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Telecommunication

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Thought Process2

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Identifying key growthdrivers

 Subscriber Base, Rural  India, VAS Services

Differential analysisparameters

 Impact on ARPU, Private and 

 Public Firms

Final Conclusion

 Summary of our findings

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Contents

SWOT analysis of the sector

Market analysis

Growth and market share of public and private

players

Profit margins of public and private players

Analysis of investments

Future growth prospects of the sector

Future scope of the project

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SWOT Analysis of Telecom sector5

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STRENGTHS

• Increase in mobile subscriber base• Healthy competition and attractive business

environment

•

Decreased restrictions for foreign participation• Increase in foreign investments-

Singtel(Singapore), Telekom Malaysia, NTT(

Japan), Sistema ( Russia)

• Demand for mobile value added services

• 76.5% increase in broadband subscribers in 2008

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WEAKNESSES

Maximum number are prepaid users with low activity

level

Average Revenue Per User(ARPU) is declining due to

rise in prepaid users Delay in implementing 3G

Limited infrastructure in rural areas

Shrinking market of fixed line telephoning Dominance of fixed line telephoning by BSNL and

MTNL (rural- 99%)

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OPPORTUNITIES

Recommendation to allow foreign participation for the

auction of 3G

Deployment of Next Generation Network(NGN)

infrastructure Launch of new multimedia mobile handsets- positive

impact on data service usage

Issue of international and national long distance

licenses- opportunity for companies to develop market

presence

Opportunity to develop WiMax and fibre for

broadband services

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THREATHS

Mobile network portability(MNP)- increases pressure in

on operators to retain customers

Uncertainty of sufficiency in spectrum allocation for 3G

Network capacity struggling to keep up with demand

Fixed line sector may decline at a higher rate

Current slowdown in domestic consumption may

negatively impact IP services Development of IPTV services may be adversely

effected by high costs, slow speed and low usage

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MARKET ANALYSIS10

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Telecom sector is 2nd largest with 430mn connections (Mar,2009)

Growth rate of 45-50% in recent years

Indian mobile market growth11

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Teledensity growth in India

•GOI has set a target of 45% teledensity which will need $73bn of investments

•Major chunk is expected from FDI

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Private sector accounted for more than 75% of subscriberadditions ( early 2004)

Yearly net additions of mobile subscribers13

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Prepaid-postpaid subscriber base

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Postpaid million 3.6 6.5 10.8 13.1 15.8 17.3

Prepaid million 9.1 19.6 30.2 56.0 105.6 175.4

Total GSMsubscriber basemillion 12.7 26.2 41.0 69.2 121.4 192.7

Proportion of prepaidand postpaid

-Postpaid per cent 28 25 26 19 13 9

-Prepaid per cent 72 75 74 81 87 91

Source: CRISIL Research, TRAI and COAI

•Rapid increase in the prepaid subscribers probably due to availability of

cheaper handsets and low tariffs

•Most of the subscribers are inactive leading to decrease in ARPU

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Percentage growth of prepaid subscribers has been steadily increasing as

compared to postpaid subscribers

Breakup of prepaid and postpaid subscriber base

0

10

20

30

40

5060

70

80

90

100

Postpaid

Prepaid

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Rural markets are yet to be captured and provides a immense

growth prospects for the for the existing players

However, immense investments in infrastructure is required

Growth of rural wireless subscriber base16

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Growth of public call office17

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Broadband Subscribers18

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Major players in telecom sector

Major players (in the decreasing

order of market share)

1 Bharti Airtel

2 Reliance

3 Vodafone Essar

4 BSNL

5 IDEA Cellular

6 Tata Teleservices

7 Aircel

8 MTNL

9 Spice Communications

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FDI Inflow in the industry

•FDI of upto 74% allowed for ISP’s and radio paging services

•FDI of upto 100% permitted for electronic mail and voice mail

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GROWTH AND MARKET SHARE OFPUBLIC AND PRIVATE SECTOR

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SpiceOthers 0 78

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BhartiAirtel, 24.69

Reliance, 17.68

VodafoneEssar, 17.57

BSNL, 13.33

IDEACellular, 9.86

TataTeleservices, 9.

16

Aircel, 4.63 MTNL, 1.21Spice

Communications, 1.10

Others, 0.78

MARKET SHARE OF MAJOR PLAYERS IN THE SECTOR22

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Demand

Telecom subscriber base rose by 11.45 million to

464.8 million

wireless subscriber base grew to 427.3 million

The mobile segment added 12.0 million subscribersin June 2009 as compared to 11.6 million

subscribers in May 2009.

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Public sectorA Brief analysis

Mahanagar Telephone Nigam (MTNL) Government (56.25%)

Fixed-line and mobile telephony

Delhi, Mumbai

Services: Data, internet Bharat Sanchar Nigam (BSNL) Government (100%)

Fixed-line and mobile telephony

GSM – outside Delhi and Mumbai 23 circles

Services: Data, internet

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The market share of BSNL has seen a sharp decline since 2006

BSNL wireless market share (2005-08)

2005 2006 2007 2008

BSNL market Share 23.2846 23.4838 20.5911 17.3982

0.00

5.00

10.00

15.00

20.00

25.00

BSNL market Share

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Market Share (Wireless subscribers) of

major operators

0

5

10

15

20

25

30

     S   e   p  -     0     7

     O   c    t  -     0     7

     N   o   v  -     0     7

     D   e   c  -     0     7

     J   a   n  -     0     8

     F   e     b  -     0     8

     M   a   r  -     0     8

     A   p   r  -     0     8

     M   a   y  -     0     8

     J   u   n  -     0     8

     J   u     l  -     0     8

     A   u   g  -     0     8

     S   e   p  -     0     8

     O   c    t  -     0     8

     N   o   v  -     0     8

     D   e   c  -     0     8

     J   a   n  -     0     9

     F   e     b  -     0     9

     M   a   r  -     0     9

Airtel

BSNL

Vodafone Essar

Reliance

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Private network growth27

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Comparison of PBITDA for public and

private sector firms

0

5000

10000

15000

20000

25000

Comparison of Total PBITDA

Public Private

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Wireline market comparison29

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Market Share – Fixed Wireline

BSNL, 76.70%

MTNL, 9.46%

BhartiAirtel, 7.53%

HFCLInfotel, 0.44%

Reliance CommunicationsLtd, 3.01% Shyam

Telelink, 0.30%

Tata TeleservicesLtd1, 2.57%

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Internet Subscriber Base Comparison31

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ISP Market Share of various operators32

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Analysis of ISP subscriber base data33

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Telecom infrastructure34

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Public-Pvt sector in infrastructure35

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Summary36

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Demand Forecast: Increase in subscriber base

Factors affecting future of Indian Telecom

Industry• 3G spectrum

• New entrants

• Implementation of 4G

Future growth prospects38

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3G spectrum

The much awaited 3G spectrum policy was unveiledby the DoT in August 2008

The reserve price for a pan-India 3G licence is

fixed at Rs 22 billion To each successful bidder

the government plans to allot 5 MHz of spectrum in the2.1 GHz frequency band.

Auction of 1.25 MHz of spectrum in the 800 MHz bandtowards 3G services is expected to be held at a laterstage.

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Global 3G subscriber base (as of December 2007)3G subscribers 3G penetration

(million nos) (per cent)

UK 11.8 16.0

France 11.5 22.4

Germany 8.7 9.0

Italy 20.4 22.7

Indonesia 0.6 0.7

Malaysia 1.4 6.1

Japan 72.7 69.1

Phillipines 0.3 0.6

South Korea 19.9 45.8

Australia 6.7 31.3

US 6.3 2.5

World 286 8.6

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K k f I di f l b l

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Key takeaways for India from global

case studies

We have studied the implementation of 3G services

in Japan and some European countries to

understand the scale of deployment over a period

of time, the nature of problems faced at inceptionand the recent growth phase. The key factors that

determine adoption of 3G services in any market

are:

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Demand forecast 2009-13(3G)42

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The game changer in Telecom industry

Mobile number Portability43

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Impact

Competitive landscape slated to change

Both Public and private operators will have to

change strategies

For Customers

More value for money

Bright prospects for new entrants

Market Share troubles for existing operators (Publicand private)

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Analysis of public and private sector45

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Public Sector (BSNL & MTNL)

Wireless subscriber base share decreasing for BSNL

Cause of concern

Market share for Reliance increasing in GSM

BSNL & MTNL have a healthy market share Fixed Wireline market share is strong

Internet market share is healthy

BSNL needs to improve as compared to marketleader

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Future scope of the project

Study on the number of employees

Impact on profitability of speed in decision making

Study of the cash flows

Effect of employee salary on profitability

Study of talent pool

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References49

Telecom Regulatory Authority of India (http://www.trai.gov.in/)

Department Of Telecommunications

(http://www.trai.gov.in/) Indian Brand Equity Foundation

(http://www.ibef.org/)

Prowess database

Crisil Research

(https://www.crisilresearch.com)