TELECOMMUNICATIONS November 2010 TELECOMMUNICATIONS November 2010 Contents Advantage India Market overview Investments Policy and regulatory framework Opportunities Industry associations 2 ADVANTAGE INDIA Telecommunications November 2010 Advantage India For more than a decade, the sector has witnessed a steady addition in wireless subscribers. India has been adding 15-20 million subscribers every month, making it the world’s fastest growing wireless market. Mobile handsets sales in India are expected India is the second-largest telecom market in to reach 138.6 million units in 2010, an High growth the world with 706.4 million subscribers as increase of 18.5 per cent over 2009. Demand Among the on August 31, 2010, which are estimated to for biggest telecom reach approximately 1 billion by 2014. mobile markets in the handsets world Advantage India The Department of Telecommunications (DoT), Liberal Well-defined Telecom Regulatory Authority of India (TRAI), and The telecom sector is one of the highest foreign regulatory Telecom Disputes Settlement and Appellate Tribunal FDI-attracting sectors in India, and has investment framework (TDSAT) have enabled to create well-defined recorded FDI inflow worth more than regime High profitability regulations for the sector such as the National US$ 9 billion between 2000 and 2010. due to a large Telecom Policy 1999 and Universal Service subscriber base Obligation Fund (USOF). An increase in the minutes of usage (MoU) compensates for the decline in tariffs, thereby contributing to healthy revenue growth. India has one of the highest minutes of usage (MoU) per subscriber per month, at more than 400 minutes. Sources: ―TRAI: The Indian Telecom Services Performance Indicators (April - June 2010),‖ TRAI website, http://www.trai.gov.in/Default.asp, accessed 20 November 2010; ―TRAI: Spectrum Management and Licensing Framework,‖ TRAI website, http://www.trai.gov.in/Default.asp, page 18, accessed 20 November 2010; ―Fact Sheet on Foreign Direct Investment (FDI) from August 1991 to September 2010,‖ Department of Industrial Policy & Promotion, http://dipp.nic.in/, accessed 20 November 2010; Framework India 2012: Telecom growth continues, Ernst & Young – Telecom Report, 2008; ―Telcos to recoup 3G bid money in 5-6 years: Analysys Mason,‖ livemint website, http://www.livemint.com/2010/05/30230743/Telcos-to-recoup-3G-bid-money.html, accessed 30 November 2010; ―Gartner Says Indian Mobile Handset Sales To Reach 138.6 million in 2010,‖ Gartner website, http://www.gartner.com/it/page.jsp?id=1412313, accessed 30 November 2010 3 TELECOMMUNICATIONS November 2010 Contents Advantage India Market overview Investments Policy and regulatory framework Opportunities Industry associations 4 MARKET OVERVIEW Telecommunications November 2010 Market overview • The telecom sector in India has witnessed unparalleled growth by global standards in the last decade and continues to be one of the country’s biggest success stories. This growth has been built on the wireless revolution. • At the end of August 2010, tele-density was recorded at 59.6 per cent with a total telephone subscriber base of 706.4 million. • By 2014, the wireless subscriber base is expected to reach approximately 1 billion to include around 572 million urban subscribers and 468 million rural subscribers. • Revenues of the Indian telecom industry are projected to reach US$ 45 billion by 2012, compared with US$ 33 billion in 2009. • Key players in the Indian telecom market are Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Limited (MTNL), Bharti Airtel Limited, Reliance Communication, Vodafone, Idea Cellular, Aircel and Tata Teleservices. Sources: ―TRAI: The Indian Telecom Services Performance Indicators (April - June 2010),‖ TRAI website, http://www.trai.gov.in/Default.asp, accessed 20 November 2010; ―TRAI: Spectrum Management and Licensing Framework,‖ TRAI website, http://www.trai.gov.in/Default.asp, page 18, accessed 20 November 2010; Framework India 2012: Telecom growth continues, Ernst & Young – Telecom Report, 2008; ―TRAI Press Release No 53 /2010,‖ TRAI website, http://www.trai.gov.in/Default.asp, accessed 20 November 2010 5 MARKET OVERVIEW Telecommunications November 2010 Market segments Telecom sector Radio paging and VSATs and Basic services Wireless services Internet services GMPCS PMRTS • The Indian telecom industry can be primarily divided into basic, cellular and internet services. It also has relatively segments such as radio paging services, very small aperture terminals (VSATs), public mobile radio trunked services (PMRTS) and global mobile personal communications by satellite (GMPCS). 6 MARKET OVERVIEW Telecommunications November 2010 Market segments — wire line • The subscriber base of wire line services stood Market share of wire line services as on August at 36 million as on August 2010, with a 31, 2010 (per cent) teledensity of 3 per cent. 0.5 0.1 • Public sector undertakings — BSNL and MTNL 3.4 BSNL — have a major share of the wire line market 3.4 covering more than 80 per cent. 8.9 MTNL Bharti • MTNL is present in Delhi and Mumbai, while 9.7 BSNL covers the rest of the country. Tata Reliance • Although private players such as Tata Teleservices, Bharti Airtel and Reliance have 74.0 HFCL registered significant growth, BSNL continues to Sistema dominate the segment in terms of wire line subscriber base. Sources: ―TRAI: The Indian Telecom Services Performance Indicators (April - June 2010),‖ TRAI website, http://www.trai.gov.in/Default.asp, accessed 20 November 2010; ―TRAI Press Release No 53 /2010,‖ TRAI website, http://www.trai.gov.in/Default.asp, accessed 20 November 2010 7 MARKET OVERVIEW Telecommunications November 2010 Market segments — wireless • The wireless segment includes GSM and CDMA Market share of wireless services as on August services and is much larger than the wire line 31, 2010 (per cent) segment in India. The segment is growing steadily because of the convenience and utility it offers. 0.4 0.1 Bharti 6.7 Reliance • The subscriber base of wireless services stood at 21.1 Vodafone 670.6 million as of August 2010 with tele-density 10.9 of 56.6 per cent. Tata BSNL 11.3 • As of June 2010, the wireless market recorded 17.2 Idea 527. 6 million GSM subscribers accounting for 83 Aircel per cent of the market and 107.9 million CDMA 11.5 Unitech 17.0 subscribers accounting for the remaining 17 per Others cent. • Private players such as Bharti Airtel Limited, Note: Others include Sistema, MTNL, Videocon, Loop, Stel, Reliance Communication, Vodafone, Tata, BSNL, HFCL, and Etisalat. Idea Cellular and Aircel cumulatively hold a major Sources: ―TRAI: The Indian Telecom Services Performance Indicators (April - June 2010),‖ TRAI website, share of the wireless market. http://www.trai.gov.in/Default.asp, accessed 20 November 2010; ―TRAI Press Release No 53 /2010,‖ TRAI website, http://www.trai.gov.in/Default.asp, accessed 20 November 2010 8 MARKET OVERVIEW Telecommunications November 2010 Market segments — broadband and the Internet • High growth in broadband outreach is expected to drive the next phase of growth in the telecom industry. While broadband connections are increasing rapidly, their reach in India is still at 0.7 per cent, as against the worldwide outreach of 8.1 per cent. • As on August 31, 2010, the subscription base of broadband was 10.1 million. Broadband subscribers are expected to grow to 30 million, while Internet subscribers are expected to grow to 45 million by 2012. • Key players in the segment are BSNL, MTNL, Bharti, Tata Communication, Reliance Communication, Sify Technologies, YOU Telecom, Data Infosys and Hathway Cables. • Following the 3G and Broadband Wireless Access (BWA) auction, the data sector is expected to grow rapidly. Sources: ―Fact Sheet on Foreign Direct Investment (FDI) from August 1991 to March 2010,‖ Department of Industrial Policy & Promotion website, http://dipp.nic.in/, accessed 20 November 2010; ―TRAI Press Release No 53 /2010,‖ TRAI website, http://www.trai.gov.in/Default.asp, accessed 20 November 2010 9 MARKET OVERVIEW Telecommunications November 2010 Market segments —VSAT • At present, there are eight VSAT service Market share of VSAT services as on providers in India, including BSNL, Bharti June 30, 2010 (in per cent) Airtel, Hughes Communications India Ltd 0.7 and HCL Comnet Ltd. 2.1 0.1 Bharti Airtel Limited Hughes Communications • The number of VSAT subscriber services 4.6 Ltd. 10.2 HCL Comnet grew by 4,311 to 128,406 for the quarter 30.9 ending June 2010. The market for VSAT Tatanet Services services registered 3.5 per cent growth in BSNL the quarter ending June 2010. 21.4 Essel Shyam • Bharti Airtel is the current market leader, Infotel Satcom with a market share of 30.9 per cent, 30.0 followed by Hughes Communications India Bharti Broadband Ltd, which has a market share of 30.0 per cent. Sources: ―TRAI: The Indian Telecom Services Performance Indicators (April - June 2010),‖ TRAI website, http://www.trai.gov.in/Default.asp, accessed 20 November 2010; ―TRAI Press Release No 53 /2010,‖ TRAI website, http://www.trai.gov.in/Default.asp, accessed 20 November 2010 10 MARKET OVERVIEW Telecommunications November 2010 Other segments Radio paging services PMRTS GMPCS Global Mobile Personal Communications by Satellite (GMPCS) services were launched in India Radio paging services were in 1999. These services allow a subscriber to launched in India in 1995. communicate with others from any point on earth At present, all but four As of June 2010, five operators are offering