India Telecom Market

Telecom Circle
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Background
2nd largest market after China in terms of number of

subscribers
Indian mobile industry is reaching maturity where the
new subscriber addition has slowed considerably
Reported subscriber base as of Dec12 was 861 million
but the real active base is much lower at around 650
million
The base dropped from 937 M in Mar12 to 861 M in

Dec12
Fixed line subscription at 31 million which is shrinking

every month. The rest of the presentation would focus

on mobile industry as it is the most significant part of
Telecom Industry
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Structure of Indian Mobile

Industry
India is divided into 23

circles and separate

licenses have been issued
for each circle
Division of circles mostly
along the state
boundaries
Circles were categorized
as Metros, A, B and C
based on the revenue
potential of the circle
when 1st set of auctions
were held in 1995

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Brief History of Indian Mobile

Industry
1994
Start of
Cellular
operations

1999
New Telecom
Policy

2000-01
3rd/4th
Operator
Licenses

2004
Calling Party
Pays (CPP)
Introduced

2003
CDMA
networks
launched

2008
Fresh
Licenses
issued to 6
players

2005
Lifetime
Validity
Products
Issued

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2010
3G, BWA
auctions

2009
Tariff wars
amongst
operators

Hyper growth in subscriber base

punctuated in 2012
1,000
900
800
700
600
500
400
300
200
100
-

Mobile Subscriber Base

( Million)

CDMA
GSM

CDMA data has GSM numbers of Tata & Reliance from 2010
onwards
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Source: COAI, AUSPI

Bipolar market Low Rural penetration

still an opportunity
Mobile penetration
(%)
180
160

160

143
7/7/15

139

140
120

107

100

75

80

73

71
7/7/15

33

36

397/7/15

2010

2011

62

56

60
40
22
20
7
1
0
2005

45

39
13
3

20
7

2006

2007

30
12
2008

Significant
Significant
disparity between
between
disparity
Urban and
and Rural
Rural
Urban
penetration
penetration
Different market
market
Different
dynamics for
for
dynamics
either side
side of
of
either
market
market

20

2009

2012
Source: TRAI

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Fixed Line subscriber base is

Shrinking
Subscriber base
(million)
as of 31st Dec, 2012

Operator
BSNL

21.04

MTNL

3.46

Bharti Aitel

3.28

Reliance Communications

1.26

Tata Teleservices

1.49

HFCL

0.18

Others

0.08

All India

30.79

The fixed line subscriber base has dipped

by 6 million in last three years
Source: TRAI
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Handset Market: 3rd Largest after

China & US
Analysts estimated Indian Handset market size

f0r 2012 between 190 210 million

Low cost handsets dominate with the average
selling price of ~Rs 3200 ($55). However, with
increasing penetration, the ASP has started to
increase thereby reversing the trend
ASP increased by over 20% in last one year

Market is dominated by Nokia, Samsung and

Indian brands like Micromax, Karbonn, etc

Share of CDMA in handsets is on a decline after
the decision of Reliance and Tata to focus on GSM

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Smartphones are new growth engines

India is the 3rd largest market for smartphones

after US and China

Growth driven by

Consumer aspiration
Affordable due to falling prices and EMIs
Increasing Data consumption
India is the 1st country where the internet traffic from

mobiles has exceeded the fixed line

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Competitive Intensity
As a result of separate licenses, there are few

pan India operators. However, in the period

1999-2005, consolidation led to emergence of
larger players
In 2007-08, new licenses were issued to new
players taking total number of operators in
each circle to as high as 13

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Current Operators
GSM

Bharti Airtel

Vodafone

Idea

BSNL/MTNL

Aircel

Reliance

Tata Docomo

Telenor

Loop

Stel*

Etisalat*

CDMA

Reliance
Tata Indicom
MTS

* Stel & Etisalat closed down their operations in 2012 due to license
cancellation by supreme court post 2G controvery
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Tariff wars (2009 onwards)

India is currently the most competitive market

in the world which has led to tariff wars

$1 = Rs 60
Rs 1 = 100 p
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Impact of Tariff wars

Revenue growth has got impacted

significantly
The break-even point for new operators has

increased significantly
Increase in churn and Multiple SIM
It is estimated that only 50% of new subscriber

addition is actually new subscribers. Rest all are

either churning from one network to another or
are adding to Multiple SIM phenomena

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High Proportion of Prepaid

Subscribers
Prepaid as % of Total Subscribers
120%
100%

80%

80%
60%
40%

44%

53%

63%

73%

78%

86%

96% 96% 96% 96%

91% 93%

26%

20%
0%

99% of new subscriber additions are in

prepaid
Source: TRAI
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High volumes have led to continuous

decline in costs in line with the ARPU
GSM ARPU & Cost data (Rs)
1400
1200 1158
1000
800 845

814

731

600
400

503

453
328

200
0
2000

2001

2002

288

2003
ARPU

412
193
2004

352

316

159

146

2005

Cost/Sub

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2006

282
128
2007

240
123
2008

Composition of GSM operator

revenues
Revenue Break-up as % of Gross
Revenues
Rental; 18.8

Roaming; 9.0

Airtime; 52.1

VAS; 14.3
SMS; 5.8
Net Service Revenue = 78% of Gross Service Revenue
Net Service Revenue = Gross Service Revenue
Interconnection Usage Costs Outroaming Airtime
Source: TRAI report for Quarter ending
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Composition of GSM operator

costs
As % of Total Costs

7%
10%
8%
51%
24%

Network
Operating
Costs
Personnel
Costs
Administrativ
e Costs

Sales &
Marketing
Costs
Outsourcing
Costs

As % of Net Rev
6%
10%
8%
52%
24%

Network operating expenses proportion of costs

increased from 36% in 2005 to 51% in 2008
Source: PwC Benchmarking report Nokia Internal Use Only

VAS Revenues are dominated by

SMS and Ring-back Tones
Postpaid
SMS
GPRS
20%
40%
4%
9%
16%
11%

Content
Downloads

Prepaid
CLI
Ringtones &
Ringback
Tones
Others

24%
36%
5%

5%
30%

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Regulatory Issues
Defense occupies chunk of spectrum and hence

there is scarcity of spectrum leading to poor

quality of service
New Telecom Policy, 2012
Policy announced but implementation is still

unclear
2G licenses controversy
Licenses issued in 2007-09 have been challenged

in the court due to undue favor to a few player

Licenses of new players were cancelled by the
supreme court

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Spectrum Allocation Plan

Known as 450
UHF MHz Band
Currently used
for Police &
Security
networks
450 47
0

698 862

Known as 850
MHz band
Allocated to
CDMA
Entire band
available for
mobile

824 844
Known as 700
MHz band
Identified by
WRC-07 for
IMT
Entirely held
by defense

Paired
With

890 902.
5

915 935 947.

5

869 889

Paired
With

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Known as 900
MHz Band
Allocated GSM
All available
spectrum
allocated to
mobile services

960

Spectrum Allocation Plan

(contd)
Known as 1800
MHz band
Allocated to GSM
Up to 80%
spectrum is with
defense

Paired
With

190 191
0
0
171 178
0
5

Paired
With

180 188
5
0

198 199
0
0

Known as US PCS
band
CDMA operators
have claimed this
band but GSM
operators oppose
it due to
interference
Defense has all
the spectrum
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Known as 2.1 GHz

band
Allocated to WCDMA
Defense currently has
bulk of spectrum and
is expected to vacate
some

171 178
0
5

Paired
With

180 188
5
0

Spectrum Allocation Plan

(contd)
Known as 2.3 GHz
TDD band
Intended allocation
for BWA
250
0
230
0

269
0

240
0
Known as 2.6
GHz band
Part intended
allocation for BWA
and part for
mobile services
Currently entire
band is with
defense
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Visit Telecom Circle to read interesting articles on

Telecom and Internet
http://www.telecomcircle.com
To download
1. India Subscriber Database Circle-wise, operatorwise from year 2000 onwards
2. Circle-wise ARPU data for GSM networks
3. Case study on how Indian Carriers make 40%
EBIDTA margins at 2 cents a minute
Visit
http://www.telecomcircle.com/2009/06/india-telecom/
Send your comments & feedback at
mohit@telecomcircle.com
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