Telecom market in India - November 2006

November 13, 2006 Mumbai www.sterliteoptical.com

- Pankaj Khanna

Telecommunications Market in India


Agenda- Telecommunications Market in IndiaAgenda- Telecommunications Market in India

• The World – Shrinking into a global village

• India Today – a Thought Collage

– at an Inflexion Point

• India’s Telecom Evolution – a Revolution– The Telecommunication Landscape

– Voice to Video: the Data Trajectory

• Another Revolution on the cards– A fresh Business Model required?

– Convergence: Next Step in the Evolution

– Drivers: Key Growth Elements

• The Wire and Cable Industry












The World is Flat (Tom Friedman)

… the leveling of the economic world has “accidentally made Beijing, Bangalore and Bethesda next-door neighbors” …

… these flatteners converged around the year 2000, and created a flat world: a global, fiber-connected, web-enabled platform for multiple forms of sharing knowledge and work …

The World – A Global VillageThe World – A Global Village


The World – Economic Growth while coming closerThe World – Economic Growth while coming closer

USA� - 300 mn$ - 41,399� - 195 mn� - 51 mn

Japan� - 127 mn$ - 30,615� - 92 mn� - 25 mn

China 2005 2000� - 1313 mn 1262 mn$ - 7,198 3,870� - 450 mn 85 mn� - 46 mn N/A

India 2005 2000� - 1103 mn 1016 mn$ - 3,320 2,420� - 90 mn 4 mn� - 2 mn N/A

Source: Wikipedia, CIA

Legend� - Population, 2005$ - GDP per capita (PPP, 2005, USD)� - Mobile Subscriber Base (2005)� - Broadband Subscriber Base (2005)

� All developed economies have over 65% Mobile & 12% Broadband penetration.

� India and China are among the fastest growing Telecom and Internet Markets.

Ergo, rapid economic development and cross border trade is facilitated by boundary-less Telecom and Internet Infrastructure growth.












India Today– A Thought CollageIndia Today– A Thought Collage

"Our (India and US) relationship has never been better. We will work together. There is no limit to what we can achieve." - George W Bush, President, United States

• Per capita consumption of many necessities still low = huge market potential !

• FDI is needed in infrastructure:- USD 75 bn in the power sector- USD 25 bn in telecommunications- USD 50 bn in airports, seaports & Roads

"India is on its way to becoming IT, manufacturing kingdom of the world."- Mr Yasukuni Enoki, Japanese Ambassador to India

Young Indian engineers, men and women, walk briskly from building to building, dangling ID badges. One looked like he could do my taxes. Another looked like she

could take my computer apart. And a third looked like she designed it!

"India has evolved into one of the world's leading technology centres."- Mr Craig Barrett, Chairman, Intel Corporation

“We came into India wanting to make it a hub for all the products that we are producing there including the supplier base. I'm pleased with the progress.”

- Mr Leif Johansson,President and CEO, AB Volvo


India Today– At an Inflexion PointIndia Today– At an Inflexion Point

23

5217

2758

21

0%

20%

40%

60%

80%

100%

Workforce GDP

Services Industry Agriculture

Source: Economy Watch, Wikipedia, CRU

India

Rank by GDP (PPP) (2005) 4

Area (in sq. km.) 3287263

Population Density 338

GDP per capita, PPP (2005, USD) 3253

Tele-density (2005) 15

Broadband Penetration (2005) 0.14

Fiber Usage (2005, in '000s fkm) 2907

Fiber / Area 0.9

Fiber / Person 0.003

� Explosion in middle class with higher literacy and technical aptitude awareness.

� Emergence of highly educated young workers with greater disposable incomes.

� Boom in Industry & Services sector; Growing Government spending on Infrastructure

Ergo, India is a long-term Growth Story, at the cusp of Change.

China Japan US

2 3 1

9598086 377873 9629091

137 336 31

6727 31638 41200

58 134 130

3.5 20 17

15030 8335 18500

2 22 2

0.01 0.07 0.06












India’s Evolution –The Telecommunication LandscapeIndia’s Evolution –The Telecommunication Landscape

PricesMobile Outgoing tariff at 50¢ a min.Handsets more than $ 800.

Outgoing tariff at 1.8 ¢ a min.Sub 50 dollar handsets available.

Regulator No regulator / No policies till 1994.Independent regulator – TRAIAppellate Tribunal – TDSATIndustry Bodies – TEMA, ISPAI, AUSPI

Penetration Phones < 3% till March ’00.Over 13% in June 2006.Still < 1% Internet penetration.

Competition Monopoly of Govt. Service Providers.

Top Market Shares of Private operators. Healthy Competition.

Technology High Resistance to new technology.Test-bed of cutting edge research.IPTV, FTTx, WiMAX, IPv6, WCDMA trial deployments started.

Viewpoint Only a communication medium.An Emerging Industry.Early Technology Adopters Prosper.

Then Now


Cell-phone Communication

Voice Chat

Mid 1990s

SMS / Text Msg

Early 2000s

MMS/Streams/Games

2005+

IT and ITES Call Center

2000-2003

Data Processing

2003+

Video/Image Processing

2005+

Meetings / Communication

Telephone / Physical Meeting

Video Phone

Video Conferencing

2005+

VOICE DATA VIDEO

Trajectory –Data-Intensive ServicesTrajectory –Data-Intensive Services

EntertainmentRadio

Pre 1980s

Broadcast TV

1980’s

IPTV

2007

Internet / Chat

Late 1990s


Agenda- Telecommunications Market in IndiaAgenda- Telecommunications Market in India











Business Case –Telecom in IndiaBusiness Case –Telecom in India

Population �

GDP per capita ��

Urban Disposable Income ��

Power, Education & Communication Connectivity ‘for everyone’ planned

by the Indian Government

�� Equipment Prices

�� Cost of Services per User

�� Bandwidth & Licensing Costs

Tele-density & Internet Penetration have spurted each time Consumer Eqpt. or Service costs are reduced

Operators sell multiple services & constantly evolve new applications to grab larger share of subscribers wallet

3G & Broadband affecting MB/user ��

Data to Voice ratio in ARPU ��

High-speed networks (fiber) reqd ��

Semi-urban & Rural Connectivity increasing Market size but Business Models need to be re-worked

�� Infrastructure Sharing / Growth

�� Regional Content Development

�� No-frills, need-based eqpt uptake


Business Case –Telecom in IndiaBusiness Case –Telecom in India

Current (per month)

Telephony (Basic)

Internet

CATV

Telephony (Cellular)

e-Education

e-Medicine

Video Phone / Conference

Gaming

IPTV / Program (video)-on-demand

~ USD 7

~ USD 5

~ USD 6

~ USD 8

--

--

--

--

--

~ USD 26

� Bandwidth per user: Kbps Mbps

Future (per month)

< ~ $ 15 - $ 25

� Nearly 10 million Households pay >$25 per month (4% of Income) currently.

Opportunity to target 90 million households if prices drop less than $20 p.m.


Convergence –Next Step in the EvolutionConvergence –Next Step in the Evolution

Voice Data Video Broadcast

Video Stream

Telcos

Cellular

ISPs

CATV

Broadband

BSNL / MTNL/ Reliance/ Airtel/ TTSL…

Sify / VSNL...

Hathway…

� Incumbents realize Power of Broadband.

EarlierNow

Hence, migrating to offer Complete Basket of Services.


Infrastructure:

• Pan-India Optical Networks.• SEZ’s for IT and Telecom.• Construction boom. • ‘Power/Telecom for all’.

Technology:

• Urban deployments for 3G, IPTV,FTTx, WiFi, Gaming.

• Rural connectivity through fiber,Wi-MAX, VSATs.

• Bio-tech, Nanotech, ITES have encouraged indigenous R&D

Drivers –Key Growth ElementsDrivers –Key Growth Elements

Government:

• Long-term development road-map.• Encouraging foreign participation for R&D.• Tax holidays for emerging technologies.• More Public-Private partnerships.

Consumer:

• Increasing Awareness of Global Trends.• Social networking, IM & Gaming are retail drivers for 3G & Broadband.

• Data Sourcing to Knowledge based industry.• Price & Promotions to be differentiators.

� Roadmap divided into 3 phases: 2007, 2012, Vision 2020.

� Consumer Knowledge will lead to quick uptake of Global Technologies

High Speed Networks will be vital for accelerating growth and vice-versa.












Indian OFC Market Size

2.2 1.9 1.5 2.0 2.3 2.5

-

0.5

1.0

1.5

2.0

2.5

3.0

2001-2 2002-3 2003-4 2004-5 2005-6 2006-7 (e)

in m

illio

n fk

m

Indian Copper Cable Market Size

56 7 8

1214 14

17

20

26

2927

14

76

7 7

0

5

10

15

20

25

30

'90-91 '93-94 '96-97 '99-00 '02-03 '05-06

in m

illion pairs

(CRIS-INFAC, Telecom Cables Review)

Projects initiated in New Infrastructure Areas utilizing Fiber to increase Market Size

The Wire and Cable IndustryRight of Way Owners growing Market SizeThe Wire and Cable IndustryRight of Way Owners growing Market Size


What Next… All these will drive Fiber usage …What Next… All these will drive Fiber usage …

• Applications - Growth in e-Commerce– Urban: Online Banking, Audio/Video, Gaming– Rural : ‘e-Choupal’, e-Education, e-Medicine

• Media - Wireless AND Wireline– Fiber and DSL for Data-Intensive Applications– WiMAX and 3G for Mobility

• Regulation – Increasingly User Centric– Price is vital to increase Usage & Penetration– Technology Adopters follow Global Trends

• Availability -– Urban: 3G, IPTV, Broadband demand growing– Rural : Public-Private Partnerships common

• Equipment –– Carrier: India is key market for Global Vendors – Enterprise: SME to drive growth in future– Consumer: Lower Prices will boost Market Size

“Er… it started with buying a cell phone”

Source: IMAI

Source: Cartoonstock


Thank YouThank YouThank YouThank You


India –DemographicsIndia –Demographics

• Capital – New Delhi

• Area – 3 mn sq.km

• Popn. Density - 329 /sq.km

• GDP (PPP) - $ 3.63 trillion

• Growth rate – over 9 %

• Workforce - 497 million

• Literacy Rate - 60 %

• Age Structure - < 14 yrs (31 %)

- 15-64 yrs (64 %)

- > 65 yrs (5 %)Go-to-Market Case:• Population – 1.1 billion (July 2006e)• Middle class consumers – 300 million (Mar 2006e)• Fixed lines – 41 million (Sept 2006)• Mobiles – 129 million (Sept 2006)• Number of TV Sets – 105 million (July 2006)• Cable TV – 70 million (July 2006)• PC penetration – 19 million (July 2006)• Internet subscribers – 8.4 million (Sep 2006)• Broadband subscribers – 1.8 million (Sep 2006)

Source: Economy Watch, Wikipedia, TRAI, IMAI


India – Poised for GrowthThe Story so far …India – Poised for GrowthThe Story so far …

3320

1500

2000

2500

3000

3500

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

GDP

900

950

1000

1050

1100

1150

GDP per capita PPP, USD

Population in millions

Source: www.indexmundi.com

40

114

0

1500

3000

4500

6000

7500

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

0

5

10

15

20

25

30

35

40

45Broadband subscribers ('000s)

Internet subscribers ('000s)

B'band charges / month (USD)

Source: TRAI, DoT

3.8

13.3

4.4

1.82.9

0

30000

60000

90000

120000

150000

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

0

2

4

6

8

10

12

14

Mobile subscribers('000s)

Total Telephonysubscribers ('000s)

Mobile charges /min (US cents)


Others

1%

Asia-Pac

8%

Europe

23%Americas

68%

Indian IT Exports2005-2006 - $ 18 billion

Source: NASSCOM

5064 9499

7973

11107

442 467

0

2000

4000

6000

8000

10000

12000

Internet Mobile Fixed

in million USD

2004-05 2005-06

122 12736

223

262

24

0

50

100

150

200

250

300

e-Advertising E-travel B2C e-Com

in million USD

2004-05 2005-06

1342 2382 57091756

3568

6453

0

1000

2000

3000

4000

5000

6000

7000

Enterprise Phones Carrier

in million USD

2004-05 2005-06

Telecom Equipment and Integration Services2005-2006 - USD 12 billion

India – Poised for GrowthThe Story in Numbers …India – Poised for GrowthThe Story in Numbers …

Telecom Services Revenues2005-2006 - USD 20 billion

Online Business-2-Customer Revenues2005-2006 - USD 300 million

Source: Voice & Data, eStatsIndia, IAMAI