THE INDIAN TELECOM SECTOR

An Industry Profile from

McG

Madras Consultancy Group, Chennai

 Important Note & Disclaimer !

This is a Demo Pack of a comprehensive “Industry Profile” from

Madras Consultancy Group ( McG ), Chennai, India. The data &
information presented herein as well as in the main profile
have been collated from various published sources & McG ’s own
database. The profile is intended to provide the audience a
flavour of the Indian Telecom Sector. Prior to undertaking
any business or investment decision, further detailed investigations /
studies are recommended. This presentation remains McG ’s
intellectual property & no part may be reproduced or circulated on
electronic media, in print form or by email without the prior
permission of Madras Consultancy Group, VI-2, Habib Complex,
3, Durgabai Deshmukh Road, R.A. Puram, Chennai, 600 028, India

Copyright © Madras Consultancy Group 2003. All rights reserved

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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

60
54
50
44
40
36
30 29
23
20 20

10

0
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 number
will 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
By Sales Volume

Others
21%
Nokia
Nokia is the leader
34%
followed by Motorola
Panasonic
4%

Kyrocera
Samsung has emerged
4% as a major player
Siemens
7%
Motorola
Samsung Ericsson
15%
7% 8%

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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 3000

Component 1150
Satellite communications equipment 350
Telephones 90
Mobile phones 45
Telecom modules 35
Connector boxes 35
Others 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 an

installed 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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 To place an order or for enquiries, please contact :

Madras Consultancy Group

VI - 2, Habib Complex
No 3, Durgabai Deshmukh Road
R A Puram
Chennai - 600 028
India

Tel : 91 (44) 2493 9161 / 2493 6321

Fax : 91 (44) 2493 4862
email : [email protected]
web : www.consultmcg.com

Copyright © Madras Consultancy Group 2003. All rights reserved

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