Indian Mobile Industry
INTRODUCTION TO THE WORLD’S FASTEST GOWING TELECOM MARKET
2
THE WORLD’S SECOND LARGEST MARKET
Area – 3,287,263 Square kilometers
Population (July 2005) – 1.08 Billion
22 National Recognized Languages
Literacy Rate (2005) – 65%
Average Annual Growth Rate
– Population – 1.4%
– Labour Force – 2.5%
– GDP Growth- 6.7%
Trade (2004)
– Total Exports (FOB) – USD 76 Billion
– Total Imports (CIF) – USD 97 Billion
Forex Reserves (including gold) =USD 155 Billion
Source : The World Bank Group
3
….& ONE OF THE FASTEST GROWING ONES
One of the fastest growing economies in Asia.
Annual GDP growth rate of ~8% over next 5-10 years
Set to emerge as 3rd largest economy in the world by 2020
Major global hub for IT & IT enabled services
Mobile telephony transforming people’s lives
4
Background of Mobile Revolution in Indian Telecom
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Policy announced for additional licenses in Basic and Mobile Services (Jan
2001).
Entry fee:
– Basic Services: US$ 0.2mn – US$ 25.5mn (+ Bank Guarantees = 4 times
entry fee for rollout obligations)
– GSM Mobile Services (4th Operator bid): US$ 0.2mn – US$ 45mn
License fee (revenue share) reduced from provisional 15% to 12%, 10% &
8%.
Limited Mobility allowed to Basic Services (CDMA spectrum allotted to
BSOs).
Rollout Obligations to cover Urban / Semi-Urban / Rural areas in equal
proportion.
New licenses awarded in Jul - Sep 2001 : Basic (25), GSM Mobile (17).
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MOBILE – MAJOR CONTRIBUTOR TO TELE DENSITY
14
Total – 12.3%
12
10
Mobile – 7.5 %
8
6
Fixed – 4.8 %
4
2
0
1997
1998
1999
2000
2001
2002
2003
2004
Feb'
06
Cellular constitutes ~61% of current national tele density – has played an important role in
taking overall tele density from 0.8 in 1994 to 12.3 in Feb’06.
10
GSM DRIVING MOBILE GROWTH
70
GSM
Subscribers in Million
60
CDMA
65
50
41
40
26
30
20
19
13
10
8
6
11
2
1
2
4
1999
2000
2001
0
1
2002
2003
2004
2005
Feb'
06
Year Ended March
GSM driving growth of Indian market with nearly 80% market share & about 75% of new
additions
11
IN SYNC WITH WORLDWIDE TRENDS
Worldwide GSM constitutes 75% of the subscriber base and 80% of the
monthly additions.
1800
GSM
Subscribers in Million
1600
CDMA
1400
1200
1000
800
600
400
200
0
1992
1993
1994
1995
1996
1997
1998
1999
Year Ended December
2000
2001
2002
2003
2004
Jan'
06
12
INDIAN GROWTH FUELLED BY INCREASED COVERAGE
6000
Number of Cities & Towns
5048
5000
4000
3076
3000
2000
1575
918
1000
0
249
421
Dec'
98
Jun'
99
Nov'
00
1743
1116
Apr'
01
Sep'
02
Sep'
03
Dec'
04
Dec'
05
• Estimated that service providers will cover 5,000 towns by mid 2006
• Ubiquitous coverage holds the key to future growth of mobile industry
13
AND CONTINUOUSLY IMPROVING AFFORDABILITY
0.07
Effective Tariffs – 400 Minute Basket
0.06
USD per minute
0.05
0.04
0.03
0.02
0.01
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In last 3 years alone, effective local call cellular tariffs have plummeted by 80% from
USD 0.06 / minute in December 2000 to USD 0.01 / minute in December 2004.
During 2005, tariffs have declined further by ~ 37%
Source:TRAI Quarterly Performance Indicators, March 2005
14
INDIAN MOBILE INDUSTRY – CURRENT STATUS 2006
133 state-of-the art Networks (GSM + CDMA) on Air: 91 on GSM
Total Investments ~ USD 15 billion
Nearly 85 million mobile subscribers (GSM + CDMA) – end February 2006
– with GSM accounting for ~80% of the subscribers base.
4-5 million new mobile phone subscribers added every month, Total adds in
2005 ~28 million, showing growth of almost 60% in last 12 months
Services in ~ 5000 cities & towns & ~1 lakh villages
Fixed Mobile Crossover in October 2004, GSM Fixed Crossover in April 2005
Mobile the primary driver of growth, accounts for 7% tele density
15
GROWING SUBSCRIBER BASE
50
Prepaid
45
Postpaid
40
Million
35
30
25
20
15
10
5
0
1999
2000
2001
2002
2003
2004
2005*
• Subscriber growth predominantly on the prepaid plank
• Allows even credit challenged subscribers to take advantage of benefits of
connectivity
• Mobile connectivity a common feature amongst blue collar segment
COAI-PWC Benchmarking Reports
* COAI Estimates
16
…IMPROVED AFFORDABILITY
Blended Airtime Rate
0.1
0.08
USD / minute
0.1
0.06
0.1
0.04
0.0
0.036
0.02
0.0
0.0
1USD=Rs. 44.3
0.0125
2000
COAI-PWC Benchmarking Reports
*TRAI Report Dec-05
2001
2002
2003
2004
2005*
17
GROWING MINUTES OF USE
393
400
Minutes/Subscriber/Month
350
287
300
245
250
200
204
220
192
175
150
100
50
0
1999
COAI-PWC Benchmarking Reports
*TRAI Report on GSM
2000
2001
2002
2003
2004
2005*
18
DECLINING ARPUS
32
29.3
USD/Subscriber/Month
26.1
24
18.4
16.5
16
11.4
8.7
8.2
8
0
1USD=Rs. 44.3
1999
2000
2001
2002
2003
2004
2005*
• Increased subscriber base accompanied by constantly declining ARPUs –
demonstrating the increased acceptance of mobile services amongst low
end consumers.
COAI-PWC Benchmarking Reports
*TRAI Report
19
REDUCED OPEX PER SUBSCRIBER
22.4
19.1
USD/Subscriber
20
10.2
10
7.4
6.5
4.7
0
1USD=Rs. 44.3
1999
2000
2001
2002
2003
2004
3.6
2005*
• Opex per subscriber brought down by 80% in last 5 years
• Result of better improved efficiency by operators as well as the benefits of
economies of scale
COAI-PWC Benchmarking Reports
* COAI Estimates
20
COMPOSITION OF NET SERVICE REVENUES
Gross IUC Revenue,
15%
Other Revenues, 3%
Airtime, 28%
Other VAS, 5%
SMS Revenues, 4%
Roaming Revenues,
12%
Rentals, 13%
Activation &
Processing fees, 20%
Airtime
Rentals
Activation & Processing fees
Roaming Revenues
SMS Revenues
Other VAS
Other Revenues
Gross IUC Revenue
Roaming Revenues 12%; SMS Revenues 4%; Other VAS 5%
Source: Price Waterhouse Benchmarking Study, December 2004
21
REVENUES FROM VALUE ADDED SERVICES
10%
8%
As a %age of Service Revenues
VAS Composition
Others
34%
10%
Postpaid
12%
SMS
54%
8%
CLIP
12%
6%
CLIP
0%
2%
Prepaid
4%
Others
17%
SMS
83%
0%
• Prepaid subscribers are increasingly taking to value added services, Percentage of Revenues
from VAS for prepaid subscribers has gone up from 3% in 2003 to 8% in 2004.
• Overwhelming proportion of this comes from SMS, which is the VAS of choice for prepaid
subs.
Source: COAI-Price Waterhouse Benchmarking Study, December 2004
22
GROWTH IN VALUE ADDED SERVICES
23
REVENUES FROM VAS
“Revenue from the VAS segment is growing at the rate of 30 to 40 percent
annually. At present, this segment accounts for 10 to 13 percent of the total revenue of
a service provider,”
- Tim DeLuca Smith, Communications Manager, SmartTrust.
“Market for mobile VAS is currently about USD 85 million and it is expected to grow
around 800 million by 2010.”
- Arun Gupta, CEO Mauj Telecom
Daily downloads of around 1 million ringtones and ringback tones.
– average cost: Rs 9 per ringtone.
During festive season the figures skyrocket…..
– This Diwali, there was a six fold increase in value added service
downloads, over a normal day.
– Delhi circle alone saw 8.5 million SMSs being exchanged on Diwali
day as against 5.5 million last year.
24
REVENUE GENERATED FOR OPERATORS FROM VARIOUS APPLICATIONS
Charges
Application
(in USD)
Estimated monthly
downloads
Operator Revenue
Share
(in million)
2G – SMS
0.02– 0.11
1,100
90%
2G – P2A/ A2P
0.05 – 0.23
50
70-75%
2.5G Messaging
0.07/MMS; 2.23
unlimited for 1 month
5
80-90%
CRBT
0.14-0.34
7
50-60%
Wallpapers
0.23
14
50-60%
Games
1.13-3.39
14
25-50%
IVRS
0.07-0.14/minute,
voice + transaction
charges
1USD=Rs. 44.3
Source: Global Equity Research
25
REVENUES FROM SMS
200
180
180
SMS Volumes in billion
160
140.2
140
120
100
89.4
80
50.7
60
40
20
12.3
20.6
33.1
0
2004
2005
2006
2007
2008
2009
2010
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
26
CONSUMER AWARENESS FOR DATA SERVICES IN INDIA
Roaming
90
Voice Mail
76
Call Waiting
62
Email
27
Instant Access
10
Data Services
7
M-banking
5
MMS
4
0
20
40
60
80
100
27
Source: Portio Research
INDIA’S PLACE IN ASIA PACIFIC
28
ARPU
35
ARPU
Average
30
25
USD
20
15
10
5
0
Malaysia
Philippines Indonesia
Thailand
China
Singapore
Australia
India
INDIA
• ARPUs well below Asia Pac average
• Market driven by volumes not margins
COAI PWC Benchmarking Study, December 2004
29
MINUTES OF USE
350
ARPU
Average
Minutes/Subscriber/Month
300
250
200
150
100
50
0
Malaysia
China
Singapore
Australia
India
INDIA
• One of the most talkative markets in the region
• Increased use a direct result of affordability of service
COAI PWC Benchmarking Study, December 2004
30
COST OF CUSTOMER ACQUISITION
120
100
Cost of Customer Acquisition
Average
USD
80
60
40
20
0
Malaysia
Philippines Indonesia*
Thailand*
Singapore
Australia
India
INDIA
• One of the lowest costs of customer acquisition in the region
* For the year 2002
COAI PWC Benchmarking Study, December 2004
31
MONTHLY CHURN
9%
8.0%
8%
6.7%
7%
6%
5%
4%
3%
2%
2.0%
1.9%
1.0%
1%
1.2%
1.5%
1.4%
Singapore
Australia
0%
Malaysia
Philippines
Indonesia
Thailand
China
India
INDIA
• The highest Churn in the Asia Pac Region – demonstrating existence of an
intensely competitive & vibrant mobile market
COAI PWC Benchmarking Study, December 2004
32
BAD DEBTS AS A % OF NET SERVICE REVENUES
4%
3.1%
3%
3.0%
2.8%
3%
2%
1.6%
2%
1.3%
1.1%
0.9%
1%
1%
0%
Malaysia
Philippines
Thailand
China
Singapore
Australia*
India
INDIA
• Bad Debts above Asia Pac averages; need to be brought under control
COAI PWC Benchmarking Study, December 2004
33
EBITDA
70%
60
EBITDA
Average
60%
50
50%
40
40%
30
30%
20
20%
10
10%
0%
0
Malaysia
Philippines
Indonesia
Thailand
China
Singapore
Australia
India
INDIA
• Lowest EBITDA in Asia Pac Region; Combined effect of lowest tariffs & highest
costs
COAI PWC Benchmarking Study, December 2004
34
PAST PERFORMANCE AND FUTURE AHEAD
35
Convergence of Tariffs and Growth of mobile services
Full Mobile (Rs./min)
Mobile Subscriber base (Millions) Lowering of ADC
from 30% to 10%
of sector revenue
Effective charge (in Rs. per min.)
18.00
16.00
100
89.54
90
NTP '
99
14.00
CPP
introduced
Telecom
Tariff Order
12.00
80
70
10.00
3rd & 4th
cellular
operator
8.00
52.17
CDMA
introduced
50
40
6.00
33.60
30
4.00
2.00
60
20
0.88
0.00
Mar-98
1.20
1.88
Mar-99
Mar-00
3.58
Mar-01
13.00
10
0.90
1.18
0
6.50
Mar-02
Mobile subscriber base (in Million)
Fixed (Rs./min.)
Limited Mobile (Rs./Min)
Mobile growth and effective charge per minute
Steps taken for increasing growth
Mar-03
Mar-04
Mar-05
Mar-06
36
Falling ARPU vs. Rising Subscriber Base
100
90
89.54
80
70
60
51.57
50
40
30
29.77
20
10
33.6
25.12
3.58
19.95
6.5
14.31
13
10.59
9.19
7.90
0 1.88
Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06
ARPU(in $)
* ARPU of March-06 are Estimated
Subs. in (Mn)
37
Urban/Rural income-wise distribution of households
Income Group
Rural Households
Urban Households
Lower
60 (43.48%)
10 (18.52%)
Lower Middle
56 (40.58%)
20 (37.04%)
Middle to High
22 (15.94%)
24 (44.44%)
Total
138 (100%)
54(100%)
38
Effect of CPP Regime
Thousands
Additions in Mobile
CPP Introduced
2500
2000
1500
1000
500
0
Feb03
Mar03
Apr-03 May- Jun-03 Jul-03
03
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DECLINING ARPUS
32
29.3
26.1
USD/Subscriber/Month
24
18.4
16.5
16
11.4
8.7
8.5
8
7.0
6.5
6.0
5.0
0
1999
1USD=Rs. 44.3
2000
2001
2002
2003
2004
2005*
2006*
2007*
2008*
2009*
• Increased subscriber base accompanied by constantly declining ARPUs – demonstrating
the increased acceptance of mobile services amongst low end consumers. To achieve the
required growth, the focus will shift to villages with low teledensity, and ARPU will be
going sub $5 mark I next few years.
COAI-PWC Benchmarking Reports
* Estimates
40
Past Growth and future Expectations
20%
16
14
12
10
10%
8
6
4
2
0%
Growth
Mar-06
2
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Dec-05
1
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Mar-05
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41
Growth (Estimates)
1
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M illio n s
350
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1
300
3
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250
200
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150
100
50
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2003 2004 2005 2006 2007 2008 2009 2010
42
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Teledensity (%)
30
25
20
15
10
5
0
1997
1998
1999
2000
Urban
2001
2002
Rural
2003
2004
2005
2006
2007
Total
43
Enhancement of Rural Density
35
31.1
30
26.2
25
21.3
20
15
10
5
0
6.9
2.3
0.5
1999
8.2
10.4
3.6
2.9
0.9
0.7
2000
2001
Rural
•
14.3
12.2
5.1
4.3
1.5
1.2
2002
2003
Total
7.04
1.7
2004
9.08
9.86
1.74
Source: TRAI 1.94
2005
Jul-05
Urban
To bridge the Urban-Rural divide, Cost to Serve the Rural area should be reduced
Impact of CDMA on India’s Wireless Industry
Tariffs
Subscribers
(Millions)
Rs.0.40/min.
Voice Tariffs
90
Rs.1.00/min.
Voice Tariffs
80
70
60
50
40
30
Rs.4.00/min.
Voice Tariffs
20
CDMA Limited Mobility
Introduced
with competitive
Service Offerings
10
Sources: TRAI study
83 million net wireless sub adds since
competition from CDMA Limited Mobility was introduced
05
4
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3
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45
FUTURE GROWTH POTENTIAL
46
Urban population -Indian Census 2001: Agewise
distribution
80+
70-74
Age Groups
60-64
50-54
40-44
30-34
20-24
10-14
0-4
0
50
100
150
200
250
300
350
Population in lac
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The next generation
People born in 1980’s & 90’s
– Majority of these young people will be in their early twenties
and thirties in the next ten to fifteen years
General profile of next generation
– Just started working or would start in near future
– Single or just married with high disposable incomes
– High Lifestyle Aspirations
48
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."Growth has been accelerating in each decade
Industry + services (78% of GDP) growing at +8%
Impact of agriculture on overall growth is steadily reducing
Per capita income has grown by 7% CAGR over the past decade and is projected
to cross $1,000 by the end of the decade
49
Break up betw een Basic and Non Basic Household Expenditure
2002-03
2001-02
2000-01
1999-00
1998-99
1997-98
1996-97
1995-96
1994-95
1993-94
1992-93
0%
10%
20%
30%
40%
50%
Basic
60%
70%
80%
90%
100%
Non-Basic
Moving away from basic necessities
Aspirations given wings by higher Disposable Income’s have changed consumption
patterns
Decrease in outlay on basic: 16%
Increase in non-basic items: 39%
50
SUBSCRIBER BASE & MOBILE PENETRATION
350
100%
316
Subscriber Base
92%
Mobile Penetration
300
90%
88%
80%
Million
250
70%
60%
58%
200
50%
150
40%
40%
36%
100
30%
25%
50
32
14
20%
48
29 12%
27
4
0
Malaysia Philippines Indonesia Thailand
China
18
Singapore Australia
10%
4.50%
0%
India
INDIA
• 2nd largest market in Asia Pac, in absolute terms
• With a mobile tele density of only 4.5% (now 6%) – the one with the highest untapped
potential
COAI PWC Benchmarking Study, December 2004
51
FUTURE SUBSCRIBER GROWTH
500
China
COAI Projections
Actual
Million
400
300
200
100
0
9
10
11
12
13
Year Ended December
14
15
16
Year
9
10
11
12
13
41
15
16
India
2003
2004
2005
2006
2007
2008
2009
2010
Sub (MLN) Actual
31
48
76
Sub (MLN) Projected
28
48
81
130
207
290
377
471
1996
1997
1998
1999
2000
2001
2002
2003
6.8
13.2
24
43
85
145
207
279
China
Subs (MLN)
52
The tariff drivers
53
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Shift in tariff paradigms of cellular services
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Shift in tariff paradigms of cellular services
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Thank you.
S D Saxena
Director (Finance), Bharat Sanchar Nigam Limited
sdsaxena@bsnl.in
+91 11 23714141
58