Table of Content-Telecom Wireless Industry

TELECOM WIRELESS INDUSTRY

CREDIT ANALYSIS & RESEARCH LTD.

4th Floor, Godrej Coliseum, Somaiya Hospital Road,

Off Eastern Express Highway, Sion (East), Mumbai – 400 022

February 2012

February 2012 TELECOM WIRELESS

Table of Contents Executive Summary

SECTION- I CARE Research’s OUTLOOK

Outlook on Indian Telecom Wireless Industry

Subscriber Forecast - Subscriber growth to dampen

Average Revenue per User (ARPU) – Uptrend expected

Revenue Forecast – Topline is expected to rise

Outlook on Profitability

3G story to gather momentum over next 2-3 years

Value Added Services (VAS) – The bright spot

Regulatory Overhang

SECTION- II INDUSTRY SECTION

History of Indian Telecom

Phase I – Pre-liberalization (1947-1989)

Phase II – Telecom Sector in the Post-liberalisation Era (1990-1999)

Phase III – Current scenario (2000-2011)

Overview of the Global Telecom Wireless Industry

Macro Environment and its Potential Impact on Telecom Industry

Mobile Penetration in Various Geographies

Mobile Signal Coverage

Comparative Analysis

Urban vs. Rural – ‘The Digital Divide’

Teledensity

Subscriber Growth

Urban vs. Rural Subscribers - Player wise

GSM vs. CDMA

Subscriber Growth

Composition of Revenue

MOU and RPM

Prepaid vs. Post-paid

Subscriber Composition

GSM and CDMA Subscribers – Circle wise

ARPU

Rate per Minute (RPM)

Active Subscribers


Player wise Comparison Mobile Broadband Spread

Cost Analysis

Regulatory charges

License fees

Spectrum Charges

Access charges

Non Regulatory Charges

Network operating cost

Employee Cost

Marketing and Brand Promotion Expenses

Investments and Credit Profile Credit Profile

Foreign Direct Investment (FDI)

Major M&A Deals in Indian Telecom Sector related to FDI

Domestic Investment

Capital Expenditure (CapEx)

CapEx Guidance by Major Telecom Players

3G

Overview

3G Adoption Worldwide

3G Auction in India

3G Adoption in India

Financing of 3G License Fees

Current state of 3G in India

3G Roaming Pacts

VAS 1 Overview

Market Size of MVAS

Demand Drivers for MVAS

Business Model of VAS

Platforms for Delivering VAS

Segmentation

Entertainment VAS

Information VAS

Transactional VAS

Enterprise VAS

VAS 2 Utility MVAS


Key categories of Utility MVAS

Regulations in MVAS

Revenue Sharing across the VAS value chain

Key challenges for VAS

VAS Player Profile OnMobile

Comviva

IMI Mobile

Spice Digital

Hungama

MNP

Overview

MNP around the World

MNP in India

MNP Requests – Circle wise

MNP Requests vs. Net Wireless Additions

MNP Requests – Player wise

MNP Impact

Mobile Handsets Overview

Factors Driving Mobile Handset Growth

Mergers & Acquisitions Existing M&A Guidelines

TRAI Recommendations

New M&A Guidelines as issued in February 2012

Herfindahl-Hirschman Index (HHI)

Global Scenario

Need for Consolidation

Technology FDMA vs. TDMA vs. CDMA

Generations of Wireless Telecommunication Technology

Evolution of GSM technology

Evolution of CDMA technology

GSM network Structure

CDMA network Structure

Telecom Regulatory bodies Department of Telecommunications (DoT)

Telecom Regulatory Authority of India (TRAI)

Telecom Disputes Settlement and Appellate Tribunal (TDSAT)


Telecom Commission

Expected Changes in the Regulatory Structure

Licensing Framework Cellular Mobile Telephone Service (CMTS)

Scope of CMTS operators

Migration to Unified Access Service (UAS) licensing regime

Service Areas & License fees – UAS

Scope of UAS operators

Cancellation of Licenses by the Supreme Court in Feb. 2012

Global Perspective

License Renewal

International Practices in License Renewal

New Unified Licensing Regime

Draft Guidelines for Unified License

Draft Guidelines for Class License

Implications of New Unified Licensing Regime

Spectrum Allocation Spectrum Availability

Spectrum Allocation in India

Need for Spectrum Refarming

Spectrum Allocated to Various Players

Spectrum Availability in Various Circles

Subscriber-Linked Criterion for Spectrum Allocation

Charge for Excess Spectrum

Spectrum Sharing

Spectrum Trading

NLD & ILD National Long Distance (NLD) Service

NLD License allocation

NLD market size

NLD outgoing MOU trend

Decline in NLD tariffs

NTP 2011 Perspective

International Long Distance (ILD) Service

ILD License allocation

ILD market size

ILD outgoing MOU trend

Decline in ILD tariffs Universal Service Obligation Fund (USOF)

Background


Widening Urban – Rural teledensity Gap

Assistance offered to service providers

Competitive Selection of Service Providers

Accomplishment So Far

USOF Fund Status

USOF across Various Countries

SECTION- III COMPANY SECTION

Bharti Airtel Ltd

Background

Segment Operations

Capex Plan

Financial Performance Review

Key Operating Parameters

Share Price Movement, Shareholding Pattern & Credit Rating

Reliance Communications Ltd Background

Segment Operations

Capex Plan




Idea Cellular Ltd Background

Segment Operations

Capex Plan




Tata Teleservices Maharashtra Ltd Background

Segment Operations




Mahanagar Telephone Nigam Ltd Background

Segment Operations





Unlisted Telecom Companies Vodafone India Ltd

Aircel Ltd

Tata Teleservices Ltd

Bharat Sanchar Nigam Ltd

SECTION- IV ANNEXURES

Annexure I – Nomenclature of telecom circles

Annexure II – Circle wise subscribers (000's)

Annexure III – Operator wise subscribers (000's)

Annexure IV - Circle wise spectrum allocation

List of Graphs and Tables

SECTION- I CARE Research’s OUTLOOK

Outlook on Indian Telecom Wireless Industry

Wireless Subscriber Forecast - FY 2009- FY 2014E

GSM and CDMA Subscriber Forecast - FY 2009- FY 2014E

Urban and Rural Subscriber Forecast - FY 2009- FY 2014E

ARPU Forecast - FY 2009- FY 2014E

Revenue Forecast - FY 2009- FY 2014E

EBITDA Margin Forecast - FY 2010- FY 2014E

3G Subscriber Forecast - Dec 2010- FY 2016E

VAS Market Growth - Dec 2010- FY 2016E

SECTION- II INDUSTRY SECTION

History of Indian Telecom

History of telecommunication in India - 1947 - 2012

"Mobile Subscribers base at critical developments of the Indian

telecommunication Industry"

Overview of the Global Telecom Wireless Industry

Mobile Penetration in Key Geographies - 2011

Global Mobile Subscribers and Teledensity CY 2001 – CY 2011

Teledensity (%) - Country Wise - CY 2005- CY 2010

Developed Vs. Developing Teledensity (%) - CY 2001 – CY 2010

% of the World’s Population Covered by Mobile Cellular Signal - 2003, 2010


Mobile Broadband penetration - CY 2007 – CY 2010

Comparative Analysis

Teledensity – Urban Vs. Rural - FY 2007 - Nov. 2011

Subscriber Growth – Urban Vs. Rural - FY 2007 - Nov. 2011

% share of Urban Subscribers - FY 2009 - FY 2011

% share of Rural Subscribers - FY 2009 - FY 2011

Urban vs. Rural – Subscriber Composition for various players (as of March-11)

Playerwise Subscriber Growth – Urban, Rural and Overall - FY 2009-FY 2011

Share of Subscribers - GSM & CDMA - Sep. 2006, Sep. 2011

Subscriber Growth – GSM Vs. CDMA - FY 2004 - Nov. 2011

ARPU - GSm vs. CDMA - June 2006- Sep. 2011 (Quarterly)

Revenue from Call Charges - GSM vs. CDMA - Dec. 2006 - Sep. 2011

Rental Revenue - GSM vs. CDMA - Dec. 2006 - Sep. 2011

Revenue from Roaming - GSM vs. CDMA - Dec. 2006 - Sep. 2011

Revenue from SMS - GSM vs. CDMA - Dec. 2006 - Sep. 2011

Other Revenue - GSM vs. CDMA - Dec. 2006 - Sep. 2011

Revenue Composition - Call Charges, Rental, Roaming, SMS, Others - GSM vs.

CDMA

MOU per subscriber per month and RPM - Sep. 2006 - Sep. 2011

Prepaid Vs. Post-paid Composition - June 2006 - Sep. 2011

Prepaid as % of total – GSM Vs. CDMA - June 2006 - Sep. 2011

% Prepaid Subscribers across circles for GSM and CDMA (as of Sep. 2011)

Prepaid Vs. Postpaid ARPU - GSM - June 2006 - Sep. 2011

Prepaid Vs. Post-paid ARPU - CDMA - June 2006 - Sep. 2011

ARPU – GSM (Circle wise) - Prepaid & Postpaid

ARPU – CDMA (Circle wise) - Prepaid & Postpaid

Rate Per Minute - FY 1999 - FY 2011

Rate Per Minute - GSM - Sep. 2006 - Sep. 2011

Rate Per Minute - CDMA - Sep. 2006 - Sep. 2011

Active Subscribers as of December 2011 (Circle wise)

Playerwise Comparison of Subscriber Market Share, 2G and 3G Licenses, Active

Subscribers

Circlewise Subscriber Share Ranking

Cost Analysis

Telecom Cost Structure

License Fee Structure over the Years

Spectrum Charges Structure

License Fees and Spectrum Charges - June 2008 - Sep. 2011

Regulatory Charges in Asian Countries

Interconnection Charges

Cost Cutting Strategies adopted by Indian Telecom Players

Network Operating Costs for Bharti Airtel, Idea and Rcom - FY 2007-FY 2011

Employee Costs for Bharti Airtel, Idea and Rcom - FY 2007-FY 2011

Marketing and Brand Promotion Expenses of Bharti Airtel, Idea and Rcom - FY 2007-


FY 2011

Investments and Credit Profile

Debt to Equity Ratio - FY 2009 - FY 2011

Interest Coverage Ratio - FY 2009 -FY 2011

Return on Capital Employed - FY 2009 -FY 2011

Capex - FY 2009 -FY 2011

Capex Composition - FY 2011

FDI Limits

FDI in the Indian Telecom Sector (US$ Mn) - CY 2004 - CY 2011

Major M&A Deals in the Indian Telecom Sector - 2006 - 2011

Capital Employed - FY 2010 - FY 2011

Investments (Fixed Assets) - FY 2010 - FY 2011

Major Telecom Projects to be Completed by March 2014

Capex Guidelines by major players for FY 2012

3G

Global 3G Subscriber Statistics

2G & 3G Population Coverage - CY 2009, CY 2010

3G Auction Fees Paid - Circle & Subscribe wise

3G Services Offered in India

3G vs. 2G - Operational Differences

Circles covered pre and post 3G Roaming Pacts by Bharti, Vodafone and Idea

VAS 1

VAS Market Size Forecast - CY 2006 - CY 2012

Wireless Subscriber Growth - FY 2004 - Oct. 2011

Growth in telecom revenue and wireless subscribers - FY 2005 - FY 2011

Reach of TV, PCs and Mobile phones in India - CY 2005 - CY 2010

Global comparison of non-voice revenue as % of total telecom revenue

Decline in ARPU over the years - FY 2006 - FY 2011

Growth in VAS after launch of 3G service - China & S. Korea

MVAS Value Chain and Its Stakeholders

MVAS Stakeholders and their Share of Revenue

Entertainment VAS - Segments

Information VAS - Segments

Transactional VAS / m-Commerce - Segments

Enterprise VAS – Segments

VAS 2 Countrywise Banks per 1000 People

Countrywise Doctors per 1000 People

Countrywise Schools per 1000 People

Categories of Utility MVAS

Financial Exclusion Statistics

Number of Doctors per 1000 people in India

State of education in India

Use of VAS in Government Initiatives


Revenue Sharing Arrangement across MVAS Value Chain

VAS Player Profile

OnMobile Revenue - Domestic vs. Global - in FY2011

OnMobile - Major Acquisitions - 2006-2011

OnMobile - Key Clients

OnMobile- Products & Services

OnMobile - Key Performance Indicators

Comviva - Key M&As

Comviva- Key clients and Technology Partners

Comviva- Products and Services

Comviva - Key Performance Indicators

IMIMobile - Key M&As

IMIMobile - Key Clients

IMIMobile - Products and Services

IMIMobile - Key Performance Indicators

Spice - Key M&As

Spice - Key Clients

Spice - Key Partners

Spice - Products and Services

Hungama Mobile - Key Clients

Hungama Mobile - Key Performance Indicators

USP of leading 5 VAS Players

MNP Worldwide MNP Adoption

Porting Rates in Various countries

Porting Transaction Charges

in various countries

Zone Wise Total MNP Requests (March 2011-November 2011)

MNP Requests – Circle wise (Until November 2011)

New MNP Requests against Net Wireless Additions (March 2011-November2011)

Operator Wise MNP Gainers and Losers (Net)

Mobile Handsets Handset Volume Growth and Wireless Subscriber Growth - FY 2005-FY 2011

Smartphone Penetration in Various Countries (2010)

Drivers for Handset Growth

Market Share of Handset Manufacturers in India - FY 2011

Market Share of Handset Manufacturers Globally - 3QCY2011

Global Market Share of Smartphone Operating Systems

Trends in Average Selling Price of Handsets in India

Global Mobile Handset Demand - CY 2005 - CY 2011

Mobile Handset Demand in India - CY 2005 - CY 2011

Mergers & Acquisitions

M&A Guidelines Issued by DoT on 22nd April 2008


TRAI Recommendations on M&A (May 2010)

New M&A Guidelines as issued in February 2012

HHI in Different Service Areas in India - 2001, 2004, 2007, 2009

Country wise Number of Operators

Major M&A deals in Indian Telecom Sector

Technology Basic differences among channel access methods - FDMA, TDMA and CDMA

Generations of Wireless Telecommunication Technology

Difference in Modulation & Coding schemes of GPRS and EDGE technologies

Evolution of GSM technology

Evolution of CDMA technology

GSM Network Structure

CDMA network structure

Licensing Framework

Entry of telecom operators under Various Policy Regimes

Entry fee of UAS license - Circles wise

License Allocation Status

Cancelled Licenses Post Supreme Court Verdict

Spectrum Allocation

Spectrum Holdings in Various Countries

Spectrum for Mobile Services as per National Frequency Allocation Plan

Spectrum available for Telecom Service Providers in different frequency bands

Circle-wise Spectrum Allocation to GSM Operators

Circle-wise Spectrum Allocation to CDMA Operators

Availability of GSM Spectrum in Various Circles

Availability of CDMA Spectrum in Various Circles

Minimum subscriber base (in thousands) required for allotment of different amounts

of spectrum

NLD & ILD

List of NLD Service License Holders

Revenue from NLD service (June 2008 -June 2011)

NLD Service Provider wise Market Share – FY2011

Circle wise % Share of NLD in outgoing MOU per subscriber per month - GSM (June

2006 - June 2011)

Circle wise % Share of NLD in outgoing MOU per subscriber per month - CDMA

(June 2006 - June 2011)

% Share of NLD in outgoing MOU per subscriber per month - GSM (June 2007-June

2011)

% Share of NLD in outgoing MOU per subscriber per month - CDMA (June 2007-

June 2011)

Percentage decline in NLD tariffs during the period prior 1/5/99 to 31/3/11

List of ILD Service License Holders

Revenue from ILD service (June 2008-March 2011)

ILD Service Provider wise Market Share FY2011


Percentage decline in ILD tariffs in India during the period prior 1/5/99 to 31/3/11

Universal Service Obligation Fund (USOF)

Background

Universal Service Levies

Universal service levies across various countries

Widening Gap between Urban & Rural teledensity (FY98-FY11)

Participants in USOF scheme

USOF Funds Status (FY03-FY11)

Activity-wise total disbursement 2003-October 2011

Service provider wise total Disbursement 2003 - October 2011

Universal Service Funds across various countries

SECTION- III COMPANY SECTION

Bharti Airtel Ltd Segment Operations

Consolidated Financial Performance (FY09-FY11)

Segment wise Performance – Revenue (FY09-FY11)

Segment wise Performance – EBIT margin (FY09-FY11)

Key Operating Parameters (Q3FY11-Q3FY12)

Share Price Movement (Jan 2011-Jan 2012)

Share Holding Pattern as on December 2011

Credit Rating as on February 2012

Reliance Communications Ltd Segment Operations








Idea Cellular Ltd Segment Operations








Tata Teleservices Maharashtra Ltd Segment Operations









Mahanagar Telephone Nigam Ltd Segment Operations








The report elucidates facts on the Indian Telecom Wireless Industry, supplemented by the

latest statistics. The report is divided into three sections. Section I mainly CARE Research’s

outlook on the industry over next 2-3 years. Section II covers overview of various segments

of the industry, performance of the industry in the last financial year and also analysis of

past five years’ data. It also talks about various regulatory issues involved in the industry.

Section III gives details of the various players in the industry. Following are few points

which are emphasised to accomplish the report:

Section I

CARE’s perspective of the telecom industry in terms of subscriber growth spread

across various segments like urban-rural, GSM-CDMA.

CARE’s outlook on topline and profitability of the sector.

Brief on future growth of various segments of the industry like 3G and Value Added

Services (VAS).

Expectations on various regulatory issues.

Section II

Comparative analysis of various industry parameters like subscriber growth across

segments, Average Revenue per User, Rate per Minute, regulatory and non-

regulatory costs, various components of revenue.

Brief on new growth areas of 3G and VAS

Details of regulatory policies related to licensing framework and spectrum allocation

Section III

Brief on key listed and unlisted telecom players

For an in-depth analysis and CARE’s view on the future of this sector, please refer to the

exhaustive report on Indian Telecom Wireless Industry, February 2012 by CARE Research.

The subscription to this report includes four quarterly updates on the industry for the

period June 2012 - March 2013

Kindly click on the link below to subscribe a copy of the same

http://www.careratings.com/content/ResourceCenter/IndustryReport.aspx

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DISCLAIMER

This report is prepared by CARE Research, a division of Credit Analysis & REsearch Limited [CARE]. CARE Research has taken utmost care to ensure accuracy and objectivity while developing this report based on information available in public domain. However, neither the accuracy nor completeness of information contained in this report is guaranteed. CARE Research operates independently of ratings division and this report does not contain any confidential information obtained by ratings division, which they may have obtained in the regular course of operations. The opinion expressed in this report cannot be compared to the rating assigned to the company within this industry by the ratings division. The opinion expressed is also not a recommendation to buy, sell or hold an instrument.

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Table of Content-Telecom Wireless Industry

Documents

eastern express

brand promotion

somaiya hospital

prior written

period prior

share holding

share price

key operating