Transcript India’s Telecom Success Story

Snapshot of
Telecom in India
(prepared in Feb ’04)
Reforms (liberalisation) started in telecom
Status in 1994
• 0.8% teledensity – far below world average of 10% and other
neighbouring countries.
• Total phones: 8 mn with a waiting list of 2.5 mn.
• Below 25% villages (1.7 lakhs) covered.
National Telecom Policy 1994 announced.
• Telecom a national priority for increased economic development.
• Plan targets revised to have telephone on demand and all villages
covered.
• All services available internationally to be available in India by 1996.
• Value-added services opened in 1992 (cellular mobile, radio paging,
email, etc.)
• Resource gap of Rs 23,000 cr to meet the revised targets
necessitated private sector participation.
• Tendering process for selection of private players for Basic and
Cellular services.
2
1991-96 : Pre-privatisation scenario
16
14
12
10
Supply
Demand
8
6
4
2
0
1991
1992
1993
1994
1995
1996
3
Introduction of Privatisation
• Licenses awarded (in 1995-97) after tendering and bidding process:
– 8 GSM licenses in 4 metros (no bidding – beauty parade).
– 34 GSM licenses in 18 state circles
– 6 Basic Service Licenses in 6 state circles
• Results not satisfactory due to:
– Actual revenue realisations far short of projections leading to
operators being unable to arrange finance for their projects and
complete rollouts.
• Government appreciates the concern of the operators and allows for
mid-course corrections.
4
NTP ’99 - new telecom policy
Focus on creating an environment which enables continued attraction of
investment in the sector and allows creation of communication
infrastructure by leveraging on technological development.
Targets revised:
• Telephone on demand by 2002 – teledensity of 7% by 2005 and 15% by 2010.
• Encourage development of telecom in rural areas with suitable affordable tariff
structure – to raise rural teledensity from 0.4% to 4% by 2010.
• Internet access in all District Headquarters (DHQs) by 2000.
• High speed data and multi-media capability using technology including ISDN
to all towns with a population greater than 200,000 by 2002.
• Universal Service Obligation defined to provide voice and low speed data
services to all uncovered villages.
5
Role of private sector in the early years
45
40
40.23
37.29
36.02
35
35.35
30.19
30
34.73
32.44
28.39
25
26.51
23.57
22.79
20.51
20
17.8
14.88
14.54
15
21.59
18.68
17.44
10
5.5
3.58
5
1.88
1.2
0.88
0.34
0
1997
1998
Demand
1999
Total
2000
GSM Mobile
2001
Dec-01
Wireline
6
2001: the turning point
•
Policy announced for additional licenses in Basic and Mobile Services
(Jan 2001).
•
Entry fee:
– Basic Services: US$ 0.2mn – US$ 25.5mn (+ Bank Guarantees = 4
times entry fee for rollout obligations)
– GSM Mobile Services (4th Operator bid): US$ 0.2mn – US$ 45mn
•
License fee (revenue share) reduced from provisional 15% to 12%, 10%
& 8%.
•
Limited Mobility allowed to Basic Services (CDMA spectrum allotted to
BSOs).
•
Rollout Obligations to cover Urban / Semi-Urban / Rural areas in equal
proportion.
•
New licenses awarded in Jul - Sep 2001 : Basic (25), GSM Mobile (17).
7
2001: Mobile revolution triggered
12
0.23
10
0.15
• Tariff for GSM cellular
mobiles reduced.
8
0.1
6
4
0.08
10.53
0.05
8.53
6.43
2
3.58
0
Sep
'01
GSM Mobile
Mar
'02
• Existing Operators expand
service coverage.
• 3rd & 4th GSM Operator
networks rollout - further
tariff reductions.
4.8
Mar
'01
• CDMA WLL(M) launched in
limited manner in few
circles.
Sep
'02
Dec
'02
WLL(M)
• Newly licensed BSOs roll
out networks for WLL(M)
on CDMA.
8
Tariff & Interconnection Regulations
• Movement towards cost-based tariffing.
• Tariffs closely regulated by TRAI between 1999-2002.
• Interconnection Usage Charges established on the principles of
“work done” – termination charges introduced.
• Calling Party Pays (CPP) for mobile tariffs – free incoming calls
ushered in.
• Access Deficit Charges (ADC) for cost-minus fixed line services.
• Forbearance allowed recently on all tariffs (except rural fixed line).
9
Increased competition leads to tariff reduction and
affordable services
Long Distance Peak rate tariffs (Rs / min)
90
80
70
60
NLD
ILD
50
40
30
20
10
0
Pre 1999
1999-00
Oct-00
Jul-02
Mar-03
Current
Local Call Tariffs (Rs / min)
16
14
12
10
8
6
4
2
0
Fixed Line
GSM Mobile
Jul-02
May-03
10
Pre 1999
1999-00
Oct-00
May-01
Convergence of tariffs
3
2.5
2
1.5
1
0.5
0
Mar-01
Sep-01
Mar-02
Sep-02
Mar-03
Jun-03
Fixed
0.69
0.69
0.69
0.69
0.69
0.78
WLL(M)
1.25
1.37
1.37
0.71
0.71
0.67
GSM Mobile
2.42
2.06
1.89
1.7
1.63
1.12
11
2003: Mobile boom has begun
Total Additions
2.5
2002: 5.15 mn
2003: 17.49 mn
2
1.5
1
0.5
0
JAN
FEB
MAR
APR MAY
JUN
2002
JUL
AUG
SEP
OCT
NOV
DEC
2003
12
Growth drivers
• Declining entry costs and falling tariffs have lowered the bar in
terms of affordability coupled with branding and advertising.
• High percentage of population owning two-wheelers are
prospective mobile telephone users.
• Upper middle class that spends 6% of its income on telecom
services.
• India lags behind other Asian economies (approx. 10 years) therefore India is poised for growth.
13
2003 : CDMA gains acceptance
7
6
25
6 mn CDMA mobile phones
22% of total mobile market share
Service coverage in over 1100 towns
20
5
15
4
3
10
2
5
1
0
0
Dec-02
Mar-03
Jun-03
CDMA Mobile
Sep-03
CDMA %
Dec-03
14
Unified Licensing introduced
•
Unified Access (Basic & Cellular) Service License (UASL) introduced (Nov
2003) as a first step towards Unified Licensing Regime.
•
Technology neutral and allows provisioning any kind of service.
•
4th Cellular GSM license used as benchmark.
•
BSOs offering WLL(M) allowed migration to UASL - additional entry fee
equivalent to 4th Cellular bid.
•
Rollout obligations to cover 50% DHQs in 3 years.
•
License fee reduced w.e.f 1.4.2004 by 2% across the board for all access
licensees.
•
Rural telephony to be covered under Universal Service Obligation.
•
Intra-circle Mergers & Acquisitions recommended by TRAI - competition not
to be compromised, SMP to be checked.
•
Spectrum pricing and allocation guidelines to be reviewed, present
allocations to continue.
15
Future Investments
US$ bn
14
12
10
8
6
4
2
0
2003
Wireline
* Market Analysts' Estimates
2004
Mobile
2005
Backbone
Total
Total
16
Revenue Projections
US$ bn
16
14
12
10
8
6
4
2
0
2004
2005
Fixed
* Market Analysts' Estimates
Mobile
2006
NLD
ILD
2007
Data
17
Projections : Fixed & Mobile
*
Millions
90
80
70
60
50
40
30
20
10
0
2003
2004
Fixed
* Market Analysts' Estimates
2005
2006
GSM
CDMA
2007
18
Teledensity - Urban vs Rural
35
30
25
20
15
10
5
0
1997
1998
1999
2000
Urban
2001
2002
Rural
2003
2004
2005
2006
2007
Total
19