Indian Telecom Industry 2012


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This paper is an effort to present an insight into the future of the highly dynamic market. It takes into account the key drivers of mobility, such as ARPU, MoU, VAS, Data Cards, future trends in wireless internet, M-Commerce, LBS, and Video on demand etc

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Indian Telecom Industry 2012

  2. 2. SCOPE  It is estimated that the blended ARPUThe wireless industry in India has shown for GSM and CDMA will decline tounparalleled growth. This paper is an effort to Rs70 and Rs60 respectively by Q1present an insight into the future of the highly 2012.dynamic market. It takes into account the keydrivers of mobility, such as ARPU, MoU, VAS,Data Cards, future trends in wireless internet, 300 GSMM-Commerce, LBS, and Video on demand etc 250 Blended 200 ARPU(InINTRODUCTION 150 100 Rupees)Indian Telecom Industry is one of the fastest 50 CDMA 0 Blendedgrowing among the world. On an average it Mar-09 Mar-08 Mar-10 Mar-11 Mar-12 Sep-08 Sep-09 Sep-10 Sep-11 ARPU(Inadds more than 17 million subscribers every Rupees)month. Telecom Industry contributes 2% inIndia’s GDP, and is bound to Increase, due toits huge potential of urban market and still  While MoU for GSM and CDMA willuntapped rural market. fall to 303 and 232 minutes respectively by March 2012.Price war among operators have ended, therehas been a move by top Telcos like Airtel, 600Idea, Reliance, who have increased their price, 500 MoU forso as to increase their profit. And help them 400 GSM(In 300paying their debt. 200 Minutes) 100 MoU forQuick Stats 0 CDMA(In Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Sep-10 Sep-08 Sep-09 Sep-11 Minutes) Fixed Line subscriber base will reduce to 33.56 mn in Q1 of 2012 with 3.89% decrease over Q1 of 2011.  The MoU levels will continue to Mobile subscriber base is expected to decline over the next few years reach 1026.2 mn in Q1 of 2012 with a though the rate of decline is expected growth of 22.88% over Q1 of 2011 with to be slow while ARPU may witness a total subscriber base is expected to be at slight increase due to price hike by 1065.3 mn in Q1 of 2012. some operators. 1500  Urban teledensity is expected to cross 182.24% whereas rural teledensity 1000Millions willl be at 44.59% mn in Q1 of 2012. 500  Overall teledensity will be around 0 84.57% in Q1 of 2012. Wireless Fixed Line
  3. 3. 200 Upcoming of various App stores is pushing % Teledensity 150 VAS to the upper level 100 50 MVAS revenue (in Rs billions) 0 150 2005-06 100 2006-07 2007-08 Urban Rural 50 2008-09 0 2009-10 2006-07 2009-10 2005-06 2007-08 2008-09 2010-11 2011-12 (E)A Pill To Survive:- Consolidations 2010-11Inner consolidation among operators has 2011-12 (E)already been started. TATA, and Barti Airtelhave announced the consolidation of theirrespective business. Video on Demand is one such VAS which will help operators to increase revenues.In second phase of consolidation, operators VOD will majorly be dominated bywill be going for Intra-circle roaming. Since Entertainment, news, sports andnone of Indias operators managed to secure devotional content. VOD drivers will be3G spectrum covering all 22 circles, the 3G, high resolution Smart phones, andconcept of is likely to pick up more real time delivery of services. Stillaggressively in the coming months. With operators will have to overcome variousIntra-circle roaming, operator are trying tobroaden their network coverage, at the same obstacles, like high transfer rates, theytime avoid losing their potential customers to have to also work on various codecs, socompetitors that content can fit the various screen size.In final phase of consolidation, big palyerslike Airtel, Idea, Reliance, will buy other One major disappointing factor for VAS isGreenfield operators, who are already the revenue split. This is usually 65-70% tobleeding and struggling to survive. operators and rest 35-30% is sharedVAS among copyright owners, content developers, content aggregators, andCurrently VAS accounts for 8-10% of the technology enablers.operator’s revenue, but in near future it willincrease. But, in near future we will see customer and VAS providers driving this segment.We have seen, operators heavily advertising Services like music, games, news,3G, and subscriber opting for it. entertainment, M-commerce etc. canThis is a positive sign for content developer directly be marketed to customers. Thisand aggregators. The Indian Mobile Value will help customers to access any contentAdded Services (MVAS) industry is expected of their choice from any provider. Theseto register a turnover of Rs 158 billion by FY contents can be accessed independent of2011-12 from the current Rs 122 billion. the mobile service providers platform,
  4. 4. through a link to any of the third-party payments for mobile games will furthercontent provider, through a Web browser boost popularity of mobile gaming.on the mobile handset, by sending a SMS M-Commerce:-or accessing IVR. M-Commerce is still struggling to make itsMobile search on smartphones is growing mark in India, because of illiterate rural7.5% month on month. It is one field population, its complexity and RBIwhich has a huge potential to grow, we regulations. Still Major commercial bankswill soon see functionalities like smart have announced tie-ups with big telecomsearches and search among different operators so as to leverage the extensiveaccounts of same user. outreach of the telecom operators toLBS:- provide micro-finance activities through mobile payments and mobile money-Factors that drive LBS are, adoption of transfer, enabled by the bankingGPS enabled smartphones, quality digital correspondent.maps, continued growth of mobileadvertising. Most banks in India including SBI, ICICI, Standard Chartered, HSBC, etc. offerVarious social networking sites like banking alerts on mobile phones via SMSFacebook and Twitter have also enabled a including deposits, cheque clearance andfeature where a person can update its withdrawals. Also there are various tie-location. ups between Telecom operators andSome popular LBS applications are: - m- banks, for example.Coupon (retail discounts), SBI and Bharti Airtel to set up a jointChildseeker(security). venture, to provide mobile bankingLBS will find its use majorly in four service. ICICI Bank has tied up withcategories:- marketplace-navigation, Vodafone Essar to enable their customersemergency, security, and other with savings accounts, pre-paidcommercial services instruments, and credit products through a mobile phone based platform. AxisMobile Gaming:- Bank, has signed an MoU with IDEA Cellular, whereby Idea will act as aThere has been a positive shift in business correspondent of Axis Bank toconsumers’ behaviour towards mobile provide the banks financial products andgaming as a source of entertainment, as services through its retail become one of the mostdownloaded content from APP stores. We will also see services like m-wallet andGames like Angry Birds have been very m-banking being adopted in near future.popular. Decreasing download charges,increasing accessibility in emerging Indian operators will definitely work tomarkets and the availability of micro- replicate the success of Grameen Phone,
  5. 5. Bangladesh. And will help banking the seeing variety of pricing model like:- payunbanked. per view, daily/monthly rental etc to cater to the different need of users. They canAccording to PwC in India 66% mobile also choose to view only one channel tousers are aware that banking transactions limited hours over a period of time, orcan be carried out using a mobile phone. they can choose for a bouquet ofOf these only 4% actually use this service. channels. Inspite of all this operators haveThough 71% were aware that bank to work on providing a good customeraccount details could be checked using a experience, in terms of audio and videomobile phone and only 6% of them use quality and access time to video portal Thethis service. most popular content on mobile TV serviceCreating awareness among subscriber is includes music videos, movie trailers,the main hurdle that companies face. weather, sports action clips, comedy videos, cartoons, and amateur videoChallenges that application creators will shots.face is to create a robust, secure and easyto use application. Unchurning the CHURN One of the problems that operators face is of Advantage with Indian Telecom industry churn rate, which is losing their customer tois that majority of the subscribers are Pre- competitors. Reason why it is important ispaid, and have the ability to conduct because Cost of customer retention is alwaysthousands of crores of small value less that cost of customer acquisition.transactions in a risk-free prepaid model.The entire channel first pays then does And MNP has made this churn even easy forbusiness hence the possibility of fraud is the subscribervery less. There are few major reasons why a customer switches to other networks.MOBILE TV  Poor Network coverageIndia has 840.28 mn mobile subscriptions  Poor customer carebut only around 134 mn households  Their close friends have switched tohaving TV sets. This gap depicts a huge other network, as intra network callpotential for the growth of mobile TV. are cheapest.Drivers for Mobile TV are:-availability of  Due to brand or advertisement,smart phones at cheap prices, launch of products (this forms the least3G services, Change in customer demand percentage of total churn)towards content & VAS. Operators have So the Companies having superior customerstarted working on mobisodes, which are service network quality, innovative andmobile episodes, formatted for mobile differentiated products & services and aphone users. These are relatively shorter strong brand proposition, will have anin length i.e 3-5 minutes. Mobile TV is at a advantage over other.very nascent stage in India. We will be
  6. 6. Indian mobile handset market Point Of FocusThe Indian mobile handset market witnesseda growth rate of 15% in the FY 2010-11 i.e. the Telecom operators will start focusing more onmarket size has increased from 25,000 cr. to Business Intelligence, Corporate Performance33,171 cr. The industry is expected to grow by Management and Analytic applications9-10% in FY 2011-12. These attractive figures software. This will not only help them gainingdescribe itself, why there are so many local competitive edge by helping them to cutand International players in market. This down operational costs, reduce revenuecompetition will intensify further, resulting leakages, but will also help in understandinginto a price war and a consequent squeezing consumer behaviour and offer betterof profit margins. products & services. To provide moreHandset manufacturer should segment their customised offers, we will see CRM beingcustomers in three broad categories:- integrated with these software’s. Operators will start focus on more on Business High end Customers, Costlier handset Intelligence, and analytics as a solution for an Mid-range Customer, want smart phones, efficient way of processing of large data. but price sensitive (Maximum consumer) Low Range handset with basic CRYSTAL GAZE functionality for rural India. Operators will start consolidating and joining hand with other operators toSmartphone shipments are forecast to growalmost 70% a year until 2015 survive. Operators must look at innovative andHandset manufactures are devising new locally relevant content as a tool tostrategies to sell their handset. They have increase ARPU.started tie-Ups with CSPs and providing In order to increase acceptance of 3Ghandset at subsidised rate. They are also services, handset bundling and mobileadvertising on one button launch of internet internet related contents should beand the applications it can support. the focus area.As Average selling price for Handset is Regional content, mobile internet,continuously declining, sales volume will be location based service, Video ondeciding factor for generating profits. demand, Mobile TV, Mobile Gaming and M-commerce will emerge asDATA CARDS applications of the future. Enterprises will explore the VASThis is one product, that none operator can market to increase the stickiness ofafford to ignore. Increasing sales of Laptop, the subscriber.and urge of being connected anywhere, Data cards and Smart phones will seeanytime are major driving force to this. With increase in sales and decrease inthe launch of 3G, even GSM players have pricesstarted giving their Data Cards. Estimates QoS and Security should be primesuggest that about 2.5 lakh data cards are sold focus for providing any service.every month.
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