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Telecommunication
Thought Process
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3

Identifying key growth Differential analysis


parameters Final Conclusion
drivers
Subscriber Base, Rural Impact on
India, VAS Services ARPU, Private and Summary of our findings
Public Firms
Contents
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 SWOT analysis of the sector


 Market analysis
 Growth and market share of public and private
players
 Profit margins of public and private players
 Analysis of investments
 Future growth prospects of the sector
 Future scope of the project
5 SWOT Analysis of Telecom sector
STRENGTHS
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• Increase in mobile subscriber base


• Healthy competition and attractive business
environment
• Decreased restrictions for foreign participation
• Increase in foreign investments-
Singtel(Singapore), Telekom Malaysia, NTT(
Japan), Sistema ( Russia)
• Demand for mobile value added services
• 76.5% increase in broadband subscribers in 2008
WEAKNESSES
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 Maximum number are prepaid users with low activity


level
 Average Revenue Per User(ARPU) is declining due to
rise in prepaid users
 Delay in implementing 3G
 Limited infrastructure in rural areas
 Shrinking market of fixed line telephoning
 Dominance of fixed line telephoning by BSNL and
MTNL (rural- 99%)
OPPORTUNITIES
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 Recommendation to allow foreign participation for the


auction of 3G
 Deployment of Next Generation Network(NGN)
infrastructure
 Launch of new multimedia mobile handsets- positive
impact on data service usage
 Issue of international and national long distance
licenses- opportunity for companies to develop market
presence
 Opportunity to develop WiMax and fibre for
broadband services
THREATHS
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 Mobile network portability(MNP)- increases pressure in


on operators to retain customers
 Uncertainty of sufficiency in spectrum allocation for 3G
 Network capacity struggling to keep up with demand
 Fixed line sector may decline at a higher rate
 Current slowdown in domestic consumption may
negatively impact IP services
 Development of IPTV services may be adversely
effected by high costs, slow speed and low usage
10 MARKET ANALYSIS
11 Indian mobile market growth
 Telecom sector is 2nd largest with 430mn connections (Mar,2009)
 Growth rate of 45-50% in recent years
Teledensity growth in India
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•GOI has set a target of 45% teledensity which will need $73bn of investments
•Major chunk is expected from FDI
13 Yearly net additions of mobile subscribers
Private sector accounted for more than 75% of subscriber
additions ( early 2004)
Prepaid-postpaid subscriber base
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2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Postpaid million 3.6 6.5 10.8 13.1 15.8 17.3

Prepaid million 9.1 19.6 30.2 56.0 105.6 175.4

Total GSM million 12.7 26.2 41.0 69.2 121.4 192.7


subscriber base
Proportion of prepaid
and postpaid

-Postpaid per cent 28 25 26 19 13 9

-Prepaid per cent 72 75 74 81 87 91

Source: CRISIL Research, TRAI and COAI

•Rapid increase in the prepaid subscribers probably due to availability of


cheaper handsets and low tariffs
•Most of the subscribers are inactive leading to decrease in ARPU
100
90
80
70
60
50
40 Postpaid
30 Prepaid
20
10
0

15 Breakup of prepaid and postpaid subscriber base


Percentage growth of prepaid subscribers has been steadily increasing as
compared to postpaid subscribers
16 Growth of rural wireless subscriber base
Rural markets are yet to be captured and provides a immense
growth prospects for the for the existing players
However, immense investments in infrastructure is required
17 Growth of public call office
18 Broadband Subscribers
Major players in telecom sector
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Major players (in the decreasing


order of market share)
1 Bharti Airtel
2 Reliance
3 Vodafone Essar
4 BSNL
5 IDEA Cellular
6 Tata Teleservices
7 Aircel
8 MTNL
9 Spice Communications
FDI Inflow in the industry
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•FDI of upto 74% allowed for ISP’s and radio paging services
•FDI of upto 100% permitted for electronic mail and voice mail
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GROWTH AND MARKET SHARE OF
PUBLIC AND PRIVATE SECTOR
Others, 0.78 Spice
Aircel, 4.63 MTNL, 1.21 Communication
s, 1.10

Tata
Teleservices, 9. Bharti
16 Airtel, 24.69

IDEA
Cellular, 9.86

Reliance, 17.6
BSNL, 13.33
8

Vodafone
Essar, 17.57

22 MARKET SHARE OF MAJOR PLAYERS IN THE SECTOR


Demand
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 Telecom subscriber base rose by 11.45 million to


464.8 million
 wireless subscriber base grew to 427.3 million
 The mobile segment added 12.0 million subscribers
in June 2009 as compared to 11.6 million
subscribers in May 2009.
Public sector
A Brief analysis
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 Mahanagar Telephone Nigam (MTNL)


 Government (56.25%)
 Fixed-line and mobile telephony
 Delhi, Mumbai
 Services: Data, internet
 Bharat Sanchar Nigam (BSNL)
 Government (100%)
 Fixed-line and mobile telephony
 GSM – outside Delhi and Mumbai
 23 circles
 Services: Data, internet
BSNL market Share
25.00

20.00

15.00

10.00

5.00

0.00
2005 2006 2007 2008
BSNL market Share 23.2846 23.4838 20.5911 17.3982

25 BSNL wireless market share (2005-08)


The market share of BSNL has seen a sharp decline since 2006
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0
5
10
15
20
25
30
Sep-07
Oct-07
Nov-07
Dec-07
Jan-08
Feb-08
Mar-08
Apr-08
May-08
major operators

Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Mar-09
BSNL
Airtel

Reliance
Market Share (Wireless subscribers) of

Vodafone Essar
Private network growth
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Comparison of PBITDA for public and
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private sector firms
Comparison of Total PBITDA
25000

20000

15000

10000

5000

Public Private
29 Wireline market comparison
Market Share – Fixed Wireline
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Reliance Communications Tata Teleservices


Ltd, 3.01% HFCL Shyam Ltd1, 2.57%
Telelink, 0.30%
Infotel, 0.44%

Bharti
Airtel, 7.53%

MTNL, 9.46%

BSNL, 76.70%
31 Internet Subscriber Base Comparison
ISP Market Share of various operators
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Analysis of ISP subscriber base data
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34 Telecom infrastructure
Public-Pvt sector in infrastructure
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36 Summary
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38 Future growth prospects
Demand Forecast: Increase in subscriber base
Factors affecting future of Indian Telecom
Industry
• 3G spectrum
• New entrants
• Implementation of 4G
3G spectrum
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 The much awaited 3G spectrum policy was unveiled


by the DoT in August 2008
 The reserve price for a pan-India 3G licence is
fixed at Rs 22 billion
 To each successful bidder
 the government plans to allot 5 MHz of spectrum in the
2.1 GHz frequency band.
 Auction of 1.25 MHz of spectrum in the 800 MHz band
towards 3G services is expected to be held at a later
stage.
Global 3G subscriber base (as of December 2007)
3G subscribers 3G penetration

40 (million nos) (per cent)

UK 11.8 16.0

France 11.5 22.4

Germany 8.7 9.0

Italy 20.4 22.7

Indonesia 0.6 0.7

Malaysia 1.4 6.1

Japan 72.7 69.1

Phillipines 0.3 0.6

South Korea 19.9 45.8

Australia 6.7 31.3

US 6.3 2.5

World 286 8.6


Key takeaways for India from global
case studies
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 We have studied the implementation of 3G services


in Japan and some European countries to
understand the scale of deployment over a period
of time, the nature of problems faced at inception
and the recent growth phase. The key factors that
determine adoption of 3G services in any market
are:
Demand forecast 2009-13(3G)
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43 Mobile number Portability
The game changer in Telecom industry
Impact
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 Competitive landscape slated to change


 Both Public and private operators will have to
change strategies
 For Customers
 More value for money

 Bright prospects for new entrants


 Market Share troubles for existing operators (Public
and private)
45 Analysis of public and private sector
Public Sector (BSNL & MTNL)
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 Wireless subscriber base share decreasing for BSNL


 Causeof concern
 Market share for Reliance increasing in GSM

 BSNL & MTNL have a healthy market share


 Fixed Wireline market share is strong
 Internet market share is healthy
 BSNL needs to improve as compared to market
leader
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Future scope of the project
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 Study on the number of employees


 Impact on profitability of speed in decision making
 Study of the cash flows
 Effect of employee salary on profitability
 Study of talent pool
References
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 Telecom Regulatory Authority of India


 (http://www.trai.gov.in/)

 Department Of Telecommunications
 (http://www.trai.gov.in/)

 Indian Brand Equity Foundation


 (http://www.ibef.org/)

 Prowess database
 Crisil Research
 (https://www.crisilresearch.com)