Telecom

Agenda 1. 2. 3. 4. 5. 6. 7.

Industry Overview Industry Value Chain & Structure Market Size and Growth Industry Segments Competition Growth Drivers Issues & Concerns

INDUSTRY OVERVIEW  BOOMING INDIAN TELECOM INDUSTRY (2ND LARGEST IN WIRELESS NETWORK)  MOBILE SUBSCRIBER BASE WAS 277.92 MILLION, WIRE LINE SUBSCRIBER BASE WAS 39.05 MILLION.(31st march 2008)  INDIAN TELECOM SERVICES GREW BY 21% ,revenue Rs 130,561 CRORE IN FY 2008  100 MILLION NEW SUBSCRIBERS; OVER 50 % FROM RURAL TOWNS(31ST MARCH 2008)  TELEDENSITY: 27.59%(31STMARCH 2008)  PROJECTED TELEDENSITY: 500 MILLION, 40% OF POPULATION BY 2010.  FULLY ORGANIZED  INDIA WILL BECOME HUB OF TELEPHONE MANUFACTURING EQUIPMENT

1.Industry Value Chain & Structure • Value chain • Structure

Telecom Value Chain Infrastructure

Tower

Support

Service Providers Finance Raising Funds

TELECOM

Marketing

Government

Dealer/ Franchisees

License

Advt.

TRAI ISI ISRO

Telecom Equipment

Other Telecom Co. Cross connection Agreement.

IT

Customers

Structure

•

TELECOM Telephon e (336.97) Wireles s (277.92 )

GSM 184.67

Wire line (39.05)

Internet (43)

Wire line

Broadcasti ng

Wireless

Cable

Radio DTH

CDMA (53.25).

Broadb and

Dial UP

Mobile Net

2. Market Size and Growth • Market Size • Future Expected Growth

•

CUSTOMER DEMAND FOR WIRELINE TELEPHONE DECLINES Decline in wire line phone – Technology advancement – Increase in investment – Privatization – FDI

Source:

Market Size • Increase due to reduced cost of government initiatives • Strong Demand – industry, – Institution – Low price

Source: www.trai.gov.in

Market Size • Cellular phenomenal due to

has growth

– Reduction in operating cost – Privatization – Increase in subscriber – Reduction in call rates – Increase in number of towers

Increased Revenue of Telecom Industry

OUTLOOK • Industry will continue to boom in future

source: www.ibef.org

ROAD AHEAD • The total subscriber base to500mn by 2010 • The Indian telecom industry's revenue expected US$ 35 bn 3.6 % of GDP US$ 76.6 bn (0712).

• Total investment projected at

us$ 24bn by 2010

•

In mobile services projected investment

•

Total 107 million handsets by 2010

3. Industry Segment Industry Segment Classified in 3 category • Telephone • Internet • Broadcast

3. Industry Segment Telephone 1.Wireless

a. CDMA b. GSM 2.Wireline

GSM HOLDS LARGER SHARE • BUT CDMA growth more than GSM due to – CDMA chipset is far smaller thanGSM – High speed data transfer and extreme security

Source: www.trai.gov.in

Reliance gets the bigger pie! Reliance has major customer base 45.79 million and Tata account for 24.33 million Average Revenue Per User per month is 159 RS

Source: www.trai.gov.in

Bharti leading in GSM! • Bharti leading with highest customer • wide network coverage • good customer service

Source: www.trai.gov.in

Internet the ‘in thing’ • Broadband accounting more growth over dial up because of – speeds up to forty times faster than a standard internet connection – Enabling to use the phone and internet simultaneously Source: www.trai.gov.in

4. Competition • Herfindahl Index • Michael porter Analysis

Herfindahl Index • Value of Herfindahl index for Telecom industry is- 2258.68 • High competition • Opportunity to enter new Player

• Major Players (In India) :– – – –

Bharti Airtel Vodafone Essar BSNL IDEA

Michael Porter Analysis

Bargaining power of Buyers • Low • Customers had to follow stated prices.

Threats of Substitute • Low • Substitutes are Couriers, Speed post, Telegram Etc – But they are not fast source of communication.

5. Growth Driver • Industry Driver/ Consumer Trend/ Export. • Regulations

GROWTH DRIVERS  New subscribers from towns and villages with populations less than 20,000  Network coverage( half of the 6,00,000 towns and villages)  Rise in consumer income and spending owing to strong economic growth  Lowering of tariffs  Lowering entry price of owning a handset  Investment in the 3G network and large number of towers setup

GROWTH DRIVERS/COMPANIES •

Investment of $32.5 billion in next 2 years

• Bharti is planning to invest 8n billion by 2010 • Reliance telecommunication will invest $8 billion in 2008 • Idea will invest 200 crore in Gujarat for capacity expansion • BSNL’s $100million expansion plan for GSM network in South India • Aircel is planning to invest US$ 5 billion in next 4 years in India

Regulations • 74% Foreign Direct Investment (FDI) permitted in telecom industry. • Proposed changes: – lowering of excise duty on data card from 16% to zero – lowering of customs duty on convergence products from 10% to 5% – full exemption for specified components of set-top boxes – internet telecommunication service brought under the service tax net – Nil additional duty of customs, on parts, components and accessories of mobile handsets including cell phones

The New Business Strategy: From Services to Business Ecosystem

Radi o pagin g

Legac y reform Fixe d wirele line ss

history

Telecom focused service business

wirel ess

e/m paym -ent

Diversifi Fixe ed solu telecom d tiline ons Applic a-tion transitio n Telecom service with VAS and mobile

future

New telecom busines s ecosyst em

WHAT THE NEW ECOSYSTEM WILL DO?  Increase tele-density  Growth of GDP  1% increase in tele-density results in 3% increase in rate of GDP growth rate

 Increase employment  Increase Government revenue

6.Issues and Concerns •

Lack of infrastructure increases initial fixed cost. Achieving break-even under these circumstances may prove to be difficult.

•

Lack of adequate spectrum

•

Interconnection charges between the private and state operators.

•

Highly taxed sector:  Paying duties and levies under various heads including annual license fees, spectrum charges and access deficit charge  levies imposed on account of sales tax, service tax and import duties on handsets and other telecom hardware

CHALLENGES FACING OPERATORS

RECOMMENDATIONS  There should be no service tax on the IUC  Avoid double taxation with both sales tax as well as service tax  Make india regional manufacturing hub for mobile handsets  Identify all the unused spectrums and allocate them to the cellular industry.

Thank You