Telecom Sector in India:2030

Prepared by Ankit Sharma Kapil Mohan Sharma Shivendra Singh Chauhan

Preindependence

Till 1990

New Economic Policy

Steady Growth

Mobile revolution

Present Scenario
Telecommunications services are a global market worth over US$ 1.5 trillion in revenue With a growth rate of 45%, Indian telecom industry has the highest growth rate in the world How big-270 million connections! 5th largest in the world 2nd largest in Asia

GSM

CDMA

Telecom Sector- Dec 2011

Tele-density (Dec 2011)

Market Share of Major Players

9.1 12.1

9.1

17.8

Vodafone

Airtel
Reliance 24.3 IDEA BSNL+MTNL TATA TELE Others

11.1 18.8

Source- DA analysis, TRAI

The changing trends

In the present scenarios, India hosts some very big names in the mobile phones as well as mobile phones network companies Along with mobile phone sets, the prices of mobile network charges have also decreased significantly This in turn has boosted the demand for added mobile services that primarily includes stock market quotes, emails, cricket info, jokes and astrology services

3G Technology promises advanced future of mobile phones in India

Now that 3G has made its magnificent entry in the country, people expect the future of mobile phones in India to flourish more rapidly High percentage of prepaid customers. About 90% of all GSM & CDMA subscribers in India are prepaid customers. Prepaid customers are low usage customers and contribute only 25-30% ARPUs as compared to the post-paid segment (for GSM, post-paid customers contributed Rs 628 in ARPU while pre-paid customers contributed only Rs 219. For CDMA, post-paid customers contributed Rs 499 in ARPU while pre-paid customers contributed only Rs. 140).

 As mentioned earlier, the introduction of number portability will further worsen the attrition scenario, since itll make easy for users to change operators and keep their same number. Operators will have to devise means and offer plans to retain subscribers and also convert some of the pre-paid customers to post-paid ones

Change Drivers Towards Telecom in 2030

Emerging Technology Economic structure and Globalization Demographics Psychographics Regulatory bodies and Government

Emerging Technologies and Trends

4G M- Commerce BWA- Broadband Wireless Access(based on WiMax) LTE(3.9G)- Long Term Evolution DLNA- Digital Living Network Alliance MNP- Mobile Number Portability (Qualcomm will use the BWA technology in India)

4G Mobile Systems (2006-2010)

Access, handoff Location coordination Resource coordination to add new users Support for multicasting and Quality of Service Wireless security and authentication Network failure and backup Pricing and billing

Mobile Computing Systems

Future Mobile Systems
Personalised Services providing stable system performance and Quality of Service (QoS) Challenges:
Mobile Station System(Networks) Service and standards

Mobile Computing Systems

Some key features of Future Mobile Systems
High usability:
Anytime, anywhere and with any technology (all-IP based heterogeneous networks)

Support for Multi-media Services at low transmission cost Personalisation(having human characteristics) Integrated Services

Telecom Puzzle Successfully Solved

Government / Regulator

Strong, independent and active regulator in place Successful implementation of regulatory changes Stable foreign investment policy

Equipment Providers

State of the art latest international technologies at affordable prices.

Customers

Embracing new services in large numbers Huge & growing market

Operators

Significant investment Providing high quality services at an affordable price

Ministry of Communications & Information Technology , India

The two key challenges

Broadband for All:
We define full broadband as enough bandwidth to implement a Full Service Access Network (FSAN), e.g. all services including TV, for domestic uses. FSAN allows Triple Play, telephone, Internet access and TV in the same connection. At least 30 - 50 Mbits/s is then needed.

Access Everywhere:
Ubiquitous and seamless availability of telecommunication services (not necessarily requiring full broadband). Coverage also in areas with little or no infrastructure, and for highmobility nomadic users. A variety of wireless solutions, including satellite links and fixed radio access, will be important for implementing Access Everywhere.

India presents a host of opportunities for telecom companies

Infrastructure Sharing

Rural Telephony

Managed Services

Value-Added Services

Growth Avenues

Virtual Private Network

WiMax 3G

Enterprise Telecom Services

To reduce their network deployment costs, many service providers are considering

Virtual Private Network is a private data network that

provides connectivity within closed user groups via public telecommunication infrastructure. Competition is likely to heat up in the VPN segment as DoT has relaxed the norms for private players.

infrastructure sharing offers the following advantages:

Improved service quality Increased affordability for customers Faster roll out of services in rural and remote areas Significant reduction in initial set up costs Increased environmental aesthetics Lower operating costs for service providers

Enterprise Telecom Services includes key services, such

as voice over Internet protocol (VoIP), dedicated telecom communication systems, IT infrastructure enabled unified communication services, etc. Telecom service providers are increasingly targeting enterprises by providing dedicated services and is expected to witness major developments in near future.

Managed services is another segment that is attracting telecom companies. On

account of the rapidly growing subscriber base, service providers find it difficult to manage their infrastructure and network management operations. In such cases, they completely or partially outsource their infrastructure or network management operations.

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Emerging technologies 3G and WiMax to assist in penetration of telecom services in India

The Indian government plans to auction the spectrum for 3G services by inviting bids from domestic as well as foreign players, and creating a competitive environment that offers better services to consumers. Therefore, the 3G spectrum is among the major investment opportunities and growth drivers of the telecom industry. The immense potential for 3G is reflected by the 3040 percent annual growth in Value-Added Services. Cell phone manufacturers are striving to develop USD 100 priced 3G handsets for the Indian market. India expects to replicate its 2G growth in 3G services.

WiMAX has been one of the most significant developments in wireless communication in the recent past. Since this mode of communication provides network access in inaccessible locations at a speed of more than 4 Mbps, it is expected to be a major factor in driving telecom services in India, especially wireless services. Thus, it will lead to the increased use of telecom services, Internet, value-added services and enterprise services. WiMAX is expected to accelerate economic growth and assist in providing better education, healthcare and entertainment services. It is estimated that India will have 13 million WiMAX subscribers by 2012. Aircel is the pioneer in WiMAX technology in India. The state-owned player, BSNL, aims to connect 74,000 villages through WiMAX. Bharti, Reliance and VSNL have acquired licenses in the 3.3GHz range to utilise the opportunities offered by this domain.

Value-Added Services and Rural Telephony holds large market potential in India
Value-Added Services in India (200910)
Person to Application & Application to Person SMS, 15% Ringtone Dow nload, 35% Person to Person SMS, 40% Game & Data, 7% Others (MMS etc.), 3%

The VAS industry was worth USD 632 million in 200910. The industry is estimated to grow by 60 percent in 2009 10 and become an USD 1,011 million opportunity.

The VAS industry is currently focussing on the entertainment sector, such as the Indian film industry and cricket; however, there is scope for growth in other avenues as utility-based services, such as location information and mobile transactions.

Rural Telephony
50

Urban Rural Teledensity in India

As the government targets to increase rural teledensity from the current 2 percent to 25 percent by 2012, rural telephony will require major investments. This segment will boost the demand for telecom services, equipment, Internet services and other value-added services; thereby, offering great market opportunities for telecom players.

Teledensity (%)

40 30 20 10 0

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
At Year Ending March Urban Total Rural

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Mobile Commerce: Overview

Mobile commerce (m-commerce, m-business)any e-commerce done in a wireless environment, especially via the Internet
Can be done via the Internet, private communication lines, smart cards, etc. Creates opportunity to deliver new services to existing customers and to attract new ones

Mobile Service Scenarios

Financial Services. Entertainment. Shopping.

Information Services.
Payment. Advertising.

And more ...

Classes of M-Commerce Applications

Economic Structure and Globalization

Growing GDP Growing Per Capita Income hence growing Purchasing Power. More telecom companies like NTT DoCoMo coming to India creating stiffer competition. This will in tariff war and alternative means of revenue generation. Growing importance of VAS.

Economic Structure
It has been observed that growth in the number of new telephone subscribers has far exceeded the growth in the global economy in the last twenty years in todays literature on telecom economics as much as the other two factors, i.e., competition and technology One plausible reason could be because of the importance that has been attached to income gap

 As a matter of strategy, it can be said that targeted intervention through access promotion can be potentially instrumental in delivering growth with equity. Access promotion means expansion of telecommunication and therefore will cause growth to occur A broad based access promotion strategy would lead to more equitable growth

 The first step towards broad based access promotion in India was initiated in the eighties when Public Call Offices (PCOs) were given private franchises for both domestic and long distance services Total number of PCOs grew from 0.2 million in 2009 to 0.9 million in 2010
The 11th year Plan (2007-2012) targeted at provision of Panchayat phones in 360,000 villages Local self-government body consisting of elected representatives at village level.

 Share of rural areas in total number of DELs in the country stood at about 22.6 per cent in January 2010, increasing from 21.4 per cent in March 2009

Demographics
The growing telecom subscribers in India and the continuous record additions of >7 mn per month. Content localization Growing proportion of young population will provide a huge opportunity for telecom companies.

Demographic Distribution of Telecom Services

Psychographics
Increasing per capita income has affected psychographics. Increasing internet subscriber base has affected the telecom operators. People are shifting from laptops to more portable devices to access internet. Telecom operators need to harvest this opportunity through synergizing with mobile manufacturers.

Role of Government

Synergy is the key for Growth

Next Generation Network

Many service providers are looking towards Next Generation Network (NGN) services as a means to attract and/or retain the most lucrative customers. The general idea behind the NGN is that one network transports all information and services (voice, data, and all sorts of media such as video) by encapsulating these into packets, similar to those used on the Internet.

Next Generation Network

Essence a) NGNs are commonly built around the Internet Protocol, and therefore the term all IP is also sometimes used to describe the transformation toward NGN. b) It implies the migration of voice from a circuitswitched architecture (PSTN) to VoIP c) One network many services d) Consolidation of several transport networks into one core transport network based on IP.

Probable Key Changes

ARPUs is continually dropping and will do so in the future due to stiff competition.(dropped 8.6 % from 2010 to 2011)* The only way out is to look for alternative revenue streams like VAS. Operators focus on increasing the pie and eating each others market share will continue to result in low tariff rates for customers. Affordability of telecom services will continue to increase due to further market expansion.

Probable Key Changes

Increasing tele-density in the rural and semi-urban areas will continue to grow as operators would want to capture it completely. VAS will form a larger portion of the total revenue for operators. Music claims one of the largest share of Indias mobile VAS market size, estimated to be worth about USD 324 mn (35%) Operators will build their individual mobile music brand to capitalise on this huge opportunity. Wireless subscribers will continuously rise as compared to wireline subscribers.

Probable Key Changes

Total wireless subscriber base will continue to form the majority of subscribers. Wire line subscriber base will continue to decline in the near future. Growing internet subscribers may result in increased use of VoIP. Use of wireless technology will increase for accessing the broadband.

Broadband Access- Technology and Market Share