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TelecomSeptember 2006
www.imacs.in
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TELECOMwww.imacs.in
Market Overview
Government regulations & policy Advantage Indiaand business
opportunities
Contents
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MarketOverview Market Overview
Government regulations& policy
Advantage Indiaand businessopportunities
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Indias telecom market has grownrapidly in the last few years
Revenues~ USD 19.5 bn (FY 2006)
CAGR(FY 2002-06) - 21% Have doubled in last 3 years
Subscribers~ 160 million (Aug 2006)
CAGR(FY 2002-06) - 38 %
Nearly quadrupled since FY 02
5-6 million being added every month
Tele-Density - 14.8 (Aug 2006)
Has doubled in 3 years Target set for 2007 under NTP 1999
achieved during FY 2005
Revenue growth 20
15
1110
9
0
5
10
15
20
2002 2003 2004 2005 2006
$Billio
CAGR- 21%
Subscriber growth
164
98
76
5344
0
60
120
180
2002 2003 2004 2005 Aug-06
CAGR- 38 %
Source:www.voicendata.com, Telecom regulatory Authority of India (TRAI),Year indicates financial year ending March
Market Overview
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and is poised to be the secondlargest networkglobally by 2008*
Source: International Telecommunications Union (ITU)
Telecom Subscribers - Country wise December 2005
China
743
USA
360
Ind
125
Rus
130
Germany
134
Japan
153
0
200
400
600
800
mn.subscribers
India - Nov2006
184 mn. subs
Expected to overtake US by 2008
* Based on excerpts from Worldwide Wireless Data Trends 2006 - a mid year update. Datacomm research
Market Overview
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Mobile telephony continues to bethe key growth driver
Progressive regulation
Migration to revenue sharing
Calling Party Pays (CPP) regime
Unified access licensing
Intra-circle merger guidelines
Intensifying competition
3 to 6 players per circle
Presence ofCDMAand GSM providers
Significant share of private sector
Subscrber Gr h M bile vs Fixed
4141
434238
143
52
7 13 34
0
35
70
105
140
175
2002 2003 2004 2005 2006
Mn.subscribers
Fixed (mn. subs) Mobile (mn. subs)
Wireless emerging as the preferred mass market format service
providers focus on Internet / broadband access to improve fixed
line ARPU*
Growing affordability ARPUsamong lowest in the world
Lower cost of ownership due to Low cost / used
handsets
Success of the pre-paid format
Source: TRAI
* Average Revenue per user2006 figuresas of Nov 2006
Market Overview
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Growing networkcoverage istriggering further market expansion
Support from Universal Service ObligationFund envisaged forsharednetworkinfrastructure creation
in uncovered rural areas
Segment Cellular reach (2003-04) Cellular reach (End 2006 - Est.)
Locations Population Locations Population
Urban ~ 1700 of 5200towns
200 million ~ 4900 towns outofnearly 5200
towns
300 million
Rural Negligible Negligible ~ 350,000 out of607,000 villages
450 million
Source: Recommendations onRural Telephony 2005 - TRAI
Market Overview
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Vibrant and competitive telecom market
Source: TRAI, IMaCS research
Consolidation leading to emergence of integrated pan-national service providers
Company Presence
Subscri bers Jul06 (mn)
Share (%)
Fixed Mobile Fixed Mobile
BSNLGovernment owned. Hasramped up GSMservices. Nationalpresence (except Mumbai and Delhi)
37.4 17.7 74.7% 19.6%
MTNL Government owned. Operates in Delhi and Mumbai. 3.8 2.0 7.7% 2.3%
BhartiIntegrated operator, with presence inall sectors. Largestmobile services provider.
1.4 19.6 2.7% 21.7%
RelianceIntegrated operator. Plans expansion of GSMnetworkapartfrom being the largest private CDMA operators.
3.0 17.3 6.0% 19.2%
Hutch Pure play GSM operator in 11 circles. 15.4 17.0%
IDEA Pure play GSM operator in 6 circles 7.4 8.2%
Tata
Teleservices
Integrated operator (along with VSNL) with presence inall
segments. ProvidesCDMAservices in 20 circles 4.0 4.9 8.0% 5.4%
AircelOperates in 2 circles. Announced Plans to expand GSMfootprint inNorth and North east
2.6 2.9%
Spice Pure play GSM player in 2 circles 1.9 2.1%
Others 0.4 1.4
Total 50 90
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Several Indian firms gaining afoothold in the global market
Indianservice providersacquiring scale in the International Long Distance market through acquisitions
Acquisitions - FLAG byReliance, Tyco and Teleglobe byVidesh SancharNigam Limited
VSNL isnow the world's fifth largest carrierof voice globally
ReliancesFLAG networkconnects with 28 countries. FLAGs FALCON cable system when completed
would connect 12 countrieswith 25 international cable landing stations
Investments in Infrastructure and
Bharti-Singteland VSNL investments in undersea cable
Emergingas Integrated telco, positioning themselvesas full service providers
Tata teleservices-VSNL, Bharti,Reliance have end-to-end presence in ILD, NLD and Access; BSNL has
announced plans to get into ILD
Focus on corporate connectivity - IPLCs, Frame relay, VPNs
Strong thrust on internet and broadband - both corporate and retail segments
Market Overview
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Governmentregulationsand policy Market Overview
Government regulations& policy
Advantage Indiaand businessopportunities
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Independent regulation has beenacritical factor in growth
2002
ILD opened to competition
Internet Telephonyallowed.
Reduction in License fees
2003
Calling Party PaysRegimeUnified Access Licensing
Reference Interconnect Order
2004
Intra-circle merger guidelines
Internet / broadband penetration
Mature regulatoryregime and an enabling policy
frameworkalready in place
2005
Unified Licensing
Quality of Service regulation
Rural Telephony
2006
Number portability
Convergence
TRAIsrecommendations
GovernmentRegulationsand policy
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Important policy initiatives
Creating a favourable investment climate to support growth
Broadband policy unveiled in 2004 - Targets20 million broadband subscribersby 2010
Focus on making Indiaaregional Telecom manufacturing hub
FDI limit increased from 49% to 74%
100% FDI permitted underautomatic route in the manufacturing sector
Deregulationvirtually complete and Unified Licensing regime
InterconnectionUsage Charge frameworkin place
Exemption from customs duty for import ofMobile Switching Centres
Comprehensive Spectrum policyand 3G policy on the anvil
GovernmentRegulationsand policy
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Advantage Indiaandbusiness opportunities
Market Overview
Government regulations& policy
Advantage Indiaand businessopportunities
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Recent developmentsareindicative of the paradigm shift inwireless growth
Of the 160 millionsubscribers, more than
90 millionsubscribersadded in the last
two years
More than 5 millionsubscribersadded
every month since Dec. 2005, translating
into the highest growth rate in the world
Ona comparison of growth since
introductionof mobile telephony, IndiasurpassesChinaat the same stage of
market evolution
India ina comparison
0
250
500
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Yea
illion
ubscribers
h na
Ind a
In the 11thyearIndia - 76 mn.China - 24 mn.
Source:TRAI
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Mobile Value Added Services (VAS)set to register explosive growth*
Indian Idol - arealityshow on Sony Televisiongot 55 million SMS
messages in 5 months
RadioMirchi - a popular FMradio channel receives~
40000-45000 SMS messages every day
R-World - the mobile portal ofRelianceCommunications
had 5.3 million visitorsout of its 18 millionsubscribers in 2005
Dataand VAS contributed to 7% ofrevenue in 2004
Messaging and music (ringtones, downloads etc) to be key contributors VAS revenues expected to grow given
Demand - Young population (60% < 30 years) and anaffinity to music and movies
Supply - aggressive pricing, vibrant ecosystem of content providers /
broadcasters, declining GPRS/mp3 handset prices
VAS expected to contribute 20% of revenue by2008 and 30% by2010
* Excerpts from Mobile Data in India. Lehmannbrothersreport. Oct 2005. IMaCS research
Advantage Indiaand businessopportunities
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Broadband and Internet connectivityon the verge ofa take-off
Internet / Broadband market (FY 2006)
6.94 mn.Internet customers(25% growth YoY)
1.35 mn. broadband customers(6-fold growth YoY)
Incumbents (BSNL / MTNL)dominate - 66% share
7-fold growth in broadbandconnectionsduring FY 2006
Broadband Policy 2004
Recognises the importance ofinternet penetration
Envisages40 million internetconnectionsby 2010
Visualises creation of infrastructurethrough variousaccess technologies
Broadband subscriber growth
2.00
1.38
0.18
0
0.75
1.5
Mar-05 Mar-06 Nov-06
Mn.subscribers
6-foldgrowth
Growing PCsales, Internet adoption insmall
townsand offerings including triple playand
video-on-demand / IPTV expected to be major
growth drivers
Source: TRAI
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Growth-driving sustainable factorsin the telecom sector
FavorableMacro-Economic fundamentalsandDemographics
StrongEconomic Growth and rising incomes
By 2020, working age population to
rise to 65%
Low tele-densityrelative to Asianpeers
Progressive policyand regulation
Independent regulation
Consistent policy framework
Favourable Investment Climate
Rising Affordability
Declining ARPUs
Lowering cost of handsets
Growing popularity of pre-paid format
Indianotjust a cost-sensitive mass market
300 millionplus middle class population Value added service revenue expected to growat
80% CAGRovernext 5 years.
IDC estimates phones with colorscreens/
cameras to account for 30%of handset sales in
2005 and 62%by 2008
People thinkabout the Indian market as a lower tier.
About 30%of the U.S. market is high endand maybeit's only5%inIndia. But Indiahas 1.1 billion people
Ron Garriques.Executive vice president,
Motorola's personal communicationssector in
On the Razor'sEdge:Cell PhonesMorph into Hip
ConsumerElectronics Devices Knowledge@Wharton
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India poised to be a USD 40 bn - 45bn telecom market by FY 2010
Telecom sector targets announced byGovernment ofIndia
250 millionsubscribers by 2007
500 millionsubscribers by 2010
20 million broadband subscribers by 2010
Mobile access to all villages with population more than 5,000 by 2006
Mobile access to all villages with population of more than 1,000 by 2007
Translating into an investment requirement of USD 25 bn to USD 30 bnTranslating into an investment requirement of USD 25 bn to USD 30 bn
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Nortel offersasuite of productsand solutionsacross two broad categoriesCarrier Networks (incorporating Wireless Networks, Wireline NetworksandOptical Networks) and Enterprise Networks.
In Indiasince 1991. HasanR&D centre in Bangalore
Promotesand supportsarange of telecommunicationsproductsand services inIndia inassociationwith licensed operators.
Has invested inBharti Airtel and also Networki2i isa 50:50 Joint Venturebetween Bharti and SingTel, connecting Chennai to Singapore
Largest pure-play GSMservice provider in India
Has over 15 millionsubscribers
Hasa 10% stake in Bharti telecom, an integrated service provider
Represents the largest foreign investment in the telecom services
sector in India
A compelling destination forTelecom service providersandequipment majors
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BSNL - Incumbent service providerand World's 7th largest TelecommunicationsCompanyproviding comprehensive range of telecom services in India
Services include Wireline, CDMA mobile, GSMMobile, Internet, Broadband, Carrierservice,
MPLS-V
PN,V
SAT,V
oIP services, IN Services etc.
MTNL- State owned operator covering the cities ofMumbai an Delhi
Provides both fixed and mobile services
BhartiAirtel - Integrated operator with presence inall segments
Leads the mobile segment in the country
Reliance Communications - Largest player in India in the CDMAsegment
Plansa GSMnetwork
TataTeleservices - Integrated operator (withVSNL) with presence inall segments
ProvidesCDMAservices in 20 circles
Advantage Indiaand businessopportunities
Key IndianCompanies
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