INDIAN TELECOM

SECTORMEGHA RANANEHA SAXENAPOOJA SHARMASHIVANGI RAWATSHIVAM SAHU

04/11/23 1

OVERVIEW

• INDIAN TELECOM INDUSTRY - AN APT EXAMPLE OF BUSINESS

• ITS HISTORY & REGULATORY FRAMEWORK,

• MAJOR PLAYERS AND THEIR BUSINESS SUCCESS(present status)

• FUTURE PROSPECTS

04/11/23 2

MOBILE A BASIC NEED FOR ALL!

04/11/23 3

4

INDIAN TELECOM INDUSTRY – A LUCRATIVE OPTION

In recent years, the Indian telecom industry has witnessed phenomenal growth. A conducive business environment, favourable demographic outlook and the political stability enjoyed by the country have contributed to the growth of the industry. India achieved the distinction of having the world's lowest call rates (2–3 US cents), the fastest sale of million mobile phones (1 week), the world's cheapest mobile handset (USD 19) and the world's most affordable colour phone (USD 31).

INDIAN TELECOM INDUSTRY

One of the fastest growing cellular

markets in the world in terms of

number of subscriber additions –

19.35 million in 3 months (April to

June 2007)

Expected to reach total subscriber

base of about 500 million by 2010

(i.e., more than one phone for

every household)

Annual growth rate of the telecom

subscribers – 47 percent (2006–

07)

More GSM subscribers than fixed-

line subscribers

INDIAN TELECOM INDUSTRY – FACTS

Total telecom subscribers –

225.21 million (June 2007)

Tele density – 19.86 percent (June

2007)

Number of new mobile

subscribers added every month –

7.34 million (June 2007)

ARPU for GSM – USD 6.6 per

month

Telecom equipment market – USD

17,100 million (2006–07)

Handset market – USD 4,750

million (2006–07) 04/11/23

SCENARIO IN EARLY INDIA• India, emerging as a major player• In 1975, the Department of Telecom (DoT) was

separated from P&T. DoT was responsible for telecom services in entire country until 1985 when Mahanagar Telephone Nigam Limited (MTNL) was carved out of DoT to run the telecom services of Delhi and Mumbai.

• In 1990s the telecom sector was opened up by the Government for private investment as a part of Liberalisation-Privatization-Globalization policy.

04/11/23 5

TELECOM LIBERALIZATION

Liberalization started in 1981 when Prime Minister Indira Gandhi signed contracts with of France to merge with the state owned Telecom Company (ITI), in an effort to set up 5,000,000 lines per year.

04/11/23 6

1985 -First mobile telephone service started on non-commercial basis in Delhi.

August, 1995 : GSM entered India

Historic first cell phone-call was made by MobileNet-joint venture between Telstra (Australia) & B.K. Modigroup.

Mobile revolution began in Kolkata.•Handset costs-40,000 & Call tariff-17 Rs/min.

In the initial 5-6 years the average monthly subscribers additions were around 0.05 to 0.1 million only and the total mobile

subscribers base in December 2002 stood at 10.5 millions.

CDMA1996 :Tata Tele services was the first to launch CDMA mobile

services in India with the Andhra Pradesh circle.04/11/23 7

THE BUBBLE BURSTS (1997-2000)Astronomical growth•High investments and huge profits

-Inflated market caused by the hype between venture capitals and companies

-Corrupted CEOs overstating their profits•Overestimating the market and its demands and absurd projections -Internet traffic doubling every 3 months! -Level 3 digging the earth 16 miles per day to install

new fiber pipes! •Limitless expectations

-Overestimating users interests and what they actually pay!

-Irrational investment for unusable infrastructure!

THE BUBBLE BURSTS(1999-2001)

Over 655 networking and telecom companies filed bankruptcy

-Loss of $750 billion! Inflated stock market tumbles

-The telecom market declined by 96 percent! -Overall, the market lost $2 trillion just in a few years

The giants fall one after another -WinStar goes bankrupt suing Lucent for $10 billion (2001)-WorldCom files the largest bankruptcy ever! -Level 3’s shares falls from $130 in 2000 to $1.98 in 2001!

Market oversupply -Cisco reported 2 billion Dollars of unsold routers -Half of the internet transmission (switches and routers) capacity was unused -Only about 20 percent of fiber pipes were led (today it is 30%)

CONTI..

• Therefore, it became necessary to separate the Government's policy wing from its operations wing. The GOI corporatised the operations wing of DoT on October 01, 2000 and named it as Bharat Sanchar Nigam Limited (BSNL).

• Many private operators, such as Reliance India Mobile, Tata Telecom, Vodafone, BPL, Bharti, Idea etc., successfully entered the high potential Indian telecom market.

04/11/23 10

National Telecom Policy 1994• Divided into 22 circles

– 4 metros

– 19 circles

• Further divided into A, B and C category based on economic parameters and revenue potential

• Each circle has a licenses

– Four operators per circle are allowed

– Licenses are saleable

North Eastern States

METRO Circles

Gujarat

Rajasthan

Maharashtra Orissa

Andhra Pradesh

Karnataka

Tamil Nadu

Kerala

Madhya Pradesh

Uttar Pradesh E

Bihar

West Bengal

Punjab

Himachal Pradesh

Haryana

Jammu & Kashmir

Uttar Pradesh

W

CHENNAI

MUMBAI

DELHI

KOLKATA

C Circles

B Circles

A Circles

Source :COAI

04/11/23 11

12

Indian Telecom Industry FrameworkIndian Telecom Industry Framework

Wireless Planning and Coordination (WPC)

Department of Telecommunications

Telecom Commission

Group on Telecom and IT (GoT-IT)

Telecom Regulatory Authority of India (TRAI)

Telecom Disputes Settlement and Appellate Tribunal (TDSAT)

Handles spectrum allocation and management

DoT – Licensee and frequency management for telecom

Exclusive policy making body of DoT

Handles ad hoc issues of the telecom industry

Independent regulatory body

Telecom disputes settlement body

REGULATORY FRAMEWORK PROVIDES LEVEL PLAYING FIELD FOR ALL OPERATORS

They formulate various policies and pass laws to regulate the telecom industry in India.

They undertake various research activities and monitor the quality of service provided in the Indian telecom industry. They also provide various recommendations to improve the status of telecom operations in India.

The Department of telecommunications (Government of

India) is the main governing body for the industry.

Telephone Regulatory Authority of India (TRAI) assists the

Government of India (GoI) to take timely decisions and

introduce new technologies in the country.

Indian govt. bodies Independent body

04/11/23

13

Go-ahead to the CDMA technology

IND

IA

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 initiated

Reduction of licence fees

2003

Calling Party Pays (CPP) was implemented

Unified Access Licensing (UASL) regime was introduced

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 (pending)

Decision on 3G services (awaited)

2007

Department of Telecommunication (DoT) is the main body formulating laws and various regulations for the Indian telecom industry.

ILD – International Long Distance

Various important regulations and laws have been passed in the Indian telecom industry post-liberalisation era

04/11/23

Revenues of Indian Telecom Industry: 2002–07 (USD billion)

9 10 1115

20

43

0

10

20

30

40

50

2002-03 2003-04 2004-05 2005-06 2006-07 ….. …. 2009-10

Rev

enue

s (U

SD

billi

on)

04/11/23 14

15

Vodafone purchased stake in Hutch from Hong Kong's Hutchison Telecom International for USD 11.08 billion.

Telekom Malaysia acquired a 49 percent stake in Spice Communications for USD 179 million.

Maxis Communications acquired a 74 percent stake in Aircel for USD 1.08 billion.

Ericsson to design, plan, deploy and manage Bharti Airtel network and facilitate their expansion in the rural areas, under a USD 2 billion contract.

116 129

680

521

100

300

500

700

2003–04 2004–05 2005–06 2006–07

FD

I (U

SD

milli

on)

Recent Deals in Telecom Sector

FDI in Telecom Sector

The Indian telecom industry has always attracted

foreign investors. In fact, the cumulative FDI inflow,

during the August 1991 to March 2007 period, in the

telecommunication sector amounted to USD 3,892

million. It is the third largest sector to attract FDI in

India in the post-liberalisation era.

FDI calculation takes into account radio paging, cellular

mobile and basic telephone services in the

telecommunication sector.

FDI AND OTHER M&A ACTIVITIES INCREASING IN NUMBER

Reliance Communications Limited has sold a five percent equity share capital of its subsidiary Reliance Telecom Infrastructure Limited to international investors across the US, Europe and Asia. The deal was worth USD 337.5 million.

The Indian telecom industry has a 74 percent FDI limit in the

telecom services segment.

The GoI has permitted 100 percent FDI in manufacturing of

telecom equipment in India.

Major trends in the telecom sector is increasing M&A activity, de-regulation of telecom policies and growing interest of international investors.

04/11/23

04/11/23 16

17

BASIC SERVICES OPERATORS

BSNL

MTNL

MAJOR PLAYERS IN DIFFERENT SEGMENTS OF INDIAN TELECOM INDUSTRY

Reliance

TTSL

GSM SERVICES OPERATORS

Airtel

Vodafone

Idea

Reliance

TTSL

BSNL

CDMA Services Operators

Reliance

INTERNET SERVICES OPERATORS

BSNL

MTNL

Reliance

TTSL

BSNL

Airtel

TTSL – Tata Teleservices Ltd.

MOBILE SERVICES

04/11/23

SERVICE PROVIDED BY THESE PLAYERS-

• These players provide services according to customer needs.

• The Indian telecom services can be divided predominantly into basic, “MOBILE AND INTERNET” services. It also comprises smaller segments, such as radio paging services, Very Small Aperture Terminals (VSATs), Public Mobile Radio Trunked Services (PMRTS) and Global Mobile Personal Communications by Satellite (GMPCS).

04/11/23 18

GSM, CDMA, 3G & WIRELESS

04/11/23 19

1-20

TECHNOLOGY USED IN TELECOM SECTORGSM (GLOBAL SYSTEM FOR MOBILE COMMUNICATION)

• The most popular standard for mobile phones in the world. • Its promoter, the gsm association, estimates that 82% of the

global mobile market uses this standard.• Gsm is used by over 2 billion people across more than 212

countries • Is considered a second generation (2g) mobile phone system.

1-21

TECHNOLOGY USED IN TELECOM SECTOR2.CDMA (CODE DIVISION MULTIPLE ACCESS )

• One of the basic concepts in data communication is the idea of allowing several transmitters to send information simultaneously over a single communication channel.

• This allows several users to share a bandwidth of frequencies.

• This concept is called multiplexing. • CDMA employs spread-spectrum technology and a

special coding scheme (where each transmitter is assigned a code) to allow multiple users to be multiplexed over the same physical channel

MARKET SHARE OF WIRELESS OPERATORS

Airtel

23%

Reliance

Communications

17%

TTSL

9%

BSNL

17%

Others

8%

Hutch

17%

Idea

9%

04/11/23 22

3G3G trend MTNL/BSNL won the bidding for Spectrum for 3G . Other players still in the row.

Launched in Delhi & Mumbai.

Brand name ‘Jadoo”- MTNL

India expects to replicate its 2G growth in 3G services

04/11/23 23

TODAY’S INTERNET STATUS

• Emergence of new applications– Video on demand – New Web-based applications– Music / Video downloading (MySpace, YouTube, iPods)

• High appetite for broadband– 50% of adults in U.S. use broadband – 52% of 8-18 year-olds have used MySpace! – More and more people get their news from the Internet and

watch less TV!• Socio-economic impact of the Internet

– Providing greater economic opportunities (E-commerce)– Stimulating economic growth and productivity

(Telecommuting)– The number of people using their mobile handsets to access

the web is now over four times those using a PC that is 38 million …… still incresaing.

Urban Rural Teledensity in India

04/11/23 25

0

10

20

30

40

50

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007At Year Ending March

Tele

dens

ity (%

)

Urban Total Rural

TELEDENSITY IN INDIA

225.21206

140.398.4

7653

19.9

5.17.0

9.112.8

18.3

0

50

100

150

200

250

2002–03 2003–04 2004–05 2005–06 2006–07 2007–08(As of June

2007)

Subs

crib

ers

(in m

illion

)

0

4

8

12

16

20

24

Tele

dens

ity (i

n pe

rcen

t)

Telecom Subscriber Base Teledensity

04/11/23 26

DELHI HAS TELEDENSITY OF 109!!

FACTS………………• Delhi has teledensity of 109• Other state like Bihar, MP, Rajasthan with 25%Teledensity.• Requierd teledensity of 75%.

04/11/23 27

VENTURE OUTSIDE INDIA• BHARTI AIRTEL in SRI LANKA has 2G 3G service since 2006.• TATA communications has a stake of 53% with NEOTEL S.

Africa.• MTNL is working with Nepal communications.• “ business outside land serves in sharing risk and

increasing market asset”

04/11/23 28

FUTURE TRENDS

04/11/23 29

EMERGING TREND “4G”30

One standard known as IEEE 802.16e (belonging to the Mobile WiMax family) is now commercially available and is a precursor to 4G.

Comprehensive IP SOLUTION on “Anytime Anywhere” basis.BSNL has license in India. To make India a leader in telecom technology TeNet created CeWiT (Centre of Excellence in Wireless Technology) to do research in 4G.

04/11/23

WORLDWIDE INTEROPERABILITY FOR MICROWAVE ACCESS.

“Wireless at maximum”WiMAX can provide broadband wireless access (BWA) up to 30 miles (50 km).

It is estimated that India will have 19 million WiMAX subscribers by 2012 (TRAI).

04/11/23 31

Conti…

Aircel is the pioneer in WiMAX technology in India.

The state-owned player, BSNL, aims to connect 74,000 villages through WiMAX.

Bharti, Reliance and VSNL(now TATA)have acquired licenses in the 3.3GHz range to utilise the opportunities.

Tata Teleservices Ltd has announced a major WiMAX deployment, including a Rs.1,968.26 crore ($500 million) investment over the next five years. The new network will cover more than 130 cities, intensifying competition across India

04/11/23 32

04/11/23 33

•Internet Protocol TV•Also called Triple play.• Currently available in Jaipur , Delhi, Mumbai Jodhpur!

ACQUIRING INDIVIDUAL SPECTRUM

• Individual microwave spectrum for company.• It will decrease the time for spectrum use & regulation.• Will lead to freely lay down network cables.• Fast services, broad band service in rural India.

04/11/23 34

35

VALUE-ADDED SERVICES AND RURAL TELEPHONY HOLDS LARGE MARKET POTENTIAL IN INDIA

RURAL TELEPHONY

VAS

04/11/23

VALUE-ADDED SERVICES IN INDIA (2006–07)

04/11/23 36

Others (MMS etc.), 3%

Game & Data, 7%Person to

Application & Application to Person SMS,

15%

Ringtone Dow nload, 35%

Person to Person SMS, 40%

• The VAS industry was worth USD 632 million in 2006–07. The industry is estimated to grow by 60% in future and become an USD 1,011 million opportunity.

04/11/23 37

•The VAS industry is currently focussing on the entertainment sector, such as the Indian film industry and cricket; however, there is scope for growth in other avenues as utility-based services, such as location information and mobile transactions.

VAS

Future services for customers

• With the Department of Telecommunications approving the sale of ‘calling cards’ by telecom companies, international and domestic tariffs are set to drop further.

04/11/23 38

RURAL TELEPHONY

• As the government targets to increase rural teledensity from the current 2 percent to 25 percent by 2012, rural telephony will require major investments. This segment will boost the demand for telecom services, equipment, Internet services and other value-added services; thereby, offering great market opportunities for telecom players.

04/11/23 39

ANY QUESTIONS????

04/11/23 40

THANK YOU!!

04/11/23 41