Indian Telecom Market Overview
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Transcript of Indian Telecom Market Overview
Zinnov Management Consulting
This report is solely for the use of Zinnov Client and Zinnov Personnel. No Part of it may be quoted, circulated or reproduced for distribution outside the client organization without prior written approval from Zinnov.
Indian Telecom Market Overview – October 2012
To access full report, please send your request to [email protected]
Agenda
2
Key Technology Trends and Partnerships
Government Regulations
2
3
Telecom Market Overview 1
Indian telecom industry is characterized by a large subscriber base, substantial tele-density but low revenues per user (ARPU1)
3
287
427 636
852 934 39
38
36
34
31
5.9 3.8 2.6 2.1 1.9
32.0 31.7 33.8
37.4 38.7
2008 2009 2010 2011 2012
Wireless Subscribers (Million) Wireline Subscribers (Million)
GSM ARPU (USD) Revenue (USD Billion)
Telecom Industry Landscape (July 2012)
28.3% 39.9% 56.6% 73.9% 79.6%
Tele-density
Large Subscriber Base
•More than 3-fold increase in subscribers since 2008
•High tele-density of 79.6% in 2012
Urban Dominance
•64.4% of the current subscribers are urban
46.5
32.0
8.3
1.9
US UK China India
Global Comparison of ARPUs (USD)
Indian telecom ARPUs are amongst the
lowest worldwide
Note: 1Average Revenue per User Source: TRAI
Focus on Mobile Value Added Services (MVAS) opportunities is necessitated by declining share of voice in telecom ARPUs
4
2.04 1.50 1.44 1.27
0.31
0.34 0.39 0.48
13.3% 18.6% 21.4%
27.3%
86.7% 81.4% 78.6%
72.7%
2009 2010 2011 2012
Spending on Voice Spending on MVAS MVAS as a %age of ARPU Voice as %age of ARPU
Average Per User Spending on MVAS (USD)
Declining voice revenue straining
ARPUs
However, per user spending on MVAS increasing both as a percentage of ARPU and as an absolute
In an effort to compliment the declining voice
revenues, carriers increasingly focusing
on adding value added services to their
portfolio
Growing smartphone adoption and
increasing mobile internet penetration,
further pushing proliferation of value
added services
Declining voice revenue straining
ARPUs
However, per user spending on MVAS
increasing
Carriers increasingly focusing on adding
value added services to their portfolio to
supplement revenues
Growing smartphone adoption & increasing
mobile internet penetration further
pushing MVAS
Note: Source: IAMAI
Indian MVAS market expected to move from the traditional SMS based services to internet based and app based services
5
1.9
3.1
4.3 5.1
60.4%
38.4%
19.9%
2009 2010 2011 2012
Indian MVAS Market Size (USD Bn)
Market Size (INR Bn) Y-o-Y Growth Rate
(E)
27%
14%
5% 17%
8%
7%
5% 7%
10%
Revenue Share MVAS categories
CRBT News Reverse CRBTSMS Based Games EducationGovernance Health Mobile App
Current MVAS (63%)
Emerging MVAS (37%)
Note: 1Caller Ring Back Tone Source: IAMAI
Growing at declining rate, Indian MVAS industry is
expected to value ~USD 6.6 billion in 2013
Emerging MVAS categories are dependent primarily on
• Telecom infrastructure
• Type of handset
1
Many Indian states have initiated m-governance practices primarily through SMS-based platform
Amidst visible traction for M-Governance in India, government pushed m-governance framework to aid adoption
6
M-Health M-Governance M-Education M-Infotainment M-commerce M-Agriculture
Bihar • Web based monitoring
system at general admin department using SMS updates sent by relevant officers
Kerala • M-governance used across
health, education, law, agriculture, finance functions
Goa • ‘e-SMS Goa’ initiative aimed at easing the process of
information delivery to citizens through the use of mobile
Andhra Pradesh • Municipal Corp using GPS
enabled phones to remotely monitor cleaning of garbage bins
Gujarat • Rajkot Municipal Corp
using SMS for sending property tax alerts, payment reminders, and vaccination alerts
Government pushing directives to aid governance across richer delivery platforms
M-Governance Framework for Public Services
One-Web approach to make websites mobile compliant
Deployment of mobile apps for public services across depts.
Uniform pre-designated codes for mobile-based
services
Adoption of open standards for
platform agnostic apps
Creation of MSDG1, a shared technical e-governance infrastructure for delivering
public services
Note: 1Mobile Services Delivery Gateway Source: Ministry of Communications & Information Technology, Department of Information Technology; Press articles, State government websites
Major telecom players are enabling mobile platform as a medium to impart education
7
• Educational firms partnering with telecom players to deliver education and expand their presence
• Telecom players partnering with NGO’s as a CSR initiative to deliver education
• Delivering basic level of education using mobile as a medium
• Using mobile platform to expand the reach of classroom education (e.g. in rural areas)
Educational firms collaborating with
telecos
Telecos taking CSR initiatives to impart
education
Expanding reach of education through
mobile network
Telecos delivering basic level education
• Edserv & Tata DoCoMo to offer IIT and AIEEE prep material through ‘Tutor on Mobile’ service
• Aircel and MTS partnering with NGOs, such as Concern India and Smile Foundation for underprivileged children educational initiatives
• Airtel imparts education through IVR which includes • Sparsh- Education to adults • English speaking course & Children
stories
• Reliance communication delivering interactive, real time courses of XLRI1 across 105 cities
Note: 1An Indian Business School Source: Company websites; Press Articles
M-Health M-Governance M-Education M-Infotainment M-commerce M-Agriculture
Almost all leading telecom companies provide information and entertainment related services
8
Key Information Categories
Key Entertainment Categories
Music and Video • Radio services round the clock • Offers movies-on-demand service and Video-on-
demand portal
Ringtones • Huge library of songs is available • Templatize & personalize caller tune
Content offering • Indian mythological stories in different Indian
languages
Sports • Live coverage & scores, results, analysis and reviews
of sporting tournaments like CL T20, CB series etc.
M-Infotainment is the largest contributor to overall MVAS revenue
Travel • Information on flight, railways, taxis schedules and
fares
News and Finance • International , national and regional news • Stock updates, foreign exchange rates alerts services
Note: Source: Company websites; Press Articles
M-Health M-Governance M-Education M-Infotainment M-commerce M-Agriculture
Telecom carriers increasingly taking interest in m-commerce services as the government aids through reforms
9
Government initiatives in M-commerce
• RBI increased mobile payment limit to INR 50,000 (~USD 1,000)
• RBI granting Semi-Closed Wallet1 licenses to telecos
• Creation of Interbank Mobile Payment Service (IMPS), by NPCI2 along with 6 Nationalized banks
• Enables microfinance activities through mobile phones
Use Case: • SBI with Ekoaspire & Oxigen
Sahyog, is providing banking & microfinance services in rural areas
M- Microfinance
• Pay for a wide range of services and goods
Use Case: • Allows users to load cash
on their mobile devices to pay utility bills etc.
Mobile wallet service
• Retail players developing mobile compliant websites & apps
• Focus on expanding reach Use Case:
• Flipkart and Naaptol provide android Apps
• SMS alerts for DoCoMo subscribers on wide range of product & services along with discount benefits on snapdeal
M- Retailing
M-Health M-Governance M-Education M-Infotainment M-commerce M-Agriculture
Note: 1A mobile payment mechanism allowing users to load cash into their mobile phones; 2 National Payments Corporation of India Source: Company websites; Press Articles
M-agriculture services finding traction with Indian farmers
10
• IVR based service available in 16 regional languages
• Provides information related to weather, agriculture, mandi
rates, live stocks, health, rural finance, and education
• Key services includes commodity prices, local info, weather updates etc.
• Multiple language support
• Accessible via voice portals, SMS, USSD1 and Data
• Free SMS based platform offering real time price
information to Indian farmers about their crops
• Huge adoption with more than 20,000 farmers being added every week
Grameen VAS
Fasal Bahtar Zindagi
M- agriculture services bridge the information gap between the farmers and market conditions
M-agriculture
initiatives
M-Health M-Governance M-Education M-Infotainment M-commerce M-Agriculture
Note: 1Unstructured Supplementary Service Data Source: Company websites; Press Articles
Telecom companies are also aggressively focusing on the fast growing data center market in India (1/2)
11
1.7 2.6
4.0
3.1
4.2
5.7
CY10 CY12 CY14
Data Center Market (USD bn)
Data Center Capacity (mn Sq. Ft.)
Data Center Market & Capacity in India
Distribution of Data Center Market in India by Ownership, CY11
Captive 78%
Third Party 22%
Key Verticals: • Manufacturing • IT-ITeS/ Telecom • Healthcare • Education
Key Verticals: • BFSI • Manufacturing • Government • Telecom
MNC with datacenter in
India 50%
My own datacenter
28%
Domestic company with datacenter in
India 8%
MNC with datacenter
outside India 7%
Can't Say 7%
CIO Preference for Data Center (Survey Responses)
• Based on the demand preferences, the 3rd party datacenter market is expected to grow rapidly as opposed to captive data centers
• Lack of in-house skills, high investments, and long gestation periods pose challenges for captive datacenters in India
Competitor DC Tier
Tata Communications II/III
Ctrls IV
NetMagic III+
Reliance IDC III+
Airtel III/III+
Wipro III
Sify III
Cost Components Cost Share
Power 38%
Maintenance 21%
Bandwidth 12%
Equipment 12%
Facility 10%
Manpower 7%
Note: Source: Gartner; IDC; Company websites; Cyber media; mit.gov.in; Zinnov CIO survey 2010; Zinnov Analysis
Key telecom players have also created an extensive portfolio for cloud based services
12
Airtel Reliance Comm. Tata Comm.
Applications (SaaS/ Hosted)
ERP
F&A
CRM
HRM
Web Collaboration
IaaS/ Virtualized Infra.
PaaS
Data Center Services Co-location
Managed Hosting
Other Key Offerings
• Vertical Specific Soln. ofor Media & Entertainment • Online Desktop (VDI) • On demand security • Hosted Contact Center • Enterprise Mobility
•On demand security
• Vertical Specific Soln. ofor Media & Entertainment oCore Banking Soln. •On demand security • Enterprise Mobility •Hosted Contact Center • Productivity Suites • Enterprise Content Management
Cloud/ Hosting Portfolio of Key Telecom Companies
Source: Company websites, Primary interviews with key industry stakeholders; Zinnov Analysis
Accordingly, the telecom companies have also established key partnerships to build cloud expertise
13
Competitor Technology Partners (Software)
Airtel
Savvis Ramco VeriSign
Microsoft Tally VMware
Symantec Software developers for mobility apps
Reliance Comm. Ramco Microsoft BigRock
Tata Comm.
Zoho SugarCRM Cisco
SuccessFactors Microsoft Google
F-Secure
Besides software partnerships, all competitors have formed technology partnerships with most of the key hardware OEMs
like HP, IBM, Cisco, Juniper, etc.
All data center service providers have strategic alliances with key network carriers (like Airtel, Reliance, BSNL, etc.) to
provide connectivity options to their customers
Key Technology Partners of Key Telecom Companies
Hardware Partnerships Network Carrier Partnerships
Agenda
14
Key Technology Trends and Partnerships
Government Regulations
2
3
Telecom Market Overview 1
There is mature adoption of IT across the entire value chain of the telecom vertical
15
ICT Solutions Across Processes
Customer Portals/Customer Support (B2C/B2B)
Supply Chain Management
Enterprise Resource Planning
GTL - Infrastructure Indus Towers Tata Quippo
Content Portals
Telecom Value Chain
Telecom Infrastructure
Network Equipment
Network Operator
Subscription & Devices1 Resellers
Nokia-Siemens Huawei Ericsson Alcatel Lucent
Bharti Airtel Vodafone Reliance Comm. TTSL2 Sun Direct
Company Outlet Dealers Blackberry Huawei UTStarcom
Facebook Rediff App stores
Core IT Requirements
Network Management
Customer Management
Partner Management
Enterprise Management
•Fault Management •Config. Management •Account Management •Performance Management •Security
•Finance & Accounting •HR •Sales & Operation Planning •Facility Management •DBMS3
•Partner Network Management •Supply Chain Management •Revenue Fraud Management
•Service Activation •Revenue and Billing Management •Customer Analytics •Contacts Centers/Call Centers
Subscribers
OSS/BSS
VAS Management
Data Warehousing and Business Intelligence Network Solutions
Note: 1Devices include mobile handsets, modems, routers, set top boxes, etc.; 2Tata Teleservices Ltd.; 3Database Management System Source: Zinnov Analysis
However, Indian telecom firms face various challenges in the adoption of IT
16
Challenges in IT
Adoption
Falling ARPUs affecting profit margins
Predictability of future IT requirements is
difficult
Lack of clarity on consumer preferences
Uncertain government regulations
Management issues in PSUs
High operation costs in remote areas
Note: Source: Primary Interviews with the CIOs; Zinnov Analysis
IT spending of the Indian Telecom vertical has grown at a rate of 14.3 per cent in FY12
17
IT Spending in Telecom, USD billion
Hardware 39.5%
BPO 24.8%
Services 29.7% Software
6.0%
IT Spend Distribution
FY07 FY12
IT Budget as a Per cent of Revenues Percentage Outsourcing
3% to 4%
5% to 6%
FY07 FY12
67%
70%
2.1
2.4
FY11 FY12
Note: Source: Nielsen Domestic IT-BPO Study 2010; Primary Interviews with Stakeholders in the Indian IT ecosystem; Zinnov’s Survey of 100 Indian CIOs across Verticals (2010); Zinnov Analysis
Telecom companies are spending on upgrading their technologies and in better management of business processes
18
IT Adoption Trends in Telecom vertical
Implementing Security Solutions
Upgrading Legacy Infrastructure
Managing Partner Network
New Infrastructure for Datacenter/Network Expansion
Private Cloud Adoption
Platform Integration
Note: Source: Primary Interviews with the CIOs; Zinnov Analysis
Supply side companies are launching a host of initiatives to come up with better solutions for the telecom vertical
19
Key Initiatives Taken by the Supply Side
Strategic partnerships to develop customized solutions
Acquiring firms for capacity expansion
Encouraging innovation and training ecosystem
New business models
Establishing telecom specific research centers
Quality outsourcing work is done out of large city centers while voice-based call centers are operated out of tier II and tier III cities. E.g.. Aditya Birla Minacs
and Hinduja Global Solutions
Wipro and Nokia Siemens Networks have established dedicated centers and testing labs for 3G and other telecom
specific technologies
VerSe Innovation Pvt. Ltd. partnered with OnMobile
OnMobile Global Ltd. acquired Dilithium Networks Inc. to get access to Dilithium’s extensive patent portfolio and enrich its
offerings in 3G video mobile services
Tech Mahindra entered into an alliance with Microsoft to offer customizable BI solutions
to telecom service providers
Note: Source: Primary Interviews with the CIOs; Zinnov Analysis
OSS/BSS Partnerships have evolved in Indian Telecom Industry
20
OSS Solution Tata Bharti Vodafone Reliance Idea Comments
Prepaid Charging
• Market share of Ericsson increased with acquisition of Telcordia
CRM • CRM solutions also being
provided by Elitecore
Fraud Management
• Subex gained market share with new fraud management contracts
• Near universal uptake in both the segments
Revenue Assurance
NA NA
Mediation NA • Solutions from Amdocs and
CSG are also popular
Order Provisioning
• Solutions from Oracle and Elitecore also being used by other carriers
Business Intelligence
NA NA • Almost all carriers using
Cognos BI solution
Interconnect Billing
• Elitecore gained market share with new projects
Note: Source: Voice & Data
Telecom carriers in India have multiple partners who help them operate key aspects of their business
21
Telecom Equipment & Network Infrastructure
• Prominent infrastructure providers are currently active in 3G and 4G rollouts
• Inter carrier partnerships for passive tower sharing
IT and Software Requirements
• Partnerships with IT and software companies for technology infrastructure, and solutions, such as billing, business intelligence, cloud services, and others
Customer Support
• Partnerships with Business Process Outsourcing (BPO) companies to run their customer care operations
Value Added Services
• Partnerships with content generators, aggregators, and portals, for delivery of value added services
Note: Source: Company websites; Press Articles
Telecom Partnerships
in India
+ + + +
+
+ + +
+
Going forward IT demand in the telecom vertical will continue to grow at a CAGR of 14.2 per cent primarily due to the introduction of new services by telecom players
22
Sustainable Growth
The
Fu
ture
of
Ind
ian
Te
leco
m
Increased adoption of smart phones and new age devices
Rising subscriber base creating demand
Introduction of 4G in India
Data based services is increasing
National Telecom Policy
Expected IT Spending in
Telecom Vertical, USD billion 2.8
4.0
7.1
FY13E FY15E FY20E
Note: Source: PwC Mobile Broadband Outlook Report 2015; Zinnov Analysis
Agenda
23
Key Technology Trends and Partnerships
Government Regulations
2
3
Telecom Market Overview 1
Indian telecom industry is regulated by an independent body called Telecom Regulatory Authority of India (TRAI)
24
• Established in 1997 as an independent body for regulation of telecom services in India, TRAI separated the regulatory function from policy-making and operation, which continued to be under the purview of the DoT
Recommending introduction of new
service provider
Recommending license terms and
ensuring compliance
Ensuring technical compatibility and
effective inter-connection
Facilitating competition
and promoting efficiency Protecting interest
of telecom service consumers
Monitor the quality of service
Levying fees as may be
determined by regulations
Telecom Regulatory
Authority of India (TRAI)
Note: Source: TRAI
Evolution of Indian telecom regulatory framework
25
• 1984 – Private Sector allowed only in telecom equipment manufacturing
• 1985: Department of Telecommunication (DoT) established
Pre-Liberalization Scenario
• Private sector participation in provision of value added system(VAS) such as cellular and paging services
Liberalization Policy
• Facilitated the emergence of Internet services in India
• Specific targets announced to be achieved by 1997
• Paved way for the entry of the private sector in telephone services
National Telecom Policy (NTP-94)
• Affordable communication for citizens • Provision of universal service to all uncovered areas,
including rural areas • Convergence of IT, media, telecom and consumer
electronics • Build manufacturing capabilities and strengthen R&D • Efficiency and transparency in spectrum management
New Telecom Policy (NTP-99)
• Aimed at regulating telecom services
• Separated the regulatory function from policy-making and operation from DoT
Establishment of TRAI
• Establishment of BSNL; privatization of VSNL • 2002: Establishment of Universal Service
Obligation Fund to finance subsidies for rural areas
• 2003: Introduction of Unified Access Licensing (UASL) regime
• 2005: Increase in FDI limits from 49% to 74% • 2006: Proposal for mobile number portability
Developments After 2000
1984 1991 1994
1997 1999 2000
Note: Source: D&B
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