Overview of mobile services industry

Mobile services
At the end of 1995, mobile telecom services were introduced in India. Initially, due to service
providers' large license fee commitments and capex requirements, mobile tariffs were high at a
time when demand was low. The National Telecom Policy (NTP) of 1999 changed the situation
with the industry moving from a fixed license fee regime to a revenue sharing one, which
encouraged more players to enter the market. Bharat Sanchar Nigam Ltd (BSNL) launched its
services as the third operator across many circles in 2002-03. The launch of services by the
fourth operator led to a decline in tariffs, which led to further growth. Two key events:
implementation of the calling party pays (CPP) regime in May 2003 (making incoming calls
free) and the Reliance Infocomms launch of services drove a new stage of development. The
CPP regime targeted low-usage customers and lured them into the mobile telephony fold. With
low-priced schemes like Monsoon Hungama, Reliance Infocomm further lowered the entry
barriers for mobile services. In June 2006, the government wherein fixed wireless subscribers
were included under the mobile segment, and only fixed wireline would be considered in fixed-
telephony segment announced a policy. Tata Teleservices launched its GSM services in mid-
2009 which caused a turmoil in the telecom industry by offering its unique 'per-second billing'
plan forcing others to follow suit initiating a round of price war. The year 2011-12 saw
subscriber growth slack from previous levels as a result of multiple developments like rising
tele-density, decline in use of multiple SIM cards and moderate growth in rural net additions,
cancellation of all 122 unified access service licenses issued in January 2008 by Supreme Court.
The companies whose licenses were impacted, apart from Uninor and Sistema Shyam, included
S Tel, Loop Telecom, Videocon, Tata Teleservices, Idea Cellular, Etisalat DB.
As of March 2016, the active subscriber base accounts for over 90.6% of the total wireless
subscriber base. Operator wise, Idea Cellular has the highest proportion of active subscribers
(105.04%), followed closely by Bharti Airtel (97.68%).

Mobile penetration by states

Mobile penetration, or mobile tele-density, is the percentage of population who possess a mobile
phone. In India, mobile tele-density varies substantially with various circles. By March 2016,
Delhi had the highest tele-density followed by Himachal Pradesh, while Bihar and Assam circles
have the lowest tele-density. The relative tele-density in various circles generally corresponds to
the per capita gross domestic product (GDP) in the circle. Higher per capita GDP states have a
higher incursion and vice versa.

Subscribers by technology
GSM being the most widespread technology worldwide, regulators decided to adopt GSM as the
technology in India. Thus, all mobile licensees had to base their service on GSM technology.
Basic service operators were granted permissions to provide limited mobility services based on
CDMA technology in 2001. The limited mobility services however were more or less competing
directly with fully mobile services leading to disputes between mobile operators and basic
service operators, hampering investments and growth in the sector.
To put an end to this dispute, the Telecom Regulatory Authority of India (TRAI) introduced the
Unified Access Service License (UASL) in November 2003, wherein a UASL license could
provide access services based on any technology. A basic service operator was able to convert to
UASL by paying the fees required. All basic service operators providing limited mobility
services converted to UASL and are now providing mobile services based on CDMA
technology.

Reliance Jio

Company Profile
Reliance Jio Infocomm Limited (founded in 2007), is a wholly owned subsidiary of Reliance
Industries Limited and is the sole 100% VoLTE operator in India that provides only 4G services.
Reliance Industries entered the telecom industry in 2010 when it acquired a substantial stake
(95%) in Infotel Broadband Services (P) Ltd. by investing ~Rs. 48 billion. Reliance Jio began
its services as a beta test in December, 2015 when it offered connections to its employees and
channel partners. The commercial launch took place on September 5th, 2016. The company
announced free voice and data services as a trial period from September 5th, 2016 till December
31st, 2016, post which it will start charging its customers for data services.
Bharti Airtel Ltd

Company profile

Headquartered in Delhi, Bharti Airtel Ltd is an integrated telecom service provider. It is the first
private player service provider to operate in all 22 telecom circles and is currently the largest
mobile operator in India with subscriber base of over 250 million and a market share of over
24%.

In March 2016, the company's subscriber base was 251 million (24.3% market share) against
239 million in March 2015. It enjoys higher-than-industry revenue per user (ARPU). The
company is the market leader in revenue share too, which is 31.3% for the year ended March
2016. Bharti has launched 4G services in 295 towns including Kolkata, Karnataka (Bengaluru),
Maharashtra (Pune, Nagpur and Nashik) and Delhi. This move was to compete against the
nation-wide launch of Reliance Jio (soft launch in September 2016, official launch on 1st
January, 2017).
Vodafone

Company profile
Vodafone India provides global system for mobile communications (GSM)-based mobile
services and has a presence across India. In 2015, Vodafone sold its indirect 4.4% stake in Bharti
Airtel as new telecom license rules prohibit telecom players from holding any beneficial interest
in competitors operating in the same domain. In June, 2016, the company insinuated that they
are in the process of filing their initial public offer (IPO) in September, 2016. While it is still not
known what would be the split between fresh issue of shares and management stake sale; we
believe that a large portion of the combined proceeds from the IPO will be used to retire the
current debt of the company, along with providing sufficient liquidity through infusions.
In March 2016, Vodafone India had 197.9 million subscribers as compared to 183.8 million in
March 2015. At the end of June 2016, the subscriber base rose further to 199.4 million,
translating into a market share of 19.3%. In an attempt to withstand Reliance Jios competitive
pricing, Vodafone began offering free data under its new 4G data scheme (customers can now
use Vodafone Supernet and pay for 1GB and receive an additional 9 GB with no extra cost).

Idea Cellular Ltd

Company profile
Idea Cellular, a part of the Aditya Birla Group, is a pan-India GSM (global system for mobile
communications) operator providing mobile services in all 22 telecom circles of India. It also
provides international long distance (ILD), national long distance (NLD) and internet services.
Idea Cellular is the third largest GSM mobile operator and its total mobile subscriber base in
March 2016 stood at 175 million compared with 158 million in March 2015. Its subscriber base
increased further to 176 million in July 2016, representing 17% of the total mobile subscriber
base in India.
Seven of the company's licenses (Tamil Nadu, Orissa, Assam, North East, Jammu & Kashmir,
West Bengal and Kolkata) were impacted by the Supreme Court's license cancellation ruling in
February 2012. In November 2012, Idea Cellular re-obtained spectrum in these circles through
the auction route. It also secured an additional slot of 1.25 MHz for Bihar. The company's
revenue market share was 19.1% as of March 2016, up 90 basis points y-o-y.