telecom predictions 2010

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Article Title: Telecommunication predictions 2010 from Deloitte India

URL: http://www.voicendata.ciol.com/content/ContributoryArticles/110020501.aspSection: Contributory ArticlesAuthor Name:Author Email:------------------------------------------------------------

In 498 Aryabhatta gave the world the digit "0" (zero) for which he became immortal. This set into motion andbought into play a paradigm shift in the fields of mathematics and Astronomy, and spread to other fields in theyears to come. The Binary code used in Today's digital world, uses two-binary digits one them being "0.

The next year, 2010 ends with 0, and will perhaps be the harbinger of a paradigm shift of a similar magnitude invarious fields which may be unleashed by the telecommunications industry.

India's telecommunications industry is booming, and the country's mobile-phone market is one of the fastestgrowing in the world. India added 113.26 million new customers in 2008, the largest globally. From 1995 withTelecom Operators Charging Rs 32 per minute and Rs. 16 for incoming calls, India now has become thecountry with the lowest calling rates, with call rates are as low as Rs.0.50 per minute with free unlimitedincoming calls.

The country's cellular base witnessed close to 50 per cent .growth in 2008, with an average 9.5 millioncustomers added every month. The year 2009 saw a similar trend with mobile-phone subscribers rising to427.29m by June 2009, driven by rising incomes, greater competition, increase d penetration in rural areas,falling rates, prepaid options and aggressive marketing campaigns. ARPU's of operators dropped from Rs. 205and Rs. 99 in March 2009 to Rs. 185 and Rs. 92 in June 2009 for GSM and CDMA respectively.

Telecom wars

TTSL has been largely instrumental in pulling down the telecom tariffs to a new low with its per-second tariff.Earlier, it was RCom, which created a similar impact in the market when the Ambanis entered the telecomindustry in 2005 with 40 paise per call tariff. Competition has yielded rich dividends for the consumers, givingthem the lowest tariffs in the world.

Now, with operators having no price differentiation, quality will be the driver for growth. Also this will most likelylead the valuation model to move from subscriber based one to a model based on margins and minutes ofusage.

With the lowest tariffs in the world, industry analyst have started raising questions on the viability of thebusiness. With MNP round the corner where a subscriber move to another service provider it is unlikely that thetariffs will rise from here. Also, on the other hand a further decrease also looks unlikely and we expect the tariffsto stabilize at this juncture.

India's the lowest tariff plans in the world and competition among mobile operators is set to increase further withoperators coming up with price plans to offset those unveiled by their rivals which may lead to hyper-competition in 2010.

This rapid re-basing in pricing by an incumbent will seriously affect and threaten smaller, regional and startupoperators, perhaps shortening the period before which industry consolidation inevitably takes place," Macquarie

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said in its research report.

In such a scenario, smaller telecom players could be forced to shut shop as they would be unable to keep upwith the competitive market forces at play and are likely to eventually sell off their operations to biggeroperators, experts believe.

Smart Phones

With the drop in prices of data plans, high end mobile phones and the introduction of 3G, the stage is set for theSmart phone to become the leading portable device in India.

The driving factors for the increase in the use of smartphones in the urban market was the need for real-timeaccess to information and on-demand access to applications such as e-mail, calendar, contact and otherinformation round the clock by people who are continuously on the move and those who want to keep in touchwith the office mails.

However the major hurdle for smartphone usage remains affordability and the downloading speed. Thesmartphone will continue gaining popularity in India especially in the upper middle class urban market.

VAS

Already estimated at more than USD 1 Billion in 2009, the MVAS industry is expected to grow at a CAGR ofmore than 50% and help the Service Providers arrest the fall in their ARPU's and improve their profit margins.Today, 90% of Operators revenues come from Voice and Rentals. Of the balance 5% comes from SMS's andMVAS accounts for only about 5% of revenue. With the overall wireless subscriber base almost up to 500Million, strong growth in the subscriber base of the telecom sector is also taking the business of mobile VAS tonew heights in the country.

* Mobile Infotainment: In 2009, the most popular mobile value added services were songs and ringtonedownloads, mobile games and mobile advertising. With the rise of reality shows, interactive participation in TVand Radio game shows and contests has already gained tremendous popularity. Given India's demographics

where more than 50% of the population is under the age of 30, infotainment is most likely to be the service thatwill run up the operators ARPU's in 2010.

* Video Conferencing is also increasing companies are cutting down their traveling to reduce costs and also forsecurity reasons. This trend will not only help reduce costs but also reduce the Carbon footprint of physicaltravel.

* Mobile advertising in India can be said to be still at a nascent stage. Yet, with an estimated 80 milliontelevision sets in the country and about five million PCs as of 2009, Mobile wins as a medium with the highestreach in the country and the potential remains extremely high. 2009 saw a dramatic rise in Mobile advertisingthrough the two main delivery mechanisms i.e. Voice and SMS. Mobile sms Advertising will likely shift frombeing a mass advertising medium to selected targeting which will be based on subscriber profiling.

Approximately 72.2% of the population of India live in about 638,000 villages. Government statistics hold thenational literacy to be around 60%. With an estimated 302.5 million illiterate, equal to the population of Russia,half the world's illiterates live in India. Recent findings by Suresh Tendulkar Committee show that around 41.8percent of the total rural population survives on a meager Rs. 447 of monthly per-capita consumptionexpenditure. For decades, Rural India has been plagued with the problems of illiteracy, poverty and exploitation.These challenges in the Rural India present the Telecommunications Industry unlimited opportunities. TheWorld Bank's World Development Report 2000/2001: Attacking Poverty identifies three crucial elements ofpoverty reduction efforts: opportunity, empowerment, and security. Experiences in rural India show thatinformation and communications technology can enhance poor people's opportunities by improving their accessto markets, health care and education.

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