Indian Telecom Market Overview

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Key Findings of the Study:
 More than 3-fold increase in subscribers since 2008
 64.4% of the current subscribers are urban
 Total wireless segment accounts for 933.7mn
 Wireline accounts for a 3.2% of the overall market

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Indian Telecom Market Overview

  1. 1. Zinnov Management Consulting Indian Telecom Market Overview – October 2012To access full report, please send your request to Info@zinnov.com This report is solely for the use of Zinnov Client and Zinnov Personnel. No Part of it may be quoted, circulated or reproduced for distribution outside the client organization without prior written approval from Zinnov.
  2. 2. Agenda 1 Telecom Market Overview 2 Key Technology Trends and Partnerships 3 Government Regulations 2
  3. 3. Indian telecom industry is characterized by a large subscriber base, substantial tele- density but low revenues per user (ARPU1) Telecom Industry Landscape (July 2012) Global Comparison of 33.8 37.4 38.7 ARPUs (USD) 32.0 31.7 31 46.5 34 36 38 32.0 852 934 39 636 5.9 427 3.8 2.6 2.1 1.9 287 2008 2009 2010 2011 2012 8.3 28.3% 39.9% 56.6% 73.9% 79.6% 1.9 Wireless Subscribers (Million) Wireline Subscribers (Million) GSM ARPU (USD) Revenue (USD Billion) Tele-density US UK China India Large Subscriber • More than 3-fold increase in subscribers since 2008 Base • High tele-density of 79.6% in 2012 Indian telecom ARPUs are amongst the lowest worldwide Urban • 64.4% of the current subscribers are urban DominanceNote: 1Average Revenue per User 3Source: TRAI
  4. 4. Focus on Mobile Value Added Services (MVAS) opportunities is necessitated by declining share of voice in telecom ARPUs Average Per User Spending on MVAS (USD) 86.7% 0.31 81.4% 78.6% 72.7% 0.34 0.39 0.48 1.50 1.44 2.04 1.27 27.3% 18.6% 21.4% 13.3% 2009 2010 2011 2012 Spending on Voice Spending on MVAS MVAS as a %age of ARPU Voice as %age of ARPU Declining voice In an effort to revenue straining Declining voice Growing smartphone compliment the revenue straining ARPUs Carriers increasingly Growing smartphone adoption and declining voice ARPUs focusing on adding adoption & increasing increasing mobile However, per user revenues, carriers value added services to internet penetration, mobile internet spending on MVAS However, per user increasingly focusing their portfolio to penetration further further pushing increasing on MVAS spending both as a on adding value added supplement revenues proliferationMVAS pushing of value percentage of ARPU increasing services to their added services and as an absolute portfolioNote: 4Source: IAMAI
  5. 5. Indian MVAS market expected to move from the traditional SMS based services to internet based and app based services Indian MVAS Market Size (USD Bn) Revenue Share MVAS categories 10% 5.1 Emerging 7% 27% Current 60.4% 4.3 MVAS (37%) 5% MVAS (63%) 38.4% 7% 3.1 1.9 8% 14% 19.9% 17% 1 5% 2009 2010 2011 2012 (E) CRBT News Reverse CRBT Market Size (INR Bn) Y-o-Y Growth Rate SMS Based Games Education Governance Health Mobile App Growing at declining rate, Emerging MVAS categories are Indian MVAS industry is dependent primarily on expected to value ~USD 6.6 • Telecom infrastructure billion in 2013 • Type of handsetNote: 1Caller Ring Back Tone 5Source: IAMAI
  6. 6. M-Health M-Governance M-Education M-Infotainment M-commerce M-Agriculture Amidst visible traction for M-Governance in India, government pushed m-governance framework to aid adoption Many Indian states have initiated m-governance Government pushing directives to aid practices primarily through SMS-based platform governance across richer delivery platforms Kerala Bihar M-Governance Framework for Public Services • M-governance used across • Web based monitoring health, education, law, system at general admin Uniform pre- agriculture, finance department using SMS One-Web approach functions updates sent by relevant designated codes to make websites officers for mobile-based mobile compliant services Gujarat Andhra Pradesh • Municipal Corp using GPS Deployment of Adoption of open • Rajkot Municipal Corp using SMS for sending enabled phones to mobile apps for standards for property tax alerts, remotely monitor cleaning public services platform agnostic payment reminders, and of garbage bins across depts. apps vaccination alerts Goa Creation of MSDG1, a shared technical e- governance infrastructure for delivering • ‘e-SMS Goa’ initiative aimed at easing the process of public services information delivery to citizens through the use of mobileNote: 1Mobile Services Delivery Gateway 6Source: Ministry of Communications & Information Technology, Department of Information Technology; Press articles, State government websites
  7. 7. M-Health M-Governance M-Education M-Infotainment M-commerce M-Agriculture Major telecom players are enabling mobile platform as a medium to impart education Educational firms • Edserv & Tata DoCoMo to offer IIT and AIEEE • Educational firms partnering with telecom players collaborating with to deliver education and expand their presence prep material through ‘Tutor on Mobile’ telecos service Telecos taking CSR • Aircel and MTS partnering with NGOs, such • Telecom players partnering with NGO’s as a CSR as Concern India and Smile Foundation for initiatives to impart initiative to deliver education underprivileged children educational education initiatives • Airtel imparts education through IVR which Telecos delivering includes • Delivering basic level of education using mobile as • Sparsh- Education to adults basic level education a medium • English speaking course & Children stories Expanding reach of • Reliance communication delivering • Using mobile platform to expand the reach of interactive, real time courses of XLRI1 across education through classroom education (e.g. in rural areas) 105 cities mobile networkNote: 1An Indian Business School 7Source: Company websites; Press Articles
  8. 8. M-Health M-Governance M-Education M-Infotainment M-commerce M-Agriculture Almost all leading telecom companies provide information and entertainment related services M-Infotainment is the largest contributor to overall MVAS revenue Key Information Key Entertainment Categories Categories Sports Music and Video • Live coverage & scores, results, analysis and reviews • Radio services round the clock of sporting tournaments like CL T20, CB series etc. • Offers movies-on-demand service and Video-on- demand portal Travel Ringtones • Information on flight, railways, taxis schedules and • Huge library of songs is available fares • Templatize & personalize caller tune News and Finance Content offering • International , national and regional news • Indian mythological stories in different Indian • Stock updates, foreign exchange rates alerts services languagesNote: 8Source: Company websites; Press Articles
  9. 9. M-Health M-Governance M-Education M-Infotainment M-commerce M-Agriculture Telecom carriers increasingly taking interest in m-commerce services as the government aids through reforms M- Microfinance Mobile wallet service M- Retailing • Enables microfinance activities • Pay for a wide range of services • Retail players developing through mobile phones and goods mobile compliant websites & apps • Focus on expanding reach Use Case: Use Case: Use Case: • Flipkart and Naaptol • SBI with Ekoaspire & Oxigen • Allows users to load cash provide android Apps Sahyog, is providing banking on their mobile devices to • SMS alerts for DoCoMo & microfinance services in pay utility bills etc. subscribers on wide range rural areas of product & services along with discount benefits on snapdeal Government initiatives in M-commerce • RBI increased mobile payment limit to INR 50,000 (~USD 1,000) • RBI granting Semi-Closed Wallet1 licenses to telecos • Creation of Interbank Mobile Payment Service (IMPS), by NPCI2 along with 6 Nationalized banksNote: 1A mobile payment mechanism allowing users to load cash into their mobile phones; 2 National Payments Corporation of India 9Source: Company websites; Press Articles
  10. 10. M-Health M-Governance M-Education M-Infotainment M-commerce M-Agriculture M-agriculture services finding traction with Indian farmers • Key services includes commodity prices, local Grameen info, weather updates etc. VAS • Multiple language support M- agriculture services • Accessible via voice bridge the information portals, SMS, USSD1 and gap between the Data farmers and market conditions M-agriculture initiatives Bahtar Fasal Zindagi • IVR based service available in 16 regional languages • Free SMS based platform offering real time price information to Indian farmers about their crops • Provides information related to weather, agriculture, mandi rates, live stocks, health, rural finance, and education • Huge adoption with more than 20,000 farmers being added every weekNote: 1Unstructured Supplementary Service Data 10Source: Company websites; Press Articles
  11. 11. Telecom companies are also aggressively focusing on the fast growing data center market in India (1/2) Data Center Market & Distribution of Data Center Market in Capacity in India India by Ownership, CY11 Data Center Market (USD bn) 5.7 Key Verticals: Data Center Capacity (mn Sq. Ft.) • BFSI • Manufacturing 4.2 Captive • Government 78% • Telecom 3.1 Third Party Key Verticals: 4.0 22% • Manufacturing 2.6 • IT-ITeS/ Telecom 1.7 • Healthcare • Education CY10 CY12 CY14 • Based on the demand preferences, the 3rd party datacenter market is expected to grow rapidly as opposed to captive data centers CIO Preference for Data • Lack of in-house skills, high investments, and long gestation periods pose challenges for captive datacenters in India Center (Survey Responses) MNC with Cant Say Competitor DC Tier Cost Components Cost Share datacenter 7% Tata Communications II/III Power 38% outside India 7% Ctrls IV Maintenance 21% Domestic MNC with NetMagic III+ company with datacenter in Bandwidth 12% datacenter in India Reliance IDC III+ India 50% Equipment 12% My own Airtel III/III+ 8% Facility 10% datacenter Wipro III 28% Sify III Manpower 7%Note: 11Source: Gartner; IDC; Company websites; Cyber media; mit.gov.in; Zinnov CIO survey 2010; Zinnov Analysis
  12. 12. Key telecom players have also created an extensive portfolio for cloud based services Cloud/ Hosting Portfolio of Key Telecom Companies Airtel Reliance Comm. Tata Comm. ERP   F&A  Applications CRM  (SaaS/ Hosted) HRM  Web Collaboration   Email    IaaS/ Virtualized Infra.    PaaS Co-location    Data Center Services Managed Hosting    • Vertical Specific Soln. • Vertical Specific Soln. ofor Media & Entertainment ofor Media & Entertainment oCore Banking Soln. • Online Desktop (VDI) • On demand security Other Key Offerings • On demand security • On demand security • Enterprise Mobility • Hosted Contact Center • Hosted Contact Center • Enterprise Mobility • Productivity Suites • Enterprise Content Management 12Source: Company websites, Primary interviews with key industry stakeholders; Zinnov Analysis
  13. 13. Accordingly, the telecom companies have also established key partnerships to buildcloud expertise Key Technology Partners of Key Telecom Companies Competitor Technology Partners (Software) Savvis Ramco VeriSign Airtel Microsoft Tally VMware Symantec Software developers for mobility apps Reliance Comm. Ramco Microsoft BigRock Zoho SugarCRM Cisco Tata Comm. SuccessFactors Microsoft Google F-Secure Hardware Partnerships Network Carrier Partnerships Besides software partnerships, all competitors have formed All data center service providers have strategic alliances with technology partnerships with most of the key hardware OEMs key network carriers (like Airtel, Reliance, BSNL, etc.) to like HP, IBM, Cisco, Juniper, etc. provide connectivity options to their customers 13
  14. 14. Agenda 1 Telecom Market Overview 2 Key Technology Trends and Partnerships 3 Government Regulations 14
  15. 15. There is mature adoption of IT across the entire value chain of the telecom vertical Telecom Value Chain Subscription Telecom Network Network Content & Devices1 Subscribers Infrastructure Equipment Operator Portals Resellers Bharti Airtel Company Outlet GTL - Nokia-Siemens Vodafone Dealers Facebook Infrastructure Huawei Reliance Comm. Blackberry Rediff Indus Towers Ericsson TTSL2 Huawei App stores Tata Quippo Alcatel Lucent Sun Direct UTStarcom Core IT Network Enterprise Partner Customer Requirements Management Management Management Management ICT Solutions Across Processes •Fault Management •Finance & Accounting •Partner Network •Service Activation •Config. Management •HR Management •Revenue and Billing •Account Management •Sales & Operation •Supply Chain Management •Performance Planning Management •Customer Analytics Management •Facility Management •Revenue Fraud •Contacts Centers/Call •Security •DBMS3 Management Centers Customer Portals/Customer Support (B2C/B2B) Supply Chain Management Enterprise Resource Planning VAS Management Network Solutions Data Warehousing and Business Intelligence OSS/BSSNote: 1Devices include mobile handsets, modems, routers, set top boxes, etc.; 2Tata Teleservices Ltd.; 3Database Management System 15Source: Zinnov Analysis
  16. 16. However, Indian telecom firms face various challenges in the adoption of IT Lack of clarity on Uncertain government consumer preferences regulations Predictability of future Management issues in IT requirements is PSUs difficult Challenges in IT AdoptionFalling ARPUs affecting High operation costs in profit margins remote areasNote: 16Source: Primary Interviews with the CIOs; Zinnov Analysis
  17. 17. IT spending of the Indian Telecom vertical has grown at a rate of 14.3 per cent in FY12 IT Spending in Telecom, USD billion IT Spend Distribution Hardware BPO 2.4 39.5% 24.8% 2.1 Services Software 29.7% 6.0% FY11 FY12 IT Budget as a Per cent of Revenues Percentage Outsourcing 5% to 6% 70% 3% to 4% 67% FY07 FY12 FY07 FY12Note: 17Source: Nielsen Domestic IT-BPO Study 2010; Primary Interviews with Stakeholders in the Indian IT ecosystem; Zinnov’s Survey of 100 Indian CIOs across Verticals (2010); Zinnov Analysis
  18. 18. Telecom companies are spending on upgrading their technologies and in better management of business processes Upgrading Legacy Infrastructure Platform Integration Managing Partner Network IT Adoption Trends in Telecom vertical Implementing Security Solutions New Infrastructure for Datacenter/Network Expansion Private Cloud AdoptionNote: 18Source: Primary Interviews with the CIOs; Zinnov Analysis
  19. 19. Supply side companies are launching a host of initiatives to come up with better solutions for the telecom vertical Strategic partnerships to develop customized solutions New business models Tech Mahindra entered into an alliance with Quality outsourcing work is done out of Microsoft to offer customizable BI solutions large city centers while voice-based call to telecom service providers centers are operated out of tier II and tier III cities. E.g.. Aditya Birla Minacs and Hinduja Global Solutions Key Initiatives Acquiring firms for capacity Taken by the expansion Supply Side Establishing telecom specific OnMobile Global Ltd. acquired Dilithium research centers Networks Inc. to get access to Dilithium’s extensive patent portfolio and enrich its offerings in 3G video mobile services Wipro and Nokia Siemens Networks have established dedicated centers and testing labs for 3G and other telecom specific technologies Encouraging innovation and training ecosystem VerSe Innovation Pvt. Ltd. partnered with OnMobileNote: 19Source: Primary Interviews with the CIOs; Zinnov Analysis
  20. 20. OSS/BSS Partnerships have evolved in Indian Telecom Industry OSS Solution Tata Bharti Vodafone Reliance Idea Comments • Market share of Ericsson Prepaid increased with acquisition of Charging Telcordia • CRM solutions also being CRM provided by Elitecore Fraud • Subex gained market share Management with new fraud management contracts Revenue • Near universal uptake in both NA NA Assurance the segments • Solutions from Amdocs and Mediation NA CSG are also popular • Solutions from Oracle and Order Elitecore also being used by Provisioning other carriers Business • Almost all carriers using NA NA Intelligence Cognos BI solution Interconnect • Elitecore gained market share Billing with new projectsNote: 20Source: Voice & Data
  21. 21. Telecom carriers in India have multiple partners who help them operate key aspects of their business Telecom Equipment & Network Infrastructure IT and Software Requirements • Prominent infrastructure providers are currently active in 3G • Partnerships with IT and software companies for technology and 4G rollouts infrastructure, and solutions, such as billing, business • Inter carrier partnerships for passive tower sharing intelligence, cloud services, and others + + + + Telecom Partnerships Customer Support in India Value Added Services • Partnerships with Business Process Outsourcing (BPO) • Partnerships with content generators, aggregators, and companies to run their customer care operations portals, for delivery of value added services + + + + +Note: 21Source: Company websites; Press Articles
  22. 22. Going forward IT demand in the telecom vertical will continue to grow at a CAGR of 14.2 per cent primarily due to the introduction of new services by telecom players 7.1 Expected IT Spending in Telecom Vertical, 4.0 2.8 USD billion FY13E FY15E FY20E Rising subscriber base creating demand The Future of Indian Telecom Data based services is increasing Introduction of 4G in India Sustainable Growth Increased adoption of smart phones and new age devices National Telecom PolicyNote: 22Source: PwC Mobile Broadband Outlook Report 2015; Zinnov Analysis
  23. 23. Agenda 1 Telecom Market Overview 2 Key Technology Trends and Partnerships 3 Government Regulations 23
  24. 24. Indian telecom industry is regulated by an independent body called Telecom Regulatory Authority of India (TRAI) • Established in 1997 as an independent body for regulation of telecom services in India, TRAI separated the regulatory function from policy-making and operation, which continued to be under the purview of the DoT Facilitating competition Ensuring technical and promoting efficiency Protecting interest compatibility and effective inter- of telecom service connection consumers Recommending license terms and Monitor the quality ensuring of service compliance Telecom Levying fees as Recommending Regulatory may be introduction of new Authority of India determined by service provider (TRAI) regulationsNote: 24Source: TRAI
  25. 25. Evolution of Indian telecom regulatory framework Pre-Liberalization Scenario Establishment of TRAI New Telecom Policy (NTP-99) • Aimed at regulating telecom • Affordable communication for citizens • 1984 – Private Sector • Provision of universal service to all uncovered areas, services allowed only in telecom including rural areas • Separated the regulatory equipment manufacturing • Convergence of IT, media, telecom and consumer function from policy-making • 1985: Department of electronics and operation from DoT Telecommunication (DoT) • Build manufacturing capabilities and strengthen R&D established • Efficiency and transparency in spectrum management 1991 1994 2000 1984 1997 1999 Liberalization Policy National Telecom Policy Developments After 2000 • Private sector participation (NTP-94) in provision of value added • Facilitated the emergence of • Establishment of BSNL; privatization of VSNL system(VAS) such as cellular Internet services in India • 2002: Establishment of Universal Service and paging services • Specific targets announced to be Obligation Fund to finance subsidies for rural achieved by 1997 areas • Paved way for the entry of the • 2003: Introduction of Unified Access Licensing private sector in telephone services (UASL) regime • 2005: Increase in FDI limits from 49% to 74% • 2006: Proposal for mobile number portabilityNote: 25Source: D&B
  26. 26. Thank You 69 "Prathiba Complex", 4th A Cross, Koramangala Ind. Layout 5th Block, Koramangala Bangalore – 560095 Phone: +91-80-41127925/6 Plot no. 131, 1st Floor Sector 44, Gurgaon – 122002 Phone: +91-124- 4420100 3701 Patrick Henry Dr. Building 7 Santa Clara CA – 95054 Phone: +1-408-716-8432 21, Waterway Ave, Suite 300 The Woodlands TX – 77380 Phone: +1-281-362-2773
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