Global Leadership – India can do it. Telecom

Telecom – Historical Development & Industry Overview India’s connection to Global Telecom Leadership Mobile leading Telecom growth in India India Telecom poised for Global Leadership – Why India can do it Reliance’s contribution to Indian Telecom’s Global leadership Index

Telecom – Historical Development & Industry Overview

India’s connection to Global Telecom Leadership

Mobile leading Telecom growth in India

India Telecom poised for Global Leadership – Why India can do it

Reliance’s contribution to Indian Telecom’s Global leadership

Telecom – Historical Development & Industry Overview

Telecom is considered a basic infrastructure industry, critical for and integral to a country’s growth Various studies by World Bank & LBS suggest that increase in Teledensity leads to rapid growth in country’s GDP (US $1 investment in telecom leads to US$ 6 increase in GDP) Telecom Industry Overview

Telecom is considered a basic infrastructure industry, critical for and integral to a country’s growth

Various studies by World Bank & LBS suggest that increase in Teledensity leads to rapid growth in country’s GDP

(US $1 investment in telecom leads to US$ 6 increase in GDP)

Important Developments in Telecommunications 1844 First telegraph message (between D.C. and Baltimore) 1876 Bell patents the telephone; first telephone message 1885 The Indian Telegraph Act 1895 Guglielmo Marconi sends first radio-telegraph message 1946 First Mobile Telephone Call 1982 First cellular telephone system 1994 National Telecom Policy (NTP 94) Announced by GoI 1995 Mobile/Cellular Telephony begins in India 1999 New National Telecom Policy Announced 2003 Unified License Regime. India 13 th in global ranking by cellular base up from 18 th rank during the previous year. 2005 Aug: India achieves 10% teledensity ahead of schedule. Target 250 Mn subs by 2007

1844 First telegraph message (between D.C. and Baltimore)

1876 Bell patents the telephone; first telephone message

1885 The Indian Telegraph Act

1895 Guglielmo Marconi sends first radio-telegraph message

1946 First Mobile Telephone Call

1982 First cellular telephone system

1994 National Telecom Policy (NTP 94) Announced by GoI

1995 Mobile/Cellular Telephony begins in India

1999 New National Telecom Policy Announced

2003 Unified License Regime. India 13 th in global ranking by cellular base up from 18 th rank during the previous year.

2005 Aug: India achieves 10% teledensity ahead of schedule. Target 250 Mn subs by 2007

India’s connection to Global Telecom Leadership

India’s connection to Global Telecom Leadership JC Bose is credited with simultaneous invention of Telegraph, independent of Marconi of Italy World’s 1 st sea cable for telegraph messages was between India & England (Calcutta to London) Among top-5 private Indian companies with over Rs. 1 Lakh Cr. Market Cap, two are telecom operators. Both are also among top-6 Asian Telecom operators

JC Bose is credited with simultaneous invention of Telegraph, independent of Marconi of Italy

World’s 1 st sea cable for telegraph messages was between India & England (Calcutta to London)

Among top-5 private Indian companies with over Rs. 1 Lakh Cr. Market Cap, two are telecom operators. Both are also among top-6 Asian Telecom operators

Mobile leading Telecom growth in India

Mobile leading Telecom growth in India Mobile exceeded Fixed Line base in FY 04-05.

India – The mobile juggernaut rolls RCL – Soft launch on 28th Dec 02 and Commercial launch on May 1 2003 Indian Mobile growth on a J curve Reliance’s entry stimulates mobile market growth. Subscriber numbers grown over 12 times in last 4 years. Indian mobile market at an inflection point

Indian Mobile growth on a J curve

Reliance’s entry stimulates mobile market growth.

Subscriber numbers grown over 12 times in last 4 years.

India Telecom – Elements of Global Leadership & Why India can do it

Why India Can achieve Global Leadership in Telecom Size of New Subscriber Market Innovation in Service Offerings SMS Usage Leadership Well structured Regulatory environment Trained Technical & Managerial Manpower At Forefront in adopting new technology Operational efficiency to maintain profitablility Government’s effort to reduce Digital Divide

Size of New Subscriber Market

Innovation in Service Offerings

SMS Usage Leadership

Well structured Regulatory environment

Trained Technical & Managerial Manpower

At Forefront in adopting new technology

Operational efficiency to maintain profitablility

Government’s effort to reduce Digital Divide

Half a billion consuming class by 2007. A historical 5-6 year lag vs. China - Current base to grow to 250mn by 2008 Expected to add 6-7 million subs per month consistently. India – an Underserved Market & Potent Mix for explosive Telecom Growth An underserved market. Current teledensity at only 18% 20% 16% 0.3% China 2.9% 1.2% - India 20% 19% 1.6% World 2003 2002 1995

Half a billion consuming class by 2007.

A historical 5-6 year lag vs. China - Current base to grow to 250mn by 2008

Expected to add 6-7 million subs per month consistently.

An underserved market.

India – an Underserved Market & Potent Mix for explosive Telecom Growth Population : 1 billion (largest Democracy, 2nd most populous country) Urban pop : 300 million in 5000+ towns Rural pop : 700 million in 0.6 million villages GDP : $3 trillion (4th largest economy in PPP terms) Telephony : 190 million (top 5 in world)

Population : 1 billion (largest Democracy, 2nd most populous country)

Urban pop : 300 million in 5000+ towns

Rural pop : 700 million in 0.6 million villages

GDP : $3 trillion (4th largest economy in PPP terms)

Telephony : 190 million (top 5 in world)

Indian Telecom – Net Adds Leader; Poised for phenomenal growth India’s Historical 5-6 year lag to China China, after peaking at 6 Mn, has come down to 5 Mn net adds pm India has already overtaken China and reached nearly 7 Mn net adds pm India destined to close the gap with China subs base

India’s Historical 5-6 year lag to China

China, after peaking at 6 Mn, has come down to 5 Mn net adds pm

India has already overtaken China and reached nearly 7 Mn net adds pm

India destined to close the gap with China subs base

Emerging Customer Segments Mobile as Utility Tool leading to Emergence of newer customer segments, contributing to phenomenal growth: Students Housewives Small Business Owners Skilled Labour (ABCD category) Quick connection for New Homes / Offices / Shops

Mobile as Utility Tool leading to Emergence of newer customer segments, contributing to phenomenal growth:

Students

Housewives

Small Business Owners

Skilled Labour (ABCD category)

Quick connection for New Homes / Offices / Shops

Drivers of Growth Drop in the handset prices … lowering the entry barrier… Lowering Tariffs… Increasing affordability Low Entry Barrier Government Policies Unified licence provides unprecedented flexibility to operators in optimising costs and services by leveraging technology and economies of scale Introduction of calling party pays (CPP) regime Changing demographics 44% population < 19 years; 75% literate Working population to grow from 485 mn to 615 mn by 2010 21 mn professionals and 90 mn graduates/ post graduates by 2010 500 mn consuming class by 2007

Drop in the handset prices … lowering the entry barrier… Lowering Tariffs… Increasing affordability

Unified licence provides unprecedented flexibility to operators in optimising costs and services by leveraging technology and economies of scale

Introduction of calling party pays (CPP) regime

44% population < 19 years; 75% literate

Working population to grow from 485 mn to 615 mn by 2010

21 mn professionals and 90 mn graduates/ post graduates by 2010

500 mn consuming class by 2007

Innovation in Service Offerings 1 st Prepaid in GSM & CDMA was launched in India along with simultaneous launch in one more country Innovative tariffs & service bundling – unparalleled in world Innovative Value Added Services & Useful Applications LOW PER CAPITA INCOME & LIMITED CREDIT UNIVERSE LED TO SERVICE INNOVATIONS

1 st Prepaid in GSM & CDMA was launched in India along with simultaneous launch in one more country

Innovative tariffs & service bundling – unparalleled in world

Innovative Value Added Services & Useful Applications

India is the leading SMS user, followed probably by Philippines In North America, SMS is becoming popular only recently. Many sms-based VAS offerings Least intrusive, tele-voting, information, contests, etc. SMS Usage Leadership TEXTING IS FIRST NON-VOICE APPLICATION PREPARING THE USERS FOR NEWER PPLICATIONS

India is the leading SMS user, followed probably by Philippines

In North America, SMS is becoming popular only recently.

Many sms-based VAS offerings

Least intrusive, tele-voting, information, contests, etc.

India has one of the best structured Regulatory Environment – DoT, TRAI, TDSAT India has moved from over-regulated to light-touch environment Smooth migration from 2 operator to 4 operator to 6 operator scenario is Exemplary. Well structured Regulatory environment

India has one of the best structured Regulatory Environment – DoT, TRAI, TDSAT

India has moved from over-regulated to light-touch environment

Smooth migration from 2 operator to 4 operator to 6 operator scenario is Exemplary.

India quickly adopted CDMA – 1X directly in 2003, while many countries moved up gradually from lower versions . Earlier, India commenced cellular services with GSM Digital Service whereas other countries began with Analog Technologies At Forefront in adopting new technology LATEST TECHNOLOGY ADOPTION HELPED AND CREATED A LARGE TECHNICAL MANPOWER BASE – ENVY OF WORLD

India quickly adopted CDMA – 1X directly in 2003, while many countries moved up gradually from lower versions .

Earlier, India commenced cellular services with GSM Digital Service whereas other countries began with Analog Technologies

Substantial talent pool of Technical & Managerial manpower. Sales / Marketing Professionals needed to be innovative for economy – conscious segments. Above two, created a cohesive & integrated Indian Telecom Management Philosophy. Notwithstanding equity-structure, Indian Telcos run by Indians By contrast, Indians are running 2 top global Telecom companies – Vodafone (UK); Orange (France) Technical & Managerial Knowhow – Uniquely Indian THE BOTTOM OF PYRAMID – UNIQUE STRENGTH

Substantial talent pool of Technical & Managerial manpower.

Sales / Marketing Professionals needed to be innovative for economy – conscious segments.

Above two, created a cohesive & integrated Indian Telecom Management Philosophy.

Notwithstanding equity-structure, Indian Telcos run by Indians

By contrast, Indians are running 2 top global Telecom companies – Vodafone (UK); Orange (France)

Inspite of running at lowest tarrifs per minute, Indian telecom cos continue to run profitable operations with increasing EBITDA margins Using scale benefits to achieve cost & operational efficiency for higher profitability Indian cost-structures & ingenuity has led to best-in-world efficiencies Operational efficiency to maintain profitablility INDIAN BUSINESS MODEL IS ADAPTABLE IN MOST COUNTRIES

Inspite of running at lowest tarrifs per minute, Indian telecom cos continue to run profitable operations with increasing EBITDA margins

Using scale benefits to achieve cost & operational efficiency for higher profitability

Indian cost-structures & ingenuity has led to best-in-world efficiencies

Govt. of India &Regulatory bodies are making efforts that Telephony does not remain an urban phenomenon USO Scheme for offering Rural telephony, has helped to increase roll-out of rural telephony services by operators Reliancce has simultaneously focussed on both Voice & Data services in rural/ semi-urban areas Usage of modern communication by fisher-folk, farmers & small traders is catching up Rural Communications NATION IS COMMITTED TO ELIMINATE DIGITAL DIVIDE

Govt. of India &Regulatory bodies are making efforts that Telephony does not remain an urban phenomenon

USO Scheme for offering Rural telephony, has helped to increase roll-out of rural telephony services by operators

Reliancce has simultaneously focussed on both Voice & Data services in rural/ semi-urban areas

Usage of modern communication by fisher-folk, farmers & small traders is catching up

Individual Companies Can Catalyse Sectoral Growth – Reliance Story

Mobile Market Composition: (Pre – Reliance Entry) Limited Coverage 29 states 4 licensees per state. Some operational since 10 years No pan India integrated & convergent player Mobile services limited to top 500 towns & high-income individuals Limited Features & High Cost 2G networks. Only voice & SMS. Limited data & No video High entry cost & call charges Receiving party pays for incoming calls Sub-standard Customer Service offered to subscribers Low Mobile Penetration: at 1.2% compared to China at 16% in 2002 Essentially under-served market

Limited Coverage

29 states

4 licensees per state. Some operational since 10 years

No pan India integrated & convergent player

Mobile services limited to top 500 towns & high-income individuals

Limited Features & High Cost

2G networks. Only voice & SMS. Limited data & No video

High entry cost & call charges

Receiving party pays for incoming calls

Sub-standard Customer Service offered to subscribers

Low Mobile Penetration: at 1.2% compared to China at 16% in 2002

Mobile Market - Changing Scenario (Post – Reliance Entry) RCL’s launch did the following to transform the Indian Mobile Market: Increased Network Coverage to even smaller towns & villages Reduce Entry Costs: (The legendary Rs. 501 Monsoon Hungama Scheme) Reduce Tariffs & affordability of mobile/telecom service (STD Call @ Post Card rate - 40p/min!) Enhance Customer Service to subscribers

RCL’s launch did the following to transform the Indian Mobile Market:

Increased Network Coverage to even smaller towns & villages

Reduce Entry Costs: (The legendary Rs. 501 Monsoon Hungama Scheme)

Reduce Tariffs & affordability of mobile/telecom service (STD Call @ Post Card rate - 40p/min!)

Enhance Customer Service to subscribers

Taking mobility to the masses * Balance over 36 months Reliance led a dramatic drop in tariffs making mobile phones an affordable mass product. Free Free Rs 750/ month Rs 16.8/ min Min cost of Data services like news, games on mobile etc Rs 1500 Rs 501* / Rs 5000 > Rs 5000 > Rs 20,000 Entry cost for going mobile 50p/msg Rs 3/ min Rs 0.40/min Rs18/min 2003 Rs 6/min Rs. 24 / min Rs. 60 / min ILD Rs. 4/ msg Rs. 30 / min 1995 1 p/ msg Rs. 2 / msg SMS cost Re 1/min Rs. 0.40/ min Rs. 9.60 / min STD rates ( Mumbai – Delhi Call Cost) 2006 2002 Parameter

INDIA HAS DONE IT. IN TELECOM. CAN DO EVERYWHERE!