Telecom Industry in India

February 25, 2011 Sonal Thakur Leave a comment Go to comments The Indian telecommunications industry is one of the fastest growing in the world. The industry has witnessed consistent growth during the last year on the back of rollout of newer circles by operators, successful auction of third-generation (3G) and broadband wireless access (BWA) spectrum, network rollout in semi-rural areas and increased focus on the value added services (VAS) market. According to the Telecom Regulatory Authority of India (TRAI), the number of telephone subscriber base in the country reached 742.12 million as on October 31, 2010, an increase of 2.61 per cent from 723.28 million in September 2010. With this the overall tele-density (telephones per 100 people) has touched 62.51. The wireless subscriber base has increased to 706.69 million at the end of October 2010 from 687.71 million in September 2010, registering a growth of 2.76 per cent. Meanwhile, Indian Global System of Mobile Communication (GSM) telecom operators added 17.45 million new subscribers in November 2010, taking the all-India GSM cellular subscriber base to 526.18 million, according to the Cellular Operators Association of India (COAI). The GSM subscriber base stood at 508.72 million at the end of October 2010. Value-Added Services (VAS) Market Mobile value added services (VAS) include text or SMS, menu-based services, downloading of music or ring tones, mobile TV, videos and sophisticated m-commerce applications. As per a report, India Telecom 2010 released by KPMG in December 2010, currently, the VAS market is worth US$ 2.45 billion-US$ 2.67 billion, which is around 10 per cent of the total revenue of the wireless industry. The share of VAS in wireless revenue is likely to increase to 12-13 per cent by 2011, on the back of increased operator focus on VAS due to continuous fall in voice tariffs, increasing penetration of feature rich handsets, availability of vernacular content and increased user adoption of VAS applications. Major Investments The booming domestic telecom market has been attracting huge amounts of investment which is likely to accelerate with the entry of new players and launch of new services. According to the Department of Industrial Policy and Promotion (DIPP), the telecommunications sector which includes radio paging, mobile services and basic telephone services attracted foreign direct investment (FDI) worth US$ 1,062 million during April-October 2010-11. The cumulative flow of FDI in the sector during April 2000 and October 2010 is US$ 9,993 million. As per an industry report the telecom industry witnessed merger and acquisition (M&A) deals worth US$ 16.60 billion during April-December 2010, which represented 28.26 per cent of the total valuation of the deals across all the sectors during the period analysed. There were 10 inbound, outbound and domestic M&A deals in the telecom sector during the first nine months

of the current fiscal. The biggest M&A deal in the sector was made by telecommunications service provider Bharti Airtel through the acquisition of Zains African mobile services operations in 15 countries. The deal involved a transaction of US$ 10.7 billion. In another deal, Bharti Airtel acquired 100 per cent stake of Telecom Seychelles Ltd for US$ 62 million. Other major M&A deals included the acquisition of 95 per cent stake in Infotel Broadband for US$ 1,032.26 million by Reliance Industries and 26 per cent stake of US-based mobile chipmaker Qualcomms Indian arm for US$ 57.72 million by Indias Tulip Telecom and Global Holding. Further, India-based GTL Infrastructure Ltd has bought 17,500 telecom towers of Aircel Ltd. for US$ 1,702.95 million. Going Global In March 2010, Bharti Airtel bought the African operations of Kuwait-based Zain Telecom for US$ 10.7 billion, driving the Indian player into the league of top ten telecom players globally. The Reserve Bank of India (RBI) has liberalised the investment norms for Indian telecom companies by allowing them to invest in international submarine cable consortia through the automatic route. In April 2010, RBI issued a notification stating As a measure of further liberalisation, it has now been decided to allow Indian companies to participate in a consortium with other international operators to construct and maintain submarine cable systems on co-ownership basis under the automatic route. The notification further added, Accordingly, banks may allow remittances by Indian companies for overseas direct investment. Tele-medicine With increase in cell phone users to around 700 million and introduction of 3G services soon in the country, remote treatment and diagnosis of patients through mobile phones would become a reality in the near future. In fact, a few telecom operators and value-added service developers are planning to use mobile phones for diagnostic and treatment support, remote disease monitoring, health awareness and communication. The Gujarat health department plans to connect all villages through its telemedicine network. The state government has so far expanded the reach of telemedicine services from 53 villages in 2008 to 453, and hopes to cross 500 villages soon. Jay Narayan Vyas, state health minister, said First thing we plan to do is to start the 104 service over the phone. People can call up and talk to paramedics in call centers who can suggest the primary action to be taken in case of any health emergency. Also, they would be able to suggest generic and over the counter drugs. 3G Services The Department of Telecom has taken the pioneering decision of launching of 3G services by BSNL and MTNL and initiation of process for auction of spectrum for 3G services to private operators. Allocation of spectrum for 3G and BWA services was done through a controlled simultaneous, ascending e-auction process.

All the 71 blocks that were put up for auction across the 22 service areas in the country were sold, leaving no unsold lots. Auction for 3G spectrum ended on May 19, 2010 after 183 rounds of intense bidding over a span of 34 days. The Government is expected to morph revenue worth US$ 14.6 billion. All the available slots across 22 circles have been sold to seven different operators. A pan-India bid for third generation spectrum stood at US$ 3.6 billion. The Anil Ambaniled Reliance Communication bagged the highest number of 13 circles at a cost of US$ 1.9 billion, followed by Bharti Airtel in 12, Idea in 11 and Vodafone and the Tatas in nine circles each, according to the Department of Telecommunications. MTNL and BSNL will have to pay US$ 1.42 billion and US$ 2.2 billion respectively. 3G spectra have already been allotted to successful bidders for commercial use on September 1, 2010 as per the timelines indicated in the Notice Inviting Application (NIA) and in the Letter of Intent issued after the bid amounts were deposited. The 3G spectrum has been allotted to AirTel, Aircel, Vodafone, S Tel, Reliance, Idea Cellular and Tata Cellular Services who won the bids through the electronic auction spread over a period of 34 days in respect of 3G and 16 days in respect of BWA. The BWA spectra have also been assigned to the successful bidders which are Aircel, Augere, Tikona, Qualcomm, Infotel and Bharti. 3G & BWA spectrum would enable users to have value added services like video streaming, mobile internet access, higher & faster data downloads. Manufacturing The Indian telecom industry manufactures a vast range of telecom equipment using state-of-theart technology. As per a press release by the Ministry of Communications & Information Technology, the production of telecom equipments in value terms is expected to increase from US$ 10.87 billion during 2008-09 to US$ 11.87 billion in 2010-2011. Favourable factors such as policy moves taken by the Government, incentives offered, large talent pool in R&D and low labour cost can provide an impetus to the industry. Exports increased from US$ 89.24 million in 2002-03 to US$ 3 billion in 2009-10 accounting for 26 per cent of the total equipment produced in the country and it is expected to increase to US$ 3.33 billion in 2010-11. Meanwhile, telecom regulator TRAI has released a consultation paper on Encouraging Telecom Equipment Manufacturing in India seeking views of stakeholders for promoting research and development (R&D) and manufacturing of telecom equipment in the country. The consultation paper issued on December 28, 2010 aims at discussing, debating and finalising measures for promotion of R&D and creation of intellectual property as well as manufacture of telecom equipment and electronic components in India. Further, the Indian mobile handsets market continued to grow in the third quarter 2010 as well to record a quarter-on-quarter growth of 3.6 per cent to touch 40.08 million units in the quarter, according to market intelligence firm IDCs India Quarterly Mobile Handsets Tracker. The year 2010 is expected to end with total mobile handset sales of 155.9 million units.

The study further showed that the Finnish handset maker Nokia had the largest share of 31.5 per cent in terms of units shipped during the third quarter of 2010. Nokia was followed by the Chinese brand GFive in terms of unit shipments market share and Korean handset manufacturer Samsung occupied the third slot. According to a report by technology researcher Gartner Inc, India ranks fourth in manufacturing telecom equipment in the Asia-Pacific (Apac) region. The country has a 5.7 per cent share of the regions total telecom equipment production revenue of US$ 180 billion in 2009. We expect India to move up to the third spot (after China and South Korea) with a share of 8.5 per cent of the total (estimated) Apac telecom equipment production revenue of US$ 277 billion by 2014, Gartner said. The firm estimates Indias telecom equipment production revenue to grow at a CAGR of 17.1 per cent to reach US$ 22.6 billion in fiscal 2014. India will be the fastest growing telecom equipment production market in the Apac region over the next five years, it predicts. Rural Telephony The rural Telephone connections have gone up from 3.6 million in 1999 to 12.3 million in March 2004 and further to 200.77 million in March 2010. Their share in the total telephones has constantly increased from around 14 per cent in 2005 to 32.75 per cent at the end of October 2010. The rural subscribers have grown to 243.04 million at the end of October 2010. The wireless connections have contributed substantially to total rural telephone connections; it stands at 233.95 million in October 2010. During 2010-11, the growth rate of rural telephones was 21.05 per cent as against 18.69 per cent of urban telephones. The private sector has contributed to the growth of rural telephones as it provided about 84.27 per cent of rural telephones during October 2010. The government plans to connect all revenue villages in India either through landline, mobile or WLL by February 2011. We have already connected about 96 per cent of the revenue villages. The remaining 25,000 villages will have connectivity by February 2011, stated Mr Sachin Pilot, Minister of State for Communications and IT. Further, the Government, under Bharat Nirman II Programme, has envisaged providing broadband coverage to all 250,000 Gram Panchayats by 2012. Policy Initiatives The government plans to formulate a comprehensive National Telecom Policy 2011 including the recognition of Telecom as infrastructure and as an essential service, encouraging Green Telecom, steps to accelerate migration from IPv4 to IPv6 at the earliest, release of IPv6 standards by Telecom Engineering Centre for implementation in the country, etc., as per a press release by the Ministry of Communications & Information Technology.

Further, the government plans to take concrete steps towards finalisation of National Broadband Plan including strategy for implementation and initiation of steps for roll out of optical fibre. The government has taken many proactive initiatives to facilitate the rapid growth of the Indian telecom industry.

In the area of telecom equipment manufacturing and provision of IT-enabled services, 100 per cent FDI is permitted No cap on the number of access providers in any service area. In 2008, 122 new Unified Access Service (UAS) licences were granted to 17 companies in 22 services areas of the country Revised subscriber based criteria for allocation of Global System of Mobile Communication (GSM) and Code Division Multiple Access (CDMA) spectra were issued in January 2008 To provide infrastructure support for mobile services a scheme has been launched to provide support for setting up and managing 7,436 infrastructure sites spread over 500 districts in 27 states. As on December 31, 2009, about 6,956 towers had been set up under the scheme

According to the Consolidated Foreign Direct Investment (FDI) Policy document, the FDI limit in telecom services is 74 per cent subject to the following conditions:

This is applicable in case of Basic, Cellular, Unified Access Services, National/ International Long Distance, V-Sat, Public Mobile Radio Trunked Services (PMRTS), Global Mobile Personal Communications Services (GMPCS) and other value added Services Both direct and indirect foreign investment in the licensee company shall be counted for the purpose of FDI ceiling. Foreign Investment shall include investment by Foreign Institutional Investors (FIIs), Non-resident Indians (NRIs), Foreign Currency Convertible Bonds (FCCBs), American Depository Receipts (ADRs), Global Depository Receipts (GDRs) and convertible preference shares held by foreign entity. In any case, the Indian shareholding will not be less than 26 per cent FDI up to 49 per cent is on the automatic route and beyond that on the government route. FDI in the licensee company/Indian promoters/investment companies including their holding companies shall require approval of the Foreign Investment Promotion Board (FIPB) if it has a bearing on the overall ceiling of 74 per cent. While approving the investment proposals, FIPB shall take note that investment is not coming from countries of concern and/or unfriendly entities The investment approval by FIPB shall envisage the conditionality that the Company would adhere to licence Agreement FDI shall be subject to laws of India and not the laws of the foreign country/countries

The Road Ahead According to a report published by Gartner Inc in June 2009, the total mobile services revenue in India is projected to grow at a compound annual growth rate (CAGR) of 12.5 per cent from

2009-2013 to exceed US$ 30 billion. The India mobile subscriber base is set to exceed 771 million connections by 2013, growing at a CAGR of 14.3 per cent in the same period from 452 million in 2009. This growth is poised to continue through the forecast period, and India is expected to remain the worlds second largest wireless market after China in terms of mobile connections. The Indian mobile industry has now moved out of its hyper growth mode, but it will continue to grow at double-digit rates for next three years as operators focus on rural parts of the country, said Madhusudan Gupta, senior research analyst at Gartner. Growth will also be triggered by increased adoption of value-added services, which are relevant to both rural and urban markets. Mobile market penetration is projected to increase from 38.7 per cent in 2009 to 63.5 per cent in 2013, according to Gartner. The much-awaited mobile number portability was launched on November 25, 2010 in Haryana and will be available to more than 700 million subscribers from January 20, 2011 across the country. As continued efforts of the Government to increase competition in the market and to provide wider choice to customer, Mobile Number Portability will be an important step. Additional read Updated: As on Dec 10 Source: IBEF
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Telecommunication--IBEF
Last Updated: September 2011

The Indian telecommunication network is the third largest in the world and the second largest among the emerging economies of Asia. The Indian telecommunication sector has continued to record noteworthy success throughout the year and has emerged as one of the key sectors that have been accountable for resurgent growth of the Indian economy. The rapid growth of the sector has been coupled with proactive polices and decisions taken by the Indian Government and dynamic involvement of the private sector. The liberal policies in the telecommunication sector have facilitated easy access to telecom companies and a fair regulatory framework offers services to the Indian consumers at affordable prices. Market size Over 20.2 million new subscribers were added in the month of February, thereby raising the total mobile phone subscription in the country to 791.38 million.

Moreover, the statistics for February state that the rate of growth (2.82 per cent) in the number of rural mobile phone subscribers surpassed than those of the urban areas (2.52 per cent) across the country. The broadband subscription in February, 2011 was 11.47 million as compared to 11.21 million in January, 2011. The Indian telecom sector is largely dominated by private operators that control a share of 87.9 per cent share of the entire sector. Among the top players in the telecom sector, Bharti Airtel owns the largest share at 20.09 per cent, followed by Reliance (16.7 per cent), Vodafone (16.54 per cent), state-owned BSNL (11.41 per cent), Tata (11.08 per cent) and Idea (10.97 per cent). Vodafone has recorded the fastest growth rate in the month of February, at 17.61 per cent in its subscription base. Reliance (16.36 per cent), Bharti (15.85 per cent), Idea (12.43 per cent), Aircel (8.26 per cent) and Tata (7.93 per cent) have also recorded decent growth rate figures for the month of February, 2011, according to Telecom Regulatory Authority of India (TRAI) database. As per statistics, the total number of mobile phone base in the country will rise to 900 million by the end of 2012 and it is further expected that this figure will steadily rise to 1.25 billion by 2015. It has also been projected that the users for the broadband base are going to reach 100 million mark by 2014, particularly after the telecom companies roll out their 3G services as per the research study conducted by Crisil. Indian Telecommunication - Major Investments Telecom managed services globally have been growing at a rate of 14 per cent on an yearly basis, with revenues aggregating up to US$ 190 billion, while in India, the growth rate of the telecom managed services is 19 per cent per year with revenues pegged at US$ 8-9 billion as stated by Arpita Pal Agrawal, Executive Director Telecom KPMG at the 3rd International conference organised by Bharat Exhibitions on Managed Services. Companies outside the telecom sector have shown interest in the sector investment and the Pharma company, Piramal Healthcare has decided to buy a 5.5 per cent stake in Vodafone's India unit for Rs 2,856 crore (US$ 640 million). With this deal, Vodafone has allotted over 26 per cent of the company shares to Indian investors in accordance to the foreign direct investment (FDI) guidelines for the telecom sector. Nokia, a US$ 12.7 billion telecom company intends to set up the companys largest manufacturing hub in Asia, overtaking the China facility centre. As of now, the China centre has a larger infrastructure than the Chennai centre, but going by the plans here, Chennai could possibly be the biggest in a year or so, said Herbert Merz, Global Head of operations and Executive Board Member, Nokia Siemens Networks, a US$ 12.7 billion telecom infrastructure manufacturer. Indian Telecommunication - Policy Initiatives In view of the widespread ramifications of the Indian economy, the government recognizes the significance of a comprehensive and forward looking telecommunications policy that assists in building a performance oriented framework for the development of the Indian telecom industry.

The main features of the New Telecom Policy 1999 include:

Strengthening of Regulator. National long distance services opened to private operators. International Long Distance Services opened to private sectors. Private telecom operators licensed on a revenue sharing basis, plus a one-time entry fee. Resolution of problems of existing operators envisaged. Direct interconnectivity and sharing of network with other telecom operators within the service area was permitted. Department of Telecommunication Services (DTS) corporatised in 2000. Spectrum Management made transparent and more efficient.

The government intends to introduce a new Telecom Policy, 2011 which will be drafted and reviewed by eight different committees set up by the Department of Telecom (DoT). The new Telecom Policy is also expected to further ease out the stringent merger and acquisition policies and the committee reviewing the issue has also endorsed the subject to DoT. This is aimed at initiating higher consolidation in the telecom market. Telecom licenses should be renewed for 10 years compared with 20 years currently, and companies must submit applications for new permits at least 30 months prior to the expiry of their licenses, as stated by Mr Kapil Sibal, Minister of Communications and Technology. Restating his earlier comments, the Minister stated that the new policy will work to delink the allocation of telecom licences from mobile spectrum. Indian Telecommunication - The Road Ahead The telecom sector in India is a major contributor to the economy and is a vital employment generating industry for thousands of professionals. With a direct impact on the socio economic structure of the country, the sector has been able to successfully surpass the targets set up by the policy makers. The dynamism displayed by the government and the private sector for uplifting the telecom sector has been recommendable and speaks volumes about the efforts behind the success story. Exchange Rate Used: INR 1=US$ 0.0213 as on September 12, 2011 References: Telecom Regulatory Authority of India, Industry reports, Press releases, Media news http://www.ibef.org/artdispview.aspx?cat_id=470&art_id=29812&in=72
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Media and Entertainment

Last Updated: September 2011

Introduction The Indian Media and Entertainment industry continues to grow at a healthy pace. The rising rate of investments by the private sector and foreign media and entertainment (M&E) majors have improved India's entertainment infrastructure to a great extent. Producing more than 1,000 films yearly, India is the largest producer of films in the world and there are over 500 Television (TV) channels in the country. Digitisation and technological improvements across the value chain have provided the required impetus for improving the quality of content and its ability to reach the masses. Growing broadband penetration is expected to attract more content online. As the second-largest mobile telephony market in the world, India has provided a new platform for content delivery. The Government, has also taken various positive measures including liberalization of the foreign investment regime and is currently working on other policy initiatives to boost the Media and Entertainment industry. Television The television industry is estimated to grow by 12.9 per cent cumulatively over 2009-14, according to PricewaterhouseCoopers (PwC). Growing popularity of the direct-to-home (DTH) services is an interesting concept in the Indian television industry. By 2012, Indian Railways will redefine the travelling experience of passengers on premium trains by providing live television services on-board. Discovery has received permission from Government of India to launch four new channels, but their launch in India is expected to take more than a year. Discovery Kids, Military Channel, ID and Discovery Home and Health are the channels that have received the permission. Music The music industry is projected to benefit from consumption through mobile value added services (VAS) and phase three of FM radio licensing. It is expected to grow from Rs 950 (US$ 205.38 million) crore in 2010 to CAGR of 17.6 per cent to touch Rs 2,140 crore (US$ 462.69 million) in 2015. Radio Many radio stations are encouraging their radio jockeys (RJs) to reach out to listeners using social networking websites like Facebook, Twitter and Orkut in order to build up a fan base for the radio station. This allows the listeners to engage with their favorite RJs even after the airtime. Furthermore, the FM stations have their fan page where the listeners can connect with the

station. My FM is one such station which has taken these initiatives and has elicited an extremely favorable response. Radio Citys online venture Planetradiocity.com has launched their internet radio station some time back. In order to increase the reach of private radio channels, the Union Cabinet has approved eauction of licences under the third-phase expansion of FM radio. Digitisation Reliance MediaWorks (RMW) has partnered with visual effects house Digital Domain to create a digital production pipeline that will make it possible for the company to work on major Hollywood projects. Reliance will have possession of the studios in Mumbai and London, while Digital Domain will manage the facilities. Airtel digital TV, the DTH service by Bharti Airtel recently announced that it has entered into a partnership with Viacom 18-Colors to launch its first subscription service offering 24|7 movie and video content. Print and Publishing The Indian print media industry is expected to grow by 9.6 per cent over the period 2010-15.The newspaper industry is also projected to perform well for the next five years growing at a CAGR of 10.1 per cent according to a report titled India Entertainment and Media Outlook 2011 by PricewaterhouseCoopers. Internet India is one of the fastest growing internet markets around the world. The advent of 3G services, availability of low rental data plans and low cost handsets have enabled a lot of users to access internet through their mobile phones. Mobile internet users are likely to touch the 46 million mark by September 2011, according to Mobile Internet in India report published by the Internet and Mobile Association of India (IAMAI) and market research leader Indian Market Research Bureau (IMRB). The report also shows that Mobile internet usage has been witnessing a 15 per cent growth quarter on quarter. Internet advertising industry is projected to grow from Rs 6 billion (US$ 129.75 million) in 2009 to Rs 15 billion(US$ 324.33 million) in 2014 showing a Compound Annual Growth Rate (CAGR) of 20 per cent over the next five years. With increasing spread of mobile and broadband services and with the arrival of modern technologies like 3G, the industry might even witness a higher growth rate than what has been projected so far. Recent Investments The India Innovation Fund (IIF), an early stage venture capital fund, has invested in SureWaves MediaTech, a Bengaluru-based start-up operating in the digital media-technology space. IIF and Accel Partners have invested Rs 10 crore (US$ 2.16 million) as part of Series A investment.

The Bengaluru-based company InMobi has acquired US-based Sprout, which creates rich media mobile advertising, for an undisclosed amount in cash and stock. Government initiatives Government has permitted 100 per cent foreign direct investment (FDI) in the advertising sector through the automatic route and the government has also liberalised the conditions for 100 per cent FDI in the film industry. Indias largest public sector broadcaster, Prasar Bharati is set to expand All India Radios FM operations to 210 new cities and towns. That would make it the largest player in the space. Road Ahead Backed by increasing media intake and increased advertising spending, the Media and entertainment industry in India is projected to grow at a compound annual growth rate (CAGR) of 14 per cent to touch Rs 1,27,500 crore (US$ 28 billion) by 2015, according to a report by KPMG and a leading industrial body. (Exchange rate 1 INR= USD 0.02162 as on September 8, 2011) References: Media news, IBEF, PwC, IAMAI, Ernst and Young, Airtel, Indian Television
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