PHASE 2:- HIGH GROWTH PHASE (FY 2001 to 2004)
In 2001, GOI published guidelines regarding
the fourth license for each circle.
FDI was increased to 49%. WLL (wireless in local loop) technology. 2003 - Transition to calling party pays (CPP)
PHASE 3:- ONGOING PHASE (FROM FY 2004 ONWARDS)
In 2005 FDI hiked to 74% In 2007 GOI allowed providers to apply for
Cross Over Spectrum.
New license issued 12 players per circle
Indian Telecom Industry – A Lucrative Option Indian Telecom Industry – Facts
One of the fastest growing cellular markets in the world in terms of number of subscriber additions – 120.00 million (in FY 2009) Expected to reach total subscriber base of about 500 million by 2010 (i.e., more than one phone for every household) More GSM subscribers than fixed-line subscribers.
*USD=50
• Data Source TRAI 2009 Report
Indian Telecom Market Overview
As on 31st March 2009
Telecom Subscribers
- Fastest growing mobile markets in the world
Mobile telecom services provide an unprecedented growth opportunity for companies
Minutes of Usage per Month – Mobile Services
USA
838
India China
461
303
Despite a low teledensity of approximately 34percent, India has the second highest minutes of usage per month. This offers huge growth opportunity to telecom companies.
Russia
88
ARPU* in India – Mobile Services
The declining ARPU implies that India Inc. is tapping a large market at the bottom of the pyramid by reducing tariffs.
* Average Revenues per
User
• Data Source TRAI 2009 Report
ARPU
CDMA Prepaid 72 75 98 82 Postpaid 393 342 360 403 A B C Metro Prepaid 188 175 184 175 GSM Postpaid 534 501 506 587
Estimates for ARPU * • Sharp decline by 18% to reach Rs 150 by FY 2010 • Rs 136 by FY 2011 * Source: Crisil Research
Circle Wise ARPU Trend
MOU (Minutes Of Usage)
The exposure to Telecom sector as on 31 March 2009
is around Rs.9590.97 crore
TELECOM SECTOR
Telecom Services
Telecom Infrastructure
TELECOM SERVICES
Fixed Landline
Subscriber Base (in 000s) Mobile Fixed TOTAL 2004-05 56973 41407 98380 2005-06 98834 41540 GSM 140374
Mobile Service
2006-07 2007-08 2008-09 166051 40780 206831 251806 39309 333586
39909 CDMA 373495
291115
Few Terminologies
Spectrum ARPU – Average Revenue Per User MOU – Minutes of Usage ADC – Access Deficit charges IUC – Inter Connection Usage Charges
Mobile Service Operators
GSM
Lower Tariff plans
CDMA
Higher tariff plans
and cheaper handsets 74% Market Share CDMA players venturing into GSM
and expensive handsets 26% Market Share Low acceptability. Few variety of handsets
Market Structure for Wireless Service (GSM)
Divided into 22 circles 4 metros 19 circles Further divided into A, B and C category based on economic parameters and revenue potential Each circle has a licenses Twelve operators per circle are allowed
Jammu & Kashmir Himachal Pradesh Punjab Haryana Uttar Pradesh W North Eastern States
DELHI Rajasthan Uttar Pradesh E Bihar Gujarat Madhya Pradesh West Bengal
New Players • Datacom Solution • S Tel • Loop telecom • Shyam Telelink • Etisalat DB India (Swan Telecom) • Unitech
Andhra Pradesh
Karnataka
METRO Circles
CHENNAI Tamil Nadu
A Circles B Circles C Circles
Kerala
Source :COAI & TRAI
OPERATOR Bharati Vodafone IDEA
TECHNOLOGY SPECTRUM No of Circles GSM GSM GSM 900 1800 1800 900 1800 13 9 22 7 15 8 13 22 22 22 22 Pan India
Status of Rollout
Pan India rollout in next 12 to 18 months Already Launched Present in 5 markets, rollout in 2 in next 6 months and rest by fiscal end Pan India with both GSM and CDMA.
RCOM
GSM CDMA
900 1800 800 800 and 1800 1800 1800
Tata Teleservice Aircel BSNL(incl MTNL)
CDMA and GSM GSM GSM
CDMA pan India presence, pan India GSM rollout planned Present in 7 markets, pan India GSM rollout by 24 months Pan India
New Players foreign tieups
MARKET SHARE
Wireless Penetration - Circle wise
* Figures in millions
Telecom Regulatory Framework
The Department of telecommunications (Government of India) is the main governing body for the industry. Telephone Regulatory Authority of India (TRAI) assists the Government of India (GoI) to take timely decisions and introduce new technologies in the country.
Indian Telecom Industry Framework
Indian Government Bodies Wireless Planning Handles spectrum and Coordination allocation and management (WPC) DoT – Licensee and Department of Telecommunications frequency management for telecom
Independent Bodies Telecom Commission Group on Telecom and IT (GoT-IT) Exclusive policy making body of DoT Handles ad hoc issues of the telecom industry
Regulatory Framework provides level playing field for all operators
The Department of telecommunications (Government of India) is the main governing body for the industry. Telephone Regulatory Authority of India (TRAI) assists the Government of India (GoI) to take timely decisions and introduce new technologies in the country.
Indian Telecom Industry Framework
Independent Bodies Telecom Regulatory Authority of India (TRAI) Telecom Disputes Settlement and Appellate Tribunal (TDSAT)
Independent regulatory body Telecom disputes settlement body
Ministry of Communication & Information Technology
Licensor Dept of Telecom Regulator Telecom Regulatory Authority of India Judiciary Telecom Dispute Settlement Appellate Tribunal
Unified License Operators Fixed Line Operators National Long Distance Operators International Long Distance Operators Wireless Operators GSM 900 & 1800
CDMA 1800Mh z
Various important regulations and laws have been passed in the Indian telecom industry post-liberalisation era INDIA
BSNL was established by DoT ILD services was opened to competition Go-ahead to the CDMA technology 2002 2000 Internet telephony initiated Reduction of licence fees 3G Spectrum Was Auctioned. In April Airtel launched 3G Service and MTNL in December 11
Private players were allowed in Value Added Services 1994 1992
Independent regulator, TRAI, was established
Calling Party Pays (CPP) was implemented 2003 Unified Access Licensing (UASL) regime was introduced Reference Interconnect order was issued
Intra-circle merger guidelines were established Attempted to boost Rural telephony 2004 2005
Number portability was proposed (pending)
1999 1997
2007 2006 2008
National Telecom Policy (NTP) was formulated
NTP-99 led to migration from highcost fixed license fee to low-cost revenue sharing regime
Broadband policy 2004 was formulated— targeting 20 million subscribers by 2010
Decision on 3G services (awaited) FDI limit was increased from 49 to 74 percent
ILD – International Long Distance
- Financials and Snap shot
PEER COMPARISION
Bharti Airtel Revenue EBITDA EBITDA Percentage PAT ARPU Market Cap 36961 15188 41.10% 8490 305 159002 R- Com 22235 8581 38.50% 5908 224 55243 IDEA 10144 2830 27.90% 901 254 23591.72 6564.3
* Figure in Crores
TTML 2065 624 30.21% 174
Bharti Airtel
FINANCIALS
Revenue 36961 Crore EBITDA 15188 Crore EBITDA Percentage Highest market share Bharti is the best placed
41.1% PAT 8490 Crore ARPU 305 Market Cap 159002.26 Crore
operator : it has access to spectrum in the 900 MHz band in 13 circles Well placed to exploit rural opportunity
R- Com
FINANCIALS
Revenue 22235 Crore EBITDA 8581 Crore EBITDA Percentage 2nd largest Player Recent rollout of GSM
40.5% PAT 5908 Crore ARPU 224 Market Cap 55243.68 Crore
service in 14 circles. Most aggressive tariff plans. Huge capex requirement. Signed tower Sharing agreement with Etisalat
Subscriber & Revenue Share (FY 09)
Idea Cellular
FINANCIALS
Revenue 10144 Crore EBITDA 2830 Crore EBITDA Percentage 27.9 5th Largest player Acquired Spice Telecom -
Crore PAT 901 Crore ARPU 254 Market Cap 23591.72 Crore
Punjab and Karnataka circles.
TTML
FINANCIALS Revenue 2065 Crore EBITDA 624 Crore PAT 174 Crore ARPU Market Cap 6564.30 Crore
Late entrant in the
Market. Foray into GSM will further erode profitability.
Active Infrastructure :-
INFRASTRUCTURE
Consists of antennas, cables, filters, switches and
transmission systems. It accounts for 55% of the total capex that is spent on infrastructure.
Passive infrastructure: Includes towers (racks, battery back-up etc) It accounts for 45% of the total capex. Passive in fracture in semi urban and rural areas is
likely to be shared so as to reduce the capital expenditure and make the service more affordable.
TELECOM TOWER COMPANIES
The telecom tower market size in India is valued at INR 775 bn. Estimated requirement of 321,000 in 2010 and 554,000 by 2015. Projected growth rate of 17% p.a. from 2008-2015. All leading mobile service operators are expanding and increasing their
coverage by:
Increasing their network Increase coverage through tower sharing Using independent tower networks
TYPES OF TOWERS
Ground-based tower (GBT) Towers are erected on ground Height of the towers are in between 200 – 400 feet GBTs are ideally suitable for rural and semi-urban areas Capex involved is in between INR 2.4 – 2.8
TYPES OF TOWERS
Roof-top tower (RTT) Towers are placed on roofs of buildings In terms of height these towers are shorter than GBTs RTTs are ideally suited for Urban areas and metros Capex involved is usually in between INR 1.5 – 2 mn
Tower Capex Demystified
Shelter houses the AC, Battery rack and Base transceiver stations Microwave antennas are used for tower to tower communication Cell site also includes a cabin for security guard Electrical works costs consists of cost of Servo stabilizer, DC power plant, Connection, Installation and Cabling Charges Pre- Opex expenses include expenses for local approvals, Muncipal deposits, civil works for gate and fence.
Major tower companies in India
New entrants
American Tower
Corporation Ramboll Tower Vision Crown Castle
Independent tower companies – Value Unlocking
Highly capital-intensive High depreciation and interest cost makes it
unviable for telecom operator to operate towers on their own.
Tower companies can earn revenue in the
form of rentals and recoverable expenses (like fuel and electricity charges) from tenants.
The tower business may not be profitable if
the tower has just one tenant.
Cost of adding an incremental tenant is quite
low, the new tenant would primarily add to the EBITDA.
Hence, as the tenancy increases the company
starts realising higher margins.
Tenancy Ratio drives the payback period.
900 MHz v/s 1800 MHz
Higher Frequency Higher cost 900 MHz
Larger coverage area and lower base station
requirement. Less capex and lower operating expenses. BTS coverage area is 15 to 20 km
1800 MHz
BTS coverage area is 4 to 5 km. Operating cost is 2.5 times of 900 MHz.
Share of net Additions Subs Market Share Revenue (mn)
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 9% 9% 657 15% 14% 3625 20% 16% 6551 24% 18% 9212 27% 19% 29% 20% 30% 21% 31% 21% 32% 22%
Year 10 33% 22%
11529 13500 15157 16541 17706 18693
Untapped Rural Markets
Urban markets are saturated with teledensity
of approx 80% Rural markets are less penetrated with teledensity of 13.5%
POSITIVES
Untapped market Churn rate is lower. Service provider is
NEGATIVES
Profitability is 7 to
net recipient of termination charge. (Rs 0.20 pm) Customers are relatively less prone to travel - operator to save on roaming charges.
10 % lower than urban. ARPU is low in rural areas – High operating Cost. Inadequate grid power and quality of power supply increases the fuel cost.
Particular Population Avg Subs ARPU Revenue (mn) Cost as a % of revenue Passive Capex Active Capex EBIDTA EBIDTA Margin (%) IRR
3G
A multitude of data related VAS services like
o Mobile TV o Location surveillance o Streaming Video on Demand o Gaming etc. o Video Telephony – Customers can watch and
talk simultaneously through Video Call Significant capacity Currently MTNL and BSNL operate 3 G services. Will help to differentiate services.
Mobile Number Portability
Large and established service providers
witness an increase in their churn rate.
More impact in Urban Saturated Markets. Positive for new players
Value Added Services (VAS)
Person to Application & Application to Person SMS, 15% Ringtone Dow nload, 35% Person to Person SMS, 40% Game & Data, 7% Others (MMS etc.), 3%
Regulatory Issues
Spectrum Allocation. Auction of New licenses. License fee on Tower Firms 3 G allocation
Future Outlook
End of CDMA. Technological Innovations Tariff Wars Consolidation
CONCLUSION
Pressure on Margins Focus on B and C circle – Low Tele density Success of 3 G services. Selective approach should be applied.