Proposal On WiMAX For Nepal To Updated as on 23rd June, 2010

Tele Net Pvt. Ltd5th Floor, Lucky Tower, TripureshworKathmandu, NepalEmail: prasunjalan@gmail.comPh No: +977-1-4254546

Confidentiality

This document contains Trade Secrets, Commercial Information or otherproprietary information of TeleNet Private Limited is Privileged or Confidential. It isconsidered exempt from disclosure under the provisions of the Freedom ofInformation Act and/or other applicable statutes. It is submitted exclusively forinternal use for the purpose of determining whether to retain TeleNet on thecondition that its contents will not be released or otherwise utilized. Thisinformation is not to be copied or distributed to persons outside the evaluationprocess without the prior written consent of TeleNet

Table of Contents

I. Nepal- An IntroductionII. What Is The Telecom Status?III. What Is The Broadband Status?IV. Why WiMAX For Nepal?V. What Are The Business Models?VI. Proposed Structure Of BusinessVII. Why Tele Net (Lucky Group)?VIII.What Are The Expectations?IX. Responsibility MatrixX. Appendix

• Nepal, is a landlocked country in South Asia and the world's youngest republic. It is bordered to the north by China, and to the south, east, and west by India

• Population is around 30mn with youth contributing over 40% and Nepal is 41st most populous country

• Divided in to 3 regions- Mountain, Hills and Terai, Nepal has 14 zonal administrations• GDP of Nepal is estimated to be $31bn with 40% contribution by service sector and

annually Nepal has $2.6bn foreign remittance which leaves a deep pocket to an average Nepali consumer to spend on luxurious goods

• The major trading centers in Nepal are Kathmandu, Birgunj, Pokahara, Narayanghat, Biratnagar, Dharan and Butwal where most of the output is sold

• Nepal has 8 major entry and exit points with an International airport in Kathmandu• Nepalese have a good appetite for luxurious brands and most of the major luxurious

cars, electronics, hotels, consumer brands are present here• Country has 25% corporate tax and 13% VAT

Nepal- An Introduction

What Is The Telecom Status?

• According to the Nepal Telecommunication Authority, Telecom circle in Nepal is divided into 2 areas- Whole Nepal and rural areas

• Curently there are two GSM operators in Nepal- Nepal Telecom and Ncell (Telia Sonera) with combined subscriber base of 5.8mn. There are two CDMA operators, Nepal Telecom and UTL (MTNL, VSNL JV) with combined subscribers base of 0.8mn. Also, there are 2 other operators in rural areas which have obtained license to develop telecom in rural areas

Y-oYGrowth

35%

What Is The Broadband Status (1/2)?• In Nepal, broadband users are estimated to be 1mn+ including wifi sharing, a total penetration of only 3.0%. VOIP

has a major dominance in outbound voice services in Nepal• Currently there are 35+ ISPs but only 5-6 ISPs actively contributing to the broadband penetration• The technology used are: dial up, ADSL, Cable Modem, radio link (wi fi),GPRS,EDGE,CDMA 1x, CDMA 1x EVDO,

3G(WCDMA), E1 Leased lines etc• Key reasons for low penetration are

– lack of wire line infrastructure, still 50% of the Nepal is facing issues with connectivity– Issues related to the cost of laying cable infrastructure– Use of traditional methods of internet supply and very less investment in infrastructure upgrade

• Nepal is a mountainous country and considering the cost of laying fiber to home, WiMAX can greatly contribute to broadband penetration.

• User size of GPRS compared to broadband validates the need of a reliable broadband service in Nepal

ADSLY-oY

Growth109%

OverallY-oY

Growth including

GPRS407%

What Is The Broadband Status (2/2)?

• Notes– The above analysis excludes ADSL users of NTC– In the analysis, it was found that the overall market is growing and expected to grow at 25-30% annually– There is no official data available as in India about market segmentation and the above data has been

gathered through our relationship with various ISPs and internal research– There is no government policy to identify a minimum speed to recognize a broadband conection

Break-down of broadband market in Nepal

Why WiMAX For Nepal?

• This is one of the most important questions asked internationally• Nepal is a hilly and mountainous region, considering this laying down fiber network as backhaul, at home is

commercially not feasible in at least 50% of the geography• Elevation of buildings and target markets is not high compared to other nations, thus providing with netter line of

sight• Many lucrative areas are underserved considering distance and spread of operation, after WiMAX implementation,

not only consumer but also wholesale business with banks, NGOs, INGOs, government entities, companies would grow at increasing rates

• Current broadband penetration is very low and key reasons are more operational than market acceptance• Users rely on CDMA or GSM GPRS for internet connectivity and Nepal Telecom even with better connectivity in

terms of broadband has not been able to fulfill the demand• Tele medicine and schools connectivity, though very niche but can act as a monopoly market for WiMAX as

currently it is either being done through VSAT or compromising wifi• Banks, corporate institutions require better and dedicated connectivity which is currently coming at high price due

to large distance between the ISPs POP and user location• Nepal can really be an attractive market for WiMAX as the bandwidth price and penetration is much lower

compared to other South Asian countries where millions of dollar are paid for bandwidth and market is competitive for target consumers

• Target market can be profiled and BTS can be installed• In Nepal scenario, it would prove to be the most reliable technology for users considering the quality of fiber which

is over the air and not under ground and also scattered market can be served• Our group is confident in delivering the right approach and assures returns which due to lack of database cannot

be presented in a attractive manner

What Are The Business Models? (1/3)I. Rural Wireless Broadband Access:

This is a tender which would be floated by the Nepal Telecommunications Authority within a month under theassistance of Asian Development Bank. Key features of the tender include

– The programe is being implemented under the grant assistance of ADB and has to be fully completed by2015. Nepal has signed an agreement with ADB under which it will get a grant of $7.9mn for rural ICTdevelopment

– 38 rural districts of Nepal is covered which is 50% of the total 75 districts of Nepal– The company getting the license would get WiMAX spectrum and permission to operate WiMAX free of cost– The licensee may operate all the possible services under the spectrum including voice, data, call

termination, STD, ISD and other services– Company can offer services in pan Nepal after fulfilling the commitments in the districts mentioned– Any of the parties involved in the tender needs to have a broadband service provider experience of atleast 5

years, our company created to run this service has been recently approved by the NTA and we expect ourpartners to bring in this experience. In the case of no experience between any of the parties, this can bebrought within Nepal

– This tender provides an excellent opportunity to have a green field WiMAX set-up at a lower cost withmonitory assistance

– Key challenges under this would include inter connecting BTS considering few hilly and mountain regions.The rural areas mentioned by the government would not generate immediate profits but its attractionsinclude e-goverenence project to be Implemented by the government under which our infrastructure wouldbe used; connecting banks ATMs, branches to the head office, which is currently facing a lot of connectivityissues and after the project implementation it would involve increase in banking connectivity transactions;others include tele-medicine, connecting schools, connecting NGOs and INGOs, which would be our targetcustomers

What Are The Business Models? (2/3)II. Independent WiMAX operator under general licensing scheme

Government of Nepal is planning to issue WiMAX license to an independent operator. Keyfeatures of this include

– After closing the process of awarding the rural wireless access broadband licensee, theprocess would start to provide a single operator with spectrum to launch WiMAX service inNepal

– The company would not have any commitment to fulfill in rural areas and can launch theservice in any city

– Extra facilities such as voice, call termination, STD and ISD is not yet cleared but a companycan run VOIP for call origination only and not termination

– Key challenges include• Large numbers of companies to participate in the bidding process• Spectrum allocation and bandwidth is not yet clear• It would involve similar issues faced by companies in India in terms of bidding process

and timeline

– However, we can explore this opportunity as well depending upon the market scenario anddiscussions

What Are The Business Models? (3/3)III. Managed Service Model with Nepal Telecommunication Corporation

This is the most attractive and feasibly business model for Nepal. NTC is an incumbent telecomoperator in Nepal similar to BSNL in India. The government of Nepal would also provide NTC withpermission to operate WiMAX in Nepal and also NTC already has 2.5GHz to run WiMAX. Keyfeatures include

– NTC has an infrastructure ready which can be utilized for WiMAX– They are present in all the 75 districts of Nepal and target customers can be achieved easily– NTC is considered to the most reliable and has the best brand value in Nepal– We have already proposed NTC for managed service model and awaiting clearance which

would not take much time, once a partner is finalized– This business model is similar to the franchisee model being adopted by BSNL in India under

which the partner has to pay a certain percentage of revenue to NTC– Our Company’s key strength lies in this business model and already providing manage

service to NTC for its entire VAS portfolio including 3G VAS– Key challenges include, may be a time consuming in getting all the clearance but can be

managed considering the cost saving and already created brand

Our Company’s core strength lies in working with NTC and this business model can be implemented sooner than any other WiMAX operator/model in Nepal

Proposed Structure Of Business

• Regarding the Business model, we propose the following three options which can be then discussed upon.

I. 50-50 JV between Tele Net (TN) and SOMA (SN)– SOMA and Telenet to create a company wherein both the parties would invest equity and then take control of the

respective domain expertise (SOMA would take care of hardware and software and Tele Net all the activities related to operation, marketing, selling, service, call center and liaising). Profits/loss would be shared equally.

II. SOMA to invest in Network Infrastructure and Tele Net in operation, marketing and selling.– SOMA would take care of the connectivity and TN to take care of marketing and selling the product to the

consumer including investment in CPE and related manpower. Net revenue after NTC's share would be then distributed equally between the parties

III. Both the parties to invest in the domain mentioned in point no:2– Both the parties would recover their CAPEX and expenses during an agreed timeline and the surplus to be

distributed equally between the parties.

We understand SOMA as an expert technology partner and Tele Net as an expert retail partner. We would be glad toknow about your company's and industry's best practices in a managed service model and a proposal if required.Please let us know about the options proposed by us and your company's views

Why Tele Net (Lucky Group)?

• We are one of the largest and most trusted business group in Nepal with presence in all the sectors including manufacturing, trading and services

• We have excellent relationship with all the concerned authorities and command a good repute• Our all major business have proved to be the most successful in Nepal such as we are the largest

mobile handsets company in Nepal within two years of operation with brands such as HTC, Spice and our owned COLORS Mobiles

• We are the largest mobile VAS company in Nepal and providing services to NTC on an exclusive basis

• We have our distribution network throughout Nepal with sales workforce• Our organization is professionally run with decentralized departments and business heads• We have already made a presentation to the government of Nepal including ministers to launch

WiMAX and would play a lead and key role in formulating WiMAX policies• Our group’s core strength lies in trust, optimism, distribution network, repute and relationships

which makes us unique and one of the largest• Companies internationally have been glad work with us recognized our business model, we work

with companies such as ZTE, Ericsson, Heisen and Spice Group for our operator business• For further information, our website is www.luckygroupnepal.com

What Are The Expectations?

• From Tele Net– Strong partner in Nepal with wide

network and strong repute– Local expertise in terms of market

knowledge, marketing, administration, relationships

– Networking, legal formalities, coordination with local government

– Long term commitment, optimist approach

– Leveraging distribution network, sharing market knowledge, promotion of product,

– Making the business as one of the largest in its domain which is proved in our other business domains

– Advisory on suitable business model

• From Business Partner– Strong partner with experience in

WiMAX– Technical expertise in terms of

technology, product experience, international market knowledge

– Worked in any of the business models proposed

– Long term commitment, optimist approach

– Leveraging market , promotion and product knowledge

– Dedicated professional to educate and promote the product in initial phase

– Support for RF planning, equipment deployment

– Jointly selection of the best business model

Appendix (1/3)Current internet connectivity of major ISPs

Appendix (2/3)

Appendix (3/3)Current internet connectivity of major ISPs