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Zinnov Management Consulting
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Indian Telecom Market Overview October 2012
To access full report, please send your request to [email protected]
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Agenda
2
Key Technology Trends and Partnerships
Government Regulations
2
3
Telecom Market Overview1
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Indian telecom industry is characterized by a large subscriber base, substantial tele-
density but low revenues per user (ARPU1)
3
287
427636
852 93439
38
36
34
31
5.9 3.82.6 2.1 1.9
32.0 31.7
33.837.4 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 SubscriberBase
More than 3-fold increase in subscribers since 2008
High tele-density of 79.6% in 2012
UrbanDominance
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
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Focus on Mobile Value Added Services (MVAS) opportunities is necessitated by
declining share of voice in telecom ARPUs
4
2.041.50
1.441.27
0.31
0.34 0.390.48
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 voicerevenue straining
ARPUsHowever, per userspending on MVASincreasing both as apercentage of ARPUand as an absolute
In an effort tocompliment the
declining voicerevenues, carriers
increasingly focusingon adding value added
services to theirportfolio
Growing smartphoneadoption and
increasing mobileinternet penetration,
further pushingproliferation of value
added services
Declining voice
revenue strainingARPUs
However, per userspending on MVAS
increasing
Carriers increasinglyfocusing on adding
value added services totheir portfolio to
supplement revenues
Growing smartphoneadoption & increasing
mobile internetpenetration further
pushing MVAS
Note:
Source: IAMAI
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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 6.6billion in 2013
Emerging MVAS categories aredependent primarily on
Telecom infrastructure
Type of handset
1
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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 monitoringsystem at general admindepartment using SMSupdates sent by relevantofficers
Kerala
M-governance used acrosshealth, education, law,agriculture, financefunctions
Goa
e-SMS Goa initiative aimed at easing the process ofinformation delivery to citizens through the use of mobile
Andhra Pradesh
Municipal Corp using GPSenabled phones toremotely monitor cleaningof garbage bins
Gujarat
Rajkot Municipal Corpusing SMS for sendingproperty tax alerts,payment reminders, andvaccination alerts
Government pushing directives to aid
governance across richer delivery platforms
M-Governance Framework for Public Services
One-Web approachto make websitesmobile compliant
Deployment ofmobile apps forpublic servicesacross depts.
Uniform pre-designated codesfor mobile-based
services
Adoption of openstandards for
platform agnosticapps
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
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Major telecom players are enabling mobile platform as a medium to impart
education
7
Educational firms partnering with telecom playersto deliver education and expand their presence
Telecom players partnering with NGOs 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 AIEEEprep 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
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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
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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 & OxigenSahyog, 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 cashon their mobile devices to
pay utility bills etc.
Mobile wallet service
Retail players developing
mobile compliant websites &
apps
Focus on expanding reachUse 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
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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
GrameenVAS
FasalBahtar
Zindagi
M- agriculture services
bridge the information
gap between the
farmers and market
conditionsM-agriculture
initiatives
M-Health M-Governance M-Education M-Infotainment M-commerce M-Agriculture
Note: 1Unstructured Supplementary Service Data
Source: Company websites; Press Articles
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Telecom companies are also aggressively focusing on the fast growing data center
market in India (1/2)
11
1.72.6
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
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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 ServicesCo-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
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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
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Agenda
14
Key Technology Trends and Partnerships
Government Regulations
2
3
Telecom Market Overview1
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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
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 IntelligenceNetwork Solutions
Note: 1Devices include mobile handsets, modems, routers, set top boxes, etc.; 2Tata Teleservices Ltd.; 3Database Management System
Source: Zinnov Analysis
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However, Indian telecom firms face various challenges in the adoption of IT
16
Challengesin IT
AdoptionFalling ARPUs affecting
profit margins
Predictability of futureIT requirements is
difficult
Lack of clarity onconsumer preferences
Uncertain governmentregulations
Management issues inPSUs
High operation costs inremote areas
Note:
Source: Primary Interviews with the CIOs; Zinnov Analysis
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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; Zinnovs Survey of100 Indian CIOs across Verticals (2010); Zinnov Analysis
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Telecom companies are spending on upgrading their technologies and in better
management of business processes
18
IT AdoptionTrends in
Telecom
verticalImplementing 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
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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 todevelop 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 Dilithiums
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
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OSS/BSS Partnerships have evolved in Indian Telecom Industry
20
OSS Solution Tata Bharti Vodafone Reliance Idea Comments
PrepaidCharging
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 segmentsRevenue
AssuranceNA NA
Mediation NA Solutions from Amdocs and
CSG are also popular
OrderProvisioning
Solutions from Oracle and
Elitecore also being used byother carriers
Business
IntelligenceNA NA
Almost all carriers using
Cognos BI solution
Interconnect
Billing
Elitecore gained market share
with new projects
Note:
Source: Voice & Data
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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, businessintelligence, 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, andportals, for delivery of value added services
Note:
Source: Company websites; Press Articles
Telecom
Partnerships
in India
+ ++ +
+
++
+
+
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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
TheFutureofIndianTelecom
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 billion2.84.0
7.1
FY13E FY15E FY20E
Note:
Source: PwC Mobile Broadband Outlook Report 2015; Zinnov Analysis
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Agenda
23
Key Technology Trends and Partnerships
Government Regulations
2
3
Telecom Market Overview1
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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
Recommendingintroduction of new
service provider
Recommendinglicense terms and
ensuringcompliance
Ensuring technicalcompatibility and
effective inter-
connection
Facilitatingcompetition
and promotingefficiency Protecting interest
of telecom service
consumers
Monitor the qualityof service
Levying fees asmay be
determined byregulations
TelecomRegulatory
Authority of India(TRAI)
Note:
Source: TRAI
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Evolution of Indian telecom regulatory framework
25
1984 Private Sectorallowed only in telecom
equipment manufacturing
1985: Department of
Telecommunication (DoT)
established
Pre-Liberalization Scenario
Private sector participation
in provision of value addedsystem(VAS) such as cellular
and paging services
Liberalization Policy
Facilitated the emergence ofInternet 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 telecomservices
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
19841991 1994
1997 19992000
Note:
Source: D&B
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