THE INDIAN TELECOM SECTOR

An Industry Profile

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Contents *

• The Telecom Industry : An Overview

• Basic Telephone Services : India

• Mobile Phone Services

• Radio Paging Services

• The Internet

• VSAT Services

• Telecom Equipment Industry : India

• Telecom Sector : Emerging Technologies

• Profiles of Top Players

• Investment Environment - Telecom Sector

• Regulatory Aspects & Government Policies

* Note : This demo pack has only a few select slides of the contents

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Global Telecom Markets

• The Telecom sector has been one of the fastest growing service industries in the world

• The sector was adversely affected by over-capacity & recession during the last 2 years

– The situation was further compounded by a few high profile bankruptcies & corporate scams in 2002

• However, the problems were confined to the developed markets of USA & Europe, and the global telecom market grew at double digit rates thanks to the robust growth of developing markets such as China & India

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Indian Telecom Market

• India started its telecommunication operations in 1851

• India’s 42 Mn. fixed line telephone network is the 8th largest network in the world & the 3rd largest among the emerging economies

• Tele-density (including mobile) :50 per 1000 persons (December 2002) against China’s 180 per 1000

• Tele-density in India is expected to reach 85 per 1000, by end 2005

• Private companies entered the telecom sector in 1992

• Current Growth • in terms of revenue : 13 % per annum• in terms of subscribers : 23 % per annum

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Indian Telecom Sector : Recent Developments

• Liberalisation of Telecom sector has moved at a fast clip, during the last 5 years, which witnessed rapid development & increased investments (both domestic & FDI)

• With high level of private sector participation, the industry has registered high growth in the recent past :

– Growth rate in subscriber base ( past 5 years) - 20 to 25 % per annum

• Private players have entered into Basic telephone services, National & International long distance (NLD) services, in a big way - the 3 major players are Tata, Bharti and Reliance

• Thanks to intense competition, prices for all services have come down during 2002 - STD / ISD rates ( fixed lines) have been fallen significantly; prices for mobile services have followed suit

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Tele-density (per 1000) : 1997 - 2003

2023

29

36

44

54

0

10

20

30

40

50

60

97-98 98-99 99-00 2000-01 2001-02 2002-03

Note : Includes Basic & Mobile

Figures as at the end March

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Village Public Telephony (VPT)

• In the National Telecom Policy (NTP 1999), the Government of India had envisaged the provision of provide telecom facility in rural areas to meet the Universal Service Obligation (USO) by March 2002

• While this target has not been achieved, there has been substantial additions during the last 2 - 3 years.

• Apart from the public sector BSNL the private sector players in the basic telephony sector, have also been provided with specific targets for Village Public Telephones (VPTs)

• The target for VPT’s, for private players was nearly 98,000 by March 2002.

• The March 2002 deadline has since been extended to Dec 2003

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Telecom Equipment Market : 2000 - 01 (contd.)

Equipment Value ( Rs. Mn.)

Infrastructure equipment for Basic & 81,000 Cellular services

Cables (OFC & JFTC) 45,000

Fixed Phone Instruments 3,500

Mobile phone Instruments (legal & grey) 10,000

Others (Routers, RAS, etc.) 40,000

Total 179,500

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Mobile Phone Services

• Mobile Phone Services : Global

• Mobile Phone Services : India

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Mobile Telephony : Global Scenario( Year - 2000 )

Market value of mobile phone : USD 450 Bn. service industry

Growth rate : 36 % per annum

Subscriber base in the Asia Pacific region : 250 Mn.(According to Yankee Group this numberwill hit 575 Mn. by 2005)

China’s subscriber base : 160 Mn

Global mobile handset market for 2002 : 465 Mn.

Global subscribers in 2002 : 1270 Mn.

Average minutes over cell phone : 280-300 per month

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Mobile Handsets : Major Players & Market Share ( 2001) - Global

Nokia34%

Motorola15%Ericsson

8%

Samsung7%

Siemens7%

Kyrocera4%

Panasonic4%

Others21%

By Sales Volume

Nokia is the leader followed by Motorola

Samsung has emerged as a major player

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Major Players & Subscriber Base September 2002

• Bharti is the leading mobile service provider in India, with a subscriber base of 2.3 Mn. customers

Bharti : 2.3

Hutchinson : 1.8

BPL : 1.0

Idea : 1.0

Others : 2.4

Total : 8.5

• Others include Escotel, Spice Communications, Aircel, Koshika, Reliance, RPG, MTNL & BSNL

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Radio Paging Services : India

• Introduction

• Market Size & Subscriber Base : 2000

• Pager Subscriber Base : Growth Trends

• Major Players & Subscriber Base

• Major Players & Revenue : 2000-01

• Major Players & Market Share (%) : 2000-01

• Recent Developments & Future Outlook

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Introduction

• Pager & mobile telephony services were launched almost simultaneously, with paging service being introduced in 27 cities

• Market size ( 2001 -02 ) : Rs. 2 Bn. (including equipment)

• Metros accounts for 50 % of the total subscriber base of paging service

• Pager subscriber base has declined from 0.8 Mn. in March 1999 to 0.53 Mn. by December 2001

• Within a couple of years, mobile telephones have overtaken pagers in India, in terms of subscriber base

• DSS Mobile continues to remain the market leader both in terms of subscriber base & turnover

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The Internet

• Introduction• Global On-line Population• Internet Users - India & Other Countries

• Internet Scenario : India• Growth of Internet Connections & Users : India • Mode of Internet Access in Business Segment• Internet Service Providers (ISPs) : Recent Development• Internet Services : Major Types & Service Providers• Leading ISPs : India• ISPs : Major Players & Plans

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Introduction

• According to eTForecasts, the worldwide Internet users is around 375 Mn. (during 2000-2001)

• Of this, US accounts for 36 %, Japan 7.2%, China 6.0%, Germany 5.1% & UK 4.8%

• Around 40 % of homes in Sweden, US, Australia & Singapore have Internet connections

• Internet users in Asia : estimated to reach 190 Mn. by 2004

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VSAT Services : Contents

• Introduction

• VSAT Industry : Evolution & Growth

• VSATs : Installed Base

• VSAT Industry : Structure

• VSAT Industry : Market Size

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VSAT Services in India : Introduction

• Very Small Aperture Terminal (VSAT) services have become an intrinsic part of the telecommunications landscape in India

• VSAT services provide reach, rapid deployment potential, voice and data communication capability & high reliability

• In 1992, the Government of India decided to give licence for the operation of VSAT services to private companies, heralding the birth of the commercial VSAT industry in India

• VSAT sector's growth was hampered by – Licensing requirements & high levels of licence fee– Restriction of private players to Ext. C band & INSAT satellite– Speed limit of 64 kbps

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Telecom Equipment Industry : India

• Telecom Equipment : Introduction • Telecom Equipment Market : 2000-01

• Telecom Switch Market

• Telecom Cable Market – Jelly Filled Telecom Cables (JFTC)– Optical Fibre Cables (OFC) – Telecom Cables : Major User Segment– Telecom Cables : Current Scenario– Telecom Cables : Future Outlook

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Telecom Equipment : Export (2000 - 01)

Product Value (Rs. Mn.)

Optical Fibre 3000Component 1150Satellite communications equipment 350Telephones 90Mobile phones 45Telecom modules 35Connector boxes 35Others 795

Total 5500

• India's telecommunications equipment export has registered an impressive growth of 222 %, with revenue at Rs. 5500 million ; of this, optical fibre cable has taken a share of 55 %

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Optical Fibre Cables (OFC) : Introduction

• Each pair of OFC can carry more than 10,000 voice channels at a time

• OFC is lighter, flexible and free from any kind of electromagnetic interference

• In OFC data is converted into light signals - this increases the speed of transmission & enables high bandwidth capacity upto 3300 Mhz.

• Major raw material for OFC is Optical fibre, low density polyurethane, jelly, nylon & polyester tape

• While OFC is technically more advanced compared to JFTC & can carry more traffic, OFC is far more expensive

• Sterlite, largest manufacturer of OFC in India has aninstalled capacity of 0.4 million FKm per annum

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Internet Protocol (IP) Telephony

• IP Telephony is an upcoming technology, which allows simultaneous communication -make voice calls, send faxes & still be online, over IP based data networks like Internet

• IP Telephony is classified as :

– Internet Telephony - uses Internet network for voice, low cost, but no assurance of service

– Voice over the Internet Protocol (VoIP) - permits voice traffic over an IP based network, offers quality service

• Since 1 April 2002, IP Telephony is allowed in India

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WLL - Recent Developments

• Government of India has issued, over 125 WLL service licences, out of which Reliance has 18, Tata has 18, and Bharti 6

• Tata Teleservices, BSNL and MTNL has launched WLL based mobile phone services

• Tata has around 0.5 Mn WLL, subscribers (including subscribers of Hughes Telecom, whom they acquired)

• Reliance will launch their services in January 2003

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Profiles of Top Players

• Videsh Sanchar Nigam Ltd. • Mahanagar Telephone Nigam Ltd.• Bharat Sanchar Nigam Ltd. • Bharti Enterprises• Reliance• Hutchison Telecom• Tata Telecom• BPL• Sterlite Optical Technologies Ltd.• Finolex Cables• Telecom Equipment Manufacturers Association• Cellular Operators Association of India

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Mahanagar Telephone Nigam Ltd. (MTNL)

• MTNL was set up on 1st April 1986, by the Government of India; to offer basic services in Delhi & Mumbai

• Over the years MTNL has emerged as India’s leading & one of Asia’s largest telecom operating companies

• MTNL has a market share of about 12 % in the Indian basic telecom services with a customer base of over 4.7 Mn. lines

• Mobile subscriber base : 286,000 (GSM & CDMA)

• On November 7th, 2001, MTNL was listed at the New York Stock Exchange

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Regulatory Aspects & Government Policies

• Telecom Regulatory Authority of India (TRAI)

• Proposed Changes in Legislation

• Telecom Dispute Settlement & Appellate Tribunal (TDSAT)

• Recent Developments in Indian Telecom Industry

• Foreign Direct Investment (FDI)

• FDI Inflow : Telecom Sector

• Sector- wise FDI Inflow - Telecom

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Foreign Direct Investment (FDI)

Foreign Direct Investment is permitted in the following sectors :

Upto 100% in :

• Manufacturing of telecom equipment

• Internet service (not providing international gateways)

• ISPs who are not offering gateway services

• Infrastructure providers (provision of assets such as dark fibres, rights of ways etc.)

• Electronic mail & Voice mail service providers

• Call centres & IT-enabled services

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