Peeyush Vaish


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Peeyush Vaish

  1. 1. Rural Telephony Challenges and the Way out !! September 2009
  2. 2. Why connect the disconnected… Rural connection: status and market forces Impact of government policy: balanced scorecard? Infrastructure sharing Rationale, – buzzword for rural Success drivers and roll out factors benefits Business case: operator strategy Barrier and challenges to rural roll out September 2009 Rural Telephony
  3. 3. Booming rural India 45% of sales 60% of sales 40% of sales 33% subscribers 50% of policies 35% of sales 33% of deposits 39% of branches Rural India is contributing significantly to the revenues of some of the large brands and telecom is slated to be the next big beneficiary. September 2009 Rural Telephony
  4. 4. Demographics: Rural vs. Urban ► 732 million people living across ~630,000 villages ► 296 million people ► Accounts for over 45% of India’s ► Accounts for 55% of India’s GDP GDP ► Accounts for ~40% of the total ► Has 23.32 mn middle to consumption pie high income households ► Has 21.16 mn middle to high ► Average household of 4.8 income households persons ► Average household of 5 persons September 2009 Rural Telephony
  5. 5. At a glance All India Where are we heading - 2012 Subscribers: ~480 million subscribers Subscribers: ~700 million subscribers Net Adds: Over 14 million additions per Telecom Penetration 60% month Rural Tele-density 35% with half the Telecom Penetration 41.08% subscriber base coming from the rural sector Source: TRAI Reports Capex investments of USD 20 billion Rural India Telecom revenues expected to reach USD Subscribers: ~140 million subscribers 54 billion (FY08: USD 31 billion) Net Adds: Over 6 million additions per month MoU to touch close to 530 minutes Telecom Penetration: 16% September 2009 Rural Telephony
  6. 6. The Road ahead Revenue Justification Network Reach • Rural India can pay for mobile services, • Geographical spread means larger investments but only around $2 per month • Lower penetration indicates lower potential of sharing • Back haul and transmissions cannot be built over simpler implementation schemes (e.g. microwave) due to size Manpower • Poor infrastructure (availability of power) leading to increased downtime and access (roads etc) • Skilled manpower to effectively manage operations without paying extra costs Distribution Reach • Spread over 600,000 villages, large distribution network is required • Traditional sales channel may not be viable as the investments of distributor may not be set off by revenues Product / Service Reach • Innovative VAS solutions that appeal to the subscriber base • May require higher levels of ‘direct’ customer service increasing costs Searching PROFITABILITY September 2009 Rural Telephony
  7. 7. Key enablers for demand in rural areas Service Operations & Service Distribution Handsets Connectivity Pricing maintenance Offerings September 2009 Rural Telephony
  8. 8. Key enablers for demand in rural areas Service Operations & Service Handsets Connectivity Pricing maintenance Offerings Ø Reach to the hinterland remains a significant challenge for the operators Ø Innovative models being built such as Bharti IFFCO tie up Distribution Ø Models involving FMCG companies could act as catalyst to distribution Ø Cell site infrastructure could be another source of distribution September 2009 Rural Telephony
  9. 9. Key enablers for demand in rural areas Service Operations & Service Distribution Connectivity Pricing maintenance Offerings Ø Mobile to transition from a community device to a household device Ø Low cost handsets (sub $ 10) still a necessity to drive growth Handsets Ø Customized handset with vernacular content Ø Customer education Ø Micro financing Ø Solar handsets September 2009 Rural Telephony
  10. 10. Key enablers for demand in rural areas Operations & Service Distribution Handsets Connectivity maintenance Offerings Ø With ARPU of rural subscribers projected at under Rs. 100, there is still need to drop tariffs. Ø Home Zoning – a win-win proposition for all Service Pricing Ø Total cost of ownership to come down to $2 to $5. Ø Revisiting high duties and levies September 2009 Rural Telephony
  11. 11. Key enablers for demand in rural areas Service Service Distribution Handsets Connectivity Pricing Offerings Ø Availability of reliable power supply – Average Diesel cost as high as Rs. 19000 p.m. per site in Maharashtra as compared to Rs. 2000 in Mumbai Operations & Ø Bio-fuels and renewable energy Maintenance Ø Windmill and solar based cell sites Ø Transportation system September 2009 Rural Telephony
  12. 12. Key enablers for demand in rural areas Service Operations & Service Distribution Handsets Pricing maintenance Offerings Ø Non availability of sufficient back-haul capacity Ø Total number of BTS to touch 600,000 by FY12. Connectivity Ø Broadband reach through Wimax Ø Passive Infrastructure Sharing Ø Intra Circle Roaming Ø Active Infrastructure sharing September 2009 Rural Telephony
  13. 13. Key enablers for demand in rural areas Service Operations & Distribution Handsets Connectivity Pricing maintenance Ø Micro Banking Ø Rural Information Services Ø Commodity Trading Service Offerings Ø Primary Health and Education Ø Regional Entertainment Ø Location based services September 2009 Rural Telephony
  14. 14. Doing Business in Rural India Reaching out to the masses and that too with a commercially viable model is one of the keys to sustain in the rural market Ø Intra Circle Roaming Ø Passive Infrastructure Sharing Ø Disbursement of USOF (Only 25% has been disbursed) Ø Shift in Metrics to be tracked September 2009 Rural Telephony
  15. 15. Intra Circle Roaming Ø Own network rollout limited to major cities/ towns § Only capacity sites added over time § Capacity sites will increase and improve coverage over time Ø In rural areas intra-circle roaming on incumbent operator § Incumbent has considerably better coverage than the new operator Partner Coverage Operator Coverage Time-to-Market benefit and CAPEX/ OPEX savings due to fewer sites September 2009 Rural Telephony
  16. 16. Passive infrastructure sharing A boost to rural Telephony market Regulatory Perspective ► In order to promote rural telephony expansion and help reduce roll put costs, Government issued infrastructure sharing guidelines ► Passive infrastructure sharing coupled with promotions of active infra sharing has boosted the rural telephony growth in India Benefits to operators 2 ► A boost to achieve the primary objective of “bridging the urban-rural Benefits to Rural India divide” promoted by Government Help in reducing the digital divide and aim 3 ► ► Operators able to tap the growth of connecting rural India to urban India potential in rural market ► Provision of rural specific Value Added ► Justification of cost and effort of 1 Services aimed at promoting growth of operators looking to expand services in rural India. Services like Primary health rural telecom market in India and education and Information to farmers ► Reduction in huge CAPEX and sharing to help in achieving overall rural growth of OPEX costs promoting operators to expand in rural India Passive infrastructure sharing would lead to annual * Source: Ernst & Young analysis OPEX savings in tune of USD 825 Mn by 2012* September 2009 Rural Telephony
  17. 17. Key Metrics to be tracked KPI Description Average Realization rate (ARR) This KPI reflects the average revenue per minute generated by the operator Airtime Rate per outgoing minute This is a subset of ARR and reflects the net revenue earned by the operator for every outgoing minute. Marginal cost per minute This reflects the service cost or variable cost for every minute of usage of the network. Net margin per MoU This KPI will substantially increase with the increase in operations as economies of scale start to creap in. Cell site utilization % This KPI can be monitored in terms of erlangs generated over a period of 6 months to understand the utilization trends and help in CAPEX planning. This can also help the Company in revisiting the home zoning concept Capital Productivity Ratio Revenue as a proportion of Gross CAPEX will assist the company in understanding the pay out period for the CAPEX incurred for the project September 2009 Rural Telephony
  18. 18. And finally… At the beginning of the 20th century, Mahatma Gandhi famously declared that “the soul of India lives in its villages… and if the villages perish, India will perish too.” At the beginning of the 21st century – rural India will push rest of India right into the next stage of communications revolution!!! September 2009 Rural Telephony
  19. 19. Thank you