By N K GOYALPresident,

Communications and Manufacturing Association of India, CMAIFounder Member, Chairman Emeritus,

Telecom Equipment Manufacturing Association of India, TEMACouncil of Electronic Hardware Association of India

Vice Chairman, ITU APT India, Chairman CTIAMember Governing Council

Telecom Equipment & Services Export Promotion Council (TEPC)Chairman, ITPS, Dubai

Director, NFL, Government of India nkgoyals@nkgoyals.com +91 98 111 29879 www.nkgoyals.com

Presentation onInnovation and Entrepreneurship in the

Indian Marketto

Cambridge Wireless International Conference

30th April, 2009 Dux Ford Cambridge

CES, 2009 being inaugurated and ribbon cutting at Las Vegas on 8th January, 2009 by NK Goyal with Sir Howard Stringer, Chairman & CEO of Sony Corporation, Mr. Tom Hanks, the American movie star, Mr.Gary Yacoubian, Chairman CEA & President of Myer-Emco AudioVideo, Mr. Gary Saprio, Vice President of CEA, Ms. Qu., Presixdent, CECC China, Mr. Patrick Lavelle, President and CEO of Audiovox, Mr. Peter Lesser, President and CEO of X-10 (USA) Inc, Mr. Loyd Ivey, Chairman and CEO of MiTek Electronics and Communications, Mr. Jay McLellan, President and CEO of Home Automation, Inc. (HAI), Mr. Mike Mohr, President of Celluphone, Mr.Grant Russell, President of Kleen Concepts 

AGENDA

- India’s Growing Indian Economy

- India Electronic & Telecom Potential

-Innovative Ways in India

-Entry Strategy for Telecom

Dr Manmohan Singh Hon’ble Prime Minister of India invites

India has got off to a good start….savor the wonderful journey of creativity andenterprise taking place in the country.

India is a nation on the move, set to regain its place in the community of nations as a plural, secular and liberal society with an open economy.

Address at McKenzie Board Meeting in India

•28 States & 6 federal territories (U Ts)

•37 official languages and 1652 languages & dialects. Most Indians speak either English or Hindi (More Indians speak English than the entire population of USA)

•Largest Democracy in the world; very strong legal system

•Federal and provincial Governments elected by the people.

Monetary Unit: Rupee1 US$ ~ 50 Rupees (INR)

Goa

HimachalPradesh (C)

PunjabHaryana (B)

Rajasthan (B)

Uttar Pradesh(B)

Gujarat (A)

Madhya Pradesh(B)

Bihar (C)

Orissa (C)

AndhraPradesh

Maharashtra (A)

KeralaTamil Nadu

Karnataka

Sikkim

a

Assam (C)

Delhi

West Bengal B)

Andaman and Nicobar Islands(C)

Calcutta

r

Bombay

m

Madras

Jammuand Kashmir (C) - NORTH EAST (C)(B)

(A)

(A)

(A)(B)

NEPAL

BHUTAN

BANGLADESH

MALDIVES

1.1 Billion People3.3 million sq. kms area

Diverse and Unique India

India …..known for

Invention of Number system, concept of zero, Chess. Origination of Algebra, trigonometry and Calculus Largest democracy in world and one of the most ancient &

living civilizations at least 10,000 years old. Largest postal network in the world Largest railway network in the world. Ayurveda, the oldest school of medicine in world, Chakra

known as father consolidated this school 2500 years ago. Only source for diamonds in world till 1896 Never invaded any country during last 1,000 years. Sanskrit, according to Forbes magazine as most suitable

language for computer software. Harappa culture (Indus Valley Civilization) established much

before when most of countries had nomadic tribes in forest dwellings.

Growing Indian Economy

8 out of Top 10 EMS companies have already set up shop in India

Contract manufacturing business expected to nearly triple in revenue over the next 5 years

India is amongst 6 countries that launched satellites and among the 3 countries in the world to build Supercomputers

100 of fortune 500 are now present in India compared to 33 in China

India adds 10-15 million new telephone subscribers every month

India’s Electronics Potential

Current India market size about US $ 34 Bill. out of which production $16.1 Bill.

Demand to grow from 4% of GDP to 12% by 2015 i.e.. 320 Bill. Total production may go up to $ 150 Bill. with employment potential of 21 mill.

Indian ICT spending is expected to grow at 19% from $ 29.5 Bill.

BELL’S TELEPHONE

Alexander Graham Bell, keenly interested in the education of deaf people, invented the microphone and in 1876 his "electrical speech machine," ie today’s telephone. Bell set up the first telephone exchange in New Haven, Connecticut in 1878. By 1884, long distance connections were made between Boston, Massachusetts and New York City.

Since his death in 1922, the telecommunication industry has undergone an amazing revolution. Today, non-hearing people are able to use a special display telephone to communicate.

Bell's "electrical speech machine" paved the way for the Information Superhighway. Fiber Optics are improving the quality and speed of data transmission.

Indian Telecom

World’s fastest Growing Telecom Market – 10-15 Mn. subscriber addition per month

Second largest in the world after China 430 Mn . Telecom Subscribers, Including wireless = 392 Mn. Retail Market for Mobile Phones – handsets, accessories etc. is

worth over US$ 15 Billion and growth 15% Internet Subscribers 10 Mn. Internet Mobile 31.30 Mn. Broadband

6.22 Mn. Projected

650 Mill by 2012 out of which fixed line hardly 49 Mill. Increase of wireless internet users from 58 Mill out of 237 Mill

during 2007 to 196 Mill out of 650 Mill by 2012 Increase of broadband subs. from 3.1 Mill out of 10.4 Mill

internet sub during 2007 to 27.3 Mill out of 45 Mill internet sub by 2012.

Indian Telecom Sector at a Glance

279 state-of-the art Networks (GSM+CDMA) 24 National Long Distance & 19 ILD Licensees >430 million Telecom subscribers including 392 Mn.

wireless subscribers Roll out of services in more than 8000 towns & cities

and over 500,000 villages Over 6 cellular mobile service providers in most of the

circles 6 new operators coming up

Indian Telecom Growth

Characterized by Mostly Voice based Predominantly urban centric Limited by slow broadband growth Wireless growing landline decreasing Prepaid driven market Spectrum Constraints on wireless World’s cheapest mobile handsets Innovative way of doing business

Continued Wireless Growth Expected

Booming economy, rising income, increasing available disposable surplus

Continued big demand, rural potential Introduction of Number Portability by mid 2009 New Operators bringing in competition, spread and

cheaper tariffs Introduction of 3G, Wimax technologies Operators allowed intra service roaming Operators scouting cheaper handsets e.g.. Spice with

IDH Media Tek, Taiwan for $15 handset. Also sets without screens being considered.

Key Drivers for the India Telecom Growth

OEM Initiative

Telecom Operato

r

Subscriber

India Economy

Regulation

FDI to 74% NTP 99 CPP No ADC UASL

4 to 5 Operator/Circle UASL Regime Mergers & Acquisition Foreign Investment

Local Mfg Initiative Local Presence in India Presence of System Int. Growing India Market Low cost Handset supply

Growth Rate of 9% PA Service based Economy High FDI inflow Huge Market Segment Govt. initiative for Telecom

Big addressable Market Growing PPP “Willingness to adopt” Increasing demand of Services “Growing India”

Technology Innovation Wireline Segment

POTS -> DSL -> PON Technology Upgradation of existing System for VAS offering

Wireless Segment

Adoption of 2.5 G Wireless Standard for GSM Directly hopping to IS 95 standard for the CDMA Evaluation amongst 3G & 4G standard for future Optimization of the Available Spectrum Invitation to Global Operators for World Class Service

Future Road Map

Wireline – Last Mile on Fiber Wireless – High Mobility & Good Coverage option Convergence – Femtocell Concept, LTE, IMS Common Platform for Content, Infrastructure , Format

Business Model Evolution

OEM

System Integrator

Content Provider

Independent Software Vendor

OEM Network Operator

Managed Service Provider

Managed Service Model – Network

Innovation- Technology

DiversifiedTelecom

Telecom Service Focused Business

Future

NewTelecom Business

Ecosystem Telecom Service Blended

with Emerging Areas like VAS & Mobile Applications

Transform to be Telecom Ecosystem Enabler

Legacy Telecom

Wireless

Historic

Radio Paging

Solutions

Wireless

Applications

E/M Payment

Early Vertical Specific programs

Mobile Wallets and Payment

Third-party consumer and early enterprise

Access and early applications

Transition

Fixed Line

TRANSFORMATION

Wireless Service Provider

Fixed Line Service Provider

Telecom Handset Manufacturers

Telecom Network Equipment

Manufacturers

Telecom Transmission Equipment

Manufacturers

Application & Content

Providers

Active & Passive Infrastructure

Providers

NewTelecom Business

Ecosystem

Drive Indian Economy Towards the 10% Economy Growth

Target

NEW ECOSYSTEM – Feeder Model

Fisherman Vegetable Vendor Textile Merchant

Blind Students Adult Education E-Medication

Lapping up Mudras I am in Queue Matter of Heart

Checking best rates “Mobile” Vendor Rediscovering Life

Where are we heading to…

Youngest Website Designer of the World – is an Indian Boy!

Challenges for India

One of the fastest growing economy in the world, BUT Rural Connectivity More than 300 Mn people still living below 1US$ a day About 800 Mn people have no access to secondary and

tertiary health care Education in rural areas significantly lagging Lack of teachers and appropriate facilities Very limited access to governance Very few have birth certificates, land records, ration cards Continuous dropping ARPU & increase MOU Spectrum constraints Lower broadband penetration

Focus areas are rural connectivity and broadband for the masses…

Indian VAS Market

SMS continues world over as highest revenue generator across all messaging categories, providing global service revenues of $177 billion in 2013 as per ABI Research

In India Revenue from VAS presently is 10-14% of total revenue, expected to grow 30% within next 5-7 years.

Rs. 28.5 Bill. as of Dec. 2006, slated to grow to Rs 42 Bill. VAS core component of operators revenue

High end users....video on demand, user generated content ie. interface between web and mobile

Long tail users, who focus on contents subsidized by ads.

Ring tones and SMS account for large portion of VAS market. About 8,00,000 ring tones downloaded daily

Good scope for utility based services eg. Location information, M commerce etc.

Indian Mobile VAS…Way Forward

Indian mobile VAS industry would go more global and would emerge as leader rather than follower.

India already having led in software, the innovations in mobile VAS are going to come from India.

Mobile VAS heading evolution like a PC from personal computer to a device to access to everything and anything you want to know. So Mobile VAS would lead to Access to wireless world for everything.

Indian Operators Business Plans

Indian momentum in subscriber addition continues to be strongly primarily driven by better coverage & fierce tariff competition. The sector is undergoing capex intensive cycle due to launches by new players and expansion of existing players. Each player is trying to grab market share ahead of others.

In anticipation of the huge potential in both mobile penetration and the coverage area of the networks, operators are planning a total capital expenditure of about US$20 billion during 2009.

Innovative ways

Most economical way of doing business, lowest tariff highest profitability

Managed services contract for network and IT services Lowest recharge less than 20 cents Missed call concept SMS based earnings due to TV games, greetings, jokes,

social networks, VAS contents Lowest acquisition cost for new connection ..half dollar for

life time 92% prepaid connections....low cost of recovery Multiple choice of technology and vendors Agricultural service, tele education M Commerce Strong incumbent behaviours Excellent roaming policies Handset bundling…...handset less than ten dollars Broadband bundling…PC on loan

Some Operators Innovative schemes

BSNLHandset bundling Rs 1458/- 15 months free talk time. Handset colored screen, secret SMS, Call blacklist, polyphonic ring tones, built in games, FM Radio etc. weighing 68 gms and rubberized key pads.

Spice Launched rural handset 11 US$ with two local language

and audio interface system for illiterate people. With Radio, life time activation but no Screen/SMS

Planned street plays and public announcements for rural areas

Tata Launched ZTE Colour handset for 20 US$ with sms in

two language,700 Kb Memory, 1.5 “ screen weighing 70 gms.

Fisherman’s CSR services for coastal areas.

Some Innovative…contd.

Tele education with Mumbai University Tata Tele services is giving prices from over 3,000

Mandis as VAS Mandi Bhav to farmers in rural market. Farmers gets information on 500 commodities in nine

regional languages Bharti

Tie up with farmers organization IFCO for updates on wolesale prices for rural areas.

Microfinance, bill payment facility on mobile Tie up with Western Unions for money transfers M Commerce

Reliance Lowest Life time GSM connection Lowest recharge Well defined in built VAS services

Some Innovative…contd.

VIRGIN MOBILE First to offer 10 paisa credit for every in coming

minute call from any network First to offer SIm based CDMA Phones After first 2 minutes call each day, calls to any

network @50 paisa per minute On payment of Rs 18/-, free 100 Local SMS and

mobile calls @ 30 paisa per minute Friday to Sunday

Innovation means changed life style….

Traditionally we were taught to talk less, brief, keep shut….NOW TALK MORE

Social changes…no time for family, personal…becoming more machine rather than good human….Delhi Univ. survey Feb.08 70% internet chatting.

First we gave cell phone to younger generation and ….now ways and means to keep them away from MMS, prone films

Increased accessibility and reach…hours of wait for calls gone.

From Radio to TV one channel ..eager wait for Chitrahaar…now hundreds of TV channels, plenty of music, pictures, video on every device….almost to the extent of irritating AND also non clarity on rates to pay AND even live Darshan (Shirdi, Golden Temple, Tirupati etc.)

Multiple task being done simultaneously by us...talking, browsing, viewing etc.

Changes in life style…. Earlier we used to send letters, greeting cards. Now SMS

culture even though network jams on high load. Earlier payments made & deliveries assured, failing which

complaint redressed. Now pay for SMS whether received or not and no way to find out.

Entertainment Tax…payable at Cinema, Theatres, not paid for TV, internet entertainment, Mobile TV, Cable TV, CAS, DVD/CVD. Again payable by DTH WHY?

Weights & Measures….we pay for exact quantity of goods, sweets without box…but mobile we pay fixed for call, SMS irrespective of actual use.

MRP mentioned on all products….tempting SMS for polls…no rates indicated…forbearance.

Broadband means ~256 mbps, but customer pays and gets less.

Airwaves nature’s largest offering to mankind & free for Radio, Mikes, TV…..but paid for mobile

Innovations also means Legal puzzle...

Spectrum...most talked word in public, everybody wants more yet goes on increasing subscribers. …thanks to innovative technologies.

Who owns mobile display space…...mobile manufacturers, content provider, service operator or CUSTOMER?

Trans countries transactions…internet payments issues of ….. Jurisdictions, acquisitions and mergers capital gains.

On Internet/VOIP customer can call anywhere in world but not within Country…restricted.

International Card seller has to certify to use authorised ILD operator. No such condition for foreign operator.

Foreigner can use foreign mobile in India on roaming, but Indian cannot use foreign SIM card within India.

Concerns for public safety…

Changing Skylines….we hardly see telecom towers in advanced countries….no guidelines in India.

Radiations - Ultrasound, Invertors, X-ray, Mobile devices, Towers….BUT no advice on prevention or protection.

Towers…safety guidelines non existent for safe use and regular verifications audit.

Over exposure, Media cloning makes all channels look the same with everything on earth as BREAKING NEWS….tiring experience.

Intrusion in privacy, data theft, increasing spam, virus, Email & SMS with wrong identity.

Hello tunes and incriminating use in public places on several occasions irritating

Increasing use by antisocial elements, sting operations.

Entry Strategy for Telecom

Zero Import Duty on components and finished material in Telecom

100 % FDI Allowed in Equipment Manufacturing 49% permitted out rightly and up to 74% FDI Allowed

with approval for Telecom Services No License required for Manufacturing Value Added Services & IT enabled Services permitted Infrastructure facilities available for Telecom

Entry Route to Indian Telecom Market

3G Auctions likely to be held shortly. Infrastructure Licenses available. Acquisitions and Mergers Venture Capital funding UASL licenses allowed. Presently about 300 pending.

GSM/CDMA Spectrum constraints. Fixed line, Wimax in delicensed band permitted.

ISP Licenses available for entire Country or State or District Level. ISPs permitted Voice over internet besides data.

National Long Distance & International Long Distance (NLD& ILD licenses). Recently licenses issued to France Telecom, Orange Business Services, AT&T , Verizon, British Telecom, Cable & Wireless

MVNO

Entry Route…cont

Capital expenditure per site decreasing Established operators still showing good

profitability Chinese vendors pushing hard to enter the market Telecom vendors looking for export (Africa, SE

Asia) If subscriber base increases to 500 million another

150.000-200.000 sites required Interesting opportunities: power saving solutions,

long lasting batteries, shared networks, combiners, shared antennas, capacity enhancing equipment

Indian Company

A foreign company can commence operations in India by incorporating a company under the Companies Act,1956 through

Joint Ventures; or Wholly Owned Subsidiaries Foreign equity in such Indian companies can

be up to 100% depending on the requirements of the investor, subject to equity caps in respect of the area of activities under the Foreign Direct Investment (FDI) policy

Import Duty Structure

The peak rate of customs duty in India is @ 10%. 217 items listed in ITA-1 are allowed at basic duty of 0%. Electronic components and parts of telecom equipment

are also at Basic Duty of 0% Imported Goods, other than the Basic Customs Duty, are

levied Countervailing Duty (CVD) which at present is @ 14%.

Special Additional Duty of 4% is also levied in all imports which is reimbursable subject to certain conditions.

Educational Cess @3%. Concluding -

Products listed in ITA-1 will attract a total duty of 21.139%

Product not listed in ITA-1 will attract a total duty of 31.703% (for finished/semi-finished/components)

CMAI

CMAI the Indian trade and business association offers one window service for information dissemination, guidance on setting up businesses in India.

It also offers consultancy services on turn key basis through its member companies

CMAI… your dependable partner in India www.cmai.asia

Where is my cell phone mama..

I want to SMS to God that I have reached safely!

GIO Factor

In Hindi – GIO means Live LongIn Hindi – GIO means Live Long

Come…..explore….and be a part of the….Come…..explore….and be a part of the….

GGreat reat IIndian ndian OOpportunitypportunity