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The Indian Telecom Success Story

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Article titled: The Indian Telecom Success Story

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The Indian Telecom Success Story The Indian Telecom Success Story Document Transcript

  • 02. Global Telecommunications Market
  • Global Telecommunications MarketTelecom remains as a silver lining in the dark clouds of France is one of the top three European countries in fiberrecession hovering above the global economy. The global deployment. The increased investment in broadbandtelecom services market is poised to generate USD1.4 infrastructure along with increased competition and reducedtrillion in 20091, despite the economic slowdown. Emerging price is driving converged services (Dual and Triple Play) andeconomies will still invest heavily in network infrastructure, boosting IPTV subscriber base, making France a leadingwhile recession-hit economies will delay upgrades. The Asia- IPTV market in Europe. Cable TV operators in Brazil &Pacific region will experience the highest growth rate in the Mexico with the help of dual play and triple play packagesnext five years, at nearly 16 percent, led by China and are looking forward to drive their ARPUs in the time toIndia2. The telecom sector in Latin America and the come. In Kenya, an ISP has introduced triple play serviceCaribbean will grow by 12 percent, fueled by emerging under the brand ‘Zuku’, offering TV, Internet and VOIPeconomies and the expansion of the middle class. services. In the Middle East, Bahrain’s’ Batelco has rolled out NGN to drive converged services; while Qatar’s Qtel has launched triple play under the brand ‘MOSAIC’. In Poland,Triple Play to ride on Broadband growth the fixed broadband (ADSL, Cable) operators are increasingly looking to double- and triple-play packages,The growth of broadband access has fueled demand for resulting in a number of IPTV deployments. In Russia also,converged voice, video, and data services-now known as triple play is to give a new fillip to IPTV deployments.the "triple play". To garner new customers, hold on to currentones, and ensure revenue growth, todays providers mustcontinue to move toward offering the triple play as a value-added service bundle.1 CPI Financials, “Global telecom services market to generate USD1.4 trillion 2 Insight Research, “Global Telecom Services Revenue Forecast: Emerging in 2009” August 2009 , Market Opportunities” 2009 ,© 2009 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.
  • The Indian Telecom Success Story | 06Mobile Payment fostering a trend for cashless Rural Expansion to help offset urban saturationtransactions China, the worlds largest telecom market, attributes itsM-PESA is an innovative new mobile payment solution that phenomenal growth to rural areas. The countrys largestenables customers to make simple financial transactions operator, China Mobile, credits rural areas with contributingthrough the mobile phone. The M-PESA scheme relies on an around 50 percent of its millions of new subscribers. Whileapplication in the mobile phone SIM card, which is going rural, China Mobile managed to avoid an Averageauthorized by a PIN code and does not require any special Revenue Per User (ARPU) fall by creating a demand fortechnology. high-margin value added services such as SMS, music downloads and ring tones.Currently, the service is mainly aimed at mobile customerswho do not have a bank account, typically because they do However, the road to rural expansion would have severalnot have access to a bank or they do not have sufficient road blocks like land acquisition (Lease/Purchase) for BTS,income to justify a bank account. The money is held safely availability of cheap and fast backhaul connectivity, costsin a bank account run by M-PESA on the user’s behalf and associated with setting up telecom infrastructure, availabilitythe user does not have any contact with the bank nor does of adequate power supply, higher operational &the bank have the user’s details. The M-PESA system allows maintenance costs and lower purchasing power of ruralcustomers to deposit and withdraw cash via local agents population. The Operators are taking adequate steps toand transfer money to other mobile phone users via SMS. In counter these challenges:a country like Kenya where 90 percent people do not have a • Micro Financing: Grameen Phone in Bangladeshbank account, the M-PESA service has seen a dramatic provides microfinance options to set up Village Phonetake-up since its launch. As of March 2009, the service had Operators (VPO). Grameen Bank provides a loan packageover 6.5m registered users (vs. 2.1m in March 2008) with to select VPOs to purchase a handset and operate their2m daily transactions in Kenya alone. M-PESA is distributed VP business.through 8,650 retail outlets countrywide (2,262 outlets inMarch 2008). This take-up clearly demonstrates the demand • Developing locally relevant content: Qualcomm’sfor easily accessible, secure cash payment services in Fisher Friend BREW application has been implementedemerging markets. More recently, commercial M-PESA in coastal Tamil Nadu. The application works on 3Gservices have been introduced by Roshan, the leading CDMA handsets and gives fisherman access to timelymobile operator in Afghanistan, and by Vodacom in Tanzania. weather alerts, real-time data on fish migration, market prices and updates on relevant government schemesIndian operators have launched similar initiatives. Offerings and policies in the local language.from some operators enable a mobile phone user to send orreceive money instantly using their mobile phone to • Setting up viable distribution and collectionauthorize the transfer. According to the GSM Association, channels: Mobitel, Sri Lankas National Mobile servicesmobile money in emerging markets could bring in USD7.9bn provider, expanded its rural penetration with a tie-up withof sales for operators by 2012. Money transfer services for the Sri Lankan Postal Department. As per the deal, posthandset owners without a bank account may bring in offices and postmen could sell Mobitel prepaid cards toUSD5bn of transaction fees and text message-linked rural customers.revenue by 2012. Indirect revenue, including revenue fromgreater customer loyalty, will probably amount to USD2.9bn.© 2009 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.
  • 07 | The Indian Telecom Success Story Technology and Content to drive the growth The effects of the slowing US economy became more predominant with all operators reporting a decline in ARPU in the final quarter of 2008. However the prevalence of more sophisticated high end handsets has helped drive growth. An increased reliance on mobile content will be the defining the trends of the US mobile market in the next one year although the range of services on offer will be operator specific. While the economy is already negatively impacting the infrastructure and handsets segments, consumers have not yet begun cutting their overall mobile data spending. The confluence of 3G, high-end devices and the evolving applications ecosystem were responsible for the strides made by mobile data in 2008. In Europe, Telefonica, which is O2’s parent company have outperformed, attributable to the continued success of high- end devices such as the iPhone which it carries exclusively. The main growth engine in Japan, in both the fixed and mobile sectors, is data services. When it comes to Mobile TV, Japan is the largest subscriber base globally. WAP/Internet browsing, ring-tones and music contributes up to two thirds of Japans data revenues. • Encouraging entrepreneurial spirit: Pakistan South Africa on the other hand is expected to witness Telecommunications Authoritys Rabta Ghar initiative strong private investment in the run-up to the 2010 FIFA encourage rural entrepreneurs to set up local World Cup and this will remain a key driver for growth in telecentres. PTA, with support from telecom operators, 2009. With mobile penetration crossing 100 percent, provides these local entrepreneurs with free equipment, operators are looking at alternate revenue streams: Mobile installation and training. broadband combined with media content. The launch of • Exploring alternate fuels: Ericsson and Orange Guinea 3G/HSPA provides them with an opportunity of service Conakry recently announced the deployment of over 100 differentiation by providing mobile broadband, combined fully solar-powered BTSs to provide connectivity to rural with media content. In Czech Republic, the mobile operators Africa, which is expected to reduce energy bills by 50 are looking at content and application through HSDPA based percent. mobile broadband and mobile advertisement as future growth option. • Government support: The Indian government provides a subsidy under USOF for companies developing rural telecom infrastructure. The government and the industry have set up a joint initiative known as Project MOST (Mobile Operators Shared Towers) to identify rural and remote areas not being covered by USOF.© 2009 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.
  • The Indian Telecom Success Story | 08 ‘ The Asia-pacific region, with India in the lead, will be the key growth market for global telecom over the next few yearsIn times of Recession Mobile subscriber base (% share of world)Most of the telecom companies in the developed andemerging markets have launched a points-based loyalty China,program; while a small percentage opted for discounting 19%their services, with the rest choosing different promotionaland marketing initiatives. With all players facing challengesin terms of increasing their Average Revenue per User(ARPU) and avoiding customer churn, most are forced toimplement programs on tight margins. India, 12% Others, 62%Asia: The Epicenter of Telecom Growthworldwide USA, 7%Asia is a booming market with countries like Japan andSouth Korea implementing advanced technologies while theChinese market is poised for growth after restructuring and Source: EIU3G license auctions. India and China contribute 31 percentof world’s subscriber base; yet the mobile penetration ratesare not as high compared to US or other developed Japan with over 30 million broadband lines in place, is theeconomies. Needless to mention, further growth is third largest country in the world after the US and China inexpected to be witnessed in this region. terms of broadband users. Much of the success of broadband in Japan is owed to the stunning growth surge that occurred back in 2003 on the back of DSL broadband technology. The restructuring of the Chinese telecom market has changed the competitive landscape of the country. With the largest mobile and broadband subscriber base, the market has stayed relatively insulated from the global meltdown. Post restructuring and the awarding of 3G licenses in December 2008, the market is poised for yet another boost. The restructuring will provide huge market opportunities to communications equipment manufacturers, thus accelerating the all-round upgrade of telecom operation support systems.© 2009 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.
  • 09 | The Indian Telecom Success Story Mobile Subscriber Data (Millions)Source: Pyramid Research, National Bureau of Statistics, CEICFixed Line Data (Millions)Source: Pyramid Research, National Bureau of Statistics, CEIC © 2009 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.
  • The Indian Telecom Success Story | 10Indian telecom crossed the target of 500 Million (Wireless operators are trying to increase their share by offering& Wire-line) Subscriber in September 20094. Buoyed by the bundled services over the wire-line network. The Middleentry of new telecom players the Indian telecom industry East region shows a balanced approach towards wirelessclocked the highest subscriber addition of 15.87 million broadband services. The telecom industry in North Americasubscribers in March, 20095. India overtook US to become has taken a hit as a result of the economic meltdown andthe 2nd largest mobile geography after China. reduced consumer spending while in South America, the operators are constantly looking to innovate by providingFixed Mobile Substitution (FMS), provision of bundled video-on-demand and other bundled services in order toservices and increased concentration on wireless broadband increase the number of subscribers. The epicenter ofis the global trend presently. In Africa, broadband telecom market continues to be Asia where China and Indiapenetration is increasing due to cheaper subscription on continue to play a key role.account of new submarine cables reaching its shore androllout of wireless broadband services. In Europe, all4 TRAI, November 20095 TRAI, April-May 2009© 2009 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.