india telecom market overview
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Nokia Internal Use OnlyNokia Internal Use Only
Telecom Circle
http://www.telecomcircle.com
India Telecom Market
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2nd largest market after China in terms of number of subscribers
Indian mobile industry is reaching maturity where the new subscriber addition has slowed considerably
Reported subscriber base as of Dec’12 was 861 million but the real active base is much lower at around 650 millionThe base dropped from 937 M in Mar’12 to 861 M in
Dec’12Fixed line subscription at 31 million which is
shrinking every month. The rest of the presentation would focus on mobile industry as it is the most significant part of Telecom Industry
Background
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Structure of Indian Mobile IndustryIndia is divided into 23
circles and separate licenses have been issued for each circle
Division of circles mostly along the state boundaries
Circles were categorized as Metros, A, B and C based on the revenue potential of the circle when 1st set of auctions were held in 1995
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Brief History of Indian Mobile Industry
1994Start of Cellular
operations
1999New Telecom
Policy
2000-013rd/4th
Operator Licenses
2003CDMA
networks launched
2004Calling Party Pays (CPP) Introduced
2005Lifetime Validity
Products Issued
2008Fresh
Licenses issued to 6
players
2009Tariff wars amongst operators
20103G, BWA auctions
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2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
GSM
10.480403
21.991743
37.378831
58.503224
105.425183
171.885864
257.845498
415 543 640 657
CDMA
0 6.189943
9.821
16.912897
41.010375
57.058033
83.503407
95.372879591163
203 250 204
50
350
650
950
CDMAGSM
Hyper growth in subscriber base punctuated in 2012
Source: COAI, AUSPI
CDMA data has GSM numbers of Tata & Reliance from 2010 onwards
Mobile Subscriber Base ( Million)
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Bipolar market – Low Rural penetration still an opportunity
6
Total
Urban
Rural
Source: TRAI
• Significant disparity between Urban and Rural penetration
• Different market dynamics for either side of market
Mobile penetration (%)
2005 2006 2007 2008 2009 2010 2011 20120
20
40
60
80
100
120
140
160
180
1 3 7 1220
33 36 39
22
39
56
75
107
139
160
143
713
2030
45
6273 71
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OperatorSubscriber base
(million) as of 31st Dec, 2012
BSNL 21.04
MTNL 3.46
Bharti Aitel 3.28
Reliance Communications 1.26
Tata Teleservices 1.49
HFCL 0.18
Others 0.08
All India 30.79
Fixed Line subscriber base is Shrinking
The fixed line subscriber base has dipped by 6 million in last three years
Source: TRAI
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Analysts estimated Indian Handset market size f0r 2012 between 190 – 210 million
Low cost handsets dominate with the average selling price of ~Rs 3200 ($55). However, with increasing penetration, the ASP has started to increase thereby reversing the trendASP increased by over 20% in last one year
Market is dominated by Nokia, Samsung and Indian brands like Micromax, Karbonn, etc
Share of CDMA in handsets is on a decline after the decision of Reliance and Tata to focus on GSM
Handset Market: 3rd Largest after China & US
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Smartphones are new growth engines
India is the 3rd largest market for smartphones after US and China
Growth driven byConsumer aspirationAffordable due to falling prices and EMIsIncreasing Data consumption
India is the 1st country where the internet traffic from mobiles has exceeded the fixed line
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As a result of separate licenses, there are few pan India operators. However, in the period 1999-2005, consolidation led to emergence of larger players
In 2007-08, new licenses were issued to new players taking total number of operators in each circle to as high as 13
Competitive Intensity
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GSMBharti AirtelVodafone IdeaBSNL/MTNLAircelRelianceTata DocomoTelenorLoopStel*Etisalat*
RelianceTata IndicomMTS
Current Operators
CDMA
* Stel & Etisalat closed down their operations in 2012 due to license cancellation by supreme court post 2G controvery
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India is currently the most competitive market in the world which has led to tariff wars
Tariff wars (2009 onwards)
$1 = Rs 60Rs 1 = 100 p
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Revenue growth has got impacted significantlyThe break-even point for new operators has
increased significantlyIncrease in churn and Multiple SIM
It is estimated that only 50% of new subscriber addition is actually new subscribers. Rest all are either churning from one network to another or are adding to Multiple SIM phenomena
Impact of Tariff wars
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1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
0%
20%
40%
60%
80%
100%
120%
26%
44%53%
63%
80%73% 78%
86% 91% 93% 96% 96% 96% 96%
Prepaid as % of Total Subscribers
High Proportion of Prepaid Subscribers
99% of new subscriber additions are in prepaid
Source: TRAI
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2000 2001 2002 2003 2004 2005 2006 2007 20080
200
400
600
800
1000
1200
1400
1158
814731
503412
352 316 282 240
845
453328 288
193 159 146 128 123
ARPU Cost/Sub
High volumes have led to continuous decline in costs in line with the ARPU
GSM ARPU & Cost data (Rs)
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Composition of GSM operator revenues
Revenue Break-up as % of Gross Revenues
Source: TRAI report for Quarter ending Dec’12
Net Service Revenue = 78% of Gross Service RevenueNet Service Revenue = Gross Service Revenue –
Interconnection Usage Costs – Outroaming Airtime
Airtime; 52.1
SMS; 5.8
VAS; 14.3
Roaming; 9.0
Rental; 18.8
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Composition of GSM operator costs
Source: PwC Benchmarking report - 2008
Network operating expenses proportion of costs increased from 36% in 2005 to 51% in 2008
51.0%24.0
%
8.0%
10.2%
6.8%
As % of Total Costs
Network Operating Costs
Sales & Marketing Costs
Personnel Costs
Outsourcing Costs
Adminis-trative Costs
26.0%
12.0%
4.0%
4.8%3.2%
As % of Net Rev
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VAS Revenues are dominated by SMS and Ring-back Tones
40.0%11.0
%
16.0%
9.0%4.0%
20.0%
Postpaid
SMS CLIGPRS Ringtones &
Ringback Tones
Content Downloads
Others
36.0%
5.0%30.0%
5.0%
24.0%
Prepaid
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Defense occupies chunk of spectrum and hence there is scarcity of spectrum leading to poor quality of service
New Telecom Policy, 2012Policy announced but implementation is still
unclear2G licenses controversy
Licenses issued in 2007-09 have been challenged in the court due to undue favor to a few player
Licenses of new players were cancelled by the supreme court
Regulatory Issues
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Spectrum Allocation Plan
450 470
698 862
• Known as 700 MHz band
• Identified by WRC-07 for IMT
• Entirely held by defense
824 844 869 889
• Known as 850 MHz band
• Allocated to CDMA
• Entire band available for mobile 890 902.
5915 935 947.
5960
• Known as 900 MHz Band
• Allocated GSM• All available
spectrum allocated to mobile services
Paired With
Paired With
• Known as 450 UHF MHz Band
• Currently used for Police & Security networks
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Spectrum Allocation Plan (cont’d)
1710
1785
1805
1880
• Known as 1800 MHz band
• Allocated to GSM• Up to 80%
spectrum is with defense
Paired With
• Known as US PCS band
• CDMA operators have claimed this band but GSM operators oppose it due to interference
• Defense has all the spectrum
Paired With
1900
1910
1980
1990
1710
1785
1805
1880
• Known as 2.1 GHz band
• Allocated to WCDMA• Defense currently
has bulk of spectrum and is expected to vacate some
Paired With
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Spectrum Allocation Plan (cont’d)
2300
2400
• Known as 2.3 GHz TDD band
• Intended allocation for BWA
• Known as 2.6 GHz band
• Part intended allocation for BWA and part for mobile services
• Currently entire band is with defense
2500
2690
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Visit Telecom Circle to read interesting articles on Telecom and Internethttp://www.telecomcircle.com
To download1. India Subscriber Database – Circle-wise, operator-
wise from year 2000 onwards2. Circle-wise ARPU data for GSM networks3. Case study on how Indian Carriers make 40%
EBIDTA margins at 2 cents a minute
Visit http://www.telecomcircle.com/2009/06/india-telecom/
Send your comments & feedback at mohit@telecomcircle.com
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