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Indian School of Business
Showing posts with label Indian Telecom Sector. Show all posts
Showing posts with label Indian Telecom Sector. Show all posts

In India every one in five owns a phone

The total number of telephone subscribers has reached 232.87 million at the end of July 2007 as compared to 225.01 million in June 2007. The overall tele-density has increased to 20.52 in July 2007 as compared to 19.86 in June 2007.

In the wireless segment, 8.06 million subscribers have been added in July 2007 while 7.34 million subscribers were added in June 2007. The total wireless subscribers (GSM, CDMA & WLL (F)) base is 192.98 million now. The wireline segment subscriber base stood at 39.89 million with a decline of 0.20 million in July 2007.


Total broadband connections in the country have reached 2.47 million by the end of July, with an addition of 50 thousand links. In July, the GSM subscriber base grew from 135.9 million in June to 141.74 million. This translates into an overall growth of 4.23% over the previous month when the addition was was 5.3 million. The country's top mobile operator, Bharti Airtel, captured 31.58% share of the market. It added 2 million new users and its subscriber base touched 44.76 million.Vodafone Essar added 1.68 million new users to take its user base to 32.43 million to retain the second slot, while state-run BSNL, which is struggling with capacity expansion, added just 0.55 million new users to remain at the third slot with a user base of 28.97 million.

Complete Report:- TRAI's Press Release Dated 24-08-2007

Indian telecom companies added a whopping 7.34 mn users in June, 2007

The temporary slowdown in India’s celebrated telecom growth over the last couple of months due to government’s enforced verification drive is now history. The telecom sector is buzzing again—operators have added a record 7.34 million subscribers in June, the highest subscriber growth in a month so far, the country’s telecom regulator. More importantly, industry players also said that June’s growth in subscriber numbers was a global record. Going forward, the industry is also confident of maintaining the growth rate of 7 million plus new users per month.


GSM players accounted for over 71% of June’s record growth and contributed 5.2 million users to this fold while the CDMA operators added the rest. This has also resulted in the Indian cellular base crossing the 185-million mark.

However, despite record growth over the last 12 months, the fact is that less than 20% of the country’s 1.1 billion population own a telephone! “If the government extends its support in the form of good policy decisions, then the sector can increase the 7 million monthly figure to about 9 million,” said the spokesperson with a leading cellular operator.

Commenting on the record growth, the Association of Unified Service Providers of India’s general secretary S C Khana said, “The growth was driven by CDMA players who cut handset prices to less than Rs 1,000, forcing the GSM sector to follow suit. The competition that followed over the handset price wars resulted in record additions. With more cheap handsets set to come in, and as the network coverage increases especially in the C category circles, the growth rate will increase.”

A closer look at June’s figures tell an interesting story. At a time when all players are riding the cellular boom, public sector BSNL has registered negative growth in five of the 21 telecom circles where it offers services. The PSU added just 0.43 million new subscribers in June compared to 1.96 million additions by Bharti Airtel, 1.54 million by Vodafone-Essar and 1.2 million by Reliance Communications. At the same time, India’s largest cellular operator Bharti Airtel continues to outperform the industry—the company added 1.9 million users last month taking its total subscriber base to over 42 million.

While cellular growth is back on track, the broadband sector has failed to match the trend. Total broadband users totalled 2.52 million in June-end, with the addition of a mere 0.06 million new connections last month. Despite 2007 being declared as the Year of Broadband, the country has added just 0.47 million high speed internet users during the first six months of the year.

India had added a record 6.73 million subscribers in January this year, but the preceding months witnessed a slow down with growth remaining below the peak of 6 million per month for the next couple of months as the impact of stringent verification rules and capacity constraints began to show. This resulted in the subscriber additions falling to 5.96 million in February, 3.53 million in March and 5.38 in April, before picking up to touch 6.57 million in May.

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Mobile firms receive windfall on rupee appreciation

Indian telecom companies are likely to get a windfall of Rs 100-150 crore during their first quarter of the current fiscal. The unexpected profits are due to the rupee appreciation, which had a negative impact on IT companies.

According to analysts, the two major companies – Bharti Airtel and Reliance Communications -- are expected to rake in Rs 100-150 crore additional profits due to foreign exchange gains. For the Aditya Birla group company, Idea Cellular, the additional profit could be around the Rs 40-50 crore levels.

The telecom companies’ capital expenditure (capex) mainly goes into equipment imports for their expansion plans. The rupee appreciation would result in foreign exchange gains as the companies are paying in dollars. The Indian rupee started appreciating against the dollar from April, rising 7 per cent this year compared with the same period last year.

Says Sumit Modi of Emkay Shares, “The majority of the active components are imported by the operators for which they pay in dollars. Therefore, the operators would benefit from the rising rupee to the extent of capex on active components.”

Idea Cellular has posted a consolidated net profit of Rs 308 crore during the first quarter of this fiscal. The net profit during the previous quarter ended March 31 was Rs 133 crore. In the case of Bharti Airtel, the consolidated total revenues for the quarter ended June 30, 2007 of Rs. 5,905 crore grew by 53% and EBITDA of Rs. 2,447 crore grew by 63% on a year on year basis. Reliance Communications is yet to announce results.

India - A preferred destination for low cost mobile handsets manufacturing

From a slow start, mobile manufacturing in India is beginning to take off and may soon rival China as a base for low-cost handset production. According to US research group Gartner, in the last 12 months alone, the number of units produced in India has soared by 68%. The subcontinent is forecast to have the highest growth in mobile manufacturing again this year.

The first factories for mobile phones were not established in India until 2005. Since then however, growing demand at home coupled with a relatively cheap labour force, has seen production increase dramatically. In 2006, Gartner reports that India produced nearly 31 million mobile phones, with a street value of US$5 billion. For 2007, it has forecast that handset production will increase by 68% in units to nearly 95 million handsets and 65% in value terms. Over the next five years Gartner says that the Indian market will see a compound annual growth rate in terms of mobile phone production of 25%.

The rampaging growth of demand for mobile connections in India is driving the demand for home-based mobile manufacturers. India is the fastest growing mobile market in the world, with a further 6.57 million mobile subscribers signing up for services last month alone. At the beginning of June 2007 the sub-continent was home to 178 million mobile users. Over six million users are being added every month and there is a captive local market for mobile manufacturers. Low mobile penetration and favourable government policies are driving mobile phone original equipment manufacturers to set up manufacturing facilities in India. Nokia started its unit in Chennai in January 2006 and produced a record 25 million handsets in the first year of operation. The vendor is also exporting mobiles from India to Sri Lanka. Motorola and electronics manufacturing service vendors (EMS) like Foxconn and Flextronics have also set up plants in India.

Gartner said though the world's top five handset makers will retain a major share of production volume, it expects local manufacturers to capture up to a fifth of India's overall mobile phone production volume by the end of 2011. It is believed that growing demand for low-cost and ultra-low-cost mobile phones and the need for EMS vendors to reduce their revenue exposure to Nokia, Motorola and Sony Ericsson, for whom they are now manufacturing in India, will contribute to the growth of local-brand mobile phones in the Indian market, said the report.

Another key challenge will be to keep handset prices low, as Indian consumers are very price sensitive. This will be achievable by gaining access to low-cost, feature-rich and local-specific chip designs, as well as a strong distribution network. Key stakeholders in the mobile phone industry value chain can provide this, so local manufacturers must look to form alliances and partnerships with them in order to succeed, it said.

In April 2005 Finnish company Elcoteq was the first company to set up a telecoms manufacturing unit in Bangalore. Korean giants LG and Samsung quickly followed suit, before market leader Nokia also got in on the act in 2006. However, Nokia has begun to export mobile phones from its plant near Chennai (Madras) to the Gulf States and Africa. In addition there are a few locally branded phone vendors and manufacturers such as Spice, Usha Lexus, and BPL that are either manufacturing locally or import the handsets.

A recent MacKinsey research report says "India leads the market in offshored back-office services, but as a manufacturing center it lags behind China, Thailand, and the rest of Asia. The reasons are well documented: multinational companies operating in India must overcome erratic electricity supplies, poor roads, and gridlocked seaports and airports while contending with government policies that discourage hiring and hold back domestic demand for goods in many sectors. Such obstacles can be considerable, but they haven't stopped some multinational manufacturers from setting up shop in India."

The research report further says "already just over half of all offshore manufacturing by US companies involves skill-intensive sectors, and that figure could rise to 70 percent by 2015. With high-skill sectors accounting for almost 40 percent of the manufacturing output of India, it is in a good position to absorb some of that increase. For one thing, the country offers abundant engineering and technical talent: every year, it produces 400,000 graduate engineers, second only to China's 490,000. Companies might also be attracted to India (and to other developing countries) by the increasing availability of reliable suppliers, the chance to escape unrelenting price pressures at home, and the size of the domestic market. LG, for example, plans to make handsets in India to take advantage of its rapidly growing demand for mobile telephones".

It also says "multinationals willing to make the effort to source and manufacture products in India are likely to obtain first-mover advantages such as exclusive relationships with the best suppliers, access to the brightest talent, and government support. Overall, these companies will learn how to cut their costs more quickly, to improve their returns, to increase their competitiveness in Western markets, and to position themselves for leadership in Asian ones. What's more, India's combination of a highly educated workforce and a large, lower-income, and underserved population could help companies learn lessons and develop products with applications in emerging markets around the world.".

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CII's Conference on Telecom & Broadband - Technical Session - I

On behalf of the Income Tax Department, Andhra Pradesh, myself and one more Officer have attended the Conference on Telecom & Broadband conducted by Confederation of Indian Industry (CII), Andhra Pradesh on 10th January 2007 at CII Sohrabji Green Business Centre, Madhapur. This conference is to understand the new tends in telecom & broadband technology, the challenges and opportunities that it provides. The conference also deliberated on how to manage expectations of various stake holders, strartegies pertaining to aligning IT & business, business continuity and telecom outsourcing beside others.

BACKGROUND:-

The telecom services have been recognized the world-over as an important tool for socio-economic development for a nation. Telecommunication is one of the prime support services needed for rapid growth and modernization of various sectors of economy. It has become especially important in recent years because of enormous growth of information technology and its significant potential for the impact it has on the rest of the economy.

Telecommunication networks of India and China are among the largest in the world. India’s position as a global capital of outsourcing industry has been a major trigger for spurring broadband demand in the country. India operates one of the largest telecom networks in Asia and fifth place after China, US, Japan and Russia, with 183.46 million telephones as on November 30, 2006, as against 125.79 million as on December 31, 2005, a 50 percent growth rate.

The mobile phone made a debut in the country in 1995 and struggled for the first three years to touch 1 million mark in 1998. Thanks to the new telecom policy operated on revenue sharing mechanism for mobile operators, and southward movement of handset prices, the number of mobile subscribers touched 100 million in June, 2006. The mobile market is expanding at an awesome rate of around 5 miilion new subscribers added every month.

Four of the top ten broadband economies of the world are in Asia. South Korea, Hong Kong, Taiwan and Singapore have the distinction of achieving highest broadband household digital connectivity index of 60% to 80%. Broadband services were launched in India in 2005 and presently cover about 300 Indian cities with a combined 2 million connections. Although the Indian broadband sector is in its nascent stage, it offers huge potential provided proper policy initiatives of the government are combined with technological innovations so as to provide these services to customers at reasonable and affordable prices combined with satisfactory service.

The Conference was inaugurated by Mr. K. Rosaiah, Hon’ble Minister for Finance, Government of Andhra Pradesh. In his inaugural address, he congratulated CII, who with the help of state government organized this conference. He stressed the importance of information technology revolution helping the governments in initiatives like tele-education, tele-medicine, and e-governance. Accelerated growth in the penetration of PCS and convergence of video, audio and communication are paving the way for this revolution, he said. The domestic consumer mass for IT, telecom and consumer electronics is also contributing to the fast pace of telecom and broadband growth in the country. As per him, the main constraints are infrastructure, government policies and high interest rates. He said “the need of the hour is globally competitive”

In the theme address, Mr. Shakti Sagar, MD of ADP Pvt. Ltd., a fully owned subsidiary of Automatic Data Processing Inc., USA, said “today’s broadband is tomorrow’s traffic jam”. According to him, the main challenges in broad band sector are
- Cost, quality and content
- Broadband equipment
- Return on investment
- Affordable and high speed broadband

Presently, Korea is ahead in broadband services with a penetration rate of 80% : out of 15 million houses in Korea, Braodband is available in 12 million houses.

In his special address, Mr. Andrew Dinsley, First Scretary (Trade & Investment), UK Trade & Investment, given the UK’s perspective on broadband. He said that Singapore has free internet facility at its airports. In UK, the broadband subscribers are increasing at rate of 1 lakh per week. In fact, the number of mobile phones in UK standing at 67 million is more than its population at 60 million. In UK, the broadband services are provided free of cost. With the emerging technologies, there are enormous investment opportunities for Indian companies in UK and vice versa. Hyderabad based North Gate Technologies, a VoIP service provider, invested in UK. Vodafone, Orange and T-mobile are investing huge amounts in R&D leading to innovation in broadband technology. If the pace continues, India will knock out Japan for the second position in terms of investments made in UK.

In his keynote address, Mr. B V R Mohan Reddy, Chairman & Managing Director, Infotech Enterprises Ltd., has said that 21st century belongs to knowledge economy, which will create wealth all around the world. Research & Development (R&D) will become a key driver in innovation. The Indian telecom sector is growing at such an unprecedented rate that Vodafone is ready to buy stake in Hutchisson Essar at a cost of around $1100 per subscriber where as the international average is only $700 per subscriber. Demand form business will drive the growth of broadband in India. With the help of broadband, business processes will be improved achieving efficiency and increasing productivity. The sectors like supply chain management, movis, music, games, local information, e-education, life sciences, health care sector, e-governance and agriculture sectors are benefited by improved and faster broadband connectivity. More and more growth is expected from Tier-II and Tier-III cities like Vijayawada, Visakapatnam, Rajahmundry, Guntur and Kakinada in Andhra Pradesh.

In the world, the total broadband connections were 17 million in 2001, which was increased to 70 millions presently. South Korea tops the list with a penetration rate of 57 per 1000 households whereas in India the rate is 2 connections per 1000 households. Presently there are 60 million television viewers and 7 million internet users under dial-up connections. These are the potential customers for barodband connections.

Technical Session I : Broadband : The Wi-Fi world. What next?

Under the Technical Session-I, Mr. K. Balachandran, MD, ADC Krone, has addressed the conference under the theme “New Networks – New Ways”. Presently, service sector contributes around 56% to our Gross Domestic Product (GDP). Indian cities like Chennai and Banglore are absorbing office space equivalent to that of any other global known cities like Tokyo and New York. According to him, bundled services will drive the growth of broadband. The service provider will have to put together his video, audio and voice services. For example, in US, the revenues of those companies which have provided bundled services have grown faster than that of companies providing single service like ISP, Video Streaming etc. The evolution and advancement of broadband technology over copper, fiber and wireless will pave the way for seamless services integrating all of our gadgets including telephone, television, mobile, and computer.

The theme of tomorrow’s world is “Any content, Any where, Any time”. In recent years, mobile operators are passively sharing the mobile towers among different service providers so as to reduce the fixed costs. Gradually, they may be service convergence and network convergence on an active sharing basis wherein broadcasting capacity may be shared among the service providers. IEEE 802.16e deals with the broadband spectrum. In India, the 3G spectrum which may be auctioned by the Indian government may be 2.3 GHz, 2.5GHz, 3.3Ghz or 3.5 GHz. The main problem in the 3G spectrum is related to uniformity of the spectrum throughout the world as different countries are using different frequencies making the standardization of equipment difficult and in effect, rising the initial cost of infrastructure for broadband services. Many of us felt the failure of network coverage in big buildings, malls, hotels, underground parking spaces. Some of the industrial areas like underground mining areas are still to be covered by the network coverage. 60 to 70% of all calls are originated from the buildings. Hence, in-building systems to enhance the coverage is one of the area are required to make the broadband available to us while on the move. Mobility, affordability and speed are the three crux areas for successful penetration of broadband services.

Gradually third party infrastructure companies are coming into picture. These companies are only for establishing the telecom and broadband equipment and facilities. For example, American Towers, a owner, operator and developer of wireless communications towers with more than 14000 sites in the United States, Mexico and Canada, is in negotiations with Tata Teleservices, Hutchison-Essar, and Bharti for outsourcing and management of towers. The move is expected to help Indian telecom companies to reduce their requirement for fresh capital, reduce costs and unlock value of shareholders. Reliance Communications has decided to hive off its mobile phone towers into a subsidiary and offload a significant stake to American Tower.

Mr. T Hanuman Chowdary, Director, Centre for Telecommunications Management and Studies, a pioneer in the development of Indian Telecom Policy, spoke on the theme “Broadband Development – R&D for Technology & Applications: A National Mission”. As per the figures given by him, Average Revenue Per User (ARPU) was 1.6 times the Per Capita Income in 1994. With the drastic reduction of tariff in recent years and with the rising personal incomes of our populace, the ARPU has come down to 0.16 of per capita income at present. There is enough back-bone bandwidth for domestic and international traffic, he said. BSNL, Rail Communications, GAIL, PGCL & numerous P-Telcos have sufficient bandwidth, provided we use them efficiently. BSNl/MTNL is also planning for another Undersea Cable. VSNL acquired Canada’s national carrier – tele Globe which has connectivity to 240 countries and ownership in 100 subsea and terrestrial cable systems. He expressed concern over minimal allocation of budget for R&D in the telecom filed. For example, ITI has spent an amount of Rs. 38.73 crores on R&D in 2006, which is a paltry 2.21% of sales. Like pharma companies, Indian telecom companies have to spend at least 20-30% of their sales on R&D. In US, IT companies spend 15% to 30% of their sales on R&D. He lauded the government for its internet policy wherein there is no entrance fee, no license fee, no revenue sharing and no territorial restriction / obligation. Induce multi-story buildings, new townships / residential complexes to install Wi Max base stations and connect them to the back-bone.

Lt. Col. Narendra Kumar Yadav, genral Manager – Projects, ICOMM Tele Limited, addressed the conference on the latest alternative technology available for broadband services. It is called High Altitude Platforms (HAPS) wherein high altitude positioning of balloons fitted with broadband equipment caters to wider area wireless connectivity. The frequency spectrum is 28Ghz or 48 Ghz. In stratosphere, 17-22 kms above the ground, the air velocity is almost zero. In this layer, airships will be placed. One such airship can cover the land area of 75km radius, beneath it. It can have multiple antennas which can cater up to an area of 600 km diameter on earth. In fact, Japan has already proved this technology. But, we have to wait 3 to 5 years for this technology to arrive in India. Vehicle users in India may have to wait for at least 7 more years for this technology startup.


Mr. Kusumba S, Treasurer, ISP Association of India (ISPAI), spoke about the dangers involved in the wireless communications and pitfalls in the government’s broadband policy. While using your mobile phones, deactivate your Bluetooth or wi-fi, otherwise the man next door or in the vicinity may hack your mobile, steal your address book or message. He has introduced the terminology like WarWalking, WarTalking and WarFlying – these terms refer to the methods adopted by hackers to look for open wireless networks to login. In fact, there is WarChalking in which the the persons finding an open wireless network marks it on the traffic post or wall post with IP address and speed of the network so that other people can can come down to that place for entering into the network and use the internet services freely.

National Telecom Policy, 2005 enunciated the broadband targets at 3 million and 9 million by 2005 and 2007 respectively. However, we could achieve only 2 million broadband subscribers by the end of 2006. In fact, this is mainly due to the lopsided policies of the Government, he says. For example, BSNL’s 7 million copper conductor pairs covering 35 to 40 million premises can be used for providing broadband services. However, only 4% of the above network is used for these services as the present policy does not allow ISPs to access this copper network. He said that it is not the technology; it is the policy which is inhibiting the growth of the broadband sector in India.

M. T. Arvind, CEO, Amplebit Technologies, has thrown light on soft modem for broadband connections. In the initial stages of internet days, we had bulky external dial-up modems. Gradually, they have been replaced with the internal modems. Nowadays, the vendors are selling computers with modem inbuilt. Even in the case of broadband connections, we are presently spending around Rs. 1200-1500 on the broadband modem, installation charges of around Rs. 250 and recurring monthly charges of Rs. 250 – 500 depending on the usage plans offered by the service providers like HathWay or Dishnet. With the introduction of soft modem, a modem in software, the initial coast of broadband connection will reduce to the level of dial-up connections making it viable for rural and semi-urban expansion. He says “ affordable bundling of broadband modem with PC will accelerate the penetration of broadband services”


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