The Telecom Industry in India

The Indian telecommunications industry is one of the fastest growing in the world and India is projected to become the second largest telecom market globally by 2010. India added 113.26 million new customers in 2008, the largest globally. In fact, in April 2008, India had already overtaken the US as the second largest wireless market. To put this growth into perspective, the country¶s cellular base witnessed close to 50 per cent growth in 2008, with an average 9.5 million customers added every month. According to the Telecom Regulatory Authority of India (TRAI), the total number of telephone connections (mobile as well as fixed) had touched 385 million as of December 2008, taking the telecom penetration to over 33 per cent. This means that one out of every three Indians has a telephone connection, and telecom companies expect this pace of growth to continue in 2009 as well. According to CRISIL Research estimates, eight infrastructure sectors, which include the telecom sector, are expected to draw more than US$ 345.28 billion investment in India by 2012. With the rural India growth story unfolding, the telecom sector is likely to see tremendous growth in India's rural and semi-urban areas in the years to come. By 2012, India is likely to have 200 million rural telecom connections at a penetration rate of 25 per cent. And according to a report jointly released by Confederation of Indian Industry (CII) and Ernst & Young, by 2012, rural users will account for over 60 per cent of the total telecom subscriber base.

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around half the country's population will own a mobile phone. Fixed line capex is projected to be US$ 3. It is projected that the industry will generate revenues worth US$ 43 billion in 2009-10. The Indian telecom industry is expected to reach a size of Rs 344. India is currently adding 8-10 million mobile subscribers every month. fixed line revenues are expected to touch US$ 12. and generate employment opportunities for about 10 million people during the same period. This would translate into 612 million mobile subscribers. 2 . accounting for a tele-density of around 51 per cent by 2012.4 billion.2 billion. by 2012.According to Business Monitor International. It is estimated that by mid 2012.2 billion while mobile revenues will reach US$ 39. and mobile capex is likely to touch US$ 9.921 crore by 2012 at a growth rate of over 26 per cent.8 billion in India. Growth in Segments According to a Frost & Sullivan industry analyst.

According to a study by Stanford University and consulting firm BDA.8 per cent in 2007. The overall cellular services revenue in India is projected to grow at a CAGR of 18 per cent from 2008-2012 to exceed US$ 37 billion. In WiMax. Currently. However.74 billion by 2010. India is slated to become the largest WiMAX market in the Asia-Pacific by 2013. which is expected to reach 18 per cent by 2010. The Indian telecommunications industry is on a growth trajectory with the GSM operators adding a record 9.66 million wireless subscribers in December 2008. Indian telecom operators added a total of 10. according to a report by Gartner Inc. the Indian MVAS is poised to touch US$ 2.3 million new subscribers in January 2009.89 million at the end of December 2008. Strategy Analytics. MVAS in India accounts for 10 per cent of the operator's revenue. 3 . A recent study sees India's WiMAX subscriber base hitting 14 million by 2013 and growing annually at nearly 130 per cent.. And investments in WiMAX ventures are slated to top US$ 500 million in India. India is likely to remain the world's second largest wireless market after China in terms of mobile connections. Further. according to the data released by COAI. this figure does not include the number of subscribers added by Reliance Telecom. and is expected to grow rapidly at 70 per cent to touch US$ 1. taking the total user base to 267. the total wireless subscriber base stood at 346. Cellular market penetration will rise to 60.Further.7 per cent from 19. according to a report by US-based research and consulting firm. Value-Added Services Market A report by market research firm IMRB stated that the mobile valueadded services (MVAS) industry was valued at US$ 1.5 million. According to recent data released by the COAI.96 billion by June 2009.15 billion in June 2008.

Further. banking. insurance products and also entertainment services.Mobile advertising. and rural markets are proving to be very receptive for such marketing. Helion. Singapore Telecommunications (SingTel). seven deals worth US$ 91 million had already been finalised. According to Venture Intelligence. Buoyed by the rapid surge in the subscriber base. Major Investments The booming domestic telecom market has been attracting huge amounts of investment which is likely to accelerate with the entry of new players and launch of new services. Venture Capitalists like Canaan Partners. Draper Fisher Juvertson. offers great potential to become an important revenue source. which has a 31 per cent stake in Bharti Airtel has received the government¶s approval to 4 . advertising. y y y Norway-based telecom operator Telenor has bought a 60 per cent stake in Unitech Wireless for US$ 1. Japanese telecom major NTT DoCoMo has acquired a 27.25 per cent stake in Tata Teleservices (Maharashtra) Ltd for about US$ 190. Presently.6 billion and a 20.23 million. mobile VAS has a US$ 700 million market with a 20 per cent y-o-y growth. huge investments are being made into this industry. and Nexus India are also innovating with services like mobile payment options. and till August 2008. which is likely to touch US$ 3 billion by 2012. there were nine deals worth US$ 41 million in 2007 in the mobile VAS space.23 billion. voice-based SMS and satellite video streaming. Marketers are increasingly using MVAS as a step ahead of SMS-based marketing to sell soaps and shampoos.31 per cent equity capital of Tata Teleservices for about US$ 2. which is an important VAS segment.

Kavveri Telecom Products Limited is planning to set up a new subsidiary . Reliance Communication has committed US$ 5.5 billion in a major expansion bid. Srei Group's Quippo Telecom Infrastructure Ltd (QTIL) plans to invest US$ 3 billion in 2008-09 to ramp up its telecom infrastructure business to grow both organically and inorganically. plans to invest US$ 400 million in India.Kavveri Telecom Infrastructure Limited (KTIL) . will put in about US$ 1. The latest to join the world's second largest telecom market is Bahrain's Batelco which has signed a deal to buy 49 per cent in Chennai-based S-Tel.16 billion in its WiMax project. Juniper Networks.13 million to hold a 20 per cent stake in Aditya Birla Telecom Ltd (ABTL). The funds will be utilised for network rollout and operations of ABTL in the Bihar circle.y y y y y y y y y y y offer long distance services in India. 5 .36 billion in the fiscal ending March 2009. with a focus on its research and development (R&D) activity.11 million over the next two years. BSNL. according to a communication ministry official. which is the second-largest maker of networking equipment. to offer in-building telecom infrastructure to telecom service providers. over the next five years.with an investment of US$ 20. Mauritius-based P5 Asia Holding Investments (Mauritius) Ltd will be investing around US$ 545.69 billion as capital investment for the fiscal year ending March 2009. Bharti Airtel will be spending US$ 2. India's leading telecom company in revenue terms. Idea Cellular will spend about US$ 2. Etisalat.5 million in the Tamil Nadu Circle for an additional 23 lakh mobile connections under both 2G and 3G technologies by 2009. for $225 million. a Gulf-based telecommunications company has picked up a 45 per cent stake in Swan Telecom. Bharat Sanchar Nigam Ltd (BSNL) is planning an investment of around US$ 201. a GSM service provider.

Indian telecommunication companies are now set to have a major global footprint. Airtel is expected to invest about US$ 200 million in setting up and expanding its operation in Sri Lanka over the next five years. The company will simultaneously roll out second generation (2G) and third generation (3G) services in the country.y y y Vodafone Essar will invest US$ 6 billion over the next three years in a bid to increase its mobile subscriber base from 40 million at present to over 100 million.74 million in Gujarat to set up 100 cell sites by August 2009. Telecom operator Aircel. which launched GSM mobile services in Bangalore on February 23. 2009. and in the Channel Islands in Europe. (begun over a decade ago). Investments Abroad After the amazing growth story in the domestic market. Telecom service provider. has announced that the company will be investing additional US$ 6. Tata Teleservices Limited. which already has operations in Seychelles. y The Bharti Group.58 million over the next year to set up base stations across the state. plans to invest US$ 220. The company had earlier made an announcement of investing US$ 24. 2009. 6 .1 million in the state till March 2009. launched its mobile services in Sri Lanka under 'Airtel' brand on January 12.

Samsung and Alcatel-Lucent.3 per cent from 2006 to 2011. y Tata Communications has bought the 30 per cent stake in Neotel that was previously held by Eskom and Transnet. Tata Communications in association with Tata Africa Holdings became the largest stakeholder with 56 per cent stake. LG. Ericsson. With this.6 per cent from 2006 to 2011. Manufacturing India's telecom equipment manufacturing sector is set to become one of the largest globally by 2010. Domestic manufacturers have little contribution in the segment.y DTH company Spize TV (owned by Pyramid Saimira Group) has bought France Telecom's European DTH operations called WorldTV Europe. Revenues are estimated to grow at a CAGR of 26. Motorola. touching US$ 13. Other foreign majors that have set up manufacturing bases in India include Foxconn. totalling 107 million handsets by 2010. y Tata Communications marked its entry into UAE by launching a range of dedicated Ethernet services in association with leading telecommunication service provider of UAE. 7 . Presently the telecom hardware manufacturing sector is dominated by international majors like Nokia. Etisalat.6 billion. Mobile phone production is estimated to grow at a CAGR of 28. who have set up manufacturing bases in India.

Flextronics Elcoteq Celestica. The new norm is expected to allow companies in a sector like telecom to raise the extent of foreign investment. with a 32 per cent penetration. And it's here that the industry sees the largest opportunity for growth. while 8 . Most of this growth has come from urban India where penetration is close to 60 per cent. "All investments directly by a non-resident entity into an Indian company will be counted as foreign in-vestment. Elextronics Aspocomp. but in rural markets it's less than 15 per cent. The new norms will benefit all such companies that have touched their foreign direct investment ceiling and part of the investment is through an Indian company owned and controlled by resident Indians. Therefore. 92 per cent of the villages in India have been covered by the VPTs.65 million fixed and Wireless in Local Loop (WLL) connections and 551.000 towers by 2010. Perlos and Solectron. Rural Telephony Rural India had 76. Salcomp. Cisco. The Indian wireless industry. Siemens. y The Cabinet Committee on Economic Affairs (CCEA) has adopted new guidelines for computation of foreign equity holding in Indian companies.064 Village Public Telephones (VPT) as on September 2008. Universal Service Obligation (USO) subsidy support scheme is also being used for sharing wireless infrastructure in rural areas with around 18. is only second after China in terms of subscribers at 325 million. The target of 80 million rural connections by 2010 is likely to be met during 2008 itself. Policy Initiatives The government has taken many proactive initiatives to facilitate the rapid growth of the Indian telecom industry.

y Indian citizens. starting in the fourth quarter of 2008.12 lakh community service centres in rural India to provide broadband connectivity in 2008-09. y The government is implementing a program of connecting 66. in case the Indian company is owned and controlled by resident. y Introduction of mobile number portability in a phased manner.foreign investment through an investing Indian company will not be considered for calculation of the indirect foreign investment. y Introduction of a unified access licensing regime for telecom services on a pan-India basis. P Chidambaram.822 uncovered villages under the Bharat Nirman programme." according to Home Minister Mr. y 100 per cent foreign direct investment (FDI) is permitted through the automatic route in telecom equipment manufacturing. The government will invest US$ 2 billion to set up 1. 9 . y FDI ceiling in telecom services has been raised to 74 per cent.

radio access network and transmission systems and not sharing of spectrum. would they need to apply for unified access service licence (UASL) and partner with an Indian company in accordance with the FDI regulations. it also allowed sharing of active infrastructure but it has been limited to antenna.81 per day for fund transfers. In early 2008. node B. y In another move.y The Finance Ministry has declared a five-fold (from US$ 100 million to US$ 500 million) increase in the external commercial borrowings amount. which companies involved in infrastructure sectors can borrow from overseas to spend in India. Mr A Raja. Only after winning a bid. The Road Ahead As on October 17. has stated that the target for the 11th Plan period (2007-12) is 600 million phone connections with an 10 . shelters. towers. the Department of Telecommunications (DoT) has stated that foreign telecom companies can bid for 3G spectrum without partnering with Indian companies. by raising the caps on fund transfers as well as mobile-based payments. and increasing the transaction limit to US$ 96. with about 8 million subscribers being added each month. y The Department of Telecom has allowed passive infrastructure sharing among operators. feeder cable. buildings. The Union Minister for Communications and Information Technology. the Reserve Bank of India (RBI) has eased its mobilebanking norms. y Further. power supply and battery backup. which includes sharing of physical sites. 2008. there were 350 million mobile and fixed line subscribers in India.

WiMax and data services will drive sector growth in 2012. Network expansion will continue in order to support the rural growth. for the development of around 100. In fact. rural telephony. by 2010. The Indian rural market is going to be the next big thing for wireless telecom providers. mobile and digital signage) as the medium of choice for advertisers. The industry will witness sustained growth in mobile services and data revenues. According to the CII Ernst & Young report titled 'India 2012: Telecom growth continues'. as against US$ 31 billion in 2008. "Going forward.000 community service centres in rural India to provide broadband connectivity. some interesting new developments worth tracking include: y The emergence of digital media advertising (internet. during 2008 to 2009. the real potential for telecom service growth is still lying untapped. The government also plans an investment of US$ 2 billion. Additionally. According to Mr Prashant Singhal. there is an enormous potential for various value-added services. revenue from India's telecom services industry is projected to reach US$ 54 billion in 2012. Ernst & Young India.investment of US$ 73 billion. Of the 11 . there seems to be huge untapped potential for mobile phone penetration in rural India." In addition to this. the government targets: y y y y y 80 million rural connections Mobile coverage of 90 per cent geographical area Internet Protocol Television (IPTV) in 600 towns Quadrupling manufacture Two-fold increase in telecom equipment R&D from the current level of 15 per cent. With the tele-density in rural areas being still about 10 per cent against the national average of about 21 per cent. Telecom Industry Leader. 3G. Apart from the basic telephone service.

Smartphones. which have computer-like features. sized at 5 million in 2008. is expected to witness a compound annual growth rate (CAGR) of 23 per cent by 2011. 12 . Hundred per cent of the materials in the phones can be recovered and used to make new products. Global mobile phone vendors are going green in India. as they enhance productivity. chargers and accessories from four cities during a 45-day campaign. Vihaan Network Ltd.available media. it was the fastest growing segment in 2008. but also with the youth that are attracted by their multimedia applications. The collected junk will be taken to Singapore for recycling. a group company of Shyam Group has launched the world¶s first zero opex GSM systems powered by solar energy rather than conventional sources. are a favourite with not only professionals.97 million in 2011 from the current US$ 57.1 million. According to a FICCI-PwC report. batteries. as per technology research firm Ascendia. Nokia collected three tonnes of junk handsets. it is expected to touch US$ 211. In a recently launched initiative. y The robust sales of µsmartphones¶ which do not seem to have been adversely affected by the economic slowdown. Smartphones market.

Loop Mobile (formerly BPL Mobile) 6. MTNL 7. Aircel 13 . Tata Teleservices 3. 1. Sistema Shyam Teleservices (SSTL) 8. Reliance Communication 5.Current Players Guiding the Way. Bharti Airtel 2.

Unitech Wireless 3. ByCell Communication 4. Ping Mobile (HFCL Infotel Ltd) Some New Players : All set to make a Mark 1. Idea Cellular 11. S Tel 2. Etisalat DB Telecom (formerly Swan Telecom) 5. Virgin Mobile. Datacom Solutions 6.9. india 14 . Vodafone 10.

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