11

Presentation to the Media

“Delivering the promise of improved Access, Coverage and Teledensity

in India”

AUSPI

16th November 2005

22

1. About AUSPI

2. Promoting advanced Telecom technologies - CDMA

3. Fueling unprecedented domestic investment and improving teledensity

4. Value for customers

5. Enunciating a telecom vision for India

6. Enablers for achieving teledensity improvement, and AUSPI’s future plans

Agenda

33

About AUSPI

1. Established in 1997

2. Members

1. HFCL

1. Reliance

1. Tata

44

Objectives of AUSPI

AUSPI facilitates the adoption of advanced

telecom technologies, to accelerate India’s

transition into a knowledge economy

Vendor

National /

International PlayersPolicy Maker

Regulator

International organizations

like IEEE, CDG

55

New Leadership

Mr. Anil AmbaniMr. Ratan N Tata

New Leadership

Mr. Ratan N Tata

66

Why CDMA ?• Better voice clarity & consistent quality

• Enhanced privacy

• Superior power control

• Lowest radiation level

• Increased talk time for mobile phones

• High Speed Data

• High speed Internet access

• India has less than 0.4% PC penetration (residential)

• CDMA 1x handsets with 140 kbps speed offers a superior alternative for e-mail and Internet access

• Advanced platform for building highly innovative applications

• Most successful 3G technology

• CDMA2000 controls 85% of the World’s 3G market and adds 15 million new users per quarter Worldwide

• Even the GSM 3G evolution relies on Intellectual property created by CDMA!

77

3G technology – a large opportunity for India

Enabling affordable fixed and mobile broadband access for urban and rural areas

88

CDMA Today

• Operational in the country with 43 private networks

• Has more than 21 million subscribers in the country

• Created new markets for mobile services

• Over 1 Mn PCOs operational

• More than 285 Mn subscribers, 130 operators and 210 networks Worldwide

• India is emerging as the key driver of growth for CDMA

• CDMA created a competitive landscape that made wireless affordable

99

Rapid wireless subscribers ramp-up

Over 61 Mn net wireless subscribers added since competition from CDMA was introduced

Source: TRAI

1010

Affordable wireless services

Source: CDG, AUSPI, TelecomWatch,COAI, TRAI

1111

Healthy competition in Handset market

Note: Vendors with a market share under 5% have been placed in the “other” category

Source: Gartner

Large number of Handset OEMs with lack of dominant market share

helps create a competitive market place

1212

Investments, subscribers and coverage by AUSPI members

September 2005 By 2007 (Est.)

Investments Rs. 36,100 Cr Rs. 53,000 Cr

Subscribers 20 Mn

(Oct. 05)

75 Mn

Number of Towns/Cities covered

3,500

(Oct. 05)

5,700

(by 2006)

Number of Villages covered

1 lakh

(Oct. 05)

4 lakh

(by 2006)

1313

Delivering enhanced value for customers

• Affordable service

• Subsidized handsets

• Innovative products

• Innovative applications

1414

Vision• AUSPI share Prime Minister Manmohan Singh’s vision of rural advancement and urban

renewal

“Science &Technology system can play a decisive role only when it advances the well being of all sections of society, not just a privileged few. It must play the bigger role of creating wealth for all, not just a selected few. A theme that is close to my heart is on ‘making technologies work for the poor and the underprivileged’. In other words, can we develop technologies, which will ameliorate the poverty, create jobs, remove the disease burden of the poor, and improve the overall quality of life?” (Source : Speech at CSIR)

• Indian IT and Telecom can jointly transform India into a knowledge society

• AUSPI will help define roadmap to achieve a dramatic increase in teledensity by end 2007

1515

Teledensity closely correlated with GDP growth

• 10 % increase in teledensity corresponds to 0.2% to 0.6% increase in GDP (Source: Vodafone)

• In a country like India, a rapid increase in telecom infrastructure has multiple benefits-a US $1 investment in telecom leads to US$ 6 increase in GDP (Source: World Bank)

• Offering differentiated services (voice, Internet access, Multimedia etc.) via advanced wireless networks will boost India’s economic growth

Source: TMG, ITU

1616

Enablers for achieving increased teledensity

• AUSPI already instrumental in establishing the early building blocks : NTP 99, migration to revenue share license fee regime, and transition to Unified Access Service Licensing Regime

• AUSPI’s future focus includes the following key enablers for enhanced teledensity:

• Early resolution of spectrum issues

• Allowing technology innovation to flourish – case of FWPs, Broadband

• Enhancement of rural teledensity, including the use of USO funds

• Sharing of National resources

• Expeditious interconnection

• Removal of ADC

• Redefinition of Adjusted Gross Revenue (AGR)

• Reduction in Revenue Sharing from 10% to 6% including USO levy

• Identification and sharing of global best practices

1717

• Technology neutral judicious allocation of spectrum to all service providers. Equality principle for all technologies.

• Sufficient upfront allocation to allow efficient planning, based on international average of 15 + 15 MHz

• Additional allocation of adequate and appropriate spectrum to CDMA operators

• Additional spectrum should be allotted in 1900 MHz band to CDMA operators as both Infrastructure and 800/1900 MHz dual band handsets are commercially available (unlike 2100 MHz band)

• Spectrum usage charges to be reduced to cover only cost of administration and management of spectrum

• CDMA operators should be migrated to a system of charging for Microwave access and backbone frequency comparable to GSM

Early resolution of spectrum issues

1818

• Developing nations around the world have used FWPs quite effectively to circumvent problems associated with the creation of last mile copper networks

• In India, fixed wireless services have contributed greatly to the growth of fixed services, & were specifically authorised in the basic telecom licenses issued in 1997

–% growth of copper fixed line connections for 12 months ending Jun 30, 2005 – 0.2%–% growth of FWP connections for 12 months ending Jun 30, 2005 - 138%

(Source: TRAI)

• FWPs serve as highly functional family phones, with affordable fixed service tariffs

• There is a huge difference between “mobility” & “portability”. Reclassification of FWPs as mobile phones

will result in great loss for subscribers, besides creating an unhealthy monopoly of the incumbent • FWP services must continue to be classified as fixed services

• FWP services have been classified as fixed services since inception• BSNL’s demands for IUC/ADC on FWPs will result in its unjust enrichment, beyond TRAI’s earlier

quantification of ADC eligibility• ADC relates to provision of below cost services, not the portability/mobility of a device. ADC, like

other tariff related matters, should be decided by TRAI • FWP attract a much higher import duty compared to mobile phones, based on their different

classification

Allowing technology innovation to flourish –

case of FWPs

1919

Allowing technology innovation to flourish - Broadband

• For knowledge based society like ours, broadband penetration would be of top priority.

• Broadband would create jobs, increase productivity through infrastructure built up.

• Provide access to new and improved service to the population.

• Availability of broadband service at affordable price will have positive impact on GDP. To increase broadband penetration AUSPI suggests:

Reduction in Custom Duty to the extent of 5% with no CVD for broadband equipment.

100% depreciation in CPEs like PCs in the first year.

Government subsidy in rural and semi urban area.

Encouragement of e-governance by government.

Adequate spectrum in one lot for wireless broadband through CDMA

Streamline allocation of spectrum and the role of SACFA.

2020

• To bridge the Urban-Rural divide, Cost to Serve should be reduced

• Innovative mechanisms need to be introduced, including effective utilization of the USO Fund

Enhancement of Rural density

0.90.70.5 1.2 1.5 1.7 1.74 1.942.32.9 3.6 4.3 5.1

7.049.08 9.86

6.98.2

10.412.2

14.3

21.3

26.2

31.1

0

5

10

15

20

25

30

35

1999 2000 2001 2002 2003 2004 2005 Jul-05

Rural Total Urban Source: TRAI

2121

• Infrastructure sharing is prevalent in countries like Malaysia, Hong Kong, Singapore, Australia. This is driven by a “Code of Access to Telecom Infrastructure”

• Infrastructure sharing reduces duplication & waste of national resources

• Infrastructure sharing can be on reasonable commercial terms

• Standard policies are required from the Central and State Governments to facilitate development of telecom infrastructure – e.g. cell site installation, Right of Way (ROW) permission

Sharing of National resources

2222

• Interconnection is to be treated as a right and must be granted without delay

• Interconnection terms should be reciprocal

• There must be flexibility in call handover principles to facilitate “least cost” in end-customer tariffs

• All subscribers of all networks should be allowed to access the services of any service provider

Expeditious Interconnection

2323

Removal of ADC

• ADC regime is not only non-transparent but difficult to monitor and administer.

• USO Fund, (whereby all operators contribute 5% of their revenues), is in existence for providing services in rural areas; imposition of an additional burden in the form of ADC on operators is not justifiable

• ADC has been withdrawn in most of the countries as it has been found to be inefficient, anti competitive and lacking in transparency

2424

Redefinition of Adjusted Gross Revenue (AGR)

• Presently AGR definition has serious flaws, also accepted by TRAI

• Following to be removed from AGR definition:

• Interest & dividend income from investments

• Revenues from sale of handsets, CPE and Capital Goods

• All payments to other licensed operators, ISP income (since no license fee is payable by ISPs)

• Reversal of debits and excess provisions

• Sale of assets

2525

• India has one of the highest tax regimens in the World, and levies must be

reduced to bring them in line with International best practices

* Backbone spectrum charges extra **Est. from Spectrum fees & revenue of China Mobile (Source: TRAI)

• High percentage of revenue share to be brought down to 6% including levy for USO fund

• High service tax of 10.2% to be brought down (already 1/3 of the total collection of service tax is estimated to be from telecom services)

• With growth of 3 to 4 million subscribers per month the additional revenues will in any event compensate for reduced taxes and levies

Reduction in levies

Pakistan Sri Lanka China India

Regulatory charges % age of revenue %age % age of revenue % age of revenue

Service tax, GST GST VAT 3% 10% + GST

License Fee 0.5% + 0.5% R & D

0.3% turnover (t.o.) + 1% of capital invested (inv)

Nil 5 – 10%

Spectrum Charge Cost recovery ~1.1% to t..o ~0.5%* (China Mobile)

2 ~ 6%**

USO 1.5% Nil (only on ISD calls) Nil Incl in license fees

Total Regulatory charges

2.5% +GST+ cost recovery

1.3% t.o.+1% inv+VAT 0.5%+3% (Tax) 17%~26% + GST

2626

Identification & sharing of Global best practices

• Establishment of handset testing procedures

• International roaming settlements

• Benchmarking service delivery

• Facilitating establishment of common standards

• Facilitating interactions between operators through joint workshops and experience sharing

2727

In conclusion

• AUSPI committed to play its role in the fulfillment of Government’s vision for enhanced telecom connectivity in India

• AUSPI members have contributed a sizable proportion of the growth seen in the Indian market

• AUSPI will continue to embrace the latest technologies with a view to speeding up the transition of the Indian economy into a knowledge-based information society

2828

Thank you !