India Telecom Market Overview

Telecom Circle
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India Telecom Market

Indian mobile industry is the fastest growing across the world adding 15-20 million new subscribers every month
2nd largest market after China in terms of number of subscribers
Crossed 500 million mobile subscriber mark in Dec, 2009
Fixed line subscription at 35 million which is shrinking every month. The rest of the presentation would focus on mobile industry as it is the most significant part of Telecom Industry
Background

Structure of Indian Mobile Industry
India is divided into 23 circles and separate licenses have been issued for each circle
Division of circles mostly along the state boundaries
Circles were categorized as Metros, A, B and C based on the revenue potential of the circle when 1st set of auctions were held in 1995

Brief History of Indian Mobile Industry
1994
Start of Cellular operations
2004
Calling Party Pays (CPP) Introduced
2000-01
3rd/4th Operator Licenses
2008
Fresh Licenses issued to 6 players
1999
New Telecom Policy
2003
CDMA networks launched
2005
Lifetime Validity Products Issued
2009
Tariff wars amongst operators

Mobile Subscriber Growth responded to policy and competitive changes
In million
Source: COAI, AUSPI

Fixed Line subscriber base is Shrinking
The fixed line subscriber base is stagnant at 37 million for last two years

Gartner and other analysts estimated Indian Handset market size f0r 2009 between 1115-125 million
Low cost handsets dominate with the average selling price of $60-65
Nokia has the dominant market share followed Samsung and LG
Share of CDMA in handsets is on a decline after the decision of Reliance and Tata to focus on GSM
Handset Market Size

As a result of separate licenses, there are few pan India operators. However, in the period 1999-2005, consolidation led to emergence of larger players
In 2007-08, new licenses were issued to new players taking total number of operators in each circle to as high as 13
Competitive Intensity

GSM
BhartiAirtel
Vodafone
Idea
BSNL/MTNL
Aircel
Reliance
Tata
Uninor
Stel
BPL
Reliance
Tata Indicom
MTS
Current Operators
CDMA

India is currently the most competitive market in the world which has led to tariff wars
Tariff wars (2009 onwards)
$1 = Rs 45
Rs 1 = 100 p

Revenue growth has got impacted significantly
The break-even point for new operators has increased significantly
Increase in churn and Multiple SIM
It is estimated that only 50% of new subscriber addition is actually new subscribers. Rest all are either churning from one network to another or are adding to Multiple SIM phenomena
Impact of Tariff wars

High Proportion of Prepaid Subscribers
99% of new subscriber additions are in prepaid

High volumes have led to continuous decline in costs in line with the ARPU
GSM ARPU & Cost data (Rs)

Composition of GSM operator revenues
Revenue Break-up as % of Gross Revenues
Gross Interconnect Usage Revenue
15%
Other Revenues
2%
VAS Revenues
10%
1%
Outroaming Surcharge
56%
Airtime (including roaming Airtime)
10%
Activation & Processing Fees
5%
2%
Rentals
Outroaming Airtime
Net Service Revenue = 78% of Gross Service Revenue
Net Service Revenue = Gross Service Revenue – Interconnection Usage Costs – Outroaming Airtime
Source: PwC Benchmarking report - 2008

v
Composition of GSM operator costs
Network operating expenses proportion of costs increased from 36% in 2005 to 51% in 2008
Source: PwC Benchmarking report - 2008

r
VAS Revenues are dominated by SMS and Ring-back Tones

Defense occupies chunk of spectrum and hence there is scarcity of spectrum leading to poor quality of service
Mobile Number Portability
Plan to roll-out mobile number portability by middle of 2010
The roll-out has been delayed for last two years due to operational readiness and security issues
Auction of 3G licenses
3G auctions have been put off several times in last couple of years due to non-availability of spectrum and lack of consensus on the auction base price
Regulatory Issues

Spectrum Allocation Plan
Known as 450 UHF MHz Band
Currently used for Police & Security networks
Paired With
Known as 850 MHz band
Allocated to CDMA
Entire band available for mobile
890
902.5
915
935
947.5
960
450
470
698
862
824
844
869
889
Identified by WRC-07 for IMT
Entirely held by defense
Known as 900 MHz Band
Allocated GSM
All available spectrum allocated to mobile services
Paired With

Spectrum Allocation Plan (cont’d)
Allocated to GSM
Up to 80% spectrum is with defense
Known as 2.1 GHz band
Allocated to WCDMA
Defense currently has bulk of spectrum and is expected to vacate some
Paired With
1900
1910
1980
1990
1710
1785
1805
1880
1710
1785
1805
1880
Known as US PCS band
CDMA operators have claimed this band but GSM operators oppose it due to interference
Defense has all the spectrum
Paired With
Paired With

Spectrum Allocation Plan (cont’d)
Known as 2.3 GHz TDD band
Intended allocation for BWA
2500
2690
2300
2400
Known as 2.6 GHz band
Part intended allocation for BWA and part for mobile services
Currently entire band is with defense

Visit Telecom Circle to read interesting articles on Telecom and Internet
http://www.telecomcircle.com
To download
India Subscriber Database – Circle-wise, operator-wise from year 2000 onwards
Circle-wise ARPU data for GSM networks
Case study on how Indian Carriers make 40% EBIDTA margins at 2 cents a minute
Visit http://www.telecomcircle.com/2009/06/india-telecom/
Send your comments & feedback at mohit@telecomcircle.com

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India Telecom Market Overview

by Mohit Agrawal on Mar 13, 2010

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