TELECOMMUNICATIONS. November 2010

Transcription

1 TELECOMMUNICATIONS November 2010

2 TELECOMMUNICATIONS November 2010 Contents Advantage India Market overview Investments Policy and regulatory framework Opportunities Industry associations 2

3 ADVANTAGE INDIA Advantage India For more than a decade, the sector has witnessed a steady addition in wireless subscribers. India has been adding million subscribers every month, making it the world s fastest growing wireless market. Mobile handsets sales in India are expected to reach million units in 2010, an increase of 18.5 per cent over The telecom sector is one of the highest FDI-attracting sectors in India, and has recorded FDI inflow worth more than US$ 9 billion between 2000 and Demand for mobile handsets Liberal foreign investment regime High growth Advantage India High profitability due to a large subscriber base Among the biggest telecom markets in the world Well-defined regulatory framework India is the second-largest telecom market in the world with million subscribers as on August 31, 2010, which are estimated to reach approximately 1 billion by The Department of Telecommunications (DoT), Telecom Regulatory Authority of India (TRAI), and Telecom Disputes Settlement and Appellate Tribunal (TDSAT) have enabled to create well-defined regulations for the sector such as the National Telecom Policy 1999 and Universal Service Obligation Fund (USOF). An increase in the minutes of usage (MoU) compensates for the decline in tariffs, thereby contributing to healthy revenue growth. India has one of the highest minutes of usage (MoU) per subscriber per month, at more than 400 minutes. Sources: TRAI: The Indian Telecom Services Performance Indicators (April - June 2010), TRAI website, accessed 20 November 2010; TRAI: Spectrum Management and Licensing Framework, TRAI website, page 18, accessed 20 November 2010; Fact Sheet on Foreign Direct Investment (FDI) from August 1991 to September 2010, Department of Industrial Policy & Promotion, accessed 20 November 2010; Framework India 2012: Telecom growth continues, Ernst & Young Telecom Report, 2008; Telcos to recoup 3G bid money in 5-6 years: Analysys Mason, livemint website, accessed 30 November 2010; Gartner Says Indian Mobile Handset Sales To Reach million in 2010, Gartner website, accessed 30 November

4 TELECOMMUNICATIONS November 2010 Contents Advantage India Market overview Investments Policy and regulatory framework Opportunities Industry associations 4

5 MARKET OVERVIEW Market overview The telecom sector in India has witnessed unparalleled growth by global standards in the last decade and continues to be one of the country s biggest success stories. This growth has been built on the wireless revolution. At the end of August 2010, tele-density was recorded at 59.6 per cent with a total telephone subscriber base of million. By 2014, the wireless subscriber base is expected to reach approximately 1 billion to include around 572 million urban subscribers and 468 million rural subscribers. Revenues of the Indian telecom industry are projected to reach US$ 45 billion by 2012, compared with US$ 33 billion in Key players in the Indian telecom market are Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Limited (MTNL), Bharti Airtel Limited, Reliance Communication, Vodafone, Idea Cellular, Aircel and Tata Teleservices. Sources: TRAI: The Indian Telecom Services Performance Indicators (April - June 2010), TRAI website, accessed 20 November 2010; TRAI: Spectrum Management and Licensing Framework, TRAI website, page 18, accessed 20 November 2010; Framework India 2012: Telecom growth continues, Ernst & Young Telecom Report, 2008; TRAI Press Release No 53 /2010, TRAI website, accessed 20 November

6 MARKET OVERVIEW Market segments Telecom sector Basic services Wireless services Internet services Radio paging and GMPCS VSATs and PMRTS The Indian telecom industry can be primarily divided into basic, cellular and internet services. It also has relatively segments such as radio paging services, very small aperture terminals (VSATs), public mobile radio trunked services (PMRTS) and global mobile personal communications by satellite (GMPCS). 6

7 MARKET OVERVIEW Market segments wire line The subscriber base of wire line services stood at 36 million as on August 2010, with a teledensity of 3 per cent. Public sector undertakings BSNL and MTNL have a major share of the wire line market covering more than 80 per cent. MTNL is present in Delhi and Mumbai, while BSNL covers the rest of the country. Although private players such as Tata Teleservices, Bharti Airtel and Reliance have registered significant growth, BSNL continues to dominate the segment in terms of wire line subscriber base. 9.7 Market share of wire line services as on August 31, 2010 (per cent) BSNL MTNL Bharti Tata Reliance HFCL Sistema Sources: TRAI: The Indian Telecom Services Performance Indicators (April - June 2010), TRAI website, accessed 20 November 2010; TRAI Press Release No 53 /2010, TRAI website, accessed 20 November

8 MARKET OVERVIEW Market segments wireless The wireless segment includes GSM and CDMA services and is much larger than the wire line segment in India. The segment is growing steadily because of the convenience and utility it offers. Market share of wireless services as on August 31, 2010 (per cent) Bharti The subscriber base of wireless services stood at million as of August 2010 with tele-density of 56.6 per cent. As of June 2010, the wireless market recorded million GSM subscribers accounting for 83 per cent of the market and million CDMA subscribers accounting for the remaining 17 per cent Reliance Vodafone Tata BSNL Idea Aircel Unitech Others Private players such as Bharti Airtel Limited, Reliance Communication, Vodafone, Tata, BSNL, Idea Cellular and Aircel cumulatively hold a major share of the wireless market. Note: Others include Sistema, MTNL, Videocon, Loop, Stel, HFCL, and Etisalat. Sources: TRAI: The Indian Telecom Services Performance Indicators (April - June 2010), TRAI website, accessed 20 November 2010; TRAI Press Release No 53 /2010, TRAI website, accessed 20 November

9 MARKET OVERVIEW Market segments broadband and the Internet High growth in broadband outreach is expected to drive the next phase of growth in the telecom industry. While broadband connections are increasing rapidly, their reach in India is still at 0.7 per cent, as against the worldwide outreach of 8.1 per cent. As on August 31, 2010, the subscription base of broadband was 10.1 million. Broadband subscribers are expected to grow to 30 million, while Internet subscribers are expected to grow to 45 million by Key players in the segment are BSNL, MTNL, Bharti, Tata Communication, Reliance Communication, Sify Technologies, YOU Telecom, Data Infosys and Hathway Cables. Following the 3G and Broadband Wireless Access (BWA) auction, the data sector is expected to grow rapidly. Sources: Fact Sheet on Foreign Direct Investment (FDI) from August 1991 to March 2010, Department of Industrial Policy & Promotion website, accessed 20 November 2010; TRAI Press Release No 53 /2010, TRAI website, accessed 20 November

10 MARKET OVERVIEW Market segments VSAT At present, there are eight VSAT service providers in India, including BSNL, Bharti Airtel, Hughes Communications India Ltd and HCL Comnet Ltd. The number of VSAT subscriber services grew by 4,311 to 128,406 for the quarter ending June The market for VSAT services registered 3.5 per cent growth in the quarter ending June Bharti Airtel is the current market leader, with a market share of 30.9 per cent, followed by Hughes Communications India Ltd, which has a market share of 30.0 per cent Market share of VSAT services as on June 30, 2010 (in per cent) Bharti Airtel Limited Hughes Communications Ltd. HCL Comnet Tatanet Services BSNL Essel Shyam Infotel Satcom Bharti Broadband Sources: TRAI: The Indian Telecom Services Performance Indicators (April - June 2010), TRAI website, accessed 20 November 2010; TRAI Press Release No 53 /2010, TRAI website, accessed 20 November

11 MARKET OVERVIEW Other segments Radio paging services PMRTS GMPCS Radio paging services were launched in India in At present, all but four radio paging service providers have been marginalised in the Indian market. As of June 2010, five operators are offering Public Mobile Radio Trunk Services (PMRTS) service to 32,522 subscribers. Global Mobile Personal Communications by Satellite (GMPCS) services were launched in India in These services allow a subscriber to communicate with others from any point on earth through a hand-held terminal. Moreover, the telephone number remains unchanged, irrespective of the subscriber s location. Iridium India Telecom Limited is the pioneer in GMPCS services in India. The Government of India (GoI) has restricted foreign equity participation in this segment to 74 per cent. Source: TRAI: The Indian Telecom Services Performance Indicators (April - June 2010), TRAI website, accessed 20 November

12 MARKET OVERVIEW Key trends (1/8) The wireless segment in India is much larger than the wire line segment and is growing steadily due to the convenience and utility it offers. QE Jun 2010 Subscriber base trends (percentage) in wireless and wire line segments ( ) 5.4% 94.6% Wireless services hold a major market share of 94.6 per cent. QE Mar 2010 QE Dec % 6.6% 94.1% 93.4% The subscriber base of the wire line segment is decreasing due to its limited usage. QE Sep 2009 QE Jun % 8.1% 92.7% 91.9% 0% 20% 40% 60% 80% 100% Wireline Wireless Sources: TRAI: The Indian Telecom Services Performance Indicators (April - June 2010), TRAI website, accessed 20 November 2010; TRAI Press Release No 53 /2010, TRAI website, accessed 20 November 2010; India 2012: Telecom growth continues, Ernst & Young Telecom Report,

13 MARKET OVERVIEW Key trends (2/8) Rural markets are expected to be the next key growth drivers for the Indian telecom sector, given rural India s growing population and disposable income. The subscriber base in the rural market has improved significantly in , with rural tele-density at 26.4 per cent as of June By 2012, the rural subscriber base is expected to account for nearly half of the total subscriber base, thereby fuelling sector growth. 140% 120% 100% 80% 60% 40% 20% 0% Tele-density trends in the urban and rural market between June 2009 and June 2010 (per cent) 95.1% 16.6% QE Jun % 18.5% QE Sep 2009 Urban 111.0% 21.2% QE Dec 2009 Rural 119.8% 24.3% QE Mar % 26.4% QE Jun 2010 Sources: TRAI: The Indian Telecom Services Performance Indicators (April - June 2010), TRAI website, accessed 20 November 2010; TRAI Press Release No 53 /2010, TRAI website, accessed 20 November 2010; India 2012: Telecom growth continues, Ernst & Young Telecom Report,

14 MARKET OVERVIEW Key trends (3/8) Bharti Airtel has the largest market share in the GSM segment. As of June 2010, Bharti accounted for 25.9 per cent of the GSM market, followed by Vodafone, with a 20.7 per cent market share. Private players accounted for approximately 86.4 per cent, while public sector operators (BSNL and MTNL) accounted for the remaining share (13.6 per cent). Market share of GSM service providers (as of June 2010) (per cent) Bharti Vodafone BSNL Idea Reliance Aircel Tata Others NOTE: Others include MTNL, Loop, Unitech, S Tel, Videocon, Etisalat, and HFCL. Sources: TRAI: The Indian Telecom Services Performance Indicators (April - June 2010), TRAI website, accessed 20 November 2010; TRAI Press Release No 53 /2010, TRAI website, accessed 20 November 2010; India 2012: Telecom growth continues, Ernst & Young Telecom Report,

15 MARKET OVERVIEW Key trends (4/8) Reliance Communications dominates the Indian CDMA mobile services segment with a market share of 52.4 per cent as of June Market share of CDMA service providers (as of June 2010) (per cent) Reliance Tata BSNL Sistema HFCL MTNL Sources: TRAI: The Indian Telecom Services Performance Indicators (April - June 2010), TRAI website, accessed 20 November

16 MARKET OVERVIEW Key trends (5/8) India is expected to feature among the top 10 broadband markets by The total number of Internet subscribers grew from 14.1 million subscribers in June 2009 to 16.7 million subscribers in June BSNL is the biggest player in this market with 9.7 million subscribers, followed by MTNL, Bharti Airtel, Reliance and Hathway Cable & Datacom. Digital subscriber line (DSL) is the most preferred technology among service providers to provide broadband services. DSL constitutes 86.6 per cent of total broadband subscribers. Cable modem technology follows with 6.5 per cent connections. Top five Internet service providers by market share (as of June 2010) (per cent) BSNL MTNL Bharti Airtel Reliance Hathway Cable & Datacom Others Sources: TRAI: The Indian Telecom Services Performance Indicators (April - June 2010), TRAI website, accessed 20 November

17 MARKET OVERVIEW Key trends (6/8) In India, growth in the subscriber base, which contributes to healthy revenue growth, mitigates the reduction in average revenue per user (ARPU). In addition, high MOUs compensate for declining tariffs QE Jun 2009 MOU June 2009 to June QE Sep 2009 QE Dec 2009 QE Mar 2010 QE Jun ARPU June 2009 to June QE Jun 2009 QE Sep 2009 QE Dec QE Mar QE Jun 2010 GSM CDMA GSM CDMA Source: TRAI: The Indian Telecom Services Performance Indicators (April - June 2010), TRAI website, accessed 20 November

18 MARKET OVERVIEW Key trends (7/8) From only 36.3 million in 2001, the number of telephone subscribers increased to million as on August 31, Between 2001 and 2010, the total number of subscribers has grown at a CAGR of 36.4 per cent. Operators are reducing operating costs and hiving off infrastructure elements such as towers into separate entities, thus inviting significant investments. Passive infrastructure sharing has benefitted the Indian mobile industry and its customers, reducing the cost burden of each operator and speeding the rollout of mobile services. In recent years, initiatives such as network cost optimisation, outsourcing of non-core activities, as well as low-cost business models have been focus areas. Sources: TRAI: The Indian Telecom Services Performance Indicators (April - June 2010), TRAI website, accessed 20 November 2010; TRAI Press Release No 53 /2010, TRAI website, accessed 20 November

19 MARKET OVERVIEW Key trends (8/8) Every telecom service provider is looking beyond basic voice services by offering a wide range of bundled offerings. For example, nearly all leading operators, including incumbents, are in the testing phase to launch commercial IPTV services. Indian operators are still new in terms of offering quad-play using existing network infrastructure for data, voice, video and basic communication services. Consumers can get all these services from the same telecom operator, and enterprises can also access virtual private networks (VPNs), video-conferencing, enterprise solutions, mobility and fixed telephony from the same integrated telecom service provider. Source: India 2012: Telecom growth continues, Ernst & Young Telecom Report,

20 TELECOMMUNICATIONS November 2010 Contents Advantage India Market overview Investments Policy and regulatory framework Opportunities Industry associations 20

21 INVESTMENTS Investments (1/2) Despite the global economic slowdown in , the telecom sector is one of the highest FDIattracting sectors in India. At present, 74 to100 per cent FDI is permitted for various telecom services. The telecom sector is among the leading sectors attracting FDI, accounting for 8 per cent of the cumulative FDI equity inflow from April 2000 to September 2010, which is valued at US$ 9,988 million. The telecom market is witnessing significant M&A activity. This trend has helped companies expand their presence in the Indian telecom market to offer better services to customers. Source: Fact Sheet on Foreign Direct Investment (FDI) from August 1991 to March 2010, Department of Industrial Policy & Promotion, accessed 20 November

22 INVESTMENTS Investments (2/2) Key deals (2010) Deal date Target name Acquirer Deal value (US$ million) June 8, 2010 Zain Africa BV Bharti Airtel Ltd 10,700.0 July 19, 2010 Aircel Ltd-Mobile Towers Chennai Network Infrastructure Ltd 1,703.7 August 6, 2010 Essar Telecom Infrastructure Pvt Ltd Transcend Infrastructure Ltd August 11, 2010 Viom Networks Ltd Macquarie SBI Infrastructure Fund January 31, 2010 Warid Telecom Bangladesh Bharti Airtel Ltd April 30, 2010 Zicom Electronic Security Systems Ltd- Electronic Security System Schneider Electric SA 48.9 January 12, 2010 Micromax Informatics Ltd TA Associates Inc 45.0 September 20, 2010 Micromax Informatics Ltd Investor Group 43.8 September 26, 2010 WIN PLC IMImobile Pvt Ltd 23.5 June 25, 2010 One97 Communications Ltd SAIF Partners 10.0 October 18, 2010 El Corp Ltd Yam Keong Chee 1.0 July 20, 2010 Karma Mobility Solutions India Pvt Ltd Spice Communications Ltd NA March 31, 2010 Wireless TT Info Services Ltd Infrastructure Development Finance Co Ltd (IDFC) May 10, 2010 Undisclosed Electronic Security Co Schneider Electric India Pvt Ltd NA February 3, 2010 TowerVision India Pvt Ltd Quadrangle Group Asia Ltd NA NA Source: Thomson ONE Banker 22

23 TELECOMMUNICATIONS November 2010 Contents Advantage India Market overview Investments Policy and regulatory framework Opportunities Industry associations 23

24 POLICY AND REGULATORY FRAMEWORK Policy and regulatory framework (1/3) The DoT governs the Indian telecom industry. In coordination with the Telecom Commission, the DoT oversees licensing, policy formulation, frequency management, administrative monitoring, research and development, equipment standardisation and validation, along with private investments. The DoT established the Telecom Regulatory Authority of India (TRAI) in1997 to streamline policy reforms and safeguard consumer interests. The Telecom Disputes Settlement and Appellate Tribunal (TDSAT) was also established in The key objectives of the National Telecom Policy 1999 (NTP 99) include telecommunication for all and telecommunication within the reach of all, achieving universal service across all villages, global standards in service quality, India s emergence as a major manufacturing base and a major exporter of telecom equipment, and the protection of the country s security interests. Source: Government of India, Department of Telecommunications, DoT website, accessed 20 November

25 POLICY AND REGULATORY FRAMEWORK Policy and regulatory framework (2/3) WPC (Wireless Planning Commission) Spectrum Management DoT Licensor and frequency management for telecom Telecom Commission Exclusive policy making function of the DoT GoT IT (Group on Telecom and IT) Handles ad hoc issues Indian telecom industry framework TRAI Independent regulator TDSAT Disputes settlement body ILD Players VSNL Bharti Reliance Private CDMA Reliance TTSL BSNL Sistema HFCL MTNL GSM operators Bharti Vodafone BSNL Idea Reliance Aircel Tata Unitech Source: Government of India, Department of Telecommunications, DoT website, accessed 20 November

26 POLICY AND REGULATORY FRAMEWORK Policy and regulatory framework (3/3) Unified Access Licensing Regime (UALR) The establishment of the UALR (2003) eliminated the need for separate licences for different services. This regime allowed players to offer both mobile and fixed-line services under a single licence after paying an additional entry fee. However, the regime does not take into account the national and international longdistance services and Internet access services. Universal Service Obligations (USO) The USO policy was implemented along with the National Telephone Policy (NTP) in1999 to widen the reach of telephony services in rural India. All telecom operators are bound to contribute 5 per cent of their revenues to this fund. This system was put in place to bridge the gap between urban and rural teledensity, which is currently more than 100 per cent. Initially, only basic service providers were under the purview of the USO. Later, its scope was expanded to include mobile services. USO helps build telecommunication infrastructure in rural areas. Source: Government of India, Department of Telecommunications, DoT website, accessed 20 November

27 TELECOMMUNICATIONS November 2010 Contents Advantage India Market overview Investments Policy and regulatory framework Opportunities Industry associations 27

28 OPPORTUNITIES Opportunities (1/2) Among the biggest telecom markets in the world According to estimates from the TRAI, the wireless subscriber base is expected to reach approximately 1 billion by 2014, with around 572 million urban subscribers and 468 million rural subscribers. Rural market By 2012, total telecom outreach in the largely untapped potential rural markets of India is expected to reach close to 40 per cent, compared with the current teledensity of around 26.4 per cent as of June Emergence of BWA technologies BWA technologies such as WiMax have been among the most significant developments in wireless communication in recent times. WiMax is expected to attract around 8 to10 million subscribers and account for around US$ billion by 2012, assuming that low-cost devices and data cards are available and services are affordable. Internet services Despite the low reach of Internet services in the Indian market, this segment is expected to grow in the next decade in terms of number of subscribers. India is expected to feature among the top 10 broadband markets by Sources: TRAI: The Indian Telecom Services Performance Indicators (April - June 2010), TRAI website, accessed 20 November 2010; TRAI: Spectrum Management and Licensing Framework, TRAI website, page 18, accessed 20 November 2010; Framework India 2012: Telecom growth continues, Ernst & Young Telecom Report,

29 OPPORTUNITIES Opportunities (2/2) Telecom infrastructure, including telecom towers and the fiber network, is expected to witness a CAGR of 20 per cent between 2008 and 2015E to reach 571,000 towers by Growth of telecom infrastructure Telecom infrastructure is being considered a critical factor in India s economic development. Telecom infrastructure is expected to continue growing due to increasing market presence in rural areas, upcoming 3G services, the expanding Internet market and an increase in the number of operators with pan-india operations. Growth in VAS The Indian mobile value-added services (VAS) industry is expected to reach US$ 5.8 billion by 2013, from US$ 2.0 billion in Currently, VAS contributes per cent of revenues for telecom operators. This is expected to rise to 20 per cent by 2013, especially after the uptake of 3G services. Telecom equipment market The production of the telecom electronics and equipment segment increased by 11.7 per cent to reach US$ 10.5 billion in , primarily driven by a rise in the demand for wireless services in India, which fueled demand for mobile handsets. The segment s production is expected to reach US$ 29.5 billion in Sources: Framework India 2012: Telecom growth continues, Ernst & Young Telecom Report, 2008; Report of Task Force to suggest measures to stimulate the growth of IT, ITES and Electronics Hardware manufacturing industry in India, Ernst & Young; Indian Telecommunication Equipment Market- Opportunities for US Companies, IVG Partners website, page 4; Emerging Landscape in Mobile VAS Industry, ASSOCHAM website, accessed 20 November

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31 INDUSTRY ASSOCIATIONS Industry associations (1/2) Cellular Operators Association Of India (COAI) 14, Bhai Veer Singh Marg, New Delhi , India Tel: Fax: /77 Website: Internet Service Provider Association Of India (ISPAI) 612-A, Chiranjiv Tower, 43, Nehru Place, New Delhi , India Tel.: / Fax: Website: Telecom Equipment Manufacturers Association (TEMA) 4th Floor, PHD House, Opp. Asian Village, New Delhi , India Tel: Fax: Website: 31

32 INDUSTRY ASSOCIATIONS Industry associations (2/2) Association Of Unified Telecom Service Providers Of India (AUSPI) B-601, Gauri Sadan 5, Hailey Road, New Delhi , India Tel: Fax: Website: Association Of Competitive Telecom Operators (ACTO) 601, Nirmal Tower, 26, Barakhamba Road, Connaught Place, New Delhi , India Tel.: / Fax: info@acto.in Website: Internet & Mobile Association Of India (IAMAI) F-36, Basement, East of Kailash, New Delhi , India Tel: kalyan@iamai.in Website: 32

33 NOTE Note Wherever applicable, numbers in the report have been rounded off to their nearest whole number. Conversion rate used: US$ 1= INR

34 TELECOMMUNICATIONS November 2010 DISCLAIMER India Brand Equity Foundation (IBEF) engaged Ernst & Young Pvt Ltd to prepare this presentation and the same has been prepared by Ernst & Young in consultation with IBEF. All rights reserved. All copyright in this presentation and related works is solely and exclusively owned by IBEF. The same may not be reproduced, wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this presentation), modified or in any manner communicated to any third party except with the written approval of IBEF. This presentation is for information purposes only. While due care has been taken during the compilation of this presentation to ensure that the information is accurate to the best of Ernst & Young and IBEF s knowledge and belief, the content is not to be construed in any manner whatsoever as a substitute for professional advice. Ernst & Young and IBEF neither recommend nor endorse any specific products or services that may have been mentioned in this presentation and nor do they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed on this presentation. Neither Ernst & Young nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any reliance placed or guidance taken from any portion of this presentation. 34