Global Leadership – India can do it.

Telecom
Index

• Telecom – Historical Development & Industry Overview

• India’s connection to Global Telecom Leadership

• Mobile leading Telecom growth in India

• India Telecom poised for Global Leadership – Why India can do it

• Reliance’s contribution to Indian Telecom’s Global leadership

Telecom – Historical Development &
Industry Overview
Telecom Industry Overview

• Telecom is considered a basic infrastructure industry, critical for

and integral to a country’s growth

• Various studies by World Bank & LBS suggest that increase in

Teledensity leads to rapid growth in country’s GDP
(US $1 investment in telecom leads to US$ 6 increase in GDP)
Important Developments in Telecommunications
 1844 First telegraph message (between D.C. and Baltimore)

 1876 Bell patents the telephone; first telephone message

 1885 The Indian Telegraph Act

 1895 Guglielmo Marconi sends first radio-telegraph message

 1946 First Mobile Telephone Call

 1982 First cellular telephone system

 1994 National Telecom Policy (NTP 94) Announced by GoI

 1995 Mobile/Cellular Telephony begins in India

 1999 New National Telecom Policy Announced

 2003 Unified License Regime. India 13th in global ranking by cellular

base up from 18th rank during the previous year.

 2005 Aug: India achieves 10% teledensity ahead of schedule. Target

250 Mn subs by 2007
India’s connection to Global Telecom Leadership
India’s connection to Global Telecom Leadership

 JC Bose is credited with simultaneous invention of Telegraph,

independent of Marconi of Italy

 World’s 1st sea cable for telegraph messages was between India &
England (Calcutta to London)

 Among top-5 private Indian companies with over Rs. 1 Lakh Cr. Market
Cap, two are telecom operators. Both are also among top-6 Asian
Telecom operators
Mobile leading Telecom growth in India
Mobile leading Telecom growth in India

Mobile v/s Fixed Line Subs Base (Mn)

100
89.6
80

60 52.2
42.8 49.5
40 46.2
33.7
20

0
Mar 04 Mar 05 Mar 06

Fixed Line Mobile

Mobile exceeded Fixed Line base in FY 04-05.

 India – The mobile juggernaut rolls
Millions

160
136
140 RCL – Soft launch on 28th Dec 02
and
120 Commercial launch on May 1 2003
100
76
80

60 48
NetAds CumSubs
40 28
60
20 10.5
0.8 1.1 1.6 3.1 5.5 20 28
0.03 0.22 17.5
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

•Indian Mobile growth on a J curve

•Reliance’s entry stimulates mobile market growth.
•Subscriber numbers grown over 12 times in last 4 years.
Indian mobile market at an inflection point
India Telecom – Elements of Global Leadership &
Why India can do it
 Why India Can achieve Global
Leadership in Telecom
• Size of New Subscriber Market
• Innovation in Service Offerings
• SMS Usage Leadership
• Well structured Regulatory environment
• Trained Technical & Managerial Manpower
• At Forefront in adopting new technology
• Operational efficiency to maintain profitablility
• Government’s effort to reduce Digital Divide
 India – an Underserved Market &
Potent Mix for explosive Telecom Growth

• An underserved market.

Current
1 2 2 teledens
995
Worl 1.6% 002
19% 003
20% ity at
only
d
Indi - 1.2% 2.9% 18%
a
Chin 0.3% 16% 20%
a
• Half a billion consuming class by 2007.
• A historical 5-6 year lag vs. China - Current base to grow
to 250mn by 2008
• Expected to add 6-7 million subs per month
consistently.
 India – an Underserved Market &
Potent Mix for explosive Telecom Growth

• Population : 1 billion (largest Democracy, 2nd

most populous country)

• Urban pop : 300 million in 5000+ towns

• Rural pop : 700 million in 0.6 million villages

• GDP : $3 trillion (4th largest economy

in PPP terms)

• Telephony : 190 million (top 5 in world)

 Indian Telecom – Net Adds Leader;
Poised for phenomenal growth
Millions

450
388
400
335
350
China India 279
300

250 207
200
136 145
150
76 85
100
48 43
50 28 24
0.03 0.22 0.8 1.1 1.6 3.1 5.5 10.5 13.2
0
Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Yr 11 Yr 12 Yr 13 Yr 14 Yr 15 Yr 16 Yr 17 Yr 18

• India’s Historical 5-6 year lag to China

• China, after peaking at 6 Mn, has come down to 5 Mn net adds pm
• India has already overtaken China and reached nearly 7 Mn net adds pm
• India destined to close the gap with China subs base
Emerging Customer Segments

• Mobile as Utility Tool leading to Emergence of

newer customer segments, contributing to
phenomenal growth:

– Students
– Housewives
– Small Business Owners
– Skilled Labour (ABCD category)
– Quick connection for New Homes / Offices / Shops
Drivers of Growth
 44% population < 19 years; 75% literate
 Working population to grow from 485 mn to 615
Changing mn by 2010
demographics  21 mn professionals and 90 mn graduates/ post
graduates by 2010
 500 mn consuming class by 2007

 Unified licence provides unprecedented

Government flexibility to operators in optimising costs and
Policies services by leveraging technology and
economies of scale
 Introduction of calling party pays (CPP) regime

Low Entry  Drop in the handset prices … lowering the

Barrier entry barrier… Lowering Tariffs… Increasing
affordability
Innovation in Service Offerings

• 1st Prepaid in GSM & CDMA was launched in India along with
simultaneous launch in one more country

• Innovative tariffs & service bundling – unparalleled in world

• Innovative Value Added Services & Useful Applications

LOW PER CAPITA INCOME & LIMITED CREDIT

UNIVERSE LED TO SERVICE INNOVATIONS
SMS Usage Leadership
• India is the leading SMS user, followed probably by Philippines

• In North America, SMS is becoming popular only recently.

• Many sms-based VAS offerings

• Least intrusive, tele-voting, information, contests, etc.

TEXTING IS FIRST NON-VOICE APPLICATION

PREPARING THE USERS FOR NEWER PPLICATIONS
Well structured Regulatory environment

• India has one of the best structured Regulatory Environment – DoT,

TRAI, TDSAT

• India has moved from over-regulated to light-touch environment

• Smooth migration from 2 operator to 4 operator to 6 operator scenario is

Exemplary.
At Forefront in adopting new technology

• India quickly adopted CDMA – 1X directly in 2003, while many

countries moved up gradually from lower versions .

• Earlier, India commenced cellular services with GSM Digital Service

whereas other countries began with Analog Technologies

LATEST TECHNOLOGY ADOPTION HELPED AND CREATED

A LARGE TECHNICAL MANPOWER BASE – ENVY OF WORLD
Technical & Managerial Knowhow –
Uniquely Indian
• Substantial talent pool of Technical & Managerial manpower.

• Sales / Marketing Professionals needed to be innovative for economy –

conscious segments.

• Above two, created a cohesive & integrated Indian Telecom Management

Philosophy.

• Notwithstanding equity-structure, Indian Telcos run by Indians

• By contrast, Indians are running 2 top global Telecom companies –

Vodafone (UK); Orange (France)

THE BOTTOM OF PYRAMID – UNIQUE STRENGTH

Operational efficiency to maintain profitablility

• Inspite of running at lowest tarrifs per minute, Indian telecom cos

continue to run profitable operations with increasing EBITDA
margins

• Using scale benefits to achieve cost & operational efficiency for

higher profitability

• Indian cost-structures & ingenuity has led to best-in-world

efficiencies

INDIAN BUSINESS MODEL IS ADAPTABLE IN

MOST COUNTRIES
Rural Communications

• Govt. of India &Regulatory bodies are making efforts that

Telephony does not remain an urban phenomenon

• USO Scheme for offering Rural telephony, has helped to increase

roll-out of rural telephony services by operators

• Reliancce has simultaneously focussed on both Voice & Data services

in rural/ semi-urban areas

• Usage of modern communication by fisher-folk, farmers & small

traders is catching up

NATION IS COMMITTED TO ELIMINATE DIGITAL DIVIDE

Individual Companies Can Catalyse Sectoral Growth –
Reliance Story
Mobile Market Composition: (Pre – Reliance Entry)

 Limited Coverage

• 29 states

• 4 licensees per state. Some operational since 10 years

• No pan India integrated & convergent player

• Mobile services limited to top 500 towns & high-income individuals

 Limited Features & High Cost

• 2G networks. Only voice & SMS. Limited data & No video

• High entry cost & call charges

• Receiving party pays for incoming calls

• Sub-standard Customer Service offered to subscribers

 Low Mobile Penetration: at 1.2% compared to China at 16% in 2002

Essentially under-served market

Mobile Market - Changing Scenario (Post – Reliance Entry)

RCL’s launch did the following to transform the Indian Mobile Market:

 Increased Network Coverage to even smaller towns & villages

 Reduce Entry Costs: (The legendary Rs. 501 Monsoon Hungama

Scheme)

 Reduce Tariffs & affordability of mobile/telecom service (STD Call @ Post

Card rate - 40p/min!)

 Enhance Customer Service to subscribers

 Taking mobility to the masses
Parameter 1995 2002 2003 2006

ILD Rs. 60 / min Rs. 24 / min Rs18/min Rs 6/min

Rs 3/ min Re 1/min
STD rates Rs. 9.60 /
Rs. 30 / min Rs Rs. 0.40/
( Mumbai – Delhi Call Cost) min
0.40/min min
SMS cost Rs. 4/ msg Rs. 2 / msg 50p/msg 1 p/ msg
Rs 501* /
Entry cost for going mobile > Rs 20,000 > Rs 5000 Rs 1500
Rs 5000
Min cost of Data services
Rs 750/
like news, games on Rs 16.8/ min Free Free
month
mobile etc
* Balance over 36 months

ed a dramatic drop in tariffs making mobile phones an affordable mass

 INDIA HAS DONE IT.
IN TELECOM.

CAN DO EVERYWHERE!