Telecom Industry : Changing Facets (Indian Market)

Compiled by:Amit DuttaSVSNK ChaitnyaSayan DasAadhar TuysiyanVishal Jain

Evolution of Communication• Smoke signals and drums in Africa, the Americas and

parts of Asia.• 1790s the first fixed semaphore systems in Europe• Breakthrough into modern electrical telecommunications

– telegraph (1830s and 1840s)• Alexander Graham Bell of Scotland was the first to

patent the telephone in 1877• In 19th century electrical means of communications

exploded into the world and connected the continents via cables on the floors of the ocean.

• In the first decade of the 20th century, Revolution in wireless telecommunications with Guglielmo Marconi, winning the Nobel Prize in Physics in 1909

Market revenue in world

• In 2008 it was $2.92 trillion.• The telecommunications industry

was about a $3 trillion sector in 2010, including about $1.3 trillion in total revenues in the U.S.

• The service revenue of the global telecommunications industry was estimated to be $1.7 trillion in 2008, and is expected to touch $3.3 trillion by 2013.

Growth Rate in World market • The world telecommunications

market is expected to rise at an 11 percent compound annual growth rate at the end of year 2010

• The leading telecom companies like AT&T, Vodafone, Verizon, Qwest Communications are trying to take the advantage of this growth.

• The total revenue earned from this industry is 3 percent of the gross world products and is aiming at attaining more revenues. 16.9% aprox. of the world population has access to the Internet

Telecommunication in India• In 1850, British east Indian Company opened Telegraph Line between

Calcutta and Diamond Harbour• The Indian telecommunications industry

• Is the world's fastest growing telecommunications industry.• 671.69 Million telephone (landlines and mobile) subscribers and

635.51 Million mobile phone connections as of June 2010• India's mobile phone market is the fastest growing in the world,

with companies adding some 20.31 million new customers in March 2010.

• 2nd largest telecommunication network in the world in terms of number of wireless connections after China

• The first operator is the state-owned incumbent BSNL.• Telecommunication policies were revised to allow private

operators, companies such as Vodafone, Bharti Airtel, Tata Indicom, Idea Cellular, Aircel and Loop Mobile have entered the space. see major operators in India

Market size & Growth Rate in India

• In 2008-09 the overall telecom equipments revenue in India stood at  136,833 crore (US$ 29.69 billion) during the fiscal, as against  115,382 crore (US$ 25.04 billion) a year before.

• The industry is expected to reach a size of  344,921 crore (US$ 74.85 billion) by 2012 at a growth rate of over 26 per cent.

Product Line of telecommunication Industries

1) China MobileCountry – China, Subscribers: 532.9 million Revenue: $66.2 billion , Market Cap: $225.0 billion Employees: 1382682) Vodafone GroupCountry – UK, Subscribers: 333 million Revenue: $65.7 billion, Market Cap: $115.7 billion Employees: 790973) China UnicornCountry – China, Subscribers: 284 million Revenue: $22.6 billion, Market Cap: $27.9 billion Employees: 205200

Top 10 telecom companies in the World (updated - 31 May 2010)

4)    TelefonicaCountry – Spain, Subscribers: 264 million Revenue: $79.1 billion , Market Cap: $107.1 billion Employees: 2500005)    America MovilCountry – USA, Subscribers: 201 million Revenue: $29.3 billion, Market Cap: $78.3 billion Employees: 55627

6)    France TelecomCountry – France, Subscribers: 192.7 million Revenue: $64.1 , Market Cap: $62.6 billion Employees: 1800007)    Bharti+ZainCountry - Bharti  - India, Zain - Kuwait , Subscribers: 163.6 million Revenue: $9.2 billion, Market Cap: $46.91 billion Employees: 312018)    AT&TCountry – USA, Subscribers: 150 million Revenue: $123 billion, Market Cap: $154.6 billion Employees: 394600

Top 10 telecom companies in the World (updated - 31 May 2010)

9)    Verizon CommCountry – USA, Subscribers: 87.7 million (for wireless business) Revenue: $107.8 billion, Market Cap: $86.1 billion Employees: 22436610)  NTT DocomoCountry – Japan, Subscribers: 54.6 million Revenue: $44.4 billion, Market Cap: $69.4 billion Employees: 21831

1. Bharti Airtel Revenue:-  US$ 7.8 Billion Employees:- 25,543 Subscribers:- 170 million (2010) Market Cap in Crores:- 108066.23

2. Reliance Communications Revenue:-  US$ 6.9 billion Employees:- 36650 Subscribers:- 100 million (2010) Market Cap in Crores:- 32683.44

3. Idea Cellular Revenue:-  US$ 3 billion Employees:- 6481 Subscribers:- 70 million (2010) Market Cap in Crores:- 14368.92

Top 10 telecom companies in India(updated - 31 May 2010)

4. Tata Communications Revenue:-  US$ 2.39 billion Employees:- 363039 Subscribers:- 67 million (2010) Market Cap in Crores:- 13181.25

5. Tata Teleservices Revenue:-  US$ 1.5 billion Employees:- 350000 Subscribers:- 35 million (2010) Market Cap in Crores:- 4393.06

6. Spice Communications Revenue:-  US$ 1.3 Billion Employees:- 31884 Subscribers:- 4.46 million (2010) Market Cap in Crores:- 4136.13

7. MTNL Revenue:-  US$ 1.1 Billion Employees:- 8000 Subscribers:- 4.4 million (2010) Market Cap in Crores:- 4044.6

8. GTL Revenue:-  US$ 1.03 Billion Employees:- 7066 Subscribers:- 1.2 million (2010) Market Cap in Crores:- 2475.12

9. GTL Infrastructure Revenue:-  US$ 1.03 Billion Employees:- 12675 Subscribers:- 0.8 million (2010) Market Cap in Crores:- 2210.49

10. OnMobile Global Revenue:-  US$ 1 Billion Employees:- 89000 / 1242 Subscribers:- 0.5 million (2010) Market Cap in Crores:- 1403.52

Top 10 telecom companies in India(updated - 31 May 2010)

Strengths• Huge Customer potential

– Teledensity still being 48% and rural tele-density 21%.– The broadband subscribers grew from 0.18 million in 2005 to6.2

million as on 30 April 2009 and about 7.98 million, at the end of the December 2009.

• High Growth Rate– Wireless subscribers growing at a CAGR of 60 per cent per annum

since 2004.• Allowed FDI limit ranging from 74% to 100%

– The total FDI equity inflows in telecom sector have been US$ 2223 million during April-November 2009-10

• High return on Investment– Easier to create economies of scale thereby increasing return on

investment• Liberalization efforts by Govt.

– The share of private sector in total telephone connections is now 82.33% as per the latest statistics available for December 2009 as against a meager 5% in 1999.

• Lower capital expenditure– The Indian telecom market is a high density area, which means more

population per tower. This means lower capital expenditure cost.

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Weakness• Poor Telecommunication Infrastructure

– Result : Large number of call drops.

• Late adopters of New Technology

– India will be among the last countries in the world to get access to 3G technology. Some estimates suggest that nearly 132 countries across the world already have 3G technology and mobile services in one form or the other.

• Most competitive market

– 10 to 12 companies offer mobile services in most parts of India, globally, the average is 4.

• A market strongly regulated by Government.

• Difficult to enter because of requirement of huge financial resources.• E.g Auction of 3G license has reached Rs 15814.15 crores.

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Opportunities• 3G Telecom services and 4G services• More Quality Service

– Mobile Number Portability will force the Service provider to improve their quality to avoid losing subscribers

• Value added Services (VAS)– The mobile value added services include, text or SMS, menu based services,

downloading of music or ringtones, mobile TV, videos, streaming, sophisticated m-commerce applications etc.

– Mobile banking, Mobile Ticketing etc• Boost to Telecom Manufacturing Companies

– Production of telecom equipments in value terms has increased from Rs. 412700 million (2007-08) to Rs.488000 million during 2008-09 and expected to increase to Rs. 575840 million during 2009-10.

• Telecom Equipment Exports – The Indian telecom industry is expected to reach a size of Rs 344,921 crore by

2012 at a growth rate of over 26 per cent, and generate employment opportunities for about 10 million people during the same period.The sector would create direct employment for 2.8 million people and for 7 million indirectly, according to a Frost and Sullivan report.

18.1

• Horizontal Integration– Entry Into other consumer segments leveraging the present channels– E.g. DTH service like Reliance BIG TV, Tata SKY, Airtel digital TV by

telecom majors like Reliance, Tata and Airtel Respectively.– Other examples : Airtel website builder

• Providing fibre Connectivity to 2,50,000 village panchayat by 2012• Trai experimenting with Number Portability• More scope in content related services, since, the consumer is

influenced by local culture– Local festivals like Baisakhi, Chhath Puja, religious festivals like

Diwali, Chrismas etc., National festivals like Independence Day etc.

4.2

Threats• Telecommunication Policies

– e.g. Trai's 2G direction affecting new players most notably Tata Teleservices, Norway’s Telenor and Essar-owned Loop Telecom

– Renewal of 2G license on the basis of market rates of 3G auctions– TRAI intentions of rolling out 4G or the fourth-generation

technology, known as the ultra-broadband in 2-3 years raising fears rendering 3G services somewhat obsolete.

• Declining ARPU (average Revenue per user)– E.g. price wars like per-second billing which is deflating revenues

and making sure the ‘survival of the fittest’• Partiality on the part of the Govt.

– E.g.Allowing 3G service in a PSU (MTNL,BSNL) before auctioning to Private Sector .

• Content Piracy

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