ROA Holdings, INC. Report No.

090801

Indian Mobile Market Dynamics and Forecast (2008-2013)

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Copyright 2010 ROA HOLDINGS, INC All Rights Reserved.

Indian Mobile Market Dynamics and Forecast (2008-2013)

Table of Contents
1. Executive Summary 2. India at a Glance 3. Indian Telecom Sector Overview
3.1. The Rise of Indian Telecom Sector 3.2. The Government Factor

4. Indian Telecom Sector Policies

4.1. Regulation and Policy Reforms

5. Indian Rural Mobile Telephony Overview

5.1. Rural Mobile Telephony Analysis

6. Indian Mobile Market Analysis and Forecast

6.1. Mobile Subscribers 6.2. Mobile Penetration Rate 6.3. Technology Adoption 6.4. Spectrum Allocation 6.5. Tariff Rate Analysis 6.6. Mobile Minutes of Use (MoU) Analysis 6.7. ARPU 6.8. CAPEX 6.9. Pre-Paid and Post-Paid

7. Current Players and Their Future Development

7.1. Bharti Airtel 7.2. Tata Teleservices 7.3. Reliance Communication 7.4. BSNL

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Indian Mobile Market Dynamics and Forecast (2008-2013)

7.5. Loop Mobile (formerly BPL Mobile) 7.6. MTNL 7.7. Sistema Shyam Teleservices (SSTL) 7.8. Aircel 7.9. Vodafone 7.10. Idea Cellular 7.11. Ping Mobile (HFCL Infotel Ltd)

8. New Additions
8.1. S Tel 8.2. Unitech Wireless 8.3. ByCell Communication 8.4. Etisalat DB Telecom (formerly Swan Telecom) 8.5. Datacom Solutions 8.6. Virgin Mobile India

9. Handset Market 10. Conclusions and Recommendations

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Indian Mobile Market Dynamics and Forecast (2008-2013)

List of Figures
[Figure 1] Indias Telecom Circles and Key Facts [Figure 2] Telecom Regulatory Framework in India [Figure 3] Rural Mobile Telephony Growth Disparity with Urban [Figure 4] Subscriber Growth Forecast including Teledensity, 2004-2013 [Figure 5] Mobile Teledensity Growth Forecast including Teledensity,2004-2013 [Figure 6] GSM and CDMA Ratio and Growth Forecast 2004-2013 [Figure 7] Indias Mobile Tariff Rates Compared with Other Countries [Figure 8] GSM and CDMA MoU Comparison, 2007-2008 [Figure 9] GSM and CDMA ARPU Forecast, 2004-2013 [Figure 10] CAPEX Growth and Forecast, 2004-2013 [Figure 11] Pre-paid and Post-paid Forecast, 2004-2013 [Figure 12] Bharti Airtels Major Events by Value Chain [Figure 13] Tata Teleservices Major Events by Value Chain [Figure 14] Reliance Communications Major Events by Value Chain [Figure 15] BSNLs Major Events by Value Chain [Figure 16] Loop Mobiles Major Events by Value Chain [Figure 17] MTNLs Major Events by Value Chain [Figure 18] SSTLs Major Events by Value Chain [Figure 19] Aircels Major Events by Value Chain [Figure 20] Vodafones Major Events by Value Chain [Figure 21] Idea Cellulars Major Events by Value Chain [Figure 22] New Operators Presence across Various Circles [Figure 23] Handset Distribution Channels in India [Figure 24] Grey Market/Illegal Distribution of Handsets

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Indian Mobile Market Dynamics and Forecast (2008-2013)

List of Tables
[Table 1] Indias GDP Comparison with its Neighbors, 2006-2008 [Table 2] Key Indian Telecom Regulatory Bodies [Table 3] Other Key Indian Non-Profit Associations [Table 4] FDI Snapshot on Indian Telecom Operators [Table 5] Policy Evolution Snapshot [Table 6] Operator Tie-ups with Premier Institutes for Promoting Rural Telephony [Table 7] Market Snapshot, 2007-2008

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Indian Mobile Market Dynamics and Forecast (2008-2013)

ROA HOLDINGS ISSUE REPORT

1. Executive Summary
For 4 years the telecom industry in India has shown tremendous growth with an average growth rate of 64.51%. In 2004 the subscribers numbered 47.38 million, mainly high income users. By the end of 2007, mobile phones have become accessible even to the low income users and the number has increased to 341.31 million by the end of 2008. The Indian mobile market continues to expand with new entrants like Virgin Mobile in 2008, Loop Telecom in 2009, and the incumbent CDMA operators like Reliance and Tata moving into GSM in 2009.The market is also expected to show a remarkable growth with the latest addition of five more telecom players. The fact that an average of between 8 and 10 million mobile subscribers were added every month in India in the recent past shows the market provides opportunities for telecom players. During 2008, more than 112 million subscribers were added, increasing the penetration from 20.31% to 29.76% in 2008.

India Mobile Market 2009 - 2013

India Mobile Market 2009 - 2013
1000 900 800 62.54% 57.99% 49.92% 40.87% 40.00% 29.76% 20.31% 12.98% 4.45% 6.93% 20.00% 10.00% 0.00% Dec - '04 Dec - '05 Dec - '06 Dec - '07 Dec - '08 Dec - '09E Dec - '10E Dec - '11E Dec - '12E Dec - '13E 30.00% 69.35% 80.00% 70.00% 60.00% 50.00%
ETC Aircel Idea Tata BSNL Vodafone Reliance Bharti Teledensity

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700 Subscribers in millions 600 500 400 300 200 100 0

Source: Optimus, ROA Holdings

It is forecast that the number of subscribers could reach as high as 868.47 million reaching at 69.35% penetration by 2013. Our estimated compound annual growth rate (CAGR) of mobile subscribers from 2008 to 2013 is 20.54%.

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Indian Mobile Market Dynamics and Forecast (2008-2013)

ROA HOLDINGS ISSUE REPORT

The revenues of the telecom industry continued to show robust growth with wireless market growing at 9.91%. The revenue stood at USD 7.36 billion for the second quarter ending in September 2008. In April 2008, India overtook US as the second largest wireless market. The entrance of new players has increased the competitiveness causing the tariff rates to hit an all time low. This has allowed mobile services to penetrate into the low income population attracting more potential users. India embraces both GSM and CDMA technologies. The government has recently opened its doors for deploying 3G technology as well. The next generation network (NGN) backbone has begun developing in India. Mobile Number Portability (MNP) is on government agenda and is likely to be implemented by the end of September 2009. The next few years are likely to witness a rapid expansion of the Indian mobile market not only in terms of subscribers but also in technology and services. Mobile operators are continuing to upgrade their technology and have started providing an increasing array of sophisticated services. The content service segment is growing at a rapid pace. It is believed to speed up further in the future and become the most lucrative part of the market. The Indian handset market is segmented. As the country has a wide gap between the rich and the poor, the handset market varies accordingly. While the low end handsets are sold in high volumes nationwide, the high-end handsets are mainly sold in the major cities. Along with the rapid growth in the mobile service market, the Indian handset market is coming into prominence. In the context of overall economic situation, even during the global economic downturn, the Indian economy is slated to grow at around 7% in 2009-10. It implies tremendous opportunities for international as well as domestic investments. Agriculture, manufacturing and services have been the traditional fundamental pillars of the Indian economy. The service sector has been the forerunner of rapid
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Indian Mobile Market Dynamics and Forecast (2008-2013)

ROA HOLDINGS ISSUE REPORT

growth contributing approximately 54% of the GDP in 2008. IT & telecommunication fall under the booming service sector umbrella. Indias robust telecom infrastructure is a result of a controlled and phased growth coupled with strong policies. The phase began by allowing FDI and privatization. To ensure fair play and benefit to the consumer, the government appointed an independent regulator called Telecommunication Regulatory Authority of India (TRAI) in 1997. A judicial body called TDSAT also exists to adjudicate disputes related to service providers. The role of TRAI is to regulate the telecom business in India. With over 300 million mobile subscribers, India has the necessary maturity of business landscape and infrastructure in place to support further growth. India has one of the largest numbers of mobile operators among the emerging markets. Most of the domestic players have significant foreign investments. For example, Telekom Malaysia owns around 40% stake in Spice Telecom, one of the oldest mobile operators in India with approximately 4 million subscribers. Similarly, Singaporean Sing Tel owns about 30% stake in Bharti Airtel, Indias leading mobile operator. The subscriber base in the rural areas is quite low in India, about 13% as of May 2009.The service providers are eyeing rural India as the next area of growth. The government has put regulatory mechanisms in place to encourage rural telephony. Rural mobile teledensity is expected to reach about 36.25% by 2013.

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Authors ROA Holdings Optimus

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