S. P. Jain Institute of Management & Research
Post Graduate Program in Management
Information Management
2009
Telecom Sector in India
Business Environment Domain Study Presentation
20th Nov 2009
Anjana Rao, Prachi Joshi, Puneet Taneja, Sandeep Sreenivasa
Agenda
History, Facts
GoI, Regulatory Bodies
Spectrum Action
India Advantage
VAS
Industry Updates, Trends
Future Technologies
Conclusion
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History, Facts
GoI, Regulatory Bodies
Spectrum Action
India Advantage
VAS
Industry Updates
Future Technologies
Conclusion
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History of Telecom in India- I
First Military Landline from
Fort William to Lalbazaar
(Calcutta ) by the British Govt
1851
1881
First Civil landline service
introduced for the British
Viceroy and his team
Merger with the Postal service
1883
1923
Formation of Indian Radio
Telegraph Company (IRT)
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Merger of ETC &IRT to form
(IRCC) Indian Radio Telegraph
Cable Company
1932
1947
Formation of Posts Telephone
& Telegraphs under Ministry of
Communication
4
History of Telecom in India- II
DOT established separate
from Postal system
1985
1986
DOT spilt into 3 :
•MTNL (metros)
•DOT (others)
•VSNL (International)
•1st call on Mobile phone
•Telecom Minister Sukh
Ram(Delhi) to Jyoti Basu
(Calcutta)
1995
•Cellular service
launched.
•New Telecom
Policy(NTP) is adopted
1997
TRAI created
(Telecom Regulatory
Authority of India)
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1999
For 3 months in a row
India beats China for
the maximum subs
added every month
2000
2009
DOT becomes a corporation =
BSNL
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Quick Facts
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): $8.2 billion
India’s Rural Mobile Phone Users :
100 Million
Source: TRAI report – Nov 2009
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Growing Numbers
Revenue(US$ billion)
Revenue(US$ billion)
43
32
20
15
9
10
11
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Telecom Companies ?
Nokia,
Motorola,
Samsung,
LG,
Sony Ericson
WTTIL, Tata teleservices tower,
QTIL
ARM,
Texas Instruments,
Qualcomm,
Infineon
Symbian, Google
Bharti-Airtel,
Vodafone, Idea,
Reliance, Tata
Teleservices
IBM, Wipro,
Aricent,
Tech Mahindra
Infinera, Cisco,
Alcatel Lucent, Nokia
Siemens, Huawei
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Market Share
Service Provider Market
5% 1%1%
Bharti Airtel
10%
Reliance Communications
23%
Vodafone Essar
BSNL
As on 30th Sep ‘09
Idea Cellular
11%
Tata Teleservices
18%
13%
Aircel
MTNL
18%
Others(Loop, MTS)
Net additions in Sep 09
Tata (26.74%) > Bharti (16.78%)
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Handset market
India
5%
Nokia
15%
Sony
6%
7%
8%
Samsung
60%
Motorola
LG
Others
Worldwide
20%
Nokia
37%
11%
Sony
Samsung
Motorola
22%
LG
5%
5%
Others
Source: IDC Press Release
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Growth Avenues
Enterprise
Telecom Services
Rural
Telephony
3G
Growth
Avenues
WiMax
Infrastructure
Sharing
Value Added
Services
Virtual Private
Network
Managed Services
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Urban-Rural Telephony
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History, Introduction, Facts
GoI, Regulatory Bodies
Spectrum Action
India Advantage
VAS
Industry Updates
Future Technologies
Conclusion
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Strategic Flow
 500 Mn Mobile and Wire line subscribers in India today
 Rs. 40,000 Crore quarterly revenue figures for this industry
Clear
Policy
So How all this happened?
Competition
Cheap tariff
regime
TRAI functions
Consumer
Protection
Ensure Quality of Service
Ensure Affordable Tariff
Regulate Interconnections
Regulation, Directions, Orders
Recommendations
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Agenda
History, Introduction, Facts
GoI, Regulatory Bodies
Spectrum Auction
India Advantage
VAS
Industry Updates
Future Technologies
Conclusion
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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 India
o
o
Circles
GSM&WLL
• 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.
• 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.
Agenda
History, Introduction, Facts
GoI, Regulatory Bodies
Spectrum Auction
India Advantage
VAS
Industry Updates
Future Technologies
Conclusion
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India’s Competitive Advantage
1.
2.
3.
4.
5.
Fastest growing free market democracy
Cost advantage in product development and back office processing
Stable economic outlook – Decade long reforms
Huge market potential – one of the largest consumer markets
Large talent pool
Source: www.telenor.com
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-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.
Porter’s
Diamond Model
Firm strategy structure
and rivalry.
-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.
Chance
Factor Conditions
Demand conditions
-The government extends full
support to industry through
reform processes.
-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.
Source: IBEF Report
Related and supporting
industries
- Policies are in place to safeguard
the interests of service providers,
as well as those of consumers.
Government
-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.
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FDI in Telecom Sector
Third largest sector to
attract FDI in India
FDI in Telecommunication Sector (US$ million)
2345.38
2008-09
1275.65
2007-08
521
2006-07
680
2005-06
2004-05
129
2003-04
116
Source: IBEF Report
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Agenda
History, Introduction, Facts
GoI, Regulatory Bodies
Spectrum Auction
India Advantage
VAS (Value Added Services)
Industry Updates
Future Technologies
Conclusion
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VAS (Value Added Services)
SMS
VAS services, Bulk Messaging, B2B and B2C
Voice IVR
Mobile Radio, Voice chat, English Learning, Devotional
and Astrology, Music on Demand
Content downloads
Mobile WAP Portal
Consumer Applications
Enterprise solutions : Mobile CRM, Mobile SFA
CRBT (Caller ring back tones)
USSD
Message along with *141#
Flash alerts
VAS offerings
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VAS market in India
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%
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Present Segments
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
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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
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VAS value chain
Content Generators
Content Aggregators
Eg. Music
Companies, Website
portals
Eg. Spice Digital,
Hungama.com,
Mauj.com
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Telecom Operators
Eg. Airtel, Vodafone,
Idea, BS
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Rural VAS
Only 12% tele-density in rural areas as compared to 72% in urban areas
Huge market potential
Sachet model of VAS promotion
Localization content
•
•
•
•
Local Mandi Rates
Weather forecasts
Health and job related information
Train services
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Agenda
History, Introduction, Facts
GoI, Regulatory Bodies
Spectrum Auction
India Advantage
VAS
Industry Updates
Future Technologies
Conclusion
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Industry Updates
Idea 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).
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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.
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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
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India 3G Story
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 switch
Product Reviews - Mar 5 2009
Source: Google Trends
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 expected
Telecoms.com - Aug 27 2009
SK C&C, Reliance team on India 3G roll out
EE Times India - Oct 20 2009
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Jan 14th 2010
Reserve Price
• 3G – Rs 35 bn
• WiMax – Rs 17.5 bn
• EVDO – Rs 8.25 bn
Expected Bid
• 2-3 times the reserve prices - to total at
least Rs65bn–Rs120bn.
Foreign players
ECB
• with no current presence in India have to
pay an additional Rs 16.50bn for 2G
spectrum.
• relaxing the normal US$500m limit on
external commercial borrowings
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Agenda
History, Introduction, Facts
GoI, Regulatory Bodies
Spectrum Auction
India Advantage
VAS
Industry Updates
Future Technologies
Conclusion
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Mobile Number Portability(MNP)
The Inhibitors
Huge Costs
Infrastructure Upgrade
Customer Retention/Increased
Competition
Cost Recovery and Bill
Reconciliation/Query Processing
Source: Voice and Data
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Mobile Virtual Network Operator
What ?
• Operator or company which does not own a licensed spectrum and
generally with out own networking infrastructure
How ?
• MVNOs resell wireless services under their brand name, using regular
telecom operator's network.
Differentiation
• 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.
Marketing
• MVNO's have full control over the SIM card, branding, marketing, billing,
and customer care operations.
Regulation
• MVNOs have not been regulated in any country.
ITU has received several requests to study the issue
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Wimax v/s 3G
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
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Generations
4G
3G
10MBPS TO
20 MBPS
600KBPS TO
2MBPS
2g
DATA RATE
14.4
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4G
Wi Max
(e not d)
LTE
• Worldwide Interoperability for
Microwave Access
• IEEE 802.16e STANDARDS
• BROADBAND EVOLUTION
•
•
•
•
Long term evolution
3GPP
80%
MOLILE EVOLUTION
• MIMO (multiple input multiple output)
smart antenna
• OFDM
• 10 To 80mbps
• Sprint, Clearwire, Comcast,
• Motorola / Lucent
• Rev m is the future
• Small investment
• MIMO
• OFDM
• 20 to 100mbps
• Revision 8 future is rev 10
• Vodafone/A&T/France Tele
• Nokia & Ericsson
• Large investment
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Agenda
History, Introduction, Facts
GoI, Regulatory Bodies
Spectrum Auction
India Advantage
VAS
Industry Updates
Future Technologies
Conclusion
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SURFING AGAINST
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)
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Road Ahead
People with and without mobile connections (in millions)
Connected
Highest Number
Not Connected
People
604
661
720
510
Not Connected
36
271
91
140
25
165
71
96
Indonesia
Brazil
Pakistan
86.6%
57.6%
China
India
USA
54.4%
43.6%
88.4%
60.5%
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References
1.
2.
3.
4.
5.
6.
7.
Trai – Quaterly Report (Nov 2009).
IBEF report 2007-08 : Telecommunication - MARKET & OPPORTUNITIES.
Cellular Statistics – Cellular Operator Association of India
IAMAI & eTechnology Group@IMRB: MOBILE VALUE ADDED SERVICES IN
INDIA- A Report.
Telenor Entering India: Investment Update
Voice and Data(May 2009): Mobile Number Portability - Poaching with
Portability.
Business India : Telecom Takeover, Bharti-MTN deal
Thank You for Your Attention !
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