Dynamics of Indian Telecom Industry

Research Report
By Jyothin Madari

Executive Summary
 

Third largest telecom network in the world Fastest growing – Forecasted CAGR growth rate of over 15.3% by the end of 2012 Monthly additions of above 8 million subscribers Growth impetus from wireless segment with 84% wireless and 16% wired National teledensity at 22%, rural teledensity at 7%, while urban at 57% 9 million Internet and 2.5 million broadband subscribers Six major operators and eight minor operators
2

Future Outlook
 

 

Need for massive investments in infrastructure development – expected to require 330,000 network towers from the present 100,000 Decrease in wireline subscriber base however strong growth in mobile subscriber base Improvements in mobile quality of service, quick service delivery, affordable pricing plans, and lower handset costs. VAS* - Key revenue stream for mobile operators Broadband penetration is low => high growth expected New Technologies paving the way for new services, additional revenue streams and rural penetration
*

Value added-Service

3

Market Forces/Growth Drivers
Industry Specific Factors

Service Providers
Subscribers

Handsets

Infrastructure/ Equipment

Younger Population

Growth
Burgeoning Middle Class Booming Knowledge Sector Growing Urbanization

High GDP Growth

Rising Income Levels

Macro Economic Factors

4

Market Size & Growth
 

Currently valued at $100B Telephone coverage in India rose to 34.5% in Jan ’09 from 33.23% in Dec ’08. Growth spurred by fall in tariffs and fall in handset prices Wireless accounts for nearly 70% of the total telephone subscriber base Total telecom subscribers growth rate during quarter ending March 2009 – 11.68% Total wireline subscribers growth rate for quarter ending March 2009 – 0.15%
5

Subscriber Base
Total Telecom Subscribers (Wireline+Wireless)* Total Subscribers % Growth QoQ Urban Subscribers Rural Subscribers Overall Teledensity Urban Teledensity Rural Teledensity
*

429.72 Million 11.68% 309.43 Million (72%) 120.29 Million (28%) 36.98 88.66 14.8
All figures for March end 2009 6

Teledensity
160 140 120 100 (% ) 80 60 40 20 0 20.74 7.02 1.57 2004 26.88 8.95 1.73 2005 12.74 1.83 2006 Urban 48.52 39.45 18.31 5.38 2007 Total 26.22 9.46 2008 Rural 33.23 13.13 2008 (Dec) 2012 25 66.39 81.06 58 135

7

Service Types
Fixed-line

Internet

Subscribers

Mobile

Broadband
8

ICT* Statistics

Fixed Telephone lines per 100 inhabitants : 3.5 Mobile subscribers per 100 inhabitants: 18.4 Internet subscribers per 100 inhabitants: 0.8 Broadband subscribers per 100 inhabitants: 0.22
*

Information and Communication Technology

9

Subscriber Base (Fixed-line and Mobile)
Number of Subscribers (in millions) 600 500 400 300 200 100 0
100 40 150 39 192.87 229 325 250

462

39.42

38

37.9

37.75

37.96

2006

J un-07

J ul-07

Dec-07

Dec-08

J an-09

2010

Fixed-line

Mobile
10

Subscriber Base (Broadband and Internet)
Number of Subscribers (in millions) 16 14 12 10 8 6 4
2.34 6 5 3.1 3.87 8 5.45 6.22 10.4 11 12.85 13.54

2 0
0.18

1.35

2006

2005

2007

2007 (Dec)

2008 (J an)

2008 (Dec)

Broadband

I nternet
11

2009 (Mar)

Fixed-line Telecom Market
Total Wireline Subscribers % Growth QoQ Urban Wireline Subscribers Rural Wireline Subscribers Village Public Telephones (VPT) Public Call Office (PCO) 37.96 Million 0.15% 27.38 Million (72.13%) 10.58 Million (27.87%) 5.61 Million 6.20 Million

All figures for March end 2009

12

Operator wise Market Share of Fixed-line Service
Urban Fixed-line Operators
MTNL 13.00%
Urban+Rural Fixed-line Operators
Other Private Operators 13.29% MTNL 9.41%

Other Private 18.00% BSNL 69.00%

Rural Fixed-line Operators
Other Private 0.35%

BSNL 77.30%
BSNL 99.65%

13

Mobile Telecom Market
Total Wireless Subscribers % Growth QoQ Urban Wireless Subscribers Rural Wireless Subscribers GSM Subscribers CDMA Subscribers 391.76 Million 12.93% 282.05 Million (72%) 109.71 Million (28%) 297.26 Million (75.88%) 94.50 Million (24.12%)

All figures for March end 2009

14

Development and Penetration
200 180 160 140 (millions) 120 100 80 60 40 20 0
3.1 5.05 10.5 0.8 37.4 22 6.4 10.9 19.1 58.5 44.2 105.4 85 180

2000

2001

2002

2003

2004

2005

2006

2007

GSM Subscriptions

CDMA Subscriptions
15

Operator wise Total Market Share of Mobile Service
Others Aircel 2.99% 4.73% Idea 8.96% Bharati Airtel 23.97%

Tata 9.93%

BSNL 13.31%

Reliance 18.56%

Vodafone 17.55%

16

GSM vs. CDMA
Statistic*
Share of Prepaid Incoming Minutes of Usage per subscriber per month Outgoing Minutes of Usage per subscriber per month Outgoing SMS per subscriber per month ARPU#

GSM
94% 249 235 30 $4

CDMA
0.7% 192 164 10 $2
17

# Average Revenue Per User *March End 2009

Operator-wise Market Share of GSM
BPL MTN L 0.73% 1.41% Vodafone 23.13% Aircel 6.22% Reliance 6.73%

Spice 1.39%

Idea 13.08%

Bharati 31.60%

BSN L 15.71%

18

Operator-wise Market Share of CDMA
BSNL 5.76% Shyam Telelink HFCL 0.63% 0.41% MTNL 0.32% Tata Teleservices 37.16%

Reliance 55.72%

19

Internet Service
Total Internet Subscribers (including Broadband) % Growth QoQ Broadband Subscribers Wireless Data Subscribers (i.e. through mobile handsets) Total International Bandwidth owned by ISPs Total National Bandwidth owned by ISPs 13.54 Million 5.30% 6.22 Million 117.82 Million 209 GB 174GB

All figures for March end 2009

20

Operator wise Market Share of ISPs
Others 4.26% Data Infosys Ltd. You Telecom Pvt. Ltd. 1.83% 1.47% Hathway Cable & Datacom Pvt. Ltd. 2.50% Tata Communications Internet Services Ltd. 2.72% Sify Technologies Ltd. 2.99% Reliance Communications Infrastructure Ltd. 6.91% BSN L 53.62% Bharati Airtel Ltd. 8.01%

MTN L 15.69%

21

Broadband Service (>= 256 Kbps)
 

Move into high-speed broadband Internet access has been distinctly slow Broadband penetration still remains at only around 0.2% Most of the local loops are owned and operated by state owned service providers, which pose a significant bottleneck for Broadband penetration Broadband services account for only 25% of the total Internet subscriber base
22

Technology wise Market Share of Broadband Subscribers
6 Subscriber Base (in millions) 5 4 3 2 1 0 DSL Cable Modem Ethernet LAN 0.474 5.364

0.244

0.042 Fiber

0.02 Leased Line

0.074 Other

All figures for March end 2009

23

Operator wise Market Share of Broadband Service Providers
Reliance Communication I nfrastructure Ltd. 2% You Telecom I ndia Pvt. Ltd. 2% Tata Communications I nternet Services Ltd. 4% Hathway Cable & Datacom Pvt. Ltd. 4% BSNL 57% MTNL 11% Sify Limited 2% HFCL I nfotel Ltd 1% Others 4%

Bharati Airtel 13%

24

ARPU & Pricing Trend
 

India has one of lowest mobile tariffs in the world resulting in low ARPU ARPU have been on the decline since 2004 due to price wars and increased competition in the mobile telecom sector ARPUs continue to drop by 5% while tariffs decrease further by 15% Low tariffs building margin pressure on operators
25

Mobile Pricing/Tariffs
Mobile Tariffs in Absolute terms 0.25 0.2 0.15 USD 0.11 0.11 0.11 0.1 0.05 0 I taly UK Belgium France Brazil Taiwan Philippines Hong Kong Argentina Pakistan Malaysia Thailand China I ndia 26 0.09 0.05 0.05 0.04 0.03 0.23 0.22 0.19 0.17 0.16

Lowest in India

0.02

Mobile Pricing/Tariffs

Tariff war has intensified in the past few months and competition has reached a new level The price war has spread to the SMS segment as well, with negative impact on operator revenues
27

ARPUs are falling
Effective margin/ min 2005 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 Cost per minute Margin Effective rate per minute 1.25 1.5 0.25 1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 Cost per minute Margin Effective rate per minute 0.87 0.95 0.08 Effective Margin/ min 2006

28

VAS (Value – added Services)

More Lucrative for operators and content providers as some VAS at 14c make more money than voice at 3c–4c. VAS include,
       

SMS, Ring tones, Caller tones Internet Data Access Mobile Commerce On-demand Music, Videos, Animation clips Contests/Voting Gaming Enterprise products (Email, Office, etc.) New Alerts/Match Scores

29

VAS Forecast and Growth
Forecast 2009-2010

VAS
Revenues $10 Billion Media content providers, mobile operators, aggregators, banks, Enterprises

2006

VAS
Revenues Parties involved $500 million (this includes texting) Media content providers, Mobile operators and aggregators

Parties involved

30

Leading VAS and mobile application service providers
Mauj.com Hungama Mobile

Indiagames

VAS
OnMobile IMImobile

Mobile-2-Win
31

Telecom Administrative Framework

Total of 22 circles
   

4 5 8 6

Metros ‘A’ Circles ‘B’ Circles ‘C’ Circles

Each circle has LDCAs (Long Distance Charging Areas) and SDCAs (Short Distance Charging Areas)
32

Telecom Regulatory Bodies
Government of India
Ministry of Communications & Information Technology

Timely policy and regulatory intervention has ensured that Sector development has stayed on track.

TDSAT

DoT

TRAI

State owned operators
License Fees/ Spectrum Charges

Private Operators

33

Regulatory Bodies – Key Responsibilities
Agency
Department of Telecommunications (DoT)

Key Responsibilities
Policy Formulation, licensing, wireless spectrum/frequency management  Enforcement of wireless regulatory measurement  Standardization/validation of equipment, R&D, etc.

Telecom Regulatory Authority of India (TRAI)

Mandate for Tariffs, Interconnection, Standards for quality of service  Recommendatory: Licensing Timing, terms & conditions, License revocation, competition facilitation, etc.

Telecom Disputes Settlement & Appellate Adjucation and disposal of disputes between service providers and/or a group of consumers Tribunal (TDSAT)

34

Upcoming Technologies and Growth Areas
    

3G WiMax Network Infrastructure Telecom Equipment Exports Handsets

35

3G

MTNL and BSNL have launched 3G services Other Private players are yet to obtain licenses Expensive affair for operators to upgrade to 3G 3G equipment upgrades will be high
36

WiMax

The total base station equipment market is estimated to be between $50 million and $120 million for WiMax Projected total WiMax connections by 2012: 6.9 million

37

Network Infrastructure

The industry needs to add additional capacity to sustain growth Continuing trend towards import of telecom equipment Shared Wireless infrastructure like, share tower services, help reduce operator costs by 15-18%
38

Telecom Equipment Exports
45000 40000 35000 (in Rs. Crore) 30000 25000 20000 15000 10000 5000 0 2006 2007 2008 2012 (Projected)
39

Exports fueled by local Telecom equipment manufacturers

Handsets – Market Share
Total (GSM+CDMA)
SonyErricson 6.80% Samsung 9.50% Others 8.40% LG 14.40%

GSM Others 7.30% SonyErricson 8.90% Samsun g 9.00%
Motorola 7.20%

LG 4.40%

Motorol a 7.80%

Nokia 62.60%

Others CDMA 11.50%

LG 47.60%

Nokia 53.70%

Samsung 11.20%

Nokia 24.30%

40
Motorola

Feedback/Questions

Sources/References
      

Capacity Building Workshop on information Society Statistics, 2007 Future Trends in Indian Telecom, 2005 Mobile Services to Mobilize Indian Telecom Sector, 2008 Indian Telecom Sector, www.mas.net.in Indian Telecom Analysis, Report Summary, 2009 Experiences in Telecom Sector Regulation in India, 2008 Indian Broadband Wireless and WiMax Market Analysis & Forecasts 2007-2014, 2007 Indian Telecom Statistics Forecast, 2003-2007

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