ‡ Calling Party Pays (CPP) for mobile tariffs ± free incoming calls ushered in.Tariff & Interconnection Regulations ‡ Movement towards cost-based tariffing. ‡ Forbearance allowed recently on all tariffs (except rural fixed line). ‡ Tariffs closely regulated by TRAI between 1999-2002. 9 . ‡ Access Deficit Charges (ADC) for cost-minus fixed line services.

Increased competition leads to tariff reduction and affordable services Long Distance Peak rate tariffs Rs / min) 90 80 70 60 50 40 30 20 10 0 Pre 1999 1999-00 Oct-00 Jul-02 M ar-03 Current NLD ILD Local Call Tariffs (Rs / min) 16 14 12 10 8 6 4 2 0 Pre 1999 1999-00 Oct-00 May-01 Jul-02 May-03 Fixed Line GSM Mobile 10 .

Convergence of tariffs 3 2.5 0 Mar-01 Fixed WLL(M) GSM Mobile 0.89 Sep-02 0.5 2 1.5 1 0.71 1.69 0.71 1.78 0.69 1.67 1.69 1.37 1.69 0.37 2.69 1.12 11 .06 Mar-02 0.63 Jun-03 0.25 2.42 Sep-01 0.7 Mar-03 0.

49 mn 2 1.2003: Mobile boom has begun Total Additions 2.15 mn 2003: 17.5 2002: 5.5 1 0.5 0 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 2002 2003 12 .

‡ Upper middle class that spends 6% of its income on telecom services. 10 years) therefore India is poised for growth. ‡ India lags behind other Asian economies (approx.Growth drivers ‡ Declining entry costs and falling tariffs have lowered the bar in terms of affordability coupled with branding and advertising. ‡ High percentage of population owning two-wheelers are prospective mobile telephone users. 13 .

2003 : CDMA gains acceptance 7 6 5 4 3 2 5 1 0 D -02 M r-03 Jun-03 Sep-03 CDM % Dec-03 14 25 6 mn CDMA mobil phones 22% o tot l mobile market share Service coverage in over 1100 towns 20 15 10 0 CDM Mobi e .

present allocations to continue.competition not to be compromised. Spectrum pricing and allocation guidelines to be reviewed. Technology neutral and allows provisioning any kind of service. License fee reduced w. Intra-circle Mergers & Acquisitions recommended by TRAI .f 1. Rollout obligations to cover 50% DHQs in 3 years. 4th Cellular GSM license used as benchmark. BSOs offering WLL(M) allowed migration to UASL . SMP to be checked. 15 .Unified Licensing introduced ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Unified Access (Basic & Cellular) Service License (UASL) introduced (Nov 2003) as a first step towards Unified Licensing Regime.e. Rural telephony to be covered under Universal Service Obligation.4.2004 by 2% across the board for all access licensees.additional entry fee equivalent to 4th Cellular bid.

Future Investments US$ bn 14 12 10 8 6 4 2 0 2003 Wireline * Market Analysts' Estimates 2004 Mobile 2005 Backbone Total Total 16 .

Revenue Projections US$ bn 16 14 12 10 8 6 4 2 0 2004 Fixed * Market Analysts' Estimates 2005 Mobile 2006 N D I D D t 2007 17 .

Projections : Fixed & Mobile * Millions 90 80 70 60 50 40 30 20 10 0 2003 2004 2005 2006 2007 Fixed * Market Analysts' Estimates GSM CDMA 18 .

Teledensity .Urban vs Rural 35 30 25 20 15 10 5 0 1997 1998 1999 2000 Ur a 2001 2002 R ral 2003 2004 T al 19 2005 2006 2007 .