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Indian Telecom Industry

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ITM EEC Batch 13B …

ITM EEC Batch 13B
Macroeconomics Presentation

By
Himanshu Ranjan
Ankur Agarwal
Prasanna Devadiga

Published in: Education, Business, Technology

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    • 1. 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
    • 2. 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
    • 3. 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
    • 4. 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
    • 5. 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
    • 6. 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?
    • 7. Scalability….
      • … ...Requires
      • Technology/Connectivity
      • Business Model
      • Organization focused on rural markets
    • 8. 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
    • 9. 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)
    • 10. 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
    • 11. 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
    • 12. 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
    • 13. 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.
    • 14. 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.
    • 15. 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
    • 16. 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.
    • 17. 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.
    • 18. 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.
    • 19. Fisherman Vegetable Vendor Textile Merchant Adult Education E-Medication I am in Queue Matter of Heart Checking best rates “Mobile” Vendor Rediscovering Life
    • 20. 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
    • 21. 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
    • 22. Impact of the Telecom Industry on the US Economy
    • 23. How does the Telecom Industry benefit the US Economy
    • 24. 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
    • 25. 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
    • 26. 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
    • 27. 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
    • 28. More details on supply side effects
    • 29. GDP Contribution of Cellular services in Comparison with other Industries
    • 30. 3.6 million US Jobs Depend on the Telecom Industry
    • 31. $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.
    • 32. Thank you very much!

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