Telecom Industry Connecting the World

SHIPRA KANSAL

Telecom in the real sense means transfer of information
between two distant points in space

Telecom is a huge and varied bastion of technologies, companies, services and politics that is truly global in nature

Introduction
Telecom stands as one of the most essential elements of the business world in terms of “Connecting the World” Volatile Sector
  

Regulatory discord Cut-throat competition Emergence of Technologies

Emergence of broadband & wireless technologies pose threat to carriers relying on aging infrastructure To survive, telecom carriers need to consider various options
  

Consolidation, Convergence, Costly Technological upgrades

Global Growth Patterns

Emerging Markets
 

Driving Volume Growth Low Tariffs (ARPUs)

Developed Markets
 

Low Subscriber Base Technological Advancements

Indian Telecom depends on the global telecom industry for technology platforms & network management While Indian market size attracts telecom giants

Indian Telecom - Scenario
    

India – Fastest growing market in World – 190 mn subscribers 4th largest mobile market growing at 6 mn Sub/month 3rd largest internet market, 4th largest by 2012 PCOs - 4.5 mn @ CQGR of 7.22% Paying highest taxes and regulatory charges; Variable License fee

OPPORTUNITIES

Data revenues – 8.5% of service revenue against world avg of 16.5%
 

Content Services – Music/Video etc Applications – m Commerce/PVR Ticketing

  

Tele-density – From 2% in 2000 to 15.44% in 2006 TEMA target of $100 bn for equipments in next 3 yrs IT & ITES Industry – $35 bn with CAGR of 35%

Indian Telecom – Global Reach
Players
Bharti Seychelles Fixed, FWP, cellular 34000 (March 2006) Emtel of Mauritius, (Since 1998) private investors and the Gov of Seychelles

Countries

Services

Subscribers

Partners

Telecom Seychelles

Jersey Telenet MTNL United Telecom (Since 2002) MTML (Since 2005) Reliance

State of Jersey

2G and 3G, ILD

Services from Oct 2006 45,032 (March 2006) 20000 (March 2006) TCIL VSNL, and NVPL Wholly owned subsidiary

Nepal

CDMA-based WLL services CDMA-based WLL services ILD services to India, Australia, Canada, France, Germany, Malaysia, NZ, Singapore, and UK

Mauritius

IndiaCall services (Since 2005) VSNL (acquired license in 2005)

US, UK and Canada

500,000 +

-

South Africa Fixed (Services to commence in Aug-Sep 2006)

Transnet/ Transtel, Eskom, Nexus, Two, CommuniTel

Source: Voice & Data

Market Structure
•Divided into 22 circles

 metros 4  circles 19
Further divided into A, B and C category based on economic parameters and revenue potential •Each circle has a licenses Four operators per circle are allowed Licenses are saleable

Jammu & Kashmir Himachal Pradesh

Punjab

Uttar Haryana Prade sh W Rajasthan DELHI Uttar Pradesh E Bihar Gujarat Madhya Pradesh Orissa West Bengal

Maharashtra MUMBAI Andhra Pradesh Karnataka

KOLKATA

METRO Circles
CHENNAI Tamil Nadu

A Circles B Circles C Circles

Kerala

Teledensity Levels
2 0 1 8 Teledensity (%) 1 6 1 4 1 2 1 0 8 6 4 2 0 4.8 4 1.3 0.3 1996 1.6 0.3 1997 1.9 0.4 1998 2.3 0.5 1999 Rural 5.8 6.9 2.9 0.7 2000 Urban 3.6 0.9 2001 Total 4.3 1.2 2002 5.1 8.2 10.4 7.0 12.2 14.3 19.7

1.5

1.7

2003

2004

Rural India

India has a 700 million people living in 638,000 villages

per-capita income of $ 0.40 per day)

As per DoT statistics 500,000 villages have telephone access.
 However, teledensity patterns reveal the low penetration of communication services

120 Number of HH in millions 100 80 60 40 20 0

102.1

135 million rural households
17 10 3.9 360

1.9 520

1 840

0.3 1300

0.3 2240

60

180

260

HH Incom e in $ per m onth

The question is : Is connectivity relevant to the rural populace of India?

Business Model

Entrepreneur-driven operator assisted telephone booths (STD PCOs) introduced in India in 1987

Today in urban areas:
  

950,000 such PCOs covering every street of smallest town generate 25 % of total telecom income 300 million people use these PCOs

Lessons for Rural Connectivity  To serve the telecom needs of rural people with incomes < $ 1 per day, aggregate demand and allow an entrepreneur to run it. Business Model  Aggregate demand to a village internet centre to provide voice/computer and internet services  Allow a local village entrepreneur to run it  Create an organization to provide the connectivity and content linkages

Global Trends – Connecting World
Convergence & Mobility

Mobile Devices with voice, data & video Mobile Wireless Broadband Communications Fibre to Home

Public Safety

 Mobile Police &

Fire personnel devices  Interoperable Communications

Computers & IT

 Entertainment

 Laptops & Handheld
Consumer Electronics

becomes Digital  Mobile Personal Digital Devices prevail

PCs  Entertainment major PC driver  IP to & in the Home  VoIP handsets

Major Players
There are three types of players in telecom services: • -State owned companies (BSNL and MTNL) • -Private Indian owned companies (Reliance Infocomm, Bharti Tele-Ventures,Tata Teleservices,) • -Foreign invested companies (HutchisonEssar(VODAFONE), Escotel, Idea Cellular, BPL Mobile, Spice Communications)

Bharat Sanchar Nigam Limited (known as BSNL, India Communications Corporation Limited) is a public sector telecommunication company in India. It is India's largest telecommunication company with, 24% market share. •Type •Availability •Founded •Slogan •Revenue •Owner •Key people Telecommunication service provider Indiawide except Delhi and Mumbai 19th century, incorporated 2000 Connecting India US$ 9.67 billion (2007) The Government of India Kuldeep Goyal (CMD) Website www.bsnl.in, www.bsnl.co.in

Mahanagar Telephone Nigam Limited

Mahanagar Telephone Nigam Limited (NYSE: MTE) is an Indian Government-owned telephone service provider in the cities of Mumbai, Thane, New Delhi, and Navi Mumbai in India. The company was a monopoly until 2000, when the telecom sector was opened to other service providers. MTNL provides fixed line telephones, cellular connection of both GSM — Dolphin(Postpaid) and Trump (prepaid) and WLL (CDMA) — Garuda-FW And Garuda-Mobile and internet services through dialup and DSL — Broadband internet TriBand. MTNL has also started Games on demand, video on demand and IPTV services in India through its Broadband Internet service called Triband.

Bharti Airtel founded by Sunil Mittal in 1985. The businesses at Bharti Airtel have been structured into three individual strategic business units (SBU’s) - Mobile Services, Airtel Telemedia Services & Enterprise Services. The mobile business provides mobile & fixed wireless services using GSM technology across 23 telecom circles while the Airtel Telemedia Services business offers broadband & telephone services in 95 cities and has recently launched a Direct-to-Home (DTH) service, Airtel digital TV. The company provides end-to-end data and enterprise services to the corporate customers through its nationwide fiber optic backbone, last mile connectivity in fixed-line and mobile circles, VSATs, ISP and international bandwidth access through the gateways and landing station.

Globally, Bharti Airtel is the 3rd largest in-country mobile operator by subscriber base, behind China Mobile and China Unicom. In India, the company has a 24.6% share of the wireless services market, followed by 17.7% for Reliance Communications and 17.4% for Vodafone Essar. Airtel: Airtel is a brand of telecommunication services in India and Sri Lanka owned and operated by Bharti Airtel. It is the largest cellular service provider in India in terms of number of subscribers. Services are offered under the brand name Airtel: Mobile Services (using GSM Technology), Broadband & Telephone Services (Fixed line, Internet Connectivity(DSL) and Leased Line), Long Distance Services and Enterprise Services (Telecommunications Consulting for corporates). It has presence in all 23 circles of the country and covers 71% of the current population.

COMPANY MARKET SHARES
Company Million Subscribers 40.3 6.1 5.7 4.9 2.9 2.1 1.4 1.3 1.0 0.8 0.8 0.9 % share BSNL Reliance Bharti MTNL Vodafone Idea Cellular BPL Tata Teleservices Spice Escotel Fascel Aircel 58.8 8.9 8.3 7.2 4.2 3.0 2.1 1.9 1.4 1.1 1.1 1.4

MAJOR MARKET TRENDS

The telecoms trends in India will have a great impact on everything from the humble PC, internet, broadband (both wireless and fixed), cable, handset features, talking SMS, IPTV, soft switches, and managed services to the local manufacturing and supply chain. This report discusses key trends in the Indian telecom industry, their drivers and the major impacts of such trends affecting mobile operators, infrastructure and handset vendors.

Indian Telecom

– Way Forward to being Global

Transparent and truly technology-neutral Government policies

Allow full range of private & Public Sector telco's to compete fairly and fully

Adequate spectrum in useable frequency bands advocated by the ITU to wireless service providers Low regulatory restrictions over new services such as Push-to-talk, IPenabled services, particularly Voice-Over IP (VoIP)

Ensure level playing field and “No” worse-off position for existing license holders

Duties on imported telecommunications and related equipment must be reduced to zero  To promote competition in IPLC “Put in Right Policies” for technology multinationals to build business in consumer end user device segments like mobile, handset, PC’s and networking product manufacturing Acquisitions with “Strategic” intent

Constraints:
 

Slow pace of the reform process . It would be difficult to make in-roads into the semi-rural and rural areas because of the lack of infrastructure. The service providers have to incur a huge initial fixed cost to make inroads into this market. Achieving break-even under these circumstances may prove to be difficult. The sector requires players with huge financial resources due to the above mentioned constraint. Upfront entry fees and bank guarantees represent a sizeable share of initial investments. While the criteria are important, it tends to support the existing big and older players. Financing these requirements require a little more liberal approach from the policy side. Problem of limited spectrum availability and the issue of interconnection charges between the private and state operators.

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