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Telecom
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KEY POINTERS TO UNDERSTAND THE TELECOM INDUSTRY
Regulatory and competitive factors that led to the high growth of
the telecom industry
Past dispute between GSM and CDM players and how it was
resolved!
"mportant operational metrics and trends in the operational
Metrics
Mar#et shares
Tower "nfrastructure $Trends%
&ow 'G and (S are going to impact the performance of the
Telecom players!
)hy consolidation is most li#ely in this industry!
*uture outloo#
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'
Pre 1995
Govt Monopoly
Tele+density was less than ,-
1995 - 1998
Sector opened up for the .rst time to private players
/ut the tele+density did not increase $only 0122 mn customers were
added in the ' years3 of which half were in Mumbai and Delhi1
This is due to4*i5ed licensing structure
less competition $only 6 players were allowed per circle%
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7
1998-2003
8icensing structure was changed to revenue sharing model
7 competitors were allowed per circle
Subscriber base increased to ,'1' mn
2003 - 2009
Golden period for the industry
Govt1 implemented CPP
)ith more subscribers3 cost came down
Telcos had both revenue and pro.t growth
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2009 - 2013
Price wars
9egative regulatory environment $6G scams3 (odafone
retrospective ta5es%
Pro.tability reduced and debts increased
Slowdown in subscriber additions due to saturation1
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2013 ONWARDS
Competition in the mobile services space has been less intense
during the last ,2 months3 compared to earlier years1Post the release of the verdict on licence cancellations3 many
operators $such as :tisalat3 S+Tel and 8oop Mobile ;e5cept Mumbaiuantum of free?discounted minutes o@ered to subscribers3
have regained pricing power to an e5tent1
Als !"e #r#r!$% & re'e%(es &r) *+!+ ser'$,es +%* 3
s(.s,r$.ers "+s .ee% $%,re+s$%/
This has aided an improvement in their realisations since the .rst
half of 60,'+,71
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All I%*$+ ).$le s(.s,r$.er .+se
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MAOR REASONS OR ROWTH SLOW DOWN IN SUSCRIERADDITIONSR$s$%/ !ele-*e%s$!4The rising tele+density is one of the very many reasons for the
fall in subscriber growth1
The wireless tele+density has risen rapidly over the past few
years1De,l$%e $% !"e (se & )(l!$#le SIM ,+r*s
The softening competitive intensity in the sector has led to a
reduction in the use of multiple S"M cards3 thereby impacting the
net additions1/esides3 the implementation of M9P in "ndia empowered the
subscribers to switch operators without having to change their
numbers1
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M*er+!e /r!" $% r(r+l %e! +**$!$%s
The rural wireless tele+density3 at 72- per cent3 is still on the
lower side implicating a huge un+tapped potential in the rural and
semi+urban mar#ets1Despite this3 the growth in rural net additions has been moderate1
)hile the cost of servicing subscribers in the rural areas is very
high3 the stringent veri.cation norms also impact the new
subscriber additions is these areas3 as rural subscribers may not
have all the relevant subscriber veri.cation documents1
MAOR REASONS OR ROWTH SLOW DOWN IN SUSCRIERADDITIONS
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MAOR REASONS OR ROWTH SLOW DOWN IN SUSCRIERADDITIONS
De+,!$'+!$% & $%+,!$'e s(.s,r$.ers $% 2012-13
"n 60,6+,' the subscriber base declined drastically1
The subscriber base plunged from A,A16 million in March 60,6
to 2B12 million in March 60,'1
=perators undertoo# large+scale deactivation of inactive
subscribers from their networ#s1
This deactivation will enable operators to increase their focuson high verage Revenue Per nit $RP% subscribers1
T" !$ & !$ $ l . $. " $ ! 86 9
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T"e #r#r!$% & +,!$'e $reless s(.s,r$.ers "+s r$se% ! 869#er ,e%!$% Se#!e).er 2013 &r) 771 #er ,e%! $% Se#!e).er 2012$%/ ! !"e )+ss$'e s(.s,r$.er ,le+%-(# *%e .4 #er+!rs.ACTIE SUSCRIER ASE
A re*(,!$% $% ,)#e!$!$'e $%!e%s$!4 &ll$%/ e:$! & &e
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INDUSTRY REENUES
A re*(,!$% $% ,)#e!$!$'e $%!e%s$!4 &ll$%/ e:$! & &e#er+!rs +%* +%$%,re+se $% !"e s"+re & re'e%(es &r) *+!+ ser'$,es +$*e* !"e'er+ll $%,re+se $% /r!" +&!er 2012
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Re!(r% % ,+#$!+l e)#l4e* ;RCE< & T# 3 #l+4ers
ROCE "+s ,)e *% *r+s!$,+ll4 &r) 2007-08
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RURAL OPERATIONS = LESS PROITALE
ROCE "+s ,)e *% *r+s!$,+ll4 &r) 2007-08
n important reasons of decreasing pro.tability apart from price wars
is !"e e:#+%s$% & r(r+l s(.s,r$.er .+se
Pro.tability of rural operations as a standalone business unit is +,0
per cent lower than that in urban areas due to following reasons4
8ower RP from rural subscribers
&igh 9etwor# Running CostRural "ndia is not only deprived of ade>uate grid
power but also the >uality of power supply$fre>uent Euctuations and phase shifts% is poor1
Conse>uently3 service providers have to largely ban# onDG sets3 which signi.cantly increase the 9=C1
8ower Tower sharing in rural areas
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SM S CDMA
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s GSM was the more widespread technology worldwide3
regulators decided to adopt GSM as the technology in
"ndia1
"n 600,3 permissions were given to provide limited
mobility services based on code division multiple access
$CDM% technology1
8imited mobility is provision of mobile services within a
short distance calling area $SDC% and has reduced
features compared to cellular services1
nder limited mobility service3 the important Froaming
feature is not available1
SM AND CDMA= OERIEW
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SM AND CDMA= DIERENTIAL LICENCE EE
CDM players paid lesser fees as there was no roaming and
certain other services1
Due to this their calling rates were low1
Till 600'3 separate licences were given for GSM and
CDM $CDM is a limited mobility service%1
T"e /'er%)e%! !"(/"! !"+! !"ese 2 se/)e%!s
ere *$s!$%,! +%* "e%,e * %! ,)#e!e $!" e+,"
!"er
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SM AND CDMA= DIRECT COMPETITIONThe limited mobility services however were more or less
competing directly with fully mobile services1L$)$!e* ).$l$!4 ser'$,es ,)#e!e* +l)s! *$re,!l4$!" ).$le ser'$,es % +,,(%! & ! re+s%s=
>rs! %l4 + s)+ll #r#r!$% & !"e).$le s(.s,r$.ers (se* r+)$%/
ser'$,es +%*se,%* %e & !"e #er+!rs #r'$*e*&e+!(res l$?e ,+ll &r+r*$%/ "$,"e@e,!$'el4 res(l!e* $% !"e s(.s,r$.er/e!!$%/ r+)$%/ &+,$l$!4
s the licence fees paid by CDM players wassubstantially lower than that of GSM players3 they couldo@er cheaper rates1GSM players were in a highly disadvantageous position1This led to a dispute and litigation between the erstwhilecellular service roviders and the basic service roviders1
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SM AND CDMA= UASL
The disputes resulted in operators3 particularly GSMoperators3 holding bac# their investment plans and thus
hampering the growth of the industry1
Subse>uently3 to put an end to this dispute3 the
Telecommunications Regulatory uthority of "ndia $TR"%
introduced the ni.ed ccess Service 8icence $S8% in
9ovember 600'3 wherein the licence fee are same for any
type of technology1
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Ke4 O#er+!$%+l Me!r$,s
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H:I =P:RT"9G M:TR"CS
Pre+paid vs Post paid
GSM (s CDM
RP
Minutes of sage
Subscriber Mar#et share
Revenue Mar#et Share
:5clusive owned vs shared towers
Share of (S
PROPORTION O PRE PAID S POST PAID
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PROPORTION O PRE-PAID S POST-PAID
SM S CDMA
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SM S CDMA
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M$%(!es & (s+/e "+s .ee% /r+*(+ll4 $%,re+s$%/ +&!er
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MINUTES O USAE
/ / 4 /Se#!e).er 2011 *(e ! re)'+l & $%+,!$'e s(.s,r$.ers&r) #er+!r %e!r?s
MOU= SHORT-TERM TRENDS
;OERALLue value proposition to
their subscribers3 particularly their high+RP subscribers1
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CRITICAL ACTORS OR 3 SUCCESS
Spectrum *ees
/uilding 'G infrastructure
Cost of 'G enabled handsets
(ariety of services o@ered through 'G
(ernacularisation or regionaliKation
Revenue model from (S
O#er+!rs +re +ls +//ress$'el4 #(s"$%/ &r AS !"r(/"#r)!$%s .(%*le* *+!+ #l+%s +%* $%,re+s$%/ %().er &
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ARESSIE PUSH OR AS
#r)!$%s .(%*le* *+!+ #l+%s +%* $%,re+s$%/ %().er &,ell-s$!es
=perators have been trying to increase subscriber adoption of these
services through4
Mar#eting L promotional strategies for creating awareness
among subscribers about the availability and a@ordability of such
services1Continuous addition and e5pansion in the number of cell+sites3
particularly 'G /TS $cell+sites%3 for enhancing their o@erings1
/undling of branded smart+phones with data plans3 as done by
"dea Cellular3 for e5ample1
Recently3 Reliance Communications and /harti irtel also
o@ered bundled data plans for two years on the purchase of
D+!+ (s+/e "+s .ee% s"$%/ + !re)e%*(s $%,re+se 'er!"e l+s! ,(#le & 4e+rs
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DATA USAE TRENDS
!"e l+s! ,(#le & 4e+rs
S"+re & D+!+ $s $%,re+s$%/ +)%/ %%-'$,e re'e%(es"$le )ess+/$%/ $s ,)$%/ *%
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SHARE O DATA IN NON-OICE REENUES
"$le )ess+/$%/ $s ,)$%/ *%
(r l+r/e #er+!rs s+ !"e$r 3 s(.s,r$.er .+se +l)s!*(.le* .e!ee% Se#!e).er 2013 +%* Se#!e).er 2013
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NUMER O 3 SUSCRIERS
*(.le* .e!ee% Se#!e).er 2013 +%* Se#!e).er 2013
S"+re & re'e%(es &r) AS $s e:#e,!e* ! $%,re+se ! 9$% 2012-13 ! 252 $% 2017-18
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AS AS O WIRELESS REENUES
H$/" s#ee* $%!er%e! $ll .e !"e .$//es! se/)e%! $% !"e"$/" .+%*$*!" ser'$,es .(! $*e AS +%* M(s$, AS $ll
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//r &+s!
HIH ANDWIDTH SERICES= MARKET POTENTIAL
Ser'$,e Re'e%(es ;$% Rs %