Telecommunication

Group 9
Mayank Kapur (25)
Parisha Dalmiya (32)
Sankalp Sharma (44)
Varun Gupta (55)
Vibhuti Sharma (57)
Overview:
Indian Telecom Industry
 Overview…Facts

• Fastest growing telecom market;

• To become second largest telecom market in
world by 2010;
• Total subscriber base: 479.07 million;
• Last month additions: 14.38 million;
• Tele density: 41.08%;
• CAGR: more than 50% (since 2003);
• Wireless subscriber base: 441.66 million;
• Wire line subscriber base: 37.41 million.

Source: trai
 Overview…Facts

• Total broadband subscriber base: 6.80 million;

• Monthly broadband growth rate: 2.7%;
• Urban region teledensity: 88%;
• Rural region teledensity: 16.54% (by May 2009);
• Expected mobile subscriber base by 2012: 690 to
700 million;
• ARPU per month: INR 205 (by Mar 2009)

Source: trai
Overview…Facts
• Divided into 23
circles Jammu & Kashmir

– 4 metros Himachal Pradesh

Punjab

– 19 circles Haryana
Uttar
Pradesh
W

Further Rajasthan
DELHI
Uttar Pradesh E

divided into A, B Bihar

West Bengal
Gujarat Madhya Pradesh

and C category
based on Maharashtra
Orissa KOLKATA

MUMBAI

Andhra Pradesh

Karnataka

METRO Circles

CHENNAI
A Circles
Tamil Nadu
B Circles
Kerala

C Circles
 Success story

• The subscriber base grew to

464.82 millions on June 2009,
registering a growth of
approximately 43% over last year.

• On Jun 09, Indian teledensity

stood at 41.08% as compared
to 28.33% last year.

Source: trai
Paradigm Shift in Telecom
scenario
• Traditionally, a government owned monopoly :
BSNL incumbent monopoly operator till 1992
• Characteristics of monopoly:
– A single seller
– Unique product
– Blockaded entry and exit
– Price makers instead of takers
• Duopoly existed with bharti and BSNL being the
two players.
Contd…

– Bharti: cellular service

– BSNL: fixed line service
– NTP 94 allowed one private service provider to compete
in basic services with DoT . It allowed duopoly in cellular
mobile services in each circle.
• Oligopoly -> Open competition
– Majors players include BSNL, MTNL, bharti, vodafone,
reliance, Tata indicom, Idea.
– Handful of competitors sheltered by significant barriers
to entry
– Price/output relationship of firms are interrelated
– Sellers have homogenous or unique products.
Tariffs
USD

• Local call charges decreased from Rs. 18 in 1999

to Rs. 0.5 now.
• National call charges decreased from Rs. 35 pm to
 Market share

• Currently 12 major players.

• Bharti occupies approx. 24% of the total wireless market.

Source: trai
 Internet Services

•  India currently has only 13.54 million Internet subscribers, which includes
broadband.
• There were 13.54 million Internet subscribers at the end of March 2009 as
compared to 12.85 million Internet subscribers at the end of December 2008
registering a growth of 5.30%.
• The number of Broadband subscribers (with a download speed of 256 Kbps or
more) was 6.22 million at the end of March 2009 .

Source: trai
Regulating Bodies and policies
Regulating Bodies

Regulates the sector

and fix tariffs

Indian Telecom
Industry
Framework

Licensing and
Frequency
Management

Adjudicates over
disputes in telecom
sector
Regulatory Framework Policy

• New Telecom Policy 1994

– provision of world class services at reasonable prices;
– ensuring India’s emergence as major
manufacturing/export base of telecom equipment;
– Availability of basic telecom services to all villages;
– 1 PCO per 500 urban population and coverage of all 6
lac villages;
– License distribution to private players.

• The private sector entry has been slower than what was
envisaged in the NTP 1994;
• Actual revenue lesser than the projections;
• Unable to fulfill some of the objectives.
Regulatory Framework Policy

• New Telecom Policy 1999

– Strengthening of Regulator;
– Strengthen research and development efforts in the
country and provide an impetus to build world-class
manufacturing capabilities;
– Encourage development of telecommunication facilities
in remote, hilly and tribal areas of the country;
– Enable Indian Telecom Companies to become truly
global players;
– Achieve efficiency and transparency in spectrum
management;
– Provide Internet access to all district headquarters by
2000;
Regulatory Framework Policy

• Universal Services Obligation

– implemented along with NTP ’99 to widen the reach of telephony
services in rural India.
– All telecom operators are bound to contribute five per cent of their
revenues to this fund.
– Bridge the wide gap between urban and rural teledensity.

• Unified Access Licensing Regime (UALR 2003)

– Eliminated the need for separate licences for different services;
– Allows players to offer both mobile and fixed-line services under a
single licence after paying an additional entry fee;
– does not take into account the national and international
long-distance services and Internet access services.
Integrated Operators
Integrated Operators
• Provide services in all categories i.e. local calling,
national calling, international calling, broadband
as well as landline.
• Example: Airtel, Reliance, BSNL etc.
The typical services of an integrated operator like
Reliance would include:
• Reliance mobile
• Reliance global call- between 4 continents
• Reliance passport- U.K , U.S.A and Canada
• Reliance PCO
• Reliance Netconnect – broadband
• Reliance Hello –landline service
• Reliance international calling
Example..

• Advantages:

– Better, cost effective services;

– Improves market share through presence in all

areas;

– High costumer retention through integrating his all

telecom related requirements;

– Enjoy internal economies of scale

Competition
Degree of Competition

• Indian mobile market much more competitive than many other

countries.
• HHI Index for few countries (for fiscal year ending mar 2009):
HHI Analysis

HHI in mergers:
• Example: Airtel + Vodafone(Combined market share 39%)

• Initial HHI: 1620 (Mod. Conc.)

• New HHI: 2356 (High Conc.)

• Change in HHI: 736

• This greatly reduces competition.

Investment and
Opportunities…
FDI

• The Indian government allows FDI of up to 74 per cent,

subject to licensing and security requirements, in the
following categories:
– Basic and cellular services
– National/international long distance
– Internet services (providing service gateway)
– Infrastructure providers (Category-II)

• The Indian government allows FDI of up to 100 per cent in

the following categories:
– Manufacturing of telecom equipment
– Internet services (not providing international gateways)
– Infrastructure providers providing dark fibre, right of way, duct
space, tower (IP Category-I)
Opportunities for Growth…

• 3G
– Major investment Opportunity;
– Expected to attract US $8–10 billion during 2008-11;
– International and foreign players can enter this segment through
joint-ventures with Indian companies with a stake of not more than
74 per cent;
– 20 million 3G-based broadband subscribers by 2014 (ASSOCHAM).

• Worldwide Interoperability for Microwave Access (WiMax)

– India is the largest single-country WiMAX opportunity in the world;
– network access in inaccessible areas at a speed of more than 4
Mbps,
– increased use of telecom services, Internet and value added
services;
– 60 million WiMax users by 2014 (ASSOCHAM).
Opportunities for Growth…

• Value added Services (VAS)

– The VAS industry was worth USD 632 million in 2007–08.
– The industry is estimated to grow by 60 percent in 2008–09 and
become an USD 1,011 million opportunity.
– Major drivers:
• Availability of contents in local language;
• M-commerce applications;
• Availability of mobile T.V.;
• Development of video based applications.

• Rural Telephony
– Huge untapped potential.
Current Scenario
3G

• BSNL and MTNL were given the 3G spectrum last year

ahead of auction;
• BSNL launched 3G services on 27th Feb, 2009 in 12 cities;

3G Auction

• Base price of 3G spectrum auction increased to INR 35

billion from the earlier decided INR 20.20 billion;
• Govt expect to raise INR 250 billion through auction of 3G
and Wi Max services;
• Govt aims to sell four 3G licenses and three broadband
wireless access licenses in 20 of the 22 zones.
Tax benefits

• DoT is considering a proposal so that the bidders of the 3G

spectrum can enjoy tax benefits;

Proposal:
• 100% tax benefit on the profits to 3G spectrum bidder
telcos for initial 5 years;
• 30% tax benefit on the profits for the subsequent 5 years;
Will India skip
3G?
4G

• US Motorola is planning to next level that is the 4G in

India;

• Motorola is all set to start trial services of technology

called Long Term Evolution(LTE) that can offer speeds up
to 70Mbps;

• Motorola and other telecom vendors are planning to meet

DoT for trial spectrum;
Number Portability

– Local number portability (LNP) for Fixed

lines,
– Full mobile number portability (FMNP) for
mobile phone lines,

refers to the ability to transfer either an existing

fixed-line or mobile telephone number assigned
by a local exchange carrier (LEC) and reassign it
to another carrier.
Facts about MNP

• United Kingdom is yet to switch to centralized solution ( as

of Jan2008).

• The time taken to port a subscriber between the service

providers should not be greater than the time taken to
activate a new subscriber.

• It takes only 3 minutes in Australia to port a subscriber

successfully.

• The first MNP implementation was made in 1990

Singapore.
MNP

• Mobile Number Portability Details :

– Delhi, Mumbai, Maharashtra and Gujarat Service comprise Zone I –
MNP to be implemented by Sep 20, 2009.
– Kolkata, Tamil Nadu, Chennai, Andhra and Karnataka comprise
Zone 2 and details will be finalized by Sep, 2009.
– Rest of the country by March 20, 2010.
– Syniverse Technologies (Zone 1) and MNP Interconnection (Zone 2)
are the two companies who have been licensed by the DoT to carry
out the MNP exercise.
• The charges are likely to be less than Rs. 300/ and
operators will take maximum 2 days to change the
provider.

• Analysis:
– Switching cost more than the avg. monthly rent.
MNP

Costs for telecom operators

• Increase in churn rate directly affects the revenues of the service
provider.
• Increases price competition.
• It may put pressure on margins, as product innovation costs and
marketing costs may increase.
• Increased investments in back-end services.
Benefits to phone subscribers
• Free mobility from one service provider to another without changing
mobile number
• Price competition it the market is competitive
• Competition among force service providers will lead to improvement
in quality of
service and product innovation

In order to retain and expand the customer base many value-added

80:20 Rule

• 80% of the total revenue comes from 20% of the total

customer base.
Pay Per
Call
Pay Per Call ( just –in)

• Tata Indicom launched it on Tuesday (1st

sept. ‘09)
• Only for Prepaid subscribers;
• Fixed charge on a per-call basis regardless
of the call duration;
• Re 1 per local call;
• Re 3 per STD call;
Thank You