India Telecom Market

Telecom Circle
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Background
Indian mobile industry is the fastest growing across the
world adding 15-20 million new subscribers every month
2nd largest market after China in terms of number of
subscribers
Crossed 500 million mobile subscriber mark in Dec,
2009
Fixed line subscription at 35 million which is shrinking
every month. The rest of the presentation would focus
on mobile industry as it is the most significant part of
Telecom Industry
Structure of Indian Mobile Industry
India is divided into 23
circles and separate
licenses have been issued
for each circle
Division of circles mostly
along the state boundaries
Circles were categorized as
Metros, A, B and C based
on the revenue potential
of the circle when 1st set of
auctions were held in 1995
 Brief History of Indian Mobile Industry
1994 2004 2008
2000-01
Start of Cellular Calling Party Fresh Licenses
3 /4th Operator
rd

operations Pays (CPP) issued to 6

Licenses
Introduced players

2003 2005 2009

1999
CDMA Lifetime Tariff wars
New Telecom
networks Validity amongst
Policy
launched Products Issued operators
Mobile Subscriber Growth responded to
policy and competitive changes
600

500

400

300 CDMA
GSM
200

100

-
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
In million
Source: COAI, AUSPI
Fixed Line subscriber base is
Shrinking
Operator Subscriber base
BSNL 28,446,969
MTNL 3,514,454
Bharti Aitel 2,928,254
Reliance Communications 1,152,237
Tata Teleservices 1,003,261
HFCL 165,978
Teleservices Limited 95,181
All India 37,306,334

The fixed line subscriber base is stagnant at 37

million for last two years
Handset Market Size
Gartner and other analysts estimated Indian Handset
market size f0r 2009 between 1115-125 million
Low cost handsets dominate with the average selling
price of $60-65
Nokia has the dominant market share followed
Samsung and LG
Share of CDMA in handsets is on a decline after the
decision of Reliance and Tata to focus on GSM
Competitive Intensity
As a result of separate licenses, there are few pan India
operators. However, in the period 1999-2005,
consolidation led to emergence of larger players
In 2007-08, new licenses were issued to new players
taking total number of operators in each circle to as
high as 13
Current Operators
GSM CDMA
Bharti Airtel Reliance
Vodafone
Tata Indicom
Idea
MTS
BSNL/MTNL
Aircel
Reliance
Tata
Uninor
Stel
BPL
Tariff wars (2009 onwards)
India is currently the most competitive market in the
world which has led to tariff wars

$1 = Rs 45
Rs 1 = 100 p
Impact of Tariff wars
Revenue growth has got impacted significantly
 The break-even point for new operators has increased
significantly
Increase in churn and Multiple SIM
 It is estimated that only 50% of new subscriber addition
is actually new subscribers. Rest all are either churning
from one network to another or are adding to Multiple
SIM phenomena
High Proportion of Prepaid Subscribers
Prepaid as % of Total Subscribers
120%
100% 91% 93% 96%
86%
80% 78%
80% 73%
63%
60% 53%
44%
40%
26%
20%
0%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

99% of new subscriber additions are in prepaid

High volumes have led to continuous
decline in costs in line with the ARPU
GSM ARPU & Cost data (Rs)

1400

1200 1158

1000

800 845 814

731
600
453 503
400 412
328 352 316
288 282 240
200 193 159 146 128 123
0
2000 2001 2002 2003 2004 2005 2006 2007 2008
ARPU Cost/Sub
Composition of GSM operator revenues
Revenue Break-up as % of Gross Revenues

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Net Service Revenue = 78% of Gross Service Revenue

Net Service Revenue = Gross Service Revenue – Interconnection
Usage Costs – Outroaming Airtime
Source: PwC Benchmarking report - 2008
 Composition of GSM operator costs
As % of Total Costs As % of Net Rev

6%
Network Sales & 10%
Operating Marketing
7% Costs Costs 8%
10% Personnel Outsourcing
8% Costs Costs
51% 52%
24% Administrative
Costs
24%

Network operating expenses proportion of costs increased from

36% in 2005 to 51% in 2008

Source: PwC Benchmarking report - 2008

VAS Revenues are dominated by SMS and
Ring-back Tones
Postpaid Prepaid

SMS CLI 24%

20% GPRS Ringtones & 36%
Ringback
4% 40% Tones
9% Content Others 5%
Downloads
16% 11%
5%
30%
Regulatory Issues
Defense occupies chunk of spectrum and hence there is
scarcity of spectrum leading to poor quality of service
Mobile Number Portability
 Plan to roll-out mobile number portability by middle of
2010
 The roll-out has been delayed for last two years due to
operational readiness and security issues
Auction of 3G licenses
 3G auctions have been put off several times in last couple
of years due to non-availability of spectrum and lack of
consensus on the auction base price
 Spectrum Allocation Plan
• Known as 450
Paired With
UHF MHz Band • Known as 850 MHz
• Currently used for band
Police & Security • Allocated to CDMA
networks • Entire band
available for mobile
890 902.5 915 935 947.5 960
450 470 698 862

824 844 869 889

• Known as 700 • Known as 900 MHz
MHz band Band
• Identified by • Allocated GSM
WRC-07 for IMT • All available
• Entirely held by Paired With spectrum allocated
defense to mobile services
Spectrum Allocation Plan (cont’d)
• Known as 1800 MHz • Known as 2.1 GHz band
Paired With • Allocated to WCDMA
band
• Allocated to GSM • Defense currently has
• Up to 80% spectrum bulk of spectrum and is
is with defense expected to vacate some
1900 1910 1980 1990

1710 1785 1805 1880 1710 1785 1805 1880

• Known as US PCS
band
• CDMA operators
Paired With have claimed this Paired With
band but GSM
operators oppose it
due to interference
• Defense has all the
spectrum
Spectrum Allocation Plan (cont’d)
• Known as 2.3 GHz
TDD band
• Intended allocation
for BWA

2500 2690

2300 2400

• Known as 2.6 GHz

band
• Part intended
allocation for BWA
and part for mobile
services
• Currently entire band
is with defense
Visit Telecom Circle to read interesting articles on Telecom and
Internet
http://www.telecomcircle.com

To download
1. India Subscriber Database – Circle-wise, operator-wise from
year 2000 onwards
2. Circle-wise ARPU data for GSM networks
3. Case study on how Indian Carriers make 40% EBIDTA
margins at 2 cents a minute

Visit http://www.telecomcircle.com/2009/06/india-telecom/

Send your comments & feedback at mohit@telecomcircle.com