Indian Telecom Industry
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Indian Telecom Industry

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ITM EEC Batch 13B

ITM EEC Batch 13B
Macroeconomics Presentation

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Himanshu Ranjan
Ankur Agarwal
Prasanna Devadiga

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Indian Telecom Industry Indian Telecom Industry Presentation Transcript

  • Telecom Industry – An Overview Ankur Agarwal- KH08JUNMBA-062 (Mob-9323933903) Himanshu Ranjan-KH08JUNMBA-069 (Mob-9867690439) Prasanna Devadiga-KH08JUNMBA-087 (9833900809) Dr.Gulnar Sharma – Macro Economics ITM EMBA- BATCH NO.13 B Source: Telecom Today/TRAI/DOT/ www.ustelecom.com
  • Agenda
    • Indian Market Structure
    • India as Fastest Growing Nation and status of telecom sector
    • Innovations in Indian context
    • Innovation in Technology
    • Current Market Situation
    • Emerging Trends
    • Impact of Telecom Industry on US Economy
  • Market Structure
    • Divided into 23 circles
      • 4 metros
      • 19 circles
        • Further divided into A, B and C category based on economic parameters and revenue potential
    • Each circle has a licenses
      • Licenses are saleable
    North Eastern States Source :COAI METRO Circles Gujarat Rajasthan Maharashtra Orissa Andhra Pradesh Karnataka Tamil Nadu Kerala Madhya Pradesh Uttar Pradesh E Bihar West Bengal Punjab Himachal Pradesh Haryana Jammu & Kashmir Uttar Pradesh W CHENNAI MUMBAI DELHI KOLKATA C Circles B Circles A Circles
  • Current Industry Structure FDI in telecom recently revised to 74%. Government gets 15% of revenues from Unified Licensing Ministry of Communication & Information Technology Regulator Licensor Judiciary Telecom Regulatory Authority of India Telecom Dispute Settlement Appellate Tribunal Dept of Telecom Unified License Operators Fixed Line Operators GSM 900 & 1800 Wireless Operators National Long Distance Operators International Long Distance Operators CDMA 1800Mhz
  • Policy Environment
    • Broad guidelines of the National Telecom Policy 1999
      • Licence fees on revenue sharing basis
      • Achieved a 7% teledensity by 2005 and Targetting 15% by 2010
        • Rural teledensity targeted at 4% by 2010
      • Calling Party Pays (CPP) regime
      • Incoming calls free
      • Outgoing calls - multi-level tariffs
  • Connectivity
    • Subscriber growth in Indian telecom has largely been driven by voice services
      • SMS is the most popular data service
      • Internet is catching on in popularity driven by broadband players
    • As per the TRAI consulting papers, data is likely to be the growth driver in future
      • Rural telephony is expected to be driven by data than voice
        • Data services would provide essential services like education and healthcare
        • But primarily demand would be driven by growth in the rural economy
    • The key question, however, is are these efforts scalable?
  • Scalability….
    • … ...Requires
    • Technology/Connectivity
    • Business Model
    • Organization focused on rural markets
  • Connecting India’s 638,000 villages
    • BSNL (state owned incumbent operator) has fibre connectivity to most Country towns
          • and fibre has almost infinite bandwidth capacity
      • 85% of villages within 15-20 Km radius of these taluka towns
          • In India, typically 300 villages in 30 Km radius
    • wireless systems can connect most of these villages
      • wireless technologies are continuously evolving
    300 villages
  • Last Mile Access Technologies
    • CorDECT Wireless in Local Loop
          • provides a telephone line and 35/70 kbps Internet connection in a 30 Km radius
          • Exchange and tower in town
          • Power requirement: 1 KW
          • start-up costs very low ($ 200 per line)
    • VSAT Technology
          • Satellite connectivity
          • provides a shared 128 kbps connection
          • Start up costs are high ($3200 per connection)
  • Business Model
    • Entrepreneur-driven operator assisted telephone booths (STD PCOs) introduced in India in 1987
      • Today in urban areas:
        • 950,000 such PCOs covering every street of smallest town
        • generate 25 % of total telecom income
        • 300 million people use these PCOs
    • Lessons for Rural Connectivity
      • To serve the telecom needs of rural people with incomes < $ 1 per day, aggregate demand and allow an entrepreneur to run it.
    • Business Model
      • Aggregate demand to a village internet centre to provide voice/computer and internet services
      • Allow a local village entrepreneur to run it
      • Create an organisation to provide the connectivity and content linkages
  • Business Models
    • Are primarily service providers
    • Revenues are driven by connectivity and content services provided
    • Focussed on Direct procurement of agri-commodities from farmers
    • No revenue model.Earnings are from savings in procurement costs
    • Provide marine and agriculture services
    • E-government services are the primary drivers
  • India - Fastest Growing Nation
      • GDP grew at 9.8% during 2007, aiming double digit growth
      • Today India is a services superpower in the making. the 12 th largest economy in world.
      • Strong investment momentum
      • Market capitalization up from USD 140 Bn in FY 2001 to > USD 1.58 Trn recently
      • FDI on the rise - USD 7.6 Bn (06) and USD 19.4 Bn (07)
      • FII investment - USD 6.5 Bn in 2006-07
      • 140 + public traded companies with market cap > USD 1 Bn
    GDP GDP composition – FY 2007 By 2050, India projected GDP is US$ 70 Trillion Source: CMIE
  • Indian Telecom
    • World’s fastest Growing Telecom Market - 8 Million plus subscriber addition per month
    • Third largest in the world after China and US- soon to overtake US
    • 264.8 Mn. Subscribers, Mobile 225.5 Mn., 153.3 Mn GSM tele-density 23.21 %
    • Fastest sale of a million mobile phones – 1 Week
    • World’s cheapest mobile handset made in India – US$17.2. Reliance plans web enabled phone at $12.
    • World’s Most affordable color phone made in India – US$27.42
    • Internet Subscribers 9.27 Mn. Internet Mobile 31.30 Mn. Broadband 2.56 Mn.
  • Indian Telecom……
    • Lowest tariff but highest profitability.
    • Lowest Call Rates in the World at 2-3 US Cents, Declining ARPU, even then Rs 275 per month for GSM
    • India ranks highest in Mobile monthly Minutes of Usages per subscriber in Asia Pacific Region and second to USA in the world….500 minutes per month
    • Innovative approach of doing business at lowest operation costs.
    • Innovative value added concepts…missed calls, rural applications, lowest prepaid charge of 2.5 cents.
  • The Future….
    • Electronic hardware market by 2015 USD 320 billion including production USD 150 billion and exports USD 21 billion.
    • Telephone subscribers: 500 million by 2010
    • PC sales: 25 million; installed base 65 million by 2010
    • ITES & Software exports: USD 60 billion by 2010
    • 40 million new internet connection; at least 50% broadband by 2010
    • Nationwide TV broadcast to be digital by 2015 beginning 2010: significant opportunity for STB consumption & manufacturing
    • Over USD10 bn investment in E-Governance and National ID Card by 2010
    2015: Total expected Market USD 320 bn; Domestic production USD 155 bn
  • UNLEASHING INDIA’S INNOVATION
    • The World Bank report released in October, 2007 says “India can innovate to $5 Trillion GDP”
    • Present GDP of India is estimated at around 1 $ Trillion (Rs 40 lac crores)
    • The Indian economy is flourishing, and the demand for telecommunications services has outpaced the legacy wired telecommunication infrastructure.
  • Innovation in technology…
    • Communications and broadcasting are converging together.
    • TV can be used for internet and voice and likewise mobile can be used for anything.
    • Terrestrial TV, cable TV, CAS and now DTH, further moving to digitalization.
    • IPTV, Mobile TV going to change lives and the way we think traditionally.
    • Indian Telecom most innovative….hello tones, Ring back tones, missed call, maximum music download, mobile in hand a fashion not elsewhere in world.
  • Innovation in technology…
    • Today experts talk of open innovation centered around customer services and developed as inter operable platforms.
    • The path to innovation…. E.g.. Apple computer to Home ,IPOD Digital Music player to I Phone- multimedia hand phone with camera, internet, music player, WIFI
    • A group of Google, Intel, Dell, HP and Microsoft collectively formed the White Space Coalition and delivered to FCC two WIFI devices that operates in this spectrum without interfering with high-definition TV.
  • Fisherman Vegetable Vendor Textile Merchant Adult Education E-Medication I am in Queue Matter of Heart Checking best rates “Mobile” Vendor Rediscovering Life
  • Current Market Situation
    • Declining revenues make it hard to justify the large capital investments made in the recent past
    • Market suspicion of large corporations will hinder the raising of new capital
    • Service providers are hesitant to invest in new opportunities that cannot provide immediate benefits
    • Data services not delivering on high expectations
    • Wireless spectral investments have crippled growth opportunities domestically as well as internationally
    • Network services and applications limp along as enterprises curb spending
    • Regulation continues to bandwidth hindrance to truly competitive markets and lower cost structures
  • Emerging Trends
    • Wireless revenues continue to increase as long distance revenues decline and local calling revenues stagnate
    • Globalization
      • Long distance
      • Wireless
    • Emergence of the “Total Communications Service Provider”
    • Convergence of
      • Enterprise and telecom networks
      • Networks and applications
  • Impact of the Telecom Industry on the US Economy
  • How does the Telecom Industry benefit the US Economy
  • Impact of Telecom Services on the US Economy
    • Telecom Services will provide a major stimulus to the US economy over the next 10 years of more than $617 billions in productivity savings from data and additional $750 billion consumer surplus from voice use and $450 billion GDP contribution from a Telecom industry.
    All amounts in billions of dollars
  • Annual Productivity Benefit from Data and Voice Application are Growing to more than $80 billion
    • In 2005 data and voice services only contributed $8 billion in productivity benefits to the US economy – roughly the size of Bahrain.
    • By 2015 these benefits have grown to more than $80 billion per year, which is approximately as big as the economy of the Philippines.
    All amounts in billions of dollars
  • Components of Future Economic Benefit
    • The two major components that will drive the future economic benefit are:
      • More Efficient Management and Documentation
      • Heath Care Efficiency Enhancements
    • Followed by still sizable benefits in:
      • Field Service Automation
      • Inventory Loss Reduction
      • Field Sales
  • A consumer surplus of $157 billion – almost all from wireless voice
    • Consumer surplus measures how much US businesses and consumers are prepared to pay in excess of what they pay
    • Consumer surplus from use of wireless services was running at $157 billion at end 2004
    • Almost all of this surplus is associated with voice
    • We expect this surplus to grow:
      • To $260 bn by 2010
      • To over $300 bn by 2015
  • More details on supply side effects
  • GDP Contribution of Cellular services in Comparison with other Industries
  • 3.6 million US Jobs Depend on the Telecom Industry
  • $63 billion in Government Revenue are Generated by the Telecom Industry
    • $14.6 billion in federal, state, and local sales and transaction taxes and surcharges on wireless services;
    • $0.9 billion in sales taxes on handset purchases;
    • $9.0 billion in employer-paid social security payments;
    • $9.0 billion in employee-paid social security payments;
    • $26.5 billion in income tax from workers dependent on the wireless services industry;
    • $2.6 billion in contributions to federal and state Universal Service funds.
  • Thank you very much!