Strategic Outlook of Indian Telecommuication

STRATEGIC OUTLOOK OF

INDIAN TELECOMMUNICATION

Presentation By: Abhisek Khatua

Indian Telecom: An Overview

• Subscriber Base of 1036.57 Million at the end of December,2015; 2nd Largest Telecom Network in the world.2nd Largest Subscriber Base

• Internet Subscriber Base of 331.66 Million at the end ofDecember, 2015; 3rd Highest in the world, CAGR 52.11%.

3rd Highest Number of Internet Subscribers

• Mobile based Internet is key component, 7 out 8 usersaccessing Internet through Mobile.

Most of the Internet accessed through Mobile Phone

• Urban Tele-density stood at 152.57 and Rural Tele-densitystood at 49.42.Increasing Penetration Rate

• Availability of affordable smart phones and Lower rates areexpected growth drivers.Affordability and Lower rate

• $71.2 Billion in FY14, grew at 10.7% compared to FY13.Surging Telecom Revenues

@Data Source: DOT , Annual Report-2015

Indian Telecom: The Notable Trends

Wireline Vs Wireless

10%

90%

Public Private

Connections (Public Vs Private)

2%

98%

WirelineWireless

44.01% 48.04% 49.42%

75.23% 79.36% 81.85%

145.46% 149.04% 152.57%

APR' 2014 APR' 2015 DEC' 2015

Rural Tele-density

Overall Tele-density

Urban Tele-density

Tele-density (81.85%)

@Data Source: DOT , Annual Report-2015


Green Telecom: Aimed at reducing Carbon Foot Print through low energy consumption; Moreenvironmental concern and more investment.

FDI Policy: FDI Limit 100%, More Foreign Capital Inflow.

BharatNet (NOFN): To connect 2.5 Lakh Gram Panchayats, Govt. approved Project“National Optical Fiber Network”; Non-Discriminatory access to Network in rural areas.

Unified License: National Telecom Policy-2012: One Nation-One License acrossservices and service areas. Spectrum Allocation through Bidding, delinked from License.

Extension to Rural Market: 62443 Uncovered Villages, Subsidy support from Govt.’sUniversal Service Obligation Fund, increasing rural subscriber base and tele-density.

Outsourcing of Non-Core Activities: Network Maintenance, IT operations and CustomerService; efficiency increased but responsiveness is pain area.

Mobile Banking: In May’ 2015, 340 Million Mobile Banking Transactions reported (75% upfrom a year ago); Due to affordable smart phones and rise in security level, More Mobile Internet.


Regulatory Frameworks

• Compensate consumers in case of call drop.

• Reduction in License Fees from 8% to 6% of Adjusted Gross Revenue.

• Monitoring of POI on monthly basis by TRAI.

Research & Development

• C-DOT, R&D arm of DoT

• Focus on Satellite Communication, Telecom Security.

• Innovative Telecom Solutions and Innovations

Emergence of BWA Technology

• Wireless Communication include BWA Technologies such as WiMax & LTE.

• Greater importance in 4G.

Emergence of Tower Industry

• Surge in Subscriber base prioritized Network Expansion.

• Significant Investment in Telecom Infrastructure.

• Creating Separate Company for lowering down the operational cost & improving capital structure.

Indian Telecom: 3 Segments

Indian Telecom

Internet Services

Fixed-Line (Wireline)

Mobile (Wireless)

Comprises establishments, operating and maintainingswitching and transmission facilities to provide directcommunications via airwaves.

Consists of companies that operate and maintainswitching and transmission facilities to provide directcommunications through landlines, microwave or acombination of landlines and satellite link-ups.

Includes Internet Service Providers (ISPs) that offerbroadband internet connections through consumer andcorporate channels.

Indian Telecom: The Value Chain

Telecom Infrastructure

Network Equipment

Network Operator

Subscriptions and Devices

Resellers

Content Portals Subscribers

• Indus• Reliance

Infratel• Bharti

Infratel• QTIL• GTL

• Nokia-Siemens

• Huawei• Ericksson

• Airtel• Vodafone• Idea• Reliance

• Sumsung• Lava• HTC• Outlet• Dealers

• Social Media

• App StoresConsumers

Indian Telecom: Key Players

24%

19%

17%

11%

8%

8%

6%7%

Bharti Airtel Vodafone Idea

Reliance Aircel BSNL

Tata Others

Wireless Segment (Airtel Dominates)

Top 5 players accounts 78.27% of Total Subscriber

60%14%

14%

7%4%

1%

BSNL MTNL Bharti Airtel

TATA Reliance Others

Fixed Line Segment (BSNL Dominates)

Top 3 players accounts 87.46% of Total Subscriber

23%

20%

16%

16%

9%

16%

Bharti Airtel Vodafone

BSNL Idea

Reliance Others

Broadband Subscription (Airtel Dominates)

Top 5 players accounts 84% of Total Subscriber

@ Data Source: DoT, Annual Report-2015

Indian Telecom: Industry Analysis

Competitive Rivalry• Customers’ low switching cost and price sensitivity

are increasing competition among players.• High exit barriers are also intensifying competition.• There are around 6 to 7 players in each region,

leading to intense competition.

Threat of New Entrants• Strict government regulations.• Extremely high infrastructure setup cost.• Difficulty in achieving economies of scale.

Threat from Substitute Products

• Hardly any threat of substitute products as there is no substitute available in the market. (Skype, Messaging Apps likes Whatsapp, Hike, Line)

Bargaining Power of Suppliers

• High bargaining power of suppliers as there are just a few suppliers in the sector.• High cost of switching suppliers.

Bargaining Power of Buyers

• Low switching cost and mobile number portability give customers high bargaining power.• Customers are price sensitive.

Porter’s Five Forces

Indian Telecom: Industry Analysis

Growth Drivers

Sector Benefits From Rising Income, Growing Young Population

Growing Demand Increasing InvestmentPolicy Support

Higher real income (growing at CAGR 8.87%) and changing lifestyles

Growing youngpopulation

Increasing MOU and data usage

Reduction in license fee

Relaxed FDI Norms

Encourages firms to expand to rural areas

Higher FDI inflows

Increasing M&A activityInviting

Resulting in

Indian Telecom: Competitor Analysis

Bharti Airtel: An Inspiring Success Story

• Set up in 1995, it is world’s 4th largest telecom operator withpresence in 20 countries.

• It is the country’s leading mobile operator, with a customerbase of 235.2 million (increased at CAGR 37.79%) as ofSeptember 2015.

• Revenues increased at a CAGR of 13.3% from $6.3 billionin FY08 to $15.1 billion in FY15.

• The company had expansion plans in Africa to tap the hugegrowth potential.

• It became the first Indian telecom company to offer 4Gservice on mobile phones (April, 2012).

Airtel operates in all 22 Telecom circles in India

Important Service Offerings:

2G, 3G, 4G,

Airtel Wifi Zone (NCR, Mumbai, Mangalore, Bangalore)

Airtel Money: m-Commerce platform for financial transactions, pan Indian presence.

Smart Drive: Navigation App exclusively available for Airtel Customers(Bangalore, Mumbai & NCR).

@ Data Source: Airtel Corporate Website


Vodafone: The Tough Guy

• Set up in 1994, it is one of India’s leading mobile operators,with more than 188.2 million subscribers as of September2015.

• Vodafone's revenues from India increased at a CAGR of8.44% to $6.7 billion during FY08–15.

• Vodafone Group plans to invest heavily in the establishmentof a fibre-optic network in India.

• Gujarat, Uttar Pradesh, Maharashtra, and West Bengaltogether account for over 45% of the total customer base.

Vodafone operates in all 22 Telecom circles in India

Important Service Offerings:

2G, 3G, 4G

m-pesa: m-commerce platform for financial transactions, partnered with ICICI & HDFC Bank.

Vodafone Stores: Total 675 stores, Total mini stores 3083, 34 Vodafone Angel Stores (entirely staffed by women)

@ Data Source: Vodafone Corporate Website


Idea: The “!” Mark

• Set up in 1995, 3rd largest mobileoperator by subscriber base.

• 2G, 3G, 4G offerings.

• The best gainer of MobileNumber Portability

• Idea Money: m-commerceplatform

Aircel: The Best Economical

• Set up in 1999, fastest growingmobile operator by subscriberbase.


• Aircel Business Solutions(ABS)

• Aircel offers most economicalcall rates.

• Best Telecom Service provider(2015 Survey by Mint & InstaVanni)

Reliance Communication: The M&A King

• Set up in 2002, subsidiary ofReliance Anil DhirubhaiAmbani Group.


• Acquisition of MTS, January-2016.

• Merger of wireless businesswith Aircel, Septemeber-2016.

• Ultraband: Service offeringinternet speeds of up to 1 Gbpsin selected locations in Mumbaiand Navi Mumbai, April-2016@ Data Source: Respective corporate Websites


BSNL & MTNL: The State Childs

• Set up: BSNL-2000, MTNL-1986.

• BSNL-largest fixed Telephony &Broadband provider.

• BSNL-DataOne (Post paid),NetOne (Broadband), 3G, 4Gofferings.

• MTNL-Service provider inMumbai & New Delhi.

Major 3G Spectrum Holders

@ Data Source: Dataregion

The Game Changer: Customer Satisfaction Matters a Lot!!!

The 4G Age Started

Let’s have a look on 4G Band Holders -Telecom Circle-wise

Telecom Circle Airtel Reliance Jio Vodafone Idea Cellualr BSNL AircelDelhi BAND 3, 40 BAND 3, 40 BAND 3 No No NoMumbai BAND 3, 40 BAND 3, 5, 40 BAND 3 BAND 3 No NoKolkata BAND 3, 40 BAND 3, 40 BAND 3 BAND 3 No BAND 40Andhra Pradesh BAND 3 BAND 3, 40 No BAND 3 No BAND 40Gujarat BAND 3 BAND 3, 40 BAND 3, 40 BAND 3 No NoKarnataka BAND 3, 40 BAND 3, 40 BAND 3 BAND 3 No BAND 40Maharastra BAND 40 BAND 3, 40 BAND 3 BAND 3 No NoTamil Nadu BAND 3 BAND 3, 40 No BAND 3 No BAND 40Haryana BAND 3, 40 BAND 3, 5, 40 BAND 3 BAND 3 BAND 41 NoKerala BAND 3, 40 BAND 3, 40 BAND 3 BAND 3 BAND 41 BAND 40Madhya Pradesh BAND 3, 40 BAND 3, 5, 40 BAND 3 BAND 3 BAND 41 NoPunjab BAND 3, 40 BAND 40 BAND 3 BAND 3 BAND 41 NoRajasthan BAND 3 BAND 3, 40 BAND 40 No BAND 41 BAND 40Uttar Pradesh (East)BAND 3 BAND 3, 5, 40 BAND 3, 40 BAND 3 BAND 41 NoUttar Pradesh (West)BAND 3 BAND 40 BAND 40 BAND 3 BAND 41 BAND 40West Bengal BAND 3 BAND 3, 40 No BAND 3 BAND 41 NoAssam No BAND 3, 5, 40 No BAND 3 BAND 41 BAND 40Bihar BAND 3 BAND 40 No No BAND 41 BAND 40Himachal Pradesh BAND 3, 40 BAND 3, 5, 40 BAND 40 BAND 3 BAND 41 NoJammu & Kashmir BAND 3, 40 BAND 5, 40 No BAND 3 BAND 41 BAND 40North East BAND 3, 40 BAND 3, 5, 40 No BAND 3 BAND 41 BAND 40Orissa BAND 3, 40 BAND 3, 5, 40 No BAND 3 BAND 41 No

BAND 5 LTE FDD (850 Mhz), BAND 3 LTE FDD (1800 Mhz), BAND 40 LTE TDD (2300 Mhz) and BAND 41 LTE TDD (2500 Mhz)

@ Data Source: Dataregion

Indian Telecom: Jio Entry

“The Way I see Jio is that it is not a telecom business. It is an Internet business that also provides connectivity” -Mukesh Ambani

Digital Revolution

• Need of Digital Tools & Digital Skills.

• India ranked 155th of 230 countries.

• Jio promised to take India to Top 10.)

Digital Life

• Data is oxygen of Digital Life.

• Exponentially growing Data Demand.

• Realization Digital India Vision.

Jio Ecosystem

• Best quality broadband network

• Compelling apps and content

• Superior digital services experience

• Affordable and simple tariffs

• Affordable, cutting-edge devices

Jio Network

• India’s first all IP network• Mobile video network• True 4G covering 18,000

Cities,2 Lakh villages• Voice over LTE (VoLTE)• Data-strong network built

for Internet• Future Proof –5G, 6G

ready

Dedicated to 120 Crore Indians: A tribute to realize the Digital India Vision of Hon’ble Prime Minister Shri Narendra Modi.

@ Date Source: Jio Corporate Presentation


“From September 5 (2016), India will change forever” -Mukesh Ambani

• Flame, Wind, Water, Earth Lyf Device (Affordable Smart Phones).

• Fuelled 4G Ecosystem@ Date Source: Jio Corporate Presentation


“Jio is the creation of the Young, by the Young and for the Young.” -Mukesh Ambani

My Jio Applications became the most downloaded Application on Google Play and AppleStore India on September 2, 2016. My Jio Applications will be free for customers till end of2016 (the Jio subscription worth of ₹ 15000 annually)


Student Plan (Future Ready Market)

• 25% More Date• Connecting 30,000 Schools

@ Date Source: EY Research on Global Telecom Trends-2020 & Jio Corporate Presentation


The Big Dream

100 Million customers (i.e. 10% of 1Billion Mobile Users) in shortestpossible time span.

The present market leader Airtel took15 years to achieve it.

@ Date Source: Jio Corporate Presentation

Indian Telecom: The Strategic Moves

The Merger Game: RComm & Aircel

The Costly Bid of Airwaves: 7 incumbents, 7 bands of 800 Mhz, 900 Mhz,1800 Mhz, 2100 Mhz, 2300 Mhz, 2500 Mhz and the most valuable 700 Mhz

Fighting over Interconnection & Blame-Game (Idea/Jio, Airtel/Jio)

Strategic Partnerships (Between incumbents in different services anddifferent service areas

Equity Infusion: Vodafone is going to infuse ₹ 20100 Cr

Vodafone Leadership Structure Rejig

Free-Free-Free & Cost Effective Mania Service Offerings

Advice To Jio

Burn the Bottom Line for 700 Mhz Airwave: High Future Pay-off is there.

Jio-Giri: Data-Giri: Marketing 3.0 (Occasional Data User, Light Data User and Heaviest DataUser)

Quality Subscribers (Follow hard Price Sensitive Consumers : No, Make Consumers PriceAware: Yes)

Stick to Low Price and Differentiated Product (Best for Oligopolistic Market)

Focus on B2C as well as B2B with Service Excellence

Prospect of Internet of Things (Smart Village, Smart City, Smart Home)

Employees & Customers: Internal Strategic Asset and External Strategic Asset

Advice To Jio

Make Investors Trust the Equation (₹ 150 K Crore Investment, 18000 Cities, 1.5 Lakhs Villages, 100 Million User Base, Break Even will be 5 years, given the choice for ₹ 149 Plan, Then High Teen Return)

Personalization is Key (Consumer should get Pre-Selection of what they are interested), Join hands with e-commerce players and mobile device companies.

SME and Start-Up: The Growing Untapped Market

The All Good of Ethics, Privacy, Security and CSR

Quality Oriented, Quality Specific and Quality Dedicated (Call Drop, Speed of Surfing, downloading, uploading, customer service)

Conclusion› Jio has started its innings in Telecom by hitting “Jio” sixer. Now they need to face the coming

attack of pace & spin both, changing pitch, umpiring, tight fielding and fielding changes andexpectations of full-stadium spectators.

› Can be Bitter Coffee for Investors

› Jio has got Spiderman Impact.

› The Digital Revolution & Disruptive Competition.

› Planned approach for Go-Grow-Sustain.

› For Jio, if they head in wrong direction, then speed and big size will only get them to the wrongplace; Jio may become a Titanic Story.

› Connected Intelligence, Simple-Smart-Secure.

Thank You

Strategic Outlook of Indian Telecommuication

Leadership & Management

Transcript of Strategic Outlook of Indian Telecommuication