EMERGING SERVICES

SECTOR
TELECOM
Amit Chourey (MS – 5)
Anuradha Porwal (MS- 10)
Arjun Moudgil (MS – 11)
Dheeraj Ahlawat (MS – 19)
Megha Agarwal (MS – 26)
Sarchana (MS – 39)
Introduction
 Recognized the world-over as an important tool for
socio-economic development of a nation
 One of the prime support services needed for rapid
growth and modernization of various sectors of the
economy
 India fastest growing telecom markets in the world
 Third largest telecom network and the second largest
wireless network in the world
 India has become the second country in the world to
have more than 100 million CDMA-based (code division
multiple access) mobile phone subscribers after the US,
which has 157 million CDMA users
Telecom Statistics of the world
Population 6.7 bn

Fixed lines 1.3 bn

Mobile subscribers 3.5 bn

(Source: BuddeComm
estimates)
Mobile text messages sent 2.3 tn

Internet users 1.2 bn

Fixed broadband subscribers 380 mn

 QUICK FACTS (India)
Total telecom subscribers 429.72 million (March 2009)

Wireless subscribers 391.76 million

Wire line subscribers 37.94 million

Tele density 36.98 per cent

India’s service providers revenue in $8.2 billion

Q1 (2009)
India’s Rural Mobile Phone Users 100 Million

India achieved the distinction of having the world's lowest call rates (2–3 US cents), the fastest
sale of million mobile phones (1 week), the world's cheapest mobile handset (USD 19) and the
world's most affordable colour phone (USD 31).

ARPU for GSM – USD 5.28 (USD./sub/ month)

 History
1851 Introduction of Telegraph services
1947 Foreign Telecom Companies nationalized to form PTT
1980’s:The • Tele-density in 1980-81: 0.3%
Beginning • Introduction of public pay phones
• Private Sector allowed
• DoT, MTNL and VSNL formed
Early to Mid 90’s: A • Telecom policy 1994
Messy Affair - Basic telephony service to private operators
- 49% FDI
- 8 licensees began operations in Aug 1995
Late 90’s • Birth of a regulator: TRAI
• NTP 1999
• (New Telecom Policy)
2000+ • CAGR of around 85% since 1999
• FDI: 74% (2005)
2007-2009 •having the world's lowest call rates the fastest growth in the number
of subscribers (45 million in 4 months),
•the fastest sale of million mobile phones (in a week),
• the world's cheapest mobile handset
• the world's most affordable colour phone
INDUSTRY SECTORS

Network Infrastructure Telecom Service

Companies: Alcatel- Providers: Bharati-Airtel,
Lucent, Cisco, Ericsson Vodafone, Idea, Reliance

Telecom

Telecom Solutions
Telecom Equipment
Providers: Tech-Mahindra,
Manufacturers: Nokia,
Aricent, IBM Indi Wipro,
Motorola, Samsung
Sasken
 TELECOM SERVICES
The Indian telecom market generated revenues of approximately USD 32 billion in 2007–08. It registered a CAGR of approximately
32 percent from 2002–03 to 2007–08. The CAGR from 2008–08 to 2011–12 is expected to stabilise at 21 percent. Apart from
mobile telephony services, other value-added services are also gaining importance.

Telecom Services – India

Telephony services (mobile and basic) and Internet services dominate the Indian telecom services

The Indian telecom services can be divided predominantly into basic, mobile and Internet services. It also comprises smaller
segments, such as radio paging services, Very Small Aperture Terminals (VSATs), Public Mobile Radio Trunked Services (PMRTS) and
Global Mobile Personal Communications by Satellite (GMPCS).

The growth witnessed in the mobile services and Internet services segments was much higher as compared to other services, such
as basic services and radio paging services which are nominal in terms of numbers.
 Basic Services

Market Share* of Basic Services

 Basic services include fixed Segments in India (2007–08)
wireline and wireless in local loop
(WLL-fixed). In 2007–08, basic WLL (F)
17%
services subscribers exceeded 60
million.

 Fixed wireline services hold a

major market share of 83 percent
in basic services.

 BSNL and MTNL are market

Fixed
leaders in this segment. 83%

 Although the government-owned

BSNL dominates the segment in
terms of subscriber base and
market share, private players have
registered a notable growth.
Wireless Service (GSM)

 Divided into 23 circles Jammu & Kashmir

 4 metros
Himachal Pradesh
 19 circles
Punjab
North Eastern
 Further divided into A, B and C category based Haryana
Uttar
States
Pradesh
on economic parameters and revenue potential W

DELHI
 Each circle has a licenses Rajasthan Uttar Pradesh E

Bihar
West Bengal
Gujarat Madhya Pradesh

Orissa KOLKATA
Maharashtra

MUMBAI

Andhra Pradesh

Karnataka
METRO Circles

CHENNAI
A Circles
Tamil Nadu
B Circles
Kerala

C Circles

Source :COAI & TRAI

Revenue(US$ billion)

According to a Frost & Sullivan industry analyst, by 2012, fixed line revenues are
expected to touch US$ 12.2 billion while mobile revenues will reach US$ 39.8 billion in
India
Growth of telecom network (in lakh)

Year ending 31st Mar ‘09

Teledensity(No of telephones per 100
population)

Year ending Mar ‘09

 STRUCTURAL COMPOSITION

%age share of %age share of Wireline

9% and Wireless in Mar 08
Wireline and Wireless
in Mar 02 Wireless Wireline
Wireless Wireline
15%

85% 91%

The growth of wireless services has been phenomenal, with wireless subscribers growing
at a compound annual growth rate (CAGR) of 75.7% per annum since 2003.

The number of wireline and wireless telephones was 382.91 lakh & 66.77 lakh
respectively in 2002.This increased to 379.65 lakh & 3917.61 lakh respectively in March
2009.
 Public vs Private

Year ending 31st Mar 09

The liberalization efforts of the government are evident in the growing share of private sector
in total telephone connections, which has steadily increased to 79.16% in March 2009 from
39.27% in 2004.

The private sector, however, is mainly active in the wireless segment while wireline
accounts for only about 1.17%.

Private sector has been growing very fast. It grew at a rate of 79.16% in 2009 as against
public sector that grew at the rate of 20.84%.
Mobile telecom services provide an unprecedented growth
opportunity for companies
Minutes of Usage per Month – Mobile Services

USA 838

India 461
Despite a low teledensity of approximately 36 .9percent,
India has the second highest minutes of usage per month.
China 303 This offers huge growth opportunity to telecom companies.

Russia 88

ARPU* in India – Mobile Services

The declining ARPU implies that India Inc. is tapping a large

market at the bottom of the pyramid by reducing tariffs;
thereby, enhancing affordability.

* Average Revenues per User

• Data Source TRAI 2008 Report
 SUBSCRIBER GROWTH

 The telecom subscriber base has witnessed an explosive growth; the additions in the
current year registered a growth of approximately 47 percent over the previous year

 The subscriber base registered a CAGR of 40.4 percent for 2002–03 to 2007–08
 India added 130 million new customers in 2008-09, the
largest globally
 The country’s cellular base witnessed close to 50 per
cent growth in 2008, with an average 9.5 million
customers added every month
 By April 2009, the total number of telephone connections
reached 441.47 million - the overall tele-density reached
37.94 at the end of April 2009
 According to Business Monitor International, India is
currently adding 8-10 million mobile subscribers every
month
 It is estimated that by mid 2012, around half the country's
population will own a mobile phone - translate into 612
million mobile subscribers, accounting for a tele-density
of around 51 per cent by 2012
Wireline subscriber Wireless subscriber

Internet subscriber Broadband subscriber

GSM surpasses CDMA in number of additions to subscriber base

Market Share* of Wireless Operators (as of

quarter ending March 2008)

CDMA, 27%
GSM, 73%

* In terms of Subscriber Base

Broadband services to drive Internet penetration in India
The emergence of private players and new Internet Subscribers: 1998–2008
technologies have provided a strong impetus to
the growth of Internet and broadband services.
The quality and penetration of these services
have undergone changes, with significant
improvement in the telecom infrastructure.The
Internet subscriber base registered a CAGR of
60 percent for the period 1997–98 to 2007–
08.

BSNL and MTNL caters to more than two-thirds of Internet subscribers

in India

The total no. of Broadband Subscribers of these 13 Service Providers

have increased from 3.1 million to 3.82 million by adding 0.72 million
(23.35%) subscribers in the quarter ending March, 2008

Private players are catching up fast due to increased penetration of

Internet and broadband services in India

The telecom market will experience high penetration of Internet

services with the support from government policies and introduction of
novel technologies in India
FDI in Telecom

Third-largest sector to attract FDI in India in the post liberalization era

The investment was majorly in handset manufacturing and telecom service provider

Indian telecom handset manufacturing market is likely touch US$ 7 billion by 2010
FDI norms in Telecom

 In Basic, Cellular Mobile, Paging and Value Added Service, and Global Mobile
Personal Communications by Satellite, Composite FDI permitted is 74% (49% under
automatic route) subject to grant of license from Department of
Telecommunications subject to security and license conditions
 FDI upto 74% (49% under automatic route) is also permitted for the following: -
- Radio Paging Service
- Internet Service Providers (ISP's)
 FDI upto 100% permitted in respect of the following telecom services: -
- Infrastructure Providers providing dark fibre (IP Category I)
- Electronic Mail
- Voice Mail
Subject to the conditions that such companies would divest 26% of their equity in
favor of Indian public in 5 years, if these companies were listed in other parts of the
world.
 In telecom manufacturing sector 100% FDI is permitted under automatic route
Investment opportunities and incentives
 No industrial license required for setting up
manufacturing units for telecom equipment
 Automatic approval of 100 percent foreign equity,
technology fee up to US $ 2 million, royalty up to 5
percent for domestic sales and 8 percent for exports in
telecom manufacturing projects
 Foreign equity of 74% (49 % under automatic route)
permitted for telecom services - basic, cellular mobile,
paging, value added services, NLD, ILD, ISPs - and global
mobile personal communications by satellite
 Full repatriability of dividend income and capital invested
in the telecom sector
Major Investments

 The Russian government is likely to pick up equity amounting to US$ 670 million-US$ 700
million in Sistema Shyam TeleServices Ltd (SSTL), a joint venture between Russia-based
telecom major Sistema and Shyam Group in India, by the end of this financial year. SSTL is
also planning to invest US$ 5.5 billion over the next 5 years in India
 Norway-based telecom operator Telenor has bought a 60 per cent stake in Unitech Wireless
for US$ 1.23 billion
 Japanese telecom major NTT DoCoMo acquired a 27.31 per cent equity capital of Tata
Teleservices for about US$ 2.6 billion in November 2008
 Bahrain's Batelco has signed a deal to buy 49 per cent in Chennai-based S-Tel, a GSM service
provider, for US$ 225 million
 BSNL, India's leading telecom company in revenue terms, will put in about US$ 1.16 billion in
its WiMax project
 Vodafone Essar will invest US$ 6 billion over the next three years in a bid to increase its
mobile subscriber base from 40 million at present to over 100 million
 Telecom operator Aircel, which launched GSM mobile services in Bangalore in February
2009, plans to invest US$ 220.58 million over the next year to set up base stations across the
state
Major Policy Initiatives

 NTP 99 with objectives of "to transform in a time bound manner, the

telecommunications sector to a greater competitive environment in both
urban and rural areas providing equal opportunities and level playing field
for all players“
 no cap on the number of access provider in any service area.
 Permission of use of dual technology spectrum under the same UAS/CMTS
licence were granted to 8 companies including BSNL & MTNL.
 FDI Ceilings raised from 49% to 74%. 100%.
 FDI is permitted in the area of telecom equipment manufacturing and
provision of IT enabled services.
 The allocation of spectrum for 3G and BWA services will give a boost to
the development of telecom sector.
Telecom services are available at low prices
in India
Steps taken to protect the interest of
consumers
 Subscribers to get full talk time on talk time recharges, barring
an administrative fee which shall not exceed Rs.2 per recharge
and applicable taxes
 Subscribers to automatically get the benefit of straight tariff
reductions without any preconditions of any explicit action by
the subscriber, for example, sending SMS etc.
 Lifetime customers need not recharge more than once in 6
months for remaining connected.
 No change in mobile number when subscriber change tariff
plans or move from prepaid to postpaid or vice versa.
 Blackout days limited to a maximum of 5 days in a calendar
year. Such days to be pre-specified and no subsequent
alteration or addition permitted.
 Promotional offers to be streamlined.
 Indian Telecom Industry – Competitive Landscape

28
Macro level competition indicators
 Competitive Landscape

India has been divided into 23 circles for

wireless operations across 4 classes - Metro,
A, B and C Circle B
 Haryana
Metros
 Rajasthan
 Mumbai
 UP East
 Delhi
 UP West
 Kolkata
 West Bengal
 Chennai
 Kerala

 Punjab

 MP

Circle A Circle C
 Maharashtra  Himachal Pradesh
 Andhra Pradesh  Bihar
 Karnataka  Orissa
 Gujarat  Assam
 Tamilnadu  North Eastern states
Source: Analyst Reports
30  J&K
 Competitive Landscape

India has been divided into 23 circles for

wireless operations across 4 classes - Metro,
A, B and C Circle B (24.6%)
 Haryana (36.1%)
Metros (98%)
 Rajasthan (32.4%)
 Mumbai (98.6%)
 UP East (19.1%)
 Delhi (121.8%)
 UP West (24.9%)
 Kolkata (63.7%)
 West Bengal (20.0%)
 Chennai (120.5%)
 Kerala (43.9%)

 Punjab (51.5%)

 MP (15.1%)

Circle A (36.5%) Circle C (20.7%)

 Maharashtra (31.5%)  Himachal Pradesh (45.8%)
 Andhra Pradesh (34.1%)  Bihar (19.5%)
 Karnataka (38.4%)  Orissa (19.2%)
 Gujarat (40.2%)  Assam (17.9%)
 Tamilnadu (42.4%)  North Eastern states (21.8%)
Numbers in brackets are penetration in the circle
Source: Analyst Reports
 J & K (27.0%)
31
 Competitive Landscape

India has been divided into 23 circles for

wireless operations across 4 classes - Metro,
A, B and C Circle B (24.6%)
Metros (98%) 3  Haryana (36.1%)
 Mumbai (98.6%) 1  Rajasthan (32.4%)
 Delhi (121.8%) 4  UP East (19.1%)
 Kolkata (63.7%) 2  UP West (24.9%)
 Chennai (120.5%)  West Bengal (20.0%)
7
 Kerala (43.9%)

 Punjab (51.5%) 5

 MP (15.1%)

Circle A (36.5%)
 Maharashtra (31.5%) Circle C (20.7%)
 Andhra Pradesh (34.1%) 10
 Himachal Pradesh (45.8%) 6

 Karnataka (38.4%) 9  Bihar (19.5%)

 Gujarat (40.2%) 8  Orissa (19.2%)

 Tamilnadu (42.4%)  Assam (17.9%) Circles in Green –

among top 10 circles by
penetration
 North Eastern states (21.8%)
India’s overall wireless penetration = 31.3% Circles in Red –
 J & K (27.0%) penetration below
Source: Analyst Reports national average
32
Rank of operators in different circles by subscriber
base
Player Bharti Airtel Vodafone Essar MTNL/BSNL IDEA Aircel TTSL Reliance Telecom
Circle

Metros 11.8 12.3 6.3 2.9 8.5 11.3

Delhi 1 3 6 5 7 2 4

Mumbai 3 2 5 5 4 1

Chennai 2 3 5 -- 1 6 4

Kolkata 3 1 5 -- 6 4 2

Circle A 33.47 23.81 13.35 17.12 10.60 20.26

Maharashtra 2 3 6 1 4 5

Gujarat 2 1 5 4 6 3

Andhra Pradesh 1 4 6 3 7 5 2

Karnataka 1 3 4 5 6 2

Tamil Nadu 2 3 5 -- 1 6 4

Circle B 28.88 26.52 20.56 19.33 11.27 24.54

Kerala 5 2 4 1 6 3

Punjab 1 4 2 3 6 5

Haryana 6 1 3 2 5 4

Uttar Pradesh (W) 5 1 4 2 6 3

Uttar Pradesh (E) 2 1 3 5 6 4

Rajasthan 1 2 4 6 5 3

Madhya Pradesh 3 6 4 2 5 1

Circle C 14.21 .74 6.51 0.66 2.38 10.18

West Bengal & A. & N. 2 1 4 - 5 6 3

Himachal Pradesh 1 7 3 5 6 4 2

Bihar 1 7 3 6 4 5 2

Orissa 1 6 3 -- 5 4 2

Assam 2 5 4 -- 1 6 3

North East 2 5 3 -- 1 6 4

J&K 1 5 3 -- 2 4 --
Source : www.isourceupdates.com
33
Penetration level in different circles

Metro Circles Above average penetration

Category A circles Average penetration
Category B circle Below average penetration
Category C circles

34
 Competitive Landscape

Bharti leads in 11 out of these 23 circles that

include 2 Metro and 2 Class A circles
Bharti Airtel is market leader in Vodafone is market leader in
1. Delhi (22.5% market share) 1. Kolkata (24.5% market share)

2. Chennai (23.8%) 2. Gujarat (33.4%)

3. AP (30.6%) 3. Haryana (23.8%)

4. Karnataka (43.4%) 4. UP East (24.6%)

5. Tamilnadu (23.2%) 5. UP West (23.5%)

6. Rajasthan (30.7%) 6. West Bengal (31.0%)

7. Punjab (27.0%)

8. Bihar (37.5%)

9. Orissa (35.7%)

10. North Eastern states (28.9%)

Reliance Communications is market leader in
11. J&K (49.9%)
1. Mumbai (23.4%)

2. MP (31.4%)
Idea Cellular is market leader in
3. Himachal Pradesh (32.6%)
1. Maharashtra (25.0%)
4. Assam (26.6%)
2. Kerala (27.5%)

Circles in Green are Metros Source: Analyst Reports

35
 Competition among operators
Operator Market share Mar’2009 Market position in circles
Total circles
#1 #2 #3 #4 <#4

25% 9 8 3 0 3 23

18% 6 3 5 2 7 23

18% 2 6 6 5 3 22

13% 0 1 7 7 8 23

11% 2 3 2 1 7 15

0 1 0 6 16 23
9%

4 1 0 1 6 12
6%

0% 5% 10% 15% 20% 25% 30%

 Competitive Landscape

Wireless subscribers
Subscriber Base (in Million) by Operators

100

90 88.4

80

70 66.3
63.3

60 57.4

50
42.6 42.7
41.1 40
40 Jan-08 Jan-09
33.7 32.8

30 22.5
25.9

20 16.8

9.9
10
4 4.5 5.2
3.0 2
1.3 0.4 0.8
0
Bharti Airtel Reliance Vodafone BSNL Idea (Inc. Tata Tele Aircel MTNL BPL BSNL + Others
Comm Spice) MTNL CDMA

37
 Competitive Landscape

Market shares of operators by subscribers

Wireless Market Share by Wireless Market Share by
Subscriber Base (Jan 2008) Subscriber Base (Jan 2009)

BSNL + MTNL BPL, 0.6%

CDMA, 1.4%
BSNL + MTNL BPL, 0.5%
MTNL, 1.1% Others, 0.2%
CDMA, 1.9%
MTNL, 1.2% Others, 0.2%
Aircel, 4.6%

Aircel, 4.1% Bharti Airtel, 24.4%

Tata Tele, 9.1%
Bharti Airtel, 23.7%
Tata Tele, 9.3%

Idea (Incl. Spice),

11.0%
Idea (Incl. Spice),
10.7%

Reliance Comm,
Reliance Comm,
18.3%
17.6% BSNL, 11.8%

BSNL, 13.9%

Vodafone, 17.5%

Vodafone, 17.0%

BSNL, MTNL and Tata Teleservices lost market shares

38
Financial comparison of operators
Bharti Airtel R Com Idea Tata Communication

Revenue (09 E) 366,844 230,257 103405 98956

Revenue (Q3 09 A) 96,334 58,502 27,305 9902

Revenue % growth (QoQ) 6.8 3.6 18.5 0.64

EBITDA (Q3 09 A) 39,450 23,525 6,805 3775

EBITDA % margin 41 40.8 26 14.4

Capital expenditure 130,631 (201,627) 77,147 (28,439)

ROE (09 E) % 24 21.4 6.6 3.0

PAT 21,593 14,106 2,195 6

PAT % growth (QoQ) 5.5 (7.9) 52.3 (96.7)

Source: Analysts reports

 3G and WiMax Auctions in India

40
 3G & WiMax Auctions

The planned 3G license allocation in India

Spectrum frequency 2.1GHz, 450 MHz, 800 MHz
band
Amount of spectrum Blocks – 2 x 5 MHz
No. of blocks – 5-10 subject to availability in each circle in 2.1 GHz band, some circles may have less
than 5 blocks
Eligibility for bidding Should be a UAS licensee or fulfills the eligibility criteria for obtaining UASL as per DoT guidelines and
also has an experience of running 3G telecom services

Reserve price Rs 300M – Rs 1,600M

Auction process Controlled, simultaneous ascending e-auction

Spectrum allocation If the no. of bids </= no. of blocks – allocation to all bidders at the highest bid price
If no. of bids > no. of blocks – proceed further as per e-auction rules
In case of tie, existing service providers will be given preference
In case of tie between existing service providers, the player with higher subscriber base will be given
preference
License period 20 years

Spectrum usage First year – no charge

charges
Second year onwards – 1% of AGR
Remarks 1. Bidding will be service area wise
2. One block allocated to MTNL and BSNL
3. Rollout obligation at the end of 5 years - to cover 90% of metro areas and 50% of DHQs/cities
41
 3G & WiMax Auctions

One of the two approaches were followed by countries while

distributing licenses – the spectrum auction or the beauty
contest
Auctions
 The two auctions that generated most of the news and revenue were – Germany ($45.8b for 6 licenses) and the UK ($35.3b
for 5 licenses)

 The high amount paid by the bidders negatively impacted their bottomline – high debt burden retarded the actual build out
of networks by years, as a result German government allowed BT and Deutsche telecom to share their infrastructure costs

 Italy’s auctions, which followed UK’s and Germany’s auctions, could generate less than one-third the license fees paid in the
UK

Beauty contest
 Several countries used beauty contest format – licenses fees that winning contestants are obligated to pay, are relatively small
compared to the sums generated in auctions

 Spain was forced to charge its license winners an additional fee, Sweden charged only $10,000 as application fee without any
additional fee for winners

 France demanding $4.6b for 4 licenses saw only two companies willing to compete

 Poland had to abandon auctions and rely on beauty contest with relatively low license fee ($500m), regulators had to drop
their demand for full payment up-front, wherein now the winners would pay only 50% up-front while remaining to be paid
over the life of the license

 Philippines used beauty contest while Singapore and Malaysia uses beauty contest with fixed fee for spectrum allocation

Source: www.law.duke.org
42
 3G & WiMax Auctions

UK’s successful model of simple ascending auction

could not be copied so successfully by India
Country Adopted approach Overall experience

UK Straightforward ascending auction Widely judged a success, 9 new entrants participated to bid strongly
for 5 licenses, 1 license reserved against the 4 incumbents, it generated $35.3b of revenue
for a new entrant

Netherlands Followed British design of Strongest potential new entrant collaborated with incumbents and
ascending auction when 5 foreign players like Deutsche Telecom, DoCoMo and Hutchison joined
incumbents and 5 licenses hands with local players
Just one weak entrant competed with incumbents and stopped bidding
after being threatened of legal action by an incumbent
Auction could generate only $2.3b

Italy Ascending auction – 5 licenses Only 6 bidders competed for 5 licenses and 1 quit in less than 2 days
after bidding
Revenue per capita below 40% of UK level, experts feel a sealed-bid or
Anglo-Dutch design would have been more effective

Switzerland Copied the UK design for 4 Discouraged by the auction design and laws permitting joint bidding
licenses, reserve price very low reduced the no. of bidders from 9 to just 4
Bidders had to pay just the reserve price – one-thirtieth per capita of UK
and German prices

Source: Paul Klemperer’s paper - How (not) to run auctions: the European 3G telecom auctions (2001)
43
 3G & WiMax Auctions

WiMax: Overview and Indian scenario

Regulatory environment and availability of spectrum
1. Government has selected WiMax as the technology for connecting rural areas to Internet, goal is to have 20m
broadband subs by 2010
2. WiMax spectrum: 20MHz in 2.3GHz & 2.5GHz bands for 15 years
3. BSNL and MTNL each received single blocks in 2.5GHz band (WiMax) spectrum
Actions
1. BSNL is building a mobile wireless network to connect 3 big states, plans to connect 400 cities with a downstream
speed of 1.5 mbps
2. Tata Communications is rolling out WiMax to connect 110 cities, to cater to the demand of enterprise segment and to
target consumer segment in 18 cities – investment of $500-600m by 2010
3. Idea Cellular is also looking at WiMax as a potential medium and completed its trials using WiMax
4. WiMax Forum to open an Indian certification lab in collaboration with IIT Delhi
Response of foreign players
1. Sprint Nextel (Xohm) to offer WiMax consultancy services in India
2. Intel to make investments in India in WiMax technology
3. Vendors like Alcatel-Lucent, Alvarion, Telsima, Beceem, Wavesat, Motorola and Samsung are increasing presence in
this area
4. According to industry estimates, network majors who have manufacturing and R&D facilities have already led a
combined investment of close to $2 billion in India towards WiMax
Market growth forecasts
1. iSuppli forecasts WiMAX will garner subscriber bases of 19 million by 2012
44
 3G: Overview and Indian scenario
Regulatory environment and availability of spectrum
1. 3G spectrum: Blocks of 2*5MHz in 2.1GHz bands for 20 years
2. The licensee shall pay annual spectrum charge of 1% of AGR after a period of 1 year
3. BSNL and MTNL each received single blocks in 2.1GHz band (3G) spectrum at a price equal to highest bidder in the
service area
Actions
1. In September 2008, BSNL announced that it had begun a pilot launch of 3G services in Pune, granting upto 2,000
existing BSNL contract customers to sign up for the service on a first-come, first-served basis free of charge
2. In September 2008, MTNL began conducting 3G trials in Delhi
3. Bharti confident of launching a commercial 3G service within six months of being awarded a licence.
4. MTNL plans to expand its service to Mumbai in 2009

3G success/failure around the world

1. Hong Kong's Hutchison Whampoa has struggled since launching 3G services in Britain in 2003
2. Vodafone ended up selling its underperforming Japanese 3G unit to Softbank in 2006
3. Singapore's three operators -- Singapore Telecommunications, StarHub and MobileOne -- rolled out their commercial
3G services in early 2005, but are yet to turn profitable on their 3G investments

4. With very low tarrifs and high licensing fee in India, profitability can be a challenge for foreign players, specially pure
3G players
Market growth forecasts
1. BMI forecasts 3G will garner subscriber bases of 14 million by end of 2009 and 71 million by 2012
45
Wimax Vs 3G
 Delay in 3G licensing coupled with fall with in equipment prices will benefit WiMAX
 some companies have already started deploying WiMAX networks in India, while 3G license are yet to be given
 3G is a cellular technology and its infrastructure is an upgrade of the exsisting GSM infrastructure where as WiMax is a
broadband technology that provides internet access with high data rates.
 3G has the capability to offer high-speed data services but doesn’t have the scalability.You need more base stations for
offering 3G at the same capacity of total bandwidth and with this, the capex per subscriber goes up. And if you add more
subscribers, the speed goes down. WiMax is a more cost-effective and efficient technology
 Time lag between 3G and the next generation network (LTE)will greatly benefit commercially available technologies, such as
WiMAX
 The WiMax customer premise equipment (CPE) is priced at Rs 5,000-10,000, while the CPEs for 3G would be cost Rs 10,000
and above.

A Comparison
3G WiMAX Result

Roll Out License to private telecom Some private telecom players like Tata Advantage WiMAX
players yet to be given, only Indicom has already rolled out WiMAX in few
BSNL and MTNL having cities
spectrum

Data download speeds 15 Mbps 70 Mbps Advantage WiMAX

(Fixed)

Data download speeds 14 Mbps 20 Mbps Advantage WiMAX

(Mobile)

Equipment/ Standard Evolved over the years New technology Advantage 3G

For Voice services Best technology Evolving technology Advantage 3G

46
 MVNOs – Global Trends and Indian Perspective

47
MVNO – Definition and concepts
 Mobile Virtual Network Operator (MVNO):
 does not have its own licensed frequency allocation of radio spectrum
 generally with out own networking infrastructure
 buy minutes of use from the licenced telecom operator
 resell minutes of usage to customers under their brand name

 have full control over the SIM card, branding, marketing, billing, and customer care operations

 first commercially successful MVNO in the UK was Virgin Mobile launched 1999
 over 400 active MVNOs operated by over 360 companies all over the world
 Hong Kong is the highest penetrated MVNO market with around 7.5% market share
 Western Europe comprises around 40% of the worldwide MVNO subscribers
 US has highest number of MVNOs (60) in the world

Motivations for mobile operators to allow MVNOs on their networks

 Segmentation-driven strategies –as a way to implement a more specific marketing mix
 Network utilisation-driven strategies - MVNO strategy can generate economies of scale for better network utilisation
 Product-driven strategies - to target customers with specialised service requirements though MVNO
 The opportunity for mobile operators to take advantage of MVNOs generally outweighs the competitive threat.

48
 MVNO in India

 Mobile ESPN, a sports themed MVNO has launched mobile VAS in November 2006
 ValueFirst has tied up with FMCG giant ITC to mobile-enable its sales and distribution process
 UK based Virgin Mobile MVNO in a tie up with Tata Teleservices (presently working as JV partner).
 Telekom Malaysia is keen to enter India by positioning itself as an MVNO
 Challenges to Success of MVNOs in India
 Volume driven market and high profitability market, not suitable for MVNOs

 Highly competitive circles and less concentrated markets

 constantly reducing tariffs, falling ARPU and low margins (COAI, 2008)
 Since MVNOs work on thin margins, high tax rates (17-26%) could prove to be
an obstacle towards a viable commercial model
 DoT (Deaprtment of telecommunication) has allowed MVNO to launch their services in India (Source: www.pib.nic.in)
 Low entry barrier need to give only 75 cr for pan India license

Circle Total Rate/circle (Rs Total

Circles crore) (Crore)
A 9 5 45
(inlcuding
metros)
B 8 3 24

C 6 1 6

total 22 75
49
Rural Telephony
Low Teledensity in Rural India
The potential market
 The next billion subscribers will come from such markets from the Bottom of the Pyramid (BOP)

 BOP has been ignored so far; growth mainly in the urban areas

 Growth necessarily needs to involves many at the BOP

 India's rural majority today accounts for more than US$100 billion in consumer spending
 The largest buyers as a group in the country

 Out of the close to 800 mn rural base, only 90.76 million are currently subscribed

 A gap of more than 700 mn potential customers

 Innovations in technology, business models and policy are required to serve the BOP efficiently

 Deep insight into the growing demand for telecom services at the BOP
Rural vs Urban additions
Rural vs Urban teledesnity
Benefits for Rural Telephony
• Benefits of Communication technologies in rural areas

– Connecting with the outside world

– Increasing the efficiency of the individual

– Ensuring better delivery of public services, such as health

and education

– Creating new sources of employment, income, and training

– Information can be a powerful economic leveler

Challenges for Rural Telephony
• Barriers to Rural telephony
– Low income

– Geographical factors

– Acquisition of land

– Right of way ex: through jungles etc

– Power supply

– Low literacy levels

– Setting up of distribution channels in remote areas

– Customized applications and content in local languages in the handsets to suit rural subscribers

– dispersed and low density rural markets

Solutions for Rural Telephony
• Increase teledensity through

– Lowering cost of mobile devices

– Providing locally relevant applications

– Tie up postal dept

– Mobile banking facilities with combo packages

– Allow MVNOs to operate exclusively in the rural areas

Rural Telecom cases
National Cases

• ITC e-Choupal

– Effort that places computers with Internet access in rural farming villages
– e-Choupals serve as both a social gathering place for exchange of information and also an
e-commerce hub

• DakNet11

– Uses wireless technology to provide broadband connectivity

– Successfully deployed in remote parts of both India and Cambodia at a cost much less than
that of traditional landline solutions
– United Villages concept connects 25 remote villages in Orissa to Internet-enabled areas
– Emails saved on hard disk
– When the Wi-Fi enabled bus passes through Raghurajpur, it picks up these emails and
delivers it to a nearby town with Internet connectivity.
Rural Telecom cases
National Cases

• Bhoomi Project of Karnataka State Government

– Revolutionized the way people access information of land records

– Several of the 7,00,000 land records are available online for banks, judicial courts and
hundreds of village kiosks all across the State

• Fisher Friend (partnership with MSSRF, TATA Teleservices and

Astute)
– Fisher Friend is an application that runs on 3G CDMA phones and empowers fishing
communities with real-time access to market data.
It can:
– Save Lives by providing timely weather alerts to survive danger at high seas
– Enhance Livelihoods by providing real-time data on fish migration and market prices
– Increase Knowledge Base by providing updates on government schemes, policies and
developments of interest to fishing communities
 Rural Telecom cases
International Case- Malaysia

• e-Bario Project
– Objective : to empower the Kelabit community of Bario through ICT
– Reduce digital gap between urban and rural communities

International Case- Korea

• Korea Information Infrastructure(KII) Project

– Under the KII project, broadband provided to 13.5 mn subscribers
– To achieve this, government funding was done
– A large part was kept for rural and remote areas

International Case - Sri Lanka

• Dailog's 'eZ buddy‘
– Supervised public phone system where an individual user is allowed to share his mobile
phone with another and charge a fee for the usage of the call, or text message
– Dialog has roped in 1,000 'eZ buddies' through their pre-paid card distribution network
Rural Telecom cases
International Case- China

• China Mobile Communications, a wireless carrier, launched an

integrated package in 2006 that consisted of text-messaging services,
voice services, and an Internet portal for rural areas.

• Farmers and fishermen can access the service to get weather

forecasts, price information, and employment opportunities outside
the agricultural industry.

• By the end of October 2006, the service had more than 12.7 million
subscribers and daily traffic exceeding 1.6 million messages,

• 40,000 visits to the Internet portal and 20,000 voice calls

18
Rural Telecom cases
International Case- Bangladesh

• Grameen Telecom (GTC)

– Currently GTC provides the GSM 900 cellular 63 mobile phones to the villagers
– A Grameen Bank(GB) member obtains ownership of the phone and provides the services to the people in the adjoining
area
– GTC supplies necessary hardware and training for operating the phone
– The price of phone and the connection fee is paid by GB to GTC
– While the member pays it back in instalments to GB
– Unit Office of Grameen Telecom is responsible for the Village Phone operation in the field.

International Case- USA

• Rural Development Telecommunications Programs of USDA

– The Rural Development Telecommunications Programs offer wide array of Loan and Grants to facilitate the construction
and deployment of advanced, high speed telecommunications and data networks in rural America
Challenges to Growth of Telecom
 Search for new cost-effective ways to roll out telecom services in rural
areas

 Connectivity of networks and cost of bandwidth are also important to

facilitate broadband usage

 Availability of local application and content is another area of concern -

most of the content available on website as of today is in English

 Task of spectrum management in a multi user and multi usage scenario is

more daunting and crucial & limited spectrum

 Sluggish pace of reform process

 Lack of infrastructure in semi-rural and rural areas

References
 Telecom Regulatory Authority of India:
 Dec’08 Report
 http://www.trai.gov.in/WriteReadData/trai/upload/StudyPapers/
12/studypaper16dec08.pdf
 http://www.cs.berkeley.edu/~brewer/ict4b/VSAT-telephone.pdf
 Telecom industry report – ibef
 http://lirneasia.net/projects/2008-2010/bop-teleuse-3/
 http://www.telecomindiadaily.in/telecom_growth_detail.php?T
GID=36
 Thank You