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Next Generation Wireless Access …From The Indian Perspective INDIA INDIA T V Ramachandran, Director General January 25, 2006 @ Tokyo

Next Generation Wireless Access-Tokyo

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Next Generation Wireless Access…From The Indian Perspective

INDIAINDIA

T V Ramachandran, Director General

January 25, 2006 @ Tokyo

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CONTENTS

THE INDIAN TELECOM SCENARIO

THE REGULATORY LANDSCAPE

THE NEXT GENERATION WIRELESS SCENARIO

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The Indian Telecom Scenario

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India – Telecom Unleashed!!

5th largest network in the world

2nd largest among emerging economies

129 state-of-the art Networks on Air: 83 GSM

Services in about 4000 cities & towns and nearlyI00,000 villages

Over 76 million mobile subscribers (GSM + CDMA) –end December 2005 – GSM running at 80% of total

market share

Nearly 5 million mobile subscribers added inDecember 2005 alone

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The Revenues

Indian Telecom Services (FY 2004-05)

S. No. Service Categories Revenues (in USD billion) Growth (%)

2004-05 2003-04

1. Fixed Access 7.25 7.34 -1

2. Cellular 5.17 3.17 63

3. NLD 1.39 1.14 22

4. ILD 0.85 0.97 -12

5. Internet Access 0.35 0.35 1

6. VSATs 0.09 0.07 29

7. Radio Trunking 0.01 0.01 4

Total Services Revenue 15.13 13.05 16

Source: Voice & Data, July

1USD=Rs. 45

With a YoY growth of 63%, Cellular revenues constitute35% of the total revenues

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Benefits to the Indian Economy from MobileTelephony

As per a 2005 Ovum study,

Economic benefits that have resulted to India are:

3.6 million jobs generated directly or indirectly.

Employment dependent on the industry expectedto rise by at least 30% over the next 12

months.

Mobile industry generates

USD 3.2 billion per annum for the Government.

An annual GDP contribution of USD 6.9 billion.

All above only from 48 million mobiles and 30% popcoverage!!

With India headed toward 200 mn by 2007,

  The Best is yet to come…..

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GSM Growth Through the Years

0

10

20

30

40

50

60

70

1997 1998 1999 2000 2001 2002 2003 2004 2005 Dec-05

Year ended April

   S  u   b   f   i  g  u  r  e  s   i  n  m   i   l   l   i  o  n

Specific points of inflexion on the GrowthTrajectory from Policy Initiatives

NTP’99

3rd & 4th Cellular 

CPP

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GSM – The Primary Engine of Growth

1 2 4

6

41

59

26

13

2

811

17

10

10

20

30

40

50

60

70

1999 2000 2001 2002 2003 2004 2005 Dec-05

GSM CDMA

Subsc

rib

ersinMillion

Year Ended MarchOct’04: Mobile–Fixed crossover 

April’05: GSM-Fixed crossover 

Cellular ~60% of current national tele density –taking overall tele density

from 0.8 in 1994 to 11.43 in 2005

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Affordable Cellular Services

1 3

0 .8

3 .50 .9

4 .4

7 .9

3 1 3 1

1 3

5 1 . 5

6 .5

3 .51 .81 .20 .8

33 . 3

0

5

1 0

1 5

2 0

2 5

3 0

3 5

1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5

   E    f    f   e   c   t   i   v   e   c   h   a   r   g   e    (   i   n   U    S    C   e   n   t

   s   p   e   r   m   i   n    )

0

1 0

2 0

3 0

4 0

5 0

6 0

   M   o   b   i   l   e   s   u   b   s   c   r   i   b   e   r   b   a   s   e    (   i   n   M   i   l   l   i   o   n    )

E f f e c t iv e c h a r g e ( in U S C e n t s P e r m in )S u b s c r ib e r B a s e ( i

3 r d & 4 t h C e ll

O p e r a t o r

C P P

I n t r o d u c e

L o w e ri ng o f A D C

3 0 % t o 1 0 % o f s e

revenueN T P ' 9

Source: TRAI Study paper No 2/2005

Region ARPU (in USD)for Q2 05

Western Europe 37.4

Middle East 22.1

Africa 20.9

Asia-Pac 18.9

Latin America 13.3

Eastern Europe 13.1

US & Canada 9.6

Global Average 21.3

India 8.0

Indian Cellular Tariffs – Lowest in the World

Also Lowest ARPUs

Source: Wireless Asia/ Telegeography Research

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Monthly Spend on Cellular Services

3

5

5

12

38

36

0

0

1

3

27

67

0 10 20 30 40 50 60 70 80

$67+

$45-66

$34-44

$23-33

$12-22

$1-11

%

Prepaid

Postpaid

Monthly Spendby IndianCustomers

0

10

20

30

40

50

60

70

80

Brazil Russia India China

Postpaid

Prepaid

% of usersspendingunder USD 12

Source: Mobile Trends 2005/06 Smart Trust

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Industry EBITDA Margins

Despite low ARPUs and heavy burden of tax and

duties on cellular industry, the industryefficiency is good and the average EBITDA

margin is at 33%

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India/ China Comparable Years of Service

0

5

10

15

20

25

30

1 2 3 4 5 6 7 8 9

China India

Million

Year Ended December 

Year 1 2 3 4 5 6 7 8 9

China 1988 1989 1990 1991 1992 1993 1994 1995 1996

Subs. (MLN) 0.003 0.01 0.02 0.1 0.2 0.6 1.6 3.6 6.8

India 1995 1996 1997 1998 1999 2000 2001 2002 2003

Subs. (MLN)

 

0.03

 

0.22 0.8 1.1 1.6 3.1 5.5 10.5 28.2

Growth levels well ahead of China

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The Regulatory Landscape

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Major Policy Initiatives That have FuelledGrowth

1994 1996 1999 2002 20041995 2001 2003

s NTP 1994

s

Private sector participationfor supplementing efforts of 

the Government

s License issued for 4 Metros

s Circles opened up for Cellular 

s NTP 1999

s Migration torevenue sharing

making industryviable

s BSNL and MTNLthird operator incellular 

s Tariff rebalancing

s Open competition

s Technology neutral

regime

s 4th Cellular operator starts operations

s ILD sector opened up

s Internet tele-

phony opened up

In limited way

s License fee reduced

s Separate USO FundEstablished

s Intra-Circle M&Aguidelinesannounced

s Broadband policy

s Start of operationsin 4 Metros

s

License issued for 20 circles

s 4th cellular licenseissued

s CPP introduced

s Unified access license

regime introduceds IUC implemented

s Explosive growth of wireless

s Start of operationsof cellular services incircles

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Major Policy initiatives in 2005

Direct Interconnectivity in Four Circles – First step towardsIndia One.

FDI limit increased to 74%.

Indigenous manufacturing by global players initiated.

Entry fee for NLD/ ILD licenses reduced.

Provision of Internet telephony, Internet services andBroadband services by Access Providers.

TRAI’s draft Regulation on Multi-Operator Multi ServiceIntelligent Network Platform.

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On The Anvil….

These policies will facilitate the next quantum leapin Indian Telecom Reforms

Assistance from USO Fund for creating cellular infrastructure in remote/ unserved areas

Introduction of holistic Unified Licensing.

Switch over to a Revenue Share ADC Regime and merger with the USO Fund.

Reduction in levies and duties on telecom

Introduce uniform Nationwide Guidelines for variousprocedures and clearances

Light touch Regulation Introduction of one tariff for all DLD calls (India One)

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The Next Generation Wireless Scenario

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Emerging Markets Will be

Wireless-centric and not PC-centric.

C.K. Prahalad, Renowned Economist

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Engines of Wireless Growth in India

BoomingKnowledge

Sector-major 

global hub for IT

enabled services.

BurgeoningMiddle Class- 100 MN added

between 1995-

2002

Rising IncomeLevels - 4th

largest economy

after USA, China

& Japan (in terms

of PPP)

GrowingUrbanization - as infrastructure

develops rural

India will become

increasingly

mainstream

 Younger Population- 51%

population below

age of 35

High GDPGrowth - 6% p.a.

in next 5-10

years.

GROWTH

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Mobile has fast moved from a class service to a mass service for the common

man – fuelled by continuously falling tariffs, increased coverage, customizedservice offerings

The real revolution will come from the continuous growth of the low income groupmarket

New & innovative use by a varied customer base has made mobile services thekey plank for infrastructure & economic development

Doctors deliver healthcarethrough GSM GPRS

Farmers track prices of Agricultural Produce

Fishermen call in their Catch

India’s Masses are Fuelling The MobileRevolution

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Value Added Services in India

 Voice will increasingly become a commodity, real revenues will

come from data.

In 2003, Mobile Data Services accounted for 5.4% of cellular 

revenues-most of this from SMS traffic.

Going forward, data revenues expected to touch USD 3.2 Billion

by 2008 representing 20.5% of the total cellular revenues of USD

15.61 Billion in that year ….Gartner Research

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Popular Value Added Services In India

health

tips

ringtones

mobile gaming

music

astrology

 jokes

PTT

news email

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Price of Value Added Services

0.04

0.06

0.13

0.15 0.15

0.23

0

0.05

0.1

0.15

0.2

0.25

SMS Picture

Messages

Logos Ringtones MMS Polyphonic

Ringtone

Source: Portio Research

Low prices of VAS enabled increased usage by Indiansubscribers

US$

C S

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Consumer Awareness For Data Services InIndia

4

5

7

10

27

62

76

90

0 20 40 60 80 100

MMS

M-banking

Data Services

Instant Access

Email

Call Waiting

Voice Mail

Roaming

Source: Portio Research

Increasing Demand for Value Added

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Increasing Demand for Value AddedServices

0

10

20

30

40

50

60

70

China Hong Kong S.Korea Japan India

   %   o

   f   S  u   b  s

Games Internet MMS Music

Source: Mobile Trends 2005/06 Smart Trust

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Growth of Value Added Services in India

Mobile music industry contributes 5% of the total operator revenues Expected to grow nearly 23% by 2010.

Daily downloads of around 1 million ringtones and ringback tones.

Average cost: 20 US Cents per ringtone.

Monthly growth rate of ringtones and ring back tones: 20-25%.

During festive season the figures increase sharply…..

This Diwali -a six fold increase in value added service

downloads, over a normal day.

Delhi circle alone saw 8.5 million SMSs being exchanged onDiwali day as against 5.5 million last year.

Indian mobile gaming market was at US$ 26 million in 2004

– Expected to grow by nearly 66% in the next 5 years to reach $336

million by 2009.

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Revenues From Value Added Services

Source: PWC Indian GSM Cellular Benchmarking Study 2004

VAS shows promising trends, share in total net service

revenue increasing continuously 

S M S C l ip O t h e r

VAS Revenue compositionfor 2004 (in %)

8%

65%27%9%

3%

7%

10% 8%

9%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

2003 2004

Postpaid Prepaid Total

VAS Revenue as % to NetService Revenue

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SMS Volumes

12.320.6

33.1

50.7

89.4

140.2

180

0

20

40

60

80

100

120

140

160

180

200

2004 2005 2006 2007 2008 2009 2010

SMSVolumesinb

illion

Expected to grow in the next five years due to – falling prices,

increasing mobile penetration,

widening user demographic and

increasing number of SMS based services.

Source: Portio Research

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Growth Of Data Market

Data market is expected to grow at a CAGR of 77% over CY 04-10

Major contributing factors will be

Burgeoning youth population (60% of population below 30 yrs)

Fast rising consumption and infotainment expenditure pie

Social affinity to music and BollywoodSource: Lehman Brothers Global Equity Research

3G (Next Generation Wireless) will happen

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3G (Next Generation Wireless) will happen

soon…

India’s path towards 3G expected through the IMT2000 Core Band.

GSM being 80% of the market,3GSM (WCDMA)expected to be the major force in 3G.

3G Spectrum Guidelines expected in Q1 06.

Tenders already floated by some companies.

Rollout expected before Q1 07.

3G in India will help achieve Broadband penetration andmitigate spectrum availability problems

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Importance & Relevance of 3G for India

3G will facilitate higher speed & data throughputs, enable delivery of wide

range of multimedia services.

3G both relevant & important for India as:

Higher voice capacity of 3G spectrum (4x-5x) can

• Ease spectrum constraint in metros & other big cities.

• Serve as an ideal platform to deliver low cost voice telephony as it is far 

more cost effective on a per erlang basis than 2G.

It will be a valuable tool to reach out into rural areas to achieve thebroadband objectives of the Government as well as to undertake keysocial initiatives such as E-Education, Tele medicine, etc.

It will enhance India’s competitiveness in ITES / BPO segment.

It’s hi-speed data capabilities will fulfill the content rich mobility experience that will increasingly be demanded in urban & metropolitan markets.

Next Generation Wireless will fuel India’s

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Next Generation Wireless will fuel India smobile growth

0

50

100

150

200

9 10 11 12 13

China India

Year Ended December 

Million

China 1996 1997 1998 1999 2000

Subs. (MLN 6.8 13.2 24 43 85

YoY (%) 94 82 79 98India 2003 2004 2005 2006 2007

Subs. (MLN 28 48 76 125 200

YoY (%) 71 56 67 60

Even at lower growth rates vis-à-vis China, India has the

potential to achieve 200 million subs by 2007

India Versus China – Future Potential

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