Telecom IndustryConnecting the World

SHIPRA KANSAL

Telecom in the real sense means transfer of information

between two distant points in space

Telecom is a huge and varied bastion of technologies, companies, services and

politics that is truly global in nature

Introduction

Telecom stands as one of the most essential elements of the business world in terms of “Connecting the World”

Volatile Sector Regulatory discord Cut-throat competition Emergence of Technologies

Emergence of broadband & wireless technologies pose threat to carriers relying on aging infrastructure

To survive, telecom carriers need to consider various options Consolidation, Convergence, Costly Technological upgrades

Global Growth Patterns

Emerging Markets Driving Volume Growth Low Tariffs (ARPUs)

Developed Markets Low Subscriber Base Technological Advancements

Indian Telecom depends on the global telecom industry for technology platforms & network management

WhileIndian market size attracts telecom giants

Indian Telecom - Scenario

India – Fastest growing market in World – 190 mn subscribers 4th largest mobile market growing at 6 mn Sub/month 3rd largest internet market, 4th largest by 2012 PCOs - 4.5 mn @ CQGR of 7.22% Paying highest taxes and regulatory charges; Variable License fee

OPPORTUNITIES Data revenues – 8.5% of service revenue against world avg of 16.5%

Content Services – Music/Video etc Applications – m Commerce/PVR Ticketing

Tele-density – From 2% in 2000 to 15.44% in 2006 TEMA target of $100 bn for equipments in next 3 yrs IT & ITES Industry – $35 bn with CAGR of 35%

Indian Telecom – Global Reach

Players Countries Services Subscribers Partners

Bharti

 Telecom Seychelles

MTNL

United Telecom (Since 2002)

Reliance

IndiaCall services (Since 2005)

Transnet/ Transtel, Eskom, Nexus, Two,

CommuniTel

VSNL (acquired license in 2005)

South Africa

Fixed (Services to commence in Aug-Sep

2006)

owned subsidiary

US, UK and Canada

ILD services to India, Australia, Canada, France, Germany,

Malaysia, NZ, Singapore, and UK

500,000 + -

MTML (Since 2005) Mauritius CDMA-based WLL services 20000 (March 2006)

NepalCDMA-based WLL

services45,032 (March

2006)TCIL VSNL, and NVPL

Wholly

J ersey Telenet State of J ersey 2G and 3G, ILD Services from Oct 2006

Seychelles Fixed, FWP, cellular34000 (March

2006)

Emtel of Mauritius, (Since 1998) private investors

and the Gov of Seychelles

Source: Voice & Data

Market Structure

METRO Circles

Gujarat

Rajasthan

Maharashtra Orissa

Andhra Pradesh

Karnataka

Tamil NaduKerala

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

•Divided into 22 circles4 metros 19 circles

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

•Each circle has a licensesFour operators per circle are allowedLicenses are saleable

Teledensity Levels

0.3 0.3 0.4 0.50.7 0.9 1.2 1.5 1.7

19.7

14.3

12.2

10.4

8.26.9

5.84.8

4

7.0

5.14.3

3.62.92.3

1.91.61.3

0

2

4

6

8

10

12

14

16

18

20

1996 1997 1998 1999 2000 2001 2002 2003 2004

Tele

den

sity

(%

)

Rural Urban Total

Rural India

India has a 700 million people living in 638,000 villages per-capita income of $ 0.40

per day)

102.1

1710

3.9 1.9 1 0.3 0.30

20

40

60

80

100

120

60 180 260 360 520 840 1300 2240

HH Income in $ per month

Nu

mb

er o

f H

H in

mill

ion

s

135 million rural households

As per DoT statistics 500,000 villages have telephone access.

However, teledensity patterns reveal the low penetration of communication services

The question is : Is connectivity relevant to the rural populace of India?

Business Model Entrepreneur-driven operator assisted telephone booths (STD

PCOs) introduced in India in 1987 Today in urban areas:

950,000 such PCOs covering every street of smallest town generate 25 % of total telecom income 300 million people use these PCOs

Lessons for Rural Connectivity To serve the telecom needs of rural people with incomes <

$ 1 per day, aggregate demand and allow an entrepreneur to run it.

Business Model Aggregate demand to a village internet centre to provide

voice/computer and internet services Allow a local village entrepreneur to run it Create an organization to provide the connectivity and

content linkages

Global Trends – Connecting WorldConvergence & Mobility

Mobile Devices withvoice, data & video

Mobile WirelessBroadband

Fibre to Home Communications

Computers & IT

Consumer Electronics

Entertainment becomes Digital Mobile Personal Digital Devices prevail

Laptops & Handheld PCs Entertainment major PC driver IP to & in the Home VoIP handsets

Public Safety Mobile Police &

Fire personnel devices Interoperable Communications

Major Players

There are three types of players in telecom services:

• -State owned companies (BSNL and MTNL)• -Private Indian owned companies (Reliance

Infocomm, Bharti Tele-Ventures,Tata Teleservices,)

• -Foreign invested companies (Hutchison-Essar(VODAFONE), Escotel, Idea Cellular, BPL Mobile, Spice Communications)

•TypeTelecommunication service provider

•AvailabilityIndiawide except Delhi and Mumbai

•Founded19th century, incorporated 2000

•Slogan Connecting India

•Revenue US$ 9.67 billion (2007)

•Owner The Government of India

•Key people Kuldeep Goyal (CMD)

Websitewww.bsnl.in, www.bsnl.co.in

Bharat Sanchar Nigam Limited (known as BSNL, India Communications Corporation Limited) is a public sector telecommunication company in India. It is India's largest telecommunication company with, 24% market share.

Mahanagar Telephone Nigam Limited

Mahanagar Telephone Nigam Limited (NYSE: MTE) is an Indian Government-owned telephone service provider in the cities of Mumbai, Thane, New Delhi, and Navi Mumbai in India. The company was a monopoly until 2000, when the telecom sector was opened to other service providers.

MTNL provides fixed line telephones, cellular connection of both GSM — Dolphin(Postpaid) and Trump (prepaid) and WLL (CDMA) — Garuda-FW And Garuda-Mobile and internet services through dialup and DSL — Broadband internet TriBand. MTNL has also started Games on demand, video on demand and IPTV services in India through its Broadband Internet service called Triband.

Bharti Airtel founded by Sunil Mittal in 1985. The businesses at Bharti Airtel have been structured into three individual strategic business units (SBU’s) - Mobile Services, Airtel Telemedia Services & Enterprise Services. The mobile business provides mobile & fixed wireless services using GSM technology across 23 telecom circles while the Airtel Telemedia Services business offers broadband & telephone services in 95 cities and has recently launched a Direct-to-Home (DTH) service, Airtel digital TV. The company provides end-to-end data and enterprise services to the corporate customers through its nationwide fiber optic backbone, last mile connectivity in fixed-line and mobile circles, VSATs, ISP and international bandwidth access through the gateways and landing station.

Globally, Bharti Airtel is the 3rd largest in-country mobile operator by subscriber base, behind China Mobile and China Unicom. In India, the company has a 24.6% share of the wireless services market, followed by 17.7% for Reliance Communications and 17.4% for Vodafone Essar.

Airtel: Airtel is a brand of telecommunication services in India and Sri Lanka owned and operated by Bharti Airtel. It is the largest cellular service provider in India in terms of number of subscribers. Services are offered under the brand name Airtel: Mobile Services (using GSM Technology), Broadband & Telephone Services (Fixed line, Internet Connectivity(DSL) and Leased Line), Long Distance Services and Enterprise Services (Telecommunications Consulting for corporates). It has presence in all 23 circles of the country and covers 71% of the current population.

COMPANY MARKET SHARESCompany Million

Subscribers % share

BSNL 40.3 58.8

Reliance 6.1 8.9

Bharti 5.7 8.3

MTNL 4.9 7.2

Vodafone 2.9 4.2

Idea Cellular 2.1 3.0

BPL 1.4 2.1

Tata Teleservices 1.3 1.9

Spice 1.0 1.4

Escotel 0.8 1.1

Fascel 0.8 1.1

Aircel 0.9 1.4

Hexacom 0.2 0.3

Shyam Telelink 0.1 0.2

MAJOR MARKET TRENDS

The telecoms trends in India will have a great impact on everything from the humble PC, internet, broadband (both wireless and fixed), cable, handset features, talking SMS, IPTV, soft switches, and managed services to the local manufacturing and supply chain. This report discusses key trends in the Indian telecom industry, their drivers and the major impacts of such trends affecting mobile operators, infrastructure and handset vendors.

Indian Telecom – Way Forward to being Global

Transparent and truly technology-neutral Government policies Allow full range of private & Public Sector telco's to compete fairly and fully

Adequate spectrum in useable frequency bands advocated by the ITU to wireless service providers

Low regulatory restrictions over new services such as Push-to-talk, IP-enabled services, particularly Voice-Over IP (VoIP)

Ensure level playing field and “No” worse-off position for existing license holders

Duties on imported telecommunications and related equipment must be reduced to zero

To promote competition in IPLC

“Put in Right Policies” for technology multinationals to build business in consumer end user device segments like mobile, handset, PC’s and networking product manufacturing

Acquisitions with “Strategic” intent

Constraints:

Slow pace of the reform process . It would be difficult to make in-roads into the semi-rural and

rural areas because of the lack of infrastructure. The service providers have to incur a huge initial fixed cost to make inroads into this market. Achieving break-even under these circumstances may prove to be difficult.

The sector requires players with huge financial resources due to the above mentioned constraint. Upfront entry fees and bank guarantees represent a sizeable share of initial investments. While the criteria are important, it tends to support the existing big and older players. Financing these requirements require a little more liberal approach from the policy side.

Problem of limited spectrum availability and the issue of interconnection charges between the private and state operators.

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