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Indian Telecom Sector Abhijeet Sangle 9300 Vaibhav Sancheti 9300 Pravin Gondhale 9355

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Page 1: Indian Telecom Sector Abhijeet Sangle9300 Vaibhav Sancheti9300 Pravin Gondhale9355 Abhijeet Sangle9300 Vaibhav Sancheti9300 Pravin Gondhale9355

Indian Telecom Sector

Abhijeet Sangle 9300Vaibhav Sancheti 9300Pravin Gondhale 9355

Page 2: Indian Telecom Sector Abhijeet Sangle9300 Vaibhav Sancheti9300 Pravin Gondhale9355 Abhijeet Sangle9300 Vaibhav Sancheti9300 Pravin Gondhale9355

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• India is the second largest telecom market in the world.• Fastest growing market in the world (in terms of new users addition).• Growth opportunities driven by strong growth fundamentals, increasing

urbanisation, rising income levels and favourable demographics. • The majority of new customers likely to come from the rural areas with

inadequate basic infrastructure and limited or no connectivity.• Fiercely competitive market.• Tariffs rates offered are one of the cheapest in the world.

Introduction

Page 3: Indian Telecom Sector Abhijeet Sangle9300 Vaibhav Sancheti9300 Pravin Gondhale9355 Abhijeet Sangle9300 Vaibhav Sancheti9300 Pravin Gondhale9355

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U.S6%

China16%

India13%Others

65%

Mobile subscribers (share of the world)

Source: India Telecom 2010, KPMG

Page 4: Indian Telecom Sector Abhijeet Sangle9300 Vaibhav Sancheti9300 Pravin Gondhale9355 Abhijeet Sangle9300 Vaibhav Sancheti9300 Pravin Gondhale9355

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Services Offered

Services

Telephony

Wire line (Landline) Wireless

GSM CDMA/WLL

DTH IPTV High Speed Data Access

Broadband

Wireless Access (BWA)

Wired Access

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The Urban consumer demands • high speed internet connectivity, • audio video streaming, • navigation and location maps, • music downloads, • gaming, • m-commerce, • IPTV and mobile TV

The Rural consumer demands • lower tariffs for voice calls, • value added services like information

about market and commodity prices, • weather updates

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Year March 2006 March 2007 March 2008 March 2009 March 2010 October 2010

Broadband Users 1.35 2.34 3.90 6.22 8.75 10.52

Wire line Users 41.54 40.75 39.42 37.96 36.96 35.43

Wireless Users 98.78 165.11 261.09 391.76 584.32 706.69

(Users in Millions)Source: TRAI Press Releases

User Base

Page 7: Indian Telecom Sector Abhijeet Sangle9300 Vaibhav Sancheti9300 Pravin Gondhale9355 Abhijeet Sangle9300 Vaibhav Sancheti9300 Pravin Gondhale9355

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March 2006

March 2007

March 2008

March 2009

March 2010

October 2010

32.00

34.00

36.00

38.00

40.00

42.00

44.00

-6%

-5%

-4%

-3%

-2%

-1%

0%

41.54 40.75

39.42

37.96 36.96

35.43

-2%

-3%-4%

-3%

-5%

Wireline Users (in Mn.) Wireline Y-O-Y Growth

Growth/Contraction in Services

March 2006

March 2007

March 2008

March 2009

March 2010

October 2010

0.00

100.00

200.00

300.00

400.00

500.00

600.00

700.00

800.00

0%

10%

20%

30%

40%

50%

60%

70%

80%

98.78 165.11

261.09

391.76

584.32

706.69 67%

58%

50% 49%45%

Wireless Users (in Mn.) Wireless Y-O-Y Growth

March 2006

March 2007

March 2008

March 2009

March 2010

October 2010

0.00

2.00

4.00

6.00

8.00

10.00

12.00

0%

10%

20%

30%

40%

50%

60%

70%

80%

1.35 2.34

3.90

6.22

8.75

10.52 73%

67%

59%

41% 42%

Broadband Users (in Mn.) Broadband Y-O-Y Growth

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Growth/Contraction in Services

March 2006 March 2007 March 2008 March 2009 March 2010 Septemeber 2010

0

20

40

60

80

100

120

140

12.818.31

26.2236.98

52.7462.51

1.90 5.80 9.3014.80

24.31 28.42

38.0047.20

63.70

88.70

119.45

137.25

Overall Rural Urban

Teledensity1 (%)

March 2006 March 2007 March 2008 March 2009 March 2010 September 2010

70

120

170

220

270

320

370

340

272

241

179

121104

366

298

264

205

131110

256

202

159

9976 73

APRU2 (Rs./User/Month)

Overall GSM CDMA

Source:1: KMPG India Telecom Report, 20102: TRAI, The Indian Telecom Services Performance Indicators Quarterly Reports

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U.S UK

Australi

a

France

German

yIta

lyJap

an

Netherla

nds

South

Africa

IndiaChina

Philippines

Brazil

IndonesiaRussi

a

49

3340

47

21

29

54

46

14

310

4

12

48

ARPU (in US $)

Global wireless ARPU comparison (2009)

Source: India Telecom 2010, KPMG

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Regulatory Environment

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Key Players

Mobile Service Providers• Vodafone, Idea, Bharti Airtel, Reliance, Tata/DOCOMO, BSNL/MTNL, Aircel, Uninor/Spice, • Others (Loop, HFCL, Sistema (MTS), Stel, Videocon, Etisalat)

Wireline Telephone Service Provider• BSNL/MTNL• Bharti Airtel• Reliance, Tata

DTH• DishTV, Tata Sky• Airtel, • Reliance ADAG• Videocon, Sun Network• Prasar Bharti

IPTV*• MTNL (Delhi)• Airtel (Chandigarth)• (On Experimental Basis)

Broadband Wireless Access (BWA)• BSNL/MTNL• Reliance Ind. Ltd.• MTS, Airtel

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Strengths Weaknesses

•Volatile regulatory environment.•Fiercely Competitive Environment.•Hence low tariff rates Low profitability

Opportunities Threats•Untapped Landscape• National teledensity at ~ 53% with• Rural teledensity at ~ 24%;

•New Technologies and Paradigms• 3G and BWA• Triple Play services with IPTV and DTH platforms.• Digital Media Exchange (DMX) for the 4th screen –

Cinema• Value Added Services (VAS)

•Global Economic Environment•Increased Competition•Corruption

SWOT Analysis of Indian Telecom Sector

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Bharti Airtel Ltd.

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Sr. No. OperatorYear

March 2008 March 2009 March 2010 October 2010

1 Bharti Airtel 23.74% 23.97% 21.84% 20.70%

2 Reliance 17.54% 18.55% 17.53% 16.89%

3 Vodafone 16.90% 17.55% 17.26% 16.70%

4 BSNL + MTNL 16.98% 14.45% 12.76% 12.18%

5 Tata 9.32% 8.97% 11.29% 11.44%

6 Idea 9.19% 9.93% 10.92% 10.76%

7 Others 6.33% 6.58% 8.41% 11.33%

Total 100.00% 100.00% 100.00% 100.00%

Market Share of Cellular Operators

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• Mobile Service• Telemedia Services

– Under telemedia services, Bharti Airtel provides broadband, data and fixed line telephone.

• Digital TV Services• Enterprise Services• Passive Infrastructure Services

Business Segments

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Revenue Spilt by Offerings (in Rs. Millions)2009-10 2008-09 2007-08

Mobile Services 3,25,717 3,04,188 2,18,697

Tele-media Services (Incl. DTH) 34,194 33,426 28,615 Enterprise Services 84,386 83,417 57,683 Passive Infrastructure Services 70,082 50,913 6,023

63%7%

16%

14%

2009-10

64%7%

18%

11%

2008-09

Business Segments

70%

9%

19%

2%

2007-08

Mobile Telemedia ServicesEnterprise Services Passive Infrastructure Services

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Business Model

Customer Acquisition

and Retention

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Business Model

Network operations and management

• Ericcson (in 14 license service areas)

• Nokia Siemens (in 7 license service areas)

• a 3-year $724 million contract.

IT Management• IT infrastructure

management,• Operational Support

Services (OSS), • Billing Support Services

(BSS), • implementation,

deployment of new IT services.

• $750 million in a 10-year contract with IBM

Customer Relationship Management

• IBM-Daksh• EDS-Mphasis

Strategic Outsourcing Model

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3G and BWA

3G:• Secured licenses for 13 circles for a total consideration of about Rs. 12,000

Cr. (Appox.)BWA:• have acquired spectrum in four circles - Karnataka, Punjab, Kolkata and

Maharasthra for a total consideration of just over Rs. 3,000 Cr.

Financing:– Debt Rs. 8000 Cr. (Approx.)– Rest Internal Cash

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Zain Africa Acquisition and its Impact

What Bharti Gets?

Pros:• Reach to 15 African Countries.• Zein Africa is No.1 in 10 markets, ranking 2nd in another four.• Added 42 millions of subscriber base. Combined user base over 180 million.• 7th largest mobile company in the world by user base. • One of the fastest growing region for telecom sector in the world.

Cons:• Zain’s African operations have posted a loss of $111 million in nine months ended

September 2009.• Loss making markets like Uganda and disputed assets of Nigeria (for which Bharti is

yet to pay.)• Direct competition with African Biggie ‘MTN’.

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Zain Africa Acquisition and its Impact

8.7

1.7

0.7

Upfront Payment by BhartiDebts on Books of Zein AfricaPayments for Nigeria Assets to be made a year later

(Amounts in Billion USD)

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• Debt raised from a consortium of foreign banks and State Bank of India.– Lead-arranger and lead-advisor Standard Chartered Bank committing

the highest amount -- $1.3 billion.– Followed by $0.9 billion by Barclays.– The rest of the co-advisors -- ANZ, BNP, Bank of America-Merrill Lynch,

Credit Agricole CIB, DBS, HSBC, Bank of Tokyo-Mitsubishi UFJ and Sumitomo Mitsui Banking Corporation -- have allocated $600 million each.

– SBI has given Loan of around $ 1 billion in Rupees.• Loan Tenure 6 Years• Interest Rate: (Floating) LIBOR + 195 basis points (Approx. 2.5% )• Debt/Equity Ratio raised to 1.3 (Q2 2010 Consolidated Results) from

earlier 0.3.

Zain Africa Acquisition Financing

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Financials

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Thank You