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Telecom Industry – An Overview
Ankur Agarwal- KH08JUNMBA-062 (Mob-9323933903) Himanshu Ranjan-KH08JUNMBA-069 (Mob-9867690439)Prasanna Devadiga-KH08JUNMBA-087 (9833900809)
Dr.Gulnar Sharma – Macro EconomicsITM EMBA- BATCH NO.13 BSource: Telecom Today/TRAI/DOT/www.ustelecom.com
2
Agenda
Indian Market Structure India as Fastest Growing Nation and status of
telecom sector
Innovations in Indian context
Innovation in Technology
Current Market Situation
Emerging Trends
Impact of Telecom Industry on US Economy
3
Market Structure
Divided into 23 circles 4 metros 19 circles
– Further divided into A, B and C category based on economic parameters and revenue potential
Each circle has a licenses Licenses are saleable
North Eastern States
METRO Circles
Gujarat
Rajasthan
Maharashtra Orissa
Andhra Pradesh
Karnataka
Tamil Nadu
Kerala
Madhya Pradesh
Uttar Pradesh E
Bihar
West Bengal
Punjab
Himachal Pradesh
Haryana
Jammu & Kashmir
Uttar Pradesh
W
CHENNAI
MUMBAI
DELHI
KOLKATA
C Circles
B Circles
A Circles
Source :COAI
4
Current Industry Structure
FDI in telecom recently revised to 74%.
Government gets 15% of revenues from Unified Licensing
Ministry of Communication & Information Technology
Regulator
Licensor
Judiciary
Telecom Regulatory Authority of India
Telecom Dispute Settlement
Appellate Tribunal
Dept of Telecom Unified License Operators
Fixed Line Operators
GSM
900 &
1800
Wireless Operators
National Long Distance Operators
International Long Distance Operators
CDMA
1800Mhz
5
Policy Environment
Broad guidelines of the National Telecom
Policy 1999 Licence fees on revenue sharing basis
Achieved a 7% teledensity by 2005 and
Targetting 15% by 2010– Rural teledensity targeted at 4% by 2010
Calling Party Pays (CPP) regime
Incoming calls free
Outgoing calls - multi-level tariffs
6
Connectivity Subscriber growth in Indian telecom has largely
been driven by voice services SMS is the most popular data service
Internet is catching on in popularity driven by
broadband players
As per the TRAI consulting papers, data is likely to
be the growth driver in future Rural telephony is expected to be driven by data than
voice– Data services would provide essential services like
education and healthcare
– But primarily demand would be driven by growth in the
rural economy
The key question, however, is are these efforts
scalable?
7
Scalability….
…...Requires
Technology/Connectivity
Business Model
Organization focused on rural markets
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Connecting India’s 638,000 villages
BSNL (state owned incumbent
operator) has fibre connectivity to
most Country townso and fibre has almost infinite bandwidth capacity
85% of villages within 15-20 Km radius of
these taluka townso In India, typically 300 villages in 30 Km radius
wireless systems can
connect most of these
villages wireless technologies
are continuously
evolving
300 villages
9
Last Mile Access Technologies
CorDECT Wireless in Local Loopo provides a telephone line and 35/70 kbps Internet connection in
a 30 Km radius
o Exchange and tower in town
o Power requirement: 1 KW
o start-up costs very low ($ 200 per line)
VSAT Technologyo Satellite connectivity
o provides a shared 128 kbps connection
o Start up costs are high ($3200 per connection)
10
Business Model
Entrepreneur-driven operator assisted telephone booths (STD
PCOs) introduced in India in 1987
Today in urban areas:– 950,000 such PCOs covering every street of smallest town
– generate 25 % of total telecom income
– 300 million people use these PCOs
Lessons for Rural Connectivity
To serve the telecom needs of rural people with incomes <
$ 1 per day, aggregate demand and allow an entrepreneur
to run it.
Business Model
Aggregate demand to a village internet centre to provide
voice/computer and internet services
Allow a local village entrepreneur to run it
Create an organisation to provide the connectivity and
content linkages
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Business Models
Are primarily service providers
Revenues are driven by connectivity and content services provided
n-L ogueD rishteeT arahaat
M arket D riven
IT C 's e-C houpal
C ost D riven
P rofi t O riented
M SSR F
N G O driven
A kshay aB hoom ie-Seva
G overnm ent P rojects
N ot for P rofit
B usiness M odelD em and aggregation through com m unity internet centres
Focussed on Direct procurement of agri-commodities from farmers
No revenue model.Earnings are from savings in procurement costs
Provide marine and agriculture services
E-government services are the primary drivers
12
India - Fastest Growing Nation
GDP grew at 9.8% during 2007, aiming double
digit growth
Today India is a services superpower in the
making. the 12th largest economy in world.
Strong investment momentum
Market capitalization up from USD 140 Bn in FY
2001 to > USD 1.58 Trn recently
FDI on the rise - USD 7.6 Bn (06) and USD
19.4 Bn (07)
FII investment - USD 6.5 Bn in 2006-07
140 + public traded companies with market cap
> USD 1 Bn
635 722891
1229
3228
0
500
1000
1500
2000
2500
3000
3500
FY2005 FY2006 FY2007 FY2010 FY2020
US$
BB
Services54%
Industry27%
Agriculture19%
GDP
GDP composition – FY 2007
By 2050, India projected GDP is US$ 70 Trillion
Source: CMIE
13
Indian Telecom
World’s fastest Growing Telecom Market - 8 Million plus subscriber addition per month
Third largest in the world after China and US- soon to overtake US
264.8 Mn. Subscribers, Mobile 225.5 Mn., 153.3 Mn GSM tele-density 23.21 %
Fastest sale of a million mobile phones – 1 Week World’s cheapest mobile handset made in India – US$17.2.
Reliance plans web enabled phone at $12. World’s Most affordable color phone made in India –
US$27.42 Internet Subscribers 9.27 Mn. Internet Mobile 31.30 Mn.
Broadband 2.56 Mn.
14
Indian Telecom……
Lowest tariff but highest profitability.
Lowest Call Rates in the World at 2-3 US Cents, Declining
ARPU, even then Rs 275 per month for GSM
India ranks highest in Mobile monthly Minutes of Usages
per subscriber in Asia Pacific Region and second to USA in
the world….500 minutes per month
Innovative approach of doing business at lowest operation
costs.
Innovative value added concepts…missed calls, rural
applications, lowest prepaid charge of 2.5 cents.
15
The Future….
Electronic hardware market by 2015 USD 320 billion including production
USD 150 billion and exports USD 21 billion.
Telephone subscribers: 500 million by 2010
PC sales: 25 million; installed base 65 million by 2010
ITES & Software exports: USD 60 billion by 2010
40 million new internet connection; at least 50% broadband by 2010
Nationwide TV broadcast to be digital by 2015 beginning 2010: significant
opportunity for STB consumption & manufacturing
Over USD10 bn investment in E-Governance and National ID Card by 2010
2015: Total expected Market USD 320 bn; Domestic production USD 155 bn
16
UNLEASHING INDIA’S INNOVATION
The World Bank report released in October, 2007
says “India can innovate to $5 Trillion GDP”
Present GDP of India is estimated at around 1 $
Trillion (Rs 40 lac crores)
The Indian economy is flourishing, and the demand
for telecommunications services has outpaced the
legacy wired telecommunication infrastructure.
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Innovation in technology…
Communications and broadcasting are converging together.
TV can be used for internet and voice and likewise mobile can be used for anything.
Terrestrial TV, cable TV, CAS and now DTH, further moving to digitalization.
IPTV, Mobile TV going to change lives and the way we think traditionally.
Indian Telecom most innovative….hello tones, Ring back tones, missed call, maximum music download, mobile in hand a fashion not elsewhere in world.
18
Innovation in technology…
Today experts talk of open innovation centered around customer services and developed as inter operable platforms.
The path to innovation…. E.g.. Apple computer to Home ,IPOD Digital Music player to I Phone- multimedia hand phone with camera, internet, music player, WIFI
A group of Google, Intel, Dell, HP and Microsoft collectively formed the White Space Coalition and delivered to FCC two WIFI devices that operates in this spectrum without interfering with high-definition TV.
19
Fisherman Vegetable Vendor Textile Merchant
Adult Education E-Medication
I am in Queue Matter of Heart
Checking best rates “Mobile” Vendor Rediscovering Life
20
Current Market Situation
Declining revenues make it hard to justify the large
capital investments made in the recent past
Market suspicion of large corporations will hinder
the raising of new capital
Service providers are hesitant to invest in new
opportunities that cannot provide immediate
benefits
Data services not delivering on high expectations
Wireless spectral investments have crippled growth
opportunities domestically as well as internationally
Network services and applications limp along as
enterprises curb spending
Regulation continues to bandwidth hindrance to
truly competitive markets and lower cost structures
21
Emerging Trends
Wireless revenues continue to increase as long
distance revenues decline and local calling revenues
stagnate
Globalization
Long distance
Wireless
Emergence of the “Total Communications Service
Provider”
Convergence of
Enterprise and telecom networks
Networks and applications
Impact of the Telecom Industry on the US Economy
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How does the Telecom Industry benefit the US Economy
US cellularwireless
Industry…
…increases US GDP, employment and Government
revenues
… improves the productivity of US business through
use of…
…wireless voice services
…wireless data services
Demand sideSupply side
24
Impact of Telecom Services on the US Economy
Telecom Services will provide a
major stimulus to the US economy
over the next 10 years of more than
$617 billions in productivity savings
from data and additional $750
billion consumer surplus from voice
use and $450 billion GDP
contribution from a Telecom
industry.
All amounts in billions of dollars
25
Annual Productivity Benefit from Data and Voice Application are Growing to more than $80 billion
In 2005 data and voice services only
contributed $8 billion in productivity
benefits to the US economy – roughly the
size of Bahrain.
By 2015 these benefits have grown to
more than $80 billion per year, which is
approximately as big as the economy of
the Philippines.
All amounts in billions of dollars
26
Components of Future Economic Benefit
The two major components that will drive
the future economic benefit are:
More Efficient Management and
Documentation
Heath Care Efficiency Enhancements
Followed by still sizable benefits in:
Field Service Automation
Inventory Loss
Reduction
Field Sales
27
A consumer surplus of $157 billion – almost all from wireless voice
Consumer surplus measures how much US
businesses and consumers are prepared to
pay in excess of what they pay
Consumer surplus from use of wireless
services was running at $157 billion at end
2004
Almost all of this surplus is associated with
voice
We expect this surplus to grow:
To $260 bn by 2010
To over $300 bn by 2015
More details on supply side effects
29
GDP Contribution of Cellular services in Comparison with other
Industries
0
20
40
60
80
100
120
140
Cellularwirelessservice
Computersystemsdesign
Publishing(incl software)
Motion pictureand soundrecording
Agriculture Motor vehiclemanufacture
Petroleumand coal
production
Con
tibut
ion
to G
DP
($b
n)
30
3.6 million US Jobs Depend on the Telecom Industry
0 500 1000 1500 2000 2500 3000 3500 4000
US jobs dependent on the US wireless industry (000)
Direct employment
Support servicesemployment
Indirect employment
Induced employment
31
$63 billion in Government Revenue are Generated by the Telecom Industry
$14.6 billion in federal, state, and local sales
and transaction taxes and surcharges on
wireless services;
$0.9 billion in sales taxes on handset
purchases;
$9.0 billion in employer-paid social security
payments;
$9.0 billion in employee-paid social security
payments;
$26.5 billion in income tax from workers
dependent on the wireless services industry;
$2.6 billion in contributions to federal and
state Universal Service funds.
Thank you very much!