Renovau Telecom. Indian Telecom Industry

Transcription

1 Renovau Telecom As he put down his receiver, Mr. K. S. Reddy, CEO, Renovau Telecom India Ltd., sighed in relief. He had just finished instructing his creative team for first set of promotional material targetting corporate houses and small businesses. He emphasized on highlighting core strength of Renovau s services without sounding too excited or eager in the brochures. He was confident that businesses will come to him rushing. After all, Renovau was soon going to launch its services in first phase of roll out plan and he was very sure that with breakthrough technology in the industry and unparalleled prices his company has to offer, he will soon have more customers than he can handle. At least he hoped so. However, journey had just begun. After years of research and development, Renovau was ready to commercialize the technology which was according to the management at least three years, a generation in telecom industry, ahead of its nearest competitors. Renovau pioneered in proprietary switching technology which permitted transmission of near DVD quality images and landline quality voice over internet bandwidth of only 128kbps. This platform independent technology made video telephony, video conferencing and video surveillance available to masses at fraction of capital and operational cost of current technology and opened untapped market among household and business users. Further, technology has applications in tele-education, tele-medicine, rural governance, call center solutions, video billboards, etc. Initial surveys and reactions in technical conferences have been promising. Yet, he was also aware of the delay in launch of service by at least six months due to negotiation setbacks and field testing. Despite signs of good reception in prior market assessment, what will happen in actual market unfamiliar with new technology is something he wasn t sure anybody can predict beforehand. Not only potential consumers will experience technology first time, Renovau still had few wrinkles to work out relating to bundling and pricing of the services, scaling up the network, and finding reliable business partners and intermediate services providers who formed the key link between Renovau and its customer. Indian Telecom Industry The Indian Telecommunication Industry has its origins way back in 1839 with the commissioning of the first telegraph line between Kolkata and Diamond Harbour. Since then the sector has witnessed many changes (Exhibit A) and today has the third largest number of connections in the world, after the United States and China. Until 1994, Department of Telecommunication (DOT) under Ministry of Communication and Information Technology (MC&IT), Government of India was sole provider of telecom services in India. Way for private players was paved with National Telecom Policy of 1999 (NTP 99) which deregulated the industry. NTP 99 facilitated the entry of private operators by allowing for a one-time entry fee and an annual revenue share rather than the high license fee bid as per the NTP 94 framework. The NTP 99 also permitted the licensing of cable operators for voice and communication. It also provided for the entry of DOT and state owned Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telecom Nigam Limited (MTNL) as the third operator for cellular services and increased the flexibility to private operators to carry their long distance traffic within a service area on their own networks. While these changes led to a growth in cellular services, fixed line private operators were slow to take off in providing basic services and none of them fulfilled the rural obligations associated with their licenses. In 2003, Telecom Regulatory Authority of India (TRAI) moved towards a Unified Access Service License (UASL), allowing for the existing licensees to provide either fixed or cellular services under the new regime, thus bringing similarity across the two licenses and eliminating the fee differential Page 1 of 33

2 between basic provider using WLL a and cellular provider. Subsequently, UASL guidelines in 2003 permitted provision of both wireline as well as wireless services in a service area under a single license (Jain & Mandi, 2008). Driven by rapid grown in per capita income and emergence of growing middle class in the last few years, telecom sector in India witnessed sharp growth at 40% Cumulative Average Growth Rate (CAGR) in last 5 years (CRISIL Research, 2007) (Exhibit B). Telecom growth was also fuelled by sharp fall in the tariffs and availability of cheap mobile handsets due to reduction in import duty from 25% to 5% in February 2000 and setting-up of manufacturing facilities in India by most mobile handset providers. This growth is driven by wireless segment which grew at whopping 66% over the same 5 year period to pentuple wireless subscriber base from 70 million in 2003 to 354 million in While India s growth is impressive, telephony penetration still falls short compared to international standards, and is even lower than South Asian countries of Pakistan, Bangladesh and Sri Lanka. Exhibit C compares India s tele-density in landline and mobile sector and broadband penetration with selected countries. Wireline Sector Fixed line telephones constituted 10.5% of total connections as of October The availability of wireless services at a lower cost with added features has taken a toll on the growth of fixed line services in India. This sector has seen a marginal decline in number of subscribers due to increasing affordability and popularity of mobile phones in the country. There are million wireline subscribers in the country as of October 2008 (TRAI, 2008b) and this figure has been decreasing at 2% year-on-year (YoY) rate in last 5 years. However, this trend is likely to reverse as number of broadband subscribers takes off due to rise in penetration of personal computers. State owned enterprises dominate the landline market with 90.6% market share, of which BSNL s share is 90% (at 81.4% of total). Exhibit B shows market share of key players in the industry. Wireless Sector Wireless segment is fastest growing segment in India with 9 million new subscribers added per month and is expected to reach 700 million by 2013 (Pyramid Research, n.d.) with CAGR of 16%. India s tele-density improved from a mere 6.5% in 2003 to 31.50% as of October 2008 and is forecasted to surge to 45% by FY2011 b (CRISIL Research, 2007). However, the overall tele-density is much lower than the average for developed (~92%) as well as developing countries (~38%), thus indicating low current levels of penetration and huge potential for the telecommunication service providers of the country (CRISIL Research, 2007). Wireless market is more fragment compared to wireline market however top three players constitute over 60% market share (Exhibit B). Wireless segment in India is served by two technologies: Global System for Mobile (GSM) communication and Code-Division Multiple Access (CDMA). Both of these segments have registered growth at around 70% per year in last five years; however GSM dominates the market with 74% market share (Exhibit B). For administrative reasons country is divided into 28 circles (Exhibit D) which are categorized based on general level of development and revenue potential into 4 types: Metro, A, B and C. The average tele-density in the metros is close to 80% whereas the corresponding figures for Circles A, B and C are 17%, 15% and 10% respectively. Growth in future is largely expected from C circle in rural areas. Tele-density in metros is expected to surpass 100% mark by 2011 due to multiple subscriptions (CRISIL Research, 2007). a Using WLL technology, fixed line service provider could provide limited mobility telephony using fixed phones. Using techniques such as call forwarding and multiple registrations, basic operator were able to provide roaming services within limited mobility telephony, thereby encroaching territory of high license fee paying mobile service providers b Financial Year in India starts from April 1 and ends on next March 31 Page 2 of 33

3 Mobile phone subscribers are classified into pre-paid and post-paid subscribers. While post-paid subscribers pay for usage of services at the end of the billing period, pre-paid subscribers pay a fixed amount in advance for which they get corresponding talk-time valid for a certain period. Low initial investment, low fixed cost and attractive tariff fuelled growth of pre-paid customers. Over , pre-paid customers grew at 94% CAGR compared to 43% for post-paid customers to constitute 87% of subscribers by FY2006 (CRISIL Research, 2007). One of the important metric in mobile market is Average Revenue per User (ARPU) and this figure is consistently on decline in India. In fact at Rs. 302 per month (CRISIL Research, 2007) in FY2006, it is one the lowest in the world. Over next 5 years, ARPU will decline at 6.2% annually to reach Rs. 219 by FY2011. Another metric measuring Minutes of Usage (MOU) per month has seen marginal upward trend in last three years and is at 465 minutes/month for both GSM and CDMA subscribers combined (TRAI, 2008a). To boost falling ARPU levels, providers are aggressively marketing Value Added Services (VAS). VAS market is estimated at Rs. 32 billion and is forecasted to touch Rs. 153 billion by FY2012 (CRISIL Research, 2008). Internet and Broadband Sector Internet in India is predominately driven by growth in personal computer (PC) penetration and by growth in applications targeting Indian consumer and in Indian languages. Mobile based data access services are growing but are very small in number currently. Internet penetration among PCs is expected to increase from around 33% in FY2007 to 43% in FY2012, with the total number of Internet subscribers going up from 10.9 million to 30.5 million over the same period. In FY2007, 54.5% of Internet subscribers were residential users (CRISIL Research, 2008). Broadband connections, defined as download speed in excess of 256kbps by TRAI, is likely to emerge as a preferred medium to access Internet with the broadband subscriber base increasing from 3.5 million in March 2008 to 16.5 million by March 2013 (CRISIL Research, 2008). Growth in the subscriber base is expected to be driven by increasing coverage, fall in the subscription cost, increasing penetration of PCs and greater penetration of Internet service. The other major driver is the growing use of online services for various routine purposes and the development of new content and applications. 65% of broadband subscribers are residential. Broadband growth in India is substantially below targetted penetration in broadband policy of October 2004 which expected 9 million broadband subscribers by end of 2007 and 20 million by Observing poor performance, TRAI issued fresh guidelines in January 2008 which encouraged BSNL/MTNL to push for broadband and suggested better utilization of Universal Service Obligation Fund c (USOF). There are 5.05 million broadband subscribers in India as of October 2008 (TRAI, 2008b), which constitute roughly 35% of Internet subscribers. As of 2007, 1200 towns and cities are covered by broadband by national telecom companies. Exhibit E shows key trends in Indian Internet sector. BSNL/MTNL occupy top slot with 62% market share. Private players are currently limited to metros and large cities. Broadband in India is provided either through Digital Subscriber Line (DSL) by fixed line operators or through cable model and Local Area Network (LAN) by Internet Service Providers (ISPs) and cable operators. Rollout of fixed WiMAX (wireless broadband) network and the introduction of new technologies such as mobile WiMAX is expected to increase the coverage and penetration of broadband over the next few years. Given the state of infrastructure and last mile connectivity d issue, BSNL is actively pursuing WiMAX though franchisee model and has allotted $750 million for rollout on pan-india basis. c USOF, started in 2002, aims to provide basic telephony services to every citizen even in remote areas where private players may not enter. USOF is funded by 5% surcharge on adjusted gross revenues of telecom service providers and government loans and grants. d connection from nearest exchange or network point to user s place Page 3 of 33

4 Regulatory Bodies A substantial portion of the credit for the growth of the Indian Telecom industry lies in the regulatory policies of the government, which are quite stringent but are aimed towards encouraging greater competition, better quality and affordable prices for the end-consumer. The government has also taken steps towards increasing the foreign participation in the sector by relaxing the Foreign Direct Investment (FDI) norms. At top level, DOT along with Telecom Commission is responsible for policy formulation, licensing, wireless spectrum management, administrative management, and running state owned companies BSNL and MTNL. TRAI was set up in 1997 to regulate telecom services, fix/revise tariff and settle disputes. TRAI regularly revises tariff, fees and duties; issues directives about customer issues; and publishes consultation papers advocating future steps for development in this sector. TRAI s new telecom policy adopted in late 2007 removed restriction on number of service providers in each circle. Companies have also been allowed to alternate technologies to expand their network coverage, such that service provider who is using GSM can use CDMA without separate licensing requirement after payment of prescribed fee. Industry Players BSNL/MTNL, Bharti Airtel, Reliance Communications, Vodafone-Essar, Idea Cellular, Tata Teleservices, Aircel, Spice, Shyam Telelink, HFCL Infotel, and BPL Mobile are top players in Indian wireline and wireless space. Broadband market is served by BSNL/MTNL, Bharti, Reliance and Sify Ltd. This section provides brief profile of top industry players. Bharti Airtel Bharti Airtel Ltd. is India s largest integrated telecom company by market cap (Rs. 1,070 billion) as well as India s leading wireless operator with 80.2 million wireless subscribers as of October, Company s mobile service segment accounts for 81% of its revenue (FY2008). Bharti has the widest network coverage in the country covering almost 71% of India s population in 23 telecom circles. Company has made huge investments every year to sustain its leadership position through quick roll out of coverage. Bharti s major strength is its distribution strategy. Bharti reaches to its customers through over 750,000 direct sales outlets and has been able to cut costs by following an approach of reaching the customers through small retailers and local shops. Bharti Airtel has led the industry in outsourcing non-core activities to companies that are pioneers in their respective fields to reduce costs and focus on core activities. Bharti provides array of reservation based or ad-hoc multicasting and video conferencing services. Various VASs include facility to record, replay, test, transcript, upload and share proceedings of the conference. On January 19 th, 2009 Bharti launched its Triple-play interactive TV offering single line to access broadband internet, telephone, and television with interactive features such as movie on demand and browsing experience. Service can be availed initially in Delhi, Noida and Gurgaon at two price points of Rs. 599 and Rs. 999 per month which include access to 117 and 135 channels respectively along with 256kbps broadband speed ( Bharti Airtel launches Triple Play, 2009). Earlier in October, 2008 Bharti had entered a technology partnership with Infosys Technologies Ltd. to provide digital Direct-to-Home (DTH) TV service ( Airtel launches, 2008) as part of 62 cities rollout of first phase of launch ( Airtel makes, 2008). With this, Bharti became 5 th private and 6 th overall company to provide DTH services in India after Dish TV, Tata Sky, Sun Direct, Big TV and DD Direct Plus. Four private operators command total of 7.5 million subscriber base ( Bharti Airtel launches DTH, 2008). Reliance Communication Page 4 of 33

5 Reliance is the second largest telecom operator in India after Bharti Airtel and is part of Anil-Dirubhai Ambani Group. It acquired the license to provide basic telecom services in July 2001, and migrated to a UASL in November 2003 for all its circles. With a total subscriber base of 57.8 million and a market share of 17.7% in October 2008 (TRAI, 2008b), it has presence in 21 circles. Wireless services account for over 75% of Reliance s revenues. Reliance s strategy involves aggressive pricing and low priced handsets which combined with its legacy brand name have led to quick growth and widespread adoption. Reliance started as CDMA player and currently is Asia s biggest CDMA service provider. Reliance also offers video telephony, IPTV and video conferencing solutions. Tariff for point-to-point video call include non-refundable installation charge of Rs. 20,000 and usage charge of Rs. 17,000 per month. Video conferencing service costs Rs per hour of use ( Tariff plan, n.d.). Reliance recently launched DTH service under brand name of Big TV which has base of about 500,000 subscribers ( Bharti Airtel launches DTH, 2008). Vodafone-Essar Vodafone-Essar group, earlier Hutchison-Essar group, provides GSM based mobile services in 16 circles of the country. At the end of October 2008, the Vodafone-Essar group had 56.7 million subscribers with 3 rd position in the industry by market share (TRAI, 2008b). Vodafone used acquisition route to expand its presence in the mobile business. The group bought equity in companies with operations/licence to operate in Delhi, Kolkata, Gujarat, Punjab and Chennai (CRISIL Research, 2007). BSNL/MTNL BSNL and MTNL are public sector player in telecom industry in both mobile, landline and internet market. BSNL operates in all 26 circles except Delhi and Mumbai which come under MTNL. BSNL entered the mobile telephony market very late. Although the company was awarded GSM license to operate as the third player in 1999, it launched its services only in October 2002; more than a year after the fourth cellular operator licenses were auctioned. Nevertheless, the incumbent has been successful in the mobile segment, where it attracted customers with its aggressive marketing, competing tariffs and extensive coverage. BSNL has largest share of fixed line and broadband market. MTNL s share in wireless market is mere 1.3% due to its limited geographical scope but it has second largest share at 9% in fixed line segment. Next for Indian Telecom Telecom industry is fiercely competitive and with number portability and zero priced roaming soon to follow, competition is going to only worsen. Companies are actively seeking new opportunities and VASs to differentiate themselves, increase ARPU and tap large potential in rural India. Mini-recharge, low cost handsets (as low as Rs. 777 from Reliance Communication when bundled with its services), bundled offerings, and lifetime prepaid are some of the VAS companies are innovating to increase MOUs. Rural subscriber base is forecasted to reach 176 million by March 2012 from 33 million in March 2007 (CRISIL Research, 2007). Network providers are also heavily investing in infrastructure to expand coverage to cater to larger population and spread their cost. Over next 5 years, total investment worth Rs. 1.1 trillion (not including licensing fee) will be made by mobile service industry (CRISIL Research, 2007). Key concerns in wireless telecom sector remain about quality of services (QoS) reflected in poor call quality, high call drop rate, and high connectivity failure. Given breakneck speed of subscriber growth and emphasis on network expansion rather than capacity increase in existing network, QoS remains major concern for all cellular companies. This is also likely to hinder adoption of Third Generation (3G) services. Another issue is about poor utilization of available spectrum by wireless service providers. Under the current regulatory policy, spectrum is bundled along with the license. Spectrum allocation is increased in stages, once the prescribed threshold in terms of number of subscribers in a circle is met. This has Page 5 of 33

6 given rise to a perception in some quarters that operators are overstating subscriber numbers to receive additional spectrum and are also not efficiently utilising available spectrum. DOT has started proceedings to auction 3G spectrum to telecom operators which will take place in January G mobile services will allow not only much faster communications but also a wide range of applications such as high-speed Internet access, video calls, music and video downloads, interactive gaming and global positioning over the Web by making possible download speed up to 2Mbps. Auction, expected to end by October 2009, is forecasted to fetch government over Rs. 400 billion. MTNL has already started 3G services in New Delhi ( MTNL launches, 2008). State of IP Telephony Telecom industry is over 130 year old industry; yet rapid pace of technological changes make it still a new industry and not a mature one. Internet bubble of mid-nineties kick started accelerated change in pace of technology, and globally trillions of dollars were spent on upgradation that created infrastructure backbone to deliver bandwidth to home and businesses. Industry saw major technology shifts in last few years from electronic telephone exchanges to fiber optics to mobile telephony, and finally to the Internet. Internet based packet switching technology proved radically different with lowest cost per call but still required massive investment and suffered from poor quality. Last couple of years saw maturity of Voice over Internet Protocol (VoIP) technologies and related protocols. With current level of technology, telecommunication lines are capable of delivering only voice calls or data calls at low bandwidths. Use of quality video calls requires very high bandwidth uses because high quality audio and video increase packet density up to 1000 times. Because of bandwidth constraints and high network traffic, slow speed of data transfer, low bandwidth connection ratios, network latency problems, and packet delays during traffic congestion continue to be key quality concerns in video telephony, specially in developing world. Solution to these requires high capital expenditure to upgrade network. Centralized server requires high bandwidth resulting in high cost of delivery. A typical today s switch with 100,000 users communicating concurrently by video telephony requires 25.6 GB bandwidth at server end and 256kbps bandwidth at user ends for low quality video. For higher high definition quality video requirements are multifold. Typical VoIP switch supports maximum of 250,000 ports, costs about $50 per port and cannot deliver reliable carrier-grade quality (landline quality) of service with current technologies in the market. Similarly, video conferencing with current technologies not only requires dedicated 2Mbps or higher download bandwidth connection but also requires expensive equipments, cameras, modems, computers and projectors. These services are more affordable in developed countries of North America, Europe and East Asia where 2Mbps lines are household norms, but have been very slow in adoption in India because of lack of bandwidth availability at affordable costs at all places. Desktop video conferencing too suffers from low adoption rate because of poor voice quality and dropped connections. Renovau Telecom India Ltd. Renovau Telecom India Ltd. is Ahmedabad based telecom technology company promising disruptive change in Internet telephony using indigenously developed packet switching device. Renovau (meaning Renew in Latin) was founded in 2004 and has corporate offices in London and Canterbury in UK and in Ahmedabad in India. Renovau currently has development center in Ahmedabad, while New Delhi and Hyderabad are proposed centers. Exhibit F presents organizational chart of Renovau Telecom and Exhibit G presents profile of key management personals. Renovau pioneered in design and development of technology and networks capable of delivering next generation video telephony and multi-play (see next section) services. Its Internet Protocol based Multimedia Subsystem (IMS) based public switched multi-play telephony service is expected to bring new paradigm shift to telephony. Its core product is ultra high density carrier grade class 5 e and class e switches connecting different users in telephone exchange Page 6 of 33

7 4 f multi-play packet switches developed over four years of research. High density permits one switch to support up to 5 million connections and scalable nature of switch allows rapid expansion by connecting multiple switches in parallel. Renovau, in effect, will be telephone company for telephone companies. Technology is pending patent approval in Mumbai Patent Office since September 2007 for Method and System for controlling QoS of Multimedia session in a communication network. In its Mission, Renew aspires to be the first choice of multi-play customers and service providers for solutions that enhance the convergent communication experience and to bring about radical change in remote communications at lower costs and improve the quality of life of masses and business operations through various enabling applications of its technology. Company envisions to Transform the world of multimedia communication, significantly improving ad hoc on-demand communication convenience, wide area large scale video surveillance and security and multi-casting flexibility through next generation networking and high-density packet switching technology and innovation. Exhibiting his confidence for new technology, Mr. Nitin Vasavada, CFO, said: Renovau s technology simultaneously reduces cost to public, improves their work output and productivity, and enhances value and quality of life for public. The Renovau s is truly a beneficial technology which will have far reaching impact in distant learning & education, telemedicine, interactive multicasting, security and productivity. Multi-Play Technology Renovau s Multi-play technology (MPT) is result of pioneering research in switching technology, data handling, management of network traffic routing, software design, and design of video terminal and surveillance equipments. Its proprietary switches control call session (call origination, packets routing and termination), authenticate and route data packets without packet loss, and ensure quality of service. Using high density switches, networks and media gateways, Renovau is able to support high traffic at fraction of cost involved in conventional telephony. Its open standard protocol for all external and internal interfaces makes technology available over telephone line, TV cable, WiMAX, broadband Internet, or even DTH services. Renovau s network is Internet based and its services are bundled with broadband. Thus anyone can use its services independent of the telephony platform (landline, WiMax, mobile) or last mile connectivity technology. Exhibit H shows system architecture of MPT. At fundamental level, technology permits transmission of near DVD quality video images with 15 frames per second frame rate over bandwidth as low as 128kbps and DVD quality images with 30 frames per second at 256kbps. At this low bandwidth, Renovau is able to provide benefit of video telephony along with ease, reliability and quality of service of a conventional phone call. High capacity switches can support up to 5 million lines and 500,000 concurrent calls per switch. Inbuilt quality check mechanism ensures quality of service in data, voice and video transfer. Technological breakthrough also permits drastic reduction in call charges. Since technology doesn t require massive investment in capital expenditures and can work on low bandwidth, cost of implementation is expected to be less than 3% of cost of compatible current technologies in the market. Company expects call charges to ultimately reduce by 75% to 90% from current prevailing rates. Since technology is Internet based, call rates are practically geographically independent and any difference is due to various taxes and levies charged by regulatory authorities in call originating and call terminating countries and roaming as differentiated for each telecom circles. To summarize, Renovau s technology offers four key advantages over existing technologies: f switches connecting different telephone companies in telephone exchange Page 7 of 33

8 1. It works on existing broadband infrastructure, is platform independent, and requires no additional capital investment for last mile connectivity provider to reach customer. 2. It reduces cost of communication to at least one-fourth while providing DVD quality video and carrier grade quality of service. 3. It introduces new services like multicasting and video surveillance at fraction of cost to all. 4. Customers get voice, video and data/internet services over a single connection. Convergent Communication Since long, telecom industry is working toward convergence of telecom networks, platforms, and technology, thus aiming for convergent communication environment where wireless, wired, and Internet communication come together with wide variety of communication and contents are available under platform independent technologies. Unlike mono play services (voice call only) or dual play services (voice and data over telephone line; or TV and Internet over cable), Renovau s multiplay service eliminates need for multiple carrier lines for services like telephone for voice call, broadband for Internet and cable for TV since user gets voice, video and data services using a single service using a single connection line. This helps in infrastructure convergence for last mile connectivity provider. Finally, Renovau s video terminal equipped instrument achieves device convergence by use of single device for phone, video telephony, voice telephony, Internet browsing, multicasting, conferencing, etc. Services Offered With its own infrastructure of network and switches, Renovau will provide multi-play services in public domain as part of main-stream telephony through last mile connectivity provider. Renovau s key services with MPT are voice/voip telephony, video telephony, interactive multicasting, three-way conference call and video surveillance. Technology also permits lawful interception g and roaming over software based phone installed in desktop or laptop. In future, company also plans to use this capability to provide entertainment such as IPTV, movies on demand, and video blogging. Renovau s services are accessed through proprietary software enabled Renovau s equipments. Calls can be made without requiring computer or separate/prior Internet connection using these instruments. Renovau s connection will include required bandwidth and Internet connectivity with no visible difference to end-customer. Wireline telephone instruments are equipped with a webcam and 5 LCD screen and have battery backup to guard against electricity interruptions, particularly in rural areas (Exhibit I). These instruments will be supplied by Renovau to end-user through TELCOS or LSPs. For existing wireless instrument, software can also be installed later when service is commissioned. Currently, only CDMA mobile handsets are supported however introduction of 3G regime will permit Renovau s services in 3G enabled GSM handsets too. Wireless user will not need to pay for 3G services but only have to have 3G enabled mobile phones. The phone instruments are given a unique number like any telephone number (existing TELCO numbers for existing customers) and these numbers have a unique IP number allocated to it. Packet switch in Renovau Network Cloud does the translation from phone number dialed to IP address and routes audio and video to called parties video phone device. Voice Telephony VoIP technology enables customer to make regular audio calls with landline quality of service from their Renovau enabled wireline or wireless equipment. Charges for these calls will be geographically independent and billing can be at a fraction of minute, without need to round up. Renovau provides better quality, reliability and convenience compared to web based Skype, Google Talk, Yahoo! Messenger, etc. Video Telephony g interception of telecommunication by law enforcement agencies in accordance with local law Page 8 of 33

9 Video telephony is telephone call service where caller and called can see video of each other while making an on demand phone call. Caller party can call called party by simply dialing a landline or mobile phone number. If called party has a video enabled instrument then both caller and called can see each other while talking. If both parties are part of Renovau s network then video will of DVD quality. Self-video can be blocked if privacy is desired. Video can also be displayed on dedicated video terminal equipment, soft phone enabled mobile device, or projected or larger screen such as plasma TV or overhead projector by connecting Renovau telephone equipment with these screens. Interactive Multicasting In multicasting, one caller can simultaneously communicate with up to 10,000 participants in real time as in a conference call. At any point of time, one person speaks while others hear and see him/her. Speaker control can be transferred to any of the listener, and then he/she becomes speaker. R&D is underway to permit simultaneous communication from all users where each can talk and listen at the same time and technical fix is expected in next six months. Three-way Conference Call Under this feature, three parties can engage into real time communication simultaneously and each can listen, speak and see others at the same time. Video Surveillance Customer can monitor activities at office, factory, or any premise by accessing specially enabled Renovau s camera by dialing a phone number from any place in the world. Each camera will be given a telephone number and unique associated IP address. User can also pan camera, zoom in and out, and tilt the viewfinder to focus on one object or cover wider premises. Unlike conventional Close- Circuit Television (CCTV), authorized security personals will be able to listen to conversation and make announcement (through inbuilt microphones and speakers), thus making surveillance interactive and more effective. Many users can simultaneously dial into one camera and one user can dial into many cameras. Deployment cost will depend on resolution, zoom and other features (day/night use, indoor/outdoor use) of the camera though it is expected to be about one-tenth of current prices due to not much infrastructural requirement in form of control center equipments. Since each camera will be independently connected to internet, camera and monitoring display needn t be physically wired together unlike CCTV. Video captured by camera can also be recorded for future use. Other Features Under video message feature, if called party doesn t pick up the phone then caller can leave a video message. When not used in call, 5 LCD screen attached to telephone can be used for low resolution web browsing, checking s, chatting over instant messengers, and so on by connecting USB keyboard and mouse to telephone equipment. Future services include streaming public videos. TV channels can offer entertainment services over broadband enabled video equipment at near DVD quality. Value added services movie on demand or video blogging will also be provided. Applications Renovau expects this technology to have wide variety of applications. Multicasting can be cost effective substitute for conference calling after technical upgradation to permit simultaneous conversation. Tele-education, tele-medicine, rural governance, rural education, Page 9 of 33

10 rural healthcare, and rural trade access initiatives can be effectively implemented using platform independent and low cost multicasting technology. Government offices, education institutes, hospitals, news services, religious organizations can find applications in mass communication potential of interactive multicasting. Renovau estimates multicasting to cost $100-$200 per line in capital investment compared to $5,000-$12,000 for IP based video conferencing. Video surveillance will be useful for residential security in homes, institutions, communities; and commercial security in banks, malls, offices, private premises, factories, assembly lines and parking lots. Furthermore, law enforcement agencies and military can use surveillance for security, safety and monitoring public places, airports, railway stations, special events, etc. Clear advantage in terms of lower capital expenditure and operational cost has potential to replace CCTV and make surveillance more affordable to all. Apart from household and business uses, voice and video telephony can also provide effective solution to requirements of small to medium size call center. Special features such as incoming call distribution, call recording, and integration of database and payment gateway are will not only reduce operating expenditure of call center but also allow its employees to telecommute. Other potential applications include advertising in form of remote controlled video billboards, dating agencies, social networking services, IPTV, public call offices, etc. Business Model Three-Tier Partnership Framework Renovau plans to rent its services to TELCOs and ISPs and approach customer through partnership or joint ventures with existing last mile connectivity providers. To start with, Renovau will provide four basic services: voice telephony, video telephony, video surveillance, and interactive multicasting. Target customers include local governments, medium and large businesses, public call offices, and households. Renovau plans to avoid having exclusive tie-ups with any one TELCO or ISP. Renovau employs a three-tier partnership model to rapidly scale its services across India. At top level, Renovau will provide switching infrastructure, quality of service management tools, error detection and call routing services, and billing tools. Renovau will also supply terminal equipments and surveillance cameras with embedded software to the end user via local franchisee. At second level, TELCOs/ISPs/Cable/WiMAX/DTH in each telecom circles will provide last mile connectivity to subscribers and call terminating agreements. Renovau will share revenue generated from its services with these partners at pre negotiated rate. At third level, Local Service Provider (LSP), a local entrepreneur or franchisee, will provide marketing, equipment installation and maintenance, billing and payment collection, customer support and satisfaction monitoring services. Renovau will provide training and guidance and will ensure standards of service. Revenue streams for third level partners will include share of Renovau s revenue (about 15%) and profit margin (about 10%) on equipment sale. Actual rates will be subject to negotiation. Exhibit J shows tentative breakup of revenue among three partners. Renovau has already undergone field testing with BSNL and Tata Teleservices and is currently in talk with MTNL, Vavasi Telecom, Reliance Communications and other GSM/CDMA players to test technical compatibility and national deployment. Revenue Model Renovau will have three main streams of revenue: profit mark up on sale of terminal equipments to end users, usages charges and monthly rentals. Other sources of revenue include advertisements on screen of phone equipments, web browsing usage charge, video on demand, and switching charges Page 10 of 33

11 for other connections for TELCOs where even subscriber doesn t have Renovau s service. These are expected to contribute 10% to gross revenues. Various packages and rental plans are yet to be finalized. Renovau software and accessories enabled video phone equipment will cost end consumer about Rs. 8,000 as one time cost while pure VoIP phone will cost Rs. 1,400. Equipment will cost Renovau $157 and $28 respectively (including taxes and duties) resulting in approximate markup of Rs. 1,200 and Rs. 200 respectively. Upfront cost of software embedded surveillance camera will vary depending on resolution required starting from Rs. 10,000 onwards. A typical traffic camera, for example, will cost about Rs. 50,000. For Rs. 12,000 camera, landed cost to Renovau will be $250 and profit margin will be Rs User will also pay refundable deposit ranging from Rs. 500 to Rs. 2,000 per connection. Company will also accept payment in installments or offer rental model for equipments instead of one time sale. Manufacturing of terminal equipments has already been outsourced to Wooksung, a Chennai based Korean company. Wooksung will install proprietary software and sell to Renovau for shipping to LSPs. Usages charges for video telephony will be approximately Rs per minute for local call, Rs per minute for national long distance call, and Rs per minute for international long distance call. Uses charges for VoIP telephony will be Rs. 0.10, Rs and Rs per minute respectively. Multicasting calls will be billed at Rs per minute. Customer will be charged based on fraction of minute basis and not for amount of data uploaded to/downloaded from Internet. For video surveillance, charges will be based on monthly fee for unlimited access. Rental for telephone equipment will be flat Rs. 500 per month. Rentals for video camera will vary depending on type of camera and is expected to be around Rs per month for above mentioned traffic camera, for example. Since Renovau s technology will work at back end at exchange level, customers will not interact with Renovau and its services will be provided as VAS to existing subscribers of TELCOs/ISPs. Customers will be billed in the name of TELCOs/ISPs and Renovau will collect its share of charges from these companies based on usage of Renovau specific services separately from normal telephone or Internet usage. Embedded software in the equipment will control and monitor usage of Renovau s services at user s end. Launch Plan Since Renovau will be provided services through existing TELCOs, it doesn t need license or permission from DOT or TRAI. Since March 2008, DOT has also agreed to terminating and connecting Internet based calls to landline network as part of broader policy change. Switching infrastructure for 5 million lines supporting 500,000 concurrent connections capacity is already in place in Gujarat. Renovau plans to set up an over 1000 operator customer care center and a switch/server hub in Gandhinagar to cater to pan-india network and services. Company will also shift its India headquarter to 25 acre space in Gandhinagar. Offices and technical support centers will be located in all telecom circles. Company will launch services in three phases. First phase covering Gujarat has been scheduled for beginning of 2009 after finalization of business agreement with BSNL. Next phase will cover eight telecom circles h and is expected to be operational by June/July Last phase will add remaining 15 circles i in the network by March Initially, services will be launched through TELCOs such as Tata Teleservices, BSNL and MTNL, which will be followed up by Cable TV providers, DTH operators, and Wireless providers like Aircel. Though launch for first phase has been delayed by about six months, company is expecting 25,000 subscribers in first month. Eight sub franchisees in Ahmedabad, Surat, Vadodara, Rajkot, Daman, h Andhra Pradesh, New Delhi and NCR, Karnataka, Kerala, Maharashtra, Punjab, Tamilnadu, West Bengal i Asaam, Bihar, Chennai, Chhattisgarh, Himachal Pradesh, Haryana, Jharkhand, Kolkata, Madhya Pradesh, Mumbai, Orissa, Rajasthan, Uttar Pradesh (East), Uttar Pradesh (West), Uttaranchal Page 11 of 33

12 Gandhinagar, Godhra and Ankleshwar are appointed as local contacts. Company has hired Mudra Communication as its advertising agent and has been advertising in print media since May Financials Assuming a deployed capacity of 3 million lines and 300,000 concurrent connections, out of switch capacity of 5 million lines, Renovau is able offer billion minutes of talk time per year. A 24 7 on surveillance camera, for example, will consume about 0.53 million minutes annually. Company projects 95% connection utilization and 70% minutes utilization by year FY2013 for all services (Video, VoIP, multicasting) and all target segments (households, businesses, PCOs, surveillance, High Net-worth Individual) through all channels (TELCOs, ISPs, Wireless, Cable) combined (Exhibit K). At 70% connection utilization level, break even points is just over 800,000 connections. Exhibit K presents projected balance sheets and Profit & Loss statements of the firm based on these assumptions. Company is in process of securing funding for Rs billion capital expenditure for constructing headquarter complex, telecom equipments, patent and license fee, and working capital. Project will be financed in part by debt and in part by private equity from High Net worth Individuals (HNIs) and Private funds. Debt will constitute 30%-50% of requirement and will be raised through term loans at estimated rate of 12% interest. Current investment of Rs. 630 million has been made by promoters and associates. Firm estimates assets worth Rs billion as collateral in form of land, building and telecom equipments. Demand Assessment and Competition As of October 2008, there are million landline subscribers and million wireless subscribers in India resulting in 31.50% tele-density (TRAI, 2008b). Number of telephones is growing at over 40% per annum, one of the fastest in the world. Renovau estimates robust demand for its new technology and expects to fill initial launch capacity of 3 million, less than 1% of total number of telephone connections, in first three year of launch ( ). There are various companies offering VoIP telephony (Net4India), video telephony (Polycom) and surveillance (Axis) services in the industry however they either are very expensive or provide poor quality compared to Renovau. Renovau is years ahead of its competition and while competitive technologies are investing heavily in R&D in this area, management expects that the company has three years before it faces serious competition for similar service. Company expects that hiring its services is most likely cheaper solution for its competitors than spending on in-house development of comparable technology where time, cost and final quality output are all uncertain. Based on interest shown by various government and business entities, Renovau management is confident of adequate demand in the market, specially for interactive multicasting as affordable teleconferencing tool and video surveillance as replacement of CCTV and other security devices. Management believes that these two will be major sales driver as compared to personal video telephony. Marketing and sales team is in process of technical demonstration and soliciting businesses. Various institutes have shown interest in Renovau s technology even before its launch. Indian Institute of Planning and Management (IIPM) has tied up with Renovau for in-house development of tele-education curricula and broadcasting license. Gujarat Industrial Development Corporation and Police Housing Corporation have expressed their intention to place orders for equipments and Renovau s services. Real Estate development company, N G Corporation has sought to use Renovau s video surveillance for is upscale housing project in Special Economic Zone (SEZ) 26km from Ahmedabad. Various Call Centers have also evinced interest in converting their call desks to Renovau s VoIP services. Cyber Cafés presently offering international cheap voice calls through Net2phone, Skype, etc. have shown interest in buying 10 million minutes per month in Ahmedabad for VoIP traffic. There is a proposal being worked out for 1.5 million Tata Teleservices Public Call Offices (PCOs) across India to be replaced with Renovau Kiosks with Video phones. Renovau is also in communication with Bennett, Coleman & Co. Ltd. regarding use of its services in their media house. Page 12 of 33

13 Tata Teleservices has officially soft launched Renovau services in Assam from 1 st December 2008 and will deploy about a million security cameras across the border. For this Renovau is providing switching through Tata Cable network up to Assam ( Tata Teleservices eyeing, 2008). As part of testing, service is in operation in BSNL offices in Ahmedabad, Noida and Bangalore and in Tata offices in Delhi, Hyderabad and Ahmedabad. There is sufficient interest in such service for small to medium business owners and there isn t any immediate threat to my knowledge, said Mr. Sharad Sharma, Jr. Telecom Officer (Business Development) at BSNL, Ahmedabad who tested Renovau s service for technical requirements. He, though, rued that pilot launch in BSNL office has not received enthusiastic response due to resistance to change by senior management. There are about 50 sets installed combined at home and at work for senior officials at BSNL office in Ahmedabad. He surmised that unfamiliar brand name and new technology may be two critical hurdles in success of Renovau. In May 2008, Renovau undertook a sample survey of 236 residents of Ahmedabad to identify market segments and pricing strategy for the home video phone service and to estimate average usages and ARPU levels. While sample size is too small to make any general inference, survey respondents do show interest in new service for both personal and business use. Majority of customers indicated that they will be interested in subscribing Renovau s service and its video telephony features is most looked after one. Survey is divided between people who would prefer to pay for equipment up front and those who would prefer to pay in installments. While price appeared to be least of public concern, possibly due to already low rates in telecom in India, respondents still indicated price to unreasonably high. With high upfront equipment cost and monthly rentals apart from usage charges this seems potential barrier. On the other hand, typically interviewees have incentive to answer such direct question incorrectly. Large part of survey sample was unaware of any competing technologies, though there are indicators that some companies were trying to venture in similar business. Estimated average revenue per user based on survey usages is Rs Exhibit L shows detailed response to the survey. However, since primary focus of Renovau is business customers using multicasting and surveillance service and not home users, management believes that equipment cost will not be barrier because pay back cost will be as low as three months compared to existing technologies. Mr. Vasavada forecast less than 20% of customers to come from personal and home uses. Long Distance Call Market Over the last 7 years, national and international long distance tariffs have declined by over 90 per cent. This rapid reduction was driven by the entry of private players into these sectors, decrease in cross-subsidisation of access services from long distance services and advancements in technology. Over the next 5 years, long-distance tariffs is expected to continue declining by 8%-13% annually, driven by further reduction in access deficit charge j, carriage charge competition and falling cost of carrying telecom traffic (CRISIL Research, 2007). Average ILD tariff stood at Rs per minute in FY2006 and is expected to fall at the rate of 10% per year for next few years to reach Rs per minute in FY2011 (CRISIL Research, 2007). NLD call charges are also likely to fall to Rs per minute in FY2011 from Rs in FY2006. Video Conferencing Market Video conferencing involves real time compression and decompression of audio and visual signals which are transmitted by Internet or phone line. Audio and video input and output devices are required for video conferencing system. Well known companies Polycom, Sony, Radvision and Tandberg provide dedicated systems which combine all four components into one package. Video conferencing market in India is expected to grow at CAGR of 53% to reach $40 million by 2012 according to survey conducted by Zinnov Management Consulting. Market is currently sized at $7.2 million ( Telepresence market, 2008). In November 2008, BSNL inaugurated video conferencing j Access Deficit Charge (ADC) is levied by DOT on private players to compensate BSNL services in low density rural and remote areas Page 13 of 33

14 service in Bangalore in collaboration with CEPL, an Indo-US joint venture ( Virtual conferences, 2008). Service will cost Rs per minute. High oil prices, increasing cost of travel, advancement in telecommunication technology and increasing broadband penetration are fuelling growth of teleconferencing market. Market has evolved from audio-conferencing to video-conferencing and now moving to tele-presence k technology. While video conferencing capital cost ranges anywhere from $5,000 to $80,000 using today s technology, tele-presence costs to the order of $300,000 (Sen, 2008). Renovau s aims to move into tele-presence market and is working towards it in its R&D. With prices dropping to less than 25% of current costs, Renovau s multicasting technology exhibits significant potential to cater to video conferencing market. Many small private businesses who can not afford video conferencing at current prices will greatly benefits from Renovau s services. However, current limitation of only one person being able to speak at a time does pose problems for large group where impromptu and free flowing discussion is more desirable. Renovau will also face challenges from web based remote meeting and desktop sharing applications like GoToMeeting.com, WebEx.com (a Cisco company) and open source VMukti. Using webcam and headset, caller can simply log on to a website and participate into a conference call without requiring any additional hardware or software. These meetings can accommodate up to 25 people at a time and cost about $60 per month. Renovau, however, offers advantage in that video phone equipment is easily portable and doesn t require PC/laptop and external accessories such as webcam, microphone and speakers. Further, Renovau s services are not by appointment but are public switched and available over normal phones on demand. Renovau can also handle many more than 25 participants though number larger than this is unlikely for a business conference. Using soft phone on PC or laptop, these services can be used on move as well. Video Surveillance Market Video surveillance uses either analogue or digital CCTV cameras. An analogue camera can only be network-connected using a separate encoder for the digitization and compression. IP cameras are digital cameras which digitize and compress video prior to transmission and utilize Internet protocols to transfer video streams anywhere in the world ( Cisco s first, 2007), and were first released in 1996 by Axis Communication. IP cameras are capable of zooming, tilting, and panning; monitoring movement and locking on object; and offer high resolution and easy plug-and-play installation. However, these tend to incur higher installation cost compared to analogue cameras by as much as two times (Honovich, 2008). Additionally, a typical IP camera with resolution and 10fps frame rate requires bandwidth of 3Mbps ( IP Camera, n.d.). Market leader in IP camera landscape worldwide is Axis Communication which offers complete line of standard IP cameras (low resolution up to 0.3MP) and growing line of megapixel cameras (high resolution up to 16 MP). Worldwide IP surveillance camera market is expected to outgrow the conventional CCTV camera segment by 2009 to reach $4 billion by 2011 ( Video Surveillance, 2008), according to isuppli (Shah, 2007), a California based electronics consulting firm. Video surveillance market in India is sized at Rs. 2 billion ( Bosch to tap, 2008) and is growing at rate of 50-60% annually (Gupta, 2008), making it the fastest growing market in video surveillance industry. Growing security requirement due to rise in number of shopping malls, high class offices and housing, and increasing security threat due to terrorism, and low penetration of surveillance in the market makes India a promising opportunity for video surveillance business. Various international companies such as Axis Communications, Bosch Security Systems, DVTel ( DVTel Expands, 2007), and Cradle Technologies are eyeing the share of pie. With its ease of installation, low capital and operation cost, and low bandwidth requirement compared to exiting technologies, along with advanced features such as audio recording and announcements, Renovau s MPT is well positioned to make use of this opportunity. k Video conferencing is like staring at someone s face while communicating while tele-presence gives the impression that you are sitting across the other person by delivering life size panoramic images Page 14 of 33

15 Tele-Education Market Department of Education has shown interest in promoting tele-education and linking affiliated campuses of its large universities. India launched EDUSAT, a satellite exclusively devoted to distant learning, in September In January 2008, Indian Space Research Organization (ISRO) and Indian Institute of Technology Bombay jointly launched a tele-education program covering about 50 engineering colleges across the country using EDUSAT. While thrust for distant education is prominent, actual market is difficult to estimate. Further, because tele-education has most potential when used by government universities and school, slow speed of decision making and adaptation is likely to prove hindrance in developing and capturing this segment of market. Tele-Medicine Market In last few years due to work by ISRO, Apollo Hospital Group, Narayana Hridayalaya and others telemedicine in India is slowly coming of age. Aravind Eye Hospitals and Sankara Netrhralaya have been using VSAT l enabled mobile vans to do tele-ophthalmology (Ganapathy, n.d.). The Government of India is embarking on a major e-governance project with 110,000 multi purpose Internet kiosks in villages. Plans are afoot to provide basic health care using these kiosks. The MC&IT has drawn up standards on tele-medicine and these will eventually be implemented. Preliminary information is being gathered regarding the feasibility of launching a HEALTHSAT a satellite exclusively for providing health care. Efforts are also underway to connect small hospitals with district or state hospitals in Kerala, West Bengal and North-Eastern State. Despite growing interest for tele-medicine, it s not certain if it will create substantial demand for Renovau s services. Even now, there are only 350 tele-medicine units located in suburban and rural India and the 30 units functioning in tertiary care hospitals. Further, reservations about quality of medical care by doctors, unfamiliarity by patients, infrastructure constraints, literacy and technical hurdles deter rapid expansion of tele-medicine in India. Renovau will also have to compete with VSAT and HEALTHSAT (when it comes) for share of tele-medicine market. Rural Access (Governance, Education, Information, ) Rural telephone penetration remains very poor in India however this is on radar of growth of various telecom companies and is forecasted to witness explosive growth in near future. Rural governance, rural healthcare and other markets are accessible to Renovau since telephony at least at district and panchayat level is not an issue. Due to public policy angle and government decision making involved direct market cannot be estimated, however large untapped potential makes this a lucrative opportunity for Renovau. Going Forward Despite new service and low prices, Renovau management feels that creating appropriate product bundling in terms of equipment cost, usage cost, and product placements will require creative solutions. Making people realize the true potential of Renovau services and educating them to communicate differently will also be going to be time consuming and will need lots of efforts. Public use is largely function of public awareness and making potential subscriber comfortable with new technology and new brand name can be a challenge to the company. This will specially be true of small to medium enterprises which are expected to contribute large chunk of subscriber base. Further, with entry of telecom giants like Bharti Airtel and Reliance Communications into IPTV and video conferencing segment, Renovau will face serious challenge in branding and differentiation. l Very Small Aperture Terminal are small (~1.2m) antenna dishes that connect with geosynchronous satellite to transmit data up to 4Mbps, typically used on the move Page 15 of 33

16 High upfront equipment cost, refundable deposit and monthly rental can also present substantial entry barriers to personal/home consumer segment. Many telecom and wireless companies provide free unlimited talk time with monthly rental lower than Renovau s Rs. 500 and after this even Rs per minute for NLD call may deter prospective personal user. Company will offer multiple price plans to cater to different uses sub-segments and varying affordability of customer. This will not be a factor for business users which are expected to contribute over 80% of subscriber base. Current Renovau business model emphasizes about not selling its services but providing it through TELCOs and ISPs. Could exclusive tie-up with one intermediary prove financially beneficial to the firm? Exclusive agreement will limit reach to subscribers but will provide better product differentiation and higher price point with respect to consumer. It will also lower part of revenue shared with TELCO/ISP and hence improve margin for Renovau. This, however, may encourage others to develop similar technology and impact future potential. Consolidation in telecom sector also presents interesting opportunities for the company. To capture market in wireless segment Renovau currently plans to provide software enabled handsets to TELCOs to sell to their customers. In long term company is looking to enter into direct agreement with handset manufacturer. Furthermore, when 3G technology unveils in near future, firm s low bandwidth switching advantage may be undermined though cost still remains key differentiator. Question though remains about penetration of this service for GSM handset users, since 3G enabled handsets are going to be expensive to buy. Finally, could Renovau itself become fixed line or cellular service provider and do away with level two intermediaries? These are not questions management is worried right now but they do hint at long term implication and possible decision challenges that lies ahead in front of Mr. Reddy. Page 16 of 33

17 Exhibit A History of Indian Telecom Year Event 1851 First operational landlines laid by the government near Calcutta 1947 Nationalization of all foreign telecommunication companies to form the Posts, Telephone and Telegraph (PTT), a monopoly run by the government's Ministry of Communications 1985 Department of Telecommunication (DOT) established, an exclusive provider of domestic and long-distance service that would be its own regulator (separate from the postal system) 1986 Conversion of DOT into 2 government-owned companies: the VSNL for international telecommunications and MTNL for service in metropolitan areas 1989 Telecom Commission was formed 1991 Telecom equipment manufacturing opened to private sector 1994 National Telecom Policy announced focussing on telecommunication for all and telecommunication within the reach of all ; Cellular tender bid opened with 2 license per circle 1995 GSM enters India; Handset costs Rs. 40,000 and call tariff Rs. 17 per minute; Bidding for private players in fixed line sector opens 1997 Telecom Regulatory Authority of India (TRAI) created to provide an effective regulatory framework and adequate safeguards to ensure fair competition and protection of consumer interests 1999 Cellular Services are launched in India; New National Telecom Policy adopted 2000 DOT becomes corporation named BSNL; National long distance competition policy formulated 2001 Fixed line service guidelines and fourth cellular operator guidelines announced; BSNL/MTNL became third operator in circle; License issued to private companies as fourth cellular operator 2003 Calling Party Pays regime makes incoming call free bringing many low-usage customers into mobile telephony fold 2004 Broadband Policy recognises the potential of broadband service in growth of GDP and enhancement in quality of life through societal applications as well as employment generation by way of high speed access to information and web-based communication 2006 India surpasses China in monthly subscriber additions; One-India plan introduced which enabled calling anywhere in India at Rs. 1 per minute 2007 India becomes the third largest country in terms of mobile and fixed line subscribers 2008 Auction of 3G Spectrum; Plans for auctioning of WiMAX services Source: TRAI Page 17 of 33

18 Exhibit B State of Indian Telecom Industry Telecom Subscriber Growth in India Wireline Wireless Number of Subscribers (million CAGR for Wireline -2% Wireless 66% Total 40% Dec-03 Dec-04 Dec-05 Dec-06 Sep-07 Sep-08 Year Source: TRAI, CRISIL Research 2007 Fixed-line Market Share as of September 2008 MTNL 9% Reliance Communication 2% Bharti Airtel 5% Tata Teleservices 2% Others 1% BSNL 81% Source: TRAI Page 18 of 33

19 GSM vs. CDMA Market Share GSM CDMA 350 Number of Subscribers (million) CAGR for GSM 66% CDMA 74% Total 77% Dec-03 Dec-04 Dec-05 Dec-06 Sep-07 Jun-08 Year Source: TRAI, CRISIL Research 2007 Wireless Market Share as of August 2008 Tata Teleservices 9.3% Spice 1.2% Aircel 4.3% MTNL 1.3% Others 0.7% Bharti Airtel 24.5% Idea 9.6% BSNL 14.1% Reliance 17.8% Vodafone Essar 17.3% Source: TRAI Page 19 of 33

20 Exhibit C Indian Telecom Industry compared to World s State of Telecom Industry across World (2006) Fixed-line Subscribers Mobile Subscribers Internet Users Broadband Users 120 Subscribers/Users per 100 Population Australia Brazil China Germany India Indonesia Japan Malaysia South Korea United Kingdom United States Source: Economists Intelligence Unit Note: Broadband is Internet with transmission speed > 128kbps Page 20 of 33

21 Exhibit D Telecom Circles and Service Providers Circle\TELCO Bharti Airtel Reliance Comm Vodafone- Essar BSNL Idea Cellular Tata Teleserv Aircel MTNL Spice BPL Mobile Andaman & Nicobar Andhra Pradesh Assam Bihar Chennai Chhatisgarh Delhi Gujarat Haryana Himachal Pradesh Jammu & Kashmir Jharkhand Karnataka Kerala Kolkata Madhya Pradesh Maharashtra Mumbai North East-I North East-II Orissa Punjab Rajasthan Tamil Nadu Uttar Pradesh (East) Uttar Pradesh (West) Uttaranchal West Bengal Source: TRAI Note: Shading in circle represents percentage share (October 2008) for a service provider in a particular circle Page 21 of 33

22 Exhibit E State of Indian Internet Industry Internet Subscriber Growth in India Non-Broadband Broadband Number of Subscribers (million) CAGR for Broadband (2 yr) 70% Non-broadband (5 yr) 15% Total (5 yr) 25% Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Year Source: CRISIL Research 2008 Internet Subscriber Market Share as of September 2007 BSNL 47% Others 14% Reliance 6% Bharti 7% Sify Ltd 7% MTNL 19% Source: CRISIL Research 2008 Page 22 of 33

23 Exhibit F Organizational Chart of Renovau Telecom Chairman & MD K S Reddy Management Board Management Council President & CEO K S Reddy President Multicasting Services President Enterprise Solutions President Surveillance Networks President Local Service Providers President Overlay Network CFO & Director Strategy Director Marketing & Communication Director Terminal Devices Director Internal Audit Director Admin & Support Services Director Customer Services Director Human Resources Director Technology Director IT & Systems Source: Renovau Page 23 of 33

24 Exhibit G Profiles of Key Management Personals K. Shekhar Reddy, Chairman & MD, CEO, CTO RTPL's Management team globally is headed by Mr. K S Reddy. Mr. Reddy, 51, holds a M.Tech. degree In Computer Sciences from Indian Institute of Technology, Madras. He is a serial Entrepreneur for the last 23 years with experiences in over 8 countries. He has built and sold a few businesses in India and US in the telecom and IT space. Mr. Reddy also spearheads the Technology development. Prior to founding Renovau, he was president of Quantum Capital INC. Previously; he held management positions with Airtel Telecom Limited, KarmaSoft India Limited, Etiam Inc, Inspira Inc and of KLG Softech Limited. Rajesh Chharia, CMO Mr. Rajesh Chharia, 48, is responsible for product strategy, product management, product marketing, field marketing, corporate communications, branding, and customer programs worldwide. Prior to this role, he was the CEO of CJ Online Pvt Ltd. He has varied 25 years of corporate exposure as Chief Strategist executing corporate strategic initiatives including new product strategy, M&A direction and emerging vertical markets. Nitin Vasavada, CFO Mr. Nitin Vasavada, 51, is a Fellow of Institute of Chartered Accountants of India and Institute of Company Secretaries of India and is Associate member of ICWAI. He has 25 years of experience working as CFO/advisor with corporate groups such as Apollo Tyres, KEC international, Bodal Chemicals, and other companies. Chirag Shah, Company Secretary Mr. Chirag Shah, 31,is a fellow of Institute of Company Secretaries of India and has over 13 years of industry exposure, of which 6 years at senior advisory level. He has been advisor to various firms on company law and legal matters. Source: Renovau Page 24 of 33

25 Exhibit H Network Architecture Source: Renovau Page 25 of 33

26 Exhibit I Video Telephone Equipment Source: Renovau Page 26 of 33