Would cheaper rates bring in more profits?

Evolution of Mobile Telecom Sector in India

The Indian Government

announced NTP in September 1994.

Foreign equity participation

up to 49 per cent was allowed in basic telecom services

Mobile phones came to India

on 31st July95 with an outgoing call rate @16.80/ min and incoming @8/min.

Evolution of Mobile Telecom Sector in India(Contd.)

The reasons for such hefty

call rates were:-

high license fee imposed by

the govt. lack of competition. High fixed cost.

In 1995-96 only 3000 people

were having cell phones. Even 4 years later, as the price was too high to generate sufficient demand, mobile phone industry was in heavy losses with less than 2 million subscribers.

NTP99 and its impact

NTP 99 Reduction in license fee Incoming was made free Reduction in call rates(by
Millions
900 800 700 600 500 400 300 200 100 0 Millions

almost 60%). customers.

Increase in number of
Increase in number of

service providers.

1999 2006 2011

Further reduction in call rates

Millions
900

2G Scam 122 licenses at very low prices 85 companies with little or no experience
Increase in number of

800 700 600 500 400 300 200 100 0 Millions

service providers.

1999 2006 2011

Mobile subscriptions and Mobile Handsets

Mobile subscriptions demand is closely related to the demand

for mobile handsets. Mobile handset is a complementary product for mobile subscription. The price of Mobile handset went down from 15000 in the year 1995 to 1000 in 2011.

Which in turn increased the demand for mobile subscriptions.

The Indian telecommunication industry is the world's fastest growing industry

The Indian telecommunication industry is the world's fastest growing

industry with 826.93 million mobile phone subscribers as of April 2011. It is also the second largest telecommunication network in the world in terms of number of wireless connections after China.
Rank Country Number of mobile phone Over 5 billion Population % of population Last updated World 6,909,500,000 2010

China

896,200,000

1,341,000,000

67.1

May 2011

India

840,282,797

1,210,193,422

70.23

May 2011

United States

302,947,098

310,866,000

96

Dec 2010

Reduction in call rates

New Users Multiple Connections

Increase in no. of

Increased Usage
0% 50% 100% 150%

new consumers. Increase in usage and multiple connection. Reduction in the call rates and mobile prices. Decline in ARPU but increase in TR.

ARPU

Market Penetration

Demand correlation with income

Demand for mobile phones in India is positively correlated with increase in income. India's economy has been growing at a stellar pace in recent times and people have shared this growth.

Today's chart of the day shows how the per capita income in India has been on the rise. Indias per capita income doubles in 7 years to Rs38,084 million.
Wireless telecom market in India is experiencing the phase of high growth for past few years. Overall mobile subscribers in India have increased from 165.11 million in March 2007 to 771.18 million January 2011. As a result, mobile tele-density jumped from 14.61% to 64.74%.

Income in India was rising. This increased the demand for mobile handsets and hence mobile subscriptions.

Demand correlation with income(Contd.)

Indian wireless telecom market is witnessing unprecedented

growth mainly driven by high income growth According to Vodafone survey Em= 2.45. Mobile subscribers targeted all income groups: High- internet and online payment facilities. Middle- cheap handsets with loads of features. Low- Life time validity on pre-paid cards.

Mobile phone v/s fixed phone

Reduction

in the price of mobile subscriptions has reduced the demand for fixed phone. Percentage change in quantity demanded for fixed phone to percentage change in price of mobile subscriptions is positive between them so they are substitutes. Hence, the increase in demand for mobile subscription has adversely affected fixed phone market.

Fixed phones per Mobile Phones

7 6 5 4 Fixed phones per Mobile Phones

3
2 1 0

Market Spoiler
Japans NTT DoCoMo collaborated with Tata

Teleservices and launched the Tata DoCoMo in India on 10th June 09. DoCoMo launched Pay Per Second and Pay Per Character talk and SMS plans respectively. All competitors were forced to reduce their prices too. As a result TR reduced for the entire market, including DoCoMo. Hence reducing prices will only spoil the market further for the service providers.

Other Sources of Revenue

Tie-ups
Reality Shows Value Added Services

Mobile Internet Users

Data Card Broad Band

Tie-Ups
Airtel with Nokia and Radio Mirchi
Vodafone with ICICI Bank Aircel with Facebook Idea Cellular with Yahoo! and Geodesic

REALITY SHOWS
Reality shows like Big Boss, Indian Idol, Nach Baliye etc.,

which engage audiences are increasing day by day.

On an average, a popular reality television show gets

around 7 million text messages per episode. At Rs. 4 per SMS, it adds Rs. 28 million per episode. Over a year, it sums upto around Rs. 1460 million. On a 50-50 split between the production house and the mobile operator, it works out to Rs. 730 million to the mobile operator.

MOBILE VALUE ADDED SERVICES

MOBILE INTERNET USERS

India has 100 million internet users. This includes approximately 40 million mobile internet users also. Delhi tops the country with 10% of its 2 cr users surfing the internet from their mobile phones.
Internet users (in million)
150 100 50 0
1998 2000 2002 2004 2006 2008 2010 Internet users (in million)

Penetration %
10.00% 8.00% 6.00% 4.00% 2.00% 0.00%
1998 2001 2004 2007 2010

Penetratio n%

DATA CARD
Most telecom operators have entered this market . The data card segment is estimated to be worth Rs 740 cr in the financial year 2009-10 Sales of data cards is expected to grow from 11 mn in 2009-10 to 20 mn by the end of 2011.

BROADBAND
Broadband

PERCENT OF SHARE
80 70

connection base grew by 3.39% during July 2010, up from 9.45 million at the end of June 2010.

60

50

40 PERCENT OF SHARE

30

India has 10.52

million broadband users (till Oct.2010), constituting 6.0% of the population.

20

10

Mobile Number Portability

25% of the respondents are

willing to part with their current service provider. Vodafone and Aircel Port-in to Port-out ratio are 2.12 and 2.51 respectively. Airtel has a ratio of 1.27 Worst hit are Reliance CDMA and GSM and Tata Tele CDMA with ratios of 0.01, 0.05 and 0.06 respectively

Mobile Number Portability

Vodafone's India service revenue

up by 16.7%
Reliance income fell 71% to

Rs13.5bn in March 11 end from Rs 46.6bn

Trends in Market
Despite high

elasticity Airtel prevails in North Vodafone in West Aircel in South Idea in East

By
Aditi Pattanayak Ajay Raja Ankit Pancholi Anurag Kalra Arjun Jain Avishek Mehta Chirag Kriplani Dhananjay Singh Hanuman Asopa Vritika Sharma