3 G Deployment In India

3G Deployment in India

A Report

20 June 2008


Contents

► 3G in India

► Risk in Deploying 3G in India► Commercial Risk

► Technology Risk

► Financial Risk

► Technology Perspective► Decision Criteria

► Technology Choices

► Infrastructure

► Market Perspective► Consumers

► Competitors

► Collaborators

3G in India


3G In IndiaThe Indian Telecom Scene


► Helps communication become more visual –

more interplay of eyes and ears

► Enables video broadcast and data-intensive

services

► Row over 3G spectrum allocation in India

► 8 operators will be allocated 3G spectrum.

Five in 2.1GHz, two in 800MHz and one in

450 MHz

3G In IndiaA snapshot….

Visual

Communication

Data Intensive

Services

Present Scenario

Future Prospects


Risks in deployment of 3G


Risks in deployment of 3G

► Commercial Risk

► Technology Risk

► Financial Risk

TYPES OF RISKS


Risks in deployment of 3G Commercial Risk

► Revenue generation model

► Cannibalisation of existing

2G applications

► Low penetration levels

► Exorbitant roaming

charges

Commercial Risk Technology Risk Financial Risk



Regulatory Requirements

► Licensing

► TRAI approving MVNO’s

► Service level agreements

► Content IPR, regulation of

content

► Security

► M-commerce

► Session hijacking

► Spam, virus and worm attacks

Benefits - CDMA Operators

► CDMA operators have an edge

for 3G deployment

Killer Applications

► Video telephony and music

download

► High quality creating lock in




Preferred Government Players

► Towards MTNL and BSNL

Foreign Entrants

► China Mobile, Qualcomm

Users Not Keen to Upgrade

► Users not keen for high end

applications

Collaborative Arrangements

► Indus towers, window into the

internal workings





Excessive Pricing

► Prices need to be set after

carefully studying competition

Incomplete Utilisation of 3G

Features

► Key drivers for high ARPU not

utilised

Availability of Complementary

Assets

► 3G/dual band enabled handsets

► Appropriate network and software

infrastructure


Risks in deployment of 3G Technology Risk

► Underlying 3G

technology

► W-CDMA

► Cdma2000

► Next generation

networks



Risks in deployment of 3G Technology Risk

Infrastructure

► Base stations and transmission

networks

Network Management Complexity

► Applications

► Control

► Access

R & D Efforts

► Shared R & D

WiMAX

► Cheaper spectrum

► Efficiencies and benefits

► Low price entry

► Government favour

► BSNL gearing up



Risks in deployment of 3G Financial Risk


► Spectrum allocation

► High licensing fee

► No resell/trade allowed

► Cheaper rate for CDMA

► Stringent regulatory requirement

► Financing M&A

► Timing of ROI constraints


Technology Perspective of 3G Deployment


Technology Perspective of 3G Deployment

► Decision criteria

► Technology choices

► Infrastructure requirements

► Regulators role

TOPICS


Technology Perspective of 3G Deployment Decision criteria

► Revenue generation

► Cost efficiency

► Time to market

► Performance and scalability

► Address new business domains

Decision

Criteria

Technology

Choices

Infrastructur

e

Requirement

s

Regulators

Role


Technology Perspective of 3G Deployment Technology choices

Decision

Criteria

Technology

Choices

Infrastructur

e

Requirement

s

Regulators

Role

► W-CDMA, cdma2000

► Why WCDMA?

► Advances in W-CDMA

► Release 99

► Release 4/5/6

► LTE (Release 7)


Technology Perspective of 3G Deployment Infrastructure requirements

Decision

Criteria

Technology

Choices

Infrastructur

e

Requirement

s

Regulators

Role

► Network Architecture

► Service Network

► Change required


Technology Perspective of 3G Deployment Infrastructure requirements – Network Architecture

► Network Architecture

– 3 subsystems

► Mobile Station (MS)

► Core Network

► Radio Access

Network

Decision

Criteria

Technology

Choices

Infrastructur

e

Requirement

s

Regulators

Role



► Mobile Station Features

► Multi–Mode Capability

► Video Capture and Replay

► Handwriting and Voice Recognition

► Bluetooth, WAP · Browser

► Internet, Audio Player, Games

► Location Capability

Decision

Criteria

Technology

Choices

Infrastructur

e

Requirement

s

Regulators

Role



► Core Network► Circuit switched domain

► MSC

► GMSC

► VLR

► Packet switched domain

► SGSN

► GGSN

► Common entities

► HLR

► AUC

► EIR

Decision

Criteria

Technology

Choices

Infrastructur

e

Requirement

s

Regulators

Role



► Radio Access Network

► Base Station System (BSS)

► BSC

► BTS

► Radio Network System

(RNS)

► Node B

► Radio Network

Controller (RNC)

Decision

Criteria

Technology

Choices

Infrastructur

e

Requirement

s

Regulators

Role


Technology Perspective of 3G Deployment Infrastructure requirements – Service Network

Types of Services

► Circuit switched services

► Supplementary services

► Packet switched services

► VAS

► IP/Multimedia services

Service Network Features

► Protocol support

► Load balancing

► Data rates

► QoS

► Security

Decision

Criteria

Technology

Choices

Infrastructur

e

Requirement

s

Regulators

Role


Technology Perspective of 3G Deployment Infrastructure requirements – Change required

► Interoperability

► Between WCDMA and existing 2G networks

► Infrastructure sharing

► Site sharing

► NETCO

► Node B + RNC sharing

Decision

Criteria

Technology

Choices

Infrastructur

e

Requirement

s

Regulators

Role


Technology Perspective of 3G Deployment Infrastructure requirements – Change Required

S. No. 2G/2.5G Device 3G Device

1 2G-SGSN (Serving GPRS Support Node) 3G-SGSN (Serving GPRS Support Node)

2 2G-GGSN (Gateway GPRS Support Node) 3G-GGSN (Gateway GPRS Support Node)

3 2G-CGF (Charging Gateway Function) 3G-CGF (Charging Gateway Function)

4 2G-HLR/AuC/EIR 3G-HLR/AuC/EIR

5 2G-MSC/VLR 3G-MSC/VLR

S. No. 2G/2.5G Device 3G Device

1 Base Transmission Station (BTS) Node B

2 Base Station Controller (BSC) Radio Network Controller (RNC)

Decision

Criteria

Technology

Choices

Infrastructur

e

Requirement

s

Regulators

Role


Technology Perspective of 3G Deployment Regulators role

► Licensing

► Spectrum

► Content

► Virtual operation

► Interconnection

► Security

► Interconnect charging

► QoS

Decision

Criteria

Technology

Choices

Infrastructur

e

Requirement

s

Regulators

Role


Market Perspective of 3G Deployment


Market Perspective of 3G Deployment

► Consumer Behaviour

► Competitive Forces

► Collaborative

Arrangements

► Cost Benefit Analysis

TOPICS


Market Perspective of 3G Deployment Consumer behaviour – Indian Market

Rural Market

► Low reach

► Demand for 3G

► Deployment of 3G

► Government incentives

Urban Market

► High population density

► High penetration levels

► Increased acceptance of 3G

► Higher ARPU

Consumer

Behaviour

Competitive

Forces

Collaborativ

e

Arrangemen

ts

Cost Benefit

Analysis


► Educating farmers for

best development practices

► Regional language content

► M-commerce, health care,

information and location

based services

Market Perspective of 3G Deployment Consumer behaviour – 3G applications

► Selling and procurement

information

► Locally relevant

information

► Reduce trips and maintain

relationships with distributors

Best transport and distributionBest markets

Other servicesBest education practices

Rural Applications


► Banking, interactive shopping,

ticket booking, brokerage

► Video surveillance, control of

household devices

► Location info, maps

Market Perspective of 3G Deployment Consumer behaviour – 3G applications

► MMS/Video telephony

► Games. Audio/video clips

► Search engine

► Personal organizer, video

conferencing, corporate

directory

Portal and officeCommunication and entertainment

Mobile servicesM-commerce

Urban Applications


Market Perspective of 3G Deployment Consumer behaviour – Key Drivers for India

Revenue Share

60%25%

15%

Operator Content Aggregator/Developer Copyright Owner

Value Added Services – Revenue Sharing


Market Perspective of 3G Deployment Consumer behaviour – Key Drivers for India

Video/Audio

Sharing

Value Added Services

Social

Networking

Online

Multiplayer

Games

Mobile TV

Video streaming

Video

conferencing

Mobile

Broadband

Talk and Web

box

Web portal

Search engines

Maps

CommunityPlace Shifting

ServiceInternet Access Web Browsing

Blogging


Market Perspective of 3G Deployment Competitive Forces - Players

Group CompanyTotal

Subscribers

Market

Share

Airtel (GSM) 61984721 23.77%

Reliance (CDMA +

GSM)45453213 17.43%

Vodafone Essar

(GSM)44126243 16.92%

BSNL (GSM +

WLL)40787682 15.64%

Tata (CDMA) 24330231 9.33%

Idea (GSM) 24001573 9.21%

Aircel (GSM) 10610428 4.07%

Spice (GSM) 4210669 1.61%

Source: India Cellular

Consumer

Behaviour

Competitive

Forces

Collaborativ

e

Arrangemen

ts

Cost Benefit

Analysis


Market Perspective of 3G Deployment Competitive Forces - Circles

Mumbai

Delhi

Karnataka

Kolkata

Gujarat

Low High

ARPU

Lo

wH

igh

Po

pu

latio

n d

en

sity

AP

Assam

Chennai


Market Perspective of 3G Deployment Collaborative Arrangements

► GSM network equipment and infrastructure

► Alcatel-Lucent, Nokia, Ericsson,

Siemens, Motorola, Huawei

► Infrastructure sharing agreements

► 3G applications/content developers

► Dual/Triple band handsets with

multimedia capability

► 3G compliant chipsets by TI

Consumer

Behaviour

Competitive

Forces

Collaborativ

e

Arrangemen

ts

Cost Benefit

Analysis


Market Perspective of 3G Deployment Cost Benefit Analysis – Tariffs and pricing

► Pricing mechanisms

► Flat rate

► Standard package

► File size charging

► Premium services charging

► Multiple parties, revenue

sharing

► Cost per subscriber goes down

with usage

Consumer

Behaviour

Competitive

Forces

Collaborativ

e

Arrangemen

ts

Cost Benefit

Analysis


Market Perspective of 3G Deployment Cost Benefit Analysis – Subscriber base estimation

Year 2007 2008 2009 2010 2011 2012

Total Population 1128521000 1,144,734,000 1,160,813,000 1,176,742,000 1,192,506,000 1,208,116,000

Rural Population (@70%) 789964700 801,313,800 812,569,100 823,719,400 834,754,200 845,681,200

Urban Population (@30%) 338556300 343,420,200 348,243,900 353,022,600 357,751,800 362,434,800

Total Targeted Population 247,489,140 350,000,000 425,000,000 500,000,000 700,000,000 900,000,000

Aggregate Penetration

(%age) 22% 30% 37% 42% 59% 74%

Targeted Rural Penetration 50,000,000 100,000,000 150,000,000 200,000,000 375,000,000 550,000,000

Rural Penetration (%age) 6% 12% 18% 24% 45% 65%

Targeted Urban Penetration 197,489,140 250,000,000 275,000,000 300,000,000 325,000,000 350,000,000

Urban Penetration (%age) 58% 72% 79% 85% 91% 97%

Demographics

Mobile Penetration



Urban:Rural Penetration 3.9497828 2.5 1.833333333 1.5 0.866666667 0.636363636

Targeted Penetration 6,800,000 9,000,000 18,000,000 36,000,000 72,000,000 100,000,000

Aggregate Penetration

(%age) 0.60% 0.79% 1.55% 3.06% 6.04% 8.28%

Rural Penetration (Based on

AR) 1,373,798 2,571,429 6,352,941 14,400,000 38,571,429 61,111,111

Urban Penetration (Based on

AR) 5,426,202 6,428,571 11,647,059 21,600,000 33,428,571 38,888,889

Urban Users Changeov er 0% 10% 20% 30% 40% 50%

Mobile Users - 25,000,000 55,000,000 90,000,000 130,000,000 175,000,000

Broadband Users - 642,857 2,329,412 6,480,000 13,371,429 19,444,444

Rural Users Changeov er 0% 0% 0% 5% 10% 15%

Mobile Users - - - 10,000,000 37,500,000 82,500,000

Broadband Users - - - 720,000 3,857,143 9,166,667

Aggregate Ratio (AR)

Broadband Penetration

Potential 3G customers



Total 3G Users - 25,642,857 57,329,412 107,200,000 184,728,571 286,111,111

3G Mobile Rural Penetration 0.00% 0.00% 0.00% 1.21% 4.49% 9.76%

3G Mobile Urban

Penetration 0.00% 7.28% 15.79% 25.49% 36.34% 48.28%

3G Mobile Aggregate

Penetration 0.00% 2.18% 4.74% 8.50% 14.05% 21.31%

3G Broadband Rural

Penetration 0.00% 0.00% 0.00% 0.09% 0.46% 1.08%

3G Broadband Urban

Penetration 0.00% 0.19% 0.67% 1.84% 3.74% 5.36%

3G Broadband Aggregate

Penetration 0.00% 0.06% 0.20% 0.61% 1.44% 2.37%


Market Perspective of 3G Deployment Cost Benefit Analysis – Cost and Revenue

Year 2008 2009 2010 2011 2012

Avg. Inhabitants per square km - India 350 355 360 365 370

Avg. Inhabitants per square km - Delhi 10,500 11,000 11,500 12,000 12,500

ARPU per month (@10% increase) - India 300 330 363 399 439

ARPU per month (@10% increase) - Delhi 480 528 581 639 703

3G Mobile Penetration - India (aggregate) 2.18% 4.74% 8.50% 14.05% 21.31%

3G Mobile Penetration - Delhi (urban) 7.28% 15.79% 25.49% 36.34% 48.28%

Operator Market Share 15% 15% 15% 15% 15%

Revenue per square km per month - India 344 833 1,666 3,071 5,196

Revenue per square km per month - Delhi 55,035 137,593 255,420 417,882 636,241

Usage Rate per month per user

(@10% increase). 500 550 605 666 732

Broadband Penetration - India (aggregate) 0.06% 0.20% 0.61% 1.44% 2.37%

Broadband Penetration - Delhi (urban) 0.19% 0.67% 1.84% 3.74% 5.36%

Operator Market Share 15% 15% 15% 15% 15%

Revenue per square km per month - India 15 59 200 526 962

Revenue per square km per month - Delhi 1,474 6,070 19,157 44,773 73,639

Annual Total Revenue per square km - India 4,304 10,696 22,388 43,165 73,896

Annual Total Revenue per square km - Delhi 678,105 1,723,962 3,294,924 5,551,856 8,518,555

Revenue

Demographics

Handset

Broadband


Market Perspective of 3G Deployment Cost Benefit Analysis – Cost and Revenue

CAPEX 15,000,000

Depreciation (over 5 years) 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000

Annual OPEX (@100% of depreciation) 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000

Annual TCO (Depreciation + OPEX) 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000

TCO per square km (@280 sq. km per site) 21,429 21,429 21,429 21,429 21,429

Profit per square km (India) (17,124) (10,732) 960 21,737 52,467

Gross Margin (India) -2.53% -0.62% 0.03% 0.39% 0.62%

Profit per square km (Delhi) 656,677 1,702,534 3,273,496 5,530,428 8,497,127

Gross Margin (Delhi) 96.84% 98.76% 99.35% 99.61% 99.75%

Cost

Profitability

Thank you

Suneet Deshmukh

3 G Deployment In India

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