Indian Telecom Industry An Overview

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Indian Telecom Industry An Overview
2
Market Structure

• Divided into 22 circles
• 4 metros
• 19 circles
• Further divided into A, B and C category based on
  economic parameters and revenue potential
• Each circle has a licenses
• Four operators per circle are allowed
• Licenses are saleable

North Eastern States
Source COAI
3
Current Industry Structure
FDI in telecom recently revised to
74. Government gets 15 of revenues from Unified
Licensing
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Policy Environment

• Broad guidelines of the National Telecom Policy
  1999
• Licence fees on revenue sharing basis
• Unified licensing regime introduced in 2003
• Targets a 7 teledensity by 2005 and 15 by 2010
• Rural teledensity targeted at 4 by 2010
• Universal Service Obligation (USO) replaced with
  contribution to the Universal Service Fund (USF)
• Calling Party Pays (CPP) regime
• Incoming calls free
• Outgoing calls - multi-level tariffs

5
Technologies
Mobile technologies

• Recent evolving technologies
• corDECT- Fixed wireless voice data
• DSL, ADSL - Broadband
• VSAT - Satellite

Source COAI
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Current Statistics
Mobile Telephony on a fast track
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Teledensity Levels

• Urban Telephony surpasses targets
• Rural left far behind

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Rural India

• India has a 700 million people living in 638,000
  villages
• per-capita income of 0.40 per day)

• As per DoT statistics 500,000 villages have
  telephone access.
• However, teledensity patterns reveal the low
  penetration of communication services

The question is Is connectivity relevant to the
rural populace of India?
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Connectivity

• Subscriber growth in Indian telecom has largely
  been driven by voice services
• SMS is the most popular data service
• Internet is catching on in popularity driven by
  broadband players
• As per the TRAI consulting papers, data is likely
  to be the growth driver in future
• Rural telephony is expected to be driven by data
  than voice
• Data services would provide essential services
  like education and healthcare
• But primarily demand would be driven by growth in
  the rural economy
• There exist 40 different projects in rural ICT
• The key question, however, is are these efforts
  scalable?

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Scalability.

• ...Requires
• Technology/Connectivity
• Business Model
• Organisation focussed on rural markets

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Connecting Indias 638,000 villages

• BSNL (state owned incumbent operator) has fibre
  connectivity to most County towns
• and fibre has almost infinite bandwidth capacity
• 85 of villages within 15-20 Km radius of these
  taluka towns
• In India, typically 300 villages in 30 Km radius

300 villages

• wireless systems can connect most of these
  villages
• wireless technologies are continuously evolving

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Last Mile Access Technologies

• CorDECT Wireless in Local Loop
• provides a telephone line and 35/70 kbps Internet
  connection in a 30 Km radius
• Exchange and tower in town
• Works at 55? C
• Power requirement 1 KW
• start-up costs very low ( 200 per line)
• VSAT Technology
• Satellite connectivity
• provides a shared 128 kbps connection
• Start up costs are high (3200 per connection)

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Business Model

• Entrepreneur-driven operator assisted telephone
  booths (STD PCOs) introduced in India in 1987
• Today in urban areas
• 950,000 such PCOs covering every street of
  smallest town
• generate 25 of total telecom income
• 300 million people use these PCOs
• Lessons for Rural Connectivity
• To serve the telecom needs of rural people with
  incomes lt 1 per day, aggregate demand and allow
  an entrepreneur to run it.
• Business Model
• Aggregate demand to a village internet centre to
  provide voice/computer and internet services
• Allow a local village entrepreneur to run it
• Create an organisation to provide the
  connectivity and content linkages

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Business Models

• Are primarily service providers
• Revenues are driven by connectivity and content
  services provided

• Focussed on Direct procurement of
  agri-commodities from farmers
• No revenue model.Earnings are from savings in
  procurement costs

• Provide marine and agriculture services

• E-government services are the primary drivers

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N-Logues Business Model
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Key Learnings

• The primary mechanism of service delivery has
  been the community internet centre. Demand
  aggregation is seen as the right approach across
  the board
• The largest rural services companies (n-Logue and
  e-Choupal) are both profit driven entities.
• Profitability drives sustainability
• Bandwidth is a constraint to drive relevant
  content services
• Cost of bandwidth as well as spectrum charges are
  very high

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Key Policy Initiatives Being Considered

• Niche Operator/Rural Service Provider
• A new operator in rural areas with a teledensity
  of lt1
• Would be allowed to offer voice and data services
• License fee and spectrum fees would be waived
• Will annually pay 6 of gross revenues as licence
  fee
• No clarity on support from USF
• This policy is awaited keenly to boost rural
  communication services
• NEGAP
• Envisages government setting up a network of
  internet centres
• The general feeling is that the government is
  much better as a fiscal facilitator than a
  service provider.