Professional Documents
Culture Documents
AUGUST 2015
TELECOMMUNICATION
Executive Summary. 3
Advantage India... 4
Strategies Adopted24
Growth Drivers... 26
Opportunities. 39
Success Stories 43
Useful Information.... 49
AUGUST 2015
TELECOMMUNICATION
EXECUTIVE SUMMARY
Second-largest
subscriber base
Third-highest number of
internet users
With a subscriber base of nearly 1002 million by the end of May 2015, India has the
second-largest telecom network in the world
With 267.39 million internet subscriptions at the end of December 2014, India stood thirdhighest in terms of total internet users in 2013. It is expected that India will be the second
largest country in terms of internet subscribers in 2015
Mobile based Internet is a key component of Indian Internet usage, with seven out of eight
users accessing internet from their mobile phones
Urban teledensity stood at 148.9 per cent and rural teledensity at 48.6 per cent as on May
2015, up from 2.29 per cent and 9.45 per cent, respectively, in May 2014
Availability of affordable smartphones and lower rates are expected to drive growth in the
Indian telecom industry
AUGUST 2015
TELECOMMUNICATION
ADVANTAGE INDIA
AUGUST 2015
TELECOMMUNICATION
ADVANTAGE INDIA
Robust demand
Growing
demand
2015*
Number of
subscribers:
1002.05
Million
Attractive opportunities
High ratings
Advantage
India
In terms of telecommunication
ratings, India ranks ahead of its
peers in the West and Asia
FY16E
Number of
subscribers:
1.2 billion
Policy support
Source: BMI (Business Monitor International) Report, TechSci Research, Internet Mobile Association of India (IAMAI)
Notes: * figure for 2015 is up to 31st May 2015, MNP - Mobile Number Portability, E - Estimates (2016E - Estimates for 2016)
AUGUST 2015
TELECOMMUNICATION
TELECOMMUNICATION
THE TELECOM MARKET SPLIT INTO THREE SEGMENTS
Mobile
(wireless)
Telecom
Fixed-line
(wireline)
Internet
services
AUGUST 2015
TELECOMMUNICATION
TELECOM SUBSCRIBER BASE EXPANDS SUBSTANTIALLY
India is currently the second-largest telecommunication
market and has the third highest number of internet users in
the world
Indias telephone subscriber base expanded at a CAGR of
19.22 per cent to 1006 million over FY0715
Teledensity (defined as the number of telephone
connections for every hundred individuals) increased from
18.3 in FY07 to 79.67 in FY15
In May 2015, total telephone subscription stood at 1002
million, while teledensity was at 79.67
90
80
70
60
50
40
30
20
10
0
1000
800
600
400
200
0
Teledensity (RHS)
AUGUST 2015
TELECOMMUNICATION
SURGING TELECOM REVENUES
Indian telecom sectors revenue grew 10.7 per cent to
USD71.2 billion in FY14 as compared to USD64.3 billion in
FY13
CAGR: 10.4%
37.7
32.1
33.2
33.3
FY08
FY09
FY10
40.8
39.1
FY12
FY13
23.3
19.6
FY06
FY07
FY11
AUGUST 2015
TELECOMMUNICATION
WIRELESS SEGMENT DOMINATES THE MARKET
Indias telephone subscriber base reached 1002 million in
May, 2015
0.49%
55.76%
Urban wireless
Rural wireless
Urban wireline
Rural wireline
AUGUST 2015
10
TELECOMMUNICATION
WIRELESS SUBSCRIPTIONS WITNESS ROBUST GROWTH OVER THE YEARS
975.78
943.9
868
261
165
392
584
812
919
CAGR: 24.78%
969.8
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16*
Source: Telecom Regulatory Authority of India, TechSci Research
Notes: CAGR - Compound Annual Growth Rate,
FY16* - As of May 2015
AUGUST 2015
11
TELECOMMUNICATION
WIRELESS TELEDENSITY GROWS OVER THE YEARS
The mobile segments teledensity surged 5x from 14.6 per
cent in FY07 to 77.27 per cent in FY15, while coming at
77.58 per cent in May 2015
GSM services continue to dominate the wireless market
with an 94.36 per cent share (December 2014); CDMA
accounts for the remaining 5.64 per cent
77.58%
FY15
77.27%
FY14
75.43%
FY13
70.90%
FY12
76%
FY11
68%
FY10
49.60%
FY09
33.70%
FY08
22.80%
FY07
14.60%
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
AUGUST 2015
12
TELECOMMUNICATION
WHILE BHARTI AIRTEL DOMINATES WIRELESS SEGMENT
Bharti Airtel is the market leader, with a 23.51 per cent
share of total subscription, followed by Vodafone (18.96 per
cent share)
Bharti airtel
0.36%
Vodafone
0.28%
4.89%
0.76%
Idea
Relaince
6.32%
0.
23.51%
BSNL
Aircel
8.48%
Tata
7.96%
Telewigs
18.96%
11.14%
Sistema
Videocon
16.44%
MTNL
Quadrant
AUGUST 2015
13
TELECOMMUNICATION
BSNL DOMINATES FIXED-LINE SEGMENT
Total fixed-line subscription stood at 26.27 million, while teledensity reached 2.09 per cent due to wide usability of the
wireless segment in FY16*
BSNL is the market leader with a 61 per cent share, followed by MTNL (13.48 per cent)
BSNL, MTNL, and Bharti together account for 87.61 per cent of the total fixed-line market
0.22% 0.87%
0.31%
4.48%
45
40
35
41
39
30
4.00%
38
37
35
BSNL
MTNL
6.51%
3.50%
32
30
28
3.00%
27
25
26
Bharti
13.06%
TATA
2.50%
Reliance
2.00%
20
1.50%
15
10
13.48%
61.07%
Quadrant
1.00%
Systema
0.50%
Vodafone
0.00%
AUGUST 2015
14
TELECOMMUNICATION
NUMBER OF INTERNET SUBSCRIBERS INCREASING AT A FAST PACE
Internet subscriptions (in Million)
The number of Internet subscribers increased at a CAGR of
53.64 per cent to 267 million in 2014 from 8.6 million in
2006
267
239
CAGR: 53.64%
8.6
10.4
12.9
15.2
18.7
22.4
25.3
2006
2007
2008
2009
2010
2011
2012
2013
2014
AUGUST 2015
15
TELECOMMUNICATION
STRONG GROWTH IN BROADBAND DRIVES INTERNET ACCESS REVENUES
15.56
15.52
14.9
15.1
13.4
10.9
15
3.1
2.1
5.5
7.8
CAGR:
22.17%
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16*
Source: Telecom Regulatory Authority of India, TechSci Research
Notes: CAGR - Compound Annual Growth Rate
FY16* - Data as of May 2015
AUGUST 2015
16
TELECOMMUNICATION
BSNL ACCOUNTS FOR MAJOR SHARE IN BROADBAND SUBSCRIPTIONS
Bharti has the largest share (22.28 per cent) of the total
broadband market
22.28%
Bharti
Vodafone
8.46%
BSNL
Idea
15.02%
20.26%
Reliance
Others
17.60%
AUGUST 2015
17
TELECOMMUNICATION
KEY COMPANIES IN THE MARKET
Company
Ownership
Presence
Mahanagar Telephone
Nigam Ltd (MTNL)
Reliance
Communications
Bharti Airtel
Vodafone India
AUGUST 2015
18
TELECOMMUNICATION
NOTABLE TRENDS IN THE INDIAN TELECOM SECTOR (1/2)
Green Telecom
The green telecom concept is aimed at reducing carbon footprint of the telecom industry
through lower energy consumption
TRAI initiated a consultation process in May 2010, requesting inputs from firms across the
telecom value chain to provide recommendations on green telecoms framework and
implementation
Expansion to Rural
Markets
There are over 62,443 uncovered villages in India; these would be provided with village
telephone facility with subsidy support from the governments Universal Service Obligation
Fund (thereby increasing rural teledensity)
In May 2015, the rural subscriber base accounted for 42.1 per cent of the total subscriber
base, thereby fuelling the sectors growth
Emergence of BWA
Technologies
AUGUST 2015
19
TELECOMMUNICATION
NOTABLE TRENDS IN THE INDIAN TELECOM SECTOR (2/2)
Telecom Finance
Commission
The Telecom Commission (TC) is likely to set up a Telecom Finance Corporation (TFC)
for channelling funding for telecom projects at competitive rates in order to facilitate
investment in the sector
To boost local research and manufacturing of telecom products, the government has
proposed an investment of USD32.2 billion in three phases: i) USD9.2 billion to the
Telecom Research and Development Fund, ii) USD4.6 billion for the Telecom
Entrepreneurship Promotion Fund, and iii) USD18.4 billion to the Telecom Manufacturing
Promotion Fund during the 12th Five-Year Plan
As part of the recent outsourcing trend, operators have outsourced functions such as
network maintenance, IT operations, and customer service
Rising investments
Outsourcing non-core
activities
Mobile banking
In 2015, 340 million mobile banking transactions were reported, up 75 per cent from a year
ago
Availability of affordable smartphones, along with a rise in the security level of mobile
transactions, is expected to boost growth of transactions conducted via phones, with the
overall transaction value being tripled in 2014 from last year
Source: Searching for New Frontiers of growth: Indian Banks- PwC, TechSci Research,
Reserve Bank of India
AUGUST 2015
20
TELECOMMUNICATION
EMERGENCE OF TOWER INDUSTRY
A surge in the subscriber base has necessitated network expansion covering a wider area, thereby creating a need for
significant investment in telecom infrastructure
To curb costs and focus on core operations, telecom companies have been segregating their tower assets into separate
companies
Creating separate tower companies has helped telecom companies lower operating cost and improve capital structure; this
has also provided an additional revenue stream
Inspired by the success seen by Indian players in towers business, most of the operators around the world are replicating
the model
Rising
competition
Higher
operating
cost and
debt burden
Focus on
tower
sharing to
reduce
costs
Segregation
of towers
into
separate
companies
AUGUST 2015
21
TELECOMMUNICATION
TELECOMMUNICATION
PORTERS FIVE FORCES ANALYSIS
Competitive Rivalry
Threat of New
Entrants
(Low)
Substitute Products
Bargaining
Power of
Customers
(High)
Competitive
Rivalry
(High)
Threat of
Substitute
Products
(Low)
Bargaining
Power of
Suppliers
(High)
AUGUST 2015
23
TELECOMMUNICATION
STRATEGIES ADOPTED
AUGUST 2015
TELECOMMUNICATION
STRATEGIES ADOPTED
Marketing strategy
Players are using innovative marketing strategies to succeed in this sector. For example,
Reliance Communication offers both CDMA and GSM mobile services and has
launched All Share Post-paid Plan which offers group or family members free
sharing of voice and data on a single bill
Bharti Airtel launched HD gaming for smartphones, and introduced a rural portal
the first ever portal to cater to the rural segment
Differentiation
Pricing strategy
Players price their products very carefully due to the price sensitive nature of customers
and high competition in the sector. Players generally go for price war. For example,
AUGUST 2015
25
TELECOMMUNICATION
GROWTH DRIVERS
AUGUST 2015
TELECOMMUNICATION
SECTOR BENEFITS FROM RISING INCOME, GROWING YOUNG POPULATION
Increasing
investments
Policy support
Growing demand
Growing demand
Higher real
income and
changing lifestyles
Reduction in
license fee
Inviting
Growing young
population
Increasing
MOU and data
usage
Relaxed
FDI Norms
Increasing M&A
activity
Encourages
firms to expand
to rural areas
AUGUST 2015
27
TELECOMMUNICATION
RISING INCOME FUELS DEMAND FOR TELECOM SERVICES
Incomes have risen at a brisk pace in India and will continue
rising given the countrys strong economic growth
prospects. Nominal per capita income have recorded a
CAGR of 8.87 per cent over 200015
10.0%
8.0%
2000.0
2302.5
2128.8
1978.7
1832.8
1702.1
500.0
1584.3
2.0%
1504.5
1000.0
1514.6
4.0%
1552.5
6.0%
1500.0
1430.2
0.0
0.0%
-2.0%
-4.0%
Growth Rate
AUGUST 2015
28
TELECOMMUNICATION
INCREASING INCOME AND GROWING RURAL MARKET DEMAND DRIVERS
The emergence of an affluent middle class is triggering
demand for the mobile and internet segments
A young, growing population is aiding this trend (especially
demand for smart phones)
222
273
26
50
322
15
32
40
35
29
25
17
12
2
3
6
7
1
2008
2020
2030
Globals (>18412.8)
Strivers (9206.4-18412.8)
Seekers (3682.5 - 9206.4)
Aspirers (1657-3682.5)
Deprived (<1657)
AUGUST 2015
29
TELECOMMUNICATION
INCREASING INTERNET REVENUES AND SUBSCRIPTIONS
MVAS revenues (in USD Billion)
9.5
7.8
CAGR: 30.93%
6.2
4.9
4.2
3.2
1.7
1.9
2008
2009
1.1
2007
2010
2011
2012
2013
2014 2015E
AUGUST 2015
30
TELECOMMUNICATION
STRONG POLICY SUPPORT CRUCIAL TO THE SECTORS DEVELOPMENT (1/3)
Reduction in license
fees
In May 2012, the Union Cabinet declared to abolish roaming charges and allow mobile
number portability even outside designated circles (without having to pay extra charges)
BSNL has announced Free roaming across All India in 2015
From May, 2015, TRAI have announced to drop 20 per cent in calling and 75 per cent in
messaging while travel outside
Relaxed
FDI norms
FDI cap in the telecom sector has been increased to 100 per cent from 74 per cent; out of
100 per cent, 49 per cent will be done through automatic route and the rest will be done
through the FIPB approval route
FDI of up to 100 per cent is permitted for infrastructure providers offering dark fibre,
electronic mail and voice mail
AUGUST 2015
31
TELECOMMUNICATION
STRONG POLICY SUPPORT CRUCIAL TO THE SECTORS DEVELOPMENT (2/3)
Allowed the use of
WiMAX
Set up internet
connections
Expansion to rural
areas
The Department of Information Technology intends to set up over 1 million internetenabled common service centres across India as per the National e-Governance Plan
The USOF identied 5,000 villages, and is in the process of developing a scheme to
connect them through wireless broadband
It also focussed on providing 888,832 broadband connections in rural areas by 2014
The USOF plans to strengthen the OFC network in rural and remote areas
Rural Solar Mobile Charging Facilities (SMCFs) in 5000 villages through Lighting a Billion
Lives (LaBL) project
The SMCFs shall be run by village entrepreneurs who shall recover nominal fees from the
rural public towards charging of mobile phones
Notes: USOF - Universal Service Obligation Fund; OFC - Optical Fibre Cable,
WiMAX - Worldwide Interoperability for Microwave Access Telecommunications
AUGUST 2015
32
TELECOMMUNICATION
STRONG POLICY SUPPORT CRUCIAL TO THE SECTORS DEVELOPMENT (3/3)
The USOF is expected to extend nancial support to operators providing services in rural
areas and encourage active infrastructure sharing among operators
TRAI has recommended that USO levy component to be reduced from 5 per cent to 3 per
cent of annual revenues for all the licenses from April 2015
Financial support
Enhanced spectrum
limit
The prescribed limit on spectrum would be increased from 6.2MHz to 2x8 MHz (paired
spectrum) for GSM technology in all areas other than Delhi and Mumbai, where it will be
2x10MHz (paired spectrum)
Telecom players can, however, obtain additional frequency; there will be an auction of
spectrum subject to the limits prescribed for the merger of licenses
The government revised the M&A guidelines for the telecom sector in 2013; it raised the
limit on the market share of a merged entity in a circle to 50 per cent from 35 per cent
earlier
The final draft guidelines stated that it would allow companies to trade spectrum and
retained the clause that would make the companies pay for spectrum beyond a prescribed
limit if it was acquired after paying the entry fee and not through auction
In December 2013, the Empowered Group of Ministers (EGoM) approved the mergers
and acquisitions guidelines
In September 2014, government allowed mergers between firms having upto 50 per cent
combined market share
Source: TechSci Research
Notes: USOF - Universal Service Obligation Fund; OFC - Optical Fibre Cable
AUGUST 2015
33
TELECOMMUNICATION
NATIONAL TELECOM POLICY - 2012
Increase rural
teledensity from 39 to
70 per cent by 2017,
and 100 per cent by
2020
National Telecom
Policy - 2012
Liberalisation of
spectrum, and
convergence of
network, services and
devices
Unified licensing,
delinking of spectrum
from license, online
real-time submission
and processing
Source: Digital Dawn,
KPMG Report 2013, TechSci
Research
AUGUST 2015
34
TELECOMMUNICATION
Process of M2M Roadmap Formulation
Firming up of issues &
viewpoints through
Questionnaire to
Stakeholders
AUGUST 2015
35
TELECOMMUNICATION
FOREIGN INVESTMENTS FLOWING IN (1/2)
Cumulative FDI inflows into the telecom sector over April 2000May 2015 amounted to USD17.42 billion
During this period, FDI into the sector accounted for 7 per cent share of total FDI inflows into the country till May 2015
FY14
17,421.78
FY13
17058.03
FY12
14163.01
12,856.06
FY11
12,552.19
FY10
10,589.27
9,872.49
FY15
FY16*
AUGUST 2015
36
TELECOMMUNICATION
FOREIGN INVESTMENTS FLOWING IN (2/2)
In 2014, total
respectively
inbound and outbound deal value in telecommunication was USD2.71 billion and USD118 million,
Acquirer
Acquisition price
(USD million)
Division acquired
350
1,260
1,641
Bharti Airtel
SingTel(2013)
302
Bharti Airtel(2013)
914
Target
Bharti Infratel
Bharti Airtel
Vodafone India Ltd
Bharti Airtel
AUGUST 2015
1,300
Entire business
Stake
37
TELECOMMUNICATION
EXPANSION AND GROWTH STRATEGIES OF LEADING PLAYERS
ZTE Telecom India, the wholly owned subsidiary of Chinas ZTE Corp, entered into an
exclusive agreement with Pune-based Calyx Group to market and distribute products
across India
ZTE plans to enter the Indian smartphone market with five models priced at USD107275
It also plans to introduce tablet PCs in the Indian market after the smartphone launch
Mobile wallet by
Vodafone
Vodafone India and ICICI Bank launched M-Pesa, a service for mobile money transfer and
payment
The service would allow customers to transfer money to any mobile phone in India, debit
and deposit funds, withdraw cash from designated outlets, pay bills, and shop at select
merchant establishments. M-Pesa would be available across India in the next 1218
months
There are many companies from China entered into the Smartphone business in India.
Companies such as Xiaomi, One Plus, OPPO, Huawei, etc. have launched their
Smartphones in India.
Under the Make in India plan, many companies are also establishing their manufacturing
and assembly lines in India
Source: Thomson Banker, Deal Tracker, TechSci Research
Note: M&A - Merger and Acquisition
AUGUST 2015
38
TELECOMMUNICATION
OPPORTUNITIES
AUGUST 2015
TELECOMMUNICATION
OPPORTUNITIES ACROSS SEGMENTS IN THE INDUSTRY (1/2)
Increasing mobile subscribers
Internet penetration is
expected to grow steadily and
is likely to be bolstered by
government policy
AUGUST 2015
40
TELECOMMUNICATION
OPPORTUNITIES ACROSS SEGMENTS IN THE INDUSTRY (2/2)
Growth in MVAS and cloud
computing
Development of telecom
infrastructure
It is anticipated to reach
USD34 billion by 2020
AUGUST 2015
41
TELECOMMUNICATION
MOBILE APPLICATION MARKET: FAST GROWING SEGMENT
The mobile application (app) market is expected to expand
at a CAGR of 104.32 per cent to USD626.23 million during
201416
626.23
CAGR: 104.32%
2014
2016F
AUGUST 2015
42
TELECOMMUNICATION
SUCCESS STORIES
AUGUST 2015
TELECOMMUNICATION
BHARTI AIRTEL: AN INSPIRING SUCCESS STORY (1/2)
Set up in 1995, Bharti Airtel is Indias largest mobile operator with presence in all of Indias 22 circles
It is the countrys leading mobile operator, with a customer base of more than 226 million as of March 2015, and the worlds
fourth-largest telecom operator
Revenues increased at a CAGR of 18.8 per cent from USD4 billion in FY07 to USD15.1 billion in FY15
CAGR: 18.82%
Mobile services
India
3%
4%
7%
International
wireless
5%
52%
29%
14.2
14.2
FY12
FY13
FY14
15.1
12.3
Tower
Infrastructure
Airtel business
14.3
7.6
8.3
6.3
3.8
Telemedia
FY07
Digital TV
AUGUST 2015
FY08
FY09
FY10
FY11
FY15
44
TELECOMMUNICATION
BHARTI AIRTEL: AN INSPIRING SUCCESS STORY (2/2)
Total subscribers (Million)
CAGR:
22.69%
252
221
271
220
226
233
131
AUGUST 2015
95
62
37
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY*16
45
TELECOMMUNICATION
VODAFONE: INDIAS THIRD-LARGEST MOBILE OPERATOR (1/2)
Revenues (USD billion)
CAGR: 15.61%
7.4
6.7
5.9
3.9
4.4
6.2
6.7
4.9
2.1
AUGUST 2015
46
TELECOMMUNICATION
VODAFONE: INDIAS THIRD-LARGEST MOBILE OPERATOR (2/2)
Total subscribers (Million)
CAGR: 18.55%
148
147
153
167
183
185
124
91
61
40
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16*
AUGUST 2015
47
TELECOMMUNICATION
MOBILE NUMBER PORTABILITY: A PARADIGM SHIFT IN INDIAN TELECOM
Mobile Number Portability (MNP) in India was introduced in
November 2010
160.25
117.01
FY14
FY15
FY*16
AUGUST 2015
48
TELECOMMUNICATION
USEFUL INFORMATION
AUGUST 2015
TELECOMMUNICATION
INDUSTRY ASSOCIATIONS
Association of Unified Telecom Service Providers of India (AUSPI)
B-601, Gauri Sadan 5, Hailey Road, New Delhi 110 001, India
Tel: 91 11 23358585
Fax: 91 11 23327397
Website: http://www.auspi.in/
AUGUST 2015
50
TELECOMMUNICATION
APPENDIX
BMI telecoms business environment ratings
Industry rewards: it considers average revenue per users, number of subscribers, subscriber growth, and number of
operators
Country rewards: it considers urban/rural split, age range, GDP per capita, USD
Industry risks: it considers regulatory independence
Country risk: it rates the country on short-term external risk, policy continuity, legal framework corruption
Telecom ratings: overall rating of the above indicators
AUGUST 2015
51
TELECOMMUNICATION
GLOSSARY (1/2)
BWA: Broadband Wireless Access
CAGR: Compound Annual growth rate
AUGUST 2015
52
TELECOMMUNICATION
GLOSSARY (2/2)
OFC: Optical Fibre Cable
TRAI: Telecom Regulatory Authority of India
AUGUST 2015
53
TELECOMMUNICATION
EXCHANGE RATES
Exchange rates (Fiscal Year)
AUGUST 2015
54
TELECOMMUNICATION
DISCLAIMER
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55