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Presentation as part of domain study module in Business Environment course.
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Telecom Sector in India
Anjana Rao, Prachi Joshi, Puneet Taneja, Sandeep Sreenivasa
Business Environment Domain Study Presentation20th Nov 2009
S. P. Jain Institute of Management & ResearchPost Graduate Program in Management
Information Management2009
AgendaHistory, Facts
GoI, Regulatory Bodies
Spectrum Action
India Advantage
VAS
Industry Updates, Trends
Future Technologies
Conclusion
BE - Domain Study - Telecom 2
History, Facts
GoI, Regulatory Bodies
Spectrum Action
India Advantage
VAS
Industry Updates
Future Technologies
Conclusion
BE - Domain Study - Telecom 3
History of Telecom in India- I
BE - Domain Study - Telecom 4
1851 1881 1883 1923 1932 1947
First Military Landline from Fort William to Lalbazaar
(Calcutta ) by the British Govt
First Civil landline service introduced for the British Viceroy and his team
Merger with the Postal service Merger of ETC &IRT to form (IRCC) Indian Radio Telegraph Cable Company
Formation of Posts Telephone & Telegraphs under Ministry of Communication
Formation of Indian Radio Telegraph Company (IRT)
History of Telecom in India- II
BE - Domain Study - Telecom 5
1985 1986 1995 1997 1999 2000 2009
DOT established separate from Postal system
DOT spilt into 3 :• MTNL (metros) • DOT (others) • VSNL (International)
TRAI created(Telecom Regulatory Authority of India)
DOT becomes a corporation = BSNL
For 3 months in a row India beats China for the maximum subs added every month
• Cellular service launched.
• New Telecom Policy(NTP) is adopted
• 1st call on Mobile phone
• Telecom Minister Sukh Ram(Delhi) to Jyoti Basu (Calcutta)
Quick Facts
BE - Domain Study - Telecom 6
Total telecom subscribers : 509 million (Sep 2009)
Wireless subscribers : 471.7 million
Wire line subscribers : 37.3 million
Tele density : 43.50 per cent
India’s service providers revenue in Q1 (2009): $8.2 billion
India’s Rural Mobile Phone Users : 100 Million
Source: TRAI report – Nov 2009
Growing Numbers
BE - Domain Study - Telecom 7
2002-03
2003-04
2004-05
2005-06
2006-07
2008-09
2009-10(forec
asted
)
9 10 1115
20
32
43
Revenue(US$ billion)Revenue(US$ billion)
Telecom Companies ?
BE - Domain Study - Telecom 8
Nokia,Motorola,Samsung,
LG, Sony Ericson
Infinera, Cisco,Alcatel Lucent, Nokia
Siemens, Huawei
Bharti-Airtel,Vodafone, Idea,
Reliance, Tata Teleservices
IBM, Wipro, Aricent,
Tech Mahindra
ARM,Texas Instruments,
Qualcomm, Infineon
Symbian, Google
WTTIL, Tata teleservices tower, QTIL
Market Share
BE - Domain Study - Telecom 9
As on 30th Sep ‘09
Net additions in Sep 09Tata (26.74%) > Bharti (16.78%)
23%
18%
18%
12%
11%
10%
5% 1% 1%Service Provider Market
Bharti AirtelReliance CommunicationsVodafone EssarBSNLIdea CellularTata TeleservicesAircelMTNLOthers(Loop, MTS)
Handset market
BE - Domain Study - Telecom 10
59%
8%
7%
6%
5% 15%
India
NokiaSonySamsungMotorolaLGOthers
37%
5%
22%5%
11%
20%
Worldwide
NokiaSonySamsungMotorolaLGOthers
Source: IDC Press Release
Growth Avenues
BE - Domain Study - Telecom 11
Growth Avenues
Enterprise Telecom Services
RuralTelephony
Value Added Services
Virtual Private Network
Managed Services
Infrastructure Sharing
WiMax
3G
Urban-Rural Telephony
BE - Domain Study - Telecom 12
Rural India
Population Contributio
n
15-20%
72%
Subscription
Contribution
80-85%
28%
History, Introduction, Facts
GoI, Regulatory Bodies
Spectrum Action
India Advantage
VAS
Industry Updates
Future Technologies
Conclusion
BE - Domain Study - Telecom 13
Strategic Flow
ClearPolicy
Cheap tariff
regime
Competition
So How all this happened?
500 Mn Mobile and Wire line subscribers in India today Rs. 40,000 Crore quarterly revenue figures for this industry
TRAI functions
BE - Domain Study - Telecom 15
Consumer Protection
Ensure Quality of Service
Ensure Affordable Tariff
Regulate Interconnections
Regulation, Directions, Orders
Recommendations
AgendaHistory, Introduction, Facts
GoI, Regulatory Bodies
Spectrum Auction
India Advantage
VAS
Industry Updates
Future Technologies
Conclusion
BE - Domain Study - Telecom 16
Spectrum Allocation
Need for Spectrum Allocation
• Spectrum auctions ensure the efficient use of spectrum by allocating it to those entities that value it most, while also generating revenues for governments.
• In order to allocate spectrum amongst competing service providers, regulatory agencies often use auctions.
• The key challenge before regulatory agencies is to design auctions in such a way as to foster competition while at the same time ensuring that bidders can effectively use the spectrum for their business.
Spectrum Allocation in Indiao o
Circles•In India, telecom licences were auctioned for basic and cellular services from 1991 by the Department of Telecom (DoT).•The entire country was divided into roughly 20 circles, categorized as A, B, or C depending upon their revenue potential.
GSM&WLL
•Required to seek Foreign partners.•For cellular licences, Global System for Mobile Communications (GSM) was the chosen technology and for basic services, a combination of fiber optic and wireless in the local loop (WLL) was selected.
AgendaHistory, Introduction, Facts
GoI, Regulatory Bodies
Spectrum Auction
India Advantage
VAS
Industry Updates
Future Technologies
Conclusion
BE - Domain Study - Telecom 19
India’s Competitive Advantage
BE - Domain Study - Telecom 20
1. Fastest growing free market democracy2. Cost advantage in product development and back office processing3. Stable economic outlook – Decade long reforms4. Huge market potential – one of the largest consumer markets5. Large talent pool
Source: www.telenor.com
Porter’s Diamond Model
BE - Domain Study - Telecom 21
Factor ConditionsFactor Conditions
Related and supporting industries
Related and supporting industries
Demand conditionsDemand conditions
Firm strategy structure and rivalry.
Firm strategy structure and rivalry.
ChanceChance
GovernmentGovernment
- Presence of skilled labour pool.- Rapidly developing robust
telecom infrastructure.- Increasing disposable income
of consumers.- Increasing demand due to
changing lifestyles and growing attraction for mobiles with new features.
- Presence of skilled labour pool.- Rapidly developing robust
telecom infrastructure.- Increasing disposable income
of consumers.- Increasing demand due to
changing lifestyles and growing attraction for mobiles with new features.
-The government extends full support to industry through reform processes.
- Policies are in place to safeguard the interests of service providers, as well as those of consumers.
-The government extends full support to industry through reform processes.
- Policies are in place to safeguard the interests of service providers, as well as those of consumers.
- Intensive competition in the country has made it possible for service providers to offer the services with lowers fare in the world, profitability,
- Many new handset have been launched.
- Intensive competition in the country has made it possible for service providers to offer the services with lowers fare in the world, profitability,
- Many new handset have been launched.
- India has a large middle class of 300 million,
- Growing affordability and lifetime free schemes have care a market at the bottom of the pyramid.
- Teledensity (~43.5%) offers huge future potential.
- India has a large middle class of 300 million,
- Growing affordability and lifetime free schemes have care a market at the bottom of the pyramid.
- Teledensity (~43.5%) offers huge future potential.
- Competent handset manufacturers have produced the lowest priced handsets for the Indian market.
- Handset players are setting up manufacturing bases in India for better operation management.
- Many telecom and equipment and software companies are based in India.
- Competent handset manufacturers have produced the lowest priced handsets for the Indian market.
- Handset players are setting up manufacturing bases in India for better operation management.
- Many telecom and equipment and software companies are based in India.
Source: IBEF Report
FDI in Telecom Sector
BE - Domain Study - Telecom 22
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
116
129
680
521
1275.65
2345.38
FDI in Telecommunication Sector (US$ million)
Third largest sector to attract FDI in India
Source: IBEF Report
AgendaHistory, Introduction, Facts
GoI, Regulatory Bodies
Spectrum Auction
India Advantage
VAS (Value Added Services)
Industry Updates
Future Technologies
Conclusion
BE - Domain Study - Telecom 23
VAS (Value Added Services)
SMSVAS services, Bulk Messaging, B2B and B2C
Voice IVRMobile Radio, Voice chat, English Learning, Devotional and Astrology, Music on Demand
Content downloadsMobile WAP PortalConsumer Applications Enterprise solutions : Mobile CRM, Mobile SFA
CRBT (Caller ring back tones)
USSDMessage along with *141#Flash alerts
VAS offerings
BE - Domain Study - Telecom 25
VAS market in India
BE - Domain Study - Telecom 26
VAS: Not a form of basic service but adds value to the total service offering
Contributes to 10% of total revenue from telecom operators
The corresponding figure in developed nations is ~25%
Present Segments
BE - Domain Study - Telecom 27
Population of India – 1,130 mn
Mobile Subscriber Base – 509 mn
GPRS Enabled – 70 mn
GPRS Activated – 17 mn
GPRS Users – 10 mn
Source: IAMAI Report
Why mobile VAS ?Decrease in ARPU for telecom operators
Very low operating margins
Decreasing call rates: Lowest in the world @ 1p/sec
Increase in number of operators in each circle
Saturation in metro market: Over 100% tele-density in 4 metros
BE - Domain Study - Telecom 28
VAS value chain
Content GeneratorsEg. Music Companies,
Website portals
Content Aggregators Eg. Spice Digital, Hungama.com,
Mauj.com
Telecom Operators Eg. Airtel, Vodafone,
Idea, BS
BE - Domain Study - Telecom 29
Rural VAS
Only 12% tele-density in rural areas as compared to 72% in urban areas
• Local Mandi Rates• Weather forecasts• Health and job related information• Train services
Huge market potential
Sachet model of VAS promotion
Localization content
BE - Domain Study - Telecom 30
AgendaHistory, Introduction, Facts
GoI, Regulatory Bodies
Spectrum Auction
India Advantage
VAS
Industry Updates
Future Technologies
Conclusion
BE - Domain Study - Telecom 31
Industry UpdatesIdea Cellular’s Acquisition of Spice Telecom
• Idea acquired 40.8% stake of Spice Communications at Rs 77.30 a share for Rs 2,716 crore. There was a share swap in which Spice shareholders got 49 Idea shares for every 100 Spice shares held.
Vodafone’s entry into India
• Vodafone paid a discounted price of $10.9 billion in cash for acquiring the 52% stake held by Hutchison Telecom International (HTIL)
Telenor-Unitech Deal
• Telenor is in the process of acquiring controlling stake of 67.25% in Unitech wireless via equity infusion
TTSL – DoCoMo Deal.
• Japanese carrier NTT DoCoMo acquired 26 per cent stake in Tata Teleservices (TTSL).
BE - Domain Study - Telecom 32
Bharti-MTN deal
To create a $61-billion transnational telecom
goliath.
•Combined revenues of $20 billion •Over 200 million subscribers across Africa, Asia and Middle East.
Takeaways for Bharti
•Access to new geographies with high growth potential.•Greenfield project, time-consuming and capital intensive.
Reasons for failure -Dual listing
•Indian rupee is not fully convertible•Not possible to go in for dual listing of shares.•which allows people to buy shares in the stock exchanges of one country and sell in the bourses of the other country
BE - Domain Study - Telecom 33
India 3G Story
BE - Domain Study - Telecom
In India, 3G mainly for voice?Indiatimes - Sep 8 2008
India 3G kicks off; but at what cost?CIOL - Jan 16 2009
India 3G News: BSNL flips the switchProduct Reviews - Mar 5 2009
DoT looking to hike the reserve price for the auctions of the pan-India 3G spectrum
TopNews - Jun 12 2009 India 3G auction may happen sooner than expectedTelecoms.com - Aug 27 2009
SK C&C, Reliance team on India 3G roll outEE Times India - Oct 20 2009
34Source: Google Trends
• 3G – Rs 35 bn• WiMax – Rs 17.5 bn• EVDO – Rs 8.25 bn
Reserve Price
• 2-3 times the reserve prices - to total at least Rs65bn–Rs120bn.Expected Bid
• with no current presence in India have to pay an additional Rs 16.50bn for 2G spectrum.Foreign players
• relaxing the normal US$500m limit on external commercial borrowingsECB
Jan 14th 2010
BE - Domain Study - Telecom 35
AgendaHistory, Introduction, Facts
GoI, Regulatory Bodies
Spectrum Auction
India Advantage
VAS
Industry Updates
Future Technologies
Conclusion
BE - Domain Study - Telecom 36
Mobile Number Portability(MNP)
BE - Domain Study - Telecom 37
The InhibitorsHuge Costs Infrastructure Upgrade
Customer Retention/Increased Competition
Cost Recovery and Bill Reconciliation/Query Processing
Source: Voice and Data
Mobile Virtual Network Operator• Operator or company which does not own a licensed spectrum
and generally with out own networking infrastructureWhat ?
• MVNOs resell wireless services under their brand name, using regular telecom operator's network.How ?
• Deploy their own mobile Intelligent Network (IN) infrastructure in order to facilitate the means to offer value-added services.
• The goal is to differentiate versus the incumbent mobile operator, allowing for customer acquisition.
Differentiation
• MVNO's have full control over the SIM card, branding, marketing, billing, and customer care operations.Marketing
• MVNOs have not been regulated in any country. • ITU has received several requests to study the issueRegulation
BE - Domain Study - Telecom 38
Wimax v/s 3G
BE - Domain Study - Telecom 39
3G WiMax Result
Spectrum Price To be auctioned DoT has recommended 25% of reserve price of 3G spectrum
Advantage WiMax
Spectrum Allocation Simultaneous Simultaneous Neutral
For Voice services Best technology Evolving technology
Advantage 3G
Equipment/Standard Evolved over the years New technology Advantage 3G
Data download speeds (fixed)
15 Mbps 70 Mbps Advantage WiMax
Data download speeds (mobile)
15 Mbps 20 MBPS Advantage WiMax
Source: Business Standard
Generations
BE - Domain Study - Telecom 40
2gDATA RATE14.4
3G600KBPS TO 2MBPS
4G10MBPS TO 20 MBPS
• Worldwide Interoperability for Microwave Access
• IEEE 802.16e STANDARDS• BROADBAND EVOLUTION
• Long term evolution• 3GPP• 80%• MOLILE EVOLUTION
Wi Max(e not d)
•MIMO (multiple input multiple output) smart antenna•OFDM•10 To 80mbps•Sprint, Clearwire, Comcast, •Motorola / Lucent •Rev m is the future•Small investment
LTE
•MIMO•OFDM•20 to 100mbps•Revision 8 future is rev 10•Vodafone/A&T/France Tele•Nokia & Ericsson •Large investment
4G
BE - Domain Study - Telecom 41
AgendaHistory, Introduction, Facts
GoI, Regulatory Bodies
Spectrum Auction
India Advantage
VAS
Industry Updates
Future Technologies
Conclusion
BE - Domain Study - Telecom 42
SURFING AGAINST
BE - Domain Study - Telecom 43
Top Ten Challenges Sustenance of same EBITDA
Competitive tariffs
VAS applications on Device
Spectrum management
Broadband expansion in Rural
Transition to NGN
Content Regulation of Data
Ecosystem to facilitate M&A
Reduce Circles to relax Roaming
Alternate Technologies (Solar/Wind
for power back-up)
THE TIDE
Road Ahead
BE - Domain Study - Telecom 44
China India USA Indonesia Brazil Pakistan
720510
271140 165 96
604
661
3691 25 71
54.4%43.6%
88.4%60.5% 86.6% 57.6%
People with and without mobile connections (in millions)
Connected Not Connected
Highest Number Not Connected
People
References1. Trai – Quaterly Report (Nov 2009).2. IBEF report 2007-08 : Telecommunication - MARKET & OPPORTUNITIES.3. Cellular Statistics – Cellular Operator Association of India 4. IAMAI & eTechnology Group@IMRB: MOBILE VALUE ADDED SERVICES IN
INDIA- A Report.5. Telenor Entering India: Investment Update6. Voice and Data(May 2009): Mobile Number Portability - Poaching with
Portability.7. Business India : Telecom Takeover, Bharti-MTN deal
BE - Domain Study - Telecom 45
Thank You for Your Attention !