1. India StudyTEKES NETS and FENIX Programs Vipul Chauhan Country Manager Finpro India 10. July 2004
2. Table of Contents• Chapter 1: Market Overview• Chapter 2: Service Providers• Chapter 3: Internet Service Providers• Chapter 4: Equipment Manufacturers• Chapter 5: Content Business• Chapter 6: Telecom Software Vendors• Chapter 7: Future Challenges• Chapter 8: Strategies• Chapter 9: Finnish Companies in India• Chapter 10: Conclusions India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 2
3. Executive Summary• Lowered call tariffs are a major industry growth driver• Wireless Subscriber growth will continue around 10m users/year• India is primarily a low priced handset market (100-150 Euro)• Prepaid will continue to dominate in both GSM and CDMA segments• Operators are experiencing low ARPU because of lowered call tariffs, thus they are focusing upon content aspect• Games and content should to be developed keeping local trends and tastes in mind• GPRS and MMS are here, but fail to gain subscribers as compatible handsets are expensive• SMS based applications, services are most sucessful so far• Internet penetration is low but the industry is growing at a rapid pace• Broadband & Wi-Fi are here, but too expensive for general public• Dial-in is the most preferred mode for internet access• To sell services to Indian companies, you need a local contact India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 3
4. Chapter OneMARKET OVERVIEW VIPUL CHAUHAN
5. Evolution of Communications in India EDGE CDMA 2000 1x Wi-Fi GPRS Broadband GSM Internet Cable TV FirstPhone1882 1990 1995 2001-02 2003 2004 - onwards India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 5
6. Evolution of Wireless communications in India No 3G Licenses have been issued so far W-CDMA CDMA 3G 2000 1x EVDO TD- SCDMA CDMA GPRS 2.5G 2000 1x MMS 2G GSM SMS WAP 1996 1999-00 2001 2002 -03 2003 2004 - onwards India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 6The first GSM call was made in 1996 on Bharti Cellular Netwrok in New Delhi.Dual Band GSM 900 & 1800.SMS service started in the year 2000Present CDMA standard is CDMA 2000 1X
7. Circle and License Areas Policy • Entire Nation is divided into 4 circles – Metros, A, B & C Metro circle – Delhi, Mumbai, Kolkata & Chennai A Circle: States of Maharshtra, Gujarat, Andhra, Karnataka & Tamilnadu B Circle: States of Kerala, Punjab, Haryana, Uttar Pradesh, Rajasthan & Madhya Pradesh Circle Definition: Areas classified on the basis of C Circle: States of Faded area in the regions shows subscriber and revenue Himachal, Bihar, Orissa, potential, where Metro cellular network coverage Assam, Kashmir and circle has the highest North East States potential and C circle has India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 7 the lowestEach circle requires a different license. As in case of Metro cities, each city license issold separately.Operators can sell their license to any operator in case they are willing to exit fromthe license area.
8. Call Tariffs in IndiaCall Specifications Tariff Basis TariffsIncoming Calls (fixed to • All incoming calls on • All incoming calls are free in Home Network mobiles are free since (Postpaid & Prepaid)mobile, mobile to mobile, mobile April 1 2002to fixed) • Incoming is not free on roaming, 0,02 Euro – 0,07 • Incoming calls on fixed Euro/minute line are free • Distance specific call • M to M outgoing in home network: 0,04 - 0,04Outgoing Calls tariffs i.e. home network, Euro/minute(all outgoing calls on all 51 - 200 kms, 200- 500 • M to M outgoing Intercity call < 200 km: 0,04 Euro/minutenetworks (roaming, kms, more than 500 kms • M to M outgoing intercity call > 500 km: 0,07 Euro/minuteinterconnected) are priced and Internationalbetween 0,02 – 0,8 • M to Fixed outgoing home network: 0,05 EuroEuro/minute) • Calling Party Pays • M to Fixed outgoing < 200 km: 0,06 Euro – 0,08 Euro • M to Fixed outgoing > 500 km: 0,12 Euro • M to International: 0,80 Euro – 0,35 Euro • SMS Receiving: Free • SMS Sending: 0,03 Euro (domestic) 0,09 Euro (international) India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 8India presently follows a CPP model, whereby calling party pays.Incoming calls were made free since April 1, 2002 and that has substantially boosted the subscriber growth ratein India. However, making incoming calls free also reduced operator ARPU.For outgoing calls there are multi-level tariffs; (applicable to all Mobile and fixed)•Mobile to mobile & Vice Versa•Mobile to fixed & Vice Versa•Mobile to CDMA & Vice Versa•Mobile to International & Vice VersaRoaming is another important aspect when talking about voice revenuesAll Indian operators have bilateral agreements among themselves for providing national roaming facility (GSM+ CDMA operators).For International roaming, Indian operators have tied up with other operators elsewhere in the world toprovide International roaming services.Tariffs in India are set as per the distance between the cities. There are four levels for this tariff structuringbased on distance, i.e.:•Distance upto 51 KM is classified as home network•Distance from 51-200 KM is the first level for determining inter-city calls, followed by•200-500 KM•500 and beyond KMInternational calls are tariffed as per the regions like US and Canada, Europe and Pacific rim etc.
9. Fixed Line Segment Overview• A monopoly sector controlled by Government until 1996• Today 6 service providers, 2 State Owned, rest private• Subscriber base 43,18 million (May 2004)• Sector growth slowed since mobile tariffs fell• Only 1,83 million subscribers are added over last one year (May 2003-May 2004)• Increased competition from CDMA Services India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 9
10. Wireless Segment Overview• 29 million GSM, 9 million CDMA subscribers (June 2004)• Both GSM 900 & 1800 present• CDMA operators use 1800 Mhz Band• Number portability is missing• Government is yet to make decision on 3G spectrum• Indias telecom sector is carved into 23 circles or zones, classified as "metro" and "A", "B" and "C" circles, based on subscriber potential• Unified licensing introduced in 2004• As a part of Unified license policy, 15% of operator revenues go to the government• To operate, each circle requires a different license• Lowest call tariffs in the world -- as low as one Euro cent a minute on average India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 10
11. Mobile Value Chain Analysis Billing MMS, GPRS Application Service Provider (ASP) Hosted Application Instant Messenger Infrastructure Network Equipment Equipment Network Subscription Handset Vendors Vendors Operators resellers Resellers End User Revenue Sharing Model Content Content Provider Content Ringtones, Logos, Developers Aggregators/ Email, Wallpaper Portals Downloads India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 11In GSM segment opeartors do not offer handsets along with their subscription, likein Europe or America. Consumers have to go and buy the handsets of their choiceat numerous handset Kiosks in each city. These Kiosks are multi purpose kiosksand one can buy not only handset but also a GSM connection, phone accessoriesetc.MMS and GPRS are offered via operators, while majority of other content likeLogos, Ringtines, Picture Messages are offered via portals.When speaking of revenues, operators are in dominant position. Major share ofrevenues goes to operators. For example 80% of revenue from a Ringtonedownload goes to operator, rest to the portal.
12. Road to 3G in India Digital generations 2G 2.5G 3G GPRS, CDMA EDGE W-CDMA? No decision on Nokia, Ericsson, 3G Spectrum yet ! Motorola have delivered GPRS networks India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 12GPRS is widely offered by major operators. BPL was the first operator to LaunchGPRS in India, followed by Airtel, Hutch and Idea.Recently the two GSM operators- Hutch and Idea, unveiled their EDGE NetworksAccording to a submission made to the Telecom Regulatory body “TRAI” by T. V.Ramchandran, director-general of the Cellular Operators Association of India(COAI), “The allocation of the PCS 1900 band would not only result in a majorinterference to the services offered by operators using GSM technology but alsoblock the progress of 30 million subscribers to 3G.”There are two important components in a mobile service: uplinking (a call or datasent from your mobile phone to a base station) and downlinking (receiving a call ordata from base station to mobile phone).While uplinking, the airwaves in the PCS 1900 band clash with those in 1800 band(allotted to operators using GSM technology) that downlink the call and data.While downlinking, the PCS 1900 band interferes with the IMT 2000, which is theuplinking mode for 1920-1980 MHz paired with 2110 to 2170 Mhz (the core bandidentified by the International Telecommunications Union for 3G services).
13. ISP Segment Overview • Internet Services launched in India in August 1995 • 189 operational ISPs as of Dec. 2003 • Total Licenses issued 540 • Over 8.500 leased line customers, growth rate 9,6% • 8.850 Cyber cafes as of Dec. 2003 • Total Broadband customers: < 150.000 (DSL, ADSL) • 118 ISPs given permission to offer VoIP • Minute usage in Q4 2003 for VoIP was 20,1 million minutes, a growth of 41,5% over last quarter • ARPU: 5 € approx. • PC Penetration in India: 11 per 1.000 people • Internet users: 18 million • Internet penetration: 1,7 % of the population • PC sales in 2003-04: > 3m units, 30% growth India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 13•ISP License is one of the most liberal License, wherein no License Fee has beenlevied on the ISPs till 31st October 2003.Thereafter, a token license fee of Rs. Oneper annum is payable w.e.f. 1st November 2003.•ISPs have been permitted to set up International Gateways by having businessarrangement with Foreign Satellites Providers and Collaborators.•ISPs have been permitted to provide last mile access using Radio and Fiber Optics.•ISPs have been permitted to provide ISP Services through Cable T VInfrastructure / Operators.•The Government has initiated an ambitious plan to developed National InternetBackbone (NIB) in the country.•100% FDI allowed through automatic route to the ISP (without gateways), 74% incase of ISPs setting up International Gateways.•ISPs permitted to set up Submarine Cable Landing Stations either singly or jointlyin collaboration with International Undersea Bandwidth Carriers.•National Long Distance Services opened to private sector on non-exclusive basis.•International Long Distance Services opened up to private sector on non-exclusivebasis w.e.f. April 1, 2002•Internet Telephony Services opened up to ISPs w.e.f. April 1, 2002.•De-licensing of W-LAN in 2.4 Ghz band using IEEE 802.11b technology•Reduction of Performance Bank Guarantee by 50% for Category A & B ISPs and
14. Telecom Software Vendors • Outsourcing gave boost to the Telecom Software Industry • Industry revenue: 1,2 billion Euro (2003-04) a growth of 18% • A middle level expert costs < 600 US$ a year • Big pool of skilled workforce, 50 out of world’s 74 SEI CMM Level 5 companies are in India • Multi level services • Device architecture • Symbian, Series 60 • Content Applications • Web, GSM, GPRS, CDMA, 3G applications India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 14For the ICT industry and its customers, the primary driver for offshore outsourcingis the reduction of costs. Some estimate that costs can be reduced by 40 percentand sometimes by as much as 70 percent for offshore destinations such as India,China and the Philippines. These cost savings are directly attributed to reducedlabour and other business costs.A snapshot of average base salaries for programmers around the world shows that aUS programmer cost on average approximately US$ 63,350 in 2002, substantiallymore than many of their overseas counterparts. A professional of similar skillscosts US$ 40,000 in Australia, US$ 5880 in India, US$ 6564 in the Philippines, US$7200 in Malaysia and US$ 8952 in China.In some cases, like for China, IT and ITES outsourcing may assist global oroverseas firms to establish a presence in the region of the outsourcer (e.g. China orAsia), hence assisting those companies to expand their businesses globally andbenefiting their home economies.In the particular case of India, its success first in software development and now inIT Enabled Services (ITES) is driven by a number of additional advantages. Afocus on demonstrating quality services has proven to be a significant factor ingaining market share. According to NASSCOM, the Indian software industrycontinues to receive international recognition for its quality in softwaredevelopment. Out of the top 300 companies, more than 216 have already acquiredISO 9000, SEI or other certification. As far as SEI CMM (Software EngineeringInstitute Capability Maturity Model) Level 5 is concerned, the Indian software
15. Content Business Overview• Indian content market is mainly SMS driven• Almost 1 billion SMS per month• Most of the downloads and service requests are oriented through SMS• M-banking also available – SMS based• GPRS penetration 8-10%• Overall content market estimated at 5 million Euro• SMS and MMS account for 10% of operator ARPU• Downloadable content available through portals, operator portals• M-ticketing is missing India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 15
16. Industry Growth Drivers 1(2) • Fixed Line Segment • Capacity expansion of fixed line exchanges helped consumers avail quick connections • Quick connection availability boosted no. of fixed line connections during 1985 - 1995 • Wireless Segment • Vast geographic expanse of India acted as a catalyst to boost mobility • Low call costs since 2002 fueled the wireless segment • Narrowing gap of call costs between fixed and wireless convinced customers to subscribe to wireless connections • Nationwide roaming facilities on GSM • SMS facility • Internet + Subscription bundling • Reduced cost of handsets (affordability factor) • Customs duties have been reduced from 10% to 5% • In remote areas where providing fixed line connections was difficult, wireless did the magic • CDMA fixed wireless gave customers 3 in one advantage – Mobility, internet and messaging Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 16 IndiaUntil 1996, India was a pure fixed line market.
17. Industry Growth Drivers 2 of 2 • ISPs • Advanced communication options like instant messenger • Voice Communication through VoIP and Instant Messenger • Lowered tariffs • Broadband availability • Always on connection availability • CDMA Systems helped internet spread further India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 17•Over 78% of the Internet Users are in the age group 18 – 39 years and 75% of theInternet Users are Males.•The Capital Cities (New Delhi and Other State Capital) accounts for 79% ofInternet Connections of the Country.•More than 86% of top Corporate Houses have endorsed that Internet and E-Commerce is an integral part of their corporate strategic framework.•Over 76 % of the Internet Users use E-mail Services•Over 61% of the Users Access Internet from school, colleges, place of work andCyber Cafes while 27% access Internet from homes.•Among the career conscious and education driven middle class, Internet is seen ascritical to success in professional life.•There are approx 59 million telephone connections (including Mobile) and 8.5million PC base in India.•There are approx. 47 million Cable T V Connections out of 92 million TV Sets inthe Country
18. Growth Inhibitors• Cultural misunderstandings• Project management difficulties• Infrastructure failures• Language barriers• Political factors India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 18
19. Market Regulations - Telecom • The industry is governed under National Telecom Policy - 1999 • full competition through unrestricted private entry in almost all service sectors • end to monopoly in the national and international long distance segment • Provide a telephone on demand by 2002. • Achieve a teledensity of 7 by the year 2005 and 15 by the year 2010. • Increase the rural teledensity from 0.4% to 4% by the year 2010 with greater reliability. • Cover all villages by 2002. • Provide Internet access to all district headquarters by the year 2000. • Provide high-speed data and multimedia capability using the latest technologies to all town with a population greater than 200,000 by the year 2002. • Encourage rural telecommunications through affordable tariffs and imposing rural coverage obligations an all fixed-service providers. • Unified Licensing introduced in 2004 • No difference between fixed line and mobile segments • Operators can provide ”ANY” service(s) to their customers by using “ANY” technology India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 19The NTP 99 has been a positive milestone for the industry.After NTP 99, industry attracted foreign investments in form of equity from globalplayers like Vodafone, BT, AT&T, Warburg, Hutchison etc.In early 2004, there was a major rift among CDMA and GSM operators because oflicensing conditions. GSM operators blamed that CDMA license holders are notallowed to offer National roaming as their license permits them to offer servicewithin a Short Distnace charging area known as SDCA. The matters were taken toTelecom Dispute Settlement Tribunal TDSAT. The government howeverunderstood it basic mistake in license drafting and as a result offered UnifiedLicensing. Now all operators can offer all services using any technology platform.They will, however be supposed to pay unified license fee deficits.
20. Market Regulations - ISPs • Industry governed under Indian Telegraph Act, 1885, Indian Wireless Telegraphy Act 1933 and TRAI Act 1997 • A Company registered in India under the Companies Act, 1956 will be eligible to apply for being an ISP • Licenses area divided into Zones known as “Circles” • Three categories of licenses • A: All over India • B: 20 Territorial Telecom Circles • C: Remaining Areas • The validity of license is initially for a period of fifteen years • Interface Requirements (i) Subscriber Dial up Access 2 wire access over PSTN for modem interface. 2 wire dial up access on ISDN Basic and Primary rate interfaces. (ii) Leased Line Interface 64K, N x 64K or 2.048 Mb/s, N x 2.048 Mb/s Leased lines. Frame Relay. X.25 ATM G. 703 • ISPs will be free to fix their own tariff India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 20Since 1995, a number of countries have permitted VOIP as a technology option tothe classical PSTN as well as Internet Telephony so as to provide a cheaperalternative to classical PSTN calls. In India, the ISPs were allowed to offer InternetTelephony Services with effect from April 1, 2002. With the choice availability ofToll Quality (PSTN) and Non-Toll Quality options, Internet Telephony has thrownopen Long Distance Telephony to those sections of Society, which could not affordthe same earlier. Further, Internet Telephony is proving to be a key driver for localentrepreneurs to set up Community Information Centers / Cyber-kiosks, etc evenin small towns and villages. In fact it has made distance learning, Tele-medicine ande-governance etc a reality in Indian context.More than 90 ISPs have been granted license for offering Internet TelephonyServices. There has been a substantial growth in the Cyber Café / offering InternetTelephony Services. It is expected that Internet Telephony will provide fillip to thedemand for network facilities including bandwidth, last mile access and otherconnectivity resources and bridging the digital divide within the Country. However,an important issue needing immediate attention is tackling the Internet TelephonyGrey Market which is estimated to be about 90 per cent of the total InternetTelephony market in India and requires concerted efforts by Government andindustry. It is imperative that all leading ISPs including VSNL, BSNL and MTNLjoin hand to tackle the menace.
21. IPR & DRM Issues • Indian Copyright Act 1957 governs the IPR and Copyright issues • India recognizes digital signatures and e-documents at par with paper documents • Anti Piracy laws are strict but…. wide scale illegal copying of softwares, music cds, mp3s, DVDs and Video CDs • Software Piracy is among the highest in the world • Metro cities like Delhi and Mumbai have Piracy hubs, where almost each and every software is available • Software piracy exists beacuse consumers usually buy Assembled PCs having illegal software copies • Filesharing (software and music) through Kazaa and Morpheus are prevalent • Spam is an offence and it is madatory for operators and ISPs to deploy spam filters • Attempt to crack digital encoding of copyright software, music, movie etc. is an offence ------ BUT ONLY IF YOU ARE CAUGHT !!!!! India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 21Protecting the IPR is a complex issue in India altogether.Software and music piracyis immense in the country. India is a huge piracy hub in Asian continent. Majorityof piracy is about softwares and Operating System.Though government has strictlaws, it is difficult to completely wipe out piracy.In India the intellectual property protection with regard to a computer software isgoverned by the Indian Copyright Act, 1957 (hereinafter called “ The Act” ). Aperson claiming to be a creator of a software programme, can claim a copyrightover it. Unlike in the United Kingdom, which has a separate law governing adatabase, be it computer generated or otherwise, called the “database right”, inIndia there is no special right apart from the copyright that can be claimed by sucha creator. However under the Act, registration of a copyright is not mandatory, butadvisable. The Act, applies only to works first published in India, irrespective of thenationality of the author. However the Government of India has the power toextend the benefits of the Act to works first published in any foreign country.Any work first published in any country which is a member of the BerneConvention or the Universal Copyright Convention will be accorded the sametreatment as if it was first published in India. And for this purpose a bodyincorporated under any law of a country mentioned in the schedule so brought outby the Government of India shall be treated in the same manner as if it wasincorporated under the Indian law.As per the Act, computer software falls under the category of “Literary work”,which has been defined to include computer programmes, tables and compilations
22. Market SWOT Analysis Strenghts Weaknesses • Lowest call tariffs in the world • Huge wireless subscriber potential • Market strongly regulated by Govrenment body – Governing • Fastest growing mobile market in the world both ISP and Telecom sectors • Consumers are ready to pay for cutting edge services • Too many authorities ruling the sector • Government proposes to hike FDI limit in Telecom to 74% • Huge potential for low end and cheap handsets • Unified license regime • Wide scale Consumer churn in Telecom and ISP • Wide spread VAS deployment is restricted due to language and literacy problems • Primarily a voice based marketOpportunities Threats• To offer value added services on GSM, CDMA and IP • Low cost service providers – no possibility of breaking even in short term• Language independent services • Weak IPR protection• Mobile Marketing concepts • Software and digital content Piracy• Content influenced bu local culture and Global sucess stories • Political instability• M-Commerce • Regulatory interference• Unified messaging platforms• Foreign investment in form of equity or technology India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 22
25. Telecommunication Segments Services Entry Policy Players in operation Basic fixed line • No cap on number of • BSNL in all circles except Delhi & Mumbai held licences. Separate by MTNL. 5 Private Operators with 31 licences. licence for each circle. Mobile • Present cap of 4 • MTNL in Mumbai and Delhi. BSNL in one metro (GSM+CDMA) operators per circle and and 16 circles. 9 Private companies operating in metro. 3 private and 23 circles and 4 metros, with 50 licences. BSNL/MTNL NLD (National • No cap on number of • Earlier there was a monopoly of BSNL. Now Long licences. Only all-India Reliance, Bharti and VSNL have been granted Distance) licences will be granted. licences. ILD (International • No cap on number of • A monopoly of VSNL until April 2002. Tatas Long licences. acquired controlling stake in VSNL. Recently Distance) entry of Bharti, Reliance and Data Access. India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 25The Indian Telecommunications industry is divided into four Service segments:•Basic Services (Conventional Fixed line + CDMA Fixed line)•Mobile (GSM + CDMA)•National Long Distance (NLD) or Subscriber Trunk Dialing (STD)•International Long Distance (ILD)•ILD – Voice over internet (VoIP)The entire country is divided into Telecom License Zones known as “Circles”.Licenses are awarded to the operators as per the circles, not as per the states.Each circle requires a different license.
26. Fixed Line Operators
27. Fixed Line Operators Subscriber Base 34,862,000 BSNL is a public sector giant with a huge market share Public sector companies hold majority market share in Fixed line telephony 4,475,000 609,047 100,438 160 71,932 371,148 BSNL MTNL Bharti HFCL Reliance Shyam Tata State Owned Private Operators India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 27BSNL (Bharat Sanchar Nigam Limited) is the public sector giant having majoritymarket share in fixed line telephony.BSNL is followed by Mahanagar Telephone Nigam Limited (MTNL) which is againGovernment owned. MTNL has licenses to operate fixed line services in the citiesof New Delhi and Mumbai only.The private operator Bharti operates under the brand name Touchtel. Bharti hasbeen very lucky in penetrating the so called nest of public sector giants.
28. Fixed Line Market Share Shyam Reliance Tata HFCL Bharti MTNL BSNL BSNL is a market leader with a massive 86% market share India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 28BSNL’s Telephone Network includes:•Local Switching (as on 30.04.2004) Total Equipped Capacity 46.3 million Lines Direct Exchange Lines 35,4 million Lines•Village Public Telephones as on 30.04.200: 4,50 million•STD StationsNumber of STD Stationsas on 30.04.200431,733•Transmission Systems as on 30.04.2004 Coaxial 6024 kms. Microwave 63249 kms. UHF 45,130 kms. Optical Fiber 0,45 million kms.•Satellite Based Services (as on 30.04.2004) Total Number of MCPC –VSATs: 301 Number of IDR ROUTES: 71STD: Subscriber Trunk Dialing (abbreviation for Intercity calls)
29. Operators Operator Subscribers Range of Services Service Areas BSNL 34,86 million Fixed line network, GSM, CDMA All over India (WLL), Internet, MPLS VPN, Unified Messaging, IN, ISDN,Leased line, long sitance calling, international gateway MTNL 4.47 million Fixed line network in cities of DELHI Only in New Delhi and and BOMBAY only. GSM, CDMA Bombay (WLL), Internet, IN , Unified Messaging, ISDN,Leased line, long distance calling BHARTI 609,047 Fixed line network, GSM, DSL, IN, Delhi, M.P, VPN, International gateway HFCL Infotel 100,438 Fixed line, Broadband DSL, CDMA Only in State of Punjab India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 29As already described the entire country is divided into telecom circles and operatorsare required to have licenses as per the respective circles.With the entry of more and more private players in the fixed line telephony, thecompetition is becoming fierce, as a result operators are now focusing uponoffering various services to the consumers along with their fixed line connections.BSNL, which is a market leader in fixed line segment, also offers I-NET, India’sx.25 based packet Switched Public Data Network is operational in104 cities of thecountry. It offers x.25 x.28 leased, x.28 Dial up (PSTN) Connection) and framerelay services. It had 4661 I-Net connections all over India as of Dec. 2003.
30. Operators Operator Subscribers Range of Services Service Areas Reliance 160 Fixed line network, CDMA (WLL), Gujarat, Haryana, Punjab, Internet, VPN, Unified Messaging, Delhi, WB, UP(E), IN, ISDN,Leased line, long sitance calling, international gateway, nationwide fiber optic network TATA 371,148 Fixed line, CDMA, VPN, Centrex, AP, Delhi, Gujarat, Broadband, ADSL, DSL, Karnataka, Tamil Nadu, Conference services MaharastraSHYAM TELELINK 71.932 Fixed line network, International Only in Rajasthan gateway, CDMA India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 30
31. Fixed Vs. Mobile - Statistics 45 • Mobility is fast catching up with fixed line Millions 40 35 30 • Mobile subscribers are expected to cross fixed 25 line subscribers by mid 2005 20 15 10 5 0 Fixed GSM CDMA 45 Millions 40 35 In Telecom circles like Delhi, Punjab, 30 Haryana and Mumbai Mobile users have 25 crossed over fixed line users already 20 15 10 Fixed Mobile India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 31The difference between the numbers of fixed line and mobile subscribers is fastnarrowing.Low tariff structures offered by mobile operators are attracting consumers to switchover to mobile phone subscriptions. This trend has a two way side effect on fixedline telephony, first fixed line operators are finding it hard to reduce consumerchurn, second their ARPU has taken a big leap downwards.Reduced mobile tariffs could be explained as the most prominent reason forincreased mobile subscriber base.Facilities like SMS, MMS further attract consumers to shift from fixed line servicestowards mobile.
32. GSM Operators
33. GSM Segment Overview• GSM introduced in 1995• One of the fastest growing mobile markets in the World for GSM• Subscriber growth rate for Jan. 2003-2004 was 200% approx.• 35 networks on 900 Mhz, 11 on 1800 Mhz Technology• Presently, approximately 1 million GSM subscribers are added every month• Unified license system introduced by government in 2004• 3G spectrum decision is awaited India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 33
34. GSM Growth Drivers 1 (2)• 1st wireless communication standard in India• Nationwide roaming available in Prepaid and Postpaid• European and USA roaming widely available• Wide handset options - high end and low end• Camera Phones• Low call tariffs fuelled the growth since 2002• Large unsatisfied demand • Affordability: Middle class embracing cheap low-cost services• Low entry barriers• Large urban take-up due to aggressive marketing by Telcos India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 34
35. GSM Growth Drivers 2 (2) Call costs have fallen 0.31 drastically over 90% Fallen call costs have been a major growth driver for wireless industry (especially GSM) 0.16 Call costs in € from 1996 – Present day Operators are worried over falling ARPU, therefore a minor consolidation is seen in costs 0.08 this year 0.06 0.05 0.04 During festivals, special offers are introduced by operators for international dialing 1996-97 1997-98 2000-01 2002-02 2003-04 2004-onw ard India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 35Lowered call costs are the major driving force behind the industry growth. It is nowpossible for an individual to afford making calls.On one side where call costs have boosted the industry growth, as a side effectARPU has shown a negative growth.From last year onwards, operators are now looking towards streamlining theirARPU, therefore one can see minor escalation in call costs towards the end of lastyear.
36. Wireless Subscribers Growth – GSM India presently is one of the 28,153,674 fastest growing mobile markets in the World, with Growth rate in GSM segment during 2003 21,991,743 touching nearly 200% 10,600,000 5,478,932 3,107,449 Dec. 2000 Dec. 2001 Dec. 2002 Dec. 2003 May-04 Tim eline *Subscribers in Millions India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 36The subscriber growth saw a phenomenal increase from 2002 onwards. This wasmainly due to lowered call tariffs and full scale implementation of SMS services allover India. December 2002, where India touched the 10 million mark could bedefined as a milestone for Indian wireless industry.Subscriber growth continued from 2002-03 and there were close to 22 millionsubscribers as of December 2003.Two main elements for this phenomenal growth are 1. lowered call tariffs & 2.Free incoming callsConsumers who were once reluctant to subscribe to mobile subscriptions foundedfeasible and convenient to avail as now there was hardly any difference between themonthly bills compared to fixed line, and mobility was definitely a crucial element.The above phenomena in India is taking shape because of the presence of hugemiddle class population. On an estimate there are some 300 to 350 million peoplebelonging to this group in India. Unlike a car or a television set (where one isenough in the family) with the lowered call tariffs it became possible even for familymembers to own a mobile phone each.
37. Indian GSM Industry Revenues 1.56 1.18 Industry revenues show a increase of over 30% over last year Revenues in billion € 2002-03 2003-04 India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 37The increase in revenue reflects the new subscriber additions.
38. Market Developments since 2001 in 2001 in 2004 Bigger operators acquired small players to 18 GSM consolidate their 9 GSM subscriber base Operators and to be able to Operators counter low tariff CDMA operators India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 38India is a vast country with over 3000 Kms of distance from north to south andsimilarly from east to west. Covering this huge scope of land became a challengingtask for the operators, as a result many failed and vanished from the businessbecause the industry demanded huge capital investments and some of them were ofcourse unable to do so.The above scenario triggered two situations:•Smaller operators sold their licenses to big players•The bigger players seeing an opportunity to expand, acquired smaller operators
39. Mobile Operators Subscriber Base - GSM Bharti is the undisputed 6,761,367 leader among GSM operators 5,254,117 5,148,048 Bharti was the first mobile operator in India 3,721,773 1,882,754 1,208,890 1,026,377 850,831 230,550 Bharti BSNL Hutch Idea BPL Spice Aircel MTNL Reliance India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 39Aircel is recently acquired by HUTCH for an estimated amount of 223 millionEuro.
40. Market Share – GSM operatorsBig private operators like Bharti and Hutch eachhave recently acquired 2 other smaller operators State Owned 25% MTNL Reliance 1% 3% Aircel 4% Bharti Spice 26% 5% BPL 7% Private Idea 75% 14% Hutch 20% Private operators lead the GSM business BSNL 20% India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 40
41. Operator ARPU for 2003-04 9.90 ARPU dropped by 17% in 2003-04 8.43 8.36 Q4 compared to 9,9 € in Q1 8.05 7.32 7.35 7.60 Subscriber base of monthly ARPU 6.80 9,25 € or less has gone up to 46% in 2003 compared to 28% in 2002 ALL INDIA BPL Hutch Idea Reliance Bharti Spice Aircel Amount in € India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 41During the days when incoming was not free, operator ARPU was almost twice asthat of today.Despite of offering various data services over their networks, operators have beenunable uplift the ARPU. This shows that India still is mainly a voice market.On an estimate 80% of operator revenues are voice based and the remaining 20%constitute of all the data traffic.In such a scenario, operators have a big challenge not only to introduce more andmore attractive content but also to see that they add new subscribers on the basis ofcontent not voice. This however will be a big challenging task for Indian operatorsas promoting data services where roughly 45% of the population is still completelyilliterate. To add to the complexity is the language scenario in India. There are 18languages and 844 dialects and offering streamlined data services in all of theselanguages is by no means a simple task.SMS is the only thing which is available in different languages.
42. ARPU vs. Subscriber Statistics 29 24.43 ARPU Subscribers 8.36 1.6 1999 2004 *ARPU in Euro *Subscriber in Millions India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 42Indian consumer is extremly cost conscious.The cost syndrome is visible in the above figure, as call costs fell, no. of subscribersrose! In a way, as operator’s ARPU declined, they experienced a surge in subscriberadditions.
43. PrePaid vs. PostPaid Subscribers PostPaid 33% The growth in Prepaid has been 26.7% during 2003—04, while postpaid segment has just grown some 6% Prepaid rules in India PrePaid 67% India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 43Prepaid is a big phenomena in India. Although detailed statistics are not availablefor each operator but on an estimate 60-70% of the subscribers (of all theoperators) are prepaid customers.The reasons for prepaid being so successful in India are:•During the days when incoming calls were not free, it was difficult to control theindividual expense limit which prepaid easily solved.•To avail a postpaid connection one needed documentation like address proof etc.•Roaming on prepaid further boosted the prepaid subscriber base.•Teenage users whose parents wanted them to exercise restrain, founded easier togive them prepaid connections.•Retail channels earned good commission selling prepaid coupons to consumersand therefore, they invested more on promoting prepaid
44. GSM Operators Business Model Portals In India, third party billing doesn’t Revenue Sharing exist Revenue share model is the most prevalent mode of doing ASP business Revenue Sharing Operator Billing End User Revenue Sharing TV Channels Royalties Movies Content Revenue Sharing Developers India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 44The billing relationship in India exists exclusively between the operator and theconsumer. All the other contributors (value added service providers, ASPs, TVchannels and movie production houses maintain revenue sharing or profit sharingrelationship only with the operator.Operators in India get to keep a major share of the revenues coming from all theother services besides voice.When a consumer downloads a ringtone or a logo from a website, operator gets tokeep 60% of the earnings, similarly;•Almost 60-70% of the revenues for services hosted by ASP•80% of the revenues for SMS based TV opinion polls•75% incase of downloading a movie clip or a movie ringtoneM ticketing is missing in India, however, one can request for a ticket for an eventthrough an SMS but one cannot actually complete a transaction over his mobilephone.
45. VAS Awareness in India Basic VAS Advanced VAS 90 While roaming is well known, 76 MMS is surprisingly less known, similar to M-Banking 62 56 Operators have to promote awareness now, instead of 39 introducing any more new 33 27 services 21 10 7 5 4 Email MMS Roaming M-Banking Call Waiting Messaging Data services Voicemail Internet Services conferencing Access Call forward Dial in Voice Call Source: Voice and Data India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 45As described earlier, literacy is a big factor which determines the success of valueadded services especially, advanced services like email, M-banking and MMS.Roaming, voice mail, call waiting, call forward are some of the services whichconsumers are well aware of. Advanced services like call conferencing, email andM-banking have so far been unable to penetrate.One critical aspect to be considered here is the share of relevant consumers forrelevant services. Housewives and teenagers of course do not have any immediatevalue added for advanced services. Operators here face a challenge to market theirservices exclusively for corporate consumers.
46. GSM OPERATOR- BHARTI • Brand Name: AIRTEL • Network: GSM 900, 1800, GPRS, EDGE • Network Coverage: 17 Telecom circles • Subscriber base: 7,062,443 (May 2004) • Market Share: 26% • ARPU (Mar. 03-04): 8,4 € • Subscriptions: Post Paid, Pre Paid India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 46Bharti was the first mobile operator operational in India. India’s first GSM basedphonecall was made on Airtel network.
47. BHARTI Services Business Model and Revenue Sources• VOICE BASED • Content and Data Downloads • Voice mail • Offers Java games, logos, ringtones through their content • Dial a service portal• SMS BASED • Also in agreement with Yahoo India for basic content download • Info messages • SMS Chat • Advertising Campaigns • Email access via SMS • Latest movie ringtones, wallpapers available at their content • Ringtones and Logo downloads portal • Instant Messenger • Hosting third party campaigns like Coke and Master Card• GPRS • SMS Polls on TV • Mobile office • Users can vote through SMS for polls organized by TV • Content Portal Channels • Revenue sharing agreements with TV channels• OTHERS • Prepaid Recharging • MMS • Fax & Data, CLIR, Prepaid Roaming, • Subscribers can recharge either at ATMs using their ATM cards Or • Itemised billing, • Location based services • Direct debit facility with the subscriber’s bank account (SMS based service) India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 47
48. HUTCHISON TELECOM• Brand Name: HUTCH• Network: GSM 900, GSM 1800, GPRS, EDGE• Network Coverage: 14 Telecom Circles• Subscriber base: > 5 million• Market Share: 20%• ARPU (Mar. 03-04): 9,9 Euro (Highest in GSM segment)• Subscriptions: Post Paid, Pre Paid India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 48
49. HUTCHISON TELECOM Services Business Model and Revenue Sources• VOICE BASED • Content and Data Downloads • Voice mail • Offers News, Java games, logos, ringtones over GPRS in partnership with • Dial in services ( Dial a Pizza etc.) MSN and Mauj • Voice Response • Also in agreement with Yahoo India for basic content download• SMS BASED • Info messages • SMS Polls on TV • SMS Chat • Users can vote through SMS for polls organized by TV Channels • Yahoo Email & Messenger access via SMS • Revenue sharing agreements with TV channels • M-Banking • Ringtones and Logo downloads • Mobile Banking • Instant Messenger • HDFC and Bank of Punjab customers can access their accounts by SMS • BBC News• GPRS • E-Mail and communications • MSN & Yahoo email • Users can access their office emails through GPRS or SMS • Content Portal • Hotmail and MSN Messenger• OTHERS • Yahoo email and Messenger • MMS • PUSH TO TALK over GPRS • Fax & Data, CLIP, Call forward, CLIR, Prepaid Roaming, • Itemised billing, • Location based services India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 49 • Unified messaging (UMS)
50. IDEA• Brand Name: IDEA• Network: GSM 900, 1800, GPRS, EDGE• Network Coverage: 6 Telecom circles• Subscriber base: < 4 million• Market Share: 14%• ARPU (Mar. 03-04): 8,05• Subscriptions: Post Paid, Pre Paid India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 50
51. IDEA Services Business Model and Revenue Sources• VOICE BASED • Content and Data Downloads • Voice mail (Voice Courier) • Offers News, Java games, logos, ringtones over GPRS • Voice response • Also in agreement with Yahoo India for basic content download • Dial and Buy• SMS BASED • SMS Polls on TV • Info messages • Users can vote through SMS for polls organized by TV Channels • Chat – SMS, GPRS and PC • Revenue sharing agreements with TV channels • Web and POP3 Email access • M-Banking • Ringtones and Logo downloads • Mobile Banking • Global and Group SMS • Missing • Language SMS • City Guide • E-Mail and communications• GPRS • Web Mail and POP3 Access through SMS • Surfing • Content Downloads• OTHERS • Prepaid recharging • MMS • In agreement with Banks for Prepaid recharging through ATMs or • Fax & Data, CLIP, Call forward, CLIR, through SMS (account debit) Prepaid Roaming, • Itemised billing, India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 51
52. BPL Mobile• Brand Name: BPL• Network: GSM 900, 1800, GPRS• Network Coverage: 6 Telecom circles• Subscriber base: < 2 million• Market Share: 7%• ARPU (Mar. 03-04): 7,85• Subscriptions: Post Paid, Pre Paid India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 52
53. BPL Mobile Services Business Model and Revenue Sources • VOICE BASED • Content and Data Downloads • Voice mail • Offers News, Java games, logos, ringtones over GPRS • Dial and Buy Services• SMS BASED • SMS Polls on TV • Info messages • Users can vote through SMS for polls organized by TV Channels • Chat – SMS, GPRS • Revenue sharing agreements with TV channels • Web Email access • M-Banking • Ringtones and Logo downloads • Mobile Banking • City Guide • Customers of HDFC Bank and ICICI Bnak can access their accounts (SMS Based Service) • GPRS • Surfing This August 2004, BPL has introduced its first • Content Downloads own manufactured handset in India • OTHERS • MMS • Fax & Data, CLIP, Call forward, CLIR, Prepaid Roaming, • Itemised billing, India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 53BPL is a leading player in consumer electronics like TV, Fridge, Washing machinesetc. BPL has produced it’s own handset this August. Priced at around Euro 90, theBPL handset will compete with the likes of Nokia, Motorola, Sony-Ericsson andSiemens for a pie of the Indian handsets market. Industry sources said that thehandset will be part of the BPL consumer durables stable and will be manufacturedat its Bangalore unit.Sources said that the company had tied up with Japanese electronics major Sanyofor providing lithium batteries for the handset. The company is also planning tolaunch handsets at higher price range.
54. Expansion Strategy of GSM Operators – d “Acquisition” re d ui ire cq qu A Ac Sterling Cellular Airtel Hexacom Hutch Hutchison Essar Aircel Digilink With stiff competition in sight, bigger operators Hutchison Max Telecom are consolidating their subscriber base by Aircel* acquiring other smaller operator licenses d re re d ui ui Acq cq A Aircel* RPG Cellular Idea Escotel *Aircel was recently acquired by HUTCH India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 54As explained earlier, operators are constantly seeking to consolidate their standingin the market. Indian telecom regulations limit the number of operators in eachcircle to four but it does not limit operators acquiring each other. Airtel and Hutchhave been very active in this mergers and acquisition activity.Hutchison Telecom (Hutch) recently acquired Aircel which operated in state ofTamil Nadu.Similarly, Airtel acquired Hexacoms licenses for states of Rajasthan and few north-eastern states.
55. CDMA Operators
56. Understanding WLL(F) & WLL (M) WLL (M) = Wireless in Local Loop (Mobile) WLL (M) = Wireless in Local Loop (Fixed) • Classified as fixed line telephones • No Roaming • Works within a city limit • SMS • Data Baud for Internet • Mobile Handset (Just • Two options: like GSM) • FWP • Roaming • FWT • MMS • SMS • Java • Data Baud for Internet India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 56Understanding WLL services and how they are classified has been a big confusion not only forconsumers but even to an extent some services providers have taken a long time in understandingthe services completely.CDMA in India is known as WLL (Wireless in local loop). This WLL is further divided into twocategories fixed and mobile. However, the technology standard is similar in both cases i.e. CDMA2000 1XWLL fixed refers to handsets which can replace the existing fixed line sets.WLL mobile refers to handsets which have all the features like GSM handsets.WLL fixed works within a city while WLL mobile functions similarly as that of GSM mobile.There are 2 categories to choose from in WLL Fixed:1. WLL- FWP: Fixed Wireless Phone (without wires)2.If consumers are willing to keep their old phone set then they have an option to opt for WLL(FWT) Fixed Wireless Terminal. FWT is connected to existing telephone set.Both the phones come with a data port which can be connected to a PC/Laptop serial port througha special data cable. The data cable comes along with an installation CD and it is available in theopen market for five to ten Euros.Presently LG, Samsung and Nokia are the leading equipment suppliers for WLL mobile in India.For WLL fixed, LG and Samsung handsets dominate the market.WLL fixed phones have an option to send SMS.
57. CDMA Segment overview• Present Standard: CDMA 2000 1x• Started in March 2003• Offered by 6 operators• LG and Samsung hold majority device market share• Streaming media options• Always on internet connectivity @ 114 kbps India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 57
58. CDMA growth drivers Growth in Fixed line in 2003 (much due to CDMA fixed wireless) • Nationwide roaming • Bundled internet facility • CDMA phones come with a data port where consumers can connect to internet at 114kbps • Easy subscription availability, starting from Euro 10 only • Huge variety of content • Online bill view • SMS based service activations • Aggressive launch Source: IDC Asia/Pacific Semiannual Telecom Fixed- Line Services Tracker (2H 2003), March 2004 India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 58There was a big debate in India just before the launch of CDMA services that will itsucceed or not? Recent trends reveal that CDMA is here to stay, but that doesntmean that it is going to overpower GSM.Nationwide roaming helped to boost subscribe base, option of connecting tointernet using a simple data cable proved as a catalyst in promoting CDMA servicesin India.The call tariffs over CDMA were initially lower as compared to GSM but todayCDMA and GSM call tariffs are moreover same.The calls are tariffed again on the distance parameter which is already explainedearlier.
59. CDMA Operator Subscriber Base 6,414,047 Statistics include WLL(M) and WLL (F)Reliance, a CDMA 2000 1xoperator, is a undisputedmarket leaderBoth WLL(F) and WLL (M)have been immenslysucessful in Indian Market 800,000 625,267 29,908 27,632 130,000 Reliance Tata HFCL Shyam BSNL MTNL Private Operators State Owned India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 59Reliance Infocomm was the first private operator to start with the CDMA servicesin India. However, BSNL and MTNL offered CDMA before Reliance they wereunable to tap subscribers.Reliance’s strategic alliance with LG and Samsung to offer their handsets along withtheir subscriptions proved to be a catalyst in the process. Tata Indicomm whichwas the second private operator to offer CDMA services initially failed to attractconsumers but since early 2004, it has revived its strategy and has been able to gainsome market share.
60. CDMA Operators Market Share State Ow ned 12% BSNL MTNL Shyam 10% 2% HFCL 0% 0%Tata8% Private 88% Reliance, having introduced its service in March Reliance 80% 2003 has emerged as market leader with a huge 80% market share India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 60
61. CDMA Operator Business Model Similar to GSM model, third party Movies billing is also missing from CDMA operators business model Royalties Due to spectrum availability, operators find it feasible to offer high end content themselves TV Channels Internet surfing facility over Revenue Sharing CDMA is catalyst in boosting End User subscriber growth Billing Operator Services hosted Content Downloads and offered by operator Java Games Internet accessIndia Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES // 61Due to spectrum availability it is feasible for the operators to introduce enhanceddata services over their networks. This includes streaming media, JAVA games etc.The possibility for offering enhanced data services has proved to be a catalyst inpromoting CDMA services in India.Reliance Infocomm floated a company by the name of Paradox Studios whichdevelops interactive content for Reliance’s subscribers. Following the trend TataIndicom also formed an alliance with Nokia and some major content developers tooffer 1000 games to its subscribers.The revenue sharing percentage between TV channels, movie production houses,websites is moreover similar to GSM operators.As mentioned earlier the sets come with a data port for internet connectivity, theseCDMA operators also function as a internet service provider. Consumers have todial in a specific number to activate their phone as a modem and they can use 114Kbps internet almost everywhere in India.
62. CDMA Operators - RELIANCE• Brand Name: RIM- Reliance India Mobile• Network: CDMA 2000-1x• Network Coverage: 18 Telecom circles• Subscriber base: > 6,8 million• Market Share: 80%• ARPU (Mar. 03-04): Euro 13• Subscriptions: Post Paid, Pre Paid India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 62
63. Reliance Services Business Model and Revenue Sources• VOICE BASED • Content and Data Downloads • Voice mail • Offers News, Java games, logos, ringtones • Call forward •Reliance has formed a new company called PARADOX • 3 Way Call conferencing STUDIOS, which develops content for its network• SMS BASED • View Bills • Info messages • Streaming media • International SMS • New songs from movies, Live News channels • M-Banking • Ringtones • SMS Polls on TV • Language SMS • Users can vote through SMS for polls organized by TV Channels • City Guide • Revenue sharing agreements with TV channels • Movie info • Song clips • Mobile Banking• OTHERS • with HDFC bank • CLIP, Call forward, CLIR, Prepaid Roaming, • Itemised billing • E-Mail and communications • R-CONNECT – Users can use their phones to connect to internet. Reliance • Missing also serves as an ISP in this model. • Users need a data cable to connect to their PC serial port and configure the dial in settings India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 63
64. TATA INDICOM• Brand Name: TATA or TATA Indicom• Network: CDMA 2000-1x• Network Coverage: 6 Telecom circles• Subscriber base: > 2 million• Market Share: 8 – 10%• ARPU (Mar. 03-04): Euro 10-12• Subscriptions: Post Paid, Pre Paid India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 64
65. TATA INDICOM Services Business Model and Revenue Sources• VOICE BASED • Content and Data Downloads from their portal • PUSH TO TALK • Offers News, Java games, logos, ringtones • Voice mail • View Bills • Call forward • Streaming media • 3 Way Call conferencing • New songs from movies, Live News channels• SMS BASED • Info messages • International SMS • SMS Polls on TV • Ringtones • Users can vote through SMS for polls organized by TV Channels • Language SMS • Revenue sharing agreements with TV channels • City Guide • Mobile Banking• OTHERS • Missing • CLIP, Call forward, CLIR, Prepaid Roaming, • Itemised billing • E-Mail and communications • SMART WIRELESS – Users can use their phones to connect to internet. TATA also • Missing serves as an ISP in this model. • Users need a data cable to connect to their PC serial port and configure the dial in settings India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 65
66. CHAPTER THREEINTERNET SERVICE PROVIDERS Priyanka Kapoor Vipul Chauhan
67. Growth Drivers • Falling tariffs • Availability of acess options: • Dial in • Cable • DSL • ADSL • Leased Line • ISDN • Internet subscriptions offered as freebies along with other hardwares i.e phone connection, PC, mobile phones, office equipment etc. • Content downloads – mp3, pirated software, movies etc. • Yahoo and MSN Messenger voice feature lured consumers to subscribe to internet • Mobile and IP convergence – data downloads India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 67Internet made its entry in India in the year 1995 when VSNL (Videsh SancharNigam Limited) started with dial-up connections. The first five years of internet inIndia could be defined as an incubatory stage where speeds were limited tomaximum of 64 Kbps ISDN. Initially and even today most of the home users usedto access internet over 28.8 K and 56 K modems.Using internet over phone connection with a modem has two disadvantages, firstthe phone line is blocked and then one is subjected to pay the regular call charges.This syndrome still exists today with the home users but they still prefer usinginternet through 28.8 K-56 K modems at home. This situation means that there isa huge potential for broadband service providers to attract customers for theirservices but only at prices which are affordable. Always on connectivity will helpusers (both home and corporate users) to keep their phone lines free and avoid callcharges.Present day internet subscriptions are available as freebie item along with purchaseof a desktop PC, printer, fax machine etc. This is possible due to reduced prices.Price range for internet subscriptions is as follows:•For a dial-up connection: Euro 5 for the installation CD and thenconsumers have to pay call charges for their minute usage, which is 0.02 Euro perminute.•Lease lines: Euro 9000 per year
68. Industry Developments 3G Broadband Wi-fi Smart Wireless DSL/ Wi-Fi ADSL 2G Net over Cable TV 64k 1G 28.8k 56k ISDN 1995 1997 1999-00 2002 -03 2003 2004 - onwards India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 68There is a big way to go for the Indian internet industry still. Although it has beenalmost 10 years since internet came to India there has been less progress on thebandwidth front.Cyber cafes initially chose 64 Kbps ISDN connection to run multiple PCs. Todaythese cyber cafes are opting for either smart wireless or DSL broadband. Homeusers in metropolitan cities have chosen between regular 56 K modem connectionor internet over cable TV. Cyber café business is not doing well at least inmetropolitan cities because the home users which used to visit their cafes earlier toaccess internet now have option to access internet either over cable TV connectionor through smart wireless or subscribe to a 64 Kbps always on connection (notover phoneline). From Euro 1.8 per hour in 1996 to Euro 0.04 per hour today, theprices have come down in a big way. Similarly, it is feasible now for the home usersto go for their own connection rather than visiting a cyber café.The connectivity options followed by consumers as of today are:-•Home users: mainly dial-up, smart wireless or always on connectionover cable TV•Small businesses: dial-up, smart wireless or always on connection upto 128kbps•Large businesses: DSL, ADSL, lease line
69. Access modes others DSL 8% 10% ISDN 10% Dial Up 55% Leased lines 17% Dial up is the first preference of household users, while corporate world is emerging as the lead customer for ISDN and DSL India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 69As explained earlier dial-up is still the first preference for accessing internet in India.Out of the entire dial-up segment almost 80% are home users. The rest 20% isshared by small businesses.In a small internet population of 6 million subscribers majority of the market shareis still with the dial-up connections.
70. Internet Usage 90 50 43 41 % of Users 35 38 27 23 % of Time 9 9 11 6 4 4 M u s ic / M o v ie s / Chat E m a il A c a d e m ic In fo E n te rta in m e n t D o w n lo a d s Jo bs In fo rm a tio n E d u c a tio n / India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 70The above slide shows which features of internet are used most in India. Almost90% of users subscribe to internet just because of emails, while only 27% accessinternet for entertainment purposes.This clearly shows that although India is now having exposure to latest technologiesin internet, the consumers are not infact ready to experience the advanced featuresof internet and high bandwidth. Their main objective of subscribing to internet isto be able to read emails.Users are yet to experience the thrill of high speed internet where they candownload huge data volumes in lesser time and experience streaming mediafeatures. Therefore, at such a crucial stage ISPs offering broadband have a bigchallenge to lure customers for subscribing to broadband connections.
71. Broadband in India• Available Data download bandwidth: 64 kbps – 2 Mbps• Internet over cable TV is the latest trend in metropolitan cities• Internet through ethernet cable is capturing market• Intensive investments in Fiber optic networks have enabled ISPs to offer broadband services• CDMA ”Smart wireless” enables individual home users to connect at 114 kbps• Cyber cafes opting for ”smart wireless” or DSL instead of Dial in connection• Home users prefer dial in services (upto 56k) and business houses go for ISDN and above• Huge market for Cable and DSL/ADSL modems India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 71
73. Subscriber base of leading ISPs1,004,246 691,717 686,642 629,411 354,596 174,606 73,872 BSNL MTNL Sify Ltd. VSNL TATA Internet Data Infosys Touchtel Services Ltd. Ltd. India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 73
74. Market Share of Leading ISPs OthersExtensive infrastructure investments by Data Infosys 14% BSNLBSNL has helped them to retain No. 1 4% 25%position among ISPs Dishnet DSL 4% TATA Internet Services Ltd 4% MTNL VSNL 17% 15% Sify Ltd. 17% India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 74
75. Major Service ProvidersCompany Services Broadband Main Target Customers Sify • Internet, VPN, VoIP, Enterprsie Solution, Web Hosting, e-Business, Yes Corporate clients and households Web Conferencing, Wi-Fi, Cyber cafes, International gaewayBharti • Internet, VPN, VoIP, Wi-Fi, Centrex, ISDN, Leased Line Yes Corporate clientsTouchtelMTNL • Dial in, ISDN, Leased Line, VoIP, ADSL, VPN, Managed Bandwidth Yes Corporate clients and householdsBSNL • Dial in, PSTN, ISDN, VoIP, OFC, Web conferencing, Managed Yes Corporate clients and households Bandwidth, international gatewaySpectranet • VPN, VoIP, DSL, ADSL, Ethernet , Yes Households Web conferencing India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 75
76. E-Commerce in India • Only 5 million credit card holders in India • Online transactions with credit cards are looked upon as a security threat to consumer privacy • Instead of Credit Card transactions, Cash on Delivery is practised widely • Online movie ticket booking, Air tickets and database downloads are just some of the e- transactions practised in Metro cities India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 76INDIA is expected to log the highest compounded annual growth rate (CAGR) of83.7 per cent among Asia-Pacific countries in e-commerce revenues between 2003-08, even exceeding the growth rate displayed by neighboring China in the five-yearperiod, according to research firm IDC."On a country-by-country basis, India is expected to show the highest CAGR of83.7 per cent in e-commerce revenue from 2003 to 2008, thus marginally exceedingthe CAGR of 81 per cent expected in China," according to IDCs forecast on AsiaPacific internet market.However, Chinas e-commerce revenue is projected to represent one third of theAsia/Pacific market excluding Japan by 2008.The total E-Commerce transaction value in India is estimated to be around 8,7billion USD in 2003-04In 2003, the Central Government proposed total outlay of US$560 million fornational plan on e-governance
77. CHAPTER FOUR EQUIPMENTMANUFACTURERS Vipul Chauhan
78. India Equipment Market (in billion €) 2.74 1.80Network equipment market slowed down in 2003-04showing a fall of 34,3% over last year 2002-03 2003-04 1.55 Netw ork Equipment Mobile handsets market swelled to 1,55 billion Euro during Mar. 03-04 showing a growth rate of 568% over last year! 0.23 0.05 0.05 Fixed Line handsets market remained moreover constant 2002-03 2003-04 showing consumer interests has shifted towards mobility Fixed Line Phones Mobile Phones India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 78
79. Market Growth Drivers Handset Market • Low call tariffs made it possible to afford a phone • More and more wide variety in • Major network expansion handsets activities by operators to capture subscriber base • Camera and multimedia enabled phones Primary factor • Huge geographic expanse made network business lucrative • SMS services • Long term business, as remote • Content downloads areas in India are still untapped • As operators are incapable of maintainence, companies offered AMC Network Equipment India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 79As a local cultural trend consumers are very much concerned about cost v/s utilityfactor. Handsets which are priced beyond 150 Euro do not sell equally well ascompared to the ones priced between 100-150 Euros. Buying a handset is onething, to be able to use (afford) is another. Phone tariffs which have fallen over90% during last four years have made it possible for a person to afford asubscription. Handsets with colored screen also prompted consumers to switchover.Camera and multimedia enabled handsets are slowly making their way into theIndian market. Although there might be only 3% of total mobile population usingcamera phones. The similar syndrome is also applicable to GPRS enabled handsets,GPRS penetration in India is estimated to be somewhere between 8-10%maximum. Entertainment features on a phone like ringtones, logos etc. further lurecustomers towards owning a mobile phone.On the network side, both GSM, CDMA and fixed line operators are planningmajor network expansion all across India. Operators expects the tele density to risein India and therefore, it is required that all of these operators have networkcoverage to tap new consumers.The dynamism seen today in the Indian communications market is very muchbecause of the affordability factor, which means low call costs prompt consumersto buy handsets or to subscribe to operators and this subscriber addition prompts
80. Major Global Players in IndiaCompanies Type of Activities Since Locations • R&D setup, Country office • 1990 • New Delhi, Bangalore & Nokia • Nokia Ventures recently opened • Nokia Ventures-2004 Hyderabad • Nokia Ventures in Pune • R&D setup, Software Development, • 1986 • New Delhi, Gurgaon, Design Motorola Bangalore & Hyderabad • Manufacturing Radio Products • Manufacturing Network Equipment, • 1903 • New Delhi, Bangalore, Ericsson OF Cables, AXE Switches Rewa, Kukas & Hyderabad • R&D setup • 1995 • New Delhi & Noida Samsung • Manufacturing TVs, Refrigerators, Aircon. • R&D setup • 1997 • New Delhi, Noida & LG • Manufacturing TVs, Aircon & Bangalore Refrigerators India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 80
81. Indian Equipment ManufacturersCompanies Business Groups • Colour TVs, Washing machines BPL • Mobile Phones (first handset launched in Aug. 2004) • Mobile Phone manufacturing (phones are manufactured by VK Coproration in Korea and they VK Munoth are imported) • Manufacturing Network Equipment, Switches ITI Ltd. • Fixed line telephone sets • CDMA systems HFCL • Wireless Network equipment, Optic fiber cables • Telephone sets for fixed line, PBX systems TATA India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 81
82. Handset Market Players in India US Companies European Companies Asian companies Low cost Handset Vendors India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 82Asian companies are aggressively following the Indian market because they knowthat cheaper and affordable goods move faster than the sophisticated and expensivegoods.LG, Samsung, Panasonic, Benq phones are available within a range of 100-200Euros and handsets available in this price range move faster in the market.Although, other players like Nokia, Motorola and Siemens also have cheaperhandset models, the overall situation in the low end phone market looks verypromising for the low cost Asian handset manufacturing companies.Consumers first need quality and reliability, but at the same time they also needvariety. This situation makes the handset market appear lucrative for the low costhandset manufacturers.Ericsson is in a very critical state in India as they have been unable to capture anymajor market share. The same situation also applies on Siemens.
83. Handset costs vs. Handset sales 65Around 65% of all handsetssold are priced below 150Euro C ons um er %High end phones withmultimedia, colur screen,GPRS, Bluetooth, Camera 20are yet to make theirpenetration felt in the Indian 10market 5 100-150 200-250 200-300 300 & more Handset Prices in Euro India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 83
84. Equipment Vendors - NOKIA Nokia India Total Sales for Mar. 03- 426.11 04 was 590 million Euro GSM Handset sales were 426 million Euro alone! Nokia is the India Sales figures in million € leader in GSM Year March 2003-04 The company also made its mark in CDMA category 120.37 Nokia Introduced 17 new phones in Indian Market Nokia has won 250 million Euro 33.33 9.26 worth of orders already GSM Phones Netw ork CDMA Phones Enterprise India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 84Nokia is the market leader in GSM phones. Nokia is also trying hard in the CDMAhandset segment, 50% of Nokia’s upcoming models for the Indian market areCDMA models. This shows Nokia is aggressively trying to penetrate into theCDMA segment. There 2280 model has been quite successful in the CDMAsegment.Nokia’s 3310 and 3315 have been very successful models in the Indian market. Thelatest 6600 with camera phone is the latest attraction for consumers willing to spendover 350 Euros.Nokia has been able to deliver quite well on the network side also. They havedelivered core network for Idea Cellular and recently won a huge contract worth250 million Euros for network expansion with Bharti.
85. Equipment Vendors - LG 418.33 India Sales figures in million € Year March 2003-04 92.22 7.41 CDMA (M) CDMA (F) New GSM Sets India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 85•Total India Sales were 518 million Euro•CDMA (Mobile) handset sales were 418,33 million Euro•RD-2030 CDMA handset was the highest selling Mobile handset in India !!!!•CDMA (Fixed) sets also made their way into Indian homes, LG Sold 700,000CDMA (F) setsBesides wireless, LG is also a leading player in Consumer Electronics.LG has a manufacturing facility in Noida India where they manufactureAirconditioners and other consumer durables
86. Equipment Vendors - Samsung 117.04 82 Total Handset Revenues in 2003-04 were close to 200 million Euro CDMA Sets GSM Sets India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 86Samsung is a formidable player in CDMA segment. Its CDMA Mobile handsetconstituted of most of its revenues in CDMA Segment.Both LG and Samsung dominated the CDMA market in 2003, until Nokia cutsome of their market share,Samsung is also a leading consumer durables brand in India. They are into TVs,Washing Machines, Refrigerators etc.
87. Equipment Vendors - Ericsson 458 Ericsson won a huge order with Bharti for Network Outsourcing India Sales figures in million € worth 335 million Euro! The company is also engaged in a EDGE pilot project with Bharti 269 Network Equipment & maintenence 2002-03 2003-04 India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 87Sony Ericsson made sales of 0,4 million Euro in 2003-04. Sony Ericsson ismarketing their model T105 aggressively, priced below Euro 95.
88. Equipment Vendors - Motorola Total India sales were 305,6 million Euro 187.22 A growth of 36% in revenues over India Sales figures in million € last year (2002-03) Year March 2003-04 Made a deal worth 256 million Euro in Feb. 2004 for network 80.56 expansion services 36.67 Netw ork GSM Phones CDMA Phones India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 88Motorola is very aggressive upon the Network side, they delivered the EDGEnetwork for Hutch. In GSM category the company is heavily marketing its C200Model which is priced at 65 Euro (with an Airtel connection)
89. Equipment Vendors - CISCO 194.4 India Sales figures in million € Year March 2003-04 Around 80% of their business consisted of Switches and Routers, rest included IP 107.4 Telephony, W-Lan, Storage and Optical Sw itches/Routers Advance Technologies 301.9 205.4172.2 Company made a 47% jump in revenues in 2003-04 over last year2001-02 2002-03 2003-04 India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 89
90. Equipment Vendors - LucentRevenues saw a sharp 26,6% dip in2003-04 because company got outof GSM business 373.1 RevenuesAbout 70% of revenues in 2002 -2004 came from Reliance CDMAnetwork deal, for which Lucent was 274.1a single vendor 138.9 2001-02 2002-03 2003-04 India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 90
91. Handset Market Share - GSM 64.8Nokia is the undisputedleader with 64,8%market share in GSMhandsets India handset market share % - GSM HandsetsSamsung and Panasonichave eaten some share 9.9 6.3 6.7 4.3 4.3into Nokia’s market 1.3 1 1 0.5share during last oneyear Nokia Samsung Motorola LG Hyundai Panasonic Ericsson/Sony Siemens Others Kyocera India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 91
92. Handset Market Share - CDMA 37.3LG & Samsung market 30.1leaders with 37.3% and30.1% market sharesrespectively 15.8 India handset market share % - CDMA HandsetsNokia is trying hard topenetrate into the CDMAsegment 4.3 4 3.5 2.5 2.5Nokia has introduced 4hadsets so far for CDMA Nokia Hyundai Samsung Motorola LG Ericsson/Sony Others Kyoceramarket India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 92
93. Handset Market Share GSM+CDMA 56Nokia is the undisputedleader with 56% marketshare India handset market share % - includes both GSM and CDMA handsets 13.5 7.6 6 5.6 4.1 3.7 Nokia 1.5 1 1 Samsung Motorola LG Hyundai Panasonic Ericsson/Sony Siemens Others Kyocera India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 93
94. Challenges for Handset Vendors• Retain market share?• How to build upon brand value?• Win consumer trust….and retain• Building up supply chains to reach into all parts across the country• To continue in handset business, one needs to be present in both CDMA and GSM segment• Face price threats from low cost manufacturers• Ensuring sales of high end phones in the market while pushing low end phones• Speed up the integration of latest technology into phones and introduce into the market – Time to market !!!! India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 94
95. Challenges for Network Equipment Vendors• How to increase number of repeat customers?• How to have exclusive customers• Win contracts for network expansion in remote areas• Penetrate equally in CDMA and GSM business• Local R&D is a good idea, how about Local manufacturing? India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 95
96. CHAPTER FIVECONTENT BUSINESS Vipul Chauhan
97. India Media market structure Text Sound Pictures New media Film & Dailies Magazines Radio Records TV Formats Portals Access • Times of India • India Today • AIR MW • Universal • Star TV • Indiatimes • Sify Leaders • AIR FM • Bremen • Sony • Columbia Tristar • NDTV • Hindustan Times • Outlook • Universal • Mantra • Rainbow FM • T-Series • AXN • Zee Network • The Hindu • Frontline • Twentieth century • Radio CITY • Arista • DD (State Fox • Touchtel • Indian Express • Newsweek • Radio Mirchi • Sify • BMG Crescendo owned) • Mukta Arts • VSNL • Radio Wave • Indiainfo • Asian Age • Femina • HMV • ZEE • Red FM • Vishesh Films • Tata Indicom • Deccan Herald • Cosmopolitan • MTV India • Indya.com • Local stations • Tips • HBO Asia • Dainik Jagran • Filmfare • Music Today • V-India • Zeenews • Reliance (Hindi) • Gladrags • Archies • Star Sports • V India • Data Access • Malayala • Times Music • ESPN • Yahoo India • Sarita Manorama • NDTV • Vanita (Malayalam) • AAJ TAK • Mid-Day • HBO India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 97Till early 90s, India was a pure paper based information market where dailies andmagazines were the only source of information which was available to consumersthrough retail channels.After newspapers and magazines, TV channels are the next major source ofinformation. Roughly on an average an Indian household has access to over 40channels through cable television. News channels are mushrooming almost onmonthly basis, there are some 25 news channels on air. The reason for so manynews channels on air is perhaps best known to their promoters but ever sinceSeptember 11 attacks, delivering the latest news has become a competition platformfor the channels. India is also a big market for Hollywood films, global channelslike Star and HBO have today reached the common households in India. Withover 1 billion of population, India is a huge market base for FMCGcompanies and the TV channels are encashing this opportunity very well.Television is the most commonly used medium for advertisements andcommercials. From luxury cars to suitcases and from mobile phones to tablet PCs,all the commercials can be found today on Indian TV channels.When it comes to advertising, FM channels have now made their presence felt as astrong competitor to TV channels. Times FM was the first FM services to belaunched in India during early 90s, today there are more than four FM channels ineach of the metropolitan cities in India. FM channels are a major source ofinformation in form of news and updates. FM licenses are available for 400,000
98. Content Value Chain in India (Compressed) Content & Application Content providers Developers (Embedded/ Content Aggregators/ External) Vendors • NDTV • Yahoo • ZD-Net • CNN • MSN • E-Zest • BBC • Indiatimes • Enable • ESPN, Star • Indiagmes • Channel 9 • Ruksun • AXN • Aaj TakNetwork Operators Device Manufacturers Value added resellers • Hutch • Nokia • Matrix • Airtel • Motorola • Priority Dealers • Idea • Samsung • Sanchaar Hat • BSNL • Ericsson India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 98 • Panasonic
99. Content Players Property Developers Publishers Aggregators Operators PortalsActivity ownersLeaders • Ten Sports • Mauj • Microsoft • NDTV • Airtel • Indiatimes • DD • Raptor • BPB Mult. • Yahoo India • Hutch • NDTV • NDTV • Indiagames • Yahoo • MSN India • BSNL • Aaj Tak • PTI • VCL • Google India • Tata • Zee Network • Paradox Studios • DD India • Bombay Stock • Reliance • Yahoo Exchange • CDAC • Indiatimes • Idea • MSN • Jadoo Works • Zee Network • Sharekhan • Spice • Indiainfo • Dhruva • Indiainfo • Milestone Inter. • Sify • BPL • Sify • Lumen Phon • Mantra • Octoplus India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 99
100. Top Content Downloads Wallpapers Games 11% 6% On all wireless networks, ringtones are the hot favourite among consumers Logos 17% Games are new entrant, but slowly Ringtones gaining market share 66% India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 100Ringtones are the most downloaded form of content over wireless networks.The ringtone market in India is estimated to increase from $17 million in 2002 to$400 million by 2005. Cellular subscribers in India account for nearly 200,000downloads a day. Almost 20% of these are forwarded ones.Downloading a ringtone costs between 0.12 to 0.18 Euro while downloading aJAVA game costs between 1-2 Euro for each game.As a cultural aspect, Indian people are very much fond of music and the localmovie industry called BOLLYWOOD is a big source for content, which includesringtones based on movies soundtracks, wall papers of celebrities and logosdepicting musical instruments and movie stars.While downloading a ringtone, a major share of revenue goes to operator and therest is shared between the portal and the performing arts association of India whichprotects the rights for artists, musicians and other works of art.
101. SMS Market Size• Approximately over 1 billion SMS are sent per month (over all GSM and CDMA networks)• On an average, each user sends 40 SMS per month; this amounts to 27 million Euro of revenues per month (only through SMS)• SMS and MMS accounts for 8-10% of Operator ARPU (Average)• Almost 80% of service request like Ringtone download, logo download, MMS download, City info etc. are developed on SMS platform India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 101
102. SMS based content (1 of 2) • SMS over fixed line is offered by CDMA operators and Private fixed line operators • SMS polling for TV Channels is the one of the most prominent & latest business model for operators • Operators get to keep 80% of the revenues arising from such polls, rest goes to TV Channels • Other SMS based content includes: • Chat • Weather • Dating • News, Stocks etc. India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 102SMS is the leading form of content overall. When fixed line operators sawconsumers shifting to mobile services because of additional facility of SMS overvoice, they found it moreover mandatory to introduce over fixed line to be able toretain consumers.A big boost in SMS in India is driven by TV channels. The TV channels organizepublic opinion polls whereby users are requested to send their answers by SMS.This syndrome has given a phenomenal boost to amount of SMS sent in India. FMchannels also organize these opinion polls which asks users to send SMS, but as FMchannels are only limited to metropolitan cities, SMS growth owing to FM is not asbig as compared to TV channels.Services like city info, weather, sports, news, dating, ringtones, logos, bank accountinfo, timetable info are all build upon SMS platform. The cost of an SMS is 0,02 –0,03 Euro.
103. SMS based content (2 of 2) • SMS in regional languages introduced by almost all GSM operators • Sending SMS via ICQ, MSN and Yahoo messengers is unreliable (delayed arrivals) • SMS interconnectivity over CDMA and GSM networks had problems until recently • Instant messaging service not yet operational (operators are equipped however) India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 103SMS in regional language is introduced by most of the operators but users have tofirst write the message in English which gets converted into a picture message (oflocal language) at the receiver’s end. Some handsets in the market are offering SMSand menus in a local language called Hindi but as users are more familiar usingEnglish, this particular facility has not been so successful as expected.
104. SMS Spam • Numerous service messages are received if one is traveling by road and has national roaming on the phone • On an average 7-8 SMS are received (switching between 2-3 networks) like: • “Dear Subscriber….thank your using XXX, while in Delhi call our Helpline at XXX” • “Welcome to XYZ Tel, our helpline no. is XXXX” • “welcome to ABCTel, enjoy cost saving on roaming” • “Welcome back to home network” • “Wish you a happy journey” • Marketing and advertising SMS do not exist • Operators send their own marketing SMS like: • “Download the latest Latin ringtone, SMS “RT Salsa to XXX” • “Send MMS to your friends, check out our latest wallpapers” India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 104SMS spam is so far not a great problem in India. Though location based servicesexists over GSM and CDMA networks, operators have not yet utilized the fullpotential of these services for their own or third party services marketing. Rarelyone gets a unwanted SMS saying that 10% discount is available on Cola bottles.However, if one has national roaming and he is traveling by road to another city,numerous network service messages are received which sometimes block thememory capacity in low end phones.Operators however do market their services and offers through SMS. This featureis mainly for post paid consumers where operator is certain (to a limited extent)about consumer loyalty.
105. Content Over Various Networks GSM GPRS CDMA • Content mainly offered through portals (Content aggregators • Browsing • Online bill view like Yahoo) • MMS picture downloads • Content is mainly related to • Wallpapers • Java enabled games Bollywood or local festivals e.g. • Polyphonic ringtones (arcade, simulation, glamorous and ethical content goes together • Java enabled Games puzzles) • Ringtone downloads are next to SMS, followed by flash SMS (arcade, action) • Ringtones and picture messages • Yahoo email • Picture messages • Yahoo India portal allows user to create customized picture • MSN • Movie clips, promos messages, logos, SMS etc. • M-Banking • Other portals like Indiatimes • Chat sessions • Live News clips offer: • movie info, • City entertainment info • Game updates dating, chat • Game replays • Stock updates • polls • Stock updates • WAP was a flop in India • Long download periods • Improper launch • Confusion over tariffs India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 105Speaking of content over various networks:•SMS and ringtone downloads dominate the GSM segment•SMS, ringtones, logos and MMS are mainly to be seen with users having colorscreen handsets.•Some 1 million games are downloaded daily over all networks, the share of JAVAgames (paid) is estimated to be some 30%•M-banking over GPRS and CDMA is mainly SMS based•Yahoo and MSN emails are also available through GPRS•Streaming media is available in GPRS but it is more quick to download and view amoving clip in CDMA network•Financial services like M-banking and loans for cars and homes are again buildupon basic SMS platform.•Dial a service is a very common model offered by almost all operators whereconsumers dial a fixed number and can order a pizza, flowers or request a bank toopen an account.The range of content available over CDMA is more varied and consists of lot ofoptions. Subscribers can watch promotional movie clip and news headlines live(streaming). The range of games available over CDMA is also very huge and mainlyit consists of JAVA based games.
106. Content offered by ISP and TV Channels Channel TV + ISP ISP Channel TV Signal TV Signal + Internet + (Digital + Hosted Analog) Content + Braodband Internet Cable TV Service Provider Subscribers are offered TV Channels + content + internet India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 106When it comes to content, the above slide shows the business models for ISPs andTV channels.Cable service providers pay a set-fee to channels and collect monthly fees fromconsumers. For providing internet, they collect separate fees from consumers.The role of cable TV service providers is a very crucial one in the whole context.Cable TV service provider is actually a reseller for TV channels but in the recentscenario these cable TV service providers have a more crucial role to play even forthe ISPs. These service providers have their networks in residential as well asfinancial and city centers (RF cable networks). Therefore, they can easily carry bothTV signals and internet to the home and business users. Although this trend is notvisible elsewhere except metros but we foresee that these service providers willhave a huge role to play in coming years because it might not be feasible for ISPs tomake investments themselves in building a distribution infrastructure in each andevery town, but these service providers exists in almost all metros and cities andtowns all across India. However, the bandwidth offered over such network ispresently limited to 64 kbps but that is good enough for the consumers who areplanning to switch over from dial-up connections.
107. Content Costs (in Euro) 1.9 With the ARPU falling, operators have to concentrate on introducing more and more cost viable content to ensure optimum The price range for revenue level Java games starts from 0,9 € 0.18 0.18 0.12 0.12 0.1 0.03 0.05 MMS Games SMS Message Ringtones Polyphonic Logos Wallppers Ringtones Picture Java India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 107SMS costs a very penny amount in India and therefore is the most successful. MMShas not been able to gain potential because most users are unaware on how toconfigure MMS settings on a phone.
108. Content Portals in India • Logos • Picture messages • Ringtones • Flash SMS, Blink SMS • Ringtones • Wallpapers • Screen Saver • Java Games • MMS • Polyphonic ringtones • Picture messages • M-Cards • Ringtones • Hotmail on SMS • Dating • Dating • Logos • Astrology • Astrology • News • Game News • Game News Accessible to Orange and Hutch customers only • Group SMS • Email on SMS • Jokes Downloadable for subscribers of HUTCH, AIRTEL and SPICE • Movies only Downloadable over all GSM Networks India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 108Yahoo, Indiatimes and MSN are leading content portals in India offering range ofservices like Emails, Chat, Dating, Matrimonials etc. For mibile users these portalact as a source for downloading content like ringtones, logos, wallpapers and JavaGames etc. Users who download content are billed by the operator, not by theportal.
109. Leading Content DevelopersCompany Development Platforms Products Alliances J2ME, BREW, Smartphone, Games, logos, wallpapers, Content management forMauj Symbian, SS7 ringtones HUTCH GPRS users on MSN portal J2ME, BREW, Smartphone, Games, ringtones, logos Not KnownOctoplus Pocket PC, Palm, SMS and WAP WAP, SMS, Symbian Ringtones, logos, flash Content creation forPhoneytunes SMS, ASCII SMS numerous operators and portals in India and outsideIndiagames Symbian, BREW, Smartphone Content creation for Games for consoles, PC and Java, I-Mode operator portals, GPRS and Mobile. Also networks, advisory to Advergames. Nokia (one of the eight companies worldwide) Exclusive games for Content developmentParadox J2ME, J2EE, BREW, Java Reliance CDMA for Major CDMAStudios Subscribers operators worldwide. India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 109
110. Gaming Market in India • Industry size < 1 million Euro • Piracy industry: thrice as big • Venture capital funded industry • Hollywood franchising is becoming popular • Spiderman and The Day after Tomorrow • Low development costs, between 50,000 US$ - 100,000 US$, compared to almost 200,000 US$ outside • Some 1 – 1,3 million game downloads each day, more than 50% of these are freebies • Developers get 35% of revenues, rest goes to the retailer (operator or Portal) India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 110The conventional PC gaming has grown into a huge market but the biggest stumbling block for thisindustry is the piracy market. In almost all metropolitan and semi-metropolitan cities, one can findmarkets where almost each and every game is available at almost 10% of the original price. Thesepiracy hubs have existed ever since the computers came into India and it is virtually impossible toeradicate such a huge piracy network completely.Mobile gaming market in India is still in its infant stage. There are good developer companies butthey lack the vision about what to create? Here is a big potential for companies who can givevisionary insights to the local developers and get the product made in almost half the cost.Developers get only 35% of revenues under revenue share model rest goes to the game retailer.Downloading a Java game costs from 1-2 Euro while a simple game costs some 0,3 – 0,5 Euro.Most of the downloaded games are free, offered by operators to gain consumer loyalty.The local gaming developers has so far produced only few of their games as their original productsas most of the time they are doing work upon projects which are actually designed by foreigncompanies for foreign operators. It is estimated that it will take next 3-5 years for Indian gamingindustry to fully mature and to be able to produce content based on local culture.
111. Current products, opportunities and needsProduct category Current products Opportunities and needs • Rintones, Flash SMS, Blink SMS, • SMS content market growingSMS content Prank SMS is very popular • Operators seeking services which render revenues in bulk Ring tones and graphics • Teenagers form main customer group like mobile marketing Trivia and games • Location based services exist without Information services marketing channels! • Operators have outsourced their • Independent portals offering A-Z content is missingMMS and WAP content content management to portals like • Poly’nic ringtones are hit but people would like to compose Polyphonic tones, music clips… Yahoo India their own-and as much as possible in local music Wallpapers, screen savers… • MMS available, GPRS downloadable • Services running on GPRS are in demand content available WAP-based services • WAP based services failed to kick off • All main operators have games • Games segment is expected to grow in coming yearsGames offering • Multiplayer games are expected, not existing J2ME, Symbian… • New opportunity space for business • Developers are available in plenty, concepts are missing Multiplayer games… • Multiplayer games missing • Present development on J2ME, J2EE, Symbian etc. Cross-media games… • Games cost 1 – 2 € each • Mainly games only • Consumers need to be taught upon usageApplications • Email (Yahoo and VSNL) • A whole world of applications needs to be introduced and Apps for media editing explored Communication • Email access on hig end phones is possible but consumer Personal productivity is unaware • Voice mail services need to be refinedOther • Video clips available on CDMA and GPRS • Unified messaging needs to be introduced in a Video clip services etc. comprehensive manner • Long download and buffering times Voice services etc. make consumer reluctant to subscribe • Operators need m-ticketing applications. SMS/MMS TV apps • Complexity in usage of high end phones India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 111
112. Cable TV Networks in India Digital and Analog Signal PURE ANALOG Relay TRANSMISSION Cable TV Service Provider Digital Decoder India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 112In India, the cable TV transmission available for users is an analogue transmission.Most of the TV sets in India are analog. Government is urging channels to startbroadcasting in digital formats (and some TV channels like Zee and Star have doneso) but as the TV sets are not digital, the cable service provides have to installdigital signal decoders and forward analog signals to consumers.
113. Digital TV in India • Amount of TV sets in India: 92 million • Almost 98% of TV sets are Analog, 2% of available digital sets are imported ones • Digital broadcast is available, digital TV sets are not • Cable service provider keeps digital decoders, which turns digital signal into Analog and forwards to consumers • High prices of Digital TV sets make consumers hesitant India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 113Equipment that supports digital transmissions is not made in India, which isstruggling to establish an electronics-manufacturing base, and therefore must beimported. Currently, import duties for much digital transmission equipment are51% percent, making import non-feasible.. "The lack of electronics manufacturingin the country is the biggest problem”
114. What is Missing in Content• M-Banking • Although leading operators like Reliance, Bharti and Hutch have introduced mobile banking, consumers need to be sure about security aspect • M-Banking usage needs to well communicated• Data Services • Enterprise solutions build upon UMS platform needs to be developed and marketed• Local content • Instead of replicating foreign content models, indigineous content cultures need to be followed • Local film industry BOLLYWOOD is a huge source for content • Most of the local ringtones, wallpapers are influenced by Bollywood • M-Content portals (like KEMOPETROL in Finland) hold a huge market potential depending upon introduction and marketing models• Basic Services • Train timetables • Train and flight reservations • Advertising and campaigns build upon location based services India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 114
116. Industry Overview 1221.67Industry revenues saw a growth ofalmost 18%Industry growth largely driven by topthree companies:• TATA CONSULTANCY SERVICES 1031.48• WIPRO• INFOSYS Telecom Software industry revenues in 2002-03 Million Euros 2003-04 India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 116
117. Top 20 Software & Service Exporters Source: Nasscom India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 117The combined revenue of the top 20 software and service exporters in the area ofIT Services, Products & Technology services is US$ 5.77 billion in 2003-04 andhave witnessed a year-on-year growth of 31.6 per cent (in dollar terms) compared tothe total combined revenue in 2002-03. The software and services exports industry(excluding the ITES-BPO sector), recorded revenues of US$ 8.9 billion in 2003-04,registering a growth of 25 per cent over the revenue of US$ 7.1 billion in 2002-03.North America, which accounts for over 55 per cent of the global IT spend,represented 69 per cent of Indian software exports in 2002-03, with Europe rankingsecond at 22.25 per cent of total exports. North America remains the dominantmarket for ITES-BPO (call Center and back office operations) services, accountingfor over 80 per cent of the ITES-BPO business in India. Domain-specific offeringsand end-to-end solutions from Indian services providers continues to drive thevalue and duration of the ITES-BPO contractsIndian companies have been gradually able to increase the European share in totalsoftware and services exports. Indian companies increased their efforts to train theiremployees in various European languages and business culture. In addition,companies are increasingly recruiting local executives in these countriesOver the next few years, the Asia-Pacific region will emerge as a key target regionfor the Indian software and services industry as it will be important for Indianplayers to expand to new regions
118. Industry Growth Drivers • Outsourcing • 50 – 60% cost savings • A medium level expert costs 300 € per month to hire (all inclusive) • 97% on time delivery, compared to global average of 16% • SEI CMM 4 & 5 level companies (around 25) • Presence of over 3.000 IT companies • Skilled manpower • Over 100.000 IT graduates each year • Over 200 Fortune 500 companies already outsourcing to India • Excellent communication networks operational • International Gateways • VoIP • Leased Line • Undersea Cable • Terrestrial Networks • Broadband India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 118Strong Case for Offshore Outsourcing: The offshore model promises to be one of the most important issues confrontingthe IT services sector. Offshore’s popularity has been on the rise for several years (ever since Y2K), but it seems to bepushing further into the mainstream now.Several factors have helped demand:•Customers are growing more familiar with offshore and the experiences thus far have been generally very positive•The business case for offshore is extremely strong - customers can save 25-75% of the cost by moving work offshore(referring to India)•Credibility of offshore pure play service firms has risen as a result of their size•Customer interest in cost cutting remains very highMore Customers to Adopt Offshore Outsourcing: The offshore outsourcing industry is still in early stages developmentwith lots of room for growth. Forrester Research estimates that only 3-4 percent of the Fortune 500 companies offshoremore than 10 percent of their IT services spending.Supply Side Factors (Talent Pool) are Favorable: NASSCOM estimates that 250,000+ students graduate annually withengineering degrees (both 3-year and 4-year degrees). Additionally another 500,000 graduate with non-engineering degrees,suggesting a total pool of tech-ready or ‘tech trainable’ students of 750,000+. The number of students entering 2003’s classfor engineering or technical degrees (and will graduate in 3-4 years) jumped to roughly 375,000. The growth resulted fromincreased student interest (tech industry compensation is easily in the middle/upper-middle class arena and well above thecountry’s average), but also a surge in education institutions geared toward the technology industry.North America, which accounts for over 55 per cent of the global IT spend, represented 69 per cent of Indian softwareexports in 2002-03, with Europe ranking second at 22.25 per cent of total exports. North America remains the dominantmarket for ITES-BPO (call Center and back office operations) services, accounting for over 80 per cent of the ITES-BPObusiness in India. Domain-specific offerings and end-to-end solutions from Indian services providers continues to drive thevalue and duration of the ITES-BPO contractsIndian companies have been gradually able to increase the European share in total software and services exports. Indiancompanies increased their efforts to train their employees in various European languages and business culture. In addition,companies are increasingly recruiting local executives in these countriesOver the next few years, the Asia-Pacific region will emerge as a key target region for the Indian software and servicesindustry as it will be important for Indian players to expand to new regions
119. TATA CONSULTANCY SERVICESCompany Range of Services Clients and PartnersIndia’s first • Banking • Nokiabillion dollar • Telecom • Peoplesoftcompany • Shipping • IBMNo. 1 exporterof services in • Business Process • Ericsson2003-04 • Healthcare • Fujitsu • Insurance • American and Candian Banks • Accounting • Symbian • CAD/ CAM • Adobe • SimTech India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 119
120. WIPROCompany Range of Services Clients and PartnersA billion dollar • Banking • Nokiacompany • Telecom • FujitsuSome 400 • Shipping • Nortelcleintsworldwide • Business Process • SunMore that 100 • Healthcare • Morgan Stanleyclients belong to • Insurance • Telia SoneraFortune 500 • Accounting • OTIS • CAD/ CAM • Corel • Energy sector • GM • Mobile devices • Allliannz • Government • ABN Amro • Storage Technologies • Microsoft • Media and Entertainment • Ericsson • Seagate India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 120
121. InfosysCompany Range of Services Clients and PartnersA billion dollar • Manufacturing • Ciscocompany • Energy • LucentMore than 350 • Retail • Nortelclients worlwide • Financial Services • Siebel • Logistics • Schlumberger • Telecom • Toshiba • Dell • Monsanto • Siemens • Toshiba • Microsoft India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 121
122. Other Major Telecom Software VendorsMahindra British TelecomAxes TechnologiesHughes Software India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 122
123. Chapter SevenFUTURE CHALLENGES Vipul Chauhan
124. What Future Holds?Sectors Present Trends Future Challenges GSM • Intensive subscriber growth • Ensure consistent subscriber additions • > 60% subscribers (new+old) are • Sustain ARPU growth Prepaid • Reduce Customer churn • ARPU has fallen more than 50% • Face competition from CDMA services over last 3 years • Introduce more and more SMS based services • Majority of revenues are from voice based service • Get new subscribers on the basis of content services • Compatible handsets pushing Java Games and GPRS usage • Maintain Service standards • Low GPRS usage • Content services mainly SMS based • A huge market for low end phones (>100 Euro) India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 124
125. What Future Holds?Sectors Present Trends Future Challenges CDMA • Rapid Subscriber additions • Maintain rapid consumer addition rate WLL(F) & • 30% are PrePaid, rest Postpaid • Maintain balance between Prepaid and WLL (M) Postpaid customers • ARPU is > 10 Euro • Correct Billing Problems, ensuring low bad • Handsets are available for as debt ratio low as 10 Euro (with subscription) • Lower the chances of customer churn towards GSM • Smart Wireless internet Access • Migrating to EvDO technology • Billing Problems (for Data usage) • Introduce content with rich user experience • SMS over fixed line (WLL-F) • Use spectrum availability for introducing higher content levels India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 125
126. What Future Holds?Sectors Present Trends Future Challenges Fixed • Intense consumer shift towards mobile services • Reduce customer churn towards mobile services Line • Low call tariffs • Enhanced data services on fixed line • SMS over fixed line available • Offer ADSL, DSL services to existing customers • Fluctuating ARPU • Low subscriber additions • Private operators market share increasing India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 126
127. Challenges facing Operators Counter Competition • Increase subscriber base without lowering tariffs Enterprise Solutions Subscribers • Design and offer cost effective • Avoid consumer churn enterprise solutions • Retain consumers How to? • Introduce VPN, Unified • Boost ARPU by giving more richer Messaging as services to corporate content users Content Business • What to offer and what not • How to touch consumer tastes • Boost subscriber base on the basis of content India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 127Present day, all mobile and fixed operators face four major challenges:•Reduced customer churn•Boost ARPU•Offer enterprise solutions•Introduce new and exciting contentIn a country where the prepaid accounts for more than 65% the total mobile population it issomehow very difficult to monitor consumer churn and retain customers over a long time period.This particular problem could only be solved where operators introduce new and exciting contentfor their subscribers. In a situation where mobile call tariffs have fallen almost by 90% in last 4years, there is a little room to add subscribers on the basis of call tariffs as all the tariffs offered by alloperators are moreover similar. Content and value added services are the only weapons availablewith the operators to manage to survive.On the enterprise side, operators need to have more corporate customers (where the entireorganization subscribes to one single operator). Services like unified messaging, VPN and M-banking are needed to boost their subscribers base among the urban population. WAP was a flop inIndia, GPRS faces a challenge in a situation where much of the non-urban population istechnologically illiterate and additionally handsets should be available at affordable prices.For fixed line operators it is necessary to market SMS facility wisely. Comparing to almost 10million mobile phone subscriber addition during April 2003 and April 2004 fixed line operators (allover India) were able to add only 1.83 million subscribers in the twelve month period. This trend ofconsumer churn needs to be corrected in a proper time by fixed line operators and SMS facility overfixed line is one of the available options among other like DSL services, ADSL services etc. forhome users.
128. Challenges for ISPs Counter Competition • How to leverage the first mover advantage? • Increase ROI Enterprise Solutions Household Consumers • Offer bandwidth solutions • Lure customers into availing broadband solutions for home How to? • Secure networks, VPN • Leverage VoIP based services • Web conference usage India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 128Although the internet population in India is growing, the ISPs on the other handface a tough competitive situation where they need to have more subscribers tobreak even on their network investments and at the same time also introduce newand better services (content and value added services).Operators like Bharti, Reliance and BSNL have made substantial investmentstowards laying an optic fiber network across the country to offer high bandwidthfor corporates as well as home users. These huge investments make it mandatoryfor operators to market their services aggressively. Operators are presentlyevaluating corporate users and households at the same level because they have ahuge pressure on themselves to add more and more subscribers by whatever waypossible.Voice over internet has been allowed in India since April 2002 but it has not beenable to take off very well as the internet and PC penetration in India is still very verylow. ISPs now have to focus upon using VoIP as a marketing tool. Cyber cafesand household consumers are new target groups for ISPs who would like topromote VoIP. Web conferencing and high bandwidth availability are two of themajor products for the corporate users. ISPs also need to build upon theirsubscriber base by way of luring household consumers to avail broadband optionsfor home use.
129. Chapter EightSTRATEGIES Vipul Chauhan
130. Where are the Players active? Present focus Area Fixed line Operators Value added services on fixed line like SMS. ADSL access GSM Operators Raising ARPU through content downloads like tones, MMS, wallpapers, Java games, online TV polls, boosting GPRS usage CDMA Operators Raising ARPU through content, Pre Paid roaming, ISP model Content Multiplayer games, J2ME, J2EE, Rich user experience Developers Content Portals Boosting content downloads and service request messages ISPs DSL and ADSL connections mainly for corporate users India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 130Presently fixed line operators are mainly focused upon reducing customer churnand marketing their value added services over fixed line. Fixed line operators arelooking forward to market the SMS facility over fixed line phones in a big way,perhaps this is the main reason for consumer churn in the industry wherebyconsumers tend to shift towards mobile services.GSM and CDMA operators are facing a tough challenge to stabilize and increasetheir ARPU. Boosting the ARPU is only possible through content services and notby hiking voice call tariffs because tariffs are regulated by the Government.India is still a very small player if we talk about some 24 billion USD gamingindustry worldwide. There are good content development companies who arepresently focusing upon game development for symbian, Java, handhelds and smartphones. These content development companies are now focusing upon taking anext step towards game development for playstation, xbox, gameboy and other highlevel gaming.Content portals are making their presence felt in a big way. The variety of contentavailable at their portals is immense, some of them are downloadable over GSMand CDMA networks like ringtones, logos, wallpapers etc. These content portalsare focusing upon introducing next level of services over mobile networks such asM-ticketing, M-auctions, hotel reservations etc.
131. Cooperation with external parties Foreign company selling value added services, technology, hardware, Operators solutions Indian buyers prefer buying from local Local contact. Payment is made in local Content Portals Direct Partner currency, easy to follow up and register complaints Approach Don’t necessarily need a local contact to sell ISPs or buy Content Developers Telecom Software Vendors India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 131Indian companies (operators, ISPs etc.) prefer buying from a local contact. Thereare various reasons for doing so:-•Easy to follow up•After sales•Easier to communicate with•Possibility of paying in local currency (INR)•Local partner is subjected as to local legal laws (Indian legal system is based uponthe English one)The need for a local partner exists in all three business segments i.e. operators,content portals and ISPs.In a situation where the Finnish company is looking for outsourcing of softwareand application development, a local partner is not needed. However, it isrecommended that an intensive background check is done before signing anycooperation agreements. Having a good legal firm to protect your interests will bean asset.
132. A Good Partner Evaluation Parameters How to begin the Partner Search Financial Health Get the background Customer Report References Background of the Reference Check Directors Credit Information Bankers Business Human resources Intelligence Legal Litigation Does he walk the talk or just talk India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 132It is infact quite a challenging task to define that what is actually meant by a goodpartner?Financial health of the partner is the most essential element in the evaluationparameters. A partner who can invest his own resources in marketing andpromoting is an asset. In a huge country like India, marketing and promotionactivities cost a huge amount of money as the domestic transport systems are notcheaper (airlines etc.) so it is must to get a partner who has enough resources tospend towards these things. Financial health is also correlated to having a countrywide network, as a part of local business culture, people feel good to join handswith a financially sound company.Checking the background of the company is also equally important. Informationabout bankers, balance sheet, founders and profits is critical while making apartnership decision. Finpro provides background check and various otherfacilities for the Finnish companies.
133. Cooperation parameters TRANSACTIONS I don’t want to buy Dollars or Euro to pay you, can you accept local COOPERATION currency? BASICS REFERENCES Your solution might be excellent, but who are your existing customers? SYNCHRONIZATION AFTER SALES Are you selling something which is Whom shall I contact in case of too advanced for present times? breakdown or servicing? Do you We might need it tomorrow but not have a local contact today! COMPETITIVE EDGE Will I be able to sell my services better after I buy your solution? CRITICAL COST SUCESS How affordable is your FACTORS solution? Is there anybody selling cheaper than you? India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 133The most critical success factor in India is the cost of your solution.Several companies from SEA region like Singapore and Malaysia have started tooffer cheaper and cost effective solutions to operators and ISPs, this situationdeteriorates the chances for the European and other companies to be able to selltheir services and solutions in India.Even if someone manages to sell, the next big question is how to handle the aftersales services and maintenance? In such a situation a local service provider(partner) is needed. Similarly, if the European company is willing to sell then theyshould be ready accept the local currency towards payments for their services, thisfurther emphasizes on having a local partner.It is advised to the companies who are coming on a business trip to India tocarefully prepare themselves for answering the COST, AFTER SALES ANDPAYMENT ISSUES.
134. Chapter NineFINNISH COMPANIES IN INDIA Vipul Chauhan
135. Finnish Companies in IndiaCompanies Since Activities 2000 - • Agent in New Delhi • Plans to Start manufacturing operations towards ELCOTEQ ELCOTEQ 2004 - end of 2004, Plant location will be in Bangalore 1990 - • HQ in New Delhi, 2 R&D Centres- in Bangalore & Hyderabad • Nokia Ventures, Nokia Networks, Mobile Phones • Agent in Bangalore, marketing for Nethawk 2003 - 1999- • Own office in New Delhi • Selling solutions to Mobile Operators India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 135
136. Chapter TenCONCLUSIONS Vipul Chauhan
137. Doing Business with Operators - opportunities Enterprise solutions, VPN, Secure M- Commerce, MobileVirgin Territories Marketing, Location based services, Tracking systems Potential Areas M-Banking, MMS, M-Ticketing, Applications on GPRS, CDMA, Streaming media, Telematics, Instant messaging SMS, MMS gateway, one touch services, SMS chat, Entertainment guides, online bill Saturated Areas view, TV Poll synchronization India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 137
138. Doing Business with Content Developers and Portals Content for basic low-end phones, richer content like JavaVirgin Territories games etc. for latest handsets, content and applications downloadable over GPRS, multiplayer gaming, SMS ticketing, Content Portals like Kemopetrol Potential Areas Content hosting, ASPs, Stock quotes, M-Banking, Weather updates, streaming mp3s, air tickets, games having local touch SMS Chat, dating, news, TV polls sync. MMS, Group SMS Saturated Areas India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 138
139. Niches for Finnish Companies Content Business Business • Development with platforms J2ME, ISP Business Operators J2EE, BREW, Smartphone, PDA • Multiplayer • Value added • ASP model games service on ADSL • Instant messaging • Streaming media • Wi-Fi broadband over GPRS and solutions • Mobile Marketing CDMA (Streaming • Wi-Fi secure • M-Commerce, players) access banking • VoIP services • GPRS applications India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 139Indian operators prefer application service providers who can host the application themselves andthe operator pays a monthly fee. ASP models therefore is one of the most simplest way to startbusiness with the operators. Instant messaging is another potential area where Finnish companiescan contribute so far only Airtel has instant messaging installed (provided by ACL Wireless). Mobilemarketing is another big concept which operators would like to know more about. M-banking isoffered by leading operators (SMS based) but there is plenty of room to offer enhanced applicationsfor M-banking. Operators are offering downloadable content and news services over GPRS butthere is a lot more to be offered under content and applications built upon GPRS platform.In the content business, India has the resource availability (software and application developers) butthe companies lack vision about what to develop? Finnish companies can very well contribute hereby bringing along their vision and concepts to these development companies and use their resourcesto build a user application (games). India is preparing itself for migration to 3G in next 1-3 years,this means there is a huge potential especially on the content side which needs to be exploited.Streaming media, multiplayer games, M-Commerce are just some of the examples of potentialbusiness segments.For the ISP businesses, there is of course an option to enter into the Indian market as a foreigninvestor (the FDI limit is 74%). Other then that ISPs presently lack on the content side. Games,puzzles, city guides, air and train timetables are just some of the content types which are needed bythe consumers.
140. Stumbling Blocks • Political instability • Change in taxes and duty structures • Change in foreign direct investment rules • Lobbying between CDMA and GSM operators India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 140Political instability is the main cause of policy changes in the Indian businessenvironment. Although, Governments are concentrating upon uplifting the basicinfrastructure facilities there is a great deal of opposition to each and every movemade by the Government because since 1990, no single party has got any majorityin the elections and present day Government constitute of various small parties. Allthese allies of the Government are difficult to predict and therefore, theiropposition can affect any future plans.Above scenario also implies on taxes and customs duty aspect. Any rise in taxes(on operators, service providers etc.) can have negative implications on the entireindustry. Similarly, hike in customs duties can also boost the gray market(handsets).Presently the FDI limit in telecom is 49% and as per the new budget announced inJuly 2004, it is proposed to hike this upto 74%. These positive developments arevery much welcomed by the industry and the outside world but any negative moveby the Government might result in a drastic situation where investor confidence isbrought down.
141. THANK YOU For Further information please Contact: Markku Vantunen Senior Consultant, Finpro Helsinki Markku.firstname.lastname@example.org Vipul Chauhan Country Manager, Finpro India Vipul.email@example.com India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 141
142. References• Cellular Operators Association of India• Department of Telecommunications• Association of Basic Telecom Operators• Voice and Data• IDC• Gartner• Cybermedia Research• Tele.net• Telecom Regulatory Authority of India• Nokia• Naavi.org India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 142
144. Fixed Line Operator ContactsBharat Sanchar Nigam Limited Reliance Infocomm Ltd.Statesman House, B-148 Dhirubhai Ambani Knowledge CityBarakhamba Road Navi Mumbai 400709,New Delhi-110 001 IndiaMahanagar Telephone Nigam (MTNL) HFCLJeevan Bharti – Tower 2, 8, Commercial Complex Masjid Moth,Connaught Place Greater Kailash-IINew Delhi New Delhi - 110048Bharti Tele-Ventures LimitedQutab Ambience (at Qutab Minar),Mehrauli RoadNew Delhi-110030 India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 144
145. CDMA Operators ContactReliance Infocomm Ltd. Bharat Sanchar Nigam LimitedDhirubhai Ambani Knowledge City Statesman House, B-148Navi Mumbai 400709, India Barakhamba Road New Delhi-110 001HFCL8, Commercial Complex Masjid Moth, Mahanagar Telephone Nigam (MTNL)Greater Kailash-II Jeevan Bharti – Tower 2,New Delhi - 110048 Connaught Place New DelhiTATA TelecomDLF Square, II Floor, M-Block Shyam Telecom LimitedJacaranda Marg, DLF City Phase-II, A-60, Naraina Industrial Area,Gurgaon - 122002 Phase-I, New Delhi 110028 India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 145
146. Customs Duty on Handset Import• The duty stands @ 5%• There is no dicrimination on the country of origin India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 146
147. Customs Duty on Telecom Equipment• The duty stands @ 35% on all hardware equipment• The duty on unfinished goods like RF cables is 15% India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 147
148. Foreign Investment Guidelines• FDI limit is proposed to be hiked to 74% from existing 49%• Proposals are to be cleared by Foreign Investment Promotion Bureau India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 148
149. Abbreviations Used in the Slides• BSNL – Bharat Sanchar Nigam Limited (State owned Operator)• MTNL – Mahanagar Telephone Nigam Limited (State owned Operator, offering fixed, mobile, ISP services in New Delhi and Mumbai only)• STD: Subscriber Trunk Dialing• ISD: International Subscriber Dialing• ILD: International Long Distance• NLD: National Long Distance• ISP: Internet Service Providers• DSL: Digital Subscriber Line• ADSL: Asymmetric Digital Subscriber Line• VoIP: Voice over Internet Protocol• FDI: Foreign Direct Investment India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 149