A Shende f s Ppt Assocham Telecom Conf 2006v3

8/6/2019 A Shende f s Ppt Assocham Telecom Conf 2006v3

http://slidepdf.com/reader/full/a-shende-f-s-ppt-assocham-telecom-conf-2006v3 1/23



2

Agenda

1

2

Making the Case

3 Challenges in Indian Telecom Equipment Manufacturers Space

4

5

Challenges in Indian Telecom Handset Manufacturers Space

Challenges in Indian Telecom Service Providers Space

Recommendations



3

1

2

Recommendations

Making the Case


4

5





4

The Indian Telecommunications Industry at a Glanceü~ 125 million subscribers as of Dec 2005

üMore than 4 million subscribers added per month

üThe sector has grown at ~ 35% p.a. in 2005

üTotal current investments of the telecom industry are over INR 90,000 crores

ØTotal FDI till September 2005 was INR 41,800 crores

üNetwork connecting close to 4500 towns & cities and more than 65,000 villages

üA sector, which in less than 10 years, has increased Indian tele-density to 12



While the tariffs have decreased, the subscriber base has exploded

14 14

6

3.58

2

1.60.44

0.4

0.881.2 1.88

3.58

6.5

13

33.31

51.53

0

10

20

30

40

50

60

0

2

4

6

8

10

12

14

16

1998 1999 2000 2001 2002 2003 2004 2005

M o b i l e s u b s c r i b e r b a s e ( i n M i l l i o n ) E f f e c t i v e c h a r g e ( i n R s . p e r m i n )

Effe ctive cha rge (in Rs. Pe r Su bscribe r Ba se (in m

3rd & 4th Cellular Operator

CPP Introdu ced

Low ering of ADC from 30

to 10% of sector revenueNTP'99

Source: TRAI Study paper No 2/2005

•The minutes of usage per month per subscriber has also increased from 114 minutes in 1999 to 367 minutes in 2005

•The per subscriber mE usage has increased from 12-15 mE per subscriber in 1999 to ~30 mE per subscriber in 2005



But the biggest challenge is decreasing ARPU …

Source: TRAI Performance Indicators

1299

1160

821

740

512

399374

0

200

400

600

800

1000

1200

1400

A R P U

i n I N R

p e r S u b s c r i b e r p e r M o n

t

1999 2000 2001 2002 2003 2004 2005 2006

? –> What Next

•Global average ARPU – USD 21•Indian Average ARPU – USD 8



7

Legacy

Telecom

FixedLineWi

reless

Diversified

Telecom

Solutions

Wir eless

Applications

E/MPayment

NewTelecomBusiness

Ecosystem

Telecom ServiceFocused Business

Telecom Service Blendedwith Emerging Areas likeVAS & Mobile Applications

Transform to be Telecom Ecosystem Enabler

Early VerticalSpecificprograms

Mobile Wallets andPayment

Third-partyconsumer andearly enterprise

Access and earlyapplications

Historic

Transition

Future

The New Business Strategy: From Services to Business Ecosystem

Radio

Paging

FixedLine



8

The New Telecom Ecosystem – Feeder Model

NewTelecom

BusinessEcosystem

WirelessServiceProvider

Fixed LineServiceProvider

TelecomHandset

Manufacturers

TelecomNetwork

EquipmentManufactur

ers

TelecomTransmissionEquipment

Manufacturer

s

Application&

ContentProviders

Active &Passive

Infrastructur e

Providers

Drive Indian EconomyTowards the 10%Economy Growth

Target



9

What the New Ecosystem Will do ?

If the new ecosystem is established to meet the target of 250 million subscribers, then the

•Increase in tele-density will increase the rate of growth of GDP

–A 1% increase in tele-density results in 3% increase in rate of GDP growth rate

•Current 5 million jobs generated by this sector can increase to 12 million

•Proper facilitation to various sub-sectors in the ecosystem can increase revenues generated by

the telecom industry for the government

–Mobile services industry’s annual contribution of INR 32,000 crores can increase beyond

INR 50,000 crores

–The annual revenues for the government by mobile industry can increase from INR 15,000

crores to INR 65,000 crores



10

1

2

Making the Case


4

5



Recommendations



11

Levies & Duties•The Indian Telecom sector has one the highest levies and duties imposed on it

–The total regulatory charges are between 17 ~ 26% exclusive of goods and service tax

•This high incidence of levies and duties means a low return on capital , thus adversely impacting

availability of funds for network expansion

–The return on capital expenditure for mobile services is very low in India at 7.8%

•Clubbing low tariffs, falling ARPU’s and high levies and duties means lower funds with players to

reinvest in a constantly funds demanding nature of business

Regulatory charges % age of revenue

Service tax, GST 10% + GST

License Fee 5 – 10%

Spectrum Charge 2 ~ 6%*

USO Included in license fees

Total Regulatory charges 17%~26% + GST

* Backbone spectrum charges extra GST – Goods & Service Tax Source: TRAI



12

Spectrum

•To enable a faster expansion of wireless telephony, adequate spectrum is a pre-requisite

•The growing telecom industry has witnessed a surge in spectrum usage from 12-15 mE per user

in early 2000 to close to 30 mE per user in 2005. The net result is the congestion in networks.

Since spectrum is not available, operators tend to reuse the same spectrum across multiple sites

thereby causing interference and call drops.

•The increase in FDI limit will see the true benefits once the spectrum issues is resolved. The

international Telco provider community is keenly watching the developments towards spectrum

resolution and wants it to be sorted out before it can invest in this growing market.

–An increased FDI activity can help Indian Telecom industry to meet the 250 million target



13

Connecting Rural India

•More than 70% of Indian population lives in the rural India but contribution from rural India to

Indian Telecom industry stands at a mere 20%.

•Rural tele-density stands at a mere 1.5%

•Mobile and wireless services have not penetrated rural areas the way they should.

•USO concept is a good way to achieve faster growth and penetration in really remote areas. It is

an effective way to meet government’s obligation to provide service in rural areas.



14

Infrastructure Sharing & Clearing Issues

•Being a developing country, duplication of infrastructure is a colossal waste. Infrastructure

sharing, as an option, should be considered more seriously

•The players face enormous delays in obtaining Right of Way from different agencies like NHAI,

pollution board, municipal corporations etc thus hampering faster network roll outs

–Changing local rules and regulations across different states handicaps roll outs instead of expediting

at this time



15

1

2

Making the Case


4

5



Recommendations



16

Challenges Faced by Indian Equipment Manufacturers Industry

•The current demand – supply mismatch

–The industry needs to add capacity in tunes of 150 million lines to achieve the target of 250 million

subscribers by 2007•major portion of these requirements would be catered to by importing the required telecom equipment

•

•Inverted duty structure currently hampering the industry

–The customs duty on the finished product is lower than the inputs used to manufacture it

–The telecom infrastructure equipment, majority of which is imported annually into the country at 5

percent customs duty. Whereas, duties are levied (10 - 30 percent) on inputs that go into the

manufacturing of this equipment, except ICs at zero percent, making domestic production costlier

than the imported equipment



17

1

2

Making the Case


4

5



Recommendations



18

Challenges Faced by Indian Handset Industry

•The mobile handset manufacturers have till recently bypassed India completely despite the pace

at which the handset sales have been growing for the past two - three years

–

The handset market in 2005 was over 30 million units, till recently all handsets were imported intoIndia

–No base of suppliers to source components

•

•Huge Gray Market – Almost 60 percent

–The hike in VAT on cell phones from 4 to 12.5 percent in the current budget will promote the gray

market for handsets



19

1

2

Making the Case


4 Challenges in Indian Telecom Handset Manufacturers Space


Recommendations5

R d ti



20

Recommendations

•For infrastructure sectors, (e.g. power, roads etc.) 100% exemption is available for the full term of

10 years in succession and these 10 years can be opted from the block of 20 years. A similar

100% exemption for successive 10 years out of the 20 years should be allowed for Telecom

sector, which is currently at 5 years. This will result in higher disposable capital to reinvest in

business

•There should be no service tax on the IUC amount receivable from other operators. IUC is levied

for allowing the call from the cellular service provider to be carried over to the other service

provider.

•The cellular industry is presently paying a service tax of 10.2% on its gross revenues in addition

to state governments demanding sales tax on elements like airtime, rentals etc. The industry

thus faces double taxation with both sales tax as well as service tax being levied on it

•

R d ti



21

Recommendations

•The government should seriously identify all the unused spectrums and allocate them to the

cellular industry. Also steps should be taken to enforce a more constructive and disciplined role

of spectrum utilization among service providers and other wireless users in the spirit of mutual

understanding and co-operation.

•The USO fund has yet to be utilized for practical implementation and state success stories. The

fund needs to be utilized by players more effectively and government should ensure that the

operators use this fund to enter into the rural India

•Infrastructure sharing should be mandated by the government, both for private operators as well

as incumbent

•A single window clearance system should be put in place to expedite all clearance related issues

and thus endure faster network roll-outs across India

•

R d ti



22

Recommendations

•The government should encourage the vendors to manufacture handsets in the country rather

than just reducing the import duty

–

This would enhance the telecom ecosystem further as related ancillary units would flourish

–Government should work on policies to make India regional manufacturing hub for mobile handsets



23

Thank You

www.frost.com

[email protected]

A Shende f s Ppt Assocham Telecom Conf 2006v3

Documents

Transcript of A Shende f s Ppt Assocham Telecom Conf 2006v3