Drivers & Inhibitors for Mobile Drivers & Inhibitors for - - PowerPoint PPT Presentation

Drivers & Inhibitors for Mobile Drivers & Inhibitors for Mobile Growth in South Asia Growth in South Asia

K V Seshasayee (Hinduja TMT), T V Ramachandran

(Director General, COAI) & Ashok Jhunjhunwala (IITM)

2

• S. Asian Wireless
• S. Asian Wireless –

– The ‘Happening’ Sector The ‘Happening’ Sector

! Over 100 state-of-the art Networks (GSM + CDMA) on Air

– Wide variation among countries

" SL is good in coverage " India is ramping up very fast " Bangladesh yet to get critical mass " Nepal not adequately served

! Total Investments of over 10 billion USD

– Services in over 2500 cities & towns

! 28 million mobile subscribers (GSM + CDMA) in India alone

– Subscriber adds at around 2.5 million per month now – Mobile already constituting around 40% of current national

Teledensity in India

! Mobile – Fixed crossover expected in 2004

3

Growth Drivers Growth Drivers

Cellular growth in India has been fuelled by : ! A World Class Telecom Policy from 1999

– Replaced high fixed license fee with entry fee + revenue share model – Renewed viability, kick-starts growth

! Vibrant competition ! Increased Affordability

– Over 90% drop in tariffs since commencement of service

! Introduction of CPP from May 2003 ! Growth in Pre-paids

– Catering to price conscious & marginal users

! Increased rollout and coverage

– State-of-the art nation wide infrastructure

– All Leading to a surging Subscriber Base……

4

Affordable Services Affordable Services

0.00 0.02 0.04 0.06 0.08 0.10 0.12 0.14 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03

GSM CDMA Source:TRAI Quarterly Performance Indicators, September 2003 For a 100 minute basket, tariffs are around 4 cents a minute, while for a 400 minute basket, they are even lower at less than 2 cents per minute – arguably the lowest mobile tariffs in the world.

Tariffs Tariffs-

• 100 Minute Basket

100 Minute Basket USD

5

Indian Cellular Tariffs Indian Cellular Tariffs – – Lowest in the World Lowest in the World

0.09 0.25 0.31 24.77 World Average 0.09 0.22 0.24 23.88 Asia Pac. Average 0.07 0.39 0.39 Chile 0.04 0.11 0.11 Argentina 0.07 0.12 0.12 9.31 Thailand 0.02 0.08 0.15 3.29 Philippines 0.02 0.07 0.07 China 0.28 0.57 Brazil 0.13 0.16 Indonesia 0.02 0.05 0.05 3.76 India Cost of SMS Off-peak Tariff Peak Tariff Connection Country As of date, Indian Cellular tariffs are even lower at 1.5-2 US cents / minute – apparently the lowest in the world ITU, 2003

6

Phenomenal Growth in Phenomenal Growth in Prepaids Prepaids

26 44 53 63 80

10 20 30 40 50 60 70 80

1999 2000 2001 2002 2003*

• In a price-sensitive market like India, availability of prepaid mobile services at around

USD 6 per month has lead to an explosive growth in the subscriber base Price Waterhouse, TRAI Performance Indicators, September 2003 * September 2003 % of Total Mobile Subscribers

7

Affordability : Addressable Market Affordability : Addressable Market

9% 10% 11% 12% 13% 14% 15% 3% 15% 18% 20% 22% 23% 24% 25% 3% 3% 0% 5% 10% 15% 20% 25% 30% 2000 2001 2002 2003 2004 2005 2006 2007 2008

8cents/min 4 cents/min 2 cent/min 1 cent/min Addressable population (%) Source: Salomon Smith Barney

# Addressable market increases at Lower Prices. # At current tariffs, addressable market is 180-200 million by 2008 # With current subscriber base at 28 million, the potential is tremendous

8

10.5 10 9.5 17 13.4 10.8

2 4 6 8 10 12 14 16 18 2001 2002 2003* 2004 2005 2006 Actuals COAI Projections

Future Trends Future Trends – – In In ARPUs ARPUs

• Falling ARPUs - expected that this trend will continue in future also
• Lower ARPUs, suited to Indian consumers, will enormously expand market

Year ended March

In USD Source: Actual - Price Waterhouse, TRAI Quarterly Performance Indicators, September 2003 COAI Projections – 5% p.a. drop in ARPUs between 2004-06

9

5 10 15 20 25 30 1 2 3 4 5 6 7 8 9 China India

Year 1 2 3 4 5 6 7 8 9 China 1988 1989 1990 1991 1992 1993 1994 1995 1996

• Subs. (MLN)

0.003 0.01 0.02 0.1 0.2 0.6 1.6 3.6 6.8 India 1995 1996 1997 1998 1999 2000 2001 2002 2003

• Subs. (MLN)

0.03 0.22 0.8 1.1 1.6 3.1 5.5 10.5 28.0 Year Ended December Million

Includes CDMA

India vs China in Comparable Years of Service

India Outshining China

10

100 200 300 400 500 9 10 11 12 13 14 15 16 China COAI Projections

India will Exceed the Chinese Performance India will Exceed the Chinese Performance

Million Year Ended December

471 377 290 207 130 81 48 28 Sub (MLN) 2010 2009 2008 2007 2006 2005 2004 2003 India 279 207 145 85 43 24 13.2 6.8 Subs (MLN) 2003 2002 2001 2000 1999 1998 1997 1996 China 16 15 41 13 12 11 10 9 Year

11

Other Growth drivers Other Growth drivers

! Large unsatisfied demand

– Affordability: Middle class embracing cheap low-cost services, with

low entry barriers

– Large urban take-up due to aggressive marketing by Telcos

" Take-up across all sections- maids, chauffeurs, cobblers,

school kids, vegetable vendors, wayside hawkers……

! High GDP growth rate

– Expected to be around 7% in current fiscal – As per Goldman Sachs, India could emerge as third largest

economy in next 50 years

– Rising Income Levels

" 4th largest economy in terms of purchasing power parity (PPP)

! Increased Urbanization

– With increased development of infrastructure, rural India will

become increasingly mainstreamed

! High forex reserves and Booming knowledge sector

12

The Demographic Dividend The Demographic Dividend

The Young Ones “ This is the first non-socialist market economy generation, growing up in the thick of the Information Revolution, the Connectivity Boom, coalition politics, IT-enabled everything and the rise f the service economy. As this age cohort wends its way through life, it will be shaping markets”.

• Rama Bijapurkar

Market Strategy Consultant

13

The Demographic Dividend The Demographic Dividend

The Working Age Group ! A growing working population means higher per capita income ! An ageing population needs more services ! Hence the “downside” of ageing economies like US & Europe & China would be India’s “upside” ! India’s working age population will grow and stay at the peak for

• ver a decade in the 2020’s & 2030’s before actually declining.

China’s, conversely, will peak sooner, decline sharply thereafter” …………Goldman Sachs.

14

Technology & Growth Technology & Growth

! India keenly adopting new technologies

– GPRS & 20001x available in many networks – Some operators have already announced launch of EDGE,

• ther expected to follow suit, expected to be fully launched

by mid 2004

– Growth in Data revenues expected : SMS volumes exploding – Expect keen popularity of mobile internet in India

15

Future drivers Future drivers

! Small cities starting to pick up

– Rural take up has a long way to go

! Lowered in-country and international roaming charges ! GPRS/CDMA the most efficient means to connect ATMs, POS terminals, kiosks

– no leased lines, no dial-up problems, pay-per use – already a large number of ATMs in Bombay are connected

! Corporate extranet access is another effective application Take-up will soon ramp from present 1.5-2 million/month to 4 million/month

16

Inhibitors Inhibitors

! Low RPUs (2 cents a minute) do not leave room for innovation

• r huge new Capex

! Over-served urban areas

– four to six operators, undercutting each others – marginal players will vanish, service levels can deteriorate – major urban markets will saturate in next 18 months

! No data services in local Indian languages

– handsets with Hindi very few, other languages non-existent

! No local manufacture of handsets in India-market that will absorb 40 million new subs next 12 months ! Fraud still not a concern, but companies still not adequately protected-particularly incumbent and CDMA operators ! Investment from overseas very little

– $10 billion or so needed to bring the teledensity to 15%

17

Future Trends Future Trends -

• In Competition

In Competition

! Currently 3 to 7 mobile operators in different service areas

– Policy and Regulatory framework however facilitating consolidation – M & A activities already happening

! Thus, market structure will soon evolve from “Hyper- competition” to “Adequate competition”

18

Adequate Spectrum Adequate Spectrum – – Crucial Factor in Mobile Crucial Factor in Mobile Growth Growth

“Shortage of radio spectrum is potentially one of the most serious inhibitors to a fast and positive development of the

• industry. If regulators, in a smart way, allocate more spectrum

for wireless communication, growth will be much faster and prices lower.” Wireless Foresight By Karlson & others

19

Future Trends Future Trends -

• In Interconnection

In Interconnection

! Multi-operator, multi service environment

– Increased Complexities in Interconnection – Focus on implementing interconnect billing / introducing

interconnect exchanges a pre-requisite

! Introduction of Carrier Access Codes ! Imminent introduction of Number Portability

– Both under consideration of Regulator, ensures freedom &

flexibility to consumer ! Reduction in costs by improving efficiencies, sharing infrastructure & facilities

– Already started in a small way amongst private operators – Increased reliance on infrastructure providers

20

“ The Elephant is on the dance floor……….. ……….and the Band is playing a Mobile Tune………… ………Get on that dance floor with Indian Elephant”!!! ………Neil Galloway Head of Asian Telecom ABN-AMRO BANK 9 December 2003

Indian Future is Mobile Indian Future is Mobile