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8/8/2019 Opportunities in the Indian Telecom Market
1/18
CellularOp
erators
Associa
tion
of
India
Opportunities in the IndianTelecom Market
T V RamachandranDirector General, COAI
May 9, 2002, New Delhi
8/8/2019 Opportunities in the Indian Telecom Market
2/18
CellularOp
erators
Associa
tion
of
India
Achievements of the Industry
8/8/2019 Opportunities in the Indian Telecom Market
3/18
CellularOp
erators
Associa
tion
of
India Affordable Tariffs
Tariffs have fallen by more than 90% in the last two and a half years
16.8
8
6
44.5
3
4.22
2
0
2
4
6
8
10
12
14
16
18
Apr-1999 May-1999 Dec-1999 Feb-2001
Peak Tariff Average Market Tariff
Rupees
Operators have always been offering services at tariffs lower than theceiling prescribed by the Regulator.
8/8/2019 Opportunities in the Indian Telecom Market
4/18
CellularOp
erators
Associa
tion
of
India Improved Coverage
421
607
918
1116
1369
0
200
400
600
800
1000
1200
1400
Jun-1999 Jun-2000 Nov-2000 Apr-2001 Feb-2002
Number of Cities & Towns
Renewed viability of industry post NTP 99, made it possible to extendthe services to more towns & reach out to low-end users.
8/8/2019 Opportunities in the Indian Telecom Market
5/18
CellularOp
erators
Associa
tion
of
India Increased Subscriber Growth
The number of cellular subscribers all over India crossed 6.4 millionby end- March 2002.
0
1
2
3
4
5
6
7
Mar-97
Jul-97
Nov-97
Mar-98
Jul-98
Nov-98
Mar-99
Jul-99
Nov-99
Mar-00
Jul-00
Nov-00
Mar-01
Jul-01
Nov-01
Mar-02
Million
Point of Inflexion
Point of inflexion appears to have been reached soon after NTP 99was announced and once cellular operators migrated to NTP 99.
8/8/2019 Opportunities in the Indian Telecom Market
6/18
CellularOp
erators
Associa
tion
of
India
Current Status & Trends
8/8/2019 Opportunities in the Indian Telecom Market
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CellularOp
erators
Associa
tion
of
India Current Status
Coverage : Almost 1400 Cities & Towns
Tariffs : Approx. Rs. 2 / minute
Handset costs : Rs. 2,000+
Subscriber Growth : Almost 0.3 million / month
Subscriber base : 6.5 million by FY 2002
ARPU Around Rs. 800 / month
Minutes of use : Approx. 220 minutes / month
8/8/2019 Opportunities in the Indian Telecom Market
8/18
CellularOp
erators
Associa
tion
of
India Current Trends
Growth is amongst the low-end users.
ARPUs are dropping as volumes are picking up.
Increased usage of cellphone for long distance calls as STDtariffs have crashed.
Growth in Metros continues to be aggressive as 88% YOY
growth recorded in Year 2001-02.
The B category Circles also recorded a strong growth rate of83% YOY in 2001-02.
In C Category Circles, the number of subscribers have almostdoubled in the last financial.
Prepaid segment accounts for almost 50% of the subscriberbase and 70% of the new additions.
Value added services like SMS have really caught on.
8/8/2019 Opportunities in the Indian Telecom Market
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CellularOp
erators
Associa
tion
of
India Customer Profile Demographics
Almost 50% of the cellphone users are below 30 years ofage.
Prepaid users are younger than post paid users 57%below the age of 30 as against 46% in the case of postpaids.
Prepaid users are relatively less educated.
Businessmen & traders form almost two-thirds of themarket segment.
Salaried class represents about 25%.
Post paid subscribers had a higher monthly income thanprepaid subscribers
8/8/2019 Opportunities in the Indian Telecom Market
10/18
CellularOp
erators
Associa
tion
of
India Customer Profile Usage
In most cases, cell phones are used both for business &personal purposes.
Prepaid is a recent phenomenon. More People using the cell
phone entirely for personal use tend to go in for a prepaidservice.
Over 50% of the subscribers are prepaid subscribers.70% of thesubscriber additions are in the prepaid category.
Post paid subscribers on an average have a higher monthly billthan prepaids.
50% of the prepaid subscriber yield an ARPU of less than Rs.500 / month.
83% of the usage is in local calls, 16% in STD calls and anegligible 1% in ISD calls.
Only around 15% of the calls are mobile to mobile calls, balance
are mobile-fixed or fixed to mobile calls.
8/8/2019 Opportunities in the Indian Telecom Market
11/18
CellularOp
erators
Associa
tion
of
India
Future Growth Potential
8/8/2019 Opportunities in the Indian Telecom Market
12/18
CellularOp
erators
Associa
tion
of
India Market Strategies for Growth
Consolidation
Mergers & acquisitions to consolidate footprint
4 Group companies account for 67 % of the subscriber base.
M&A activity is the market response to the number of operatorsallowed as per policy.
In most European & Asia Pacific countries, the average number ofcellular operators is between 3-4.
Innovative pricing Prepaid used as an entry strategy prepaid cards are available for
as little as Rs. 300 per month.
Lower airtime & flexi tariff packages for postpaid users
Cost Efficiencies Significant reductions in operating costs per subscriber primarily
due to increased subscriber base.
Reduction in handset costs
Flourishing second-hand handset market.
8/8/2019 Opportunities in the Indian Telecom Market
13/18
CellularOp
erators
Associa
tion
of
India Fall in Average Revenue Per User
1076
777
627
541505
481
0
200
400
600
800
1000
1200
FY2001 FY2002 FY2003 FY2004 FY2005 FY2006
Rupees
Average of Estimates by Independent Analysts
Independent analysts have projected that the ARPU will continue to drop
over the next 4 years and would stabilize at around Rs. 500 per month.
8/8/2019 Opportunities in the Indian Telecom Market
14/18
CellularOp
erators
Associa
tion
of
India Growth in Subscribers
3.566.2
10.32
16.37
26.17
38.27
0
5
10
15
20
25
30
35
40
45
FY2001 FY2002 FY2003 FY2004 FY2005 FY2006
Average of Estimates by Independent Analysts
Million
On an average, analysts estimate that the number of cellularsubscribers touch around 40 million by FY 06. It may be noted that the
effect Of WLL(M) has not been factored into the projected growth.
8/8/2019 Opportunities in the Indian Telecom Market
15/18
CellularOp
erators
Associa
tion
of
India What do Consumers Want
Corporate image of Service Provider.
Good Network Quality
Range of Value added services voice mail, informationservices, ease of use, etc.
Affordable Tariffs.
Free Incoming Calls.
Simple Tariff Plans
Flexible Offerings i.e. choice to consumer
Improved Customer Care not just in terms of ease of getting
through, speed of response, but also the ability of the customercare staff to resolve problems.
In the case of post-paid subscribers, the impact of the above onretention is lower than in the case of pre-paid subscribers whoare far more likely to switch service providers.
8/8/2019 Opportunities in the Indian Telecom Market
16/18
Ce
llularOp
erators
Associa
tion
of
India Cost of Cellular Communications
0.040.045Incoming Call
Charges per minute
0.040.045*Outgoing CallCharges per minute
6.005.625Monthly Rental
40+70+Handset Cost
IndiaChina
In USD
Despite China having almost double the purchasing power of India
and despite a lower cost structure due to lower government levies,
the cost of cellular communications in India is almost comparablewith the tariff structure prevailing in China.
* For the first 3 minutes only USD 0.045, but thereafter, USD 0.045 / minute.
8/8/2019 Opportunities in the Indian Telecom Market
17/18
Ce
llularOp
erators
Associa
tion
of
India Possible Pitfalls
Backdoor entry of WLL(M) as a fully competitive mobile
service.
Excessive & unhealthy market fragmentation.
Anti-competitive Behavior by SMP operators.
Inequitable interconnection arrangements.
Sub-Optimal Allocation of Spectrum.
Interminable delay in the introduction of CPP.
8/8/2019 Opportunities in the Indian Telecom Market
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Ce
llularOperators
Associa
tion
of
India
Thank You