MTS India: Data Business Experience
1
May 08, 2012
MTS India is a joint venture between Sistema and Shyam Group of India
SSTL
SSTL – A joint venture between Sistema
(LSE:SSA) and Shyam Group(LSE:SSA) and Shyam Group
• Sistema (LSE : SSA)
–Largest public diversified corporation in Russia and
SSTL Ownership
CIS countries
–Manages fast growing companies operating in the
consumer services sector and has over 100 million
tOthersRussian
F d ticustomers
• Shyam Group–Has diversified interests in telecom, manufacturing,
56.68%
Federation
2.18%17.14%24.00%
services and fertilizers
–Essel Shyam Communications Ltd, a joint venture
between Essel and Shyam group, is a leading pan-
I di VSAT i
2
India VSAT service company
Data market has a huge potential in India with only 10% user penetration; 30%+ broadband growth in last 3 years
100Internet users % of population
India’s internet usage lowest amongst BRIC nations… Internet connections by type
CAGR (2008-2011)
MM
77 75 757175
Internet usage driven via multiple devices (~2.5) per
connection and multiple users ( 5)
19
815
13
22
9
BroadbandOthers20%
7%
50
multiple users (~5) per connection
118
713
6
713 34%
3832
24 2325
201020092008 2011
108
0
• Severe under penetration of broadband and significant latent demand – Less than 1% penetration
• Fall in PC and laptop prices and introduction of cheaper devices like
Key growth drivers of wireless broadband
Source: TRAINote: India Population 2011: 1.2B
net books
• Increased awareness levels and the desire to get connected and stay connected on the move
EV - DO a dominant technology in the market today with 80% share of WDS subscribers; likely to account for ~30% of market by 2015
EV-DO 2011
HSPA 20%EV-DO 80%
3G
LTE
Source: Team Analysis, Telecom customer survey 2012 (n=~85)
In line with market opportunity, MTS India adopted a data centric: voice enabled strategy in 2009
Vision
Differentiated top 3 player in the data marketProfitable top 5 player in high priority voice
markets
Data Voice CostsData
• Focus on subscriber acquisition
• Target ~30% market share
Voice
• Participate in select high potential circles
• Focus on ARPU
Costs
• Variable cost model–Intra-circle roaming–Outsourcing / Managed g
by 2014• Differentiated top 3 player
improvement• Move to open market
handsets
g gservices
• Aggressively manage handset costs
Best in class execution
High performance organization
MTS India’s EV-DO coverage today stands at 248 cities; First operator to provide HSD services on national highway
K G th E bl
Coverage• MTS India has already launched High Speed
Jammuand Kashmir
Total 248* cities across India
Key Growth Enablers
S d a as a eady au c ed g SpeedData (HSD) services in 248 cities
Captures 83% of total notional MPV
• MTS India is the first operator to provide HSD services on National Highway 08 (Delhi to Jaipur)
PunjabUttaranchal
Himachal Pradesh
UttarPradesh (23)Rajasthan
Delhi
Haryana
Chandigarh
Sikkim
Assam
Arunachal Pradesh
Nagaland
(5)(11)
g y ( p )and National Highway 04 (Chennai to Bengaluru)
Customers1 3M d t b ib t d f D b 2011
Pradesh (23)
Madhya Pradesh
j
Bihar
Meghalaya
Tripura
Manipur
Mizoram
Orissa
GujaratJharkhand
(23)
(27)
(7)
• 1.3M data subscribers at end of December 2011• 27% net additions share of HSD subscribers in
Q4 2011• 1X subscribers account for ~10% of the
t d t b ib b D b 2011
AndhraPradesh
West Bengal
KarnatakaGoa
MaharashtraDadra & Nagar
Haveli
Daman &Diu
Kolkata
Mumbai
“Own” networkICR network
(29)
(1)
(1)
(22)
(17)
aggregate data subscribers by December 2011
Key HSD FactsTamil NaduKerala
Pondicherry
ICR network(30)
(38)
(14)
# of HSD cities( )
• 10 of Top 10 cities• 19 of Top 20 cities• 86 of Top 100 cities
Note: 45 cities approved under Phase V of EV-DO coverage Source: Staretegy team 6
MTS India has a compelling data product portfolio to support its data centric strategy
K G th E bl
MTS range of high-speed data products in the last 24 months
Key Growth Enablers
R)
20,000
atin
g Pr
ice
(INR
15,000Pulse16K
Blackberry
Mar
ket O
pera
10,000
Ali
Ivory10K
Blackberry9.5K
5,000Alive6.3K
Buzz3.5K
Mi-Fi4.5K
2K
1.5KLivewire
4.0K
mTag5.5K
Sep’09 Dec’09 Mar’10 Dec’10 Mar’11
Launch Date
Sources: MTS India Devices team
Jun’10 Sep’10 Sep’11 Dec’11Jun’11
7
Data business growth has been enabled by several innovative products and partnerships (1 of 2)
K G th E bl• 1st in market to launch prepaid product for data
MTS has >50% share in prepaid high-speed data
• Sachet products: Offered sachet products to suit customer
Key Growth Enablers
Sachet products: Offered sachet products to suit customer needs and higher realized rates
• DPI based innovationsProducts specially designed for users base inclined towards surfing a set of URLs – A SNS pack STV provided giving unlimited access to a set of URLs
Products
SNS pack STV provided giving unlimited access to a set of URLs
• Dialer innovationsThe Smith Micro dialer used uniformly across all our data devices for a consistent “connect” experience for all data cardProducts experience for all data card Leverages MTS portfolio of applications and provide us IP-focused advertisement opportunities to augment revenue Dialer V2.0 integrates HTML5 programming for intelligent offline and online usage which magnifies consumer experience many times overmagnifies consumer experience many times over
• Landing page innovationsEach time a MBlaze user connects, they are presented with an Unique personalized “My MTS” page with useful content of their interestDisplay of product related information – Account balance in Rs / MB, product validityMost innovative customer convenience – Customer can do a STV deduction from main account balance and thus have more flexibility of recharge and we have lesser dependency on retailer balance
Data business growth has been enabled by several innovative products and partnerships (2 of 2)
K G th E bl
Products
• MyMTS Mblaze PortalWith this initiative we would be empowering our data Customers to choose the right product at any given point of time 24*7P d t i ti ill b i d t t d thi i t ifi d
Key Growth Enablers
Products Product communication will be superior and targeted, as this is very customer specific and personalizedThis platform will help us in offering customized / segmented Usage and Revenue enhancement product
• Differential charging: Offer 5 websites of choice free of charge
Pricing
• Unlimited data: 1st in market to launch unlimited HSD product for a flat fee of INR 999 per month
Data activations increased by ~25% within 30 days of launch of product
• Content t MTS
• Consumer brands: A i f R b k h
• IT OEMs: Offer di t HP
• Distribution partnershipith th taggregators: MTS-
Yahoo customized landing page for subscribersPartners
hips
pair of Reebok shoes free on purchase of a MTS data card
discount on HP PCs along with a MTS data card
with other operators: Vodafone selling MTS powered dongles in India
9
MTS India has customized its branding efforts based on usage depth
K G th E blData Card – Branding Market Context• Market dominated by EV-DO
brands: Tata Reliance MTS
Renewed Thrust in 2011Platform 1:
SpeedContinue to position in speed as the central benefit
Key Growth Enablers
brands: Tata, Reliance, MTS• Growing threat from 3G
players: Airtel, Vodafone, Idea
• Brands primarily positioned Until 2010 MTS
Platform 2: Value
Pl tf 3
Pricing led strategy with aggressively discounted product -acquisition oriented
Move out of generic speed/value b fit• Brands primarily positioned
on speed, with cues of power, instant-ness, excitement
Speed = numeric mbps value • Rationale
Until 2010 MTS MBlaze Was built on speed, value platforms and Alliances and
Platform 3: Usage Depth
benefitsSegmented offering to address specific need from a usage perspective
Speed numeric mbps value
Reliance Netconnect: Building on pure rational driverTata Photon: benefits of
– Need gap identified through usage behavior analysis
– Decline in usage towards month end, especially in student community
– Recharge balance gets exhausted towards month end
partnerships
Tata Photon: benefits of speed
• Relatively low differentiation, highly price and discount led
• Until 2010 Mblaze was built
– Disposable income constraints prevent full recharges
• Product Solution
• Innovative daily unlimited use product
• Campaign proposition
10
• Until 2010, Mblaze was built on speed, value platforms and Alliances and partnerships
Campaign proposition– The power of the internet: Change your life in one day
Departure from generic undifferentiated speed platform
– Leverages the opportunities and possibilities of the internet
As a result, MTS is one of the top 3 data operators, has the highest data coverage in top 100 cities and has the highest data revenue % of total revenue
HSD Market (MTS active circles of operations) Relative placement vs. competition
In ‘000 HSD coverage in top 100 cities
5,000
6,000
21% growth
5,175K
4,282K
86 8153
4,006 3,000
4,000
,
3,356
2,000
27% net adds share26%
Data revenue as % of total revenue (Q4 2011)
24
14 14
926 1,168
0
1,000
Q3'11 Q4'11
adds share in Q4’11
26% growth
14 14
Q3 11 Q4 11
Others MTS
Note: RCOM subscriber base for EV-DO estimated based on intelligence inputs and past performance Source : Business Intelligence; MTS estimates 11
Overall subscriber base has grown by 1.6x and quarterly revenue by 1.5x in the last 12 months
Quarter on Quarter subscriber growth Quarter on Quarter revenue growth
18 0
In Millions90 0
In US$ M
15.115.8
14.0
16.0
18.0
74 9
81.180.0
90.0
10.0
11.7
13.4
10.0
12.0
62.3
71.774.9
60.0
70.0
4 0
6.0
8.0 52.3
40.0
50.0
0.0
2.0
4.0
Q1'11 Q2'11 Q3'11 Q4'11 Q1'1220.0
30.0
Q1'11 Q2'11 Q3'11 Q4'11 Q1'12
Note: 1) Total subscribers in Millions (Wireline, Wireless Voice and Wireless Data); 2) Total revenue from MTS India operations (Converted to US$ using average exchange rates for respective quarters; 3) Average INR to USD exchange rate in Q3’11 was at 45.79, Q4’11 was at 50.81 and Q1’12 at 50.24Source: MTS Finance
Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12
Talent and organization structure key internal challenges; Weak CDMA eco-system and regulatory support key external challenges
Internal factors External factors
L k f l i ll f d W k & h i ki t• Lack of talent especially for data business
L k f i i l hi &
• Weak & shrinking eco-systemDevices
• Lack of experience in launching & selling data products
DistributionPricing
• Vendor management complexities
• Poor perception of CDMA operatorsPricingTesting
O i ti l t t & f
• Speedy development of advanced technology for voice and data
• Organizational structure & focusInability to turn focus fast enough to data
businesses
• Lack of regulatory support
13
Long term strategic framework focused on achieving leadership in high growth data market and smart voice play
Leadership in Leadership in data led wireless market & smart voice playdata led wireless market & smart voice play
Transformational
Business as usual
SME excellenceB ndled ser ices to
M-enablementH lth Cl d
Targeted MDS2
• Accelerate smartphone market share by– Launching quality Android
WDS1 2.0• Strong customer lifecycle
management (CLM)• Ramp-up acquisition via
B CManaged services play in select
areas
D
• Bundled services to SMEs
• GTM model to address sales & service
• m-Health: Cloud based managed service coupled with OEM device partnerships
• m-Commerce:
Launching quality Android handsets
– Compelling pricing plans– High quality experience– Expanding distribution
channels
Ramp up acquisition via– improving connect rate
with OEMs– Focus on enterprise
channel– targeted retail initiatives m Commerce:
P2P remittances, bill payments and merchant tie-ups
– WiFi based tablet play– Fixed wireless solutions
Smart Voice• Get to required scale in "Win" circles – target 4-6% end of period SIM share• ICR led play in low "Option" circles – focus on ramping up sales and distribution in micro markets• 2 carrier data strategy in selected metros (if operationally feasible) – offer smartphones with voice on ICR
A
14
Delivering a high quality customer experience
With a culture of Innovation
Best in class execution (including alliances)
High performance org w/ lean cost/capex
1. Widescreen data services (WDS) 2. Mobile Data Services (MDS)