Transcript Telecommunication Sector
S. P. Jain Institute of Management & Research Post Graduate Program in Management Information Management 2009
Telecom Sector in India
Business Environment Domain Study Presentation
20
th
Nov 2009
Anjana Rao, Prachi Joshi, Puneet Taneja, Sandeep Sreenivasa
Agenda
History, Facts GoI, Regulatory Bodies Spectrum Action India Advantage VAS Industry Updates, Trends Future Technologies Conclusion BE - Domain Study - Telecom 2
History, Facts GoI, Regulatory Bodies Spectrum Action India Advantage VAS Industry Updates Future Technologies Conclusion BE - Domain Study - Telecom 3
History of Telecom in India- I
First Military Landline from Fort William to Lalbazaar (Calcutta ) by the British Govt Merger with the Postal service Merger of ETC &IRT to form (IRCC) Indian Radio Telegraph Cable Company
1851 1881 1883 1923 1932 1947
First Civil landline service introduced for the British Viceroy and his team Formation of Indian Radio Telegraph Company (IRT) Formation of Posts Telephone & Telegraphs under Ministry of Communication BE - Domain Study - Telecom 4
History of Telecom in India- II
DOT established separate from Postal system • 1st call on Mobile phone • Telecom Minister Sukh Ram(Delhi) to Jyoti Basu (Calcutta) • Cellular service launched.
• New Telecom Policy(NTP) is adopted For 3 months in a row India beats China for the maximum subs added every month
1985 1986 1995 1997 1999 2000 2009
DOT spilt into 3 : • MTNL (metros) • DOT (others) • VSNL (International) TRAI created (Telecom Regulatory Authority of India) DOT becomes a corporation = BSNL BE - Domain Study - Telecom 5
Quick Facts
Total telecom subscribers : 509 million (Sep 2009) Wireless subscribers : 471.7 million Wire line subscribers : 37.3 million Tele density : 43.50 per cent India’s service providers revenue in Q1 (2009): $8.2 billion India’s Rural Mobile Phone Users : 100 Million BE - Domain Study - Telecom Source: TRAI report – Nov 2009 6
Growing Numbers
Revenue(US$ billion)
Revenue(US$ billion) 43 32 9 10 11 15 20 BE - Domain Study - Telecom 7
Nokia, Motorola, Samsung, LG, Sony Ericson
Telecom Companies ?
WTTIL, Tata teleservices tower, QTIL Bharti-Airtel, Vodafone, Idea, Reliance, Tata Teleservices ARM, Texas Instruments, Qualcomm, Infineon Symbian, Google IBM, Wipro, Aricent, Tech Mahindra BE - Domain Study - Telecom Infinera, Cisco, Alcatel Lucent, Nokia Siemens, Huawei 8
Market Share
10% 11% 13%
Service Provider Market
5% 1%1% 18% 23% 18% Bharti Airtel Reliance Communications Vodafone Essar BSNL Idea Cellular Tata Teleservices Aircel MTNL Others(Loop, MTS)
As on 30th Sep ‘09 Net additions in Sep 09
Tata (26.74%) > Bharti (16.78%) BE - Domain Study - Telecom 9
6% 5% 7% 8% 15%
India
Handset market
60% Nokia Sony Samsung Motorola LG Others
Worldwide
20% 37% 11% 22% 5% 5% Source: IDC Press Release BE - Domain Study - Telecom Nokia Sony Samsung Motorola LG Others 10
Enterprise Telecom Services
Growth Avenues
3G Rural Telephony Growth Avenues WiMax Value Added Services Virtual Private Network BE - Domain Study - Telecom Infrastructure Sharing Managed Services 11
Population Contribution
Urban-Rural Telephony
Subscription Contribution 15-20% 80-85% 72% 28%
BE - Domain Study - Telecom 12
History, Introduction, Facts GoI, Regulatory Bodies Spectrum Action India Advantage VAS Industry Updates Future Technologies Conclusion BE - Domain Study - Telecom 13
Strategic Flow
500 Mn Mobile and Wire line subscribers in India today Rs. 40,000 Crore quarterly revenue figures for this industry
Clear Policy
So How all this happened?
Competition Cheap tariff regime
TRAI functions
Consumer Protection Ensure Quality of Service Ensure Affordable Tariff Regulate Interconnections Regulation, Directions, Orders Recommendations BE - Domain Study - Telecom 15
Agenda
History, Introduction, Facts GoI, Regulatory Bodies Spectrum Auction India Advantage VAS Industry Updates Future Technologies Conclusion BE - Domain Study - Telecom 16
Spectrum Allocation Need for Spectrum Allocation
• Spectrum auctions ensure the efficient use of spectrum by allocating it to those entities that value it most, while also
generating revenues for governments.
• In order to allocate spectrum amongst competing service providers, regulatory agencies often use auctions.
• The key challenge before regulatory agencies is to design auctions in such a way as to foster competition while at the same time ensuring that bidders can effectively use
the spectrum for their business.
Spectrum Allocation in India
o o
Circles
• In India, telecom licences were auctioned for basic and cellular services from 1991 by the Department of Telecom (DoT). • The entire country was divided into roughly 20 circles, categorized as A, B, or C depending upon their revenue potential.
GSM&WLL
• Required to seek Foreign partners. • For cellular licences, Global System for Mobile Communications (GSM) was the chosen technology and for basic services, a combination of fiber optic and wireless in the local loop (WLL) was selected.
Agenda
History, Introduction, Facts GoI, Regulatory Bodies Spectrum Auction India Advantage VAS Industry Updates Future Technologies Conclusion BE - Domain Study - Telecom 19
India’s Competitive Advantage
1. Fastest growing free market democracy 2. Cost advantage in product development and back office processing 3. Stable economic outlook – Decade long reforms 4. Huge market potential – one of the largest consumer markets 5. Large talent pool Source: www.telenor.com
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Intensive competition in the country has made it possible for service providers to offer the services with lowers fare in the world, profitability, Many new handset have been launched.
Chance
Porter’s Diamond Model
India has a large middle class of 300 million, Growing affordability and lifetime free schemes have care a market at the bottom of the pyramid.
Teledensity (~43.5%) offers huge future potential.
Firm strategy structure and rivalry.
Factor Conditions Demand conditions Presence of skilled labour pool.
Rapidly developing robust telecom infrastructure.
Increasing disposable income of consumers.
Increasing demand due to changing lifestyles and growing attraction for mobiles with new features.
Source: IBEF Report Related and supporting industries Government -The government extends full support to industry through reform processes.
- Policies are in place to safeguard the interests of service providers, as well as those of consumers.
Competent handset manufacturers have produced the lowest priced handsets for the Indian market.
Handset players are setting up manufacturing bases in India for better operation management.
Many telecom and equipment and software companies are based in India.
BE - Domain Study - Telecom 21
2008-09 2007-08 2006-07 2005-06 2004-05 129 2003-04 Source: IBEF Report 116
FDI in Telecom Sector
Third largest sector to attract FDI in India FDI in Telecommunication Sector (US$ million)
2345,38 521 680 1275,65 BE - Domain Study - Telecom 22
Agenda
History, Introduction, Facts GoI, Regulatory Bodies Spectrum Auction India Advantage VAS (Value Added Services) Industry Updates Future Technologies Conclusion BE - Domain Study - Telecom 23
VAS (Value Added Services)
SMS
VAS services, Bulk Messaging, B2B and B2C
Voice IVR
Mobile Radio, Voice chat, English Learning, Devotional and Astrology, Music on Demand
Content downloads
Mobile WAP Portal Consumer Applications Enterprise solutions : Mobile CRM, Mobile SFA
CRBT (Caller ring back tones) USSD
Message along with *141# Flash alerts
VAS offerings
BE - Domain Study - Telecom 25
VAS market in India
VAS: Not a form of basic service but adds value to the total service offering Contributes to 10% of total revenue from telecom operators The corresponding figure in developed nations is ~25% BE - Domain Study - Telecom 26
Source: IAMAI Report
Present Segments
Population of India – 1,130 mn Mobile Subscriber Base – 509 mn GPRS Enabled – 70 mn GPRS Activated – 17 mn GPRS Users – 10 mn BE - Domain Study - Telecom 27
Why mobile VAS ?
Decrease in ARPU for telecom operators Very low operating margins Decreasing call rates: Lowest in the world @ 1p/sec Increase in number of operators in each circle Saturation in metro market: Over 100% tele-density in 4 metros
BE - Domain Study - Telecom 28
VAS value chain
Content Generators
Eg. Music Companies, Website portals
Content Aggregators
Eg. Spice Digital, Hungama.com, Mauj.com
Telecom Operators
Eg. Airtel, Vodafone, Idea, BS BE - Domain Study - Telecom 29
Rural VAS
Only 12% tele-density in rural areas as compared to 72% in urban areas Huge market potential Sachet model of VAS promotion Localization content • Local Mandi Rates • Weather forecasts • Health and job related information • Train services BE - Domain Study - Telecom 30
Agenda
History, Introduction, Facts GoI, Regulatory Bodies Spectrum Auction India Advantage VAS Industry Updates Future Technologies Conclusion BE - Domain Study - Telecom 31
Industry Updates
Idea Cellular’s Acquisition of Spice Telecom
• Idea acquired 40.8% stake of Spice Communications at Rs 77.30 a share for Rs 2,716 crore. There was a share swap in which Spice shareholders got 49 Idea shares for every 100 Spice shares held.
Vodafone’s entry into India
• Vodafone paid a discounted price of $10.9 billion in cash for acquiring the 52% stake held by Hutchison Telecom International (HTIL)
Telenor-Unitech Deal
• Telenor is in the process of acquiring controlling stake of 67.25% in Unitech wireless via equity infusion
TTSL – DoCoMo Deal.
• Japanese carrier NTT DoCoMo acquired 26 per cent stake in Tata Teleservices (TTSL).
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To create a $61-billion transnational telecom goliath. • Combined revenues of $20 billion • Over 200 million subscribers across Africa, Asia and Middle East.
Bharti-MTN deal
Takeaways for Bharti • Access to new geographies with high growth potential.
• Greenfield project, time-consuming and capital intensive. Reasons for failure Dual listing • Indian rupee is not fully convertible • Not possible to go in for dual listing of shares.
• which allows people to buy shares in the stock exchanges of one country and sell in the bourses of the other country BE - Domain Study - Telecom 33
India 3G Story
In India, 3G mainly for voice?
Indiatimes - Sep 8 2008 India 3G kicks off; but at what cost?
CIOL - Jan 16 2009 India 3G News: BSNL flips the switch Product Reviews - Mar 5 2009 Source: Google Trends DoT looking to hike the reserve price for the auctions of the pan-India 3G spectrum TopNews - Jun 12 2009 India 3G auction may happen sooner than expected Telecoms.com - Aug 27 2009 SK C&C, Reliance team on India 3G roll out EE Times India - Oct 20 2009 BE - Domain Study - Telecom 34
Reserve Price Jan 14
th
2010
• 3G – Rs 35 bn • WiMax – Rs 17.5 bn • EVDO – Rs 8.25 bn
Expected Bid
• 2-3 times the reserve prices - to total at least Rs65bn–Rs120bn.
Foreign players
• with no current presence in India have to pay an additional Rs 16.50bn for 2G spectrum.
ECB
• relaxing the normal US$500m limit on external commercial borrowings BE - Domain Study - Telecom 35
Agenda
History, Introduction, Facts GoI, Regulatory Bodies Spectrum Auction India Advantage VAS Industry Updates Future Technologies Conclusion BE - Domain Study - Telecom 36
Mobile Number Portability(MNP)
Huge Costs Customer Retention/Increased Competition
The Inhibitors
Infrastructure Upgrade Cost Recovery and Bill Reconciliation/Query Processing Source: Voice and Data BE - Domain Study - Telecom 37
Mobile Virtual Network Operator
What ?
How ?
Differentiation Marketing Regulation • Operator or company which does not own a licensed spectrum and generally with out own networking infrastructure • MVNOs resell wireless services under their brand name, using regular telecom operator's network.
• Deploy their own mobile Intelligent Network (IN) infrastructure in order to facilitate the means to offer value-added services. • The goal is to differentiate versus the incumbent mobile operator, allowing for customer acquisition.
• MVNO's have full control over the SIM card, branding, marketing, billing, and customer care operations.
• MVNOs have not been regulated in any country. ITU has received several requests to study the issue BE - Domain Study - Telecom 38
Spectrum Price Spectrum Allocation For Voice services
Wimax v/s 3G
3G
To be auctioned Simultaneous Best technology Evolved over the years
WiMax
DoT has recommended 25% of reserve price of 3G spectrum Simultaneous Evolving technology New technology
Result
Advantage WiMax Neutral Advantage 3G Advantage 3G
Equipment/Standard Data download speeds (fixed) Data download speeds (mobile)
15 Mbps 15 Mbps 70 Mbps 20 MBPS Advantage WiMax Advantage WiMax Source: Business Standard BE - Domain Study - Telecom 39
Generations 2g DATA RATE 14.4
3G 600KBPS TO 2MBPS 4G 10MBPS TO 20 MBPS
BE - Domain Study - Telecom 40
Wi Max (e not d)
• Worldwide Interoperability for Microwave Access • IEEE 802.16e STANDARDS • BROADBAND EVOLUTION
4G
• MIMO (multiple input multiple output) smart antenna • OFDM • 10 To 80mbps • Sprint, Clearwire, Comcast, • Motorola / Lucent • Rev m is the future • Small investment
LTE
• Long term evolution • 3GPP • 80% • MOLILE EVOLUTION • MIMO • OFDM • 20 to 100mbps • Revision 8 future is rev 10 • Vodafone/A&T/France Tele • Nokia & Ericsson • Large investment BE - Domain Study - Telecom 41
Agenda
History, Introduction, Facts GoI, Regulatory Bodies Spectrum Auction India Advantage VAS Industry Updates Future Technologies Conclusion BE - Domain Study - Telecom 42
SURFING AGAINST Top Ten Challenges
Sustenance of same EBITDA Competitive tariffs VAS applications on Device Spectrum management Broadband expansion in Rural Transition to NGN Content Regulation of Data Ecosystem to facilitate M&A Reduce Circles to relax Roaming Alternate Technologies (Solar/Wind for power back-up) BE - Domain Study - Telecom 43
Road Ahead
People with and without mobile connections (in millions)
Connected Not Connected 604 661 Highest Number Not Connected People 720 China 54,4% 510 India 43,6% 36 271 USA 88,4% 91 140 Indonesia 60,5% 25 165 Brazil 86,6% BE - Domain Study - Telecom 71 96 Pakistan 57,6% 44
References
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Trai – Quaterly Report (Nov 2009).
IBEF report 2007-08 : Telecommunication - MARKET & OPPORTUNITIES.
Cellular Statistics – Cellular Operator Association of India IAMAI & eTechnology Group@IMRB: MOBILE VALUE ADDED SERVICES IN INDIA- A Report.
Telenor Entering India: Investment Update Voice and Data(May 2009): Mobile Number Portability - Poaching with Portability.
Business India : Telecom Takeover, Bharti-MTN deal
Thank You for Your Attention !
BE - Domain Study - Telecom 45