Telecom industry 27, 28, 63

Telecom Industry-India

Presented byL Nikhil Reddy – 10810027

Laxmi Narasimha Boddu – 10810028Swagat Patra – 10810063

Flow of the presentation

1

5

Telecom Industry Overview

Emerging Trends in Telecom Market

3 Regulatory Framework and Its Impact

4

Telecom – Investment Attracting Sector2

Major Players in Telecom Sector

6 SWOT Analysis

Flow of the presentation

1

5




4



6 SWOT Analysis

Fast facts• Indian telecom market is one of the fastest growing markets in the

world.

• With its 806 million telephone connections as on 28th Feb 2011, it is the second largest network in the world after China.

• It is the second largest wireless network in the world.

• Over 15 million connections are being added every month.

• The target of 600 million telephones by the end of 11th five year plan has been achieved in February 2010 itself.

Souce: Cellular operators association of India, TRAI, DoT

Fast facts• Wireless telephones are increasing at faster rate. The share of

wireless telephones as on 31st December 2010 is 95.54% of the total phones.

• The share of private sector in total telephone is 84.6%.

• Overall tele-density has reached 66.17%. Urban tele-density is about 148%, whereas rural tele-density is at 31.22%, which is also steadily increasing.

• Broadband connections increased to 10.74 million by November, 2010.

Souce: Cellular operators association of India, TRAI, DoT

OverviewServices offered by the telecom industry

Telecom services

Basic services

Mobile services

Internet services

VSATsGMPCS

Radio paging

PMRTS

Structure of Indian telecom industry

Telecom Industry

Public sector

MTNL BSNL

Private sector

Indian companies

Tata communication

s

Reliance communication

s

Idea cellular

Bharti Airtel

Foreign invested

companies

Vodafone Uninor MTS Virgin Airce

l

Tele-density – Number of telephones per 100 people or population (source: DoT)

2004 2005 2006 2007 2008 2009 2010 405220

20

40

60

80

100

120

140

160

20.7926.88

38.28

48.1

66.39

88.84

122

147.52

1.55 1.73 2.34 5.89 9.4615.11

24.5631.22

7.02 8.9512.74

18.2226.22

36.98

53.46

66.17

Urban Rural Total

Wireline v/s wireless (souce: DoT)

46.54%53.46%

As on Mar 2004

Private v/s public (source: DoT)

95.54%

4.46%

As on Dec 2010

2004 2005 2006 2007 2008 2009 2010 405220%

20%

40%

60%

80%

100%

39.2

7

47.0

5

57.0

1

65.3

2

75.5

3

79.1

6

82.9

6

84.6

60.7

3

52.9

5

42.9

9

34.6

8

24.4

7

20.8

4

17.0

4

15.4

PublicPrivate

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6 SWOT Analysis

India – An ideal destination for investments in telecom sector

• World’s largest democracy

• Independent judiciary

• Among the countries offering the highest rates of return on investment

• Skilled and competitive labour force

• Fifth largest telecom network in the world; second largest among the emerging economies after China

• On an average, about 14-15 million new users added per month, making India the world’s fastest growing wireless services market

Investments (continued)

• Liberal Foreign Investment Regime–FDI limit increased from 49 percent to 74 percent; the rural telecom equipment market is also open to large investments

• The large untapped potential in India’s rural markets–31.2 percent teledensity in rural markets as compared to the urban level of 147 percent

• The government promoting telecom manufacturing by providing tax sops and establishing telecom specific Special Economic Zones

• Fully repatriable dividend income and capital invested in telecom equipment manufacturing

Investments (continued)Low tele-density (depicting large

untapped potential)

Large number of additions in the

telecom subscribers+ = Telecom

advantage

• Not only the service provider companies (like Aircel and MTS), but the telecom equipment companies and the handset manufacturing companies can look forward to invest in India, given the continued explosive growth of the number of subscribers.

• Telecom equipment companies – Cisco, Avaya, Qualcom, Motorola

• Handset manufacturing firms – Nokia, Samsung, Motorola, LG, Micromax, Panasonic etc.

1

5




4



6 SWOT Analysis

Regulatory Framework provides level playing field for all operators The Department of telecommunications

(Government of India) is the main governing body for the industry. It is the main body formulating laws and various regulations for the Indian telecom industry.

Telephone Regulatory Authority of India (TRAI) assists the Government of India (GoI) to take timely decisions and introduce new technologies in the country.

The telecom Dispute Settlement and Appellate Tribunal (TDSAT)

Telecom Industry Framework

1

5


Trends in Telecom Market


4



6 SWOT Analysis

The Indian Mobile Industry : Cause & Effect

Go-ahead to the CDMA technology

Private players were allowed in Value Added Services

National Telecom Policy (NTP) was formulated

1992

1994

1997

Independent regulator, TRAI, was established

NTP-99 led to migration from high-cost fixed license fee to low-cost revenue sharing regime

1999

2000

2002

BSNL was established by DoT

ILD services was opened to competition

Internet telephony initiatedReductio

n of licence fees

2003

Calling Party Pays (CPP) was implemented

Reference Interconnect order was issued

2004

Intra-circle merger guidelines were established

Broadband policy 2004 was formulated—targeting 20 million subscribers by 2010

2005

FDI limit was increased from 49 to 74 percent

Attempted to boost Rural telephony

2006

Number portability was proposed

Decision on 3G services (awaited)

2010

2011

Number portability

19

The Indian Mobile: Cause &effect

Source: TRAi and COAI

NTP-99

3rd & 4th Cellular

Operator

Reduction in License Fee

CPP Introduced Lowering of ADC

Revenue Share ADC Regime

Lowering of ADC

Introduction of CDMA

6

0.320.40.440.441.62

3.58

14 14

0.88 1.2 1.88 3.58 6.5 13

33.31

51.53

96.63

157.58

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Indian Consumer gets the worlds lowest mobile tarrifs

0.230.22

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Highest minutes of usage

84

159179

315 320 323 326

461

Russia Malaysia Australia Korea Singapore China Thailand India

Telecom Centers of excellence in ‘PPP’ mode

India needs TCoEs’

◦ Capacity Building to sustain the explosive Growth

◦ Benchmarking global best Technologies and Practices

◦ Prepare for Mobile Info Security, Next Generation Networks, Disaster Management services etc

◦ Plan a National Information Infrastructure to make India a leading Mobile Information Society

◦ Innovate actions for bridging Digital Divide◦ To undertake India specific content &

applications development

Concept Genesis in 2006, SEVEN TCoEs’ created in 2007-2008!!...

The CoEsNo Proposed Field of Excellence Associated

Institute Sponsor

1. Next Generation Networks & Network Technology

IIT, Kharagpur Vodafone Essar+ Texas nstruments

2. Policy, Regulation, Governance, Customer Care & Marketing

IIM, Ahmedabad IDEA Cellular

3. Telecom Technology & Management

IIT, Delhi Bharti Airtel

4. Information Security & Disaster Management of Info Infrastructure

IISc, Bangalore Aircel Ltd +Texas Instruments

5. Technology Integration, Multimedia & Computational Mathematics

IIT, Kanpur BSNL +Alphion

6. Telecom Infrastructure & Energy IIT, Chennai Reliance

7. Rural Applications IIT, Mumbai Tata Teleservices

8. Spectrum Management(proposed)

WPC Government + Industry Consortium

Shared Infrastructure1. Project “MOST” – Mobile Operators Shared Tower

◦ Kick started infra-sharing in India and demonstrated proof of concept of the possibility of multi-technology (GSM & CDMA) and multi operators (upto 6 operators) sharing a single tower

2. Unique USOF Scheme to Incentives setting up of Shared Passive Infrastructure in Rural Areas:◦ Subsidy for setting up and managing 7871 towers in

500 districts spread over 27 states.◦ Subsidy proposed for another 11,000 towers in the

Second Phase.

3. ‘Guidelines on Infrastructure Sharing’ announced on April 01,2008 Active Infrastructure Sharing Permitted Procedures/Policies Streamlined

25

Much achieved, but you ain’t seen nothing yet!!!

0

100

200

300

400

500

600

700

800

2006 2007 2008 2009 2010 2011 2012

Mill

ion

Year Ended December

2006 2007 2008 2009 2010 2011 2012

Mobile Subs 149 235 330 430 525 633 741

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6 SWOT Analysis

Players of Industry

Bharathi Airtel21%

Re-liance17%

Vodafone17%

BSNL11%

Tata12%

Idea11%

Aircel7%

Others5%

15 Players in the industry as of Sep 2010

Other Payers:

-Hexacommm-Escotel-Spice-BPL-MTNL-Uninor-Virgin-MTS

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6 SWOT Analysis

Strengths

High Customer Potential Tele-density grew from 48% in 2005 to 64% in 2010. Significant growth of broadband subscriber.

High Growth Rate Wireless subscriber growing at the rate 60% per annum.

Allow FDI limit ranging from 74% to 100%. The total FDI equity inflow in telecom sector have been US$2223 million

during 2010.

High Return on Investment. Easier to create economies of scales thereby increasing the return on

investment.

Liberalization of Government. The share of the private sector in the telecom sector is 88.6% and

Lower capital expenditure. The Indian Telecom Industry is a high density area, which means more

population per tower. This means less capital expenditure.

WeaknessPoor Telecom Infrastructure.

Resulting in large call drops.

Late Adopters of New Technology. India is among the last countries to adopt 3G technology. Recent

reports suggests that already 132 countries in the world has already adopted 3G.

Most competitive market. 10 to 12 companies offer mobile services in most parts of India.

A market strongly regulated by Government.

Difficult to enter because of huge financial resources. Auction of 3G license has reached Rs 15814.15 crores

Opportunity

3G Telecom service and 4G service.More quality service.Value added service.

SMS, ringtones, mobile tv, video streaming, mobile banking, mobile ticketing etc.

Boost to Telecom manufacturing companies. Production of telecom equipments from Rs 4,12,700 million (2007-08)

to Rs 6,75,000 million (2009-2010).

Horizontal integration. Entry into other consumer segments . For example Reliance BIG TV,

TataSky, Airtel Digital TV

Providing fibres connectivity to 2,50,000 village panchayats by 2012.

ThreatsTelecommunication Policies.

Renewal of 2G license on the basis of market rate of 3G TRAI’s intention of rolling out 4G technology, known as the ultra-

broadband in 2-3 years raising fears rendering 3G services somewhat obsolete.

Declining ARPU(Average Revenue per user). Price wars like per second billing which is deflating revenues

and making sure the survival of the fittest.

Partiality on the part of Government. E.g Allowing 3G services in a PSU(MTNL,BSNL) before

auctioning to private sector.

Conclusion & Recommendation

•In this cut throat competition the winner will be that company that understands consumer needs focusing on usability and giving control to the users .

•The losers are ones that focus on technical differentiation that majority of consumers do not understand.

•Future strategy which can make one to be a leader are competitive tariff plans ,VAS and focus on rural markets.

Business

Telecom industry 27, 28, 63