Daily downloads of around 1 million ringtones and ringbac

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• THE INDIAN CELLULAR INDUSTRY
• CURRENT STATUS OPPORTUNITIES AHEAD

T V Ramachandran, Director General November 30,
2005 _at_ TIDC,Bangalore
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CONTENTS

• GROWTH OF WIRELESS WORLDWIDE
• STATUS OF INDIAN TELECOM
• STATUS OF REGULATION IN INDIAN TELECOM
• FUTURE GROWTH OPPORTUNITIES

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GROWTH OF WIRELESS WORLDWIDE
Subscribers in Million
Year Ended December

• On an average GSM net additions are about 1
  million subscribers everyday.
• Growth of GSM subscribers in 2005 achieved 276.8
  million, exceeding in 9 months the CDMA all-time
  global subscribers figure of 273.5 million.

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STATUS OF INDIAN TELECOM
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INDIA - TELECOM UNLEASHED!

• 5th largest network in the world
• 2nd largest among emerging economies
• 3 million new mobile phone subscribers added
  every month
• Fixed Mobile Crossover achieved in October05.
• 125 state-of-the art Networks (GSM CDMA) on Air
  
• Services in about 4000 cities towns and 60,000
  villages.
• Over 68 million mobile subscribers (GSM CDMA)
  end October 2005 GSM running at 80 new subs.

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INDIAN TELECOM LANDSCAPE
1USDRs. 45

• With a YoY growth of 63, Cellular revenues
  constitute 35 of the telecom service industry
  revenues.

Source Voice Data, July 2005
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MOBILE MAJOR CONTRIBUTOR TO TELE DENSITY
Total 11
Mobile 6
Fixed 5

• Oct04 MobileFixed crossover
  
  April05 GSM-Fixed crossover
• Cellular 57 of current national tele density
  taking overall tele density from 0.8 in 1994 to
  11 in 2005

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IMPRESSIVE GROWTH PERFORMANCE OF CELLULAR
INDUSTRY
Subscribers in Million
Year Ended March
GSM The Primary Engine of Growth
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CONTINUOUSLY IMPROVING AFFORDABILITY
Indias Cellular Tariffs The lowest in the world
Source TRAI Study paper No 2/2005
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INDIA/ CHINA COMPARABLE YEARS OF SERVICE
Million
Year Ended December
Growth levels well ahead of China.
11
INDIA VERSUS CHINA FUTURE POTENTIAL
Million
Year Ended December
Even at lower growth rates, India has the
potential to exceed Chinese performance
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STATUS OF REGULATION IN INDIAN TELECOM
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MAJOR POLICY INITIATIVES THAT HAVE FUELLED GROWTH

• NTP 1994
• License issued for 4 Metros
• Circles opened up for Cellular
• Private sector participation for
• supplementing the efforts of
• the Government

• CPP introduced
• Unified access license regime introduced
• IUC implemented
• Explosive growth of wireless

• Start of operations of cellular services in
  circles

• 4th cellular license issued

1994
1996
1999
2002
2004
1995
2001
2003

• NTP 1999
• Migration to revenue sharing making industry
  viable
• BSNL and MTNL third operator in cellular
• Tariff rebalancing
• Open competition
• Technology neutral

• 4th Cellular operator starts operations
• ILD sector opened up
• Internet tele-
• phony opened up
• In restrictive way

• Licence fee reduced
• USO Fund Established
• Intra-Circle MA guidelines announced
• Broadband policy

• Start of operations in 4 Metros
• License issued for 20 circles

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MAJOR POLICY INITIATIVES IN 2005

• FDI limit increased to 74.
• Indigenous manufacturing by global players
  initiated.
• Entry fee for NLD/ ILD licenses reduced.
• Provision of Internet telephony, Internet
  services and Broadband services by Access
  Providers.
• Next Major Reform NTP 2005/06
• Government reported to be addressing the
  following important issues
• Early introduction of Unified Licensing
• Interconnection charges to be determined in a
  transparent manner and be cost based.
• Encourage unbundling of copper and active sharing
  of infrastructure by BSNL in a fair manner

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NEXT MAJOR REFORM NTP 2005/06

• Roaming to be made mandatory for all operators
• Switch over to a Hybrid Revenue Share ADC Regime
  and merge it with the USO Fund.
• Reduce the high level of levies and duties on
  telecom sector.
• Introduce uniform Nationwide Guidelines for
  various procedures and clearances
• Light touch Regulation
• The concept of India One to be considered.
• Put in place policies and incentives in the field
  of hardware manufacturing
• Terms conditions for FDI to be such so as to
  facilitate the inflow.
• Based on Media Reports

NTP 2005/06 will facilitate the next quantum
leap in telecom reforms
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FUTURE GROWTH OPPORTUNITIES
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FUTURE GROWTH DRIVERS
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INDIAS MASSES WILL FUEL THE MOBILE REVOLUTION

• Mobile has fast moved from a class service to a
  mass service for the common man fuelled by
  continuously falling tariffs, increased coverage,
  customized service offerings
• The real revolution will come from the continuous
  growth of the low income group market
• New innovative use by a varied customer base
  has made mobile services the key plank for
  infrastructure economic development

Farmers track prices of Agricultural Produce
Doctors deliver healthcare through GSM GPRS
Fishermen call in their Catch
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NEED TO LOWER ENTRY BARRIER FOR CONSUMERS

• Cost of the handsets - Greatest barrier to wider
  adoption of cellular services
• Acute need for ultra low cost handsets.
• Efforts made to lower entry barrier.
• Emerging Market Handset Initiative (EMHI)
  launched by GSM Association
• Phase 1 - unveiled a sub USD 40 handset,
• Phase 2 - to bring costs down below USD 30
• Single chip cellphone solution launched by TI
  will also contribute to make available
  increasingly affordable mobile handsets to
  consumers.
• For Indian market cost of handsets needs to be
  reduced to the level of USD 10-15.
• Low cost handsets with latest features cost
  effective phones required.
• Micro financing - as done by Gramin bank is
  required.

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REVENUES FROM VALUE ADDED SERVICES
As a age of Service Revenues
VAS Composition
Postpaid
Prepaid

• Prepaid subscribers increasingly taking to VAS.
• Percentage of Revenues from VAS for prepaid
  subscribers gone up from 3 in 2003 to 8 in
  2004.
• Overwhelming proportion from SMS.

Source COAI-Price Waterhouse Benchmarking Study,
2004
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REVENUES FROM VAS

• Revenue from the VAS segment is growing at the
  rate of 30 to 40 percent annually. At present,
  this segment accounts for 10 to 13 percent of the
  total revenue of a service provider,
• - Tim DeLuca Smith, Communications
  Manager, SmartTrust.
• Market for mobile VAS is currently about USD 85
  million and it is expected to grow around 800
  million by 2010.
• - Arun Gupta, CEO Mauj Telecom
• Mobile entertainment market estimated at USD 133
  million by March 2006.
• Daily downloads of around 1 million ringtones and
  ringback tones.
• average cost Rs 9 per ringtone.
• During festive season the figures increase
  sharply..
• This Diwali -a six fold increase in value
  added service downloads, over a normal
  day.
• Delhi circle alone saw 8.5 million SMSs
  being exchanged on Diwali day as against 5.5
  million last year.

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OPPORTUNITIES TO BE EXPLORED

• Introduction of new Revenue Streams Data
• Value Added Services
• Content Development Including
• vernacular platforms
• Expeditious introduction of 3G services
• To address issues of low cost voice as well
• as data services.
• Mobile Broadband required for India With
• HSDPA, many prospects are likely to come in.

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DATA THE NEW FRONTIER

• Voice will increasingly become a commodity, real
  revenues will come from data.
• In 2003, Mobile Data Services accounted for 5.4
  of cellular revenues-most of this from SMS
  traffic.
• Going forward, data revenues expected to touch
  USD 3.2 Billion by 2008 representing 20.5 of the
  total cellular revenues of USD 15.61 Billion in
  that year .Gartner Research
• Reality game shows like KBC2, Fame Gurukul,
  Indian Idol, Deal Ya No Deal, etc have massive
  reach and generate high revenues.
• For example, Bhartis tie up with KBC2 show sees
  an average 700k SMS and 1.4 mn calls per day.
• On an annualized basis, this works out to
  over USD 5mn in revenues and USD 3mn in
  EBITDA just from one TV show.
• Hutch also has a tie up with MTV for a chat show
  and travel series.

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GROWTH OF DATA MARKET

• Data market is expected to grow at a CAGR of 77
  over CY 04-10
• Major contributing factors will be
• Burgeoning youth population (60 of population
  below 30 yrs)
• Fast rising consumption and infotainment
  expenditure pie
• Social affinity to music and Bollywood

Source Lehman Brothers Global Equity Research
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CONTENT DEVELOPMENT

• Wireless operators, music film companies,
  cartoon artists game makers entering mobile
  content market.
• In urban areas, mobile gaming is the latest fad
  Airtels initiative
• of taking its mobile gamers to the World Mobile
  Gaming
• Championship in Singapore is an indication of
  its popularity.
• In a multilingual country like India language SMS
  
• options have a huge scope.
• With the popularity of Bollywood films,
  applications
• like mobile TV, movie-themed games, etc can
  prove
• to be extremely popular.
• The potential of staying connected to the stock
  market and other financial applications is also
  growing in popularity among Indian users.

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CONTENT DEVELOPMENT

• Content developers focusing on advanced
  entertainment and next-generation business
  applications.
• As m-commerce catches on, there will be a gradual
  blurring of mobile content boundaries.
• Price cuts and innovative marketing will boost
  penetration of mobile entertainment content in
  rural areas.
• Demand of Indian customer not just for data
  services but of accompanied faster download
  rates, two-way connectivity and a better user
  experience.
• From greetings to e-mails, from pictures to
  games, the growth of content market proliferates
  on the speed of data delivery.
• Thus arises a need for high speed and data
  throughputs.

The Indian customers need 3G now
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EXPEDITIOUS INTRODUCTION OF 3G

• 3G will facilitate higher speed data
  throughputs, enable delivery of wide range of
  multimedia services. Expeditious introduction of
  3G both relevant important for India as
• Higher voice capacity of 3G spectrum (4x-5x) can
  
• Ease spectrum constraint in metros other big
  cities.
• Serve as an ideal platform to deliver low cost
  voice telephony as it is far more cost effective
  on a per erlang basis than 2G.
• A valuable tool to reach out into rural areas to
  achieve the broadband objectivesand to undertake
  key social initiatives such as E-Education, Tele
  medicine, etc.
• Enhance Indias competitiveness in ITES / BPO
  segment.
• Hi-speed data capabilities will fulfill the
  content rich mobility experience demanded in
  urban metropolitan markets.
• In China, 3G has been pushed off due to TD-SCDMA
  IPR issues
• Opportunity for India to march ahead of
  China.

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INDIAS PATH TO MOBILE BROADBAND

• Indias path to Mobile Broadband must be through
  3G in the WARC-92 identified Core Band of
  1920-1980 MHz p/w 2110-2170 MHz because
• Only band globally harmonized for interference
  free co-existence of both GSM CDMA
• Equipment availability
• Majority of countries opted for 3G in the Core
  Band- examplesJapan Korea
• India by choosing this globally adopted spectrum
  band will be able to avail of
• Economies of scale lower tariffs
• Seamless roaming
• Inter-operability
• Interference free operations
• India being a country where both GSM CDMA
  co-exist must choose a 3G path which allows for
  the co-existence as well as future growth
  development of both technologies

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HSDPA MOBILE BROADBAND

• HSDPA increases throughput, reduces latency and
  increases data capacity upto 5 times in dense
  urban environments.
• Enables wide variety of high bandwidth multimedia
  services including high quality video streaming,
  fast downloads of high resolution images and
  large files, interactive e-mails, gaming,
  telematics, etc.
• Boosts usage in business sectors by providing a
  virtual office environment anywhere and triggers
  usage in the consumer market by leveraging the
  end-user experience of fixed broadband.
• HDDPA has already been launched in UK in Oct05,
  the handsets are likely to be in the market by 1H
  06.

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SPECTRUM FOR 3G

• Indias Spectrum Policy (NFAP-2002)
• earmarks ITU identified 2.1GHz band
• for 3G services.
• 2.1GHz band globally harmonized
• technology neutral will facilitate
• harmonious evolution of both GSM CDMA
• to 3G
• Adherence to 2.1GHz band for 3G will ensure
  interference free coexistence growth of both
  GSM and CDMA operators give the Indian
  subscribers the benefits of
• economies of scale (lower tariffs),
• seamless roaming
• interoperability of systems, etc
• Consideration of the US PCS 1900 MHZ band plan,
  as being demanded by CDMA operators has several
  adverse implications for India, both in existing
  as well as future services.

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INDIA MUST ALIGN WITH INTERNATIONAL SPECTRUM
ARRANGMENTS
2.1GHz band adopted by all countries regions
except USA
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US PCS BAND CANNOT BE CONSIDERED FOR INDIAIS
DISRUPTIVE HAS SEVERAL ADVERSE IMPLICATIONS
ITU IMT 2000 core 3G Band
Proposed PCS Band
1800 MHz
DECT
1910
1880
1930
2110
2170
1710
1805
1880
1850
1910
1920
1980
1785
1990
Introduction of US PCS 1900 MHz band into India
has several adverse implications it will corrupt
impair both existing as well as future services
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WAY FORWARD

• IF
• Reachability issues are addressed,
• Cost of Service is brought down Entry Barrier
  is lowered,
• Alternative data revenue streams are identified
• Appropriate technology roadmap is followed
• THEN
• Accelerated mobile subscriber growth is sure to
  follow.

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CONCLUSION

• The Elephant is on the dance floor..
• .and the Band is playing a Mobile
  Tune
• Get on that dance floor with the Indian
  Elephant!!!
• Neil Galloway
• Head of Asian Telecom
• ABN-AMRO BANK

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THANK YOUtvram_at_coai.in