Telecom Industry – An Overview

Ankur Agarwal- KH08JUNMBA-062 (Mob-9323933903) Himanshu Ranjan-KH08JUNMBA-069 (Mob-9867690439)Prasanna Devadiga-KH08JUNMBA-087 (9833900809)

Dr.Gulnar Sharma – Macro EconomicsITM EMBA- BATCH NO.13 BSource: Telecom Today/TRAI/DOT/www.ustelecom.com

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Agenda

Indian Market Structure India as Fastest Growing Nation and status of

telecom sector

Innovations in Indian context

Innovation in Technology

Current Market Situation

Emerging Trends

Impact of Telecom Industry on US Economy

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Market Structure

Divided into 23 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 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

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Current Industry Structure

FDI in telecom recently revised to 74%.

Government gets 15% of revenues from Unified Licensing

Ministry of Communication & Information Technology

Regulator

Licensor

Judiciary

Telecom Regulatory Authority of India

Telecom Dispute Settlement

Appellate Tribunal

Dept of Telecom Unified License Operators

Fixed Line Operators

GSM

900 &

1800

Wireless Operators

National Long Distance Operators

International Long Distance Operators

CDMA

1800Mhz

5

Policy Environment

Broad guidelines of the National Telecom

Policy 1999 Licence fees on revenue sharing basis

Achieved a 7% teledensity by 2005 and

Targetting 15% by 2010– Rural teledensity targeted at 4% by 2010

Calling Party Pays (CPP) regime

Incoming calls free

Outgoing calls - multi-level tariffs

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Connectivity Subscriber growth in Indian telecom has largely

been driven by voice services SMS is the most popular data service

Internet is catching on in popularity driven by

broadband players

As per the TRAI consulting papers, data is likely to

be the growth driver in future Rural telephony is expected to be driven by data than

voice– Data services would provide essential services like

education and healthcare

– But primarily demand would be driven by growth in the

rural economy

The key question, however, is are these efforts

scalable?

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Scalability….

…...Requires

Technology/Connectivity

Business Model

Organization focused on rural markets

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Connecting India’s 638,000 villages

BSNL (state owned incumbent

operator) has fibre connectivity to

most Country townso and fibre has almost infinite bandwidth capacity

85% of villages within 15-20 Km radius of

these taluka townso In India, typically 300 villages in 30 Km radius

wireless systems can

connect most of these

villages wireless technologies

are continuously

evolving

300 villages

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Last Mile Access Technologies

CorDECT Wireless in Local Loopo provides a telephone line and 35/70 kbps Internet connection in

a 30 Km radius

o Exchange and tower in town

o Power requirement: 1 KW

o start-up costs very low ($ 200 per line)

VSAT Technologyo Satellite connectivity

o provides a shared 128 kbps connection

o Start up costs are high ($3200 per connection)

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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 organisation to provide the connectivity and

content linkages

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Business Models

Are primarily service providers

Revenues are driven by connectivity and content services provided

n-L ogueD rishteeT arahaat

M arket D riven

IT C 's e-C houpal

C ost D riven

P rofi t O riented

M SSR F

N G O driven

A kshay aB hoom ie-Seva

G overnm ent P rojects

N ot for P rofit

B usiness M odelD em and aggregation through com m unity internet centres

Focussed on Direct procurement of agri-commodities from farmers

No revenue model.Earnings are from savings in procurement costs

Provide marine and agriculture services

E-government services are the primary drivers

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India - Fastest Growing Nation

GDP grew at 9.8% during 2007, aiming double

digit growth

Today India is a services superpower in the

making. the 12th largest economy in world.

Strong investment momentum

Market capitalization up from USD 140 Bn in FY

2001 to > USD 1.58 Trn recently

FDI on the rise - USD 7.6 Bn (06) and USD

19.4 Bn (07)

FII investment - USD 6.5 Bn in 2006-07

140 + public traded companies with market cap

> USD 1 Bn

635 722891

1229

3228

0

500

1000

1500

2000

2500

3000

3500

FY2005 FY2006 FY2007 FY2010 FY2020

US$

BB

Services54%

Industry27%

Agriculture19%

GDP

GDP composition – FY 2007

By 2050, India projected GDP is US$ 70 Trillion

Source: CMIE

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Indian Telecom

World’s fastest Growing Telecom Market - 8 Million plus subscriber addition per month

Third largest in the world after China and US- soon to overtake US

264.8 Mn. Subscribers, Mobile 225.5 Mn., 153.3 Mn GSM tele-density 23.21 %

Fastest sale of a million mobile phones – 1 Week World’s cheapest mobile handset made in India – US$17.2.

Reliance plans web enabled phone at $12. World’s Most affordable color phone made in India –

US$27.42 Internet Subscribers 9.27 Mn. Internet Mobile 31.30 Mn.

Broadband 2.56 Mn.

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Indian Telecom……

Lowest tariff but highest profitability.

Lowest Call Rates in the World at 2-3 US Cents, Declining

ARPU, even then Rs 275 per month for GSM

India ranks highest in Mobile monthly Minutes of Usages

per subscriber in Asia Pacific Region and second to USA in

the world….500 minutes per month

Innovative approach of doing business at lowest operation

costs.

Innovative value added concepts…missed calls, rural

applications, lowest prepaid charge of 2.5 cents.

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The Future….

Electronic hardware market by 2015 USD 320 billion including production

USD 150 billion and exports USD 21 billion.

Telephone subscribers: 500 million by 2010

PC sales: 25 million; installed base 65 million by 2010

ITES & Software exports: USD 60 billion by 2010

40 million new internet connection; at least 50% broadband by 2010

Nationwide TV broadcast to be digital by 2015 beginning 2010: significant

opportunity for STB consumption & manufacturing

Over USD10 bn investment in E-Governance and National ID Card by 2010

2015: Total expected Market USD 320 bn; Domestic production USD 155 bn

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UNLEASHING INDIA’S INNOVATION

The World Bank report released in October, 2007

says “India can innovate to $5 Trillion GDP”

Present GDP of India is estimated at around 1 $

Trillion (Rs 40 lac crores)

The Indian economy is flourishing, and the demand

for telecommunications services has outpaced the

legacy wired telecommunication infrastructure.

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Innovation in technology…

Communications and broadcasting are converging together.

TV can be used for internet and voice and likewise mobile can be used for anything.

Terrestrial TV, cable TV, CAS and now DTH, further moving to digitalization.

IPTV, Mobile TV going to change lives and the way we think traditionally.

Indian Telecom most innovative….hello tones, Ring back tones, missed call, maximum music download, mobile in hand a fashion not elsewhere in world.

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Innovation in technology…

Today experts talk of open innovation centered around customer services and developed as inter operable platforms.

The path to innovation…. E.g.. Apple computer to Home ,IPOD Digital Music player to I Phone- multimedia hand phone with camera, internet, music player, WIFI

A group of Google, Intel, Dell, HP and Microsoft collectively formed the White Space Coalition and delivered to FCC two WIFI devices that operates in this spectrum without interfering with high-definition TV.

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Fisherman Vegetable Vendor Textile Merchant

Adult Education E-Medication

I am in Queue Matter of Heart

Checking best rates “Mobile” Vendor Rediscovering Life

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Current Market Situation

Declining revenues make it hard to justify the large

capital investments made in the recent past

Market suspicion of large corporations will hinder

the raising of new capital

Service providers are hesitant to invest in new

opportunities that cannot provide immediate

benefits

Data services not delivering on high expectations

Wireless spectral investments have crippled growth

opportunities domestically as well as internationally

Network services and applications limp along as

enterprises curb spending

Regulation continues to bandwidth hindrance to

truly competitive markets and lower cost structures

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Emerging Trends

Wireless revenues continue to increase as long

distance revenues decline and local calling revenues

stagnate

Globalization

Long distance

Wireless

Emergence of the “Total Communications Service

Provider”

Convergence of

Enterprise and telecom networks

Networks and applications

Impact of the Telecom Industry on the US Economy

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How does the Telecom Industry benefit the US Economy

US cellularwireless

Industry…

…increases US GDP, employment and Government

revenues

… improves the productivity of US business through

use of…

…wireless voice services

…wireless data services

Demand sideSupply side

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Impact of Telecom Services on the US Economy

Telecom Services will provide a

major stimulus to the US economy

over the next 10 years of more than

$617 billions in productivity savings

from data and additional $750

billion consumer surplus from voice

use and $450 billion GDP

contribution from a Telecom

industry.

All amounts in billions of dollars

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Annual Productivity Benefit from Data and Voice Application are Growing to more than $80 billion

In 2005 data and voice services only

contributed $8 billion in productivity

benefits to the US economy – roughly the

size of Bahrain.

By 2015 these benefits have grown to

more than $80 billion per year, which is

approximately as big as the economy of

the Philippines.

All amounts in billions of dollars

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Components of Future Economic Benefit

The two major components that will drive

the future economic benefit are:

More Efficient Management and

Documentation

Heath Care Efficiency Enhancements

Followed by still sizable benefits in:

Field Service Automation

Inventory Loss

Reduction

Field Sales

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A consumer surplus of $157 billion – almost all from wireless voice

Consumer surplus measures how much US

businesses and consumers are prepared to

pay in excess of what they pay

Consumer surplus from use of wireless

services was running at $157 billion at end

2004

Almost all of this surplus is associated with

voice

We expect this surplus to grow:

To $260 bn by 2010

To over $300 bn by 2015

More details on supply side effects

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GDP Contribution of Cellular services in Comparison with other

Industries

0

20

40

60

80

100

120

140

Cellularwirelessservice

Computersystemsdesign

Publishing(incl software)

Motion pictureand soundrecording

Agriculture Motor vehiclemanufacture

Petroleumand coal

production

Con

tibut

ion

to G

DP

($b

n)

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3.6 million US Jobs Depend on the Telecom Industry

0 500 1000 1500 2000 2500 3000 3500 4000

US jobs dependent on the US wireless industry (000)

Direct employment

Support servicesemployment

Indirect employment

Induced employment

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$63 billion in Government Revenue are Generated by the Telecom Industry

$14.6 billion in federal, state, and local sales

and transaction taxes and surcharges on

wireless services;

$0.9 billion in sales taxes on handset

purchases;

$9.0 billion in employer-paid social security

payments;

$9.0 billion in employee-paid social security

payments;

$26.5 billion in income tax from workers

dependent on the wireless services industry;

$2.6 billion in contributions to federal and

state Universal Service funds.

Thank you very much!