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India Study
TEKES NETS and FENIX Programs

            Vipul Chauhan
           Country Manager
             Finpro India

            10. July 2004
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
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
Chapter One
MARKET OVERVIEW
     VIPUL CHAUHAN
Evolution of Communications in India


                                                                                           EDGE

                                                                    CDMA
                                                                   2000 1x

                                              Wi-Fi

                                              GPRS

                                             Broadband

                        GSM

                      Internet
         Cable TV
 First
Phone



1882     1990       1995               2001-02                  2003                   2004 - onwards

                     India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / /   5
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 / /   6




The 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 2000


Present CDMA standard is CDMA 2000 1X
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 lowest




Each circle requires a different license. As in case of Metro cities, each city license is
sold separately.


Operators can sell their license to any operator in case they are willing to exit from
the license area.
Call Tariffs in India

Call Specifications                 Tariff Basis                                       Tariffs

Incoming 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 2002
to 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 - 0,04
Outgoing 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/minute
networks (roaming,
                                   kms, more than 500 kms                       • M to M outgoing intercity call > 500 km: 0,07 Euro/minute
interconnected) are priced
                                   and International
between 0,02 – 0,8                                                              • M to Fixed outgoing home network: 0,05 Euro
Euro/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 / /   8




India 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 rate
in 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 Versa

Roaming is another important aspect when talking about voice revenues

All 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 to
provide International roaming services.

Tariffs in India are set as per the distance between the cities. There are four levels for this tariff structuring
based 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 KM

International calls are tariffed as per the regions like US and Canada, Europe and Pacific rim etc.
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
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
•   India's 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
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 / /   11




In GSM segment opeartors do not offer handsets along with their subscription, like
in Europe or America. Consumers have to go and buy the handsets of their choice
at numerous handset Kiosks in each city. These Kiosks are multi purpose kiosks
and one can buy not only handset but also a GSM connection, phone accessories
etc.


MMS and GPRS are offered via operators, while majority of other content like
Logos, Ringtines, Picture Messages are offered via portals.


When speaking of revenues, operators are in dominant position. Major share of
revenues goes to operators. For example 80% of revenue from a Ringtone
download goes to operator, rest to the portal.
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 / /   12




GPRS is widely offered by major operators. BPL was the first operator to Launch
GPRS in India, followed by Airtel, Hutch and Idea.


Recently the two GSM operators- Hutch and Idea, unveiled their EDGE Networks


According 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 major
interference to the services offered by operators using GSM technology but also
block the progress of 30 million subscribers to 3G.”


There are two important components in a mobile service: uplinking (a call or data
sent from your mobile phone to a base station) and downlinking (receiving a call or
data 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 the
uplinking mode for 1920-1980 MHz paired with 2110 to 2170 Mhz (the core band
identified by the International Telecommunications Union for 3G services).
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 been
levied on the ISPs till 31st October 2003.Thereafter, a token license fee of Rs. One
per annum is payable w.e.f. 1st November 2003.
•ISPs have been permitted to set up International Gateways by having business
arrangement 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 V
Infrastructure / Operators.
•The Government has initiated an ambitious plan to developed National Internet
Backbone (NIB) in the country.
•100% FDI allowed through automatic route to the ISP (without gateways), 74% in
case of ISPs setting up International Gateways.
•ISP's permitted to set up Submarine Cable Landing Stations either singly or jointly
in 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-exclusive
basis 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
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 / /   14




For the ICT industry and its customers, the primary driver for offshore outsourcing
is the reduction of costs. Some estimate that costs can be reduced by 40 percent
and sometimes by as much as 70 percent for offshore destinations such as India,
China and the Philippines. These cost savings are directly attributed to reduced
labour and other business costs.


A snapshot of average base salaries for programmers around the world shows that a
US programmer cost on average approximately US$ 63,350 in 2002, substantially
more than many of their overseas counterparts. A professional of similar skills
costs 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 or
overseas firms to establish a presence in the region of the outsourcer (e.g. China or
Asia), hence assisting those companies to expand their businesses globally and
benefiting their home economies.
In the particular case of India, its success first in software development and now in
IT Enabled Services (ITES) is driven by a number of additional advantages. A
focus on demonstrating quality services has proven to be a significant factor in
gaining market share. According to NASSCOM, the Indian software industry
continues to receive international recognition for its quality in software
development. Out of the top 300 companies, more than 216 have already acquired
ISO 9000, SEI or other certification. As far as SEI CMM (Software Engineering
Institute Capability Maturity Model) Level 5 is concerned, the Indian software
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
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
                                     India




Until 1996, India was a pure fixed line market.
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 the
Internet Users are Males.
•The Capital Cities (New Delhi and Other State Capital) accounts for 79% of
Internet 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 and
Cyber Cafes while 27% access Internet from homes.
•Among the career conscious and education driven middle class, Internet is seen as
critical to success in professional life.
•There are approx 59 million telephone connections (including Mobile) and 8.5
million PC base in India.
•There are approx. 47 million Cable T V Connections out of 92 million TV Sets in
the Country
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
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 / /   19




The NTP 99 has been a positive milestone for the industry.


After NTP 99, industry attracted foreign investments in form of equity from global
players like Vodafone, BT, AT&T, Warburg, Hutchison etc.


In early 2004, there was a major rift among CDMA and GSM operators because of
licensing conditions. GSM operators blamed that CDMA license holders are not
allowed to offer National roaming as their license permits them to offer service
within a Short Distnace charging area known as SDCA. The matters were taken to
Telecom Dispute Settlement Tribunal TDSAT. The government however
understood it basic mistake in license drafting and as a result offered Unified
Licensing. Now all operators can offer all services using any technology platform.
They will, however be supposed to pay unified license fee deficits.
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 / /   20




Since 1995, a number of countries have permitted VOIP as a technology option to
the classical PSTN as well as Internet Telephony so as to provide a cheaper
alternative to classical PSTN calls. In India, the ISPs were allowed to offer Internet
Telephony Services with effect from April 1, 2002. With the choice availability of
Toll Quality (PSTN) and Non-Toll Quality options, Internet Telephony has thrown
open Long Distance Telephony to those sections of Society, which could not afford
the same earlier. Further, Internet Telephony is proving to be a key driver for local
entrepreneurs to set up Community Information Centers / Cyber-kiosks, etc even
in small towns and villages. In fact it has made distance learning, Tele-medicine and
e-governance etc a reality in Indian context.
More than 90 ISPs have been granted license for offering Internet Telephony
Services. There has been a substantial growth in the Cyber Café / offering Internet
Telephony Services. It is expected that Internet Telephony will provide fillip to the
demand for network facilities including bandwidth, last mile access and other
connectivity resources and bridging the digital divide within the Country. However,
an important issue needing immediate attention is tackling the Internet Telephony
Grey Market which is estimated to be about 90 per cent of the total Internet
Telephony market in India and requires concerted efforts by Government and
industry. It is imperative that all leading ISPs including VSNL, BSNL and MTNL
join hand to tackle the menace.
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 / /   21




Protecting the IPR is a complex issue in India altogether.Software and music piracy
is immense in the country. India is a huge piracy hub in Asian continent. Majority
of piracy is about softwares and Operating System.Though government has strict
laws, it is difficult to completely wipe out piracy.


In India the intellectual property protection with regard to a computer software is
governed by the Indian Copyright Act, 1957 (hereinafter called “ The Act” ). A
person claiming to be a creator of a software programme, can claim a copyright
over it. Unlike in the United Kingdom, which has a separate law governing a
database, be it computer generated or otherwise, called the “database right”, in
India there is no special right apart from the copyright that can be claimed by such
a creator. However under the Act, registration of a copyright is not mandatory, but
advisable. The Act, applies only to works first published in India, irrespective of the
nationality of the author. However the Government of India has the power to
extend 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 Berne
Convention or the Universal Copyright Convention will be accorded the same
treatment as if it was first published in India. And for this purpose a body
incorporated under any law of a country mentioned in the schedule so brought out
by the Government of India shall be treated in the same manner as if it was
incorporated 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
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 market




Opportunities                                                                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
CHAPTER TWO


SERVICE PROVIDERS
     Vipul Chauhan
Operators – Fixed, CDMA and GSM


 FIXED LINE                                                                               WLL/CDMA
 • BSNL (state owned)
                                             GSM                                                        • BSNL
 • MTNL (state owned)
                                              • Bharti                                                  • MTNL
  • Bharti (Touchtel)
                                                • BPL                                              • Reliance
    • Tata Telecom
                                               • BSNL                                         • Shyam Telecom
       • HFCL
                                              • Hutch                                           • Tata Telecom
  • Shyam Telecom
                                                • Idea                                                  • HFCL
                                               • MTNL
                                            • Reliance
                                        •Spice Telecom
6 Operators
                                                                                       6 Operators
                                8 Operators
                            India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / /   24
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 / /   25




The 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.
Fixed Line Operators
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 / /   27




BSNL (Bharat Sanchar Nigam Limited) is the public sector giant having majority
market share in fixed line telephony.


BSNL is followed by Mahanagar Telephone Nigam Limited (MTNL) which is again
Government owned. MTNL has licenses to operate fixed line services in the cities
of New Delhi and Mumbai only.


The private operator Bharti operates under the brand name Touchtel. Bharti has
been very lucky in penetrating the so called nest of public sector giants.
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 / /   28




BSNL’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:                                         71


STD: Subscriber Trunk Dialing (abbreviation for Intercity calls)
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 / /   29




As already described the entire country is divided into telecom circles and operators
are required to have licenses as per the respective circles.


With the entry of more and more private players in the fixed line telephony, the
competition is becoming fierce, as a result operators are now focusing upon
offering 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’s
x.25 based packet Switched Public Data Network is operational in104 cities of the
country. It offers x.25 x.28 leased, x.28 Dial up (PSTN) Connection) and frame
relay services. It had 4661 I-Net connections all over India as of Dec. 2003.
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                             Maharastra




SHYAM TELELINK     71.932                                Fixed line network, International               Only in Rajasthan
                                                         gateway, CDMA




                             India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / /   30
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 / /   31




The difference between the numbers of fixed line and mobile subscribers is fast
narrowing.


Low tariff structures offered by mobile operators are attracting consumers to switch
over to mobile phone subscriptions. This trend has a two way side effect on fixed
line telephony, first fixed line operators are finding it hard to reduce consumer
churn, second their ARPU has taken a big leap downwards.


Reduced mobile tariffs could be explained as the most prominent reason for
increased mobile subscriber base.


Facilities like SMS, MMS further attract consumers to shift from fixed line services
towards mobile.
GSM Operators
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
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
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 / /   35




Lowered call costs are the major driving force behind the industry growth. It is now
possible for an individual to afford making calls.


On one side where call costs have boosted the industry growth, as a side effect
ARPU has shown a negative growth.


From last year onwards, operators are now looking towards streamlining their
ARPU, therefore one can see minor escalation in call costs towards the end of last
year.
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 / /   36




The subscriber growth saw a phenomenal increase from 2002 onwards. This was
mainly due to lowered call tariffs and full scale implementation of SMS services all
over India. December 2002, where India touched the 10 million mark could be
defined as a milestone for Indian wireless industry.


Subscriber growth continued from 2002-03 and there were close to 22 million
subscribers as of December 2003.


Two main elements for this phenomenal growth are 1. lowered call tariffs & 2.
Free incoming calls


Consumers who were once reluctant to subscribe to mobile subscriptions founded
feasible and convenient to avail as now there was hardly any difference between the
monthly 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 huge
middle class population. On an estimate there are some 300 to 350 million people
belonging to this group in India. Unlike a car or a television set (where one is
enough in the family) with the lowered call tariffs it became possible even for family
members to own a mobile phone each.
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 / /   37




The increase in revenue reflects the new subscriber additions.
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 / /   38




India is a vast country with over 3000 Kms of distance from north to south and
similarly from east to west. Covering this huge scope of land became a challenging
task for the operators, as a result many failed and vanished from the business
because the industry demanded huge capital investments and some of them were of
course 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
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 / /   39




Aircel is recently acquired by HUTCH for an estimated amount of 223 million
Euro.
Market Share – GSM operators

Big private operators like Bharti and Hutch each
have 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
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 / /    41




During the days when incoming was not free, operator ARPU was almost twice as
that of today.


Despite of offering various data services over their networks, operators have been
unable 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 and
more attractive content but also to see that they add new subscribers on the basis of
content not voice. This however will be a big challenging task for Indian operators
as promoting data services where roughly 45% of the population is still completely
illiterate. To add to the complexity is the language scenario in India. There are 18
languages and 844 dialects and offering streamlined data services in all of these
languages is by no means a simple task.


SMS is the only thing which is available in different languages.
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 / /   42




Indian consumer is extremly cost conscious.


The cost syndrome is visible in the above figure, as call costs fell, no. of subscribers
rose! In a way, as operator’s ARPU declined, they experienced a surge in subscriber
additions.
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 / /   43




Prepaid is a big phenomena in India. Although detailed statistics are not available
for each operator but on an estimate 60-70% of the subscribers (of all the
operators) 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 the
individual 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 to
give them prepaid connections.
•Retail channels earned good commission selling prepaid coupons to consumers
and therefore, they invested more on promoting prepaid
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 / /   44




The billing relationship in India exists exclusively between the operator and the
consumer. All the other contributors (value added service providers, ASPs, TV
channels and movie production houses maintain revenue sharing or profit sharing
relationship only with the operator.


Operators in India get to keep a major share of the revenues coming from all the
other services besides voice.


When a consumer downloads a ringtone or a logo from a website, operator gets to
keep 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 ringtone


M ticketing is missing in India, however, one can request for a ticket for an event
through an SMS but one cannot actually complete a transaction over his mobile
phone.
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 / /                                 45




As described earlier, literacy is a big factor which determines the success of value
added services especially, advanced services like email, M-banking and MMS.


Roaming, voice mail, call waiting, call forward are some of the services which
consumers are well aware of. Advanced services like call conferencing, email and
M-banking have so far been unable to penetrate.


One critical aspect to be considered here is the share of relevant consumers for
relevant services. Housewives and teenagers of course do not have any immediate
value added for advanced services. Operators here face a challenge to market their
services exclusively for corporate consumers.
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 / /   46




Bharti was the first mobile operator operational in India. India’s first GSM based
phonecall was made on Airtel network.
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
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
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)
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
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
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
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 / /   53




BPL is a leading player in consumer electronics like TV, Fridge, Washing machines
etc. BPL has produced it’s own handset this August. Priced at around Euro 90, the
BPL handset will compete with the likes of Nokia, Motorola, Sony-Ericsson and
Siemens for a pie of the Indian handsets market. Industry sources said that the
handset will be part of the BPL consumer durables stable and will be manufactured
at its Bangalore unit.
Sources said that the company had tied up with Japanese electronics major Sanyo
for providing lithium batteries for the handset. The company is also planning to
launch handsets at higher price range.
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 / /   54




As explained earlier, operators are constantly seeking to consolidate their standing
in the market. Indian telecom regulations limit the number of operators in each
circle to four but it does not limit operators acquiring each other. Airtel and Hutch
have been very active in this mergers and acquisition activity.


Hutchison Telecom (Hutch) recently acquired Aircel which operated in state of
Tamil Nadu.


Similarly, Airtel acquired Hexacoms licenses for states of Rajasthan and few north-
eastern states.
CDMA Operators
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 / /   56




Understanding WLL services and how they are classified has been a big confusion not only for
consumers but even to an extent some services providers have taken a long time in understanding
the services completely.

CDMA in India is known as WLL (Wireless in local loop). This WLL is further divided into two
categories fixed and mobile. However, the technology standard is similar in both cases i.e. CDMA
2000 1X

WLL 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 through
a special data cable. The data cable comes along with an installation CD and it is available in the
open 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.
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
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 / /   58




There was a big debate in India just before the launch of CDMA services that will it
succeed or not? Recent trends reveal that CDMA is here to stay, but that doesn't
mean that it is going to overpower GSM.


Nationwide roaming helped to boost subscribe base, option of connecting to
internet using a simple data cable proved as a catalyst in promoting CDMA services
in India.


The call tariffs over CDMA were initially lower as compared to GSM but today
CDMA and GSM call tariffs are moreover same.


The calls are tariffed again on the distance parameter which is already explained
earlier.
CDMA Operator Subscriber Base


                             6,414,047

                                                                     Statistics include WLL(M) and WLL (F)
Reliance, a CDMA 2000 1x
operator, is a undisputed
market leader




Both WLL(F) and WLL (M)
have been immensly
sucessful 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 / /   59




Reliance Infocomm was the first private operator to start with the CDMA services
in India. However, BSNL and MTNL offered CDMA before Reliance they were
unable to tap subscribers.


Reliance’s strategic alliance with LG and Samsung to offer their handsets along with
their subscriptions proved to be a catalyst in the process. Tata Indicomm which
was the second private operator to offer CDMA services initially failed to attract
consumers but since early 2004, it has revived its strategy and has been able to gain
some market share.
CDMA Operators Market Share
                                                                                                                      State Ow ned
                                                                                                                          12%




                      BSNL    MTNL
              Shyam
                      10%      2%
       HFCL    0%
        0%

Tata
8%




                                                                                         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
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   //   61




Due to spectrum availability it is feasible for the operators to introduce enhanced
data services over their networks. This includes streaming media, JAVA games etc.


The possibility for offering enhanced data services has proved to be a catalyst in
promoting CDMA services in India.


Reliance Infocomm floated a company by the name of Paradox Studios which
develops interactive content for Reliance’s subscribers. Following the trend Tata
Indicom also formed an alliance with Nokia and some major content developers to
offer 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, these
CDMA operators also function as a internet service provider. Consumers have to
dial in a specific number to activate their phone as a modem and they can use 114
Kbps internet almost everywhere in India.
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
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
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
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
CHAPTER THREE



INTERNET SERVICE
   PROVIDERS
     Priyanka Kapoor
      Vipul Chauhan
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 / /   67




Internet made its entry in India in the year 1995 when VSNL (Videsh Sanchar
Nigam Limited) started with dial-up connections. The first five years of internet in
India could be defined as an incubatory stage where speeds were limited to
maximum of 64 Kbps ISDN. Initially and even today most of the home users used
to access internet over 28.8 K and 56 K modems.


Using internet over phone connection with a modem has two disadvantages, first
the 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 using
internet through 28.8 K-56 K modems at home. This situation means that there is
a huge potential for broadband service providers to attract customers for their
services but only at prices which are affordable. Always on connectivity will help
users (both home and corporate users) to keep their phone lines free and avoid call
charges.


Present day internet subscriptions are available as freebie item along with purchase
of 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 then
consumers have to pay call charges for their minute usage, which is 0.02 Euro per
minute.
•Lease lines: Euro 9000 per year
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Indian market overview

  • 1. India Study TEKES 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
  • 5. Evolution of Communications in India EDGE CDMA 2000 1x Wi-Fi GPRS Broadband GSM Internet Cable TV First Phone 1882 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 / / 6 The 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 2000 Present 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 lowest Each circle requires a different license. As in case of Metro cities, each city license is sold separately. Operators can sell their license to any operator in case they are willing to exit from the license area.
  • 8. Call Tariffs in India Call Specifications Tariff Basis Tariffs Incoming 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 2002 to 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 - 0,04 Outgoing 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/minute networks (roaming, kms, more than 500 kms • M to M outgoing intercity call > 500 km: 0,07 Euro/minute interconnected) are priced and International between 0,02 – 0,8 • M to Fixed outgoing home network: 0,05 Euro Euro/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 / / 8 India 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 rate in 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 Versa Roaming is another important aspect when talking about voice revenues All 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 to provide International roaming services. Tariffs in India are set as per the distance between the cities. There are four levels for this tariff structuring based 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 KM International 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 • India's 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 / / 11 In GSM segment opeartors do not offer handsets along with their subscription, like in Europe or America. Consumers have to go and buy the handsets of their choice at numerous handset Kiosks in each city. These Kiosks are multi purpose kiosks and one can buy not only handset but also a GSM connection, phone accessories etc. MMS and GPRS are offered via operators, while majority of other content like Logos, Ringtines, Picture Messages are offered via portals. When speaking of revenues, operators are in dominant position. Major share of revenues goes to operators. For example 80% of revenue from a Ringtone download 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 / / 12 GPRS is widely offered by major operators. BPL was the first operator to Launch GPRS in India, followed by Airtel, Hutch and Idea. Recently the two GSM operators- Hutch and Idea, unveiled their EDGE Networks According 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 major interference to the services offered by operators using GSM technology but also block the progress of 30 million subscribers to 3G.” There are two important components in a mobile service: uplinking (a call or data sent from your mobile phone to a base station) and downlinking (receiving a call or data 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 the uplinking mode for 1920-1980 MHz paired with 2110 to 2170 Mhz (the core band identified 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 been levied on the ISPs till 31st October 2003.Thereafter, a token license fee of Rs. One per annum is payable w.e.f. 1st November 2003. •ISPs have been permitted to set up International Gateways by having business arrangement 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 V Infrastructure / Operators. •The Government has initiated an ambitious plan to developed National Internet Backbone (NIB) in the country. •100% FDI allowed through automatic route to the ISP (without gateways), 74% in case of ISPs setting up International Gateways. •ISP's permitted to set up Submarine Cable Landing Stations either singly or jointly in 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-exclusive basis 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 / / 14 For the ICT industry and its customers, the primary driver for offshore outsourcing is the reduction of costs. Some estimate that costs can be reduced by 40 percent and sometimes by as much as 70 percent for offshore destinations such as India, China and the Philippines. These cost savings are directly attributed to reduced labour and other business costs. A snapshot of average base salaries for programmers around the world shows that a US programmer cost on average approximately US$ 63,350 in 2002, substantially more than many of their overseas counterparts. A professional of similar skills costs 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 or overseas firms to establish a presence in the region of the outsourcer (e.g. China or Asia), hence assisting those companies to expand their businesses globally and benefiting their home economies. In the particular case of India, its success first in software development and now in IT Enabled Services (ITES) is driven by a number of additional advantages. A focus on demonstrating quality services has proven to be a significant factor in gaining market share. According to NASSCOM, the Indian software industry continues to receive international recognition for its quality in software development. Out of the top 300 companies, more than 216 have already acquired ISO 9000, SEI or other certification. As far as SEI CMM (Software Engineering Institute 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 India Until 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 the Internet Users are Males. •The Capital Cities (New Delhi and Other State Capital) accounts for 79% of Internet 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 and Cyber Cafes while 27% access Internet from homes. •Among the career conscious and education driven middle class, Internet is seen as critical to success in professional life. •There are approx 59 million telephone connections (including Mobile) and 8.5 million PC base in India. •There are approx. 47 million Cable T V Connections out of 92 million TV Sets in the 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 / / 19 The NTP 99 has been a positive milestone for the industry. After NTP 99, industry attracted foreign investments in form of equity from global players like Vodafone, BT, AT&T, Warburg, Hutchison etc. In early 2004, there was a major rift among CDMA and GSM operators because of licensing conditions. GSM operators blamed that CDMA license holders are not allowed to offer National roaming as their license permits them to offer service within a Short Distnace charging area known as SDCA. The matters were taken to Telecom Dispute Settlement Tribunal TDSAT. The government however understood it basic mistake in license drafting and as a result offered Unified Licensing. 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 / / 20 Since 1995, a number of countries have permitted VOIP as a technology option to the classical PSTN as well as Internet Telephony so as to provide a cheaper alternative to classical PSTN calls. In India, the ISPs were allowed to offer Internet Telephony Services with effect from April 1, 2002. With the choice availability of Toll Quality (PSTN) and Non-Toll Quality options, Internet Telephony has thrown open Long Distance Telephony to those sections of Society, which could not afford the same earlier. Further, Internet Telephony is proving to be a key driver for local entrepreneurs to set up Community Information Centers / Cyber-kiosks, etc even in small towns and villages. In fact it has made distance learning, Tele-medicine and e-governance etc a reality in Indian context. More than 90 ISPs have been granted license for offering Internet Telephony Services. There has been a substantial growth in the Cyber Café / offering Internet Telephony Services. It is expected that Internet Telephony will provide fillip to the demand for network facilities including bandwidth, last mile access and other connectivity resources and bridging the digital divide within the Country. However, an important issue needing immediate attention is tackling the Internet Telephony Grey Market which is estimated to be about 90 per cent of the total Internet Telephony market in India and requires concerted efforts by Government and industry. It is imperative that all leading ISPs including VSNL, BSNL and MTNL join 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 / / 21 Protecting the IPR is a complex issue in India altogether.Software and music piracy is immense in the country. India is a huge piracy hub in Asian continent. Majority of piracy is about softwares and Operating System.Though government has strict laws, it is difficult to completely wipe out piracy. In India the intellectual property protection with regard to a computer software is governed by the Indian Copyright Act, 1957 (hereinafter called “ The Act” ). A person claiming to be a creator of a software programme, can claim a copyright over it. Unlike in the United Kingdom, which has a separate law governing a database, be it computer generated or otherwise, called the “database right”, in India there is no special right apart from the copyright that can be claimed by such a creator. However under the Act, registration of a copyright is not mandatory, but advisable. The Act, applies only to works first published in India, irrespective of the nationality of the author. However the Government of India has the power to extend 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 Berne Convention or the Universal Copyright Convention will be accorded the same treatment as if it was first published in India. And for this purpose a body incorporated under any law of a country mentioned in the schedule so brought out by the Government of India shall be treated in the same manner as if it was incorporated 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 market Opportunities 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
  • 24. Operators – Fixed, CDMA and GSM FIXED LINE WLL/CDMA • BSNL (state owned) GSM • BSNL • MTNL (state owned) • Bharti • MTNL • Bharti (Touchtel) • BPL • Reliance • Tata Telecom • BSNL • Shyam Telecom • HFCL • Hutch • Tata Telecom • Shyam Telecom • Idea • HFCL • MTNL • Reliance •Spice Telecom 6 Operators 6 Operators 8 Operators India Study for Tekes NETS and FENIX Programs/ Vipul Chauhan/ © TEKES / / 24
  • 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 / / 25 The 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.
  • 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 / / 27 BSNL (Bharat Sanchar Nigam Limited) is the public sector giant having majority market share in fixed line telephony. BSNL is followed by Mahanagar Telephone Nigam Limited (MTNL) which is again Government owned. MTNL has licenses to operate fixed line services in the cities of New Delhi and Mumbai only. The private operator Bharti operates under the brand name Touchtel. Bharti has been 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 / / 28 BSNL’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: 71 STD: 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 / / 29 As already described the entire country is divided into telecom circles and operators are required to have licenses as per the respective circles. With the entry of more and more private players in the fixed line telephony, the competition is becoming fierce, as a result operators are now focusing upon offering 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’s x.25 based packet Switched Public Data Network is operational in104 cities of the country. It offers x.25 x.28 leased, x.28 Dial up (PSTN) Connection) and frame relay 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 Maharastra SHYAM 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 / / 31 The difference between the numbers of fixed line and mobile subscribers is fast narrowing. Low tariff structures offered by mobile operators are attracting consumers to switch over to mobile phone subscriptions. This trend has a two way side effect on fixed line telephony, first fixed line operators are finding it hard to reduce consumer churn, second their ARPU has taken a big leap downwards. Reduced mobile tariffs could be explained as the most prominent reason for increased mobile subscriber base. Facilities like SMS, MMS further attract consumers to shift from fixed line services towards mobile.
  • 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 / / 35 Lowered call costs are the major driving force behind the industry growth. It is now possible for an individual to afford making calls. On one side where call costs have boosted the industry growth, as a side effect ARPU has shown a negative growth. From last year onwards, operators are now looking towards streamlining their ARPU, therefore one can see minor escalation in call costs towards the end of last year.
  • 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 / / 36 The subscriber growth saw a phenomenal increase from 2002 onwards. This was mainly due to lowered call tariffs and full scale implementation of SMS services all over India. December 2002, where India touched the 10 million mark could be defined as a milestone for Indian wireless industry. Subscriber growth continued from 2002-03 and there were close to 22 million subscribers as of December 2003. Two main elements for this phenomenal growth are 1. lowered call tariffs & 2. Free incoming calls Consumers who were once reluctant to subscribe to mobile subscriptions founded feasible and convenient to avail as now there was hardly any difference between the monthly 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 huge middle class population. On an estimate there are some 300 to 350 million people belonging to this group in India. Unlike a car or a television set (where one is enough in the family) with the lowered call tariffs it became possible even for family members 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 / / 37 The 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 / / 38 India is a vast country with over 3000 Kms of distance from north to south and similarly from east to west. Covering this huge scope of land became a challenging task for the operators, as a result many failed and vanished from the business because the industry demanded huge capital investments and some of them were of course 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 / / 39 Aircel is recently acquired by HUTCH for an estimated amount of 223 million Euro.
  • 40. Market Share – GSM operators Big private operators like Bharti and Hutch each have 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 / / 41 During the days when incoming was not free, operator ARPU was almost twice as that of today. Despite of offering various data services over their networks, operators have been unable 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 and more attractive content but also to see that they add new subscribers on the basis of content not voice. This however will be a big challenging task for Indian operators as promoting data services where roughly 45% of the population is still completely illiterate. To add to the complexity is the language scenario in India. There are 18 languages and 844 dialects and offering streamlined data services in all of these languages 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 / / 42 Indian consumer is extremly cost conscious. The cost syndrome is visible in the above figure, as call costs fell, no. of subscribers rose! In a way, as operator’s ARPU declined, they experienced a surge in subscriber additions.
  • 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 / / 43 Prepaid is a big phenomena in India. Although detailed statistics are not available for each operator but on an estimate 60-70% of the subscribers (of all the operators) 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 the individual 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 to give them prepaid connections. •Retail channels earned good commission selling prepaid coupons to consumers and 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 / / 44 The billing relationship in India exists exclusively between the operator and the consumer. All the other contributors (value added service providers, ASPs, TV channels and movie production houses maintain revenue sharing or profit sharing relationship only with the operator. Operators in India get to keep a major share of the revenues coming from all the other services besides voice. When a consumer downloads a ringtone or a logo from a website, operator gets to keep 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 ringtone M ticketing is missing in India, however, one can request for a ticket for an event through an SMS but one cannot actually complete a transaction over his mobile phone.
  • 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 / / 45 As described earlier, literacy is a big factor which determines the success of value added services especially, advanced services like email, M-banking and MMS. Roaming, voice mail, call waiting, call forward are some of the services which consumers are well aware of. Advanced services like call conferencing, email and M-banking have so far been unable to penetrate. One critical aspect to be considered here is the share of relevant consumers for relevant services. Housewives and teenagers of course do not have any immediate value added for advanced services. Operators here face a challenge to market their services 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 / / 46 Bharti was the first mobile operator operational in India. India’s first GSM based phonecall 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 / / 53 BPL is a leading player in consumer electronics like TV, Fridge, Washing machines etc. BPL has produced it’s own handset this August. Priced at around Euro 90, the BPL handset will compete with the likes of Nokia, Motorola, Sony-Ericsson and Siemens for a pie of the Indian handsets market. Industry sources said that the handset will be part of the BPL consumer durables stable and will be manufactured at its Bangalore unit. Sources said that the company had tied up with Japanese electronics major Sanyo for providing lithium batteries for the handset. The company is also planning to launch 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 / / 54 As explained earlier, operators are constantly seeking to consolidate their standing in the market. Indian telecom regulations limit the number of operators in each circle to four but it does not limit operators acquiring each other. Airtel and Hutch have been very active in this mergers and acquisition activity. Hutchison Telecom (Hutch) recently acquired Aircel which operated in state of Tamil Nadu. Similarly, Airtel acquired Hexacoms licenses for states of Rajasthan and few north- eastern states.
  • 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 / / 56 Understanding WLL services and how they are classified has been a big confusion not only for consumers but even to an extent some services providers have taken a long time in understanding the services completely. CDMA in India is known as WLL (Wireless in local loop). This WLL is further divided into two categories fixed and mobile. However, the technology standard is similar in both cases i.e. CDMA 2000 1X WLL 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 through a special data cable. The data cable comes along with an installation CD and it is available in the open 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 / / 58 There was a big debate in India just before the launch of CDMA services that will it succeed or not? Recent trends reveal that CDMA is here to stay, but that doesn't mean that it is going to overpower GSM. Nationwide roaming helped to boost subscribe base, option of connecting to internet using a simple data cable proved as a catalyst in promoting CDMA services in India. The call tariffs over CDMA were initially lower as compared to GSM but today CDMA and GSM call tariffs are moreover same. The calls are tariffed again on the distance parameter which is already explained earlier.
  • 59. CDMA Operator Subscriber Base 6,414,047 Statistics include WLL(M) and WLL (F) Reliance, a CDMA 2000 1x operator, is a undisputed market leader Both WLL(F) and WLL (M) have been immensly sucessful 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 / / 59 Reliance Infocomm was the first private operator to start with the CDMA services in India. However, BSNL and MTNL offered CDMA before Reliance they were unable to tap subscribers. Reliance’s strategic alliance with LG and Samsung to offer their handsets along with their subscriptions proved to be a catalyst in the process. Tata Indicomm which was the second private operator to offer CDMA services initially failed to attract consumers but since early 2004, it has revived its strategy and has been able to gain some market share.
  • 60. CDMA Operators Market Share State Ow ned 12% BSNL MTNL Shyam 10% 2% HFCL 0% 0% Tata 8% 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 // 61 Due to spectrum availability it is feasible for the operators to introduce enhanced data services over their networks. This includes streaming media, JAVA games etc. The possibility for offering enhanced data services has proved to be a catalyst in promoting CDMA services in India. Reliance Infocomm floated a company by the name of Paradox Studios which develops interactive content for Reliance’s subscribers. Following the trend Tata Indicom also formed an alliance with Nokia and some major content developers to offer 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, these CDMA operators also function as a internet service provider. Consumers have to dial in a specific number to activate their phone as a modem and they can use 114 Kbps 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 THREE INTERNET 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 / / 67 Internet made its entry in India in the year 1995 when VSNL (Videsh Sanchar Nigam Limited) started with dial-up connections. The first five years of internet in India could be defined as an incubatory stage where speeds were limited to maximum of 64 Kbps ISDN. Initially and even today most of the home users used to access internet over 28.8 K and 56 K modems. Using internet over phone connection with a modem has two disadvantages, first the 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 using internet through 28.8 K-56 K modems at home. This situation means that there is a huge potential for broadband service providers to attract customers for their services but only at prices which are affordable. Always on connectivity will help users (both home and corporate users) to keep their phone lines free and avoid call charges. Present day internet subscriptions are available as freebie item along with purchase of 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 then consumers have to pay call charges for their minute usage, which is 0.02 Euro per minute. •Lease lines: Euro 9000 per year