Indian Telecommunication Industry

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Indian Telecommunication Industry

  1. 1. TELECOMMUNICATION Presented by : -Himanshu Priyadarshi -Ritwik Anand
  2. 2. An Overview  India is the second most populous country in the world     with the Overall GDP of $1.85 trillion (10th overall) World’s largest democracy system with multi party model at its core. Indian telecom is the second largest in the world (behind china) on the basis of telephone users (Both fixed and wireless). The Industry grew over 30 times from 37 million users in 2001 to 960.09 million (Both fixed and wireless) in 2013. Fixed lines stood at 31.53 million in May 2013.
  3. 3. An Overview  Total mobile phone active were at 929.37 million in      2012. Total Wireless Teledensity were at 79.37% in 2012. Total monthly additions were at 8.35 million by may 2012. (Both fixed and wireless lines). Fixed line rural density is at 33 % as of May 2012 Projected Wireless Teledensity is at 84%. The Industry in India is rapidly transforming into Next Gen Network through various telephone exchange, mobile switching centers and media gateways using optical fiber or microwave radios.
  4. 4. An Overview  1.18% of household in India have broadband access.  There were 14.31 million internet users in India as of May 2012.  Total ARPU for 2012 stood at $2.36 as compared to $46.50 in US  Lowest mobile tariffs in India due to high competition.  Total revenue generated in 2012 by telecom sector to be estimated upward of US$50 billion.
  5. 5. Types of Services •Telephone •Broadband services •Broadcasting 1000 926 900 800 700 600 Telephone (In millions) 500 Internet (In millions) 400 329 300 200 100 0 99 19 0 10 1952 20 44 37 0 1.1 14.3 1991 2000 2012 Broadcasting (In millions)
  6. 6. Fixed Telephone
  7. 7. Types of Services  Telephone (Fixed and Wireless).  Fixed connections: - Based on copper or optical fibers.  The cost per connections depend upon the regions with northern sectors being the cheapest.  Besides adding future connections the introduction of FDI also adds to the demand for wired connections.  Digitization in fixed lines were recently introduced.  Bulk of the population rely on landline for their internet connections thus adding to the future demand.  Interconnectivity charges to be paid to BSNL.
  8. 8. Fixed Continued…  With 31.6 million connections in India following are the key players SHARE 0.16 0.61  BSNL 4.04  MTNL BSNL 0.07 MTNL 4.04 BHARTI 10.49  BHARTI  TATA  RELIANCE  QUADRANT  SISTEMA  VODAFONE TATA 11.07 RELIANCE 68.86 QUADRANRT SISTEMA VODAFONE
  9. 9. WIRELESS
  10. 10. 1000 800 600 400 200 0 WIRELESS •Subscriber base of more than 929 million. (second largest in world) •Estimated ARPU of $2.3 as compared to $46.32 in US. •Cost per user fluctuates at $1.7 to $2.2. •India has 7,36,354 base transreceiver stations . 20% of them can handle 3G services. •India has 75 million Smartphone users. •Smartphone's will grow at a CAGR of over 30% (US$18 billion) •Wireless handset service grew 16.7% in 2012 with revenues adding up to Rupees 288,882 crore or US$ 64.4 billion. 1.85% 0.58% 0.53% USERS REV ($BILLIONS) 0.34% 0.17% MARKET SHARE BHARTI 4.64% 7.26% VODAFONE 20.58% RELIANCE IDEA BSNL 8.66% TATA AIRCEL 16.88% 10.93% UNINOR SISTEMA MTNL VIDEOCON 12.77% 14.83% LOOP HFCL
  11. 11. Wireless Contd.. •Third highest Teledensity in world with bulk in urban areas, marked by high prospect of growth in rural areas. •3G and broadband services were auctioned at US$19.2 billion in 2010. •4G services have been slow to roll out due to high price, unforeseen policies. Indian government requires local operators to partner with global giants to ease the burden of the costs. •Private sector hold 88.49% of the market share; whereas government held agencies account for remaining 11.51%. •High competition with at least 7 to 12 companies in the same circle. •GSM is the dominant form of technology with around 80% and CDMA being at 20% of total wireless consumers base. •Wireless alone generates revenue of upwards US$31.6billion of estimated US$35.6 billion. •Lowest ARPU among fellow nations fostered by stiff competition and govt. regulation policies.
  12. 12. ARPU IN US$ Wireless Contd. 46 50 •Voice services near saturation in urban 40 areas; future growth possible by expanding data services and expansion in uncharted rural areas. •Telecom equipment requirement stood at 6.5% (US$14.3 billion) of the worlds requirement with most of it being imported. •2G still to be a dominant force to be reckon with. (please see graph below). 30 Mobile Equipment Break Up by 2015 20 33 26 10 2.3 0 CONSUMER BASE (Millions) 1500 1004 2G 5 45 50 1000 3G 500 4G LTE ARPU IN US$ 12 0 929 CONSUMER BASE (Millions) 327 121 75
  13. 13. BROADBAND SERVICES
  14. 14. No of Internet Users (In Millions) BROADBAND SERVICES Introduced in 1995. •Current users at 14.82 million from 14.62 million. Increase of 1.37% •Annual growth of 16.78% •The global trend of offering internet as valued added services being followed in India. •Government mandated 256Kbps as a requirement, however India still ranks at 110 in Internet speed. • Bulk of these users are concentrated in urban areas, whereas rural areas have limited exposition. •155 Internet service providers in India. • Internet services are slated for explosive growth in 2013with the advent of mobile payment services in India. User subscription rate to go over 20 million by 2015. •About 75% of the connections are landline based. 600 513 400 245 200 121 101 No of Internet Users (In Millions) 81 0 CHINA US INDIA JAPAN BRAZIL NO OF CONNECTIONS (IN MILLIONS) MARKET SHARE 10 9.47 N O 1.37 1.06 0.68 0.37 7.20% 9.30% O F 5 19.70% 0 63.90% BSNL BHARTI MTNL OTHERS C O N N E NO OF CONNECTIONS (IN MILLIONS)
  15. 15. BROADCASTING SERVICES
  16. 16. BROADCASTING 800 •Launched in 1952, deregulated in 1992. Comprises more than 500 channels as of 2012. •Employs 3 million people with over US$15 billion in revenue. • 70% of the revenues are generated by advertising and rest by subscriptions. • TVS being promoted as part of the one of the value added services in this day and age by local operators. •There are 552 million viewers with 462 million on satellite subscription. •With the onset of High Def services, ad revenues have been further increased by 6.7%. •Regional channels could be set up for US$20 million, whereas national channel could take US$100 millions. •Heavily rely on revenues from Advertising (revenues generated by advertising in 2012 were US$4.91 billion). •High competition due to large number of operators in various regions. 723 689 600 400 526 399 355 200 NO OF TV'S (IN MILLIONS) 356 199 186 199 156 VIEWERS 0 ADVERTISING REVENUE (IN MILLIONS-2005 DATA) $250.00 $200.00 $150.00 $100.00 $50.00 $- $247.27 $236.36 $181.82 $120.91 $54.55 ADVERTISING REVENUE (IN MILLIONS-2005 DATA
  17. 17. LEVEL OF GOVERNMENT PARTICIPATION
  18. 18. GOVERNMENT •The Government of India allowed FDI in telecom in 90s with the launch of economic revival program. 250 •At present 74%-100% FDI is allowed in 3G or less spectrums. Up to 49% is allowed in 4G spectrum. •The formation of NTP’s (National telecom 200 policies)helped in better foreign investment flows in India. Current NTP 2012 is released for the fiscal year. •TRAI (Telecom Regulatory Authority of India) was establish in 1997 to oversee day 150 to day operations related with Telecom sector. •TDSAT (Telecom Disputes Settlement Appellate Tribunal) was formed in the year 2000 to assist with ranging disputes among 100 operators in Telecom sector. •With the auction of 3G services TRAI helped Indian government earn over US$19 billion. 50 •The subscriber base exploded with the onset of NTP 99. Please see chart for references 250 Comparison of subscriber base in relation to Tariff 200 190 180 TARIFF SUBSCRIBERS 70 35 16 20 16 45 40 25 20 8 5 5 4 3.5 2001 2002 2003 2004 3 2.7 2 1.7 2006 2007 2008 0 1998 1999 2000 2005
  19. 19. Government Continued.. •The current government allows operators to provide fixed and wireless line under one license. •The government launched USO (Universal service obligation) along with NTP 99 to widen the reach of telecom and increase Teledensity. • Pricing policy and execution to be approved by TRAI and DOT. •Interconnectivity charges among operators are also to be approved by TRAI and DoT. •NTP-2012 incorporates framework for increasing the availability of spectrum for telecom services including triple play services (voice, video and data) for which broadband is the key driver. •Through the NTP-2012, DoT is floating tenders that requires 24 fibreOFN (optical fiber network) of 350,000 miles; this project will further boost the interconnectivity between rural and urban areas. WPCSPECTRUM MANAGMENT TRAI Independent Regulator DoTLicense and frequency management Indian Telecom Industry Framework TDSAT Handles Disputes among operators GoT-IT Handles AdHoc Issues Integred Fixed Line BSNL MTNL ILD Players VSNL Private CDMA Reliance TTSL GSM Players Bharti / Vodafone / Idea/BSNL/Aircel
  20. 20. Per the NTP 2012, Govt of India is rapidly developing its communication abilities and is leaving no stone unturned. Following are the main excerpts: •Increase rural Teledensity from the current level of around 39 to 70 by the year 2017 and 100 by the year 2020. •Provide affordable and reliable broadband-on-demand by the year 2015 and to achieve 175 million broadband connections by the year 2017 and 600 million by the year 2020 at minimum 2 Mbps download speed and making available higher speeds of at least 100 Mbps on demand •Simplify the licensing framework to further extend converged high quality services across the nation including rural and remote areas. This will not cover content regulation. •Reposition the mobile phone from a mere communication device to an instrument of empowerment that combines communication with proof of identity, fully secure financial and other transaction capability, multi-lingual services and a whole range of other capabilities that ride on them and transcend the literacy barrier. •Strive to create One Nation - One License across services and service areas. •Achieve One Nation - Full Mobile Number Portability and work towards One Nation - Free Roaming.
  21. 21. THE INDIAN TELECOM TIMELINE 10’3g Auctioned 2008 – 3G policy announced, spectrum auction awaited. 2006 – Number Portability was proposed 2005- Measures to boost rural Teledensity. FDI limit was also increased from 49 to 74% 2004 – Intra circle merger guidelines was established. Broadband 2004 policy was formulated 2003 – Calling party pay was implemented. Unified license regime was introduced. 2002 – CDMA services launched. 2000-BSNL was established / Reduction of license fees / ILD services opened. 1999 – NTP 99 was launched 1997 – TRAI established 1994 – NTP Formulated 1992 – PVT companies allowed in VAS
  22. 22. PRESENT TELECOM MARKET SHARE Indian Telecom (Includes phone, broadband and broadcasting subscriptions) in 2012 12% AIRTEL 23% 5% IDEA VODAFONE 15% 10% RELIANCE BSNL 12% 10% TATA OTHERS
  23. 23. MAIN PLAYERS
  24. 24. •Established in 1995 by Sunil Bharti Mittal. It generated US$14.49 billion in revenue for 2012 with overall total assets of US$31.85 billion. Its PPS (price per share is) US$5.82. •Currently operates in 20 countries. Offering 2G, 3G and 4G services. •Focuses on B2C (Business to customer) and B2B (Business to Business) segments. •Fourth largest telecom company in the world with 261 million subscribers worldwide and 183.6 million in India alone. •Offers various diversified services such as broadband, phone (fixed and wireless), TV subscription services, Airtel money (Ecommerce platform ) •Has a business strategy of outsourcing its operations to IBM and Ericsson thus further reducing its call rate to Rupees 1 or $0.02 / minute. $16.00 $14.20 $14.00 $12.00 $11.20 $10.00 STOCK PRICES $8.00 TOTAL REVENUE (IN BILLIONS) $7.27 $6.45 $6.00 $6.24 $5.78 $4.00 $2.00 $2010 2011 2012
  25. 25. •Founded in 1995, currently head by Kumar Mangalam Birla. •Had an overall revenue of US$2.8 billion. •Total Assets of US$5.34 billion in 2011. •Subscriber (Wireless) base set at 97 million subscriber. •Current 3G service provider in 11 circles. •Idea’s ARPU stood at US$2.2 for the year 2012. •Has a 3G subscriber base of 3.7 million user. • Average share price US$ 1.9. •Overall employees at 6489 in 2012 •Extensive operational infrastructure in India. •Involved in PAN-India network for its 3G distribution to its subscribers. •Offers wireless services as of 2012. P r i c e Price per share (US$) $2.00 p e r $1.50 s h a r e $1.00 $0.50 ( U S $- 2010 2011 2012 Price per share (US$)
  26. 26. •Came into existence in the year 2000 by diverging DoT (department of telecom was divererged into BSNL) •Generated revenues worth US$5.08 billion in 2012. •BSNL has the largest 3G network in India. Additionally, BSNL 3G services usually cover not only the main town/city but also the adjoining suburbs and rural areas as well. As of now BSNL has 3G services in 826 cities across India. •Wireless subscriber base of 97.7 million. •Broadband share of 9.7 million subscription •Fixed line share of 68.8 % at 24.2 million subscribers. •Total operational assets are based at US$21.41 billion. •Net income based at –US$1.61 billion (incurred losses in 2012) MARKET SHARE IN WIRELESS, BROADBAND AND WIRELESS 10.93 68.89 WIRELESS 63.89 BROADBAND FIXED LINE
  27. 27. VODAFONE Global Coverage as of 2012 •Vodafone revenue for 2012 at US$5.2 billion. •Vodafone is a successor to Essar + Hutch collaboration. •operational profit margin increased to 28.4 per cent as a result of increasing operating efficiency, based on scale and lower customer acquisition cost. •Vodafone annual ARPU at US$3.26 in 2012. •Has 141 million wireless subscribers. •Vodafone India is a subsidiary of Vodafone Global. •Vodafone paid US$2.6 billion (the second highest. •amount in the auctions) for spectrum in 10 circles. The circles it will provide 3G in are Delhi, Kanpur, Gujarat, Haryana, Kolkata, Mah arashtra & Goa, Mumbai, Tamil Nadu, Uttar Pradesh (East) and West Bengal. •Vodafone also operates 3G services in Kerala, Andhra Pradesh and Uttar Pradesh (West) through an agreement with Idea and in Karnataka through an agreement with Airtel. This gives Vodafone a 3G presence in 13 out of 22 circles in India Vodafone India Revenue (in US$ Billions) 8 6 6.6 5.3 4.9 Vodafone India Revenue (in US$ Billions) 4 2 0 2010 2011 2012
  28. 28. •Ranks among the top 5 telecommunications companies in the world by number of customers in a single country. •Headed by Anil Dhirubhai Ambani. •Generated revenues to the tune of US$2.02 billion in 2012. •Has total assets worth US$14.65 billion •Generated net income of US$28.39 million in 2012. •Has 28000 employees on its payroll. •The company has established a panIndia, next-generation, integrated (wireless and wire line), convergent (voice, data and video) digital network that is capable of supporting services spanning the entire communications value chain, covering over 24,000 towns and 600,000 villages. •Reliance Big TV offers its 1.7 million customers DVD-quality pictures on over 200 channels using MPEG-4 technology. •Reliance Communications paid US$1.8 billion for 3G spectrum in 13 circles. $2.91 $3.00 $2.00 $2.02 $1.65 $1.34 $1.49 $1.27 Reliance Stock Comparison $1.00 Reliance Revenue $2010 2011 2012
  29. 29. STRENGTH THREATS LENSER S.W.O.T ANALYSIS OPPURTUNITY WEAKNESES
  30. 30. STRENGTHS Global ARPU @ $29.98 Largest telecom infrastructure in the world (US$108.98 Billion) Annual global Wireless subscribers at 335 million. 2012 Global sales pegged at US$42.56 billion. Largest OFN facility in the world (annual production @ 400,000 miles) Net Income in 2012 @ US$8.9 US$100.62 billion in cash flow reserves Providing time tested Value added services in 29 nations Global Operational costs down by 2.9% Pioneer in GPS technology Annual stock price for 2012 at US$22.56 Global impressive brand image Robust research and development department (Annual patent fees revenue from various organizations at US$2.9 Billion) Extensive dealership network in over 89 nations Merger /Acquisitions in over 89 nations Overall global penetration @ 66% in subscriber base.
  31. 31. w E A K N E S E S
  32. 32. Our global presence and strong financials allow us to compete with the competition in India. The key to generate profit will be lower costs and quality service at Advent of acquisition or merger can lower cost of entry in Indian scenario. Wireless market in metros is saturated but rural areas is majorly untapped. Approx 67% of the population lives in rural areas. This vast market has a potential of another $8.9 billion in value added services. TRAI and DoT are efficient telecom regulators as compared with agencies in other countries . Mobile Broadband is slow to pick up; our global pioneer position with discounted value added service could be beneficial factor Manufacturing telecom equipment is our forte that India has so less to offer. Further $6.8 billion can be generated by manufacturing telecom equipment. The relative young generation of the populous also adds to the lucrative market of the smart phones. The introduction of FDI in various sectors in particular Retail would boost the demand for wire line based broadband. The potential market is estimated to be $8.9 billion in 2013. OPPORTUNITY
  33. 33. The presence of a coalition in the federal government structure creates policy paralysis in the Indian scenario (important decisions impacting economic growth and welfare are difficult to pass due to the vested interests of various political parties and groups) Developing own telecom infrastructure will be a challenge as to get the laws passed will take considerable time and would be met with opposition from the competition. Cut throat competition in India is the biggest threat (Reliance, Tata , BSNL have incurred loses due to loss-$1.9 billion combined in revenue and rising costs). The 2G scam in 2008 brought out the vulnerability of the security of foreign investment in India. The reversal order by Supreme court of India incurred losses in billions of dollars on various Multi national telecom carriers. Although lobbying in illegal in India but on the other hand very little or nothing is accomplished without lobbying. Global financial scenario (India seems to have dodged the 2008 crises bullet but is experiencing slower growth in 2012). THREATS
  34. 34. INVESTMENT IN INDIA? WHY NOT!! Yes, the political situation in India is very delicate and fragile. Lobbying is illegal and a necessary evil. India has the lowest ARPU and cut throat competition. But we shouldn’t forget this lucrative market because of these following reasons:  Second most populous country in the world with overall disposable income per person at $1,326 annual.  An upcoming younger generation eager to get their hands on a Smartphone (an estimated $18 billion dollar market in next 2 years – we pioneered with Apple and introduced I-phone to the world, a similar wind in India could add at least give us $6 billion of that share.)  We are known leaders in the telecom equipment manufacturing; India relies on the imports of the telecom equipment. By setting up a production plant we can bank on to capturing at least $4 billion of the $6.5 billion equipment market in India.  Our strong financials and global presence can help us manage our losses for first five years as we catch on with the competition and dig in for the long haul. (With the full nationwide thrust we are expecting to incur $656 million in losses in the first year with an increment of 12.8% every other year).  Losses would be generated into profits by eliminating local carriers and capitalizing on the vast untapped rural network.  Losses would also include getting spectrum licenses in all circles thus setting up our infrastructure (cell towers, OFN). We wouldn’t have to pay hefty interconnectivity charges to any carriers except BSNL. This would help us on saving on operational costs.  India’s growing economy needs more faster network, we are leaders in innovation and pioneers in establishing new technology through time – place tested measures. Our overall global assets @ $110.89 billion would come in handy in the Indian Market.
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