CONFIDENTIAL

Opportunities & Overview of Mobile

Industry in India

Prepared for:

October, 2006

No part of this presentation may be circulated, quoted, or reproduced for distribution

Indian mobile telephony market has seen explosive growth in subscriber
base but low tariffs keep building margin pressure on operators…

120 Per Minute Cellular Tarrifs (in US

cents)
100.0
Mobile Phone Subscribers (millions)

14.4
100

11 11.4
80
76.0
8.4
60
48.0 6.5 6.5

40 3.5
28.0
2.5

20 10.5
5.5
0.2 0.8 1.1 1.6 3.1
0.0
0 di
a na h al n ka an es
In hi des ep s ta an u t i v
C a N ki iL Bh al
d
gl Pa r
95

96

97

98

99

00

01

02

03

04

05

n M
06

S
Ba
19

19

19

19

19

20

20

20

20

20

20

20

*Data for 2006 is till April

Source: Telecom Regulatory Authority of India, Industry News, Zinnov Analysis
1
…this is because average revenue per user (ARPU) is going down due to
falling call prices

Effective margin/min, Effective Margin/min Illustrative

End 2005 Curently

1.6 1
ARPU
ARPU (2005)
(2005)
1.4 0.9 0.08
0.25
0.8 •• India
India has
has one
one of
of the
the lowest
lowest mobile
mobile
1.2
0.7 phone
phone tariffs
tariffs in
in the
the world
world resulting
resulting inin
1 low Average Revenue
low Average Revenue Per User Per User
0.6 (ARPU)
(ARPU)
0.8 0.5
0.95 •• The
The problem
problem is is that
that despite
despite thethe
1.5 0.87 average use of mobile phones being
0.4 average use of mobile phones being
0.6 1.25 the
the highest
highest at at 287
287 minutes
minutes aa month,
month,
0.3 India
India has
has anan average
average raterate per
per user
user
0.4
0.2 (ARPU)
(ARPU) of around $8 compared to
of around $8 compared to
0.2 global
global average
average ARPUARPU of of $$ 21.
21.
0.1
•• There
There waswas aa decline
decline of of 7.4%
7.4% in in
0 0 ARPU in 2005 since
ARPU in 2005 since 2004 2004
Cost per Margin Effective Cost per Margin Effective •• The
The ARPU
ARPU would
would continue
continue to to drop
drop
by
by about
about 5% 5% whilewhile tariffs
tariffs will
will
minute rate per minute rate per decrease further by 15%
decrease further by 15%
minute minute

*Value are mentioned in Indian National Rupees

Source: Businessworld magazine, Industry News, Voice & Data, Zinnov Analysis
2
Value-added services (VAS) are likely to save the day for mobile service
providers
Lucrative for Operators

• At 14 cents per minute, some VAS services make

much more money than the average 3-4 cents per
minute that voice does.
• Typically, data sells at anywhere between 4-65
cents
• India’s churn rate is between 3.5 per cent to 6 per
cent per month, one of the highest in the Asia-
Pacific region

Many parties make money Customer is Ready

• Media companies e.g. Star, Sony and
BCCL are betting big
• Aggregators (mobile content providers or
mobile solutions companies)
• Application Service Providers
• Network infrastructure providers and
system integrators
Mobile Music Booms
• The mobile music industry is set to
overtake legal conventional music
industry in India
• Some examples are ring tones, caller
ringback tones
• More than 100 million people armed with
mobiles want to be entertained when
they are traveling, waiting or simply
living
• And they are willing to pay for it
Value Added
Services
Host of Hot services
• The pushing and shoving to offer the next
level of services -- mobile TV, Internet and
commerce -- has already begun
• The demand for more localized, regional
content is increasing
• Bollywood content download, and Mobile
Gaming is already big

Source: Businessworld magazine, Industry News, Zinnov Analysis

3
VAS is ringing in money for mobile operators and is expected to see high
growth
2006 2009-2010

VAS Discussion
COAI* has projected that
VAS will contribute up to
$ 500 million (This 20% of total telecom
includes texting and is revenue within three years
Revenues not just operator share)
Media, mobile
Parties operators and
involved aggregators

Today VAS contributes about

9-10% of total telecom revenues VAS Discussion
Revenues $10 billion (by 2010)
Media, mobile
Parties operators, aggregators,
involved banks, Enterprises

*Cellular Operators Association of India

Source: COAI, TRAI, Industry News, Zinnov Analysis, Lehman Brothers report
4
Mobile infotainment, gaming and email are the Killer Applications
Mobile Music
Mobile music, comprising of
ring tones, caller ringback
tones and music clippings, is
registering a growth of 40-
50%. Mobile music industry is
expected to be $157 million
mid next year bigger than
conventional music industry
Mobile Gaming
According to the projections,
as many as 78.6 mn people
will be playing mobile games
by 2009, and game downloads
will have increased more than
tenfold from current levels
Mobile Email
Mobile users send and receive
email and hook into corporate
computer networks. Email is
expected on every 4th phone to
be sold in India in next 4 years
Source: Businessworld magazine, Industry news, Voice and Data
Mobile Videos & Animation clips
Indians are crazy about Bollywood
movies and music. Today there are
10, 20, and 30 second music video
clips available for download and
will soon expand to include movie
trailers, sports highlights,
animation
Mobile Contests/Voting
TV channels like Star and Sahara,
announce short codes for SMS-
based contests based on their TV
serials. Also vote for the Miss
World, Indian Idol through your
mobile to choose winners is big
News Alert/Match Scores
Mobile subscribers get news
alerts on the go. Cricket match
scores is another big
application in India
5
 SMS will remain the most used VAS service as it is offered at
a very competitive price
750 732

Volumes of VAS per year

600
549
Millions/Year

439
450

329

300

150 110
82
39 52
21 28
0
SMS Premium Voice (in Ringback GPRS
SMS minutes) Tones

2004-05 2005-06

Source: TRAI, COAI, and secondary research

6
Some of the major content providers, and application service providers
are benefiting from this VAS market…
Mauj.com
Mauj Telecom is the #1 VAS
Company in India
• Its wap portal wap.mauj.com is the
leader in the mobile gaming, mobile
music, mobile video space in India
• Employs approximately 160 people
in its offices in Mumbai, Delhi,
Chennai, Dubai, London, and New
York
• Mauj investors include Intel, Sequoia
and Westbridge capital
Mobile-2-win
It is into wireless content -
sourcing, creating &
distributing! .
• Mobile2win creates innovative
mobile marketing solutions for brands
seeking to tap into the Indian
consumer markets.
• Based in Mumbai, India, Mobile2win
provides unparalleled reach to over to
over 26 million mobile consumers
through its gateway (SMS)
Source: Telecom Regulatory Authority of India, Websites, Wireless forum
Hungama Mobile
Hungama Mobile is South
Asia's leading Mobile
Entertainment Company
• It is the largest aggregator, publisher
and developer of Bollywood mobile
entertainment and gaming content.
• It has developed over 350 Mobile
Marketing Campaigns for as many as
125 Fortune 1000 Brands.
OnMobile
Wireless Infrastructure
Software Provider
• They provide technology, aggregated
content, and complete end-to-end
managed services to telecom
operators, media houses, enterprise
clients
• OnMobile was incubated by Infosys
Technologies
IMImobile
India's leading mobile VAS
enabler and content aggregator
• IMImobile is providing its content and
technology services to over 40million
subscribers though its agreements
with operators
• It has developed its own Messaging
Centers, Gateways, Content
Management Systems, Service
delivery platforms, client and server
side applications and Voice Portals
Indiagames
It is a global mobile content
publisher mainly focused on
Gaming
• Indiagames' key investors
includes TOM Online Inc. which is
a leading wireless Internet
company in China , Macromedia,
Inc. , and Cisco Systems, Inc.
7
…Others are also riding the wave and tapping the opportunity
Smarttrust
Swedish Company is into
Mobile terminal management,
value added services, Mobile
business solutions
• The company has
implemented its thin client
software for Indian telecom
operators such as Bharti, BSNL
and Escotel
Jatayu Software
The company produces telecom
products like Gateways/Servers
(WAP, SMS, SyncML, VoiceXML,
WTA), Browsers (WML, XHTML),
Clients (SMS, e-Mail, Chat,
SyncML), and Stacks (WAP2.0
and TCP/IP)
• It employs over 200 specialists in
mobile technology
• Jataayu Software is a subsidiary
of Integra Micro Systems
Source: Telecom Regulatory Authority of India, Websites, Wireless forum
ACL Wireless
It is the leading provider of
wireless instant messaging
application to mobile operators
• Founded in early 2000, ACL has
its wireless R&D center in India
• The company presently employs
over 60 people
• ACL has successfully marketed
its ACL Wireless Instant
Messenger to 11 leading mobile
operators in Asia
Air2web.com
Wireless ASP and enterprise
development
• The company offers networking
and server software for
delivering Web pages, e-mail,
and other data to wireless
devices
• Mobile Media Websites use
Air2Web Content Gateway to
Offer Custom Designed Ring
Tones, Games and Graphics
Bharti Telesoft
Bharti Telesoft is the
software venture of India's
leading telecommunication
group Bharti Enterprises :
• Architect and deploy operator’s
VAS service delivery platform
and collaborate with key
players in the VAS value chain
to operate and manage the
service
Activemedia
Activemedia Technology is a
wireless marketing and
technology solutions
provider:
• One of the leading providers of
mobile content , applications
and marketing solutions to
operators, brands and media in
India
• Mobile operators like Hutch are
its customers in India
8
VC investments are yet to catch up in the Mobile Industry. Currently travel
and recruitment portals lead the investment pack
Drivers
Drivers
100% = US$ 75 million of funding by VCs

•• The
The Indian
Indian economy
economy have
have seen
seen aa
consistent
consistent growth
growth of
of 7-
7- 88 %
% per
per
annum
annum inin recent
recent years,
years, which
which has
has
resulted
resulted into
into
¾
¾ Growing
Growing Middle
Middle Class
Class incomes
incomes
Others, 23% ¾
¾ Consumer
Consumer spending
spending increase
increase in
in
leisure
leisure items
items and
and services
services like
like
entertainment,
entertainment, Vacation
Vacation etc.etc.
E learning,
13%
Travel , 37% ¾
¾ Indian
Indian consumers
consumers tend tend to
to spend
spend
10.4% on vacation
10.4% on vacation relatedrelated
Matrimonial,
activities
activities
11%
Employment,
¾
¾ Growing
Growing army
army ofof credit
credit card
card
16%
holders
holders and
and internet
internet users
users are
are
opting
opting to
to book
book air
air tickets
tickets online
online
¾
¾ Discounts
Discounts andand freebies
freebies by by
online
online ticket
ticket booking
booking sites
sites

* Data is for investment in the year 2005-06

Source:contentsutra.com; KPMG Consumer Market – India report 9
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