assessment of economic impact of wireless broadband in india

Report for GSMA

Assessment of Economic Impact of Wireless Broadband in IndiaDi i D tDiscussion Document

November 2010

1

The development of wireless broadband can bring significant benefits for the Indian economybenefits for the Indian economy

• Key findings: • These surveys, however, have emphasised th d t t ICT ‘ t ’ tIncrease in broadband penetration of 1% will

contribute INR 162 bn, or 0.11% to Indian GDP in 2015

Allocation of additional 5 MHz of 3G

the need to create an ICT ‘eco-system’ to realise significant and wide-reaching productivity gains

• The Indian government has developed clear spectrum will increase BB penetration by 3.3% of population and enhance GDP by INR 538 bn in 2015

• Analysys Mason has prepared this report for

g pobjectives in its National Broadband consultation paper2 in line with policies established in developed and emerging economies

GSMA to assess the direct and indirect economic impact of wireless broadband in India

• Broadband connectivity is being increasingly

economiesTarget of 100 million broadband connections by 2014

• The Indian demographics with a large rural Broadband connectivity is being increasingly seen as an integral driver of improved socio-economic performance

• Recent econometric studies have quantified

population suggests that the development of a robust wireless broadband ecosystem will be key to meet government’s objectives

• Addressing the latent demand forthe direct impact on productivity and economic growth suggesting that an increase in broadband penetration of 1% could result in 0.1% productivity gain1

Addressing the latent demand for broadband services will also support the development of strong Indian players across the value chain

ConfidentialNote: 1. Based on World Bank report; 2. Consultation Paper on National Broadband Plan – 10th June 2010 - TRAI

p y g

2

Definitions of key terms used in this presentation

Terms DefinitionsWireline Lines of copper / cable / fiber deployed underground or overhead for voice / internet services

Fixed Broadband – Wireline Data connection (>=256 Kbps download or upload speed) over wireline infrastructure

Fixed Broadband – Wireless Data connection (>=256 Kbps download or upload speed) over wireless transmission accessed from a fixed location primarily using WiMAX 802 16-2004 / 802 16 d technologylocation, primarily using WiMAX 802.16-2004 / 802.16.d technology

Wireless Broadband Data connection (>=256 Kbps download or upload speed) over wireless transmission primarily using WCDMA, HSPA, LTE, CDMA EV-DO, TD-SCDMA and WiMAX 802.16.e technologies

Internet Users Unique users accessing internet from private / shared / corporate connection

Wireless Broadband Users Unique users accessing wireless broadband services from private / shared / corporate connection

Consumers Individuals accessing broadband services from residential premises or SOHO (Small Office, Home Office) & unorganized sector (whose activities / data collection is not regulated under any legal provision) businesses

Includes large businesses and SMEs in the organized sector (for which statistics are available from budgetEnterprises Includes large businesses and SMEs in the organized sector (for which statistics are available from budget documents or reports, or whose activities or data collection are regulated under a legal provision)

Direct Impact Consumer and enterprise spend on devices and services for accessing wireless broadband

Ecosystem Impact Revenues generated by the telecom and adjacent industries from value added services / other services Ecosystem Impact enabled by wireless broadband access

Second Order Impact Increase in economic productivity of the work force as a result of access to wireless broadband services

Confidential

3

Increase of 1% in wireless broadband penetration will contribute 0 11% (INR 162 bn) to Indian GDP in 2015contribute 0.11% (INR 162 bn) to Indian GDP in 2015

Spare Spectrum Availability Based onImpact on GDP by 1% Increase in Wireless Spare Spectrum Availability Based on Existing Spectrum Allocation2

Impact on GDP by 1% Increase in Wireless Broadband Penetration (INR bn, 2015)

51%41%

0 02%

0.03%

%

21%

93

29

40 162

2013 2014 2015

0.06%

0.02%

0.11%

-34%

-7%93 2010 2011 2012

Direct Ecosystem SecondOrder

Total

Spend on Spend on Productivity

Assumptions2010 2011 2012 2013 2014 2015

-56%

pServices and

Devices

pecosystem

elements using wireless BB

yand efficiency gains among

corporate employees

Bandwidth per user1 (Kbps) 383 570 916 1,414 1,978 2,476

Allocated bandwidth (MHz) 5.0 5.0 5.0 5.0 5.0 5.0

ConfidentialSource: Analysys Mason

Note: 1. Average subscribed bandwidth per user; 2. Estimated 7.5 Mbps capacity available for data per 3G cell site, after adjustment for allocation of voice

4

Allocation of additional 5 MHz will increase BB penetration and enhance GDP by INR 538 bn in 2015and enhance GDP by INR 538 bn in 2015

Key Metrics for Scenarios of SpectrumTotal Impact on GDP by Scenarios of

Scenarios Allocated B d idth1

Wireless BB P t ti 2

Wireless Broadband

Key Metrics for Scenarios of Spectrum Allocation (2015)

Total Impact on GDP by Scenarios of Spectrum Allocation (INR bn, 2015)

(1.9% of GDP) Scenarios Bandwidth1 Penetration2 Broadband

Users3

Low (Existing 5 MHz 9.2% 117 mn

1,0342,190

2,771o G )

INR 538 b

INR 581 bn(1.2%

of GDP)

(1.5% of GDP)

( st gallocation)

Base413

515

615757

8881,652INR 538 bn

Base(Additional

5 MHz)410 Mhz 12.5% 158 mn

482787

1122413

Low Base High

(E i i (Additi l (Additi l High(Additional 15 MHz)4

20 MHz 16.1% 204 mn

Direct Ecosystem Second Order

(Existing Allocation)

(Additional 5 MHz)4

(Additional 15 MHz)4


Note: 1. Total bandwidth allocation for each existing 3G license holder; 2. Based on spectrum allocation, penetration reflects the number of users that can be supported by data cell sites; 3. Includes residential and corporate users separately; 4. Additional spectrum over existing scenario (Low case) for each 3G licensee

5

Contents

Executive Summary

Overview of Broadband Services in India

Impact of Wireless Broadband on GDP

Direct Impact: Industry Revenues and GDPDirect Impact: Industry Revenues and GDP

Ecosystem Revenues and GDP

Stakeholder Imperatives

Second Order Impact / Externalities: Socio Economic Metrics and GDP

Confidential

6

India lags in broadband penetration among BRIC nations due to affordability issues and an under-developed wireline baseto affordability issues and an under-developed wireline base

BRIC Countries & Indonesia: Broadband and

Exec Summary

• India has a significantly lower wireline penetration as compared to other emerging countries, implying a weak infrastructure b f i li b d b db d

BRIC Countries & Indonesia: Broadband and Wireline Penetration by Access Technology (2009)1

32%

base for wireline based broadband deployment

• Lower GDP per capita results in service and d i ff d bilit i th li iti

23% 22%

15%8% 8% device affordability issues, thus limiting

penetration to the consumer, professionals segments and student population through direct / shared access3%

15%

12%

1%

5%

0 1%

4%

6%

1%

8%

1%

• Overall low broadband penetration has resulted in the absence of an ecosystem (content, applications, service models and

GDP per Capita (USD) 8,214 8,675 1,111 3,678 2,247

1%0.1% 1%

Brazil Russia India China Indonesia

device categories), which can address the mass market requirement

Wireline Wireless BroadbandFixed Broadband - Wireline Fixed Broadband - Wireless

ConfidentialSource: Analysys Mason, TeleGeography, Wireless Intelligence, EIU

Note: 1. Penetration as % of population; 2. Wireless broadband includes WCDMA, HSPA, CDMA EV-DO and TD-SCDMA

7

The TCO for broadband services requires a significant percentage of consumer spend on communicationspercentage of consumer spend on communications

Consumer Spend on Communications &

Exec Summary

Broadband / Internet TCO1 % f C it

Consumption Pattern

Consumer Spend on Communications & Broadband in India (2009) • While each connected consumer (at

teledensity of 48%) spent an average ~ INR 2,000 in 2009 on communications, the minimum cost of using a fixed broadbandTCO1 as % of per Capita

Consumption

Total Consumer Spend:INR 44,786 billion

Per Capita Consumption:INR 30,291

minimum cost of using a fixed broadband connection was ~ INR 6,000

• The high TCO is a result of the high device cost as % of consumer wallet

3% Other

Education L i

1%

6%13%

20% cost as % of consumer wallet

• Indian broadband service ARPU is comparable with other countries while the per capita incomes are much lowerLeisure

CommunicationTransport

Healthcare

Housing & Utilities

12% 14%

Dial up Fixed

per capita incomes are much lower

The average monthly household income of a regular online Indian is 3.2 times higher than the national average

2009

gApparelFood

Dial-upInternet

FixedBroadband -

Wireline

Device TCO Service TCO

Broadband ARPU for India is USD 12 (INR 600), China USD 8 and Russia USD 15

ConfidentialSource: Analysys Mason, TRAI, Euromonitor, JuxtConsult, Compay websites

Note: 1. Annual Total Cost of Ownership: includes depreciated entry-level cost of PC & modem and entry level service charges

8

Further, the utility of residential internet is limited due to demand side issues with office / shared usage picking updemand side issues, with office / shared usage picking up

Exec Summary

100%

9.3 mn 11.4 mn 13.6 mn

PC Unit Sales Mix Across Segments Internet Access Points for Urban Users1

2% 2% 2% 5%100%

32 mn 46 mn 50 mn 63 mnUnit

Sales :Internet

Users:

18% 18% 18%

36% 34% 34%75%

100%

22% 25% 27% 30%

6% 7% 8% 5%2% 2% 2% 5%

75%

100%

34% 36% 36%

12% 12% 12%

18% 18% 18%

25%

50%

31% 30% 26% 23%

39% 36% 37% 37%

25%

50%

0%2008 2009 2010

Residential Institutional

26% 23%

0%2006 2007 2008 2009

Home Cyber CaféOffice School / College2Large Businesses SMB & SOHO

• Residential PC sales have remained stagnant at around 30%, with laptop sales picking up marginally

gOther

• Internet access from home is declining due to limited PC base and affordability / utility issues

2

ConfidentialSource: Analysys Mason, IDC, IMRB

marginally

Note: 1. Includes claimed internet users – individuals to have used internet at any point in the past; 2. SMB: Small & Medium Businesses, SOHO: Small Office Home Office

9

Deployment of new access lines for fixed broadband services is time consuming and yields unattractive returnsis time consuming and yields unattractive returns

Comparative Evaluation of Deploying

Exec Summary

Comparative Evaluation of Deploying Broadband Technologies in India • Deployment of new FTTx lines for offering

broadband services to individual homes does not make viable business case due to Technology Time to Deploy Capex per Sub

high cost of getting Right of Way (RoW) permission and execution

• The Capex gets rationalized only for FTTB

DSL (FTTN)Existing Line Low USD 799

DSL (FTTN)New Line High USD 2,200 The Capex gets rationalized only for FTTB

deployments for MDUs2 at a triple play ARPU level, but number of MDUs remain limited

e e

FTTH High USD 2,540

FTTB Medium USD 1 390

• Existing DSL connections are concentrated in urban areas, with top 20 cities accounting for 70% of current wireline broadband

FTTB Medium USD 1,390

WiMAX (802.16.e)1 Low USD 133

for 70% of current wireline broadband connectionsHSPA1 Low USD 125

ConfidentialSource: Analysys Mason, Industry Inputs

Note: 1. Does not include cost of spectrum; 2. Multi Dwelling Units

10

Wireless broadband deployment is scalable as compared to fixed line technologies such as xDSL Cable and Fibrefixed line technologies such as xDSL, Cable and Fibre

Broadband Lines in India Split by Technologies 8 77 mn (Mar’10)

Exec Summary

Broadband Lines in India Split by Technologies, 8.77 mn (Mar 10)

• Only upto 15 mn lines of the existing 37.0 mn fixed lines can be upgraded to DSL due to loop length & copper quality issues

7.598.77 • Fragmented business limits scalability• Cable plant up-gradation cost significant

• No scalability constraint, except spectrumNo scalability constraint, except spectrum • Lowest Capex and rollout time

• High cost associated with fibre deployment per subscriber

0.10 0.420.61

0.05

Total DSL Cable Wireless Fibre OthersTotal DSL Cable Wireless Fibre Others

Capex / Sub USD 2,2001 USD 930 USD 1252 USD 1,4003

ConfidentialSource: Analysys Mason, TRAI

Note: 1. DSL Capex per sub comprises of cost for FTTN New Copper line while for existing line Capex per sub is USD 800; 2. Wireless Capex per sub includes HSPA capex per sub; 3. Capex per sub for Fibre comprises of FTTB connection

11

However, with severe spectrum congestion in voice services, carriers find it difficult to spare capacity for wireless datacarriers find it difficult to spare capacity for wireless data

Subscribers per MHz for GSM Carriers in

Exec Summary

1 2

Subscribers per MHz for GSM Carriers inMetro and Category A Circle1

QE-Mar 2010• Almost all major GSM carriers are already

facing spectrum congestion in the metro areas for offering basic voice services, and

1.12

0.99

0 8

1.0

1.2

(mn)

do not have network capacity to offer EDGE based data services

• With the allocation of 3G and BWA

0.43 0.460.510.6

0.8

riber

s pe

r MH

z (

0.5

With the allocation of 3G and BWA spectrum, some of the voice congestion will get relieved, and operators will have spare capacity to offer data services

0.28

0.2

0.4

Sub

sc

0.2• However, 3G spectrum allocation is only 5

MHz and will only be able to support limited number of wireless broadband users as

0.0Metro Category A Circle

Airtel Vodafone Idea

number of wireless broadband users as some will be used to solve the voice congestion issues

ConfidentialSource: Analysys Mason, TRAI

Note: 1. Dotted line indicates DoT Criteria for maximum number of subscribers per MHz (at 10 MHz spectrum for GSM and 5 MHz for CDMA)

12

With economies of scale, wireless broadband offering will become more affordable for the mass market consumersbecome more affordable for the mass market consumers

Broadband / Internet TCO1 as % of per Assumptions for TCO Calculations: Entry

Exec Summary

Per Capita Consumption: INR 52,134 (2015)

Broadband / Internet TCO as % of per Capita Consumption (2015)

Wireline Broadband

Wireless BB -Data Only2

Wireless BB – Mobile2

Assumptions for TCO Calculations: Entry Level Device and Service Pricing (INR, 2015)

3.2% 3.4%

10.2% 9.8%

4 5%

Device Type Desktop Embedded Netbook Smartphone

Device Cost (INR) 8,000 10,000 5,000

7.0% 6.4%3.8%

0.7%4.5%

Device Lifetime (years) 3 3 2.5

Modem Cost (INR) 2,000 - -

WirelineBroadband

WirelessBroadband -Data Only

WirelessBroadband -

Mobile


Modem Lifetime (years) 2 - -

Monthly Service Charge – Entry Level (INR / month)

125 150 3011

2 2

Level (INR / month)

• Entry level service pricing is expected to be slightly higher for wireless broadband offerings, which is expected to reduce further with higher adoption and competition among operators

• Device cost for fixed and wireless broadband offerings will be similar by 2015

Confidential

• Device cost for fixed and wireless broadband offerings will be similar by 2015Note: 1. Annual Total Cost of Ownership: includes depreciated entry-level cost of PC & modem and entry level service charges for

data usage; 2. Data only wireless broadband usage refers to access over a PC, while mobile usage refers to that over a mobile phone, with a WCDMA connection bundled with voice services

Source: Analysys Mason, Industry Inputs, Company Websites

13

The service delivery ecosystem is developing rapidly to address the opportunity from wireless broadband servicesaddress the opportunity from wireless broadband services

Exec Summary

Service Providers• Telecom operators and ISPs have made total investment of ~ INR 1,000 bn (USD 23 bn)

for 3G and BWA spectrum, and are entering into ecosystem partnerships for delivery of data-intensive services

Device OEMs • Device vendors are launching mass market access devices such as INR 7,000 (USD 150) smartphones and INR 14,000 (USD 300) netbooks, and partnering with operators to bundle video capable handsets

Delivery & Enabling Platform Providers

• Technology vendors, both Indian and global, are developing platforms such as SDPs1 for integrated and seamless multi-screen experience, ODPs2 for easy discovery and activation, and enabling platforms (such as advertising, relevance, content management and commerce) for enhanced experience and ease of use

Product / Application Providers

• Data-focused as well as mass market product and application platforms offering services such as mobile / broadband TV, online gaming and rural VAS are being developed by various local vendors

Content Aggregators / Developers

• Content providers are aggregating and developing both popular entertainment content such as music / videos, and mass market content such as utility applications and educational content, customized for the small screen

ConfidentialNote: 1. SDPs: Service Delivery Platforms; 2. ODPs: On Device Portals

Source: Analysys Mason, Industry Inputs, Company Websites

14

Our estimates suggest that wireless broadband will have an overall impact of USD 51 bn in 2015 comprising 1 5% of GDPoverall impact of USD 51 bn in 2015, comprising 1.5% of GDP

Total Impact on GDP by Wireless

Exec Summary

• Based on our assessment of latent demand, the specific socio-economic pattern of India and international comparison, the contribution of wireless broadband industry

Total Impact on GDP by Wireless Broadband in 2015 (INR bn)

All calculations assume ‘Base’ scenario with allocation of total 10 MHz spectrum to all 3G

t contribution of wireless broadband industry in India could reach USD 51 billion in 2015, equivalent to 1.5% of GDP

With increase in 10% wireless broadband t ti i t l f INR

893 2,194

operators

penetration, an incremental revenue of INR 1,622 bn (1.1% of GDP) is generated

Other studies such as by World Bank in 2009 estimate an economic growth impact of 1.21% of GDP for developed countries and 1 38% of

0.6%515

of GDP for developed countries and 1.38% of GDP for developing countries for 10% increase in broadband penetration

• Nominal GDP of India is expected to grow at CAGR f 14% f 2010 t 2015

0.6%

0.4% 1.5%787

a CAGR of 14% from 2010 to 2015

• With the ecosystem maturity, wireless broadband penetration will increase from 0.8% in 2010 to 12.5 % in 2015

Direct Ecosystem SecondOrder

Total


15

Increase in broadband penetration will have a direct revenue impact of INR 787 bn (0 55% of GDP) in 2015impact of INR 787 bn (0.55% of GDP) in 2015

Direct Impact Key Metrics – Direct Impact of Wireless

Exec SummaryDirect Impact

Direct Impact

Parameter 2010 2015

Key Metrics Direct Impact of Wireless Broadband Penetration

2010 2015

s

CAGR:60% Parameter 2010 2015

Wireless broadband users (million) 10 158

INR 62 bnUSD 1.3 bn

0.08% of GDP

INR 650 bnUSD 15.2 bn

0.46% of GDP

Serv

ices 60%

Penetration of population 0.8% 12.5%

Wireless broadband service 523 343evic

es INR 18 bnUSD 0.4 bn

0 02% f GDP


0 10% f GDP

CAGR:50%

ARPU (INR / month) 523 343

Households with wireless broadband connection (million)1

6 72

De 0.02% of GDP 0.10% of GDP

CAGR:Businesses with wireless broadband connection (million)1

1.4 4.0INR 80 bnUSD 1.7 bn

0.11% of GDP


0.55% of GDPTota

l 58%


Note: 1. Includes households and businesses with multiple connections and users

16

The growth in wireless broadband services spend will bedriven by increase in consumer base & enterprise penetrationdriven by increase in consumer base & enterprise penetration

Projections for Consumer and Enterprise

Exec SummaryServices1

Projections for Consumer and Enterprise Spend on Wireless Broadband Services

(INR billion)• Global industry trends show the growing

importance of non-voice services including content and entertainment, financial services

d d ti i2015: 2010: CAGR 60% and advertising

• Share of non-voice revenues has the potential to reach ~30% of operator revenues by 2015650

0.46% of GDP0.08% of GDP CAGR: 60%

revenues by 2015In 2009, non-voice revenues comprised only 9% of total telecom revenues, of which voice-based VAS / CRBT and SMS had 87% share

3394650.24%

• Wireless broadband user base has the potential to grow at a CAGR of 74% to comprise 86% share of broadband users by 2015162

238311

5686

141

227

62105

183

303

0.22%2015

In 2009, only 19% of broadband users were accessing applications from a wireless system

21 49 97162

4156

2010 2011 2012 2013 2014 2015

Consumer Enterprise


17

The market for wireless devices will be driven by consumer-centric devices and will see local vendors expanding globallycentric devices and will see local vendors expanding globally

Projections for Consumer and Enterprise

Exec SummaryDevices2

Projections for Consumer and Enterprise Spend on Wireless Broadband Devices

(INR billion)• Global trends in mobile handsets, tablets

and eBooks suggest increasing use of wireless for online content consumption

2015: 2010: CAGR 50%Share of these devices in global electronic device shipments is expected to increase from 32% share in 2010 to 39% in 2012

• The size of the Indian device market will29114

136

0.02%


• The size of the Indian device market will allow the emergence of global players

• Indian brands such as Micromax, Spice and Videocon have an increasing share of the

16

22

56

85

0.02%

Videocon have an increasing share of the mobile handsets market – 22% in QE-Mar2010 from 7% in QE-Mar2009

• These players are expected to increase2546

7092

107

7

8

11

18

33

560.08%

These players are expected to increase investments in local manufacturing and expand their markets globally

11257

2010 2011 2012 2013 2014 2015

Consumer Enterprise


18

Increasing penetration of wireless broadband will have a significant impact on the broadband ecosystem revenues

Wireless BB Description1 Drivers in India Wireless BB Revenue

significant impact on the broadband ecosystem revenuesExec SummaryEcosystem Impact

Ecosystem Description1 Drivers in India (INR bn)

Consumer / Retail

• It includes:M-CommerceM-Entertainment

– M-contentM gaming

• Larger reach of mobile medium compared to PC / laptops is the key driver for growth of retail consumption on mobile in India

• Availability of devices such as smartphones and to chscreen phones at affordable price point

9

187

2010

2015

182%

Retail – M-gaming– M-app

M-Advertising

touchscreen phones at affordable price point• Lack of capacity on 2G network for data intensive

entertainment content such as Mobile videos

Financial• It consists of M-

B ki d

• Banking penetration in India remains concentrated in urban areas enabling players such as Fino, Eko to provide

m-Advertising m-Entertainment m-Commerce

1620102 67%

Financial Service

Banking and remittances using wireless BB

g p y , pbanking solution based on mobile to rural market

• Poor user experience for financial services on 2G network through SMS / voice / GPRS access

• It includes services • Tech enabled social service market in India is currently very

2052015

m-Banking

3 101%

Social Services

t c udes se cessuch as learning, healthcare and governance accessed on wireless mode

ec e ab ed soc a se ce a et d a s cu e t y e yunderpenetrated with no strong player

• Emerging innovations in both hardware and software to drive adoption

• Easy access to time consuming processes such as Passport form submission

2

63

2010

2015

m-Learning m-Health m-Government

3 101%

Corporate / Verticals

• Use of wireless BB for farming, utilities such as M2M and for enterprise solutions

• Enterprise spending priorities are shifting from cost optimization to supporting business growth

• Farmers are depending on online applications for significant costs savings & to generate additional revenues

• Lack of capacity on 2G network resulting in poor user experience

6

60

2010

2015

m-Farming m-Enterprise m-Utilities

460%

Confidential

experience m Farming m Enterprise m Utilities

Source: Analysys Mason, Industry Inputs

CAGRNote: 1. ‘m’ refers to wireless broadband enabled services accessed through wireless broadband connection over mobile handsets or PCs

19

Larger reach of mobile compared to PC / laptops is the key driver for growth of retail consumption on mobile in Indiadriver for growth of retail consumption on mobile in India

Wireless Broadband Ecosystem Revenues

Exec SummaryRetail1

Wireless Broadband Ecosystem Revenues from Retail (INR billion) • m-Advertising: The nascent mobile advertising

market in India will benefit from the increasing role of ecosystem players

2015: 2010: CAGR 82% • m-Content: Increasing carrier focus on VAS content promotion and emergence of experimental business models by D2C players are key drivers for wireless content in India187


• m-Gaming: The Indian digital gaming market is still nascent but has significant growth potential owing to the recent initiatives by players such as inno ati e pricing models

20

5

7

23

31

133 < 0.01%

0.02%

0.01%

innovative pricing models

• m-Apps: With the launch of operator app stores, there is significant potential for Indian app developers to achieve global scale23

42

70

1018

13

2

3

5

7

14

921

44

82

41

0.07%

developers to achieve global scale

• m-Commerce: m-Commerce market in India is expected to grow as the focus from banks and carriers increases, with mobile reach

1 3 8 14 22 287 13

239 20

11 3

2010 2011 2012 2013 2014 2015m-Advertising m-Content m-Gamingm-Apps m-Commerce

0.02%


pp

Note: 1. ‘m’ refers to wireless broadband enabled services accessed through wireless broadband connection over mobile handsets or PCs

20

Financial services have the potential to generate INR 205 bn in revenues for the wireless broadband ecosystemrevenues for the wireless broadband ecosystem


Exec SummaryFin. Service2

Wireless Broadband Ecosystem Revenues from Financial Services (INR billion) • Users of mobile banking and related

services, globally, is forecasted to grow at a CAGR of 59.2 % to reach 894 million users i 2015

2015: 2010: CAGR 67% in 2015

• Inward overseas remittance in India is expected to dominate the remittance market

ith h f 55% f th t t l k t i205


with a share of 55% of the total market in 2013

• Regulations in India currently permits only b k t b k d PO t PO t f

124

172

bank to bank and PO to PO transfers

Bank account to bank account remittance through mobile or online has no transaction fees as compared to Post office remittance16

38

75

p

Use of mobile banking services for cross border inward and outward transfers is strictly prohibited

16

2010 2011 2012 2013 2014 2015


21

Tech enabled social service market in India is currently very underpenetrated with no strong playerunderpenetrated with no strong player


Exec SummarySoc. Service3

Wireless Broadband Ecosystem Revenues from Social Services (INR billion)

2015: 2010: CAGR 101%

• m-Learning: The technology enabled education market in India is currently at a very nascent, but is expected to grow significantly with the initiatives taken by government such as National Knowledge

0.04% of GDP< 0.01 % of GDP CAGR: 101%

63

taken by government such as National Knowledge Network. Emerging innovations in hardware and software will further fuel the growth of mobile learning

H lth

11

19

40

0.01% • m-Health: In India, operators have launched basic health services, and government bodies in partnership with private players are using mobile primarily for health data collection and provide treatment support

1218

9

16

26

7

11

512

23

4 0.01%

0.02% treatment support

• m-Government: Government of India have launched a National e-Governance Plan to provide governance services as part of 27 Mission Mode

2 4 712

142

12

2010 2011 2012 2013 2014 2015

m-Learning m-Health m-Government

0 0 %Projects (MMPs) and 8 components online. Government IT spend is estimated to constitute 1% of the total state budget expenditure



22

Mobile corporate service helps enterprises and users to enhance productivity connectivity and competitive advantageenhance productivity, connectivity and competitive advantage


Exec SummaryCorp. Service4

Wireless Broadband Ecosystem Revenues from Corporate Services (INR billion)

2015: 2010: CAGR 60%

• m-Farming: Utility will drive adoption of m-farming services in India as the existing users claim to achieve cost savings and increase revenues


60

• m-Enterprise: Emergence of system integrators coupled with better device / smartphone and data ecosystem will drive Indian enterprise mobility apps market

15

1943

0.01%• m-Utilities: In India M2M utility applications such

as smart meters and remote video surveillance have seen major adoption

Power utility companies such as Reliance

15

24

3510

69

16

27

52

0.02%

Power utility companies such as Reliance Infrastructure and Tata Power are deploying CDMA-enabled smart meters

With high speed 3G HSPA connectivity combined with the latest compression technologies, CCTV

1 2 4 65 6 1012

2010 2011 2012 2013 2014 2015

m-Farming m-Enterprise m-Utilities

< 0.01% solution companies can provide rapid access to good quality recordings from any location strengthening the nations security



23

Wireless broadband will have an industry productivity impact of INR 888 bn (0 62% of GDP) in 2015of INR 888 bn (0.62% of GDP) in 2015

Estimation of Impact on Productivity due to Industry-wise Impact on Productivity due to

Exec Summary2nd Order Impact

Estimation of Impact on Productivity due to Wireless Broadband

Industry Industry Share of Increase

Industry wise Impact on Productivity due to Wireless Broadband (2015)

Working Population with Wireless Broadband Connectivity1 Industry

Vertical

yContribution to

GDP in 2015in Productivity in

2015

Manufacturing, Mining & Industry 17% 11%

5 mn

2010 2015

27 mn

Connectivity1

CAGR:

Government & PSUs 3% 1%

Services (excluding IT / 57% 75%

5 mn 27 mn39%

( gITeS)

IT / ITeS 11% 11%Increase in Industry Productivity in 2015

Agriculture 12% 2%

Total 100%(INR 143 trillion)

100%(INR 0.89 trillion)

INR 888 bn(USD 21 bn)

0.62% of GDP

ConfidentialSource: Analysys Mason, EIU, Euromonitor, NASSCOM, CII-PWC Report on IT/ITeS Industry

Note: 1. Includes retail wireless broadband connections used for official / business purpose and corporate connections

24

The service industry including IT/ITes will benefit the most from wireless broadband services

Industry Vertical

Penetration of Wireless Broadband and User Base (in Parentheses) Productivity Gain in 2015 (INR bn)

from wireless broadband servicesExec Summary2nd Order Impact

Vertical and User Base (in Parentheses)

Manufacturing, Mining & Industry

(0.6 mn users)1

(3.0 mn users)1

(0.4% of industry revenues in 2015)

5%

21%

2010

2015

932015

Government & PSUs

(0.7 mn users)

(3.1 mn users)(0.3% of industry revenues in 2015)

4%

20%

2010

2015

132015

Services (excluding IT /

ITeS)

(1.9 mn users)1

(9.2 mn users)1


9%

39%

2010

2015

6632015

IT / ITeS(1.9 mn users)


21%

40%

2010

2015

1022015

Agriculture(0.0 mn users)


0%

2%

2010

2015

172015

Confidential

Note: 1. Comprises organized sector employees only (employees with enterprises for which statistics are available from budget documents or reports, or whose activities or data collection are regulated under legal provision)

Source: Analysys Mason, EIU, Euromonitor, NASSCOM, CII-PWC Report on IT/ITeS Industry

25

However, the lack of spectrum will be a formidable constraint to realizing the broadband potentialto realizing the broadband potential

Spare Spectrum Availability Based on

Exec Summary

• The current spectrum allocation will not support the projected number of broadband users

Spare Spectrum Availability Based on Existing Spectrum Allocation2

51%41%

• A high level analysis based on projected demand per user, available spectrum and current network coverage indicates that the

%

21%

current network coverage indicates that the operators will not be able to serve more than ~80 million subscribers without significant additional investments in sites

-34%

-7%

The associated investments for smaller cell size and more dense coverage is unlikely to make the take-up of broadband in suburban and rural

Assumptions2010 2011 2012 2013 2014 2015

-56%

areas economically viableBandwidth per user1 (Kbps) 383 570 916 1,414 1,978 2,476




26

Additionally, lack of backbone infrastructure severely restricts deployment of broadband servicesrestricts deployment of broadband services

Number of Cities Covered with Fibre

Exec Summary

• All the service providers have extensive coverage of fibre backbone in metros / tier I cities1 (top 8 cities)

Number of Cities Covered with Fibre Backbone by Service Providers in India

• With the exception of BSNL (which covers all the 700 cities) and Railtel, all the other service providers have extremely low coverage in other cities

700

600

• Rural areas have extremely poor coverage, with only BSNL and Railtel covering a few thousand gram panchayats2200 g p y

BSNL covers about 28,000 gram panchayats out of a total 265,0003

130 11060 44

BSNL R ilT l GAILTEL Ai t l P G id T t R li All mid-sized / small villages currently remain uncovered by any service provider

BSNL RailTel GAILTEL Airtel PowerGrid Tata Reliance

ConfidentialSource: Analysys Mason, Company Websites

Note: 1. Includes top 8 cities with population > 4 mn and total income > INR 100 bn; 2. Gram panchayats are local governments at the village or small town level in India with minimum population of 300; 3. 2002 estimate for total gram panchayats

27

A clear policy roadmap for allocation of additional spectrum is required to help achieve this growth potentialrequired to help achieve this growth potential

Frequency Bands & Key Issues

Exec Summary

3.3GHz Existing Allocation and Availability

Future Roadmap1 / Satellite

• Future Roadmap: Future allocation of various frequency bands is not clear making it difficult for carriers to plan network rollout and establish their technology roadmap for


2.5GHz Future Roadmap / Satellite Interference

2.3GHz Capacity Constraint2

Capacit Constraint / F t re

and establish their technology roadmap for services

• Digital Dividend: Lower frequency bands such as 450 MHz and 700 MHz are best suited for providing rural broadband services2.1GHz Capacity Constraint / Future

Roadmap

1800MHz Capacity Constraint

suited for providing rural broadband services and can substantially reduce roll-out cost

• Existing Allocation & Availability: Better coordination between different Govt d t t t ki h / h h900MHz Capacity Constraint


departments tracking where / how much spectrum is being used, and thus support re-farming to increase total capacity available and allow more efficient allocations

700 MHz Future Roadmap Digital Dividend Spectrum450MHz Future Roadmap

• In addition, there are other policy constraints such as Right of way, active infrastructure sharing, mandate provision of fiber capacity and inclusion of Microwave for backhaul


Note: 1. Future Roadmap refers to frequency band with no existing allocation for commercial usage and can be used for offering wireless broadband services; 2. Capacity constraint refers to frequency band already allocated and with no spare capacity available

28

Contents

Executive Summary


Macroeconomic Overview of India

Demand Side Analysis

Th Wi l B db d E t

Supply Side Analysis

The Wireless Broadband Ecosystem

Socio-economic Impact of Wireless Broadband

Imperatives for Stakeholders in the Indian Wireless Broadband Industry

Confidential

29

The macroeconomic conditions are improving the prospects for broadband adoption in Indiafor broadband adoption in India

• Indian economy has experienced a high growth rate despite the global economic downturn, and is t d t t i t GDP th i th t t M i d i f hi h th t fexpected to sustain a strong GDP growth in the next ten years. Main drivers of higher growth rate of

economy are improving demographics, structural reforms and globalization• India is highly populated country with population density of 387 persons per sq km. India’s

population has crossed 1 billion mark and is growing at a rate of 1.4% every yearThis growth mainly comes from rural areas. More than 70% of Indian population are in rural areas, which has major concerns such as poor infrastructure, lower income level and illiteracy to address for better broadband penetrationThe low literacy rate in India remains a medium-term constraint for the broadband market due to limited

l f t t d l k f l k l drelevance of content and lack of language knowledgeDemographics of India population, however, is favorable for the adoption of broadband and data services. 35% of population is between 15 to 35 years of age and this group has the maximum internet users

• With the sustained growth of economy and favorable demographics, the income level of households ill i di th iddl l t Thi ill l d t li lih d h twill increase, expanding the middle class segment. This will lead to livelihood enhancement,

increase in consumption and further growth of economy• Service sector contribution to GDP is increasing substantially with rapid urbanization, expansion of

public sector, awareness and adoption of ICT and increased demand for consumer services such as healthcare and education

• With increase in income levels and population growth, the consumption per household also increases. Share of communication in consumption spent per household is expected to increase with a CAGR of 6%

Confidential

with a CAGR of 6%

30

India has seen a sustained economic growth and is expected to outpace China’s GDP growth by 2013-15to outpace China s GDP growth by 2013-15

BRIC Countries: Nominal GDP PPP

Macroeco

8%

12%

BRIC Countries: Nominal GDP, PPP Growth Rate • Indian economy has been growing at high

rate, reaching about 8.8% nominal GDP growth in the last quarter

-4%

0%

4%

2008 2009 2010 2011 2012 2013 2014 2015

• This level of growth is expected to be sustained for the next few years, with improving demographics, rising income levels structural reforms and

-8%

Brazil Russia India China

BRIC Countries: Nominal GDP, PPP, USD billi (2009)

levels, structural reforms and globalization

It is expected that India’s GDP will accelerate to a sustainable rate of 9 to 10%

USD billion (2009)

3 766

9,244by 2013 - 2015, exceeding the average growth rate of 7.3% over the past 10 years

India's GDP is expected to quadruple over the next ten years and the country is likely

2,014 2,1103,766


the next ten years and the country is likely to become a USD 4 trillion economy by 2020

ConfidentialSource: Analysys Mason, Reserve Bank of India, EIU, Industry Inputs

31

India’s population of 1 billion is growing at 1.5%, although population density varies significantly across statespopulation density varies significantly across states

Population Density by States in India BRIC C t i % P l ti G th

Macroeco

Population Density by States in India (Population per Sq Km)

1.8%

BRIC Countries: % Population Growth

Jamm KashmirJamm Kashmir

0.0%

0.6%

1.2%

Uttaranchal

Himachal Pradesh

Jammu Kashmir

Sikkim

Arunachal Pradesh

AssamDelhiHaryana

PunjabUttaranchal

Himachal Pradesh

Jammu Kashmir

Sikkim

Arunachal Pradesh

AssamDelhiHaryana

Punjab

-0.6%

0.0%2008 2009 2010 2011 2012 2013 2014 2015

Brazil Russia India ChinaManipur

Orissa

Gujarat

Uttar Pradesh

Chhattisgarh

JharkhandWest Bengal

Bihar

Sikkim

Tripura

Mizoram

Kolkata

RajasthanNagaland

Madhya Pradesh

MeghalayaManipur

Orissa

Gujarat

Uttar Pradesh

Chhattisgarh

JharkhandWest Bengal

Bihar

Sikkim

Tripura

Mizoram

Kolkata

RajasthanNagaland

Madhya Pradesh

Meghalaya

Above 1000 persons per sq km

Between 600 to 1000 persons per sq km

• India has 17% of the world's population, which is growing at the rate of 1.5%, as compared to China (0.5%), Russia (~ -0.1%) and Brazil (1.3%%) from 2010 to 2015

Karnataka

Andhra Pradesh

MaharashtraMumbai

Karnataka

Andhra Pradesh

MaharashtraMumbai





Below 100 persons per sq km

• The low population density of 387 persons per sq km makes serving rural areas a challenge for the broadband industry

KeralaTamil Nadu

ChennaiKeralaTamil Nadu

Chennai

ConfidentialSource: Analysys Mason, EIU

32

Population mix remains skewed in favor of rural population –challenging the economics of broadbandchallenging the economics of broadband

BRIC Countries: % Share of Urban and

Macroeco

• Rural population has lower income level, and hence the affordability of broadband service becomes an issue

BRIC Countries: % Share of Urban and Rural Population

On an average, nominal urban earnings are 40% more than rural earnings

About 42% of population in India is below the poverty line1

14%27%

57%71% the poverty line

• Rural areas have poor infrastructure and accessibility, making it difficult to increase wireline based broadband penetration

86%73%

p

Out of total 9 million broadband subscribers at the end of April 2010, only 5% are in the rural areas

30%43%

Brazil Russia India China There has been improvement in rural road connectivity, increasing from about 40% in 2004 to about 70% at the end of 2008


Urban Population Rural Population

ConfidentialSource: Analysys Mason, TRAI, Euromonitor

Note: 1. Below Poverty Line households are defined as those earning less than USD 1.25 per day

33

Although literacy levels are improving with government initiatives yet India is significantly behind its peersinitiatives, yet India is significantly behind its peers

BRIC Countries: Adult Literacy Rate1

Macroeco

• Government in India is taking initiatives to improve literacy in India

Karnataka state government launched `S k h Bh S h ' i

BRIC Countries: Adult Literacy Rate

88%

96%

`Saakshar Bharat Scheme' to improve literacy rate in Karnataka from the present 66.6% to 80% by 2012

Illiteracy rate has been reduced with the f64%

72%

80%

88%

help of national educational schemes such as “National Literacy Mission” and “Sarva Shiksha Abhiyan"

• Computer literacy also remains low and BRIC Countries: Literate Population (Mn)

64%2006 2007 2008 2009

Brazil Indonesia India China

language constraint limit the relevance of content currently available

English literate population is only 91 million and the total computer literates are only 87

p ( )

1,038

544 and the total computer literates are only 87 million

Only 1.8% of all Indians (20 million) prefer to read in English

155 134

China India Indonesia Brazil

ConfidentialSource: Analysys Mason, Euromonitor

Note: 1. Literacy rate taken as percentage of literate adults in populations of age above 15 years

34

However, increasing share of youth population, is expected to significantly drive utility and relevance of broadbandsignificantly drive utility and relevance of broadband

BRIC Countries: Share of Population by Age Distribution of Regular Internet Users

Macroeco

BRIC Countries: Share of Population by Age Segment in the Year 2009

7% 13% 5% 10%

Age Distribution of Regular Internet Users in India, 2009

38%44%

33%35%

29%

46%

13% %

2%

10%4% 2%

35%

37% 28%

35%

2%

13-18 yrs 19-24 yrs 25-35 yrs 36-45 yrs 46-55 yrs Above 55yrs

26%15%

31%17%


• Adoption of technologies and services is high among the youth segment, as most of the internet content is focused on the age group of 18-35 years

Internet is primarily used by the youth segment for

Population % for 0-14 yrs Population % for 15-34 yrs

Population % for 35 - 64 yrs Population % for 65+ yrs

entertainment (downloading videos & music), social networking, micro-blogging and consumption of user generated content

ConfidentialSource: Analysys Mason, Euromonitor, JuxtConsult India Online Report: 2009

35

Average real household income in India is expected to triple from 2005 to 2025 encouraging higher consumptionfrom 2005 to 2025, encouraging higher consumption

I L l f H h ld i I di 1

Macroeco

• With the growth of economy, the income level of households also increases

Average real household disposable income

Income Level of Households in India1

(No. of Households, millions)

207 244 280 e age ea ouse o d d sposab e co eis set to grow from 113,744 Indian rupees in 2005 to 318,896 Indian rupees by 2025 at a CAGR of 5.3%

44%

5%

23%

34%

1% 2%12%3%1% 1%

• Growth in Indian incomes and consumption will deliver substantial societal benefits, with further increase in service consumption, declines in poverty

43%

34%

33% p , p yand the growth of a large group of middle income households

49%

30%18%

2005 2015 2025

<90 90-200 200-500 500-1,000 >1,000

Annual Household Income, INR thousand

ConfidentialSource: Analysys Mason, McKinsey Global Institute

Note: 1. Low income segment includes HH earning less than INR 200,000 in a year, middle Income segment includes HH earning between INR 200,00 to INR1,000,000 per year, and high income segments include HH earning above INR 1,000,000

36

With higher productivity and sustained economic growth of India the disposable income will increaseIndia, the disposable income will increase

BRIC Countries: Personal Disposable

Macroeco

BRIC Countries: Personal Disposable Income - Nominal (USD billion), 2009

2,166

• Income growth is dependent on the overall economic growth in coming years

Main drivers for the increase in income 1,016

7561,082

a d e s o e c ease co elevels include sustained growth of the Indian economy, favorable demographic trends, and stable foreign exchange rates

BRIC Countries: Growth in Personal Disposable Income (Real Terms)

Brazil Russia India China • Conducive business environment backed by structural reforms and globalization have led to increase in productivity and income levels

4%

8%

12%

0%2008 2009 2010 2011 2012 2013 2014


ConfidentialSource: Analysys Mason, RBI, EIU

37

Economic development will be supported by an increase in contribution of services to the GDPcontribution of services to the GDP

% Share of Agriculture Industry and

Macroeco

• With the limited scope of growth in the agriculture and industry segment, growth in GDP will be driven by the services

t

% Share of Agriculture, Industry and Services Sector in Indian GDP

(Nominal, INR Bn)

36 345 73 256 142 779 sector

Growth in agriculture and industry sector is declining, and the GDP growth momentum is coming from services sector which is

36,345 73,256 142,779

ggrowing at ~15% per annum

• Main reasons behind the growth of services include rapid urbanization and

61% 65% 71%

increased demand for intermediate and final consumer services

ICT services have increased their share in service sector GDP from 6% in 2001 to 10%

18% 16% 12%

21% 19%17%

service sector GDP from 6% in 2001 to 10% in 20082006 2010 2015

Agriculture Industry Services

ConfidentialSource: Analysys Mason, RBI

38

With improved income level of households, spent on communication and other services is expected to go upcommunication and other services is expected to go up

% Share of Different Spend Segments in

Macroeco

% Share of Different Spend Segments in Annual Consumption for Indian Consumer • Main drivers for increased consumption

are rising incomes, population growth and substantial savings

4% 4% 3%

15% 15% 16%

3% 4% 4%2% 2% 2%2% 3% 3%

13% 14% 16% • The increased purchasing power enables consumer to spend higher on services such as healthcare, personal products

40% 38% 38%

5% 4% 3%

16% 16% 16%3%

Spent on Food & beverages is constant, and its share to consumption decreases

Communications accounts for around 2% of

2006 2010 2015

Food Apparel

Communications accounts for around 2% of spending currently and is expected to witness fastest CAGR of over 6%

Housing & Utilities HealthcareTransport CommunicationLeisure Education Other

ConfidentialSource: Analysys Mason, RBI, Euromonitor

39

Contents

Executive Summary


Macroeconomics of India

Demand Side AnalysisDemand Side Analysis





Confidential

40

Affordability of broadband remains limited due to high device costs – the industry to focus in increasing utility of servicescosts – the industry to focus in increasing utility of services

• Rural areas are under-penetrated with ~30% share of total wireline / wireless voice connections• Number of fixed internet users is further limited in rural areas, while it is growing rapidly in tier III / IV

cities, driven by the youth segment accessing primarily through cyber cafes• Broadband services as percentage of per capita income is high compared to other countries, though

ARPU is similar indicating concentration of broadband connectivity among high income urbanARPU is similar, indicating concentration of broadband connectivity among high-income urban areas

• Mobile handsets have a strong potential to drive broadband penetration owing to lower cost of ownership as compared to PC-based access as well much higher device penetration

• Current usage of internet is focused on mails, SNC, information search and entertainment, with lack of localized online content as another constraint to broadband utility for the masses

• Internet usage for utilities such as financial transactions is extremely limited with significant impact t ti lpotential

• Broadband has a significant role to play in extending the reach of education and healthcare facilities to the masses, as well as enhancing labor productivity through enablement of tele-working at home or during commuteg

• Governance is another major area currently challenged with consumer inconvenience, high processing timelines and Government overheads which can be significantly reduced through technology-enablement

Confidential

41

This macroeconomic context results in a low affordability and utility of broadband services which impacts adoptionutility of broadband services, which impacts adoption

BRIC Countries: % Penetration of Internet

Demand

BRIC Countries: % Penetration of Internet and Broadband Service

41%

• Currently, the broadband penetration is just 0.74% compared to overall teledensity of 52.74% (QE-Mar’10)

• Affordability issues

High TCO as % of overall per capita spend

14%

23% – High device pricing

• Relevance and Utility issues

Lit i5.8% 6.4%

0.5%

6.0%9% Literacy issues

Lack of content in regional languages

Lack of relevant mass market contentBrazil Russia India China

Broadband Penetration Internet Penetration


42

The spend on broadband services as % of per capita income is high compared to other countries though ARPU is similaris high compared to other countries, though ARPU is similar

Affordability

BRIC Countries: ARPU (USD) and

Demand

BRIC Countries: ARPU (USD) and ARPU as a % of GDP per Capita

20 15%

• Broadband ARPU in India is estimated at ~ INR 600 (USD 12), which is similar to some of the other countries in Asia

13.3%

14.716.9

12.315

20

10%

15%

• The high ARPU to GDP ratio is a result of the high income disparity between urban and rural areas

7.8%

3 1%

9.610

5%

10% and rural areas

• Most of the broadband users are concentrated in urban centers with much higher income levels as compared to

2.3%

3.1%

0

5

0%

higher income levels as compared to other areas

India China Russia Indonesia

ARPU / GDP per Capita ARPU (USD)


43

TCO for broadband services currently has significant share of consumer wallet though this will come down by 2015consumer wallet, though this will come down by 2015

Affordability

Entry-level TCO1 as % of Overall per Capita

Demand

Assumptions for TCO Calculations: Entry

2015

Entry level TCO as % of Overall per Capita Consumption (2009 and 2015)

2009Per Capita Consumption: Per Capita Consumption:

Wireline B db d

Wireless BB -D t O l 2

Wireless BB M bil 2

Assumptions for TCO Calculations: Entry Level Device and Service Pricing (INR, 2015)

Per Capita Consumption:INR 30,291

20%

Per Capita Consumption: INR 52,134 (2015)

Broadband Data Only2 – Mobile2

Device Type Desktop Embedded Netbook Smartphone

Device Cost (INR) 8,000 10,000 5,000

1%

6%

13%

3.2% 3.4%

10.2% 9.8%

( ) , , ,

Device Lifetime (years) 3 3 2.5

Modem Cost (INR) 2,000 - -

12%14%

7.0% 6.4%3.8%0.7%4.5%

Wi li Wi l Wi l

Modem Lifetime (years) 2 - -

Monthly Service Charge – Entry 125 150 30

Dial-upInternet

Fixed BB -Wireline

WirelineBB

WirelessBB - Data

Only

WirelessBB -

Mobile


Charge – Entry Level (INR / month)

125 150 30

ConfidentialSource: Analysys Mason, Company websites

Note: 1. Annual Total Cost of Ownership: includes depreciated entry-level cost of PC & modem and entry level service charges fordata usage; 2. Data only wireless broadband usage refers to access over a PC, while mobile usage refers to that over a mobile phone, with a WCDMA connection bundled with voice services

44

With a much higher base of data-enabled devices, handsets have a strong potential to drive broadband penetrationhave a strong potential to drive broadband penetration

Affordability

Device base of PCs data cards and data

Demand

• Residential PC (desktops & laptops) penetration stands at only 6% of total households, while internet connections as % of PC base is about 60%

Device base of PCs, data cards and data enabled mobile handsets (mn) and their penetration as % of total handset base

% of PC base is about 60%

• Wireless data cards are currently used primarily by businesses and serve primarily as a back up connectivity option

Items 2008 2009

Residential Desktops 8.3 9.9

primarily as a back-up connectivity option in the absence of fixed internet connectivity

Residential Laptops 1.7 2.5

Wireless Data 2 1 3 5Cards1 2.1 3.5

Data Enabled Handsets 1011 1491

GPRS Active Subs 30 44

ConfidentialSource: Analysys Mason, TRAI, IMRB, Industry Inputs

Note: 1. Includes enterprise connections

45

The current usage pattern of internet is very entertainment centric and does not address key mass market applicationscentric and does not address key mass market applications

Utility

Internet Usage Pattern for Consumers in

Demand

• The current usage pattern is focused on communication and entertainment and is similar to the global usage pattern

Internet Usage Pattern for Consumers in Emerging Markets

4% 1%2% 4% 3% 2% 1% 2% • This is due to the high end user segment accessing the internet today, as well as lack of spectrum / bandwidth to drive applications

10%17% 11%

6% 5%13% 12% 13%16%

6% 10%5% 5% 8%3% 2% 3%5% 5% 6% 4% 4% 1%2% 4% 3% 2% 1% 2%

pp

• Key applications which can significantly scale with 3G and BWA include

Vernacular websites and content165%

57% 59%

81% 80%

42%

Online financial transactions

Healthcare services for remote areas

Distance education and e-learning

2

3

4

34%

Indonesia India Phlippines Pakistan Thailand USA

Tele-working and commute working

Enterprise mobility applications

Tech-enabled Government services

5

6

7

Communication EntertainmentInformation Search EmailEducation eCommerce


46

Availability of local online content remains limited, but can help in expanding the reach of internet to the mass markethelp in expanding the reach of internet to the mass market

Status of Local Language Internet Users Indian Language Websites (2008)

UtilityVernacular1

Status of Local Language Internet Users(Share of Total Internet Users)

87%

Indian Language Websites (2008)

713

13%

Online Indianspreferring to read in

English

Online Indianspreferring to read local

Indian languagesEnglish Indian languages

58%42%

153117 97

34384057

Online Indians visitingEnglish websites only

Online Indians visitinglocal languagewebsites also

Hin

di

Tam

il

Tele

gu

Ben

gali

Guj

rati

Kan

nada

Pun

jabi

Mar

athi

• While 87% Indians prefer to browse in local languages, only 42% visit any local language websites due to lack of relevant content in regional languages

• Limited number of local language sites reflects the lack of localized online content to which is relevant for the mass market consumers

ConfidentialSource: Industry Inputs, Analysys Mason

47

Use of internet for financial transactions and banking is extremely limited but has a significant impact potentialextremely limited, but has a significant impact potential

Status of Banked Population and Net Usage of Internet for Commerce /

UtilityTransactions2

Status of Banked Population and Net Banking Users (2009)1

Usage of Internet for Commerce / Transactions (2009)

Total (mn) Share Online Retail as % of Total Retail Sales in India and US

Online Tickets as % of Total Rail Reservations

Total Bank Accounts 361

31%(of Total

Population)

Net Banking Users 23 6%(of Bank Accounts)

34%

Retail Sales in India and USTotal Rail Reservations

6.00%

(of Bank Accounts)

Urban Adults with Bank Account 60% of Urban Adults

Rural Adults with 0.06%Rural Adults with Bank Account 39% of Rural Adults

• Broadband offers a significant opportunity to enable financial inclusion to address the unbanked

• Currently online transactions in India are restricted primarily to travel reservations

India India US

financial inclusion to address the unbanked population in India

• Wireless broadband will be the key to virtual accounts and money transfer for the unbanked poor

primarily to travel reservations

• Online retail transactions are extremely low and broadband penetration can play a significant role in e-enabling retail in India


Note: 1. Estimates based on 2007 numbers

48

Tele-medicine based initiatives have a significant role to play in addressing the poor state of healthcare infrastructurein addressing the poor state of healthcare infrastructure

Key Challenges in Healthcare Delivery in India

UtilityHealthcare3

VillageSemi-UrbanUrban

250 Kms

10 – 15 Kms

Key Challenges in Healthcare Delivery in India • Increased reach to rural & remote areas

Telemedicine: remote diagnosis, monitoring and treatment of patients in rural / remote

Kms Kms

Village DispensaryPrimary Heath Centre & Sub-Centre

Hospital

areas at the Sub-Centre and PHC level

Access to specialist consultation to supplement advice from PHC

• High cost of private healthcare, resource limitation and sub optimum utilization

Only 0 7 hospital beds

• Limited resources and inadequate man-power & infrastructure

1 PHC1 for 30K

• No access to quality healthcare at a village level, requiring long travel times

• Timely access to critical information

Emergency support and guidance to health workers and medical officers

Only 0.7 hospital beds per 1,000 population

Only 5-6 Docs per 10K population

Very high cost of private healthcare for mass market

1 PHC for 30K population

PHC has only 4-6 patient beds; 1 Medical Officer

1 PHC for 6 Sub-Centers

Large distances in rural and remote areas

Access to only 1.4 dispensaries for 100K villagers

Only 0 36 hospital beds

• Increased efficiency for medical practitioners

Electronic Medical Records (EMR) and mass market customers

70% of hospitals and 40% of hospital beds are in private sector

Centers

1 Sub-Centre for 5K population

Sub-Centers have only 2 health workers

Only 0.36 hospital beds per 100K villagers

Very basic care available

Unaffordable cost of private care in towns

Hospital Information Systems (HIS) enable real time documentation and information sharing


Note 1: PHC – Primary Health Centre

49

Extending the reach of education services to the mass market requires technology as the key driverrequires technology as the key driver

Distance Education and E-learning Markets State of Vocational Training in India

UtilityEducation4

Distance Education and E learning Markets (2009)

State of Vocational Training in India

Total students enrolled in higher ed cation 13 mn

96%85% 86% 88%

Share of labor force receiving vocational training

education

Total students enrolled in distance learning programs 3.5 mn

Potential Revenue from distance l i USD 850 mn

85% 86% 88%

learning USD 850 mn

% Share of online in distance learning 3.5%

Addressable market opportunity for USD 30 mn

8%

25%

• The growing distance learning market will benefit from e-enablement offering convenience and

• India’s fast growing services sector is expected to create large employment opportunities

domestic e-learning USD 30 mn

India Korea Japan Germany Canada Mexico

from e enablement, offering convenience and mobility to the end user

• IGNOU and other universities are already experimenting with some of these models

create large employment opportunities

Meeting this requirement will involve extending the reach of vocational training to the mass market by leveraging broadband

ConfidentialSource: Industry Inputs, ILO, Analysys Mason

50

Broadband enabled applications such as tele-working can have a significant impact on labor productivityhave a significant impact on labor productivity

Potential for Tele-workers / Home Workers Global Comparison for Commute Time

UtilityTele-working5

Potential for Tele workers / Home Workers Global Comparison for Commute Time

Workforce requirement by IT-BPO Sector (mn)

60% in Tier-I Cities

Average Commute Time(mins)

Commuters with over 90 mins Commute Time

10.0

90% in Tier-I Cities

40

29 20%

26%

2.5

2009 2020

GlobalAverage

IndiaAverage

Global India

• The expanding IT and ITeS industry in India is facing a shortage of skilled workforce, increase in infrastructure costs and travel time

• India has high commute time, primarily in the Metros, with increasing emergence of sub-urban areas for residential use

2009 2020

infrastructure costs and travel time

• Broadband penetration can address these constraints by supporting tele-workers / home workers

areas for residential use

• High-speed wireless broadband connectivity can help consumption of multiple broadband based services in a mobile environment

ConfidentialSource: Industry Inputs, NASSCOM, Analysys Mason

51

Indian SMBs have a low ICT spend currently, and a large latent potential for broadband enabled cloud computing playlatent potential for broadband enabled cloud computing play

Enterprise ICT Spend as Percentage of Total ICT Spend by Indian Enterprises

UtilitySMBs6

Enterprise ICT Spend as Percentage of Nominal GDP (PPP, 2009)

Total ICT Spend by Indian Enterprises(2009, USD mn)

1.8%1 6% 14,251

0 8%

1.6% ,

7,674

0.6%

0.8%0.7%

L SMB

• India has low ICT spend by enterprises as • Current ICT spend is driven primarily by

India Brazil Russia China Malaysia

Large SMBs

Number of businesses:

2,500 7 mn

India has low ICT spend by enterprises as compared to its peers

Current ICT spend is driven primarily by large enterprises (~3,000 in number) against ~ 7 mn SMBs

ConfidentialSource: Industry Inputs, Gartner, EIU, Analysys Mason

52

E-enabled governance will impact consumer convenience and processing timelines and reduce Government overheadsprocessing timelines, and reduce Government overheads

Demand Drivers Description Supporting Statistics

UtilityGovernment7

Demand Drivers Description Supporting Statistics

Convenient access and lower cost for

• E-enabling Government processes result in significant reduction in direct as well as indirect cost to citizen

Number of trips to Government offices

8 0and lower cost for citizens / businesses Direct cost savings for citizens is in the range of INR

50 – 100 per transaction

Processing time for registering a deed

2.0

8.0

Manual Online

Reduction in processing time of

requests

• Computerization of departments enable faster access to the data thus reducing processing time for the service delivery

Waiting time at government offices decreases to 20% 40% d t l t

g g g(days)

15.0Same day

- 40% as compared to manual system

Rural empowerment and reduction in

• E-enabling processes such as identity verification and payment disbursement to rural workers can empower the

% NREGA funds misused or diverted1

Manual Online

and reduction in overheads for

schemes such as NREGA

p y ppoor as well as reduce leakage of funds

With ~INR 40,000 Cr being allocated annually for NREGA, huge amounts can be saved from leakage

Manual Online - Potential

30% - 60%<10%

ConfidentialSource: Industry Inputs, News Articles, Analysys Mason

Note: 1. Based on survey by Outlook in two Indian states, and report by V V Giri National Labour Institute

53

Contents

Executive Summary


Macroeconomics of India

Demand Side AnalysisDemand Side Analysis





Confidential

54

Due to inherent barriers in the fixed segment, mobile broadband will drive broadband growthbroadband will drive broadband growth

• At the moment broadband penetration is low and remains concentrated in urban areas

• DSL currently dominates the existing BB market but in future it will lose its dominant positions. Fixed line penetration is low (37 million lines in 2009) and the quality of copper is too low to upgrade it to provide DSL services

C bl BB i t i d t th b d ill i i h t h l C bl k t i• Cable BB is contained to the urban areas and will remain a niche technology. Cable market is highly fragmented. Lack of scale makes business case for rural deployment very weak. In addition to that, cable operators have no incentives to upgrade their networks due to existing revenue share framework

• Fixed wireless services, such as WiMAX, are concentrated in urban areas and target high ARPU clientele such as corporate sector. High cost of rural roll out and spectrum capacity limitations hindered the growth so far. However, the recent BWA spectrum allocations are likely to boost the growthgrowth

• Mobile broadband already contributes a significant proportion of total broadband connections. With the recent 3G auction and given the constraints in the fixed broadband segment, mobile broadband is likely to drive broadband growth

• The government needs to resolve a number of issues, such as spectrum policy, to further stimulate broadband growth. In addition to that, it launched a number of programs to accelerate broadband penetration in rural areas

Confidential

55

Summary: Supply Side

Broadband Technology

HSPA WIMAX EVDO DSL FTTB CABLE

Capex per S bSub

USD 1251 USD 1331 USD 1231 ~USD 2,2002 ~USD 1,390 ~USD 930

Time to Rollout Spectrum Spectrum

Easy up-gradation of existing CDMASpectrum

AvailabilitySpectrum Availability

of existing CDMA sites RoW Issues RoW Issues LCO Unwillingness

Realizable throughput

10 8 Mb Sit 30 Mb Sit 4 5 Mb Sit 16 Mb Li 20 Mb Li 50 Mb Li10.8 Mbps per Site 30 Mbps per Site 4.5 Mbps per Site 16 Mbps per Line 20 Mbps per Line 50 Mbps per Line

ARPU potential

Bundling Possibility

Broadband & Voice bundling

possibleOnly Broadband offering possible

Only Broadband offering possible

Triple Play offering possible




Note: 1. Does not include cost of spectrum; 2. Capex per sub taken for new line, for existing line the cost is USD 800 including cost of up-gradation of backhaul from central office to node

Favorability of parameter: High Low

56

The broadband market is currently dominated by DSL, but this is not scalable due to copper quality and loop length issuesis not scalable due to copper quality and loop length issues

SupplyDSL

Broadband Lines Split by Upgradeable DSL Lines and RequiredBroadband Lines Split by Technologies, mn (Mar ’10)

Upgradeable DSL Lines and Required Investments (USD mn): BSNL and MTNL

8.8 7.6Items MTNL

DelhiMTNL

MumbaiBSNL (Rural)

BSNL (Urban)Delhi Mumbai (Rural) (Urban)

Total Lines (mn) 1.51 2.04 10.32 18.47

Total 1 21 1 63 10 32 16 62

0.00.00.00.6

0.10.4

Households 1.21 1.63 10.32 16.62

Upgradeable Lines (mn) 0.85 1.14 4.13 8.31

• DSL accounted for 87% of all fixed broadband • Of the existing 32 mn BSNL/MTNL’s fixed lines,

Tota

l

DS

L

Cab

le

Eth

erne

t

FWA

Fibr

e

Leas

edLi

nes

Oth

er Lines Already Upgraded 0.561 0.521 0.00 5.812

DSL accounted for 87% of all fixed broadband connections in 2009

• Cable is a niche service targeting mainly urban areas

Of the existing 32 mn BSNL/MTNL s fixed lines, only 15 mn lines can be upgraded to DSL due to poor copper quality and other infrastructure issues


57

Cable industry is likely to remain focused on offering video service due to significant operational and investment issuesservice due to significant operational and investment issues

SupplyCable

Fragmented • Over 7,000 MSOs and 60,000 LCOs in

590485

750

%

15%1

Fragmented cable

industry and absence of

players with scale

Over 7,000 MSOs and 60,000 LCOs in cable industry

• Top 7 MSOs account for only 30% of overall TV households

• 70% of cable households served by t d LCO

340

250

500

5%

10%scale non-aggregated LCOs

• The existing regulatory framework on revenue share does not incentivize cable operators to upgrade their networks

0Dec-07 Dec-08 Dec-09

0% 2LCOs have

no incentive to upgrade the network

networks

• Currently cable operators under-report about 75-80% of their revenues thus reducing the base subject to revenue sharing

Cable BB Cable BB as % of Total BB

• Cable TV which usually drives cable BB adoption

• Network upgrade implies that their share of revenues will drop from the current 70-75% to 20% and will have to pay more to MSOs and broadcasters

High costsCable TV, which usually drives cable BB adoption, is already lags behind due to competition and head start by DTH, which strengthened its positions in digital TV segment

3

High costs associated with cable

network up-grade

(DOCSIS)

• For the existing DOCSIS technology, capex per sub for upgrading network to provide BB services remains as high as USD 900

Confidential

( OCS S)

Source: Analysys Mason

58

Current WiMAX offerings are not to serve the retail segment, but LTE deployments are expected to address this marketbut LTE deployments are expected to address this market

WiMAX Subscribers in 2009 (Thousand)

SupplyWiMAX

• High capex per sub and LOS requirement does not make a strong business case for service providers to target lower ARPU

WiMAX Subscribers in 2009 (Thousand)

29 retail customer (CPE for current FDD 802.16d WiMAX deployment costs ~ INR 10 000 and requires physical installation

f t l t ith li f

29

6

23

RCOM Tata Othersof external antenna with near line of sight)

• However, TD-LTE deployment will take

WiMAX Subscribers (Thousand)

Provider Market Position

• WiMAX network covers ten citiestime (~1 year) as the ecosystem is not mature for large scale deployments

RCOM

• WiMAX network covers ten cities• Plans to continue to expand the network

based on the spectrum received in the recent BWA auction

• Was the first operator to launch WiMAX services in May 2007

Tata

services in May 2007• Its WiMAX network covers ten cities• At launch Tata set a target of launching

WiMAX BB targeted at corporate segment in 115 cities and residential – in 15 cities


59

Currently 3G data services market is dominated by CDMA EVDO operatorsEVDO operators

Carrier Data ServicesMobile BB 3G Data Cards in 2009

SupplyEVDO

Carrier Data Services

R li

• EVDO data cards offerings in top 35 cities

• Bundles EVDO data cards with netbooks

Mobile BB 3G Data Cards in 2009 (Thousand)

1100990

1,200

Reliance with 2 year lock-in period

• ARPU ~ INR 700 (Oct ’09)

990

600

900

Tata

• High speed EVDO based data services in limited to 8 cities

• Bundles EVDO data cards with HP Pavilion Notebooks

10100

300

600

• ARPU ranges between INR 600 – 700

• EVDO-based MBlaze mobile broadband

100

RCOM Tata MTS BSNL/MTNL

• In addition to the 3G (WCDMA and CDMA 1x EV-

MTS

O based a e ob e b oadba dservice is available in 19 cities

• The operator offers bundles of EVDO data cards with HP Pavilion notebooks

In addition to the 3G (WCDMA and CDMA 1x EVDO) datacards, approximately 1.3 million 2G (GPRS) datacards are used in India indicating a latent demand for data services


60

Contents

Executive Summary


Impact of Wireless Broadband on GDP

Direct Impact: Industry Revenues and GDP

Second Order Impact: Ecosystem Revenues and GDP

Stakeholder Imperatives

Third Order Impact / Externalities: Socio Economic Metrics and GDP

p

Confidential

61

We have assessed the broader impact of the industry

Demand-side Analysis Supply-side Analysisy pp y y

Wireless Broadband EcosystemMobile Service

DeliveryConsumers /

RetailFinancial Services

Social Services


Revenue Impact Revenue Impact1 2

Socio-economic Impact3

Employment Productivity Gains / Social Benefits

Contribution to Economic Growth

Confidential

Social Benefits Economic Growth


62

The availability of wireless access for broadband will change the nature of the industrythe nature of the industry

Direct Impact

I 2009 thi d f th b db d bBroadband Users (million) • In 2009, a third of the broadband base consisted of corporate customers

• The residential market, however, will be th k d i f th ith d

Broadband Users (million)

97

142183

100

150

200

the key driver of growth with a compound annual growth rate (CAGR) of over 50% in the next five years

I 2009 l 20% f th b db d

26 3861

0

50

100

2010 2011 2012 2013 2014 2015• In 2009, only 20% of the broadband users

were accessing applications from a wireless system

S l id t i t h k

Broadband Users (million)Residential Corporate

183200 • Supply-side constraints, however, make wireless a more compelling access system

• Th b db d b i i26 3861

97

142

50

100

150

• The broadband base accessing services through a wireless system are projected to increase by more than 70% CAGR over the next five years

26

0

50

2010 2011 2012 2013 2014 2015

Fixed Mobile


63

The wider availability of wireless systems will lower the cost of entry and enable a strong take-up of broadbandof entry and enable a strong take-up of broadband

Direct Impact

P i t th t ti th hBroadband Spend • Prior to the spectrum auctions, the share of wireless system was below that of international peers

L t f h d t d i ill

Broadband Spend

20

30

40

billi

on 40%

60%

• Lower costs of handsets and services will significantly lower the entry cost and the average revenue per user (ARPU) for wireless broadband systems

0

10

20

2010 2011 2012 2013 2014 2015

US

D

0%

20%

• By 2015, the majority of the broadband market will be provided by wireless access systems

Wireless Broadband Spend (USD billion) and Nominal ARPU (USD)

Services Equiment Share of Wireless

• The total spend on wireless access systems will be in excess of USD 18 billion by 2015 – with ~17% in equipment

5

10

15

20

US

D b

illio

n

4681012

US

D / M

on

and devices0

5

2010 2011 2012 2013 2014 2015

U

02

nthServices Equiment ARPU


64




DeliveryConsumers /


Social Services






Confidential



65

The service delivery ecosystem is developing rapidly to address the opportunity from wireless broadband servicesaddress the opportunity from wireless broadband services

Ecosystem

Service Providers• Telecom operators and ISPs have made total investment of ~ INR 1,000 bn (USD 23 bn)

for 3G and BWA spectrum, and are entering into ecosystem partnerships for delivery of data-intensive services

Device OEMs • Device vendors are launching mass market access devices such as INR 7,000 (USD 150) smartphones and INR 14,000 (USD 300) netbooks, and partnering with operators to bundle video capable handsets

Delivery & Enabling Platform Providers

• Technology vendors, both Indian and global, are developing platforms such as SDPs1 for integrated and seamless multi-screen experience, ODPs2 for easy discovery and activation, and enabling platforms (such as advertising, relevance, content management and commerce) for enhanced experience and ease of use

Product / Application Providers

• Data-focused as well as mass market product and application platforms offering services such as mobile / broadband TV, online gaming and rural VAS are being developed by various local vendors

Content Aggregators / Developers

• Content providers are aggregating and developing both popular entertainment content such as music / videos, and mass market content such as utility applications and educational content, customized for the small screen

ConfidentialNote: 1. SDP: Service Delivery Platforms; 2. On-Device Portals


66

The development of a wireless broadband ecosystem will have a significant direct revenue impacthave a significant direct revenue impact

Wireless Broadband Ecosystem

Mobile Service Delivery

Consumers / Retail

Financial Services

Social Services


1 7 10

m- devices

m-commerce m-banking m-learning m- enterprise

m-content m-health m-farming

m- access1

2

6 7

8

10

11

m-government m-utilities

m-apps

m-gaming3

4

9 12

m-advertising5

INR 787 bn

INR 187 bn

INR 205 bn

INR 63 bn

INR 60 bn

2015 2015 2015 2015 2015


0.55% of GDP 0.13% of GDP 0.14% of GDP 0.04% of GDP 0.04% of GDPNote: 1. ‘m’ refers to wireless broadband enabled services accessed through wireless broadband connection over mobile

handsets or PCs

67

Mobile coupons, social media, customer service are the top mobile commerce trends that retailers are focusing on in 2010mobile commerce trends that retailers are focusing on in 2010

Ecosystemm-commerce (1/3)1

M-commerce Solutions in Taiwan M bil k t i tl tM commerce Solutions in Taiwan • Mobile coupons market is currently most advanced in Japan and Korea

Mobile coupons will be used by nearly 200 mn mobile subscribers globally by 2013Developed nations of the Far East, North America and Western Europe are forecast to account for the major part of the market by 2013

• Pay-Buy-Mobile is MNO led GSMA initiative for using mobile phones to make fast, secure payments in a retail environment using Near Field

Pay-Buy-Mobile

gCommunications (NFC)/ contactless technology

34 of the world’s largest MNOs such as AT&T China Mobile NTT DoCoMo O2

Touch to Pay Goods Purchased

Input PINto Authorize

AT&T, China Mobile, NTT DoCoMo, O2, SMART are serving more than 1.3 billion customers with Pay-Buy-Mobile initiative, to create & define a global approach to enable NFC payment services on mobile phones


68

There are multiple existing players in the mobile payments value chain in India who can scale up with BB servicesvalue chain in India who can scale up with BB services launch

Mobile Payment Value Chain and Economics1


Banks / ElectronicCard Payment Gateway M-commerce

Carrier

Banks

Mobile

Online Merchants

Access ChannelDistribution Partner

-1%

Enablers / Stored Value Providers

Solution Provider Merchants

D2C

Online

Retail

Merchants

M-commerce Platform

1% - 2% 1% - 18%

0%

80% - 99%

• Banks / Credit card companies integrating with m-commerce

• M-commerce platform provider that does the end to end integration across all the entities

• Application / solution distribution entities, e.g. Airtel

• Usage channel for mobile payment, e.g. payment using mobile

• Merchants accepting mobile number as payment

Rol

e

platform • Provides payment gateway or mobile mall functionalities

is distributing mChek

number for online shopping

instrument

• SBI • mChek • Airtel • mChek: SMS based • Utility companies

R

SBI• HDFC• VISA• MasterCard• Itz Cash

mChek• Paymate• Oxicash• Ngpay• ItzCash

• Airtel• HDFC Bank• IRCTC• ngpay

• mChek: SMS based• Paymate: can be

used at retail outlets and uses IVR for confirmation

• Utility companies• Airline companies• Retail stores• Online mallsPl

ayer

s

Confidential

Note: 1. For mobile payment gateway providers, the merchants give 1-2% of the transaction value. However mobile malls such as ngpay gets retail margins depending on the product (~20% for flowers and ~5% for airlines ticketing)


69

m-commerce can be a INR 31 bn value chain opportunity contributing to about 0 02% of GDP by 2015contributing to about 0.02% of GDP by 2015

m-commerce Value Chain Revenue through Market Growth Drivers


m commerce Value Chain Revenue through Wireless Broadband (INR bn) • Reach: Larger reach of mobile medium

compared to PC / laptops (635 mn mobile subs vs. 16 mn internet subscribers in 2015: 2010: CAGR 111%

Market Growth Drivers

31

FY 2010)

• Convenience: Ability to perform transactions anytime, anyplace is a major

0.02% of GDP<0.01% of GDP CAGR: 111%

14

23

y , yp jreason that is likely to drive m-commerce

• Telecom Carrier Interest: Carriers are exploring m-commerce as a new VAS

13

7

p grevenue stream

• RBI Guidelines: Regularization of mobile banking & payments sector has enabled

1

2010 2011 2012 2013 2014 2015

g p ythe development of an ecosystem



70

Content producers are extending their franchises and now play a larger role in the broadband value chainplay a larger role in the broadband value chain

Ecosystemm-content (1/4)2

Mobile FormatMobile Games

Mobile Feeds and Interactive

Mobile Sky Sports

Family Guy

TV / Film ContentMobile BBC iPlayer

Avatar

Family Guy

CNN Big Brother

• The importance of multiplatform content has led to content producers adopting a 360-commissioning model, adapting content for the Internet, the mobile, social media and gaming

• However, producers face increasing complexity and costs in creating and managing multiple versions of content for consumption on several platforms and a growing number of devices


71

Consumer applications revenue in Europe will grow from EUR 4 2 bn to EUR 6 8 bn with games as the main growth driver4.2 bn to EUR 6.8 bn, with games as the main growth driver

Consumer applications revenue


• Traditional personalization content is giving way to games and other rich content services.

• Personalization revenue will decline from EUR2 2 billion in 2009 to EUR1 9 billion in 2015

Consumer applications revenueEurope, 2009–2015

6 6 6.87.5

EUR2.2 billion in 2009 to EUR1.9 billion in 2015. The market for ringtones and wallpapers is in semi-terminal decline because of the increasing availability of free content through the mobile web and the repurposing of MP3 files.4.2

4.65.2

5.86.2

6.6

4 5

6.0

billi

on)

• Games’ share of consumer applications revenue will grow from 18% to 28% over the forecast period.

Video’s share will increase from 5% in 2009

3.0

4.5

Rev

enue

(Eur

• Video’s share will increase from 5% in 2009 to 9% in 2015, its revenue increasing from EUR200 million to almost EUR600 million.

• The increasing popularity of streamed music b i ti i h S tif ill d i

0.0

1.5

2009 2010 2011 2012 2013 2014 2015subscription services, such as Spotify, will drive an increase in music services’ share of revenue, from 3% to 9% over the forecast period. Music revenue will grow from EUR100 million in 2009 to EUR600 million in 2015

Financial Gambling GamesMusic Other Paid informationPersonalisation TV and video


72

There are multiple existing players in the mobile content space in India who can scale up with broadband adoptionspace in India who can scale up with broadband adoption


Content Developers

ContentAggregators

CarriersVAS Product / Application Developer

D2C

Carrier Billing

Voice SMS WAP

WAPSMS1

Online

Voice

• Hold content rights and produce

• Aggregate different types of

• VAS technology platform such as music on

• Multiple content delivery channels, each suitable for

• IN platforms and postpaid billing systems of

• Owns the consumer

• Billing

Technology Platform Enablers

hain

variety of content

content, can have exclusive tie ups with content developers

demand which is plugged into existing core platforms e.g. IVR, Voice and CRBT

different types of content or used across bearer channels

carriers

• A negligible number of D2C providers also have non carrier billing options

Billing

le in

Val

ue C

h

de e ope s CRBT billing options

• Enable the software platforms on which different services / applications can be hosted

• Rajshri • Airtel• Airtel• Hungama • Spice Digital

Rol

j

• Indiatimes • Vodafone

• RCom

• Idea

• Vodafone

• Apple

• Indiatimes

g

• OnMobile

• One97

p g

• Comviva

• Phoneytunes

Play

ers


Note: 1. Includes STK / UTK

73

m-content can be INR 101 bn value chain opportunity contributing to about 0 07% of GDPcontributing to about 0.07% of GDP

Ecosystemm-content (4/4)

m-content Revenue Realization on Wireless Market Growth Drivers

2

m content Revenue Realization on Wireless Broadband (INR bn) Services

• Increasing focus on VAS promotion by carriers, especially new entrants

2015: 2010: CAGR 71%


101

• Due to absence of any emerging “killer application”, carriers will maintain their focus on basic, popular, network dependent VAS such as CRBT/RBT

DeviceC f 3G


70

42

• Consumers lack awareness of 3G enabled devices and services and are unlikely to discover value proposition of 3G, unless OEMs invest in ATL promotions

Business Models42

23

137

us ess ode s• D2C models may emerge to bypass carrier billing

but scalability will be an issue

• Mobile ad based models will continue to remain in an experimental stage and will not emerge as a

7

2010 2011 2012 2013 2014 2015

significant alternate monetization model

Demand Side• Challenges around consumer awareness &

discovery of content, lack of availability of regional d l l t t ill ti


and local content will continue


74

Global online and mobile gaming market stands at ~ USD 20 billion and is growing at a significant ratebillion and is growing at a significant rate

Global Video Game Market

Ecosystemm-gaming (1/3)3

• Smartphones and touchscreen phones will realize the potential market for more sophisticated mobile games

Global Video Game Market (USD billion)

16%45 18%

• End users are prepared to pay for games

~ 50% of the top-10 iPhone App Store downloads in Jan 2010 were games11

12

14%15% 15% 15%

27

36

on

12%

15%

downloads in Jan 2010 were games

• In-game monetization is more developed on fixed platforms, but the same t h i ill b li d f bil21

257

8

10

11

18

27

US

D b

illio

6%

9%

techniques will be applied for mobile

The most basic form of in-game monetization is the freemium proposition, where the initial gaming is available without

12 1417

21

0

9

2009 2010 2011 2012 20130%

3%

where the initial gaming is available without cost, user pay for advanced features in the game

Online Games Wireless Games

Share of Wireless

ConfidentialSource: PWC

75

The Indian digital gaming market is still nascent but has significant growth potential owing to the recent initiativessignificant growth potential owing to the recent initiatives

Challenges Initiatives by Indian Games Publishers and Operators Examples


Challenges Initiatives by Indian Games Publishers and Operators Examples

Affordability• Offering ad supported free games• Innovative pricing models e.g. pay per play model, try and buy

for INR 10 etc

Ad Based Games

Consumer

• Developing rich game content (e.g. 3D games) • Customizing games for low end handsets and for easy download

on slow speed 2.5G network• Developing games for various available technology platforms

Exclusive Rights

Experience • Developing games for various available technology platforms e.g. Java, BREW, Symbian, Flash

• International partnerships to offer a variety of popular Hollywood and action games

Off i di d i l h iContent Discovery & Availability

• Offering easy to discover and navigate game catalogues on their WAP portals and websites

• Allowing side loading of games to mobile phones through their websites

Side Loading from Websites

• Currently only ~ 10 mn users download games on their mobile handsets in India

• This number can grow significantly with better user data experience for the capability to download richer gaming content as well as to play multi-player games


richer gaming content as well as to play multi player games

76

m-gaming can be INR 20 bn value chain opportunity contribution to about 0 01% of GDPcontribution to about 0.01% of GDP


m-gaming Revenue Realization on Wirelessm gaming Revenue Realization on Wireless Broadband (INR bn)

2015: 2010: CAGR 112%

• Better capabilities of 3G enabled handsets will allow game publishers to create high quality games thus

20

0. 01% of GDP<0.01% of GDP CAGR: 112% generating more interest for mobile games

• Introduction of a variety of pricing models

8

13

y p gand micro transactions will further drive the growth in user base

• Operator and D2C app stores by content

2

4

8 Operator and D2C app stores by content aggregators and publishers will enable easy content discovery and delivery

0

2010 2011 2012 2013 2014 2015



77

Mobile advertising is expected to grow significantly across major international marketsmajor international markets

Global Online Advertising Revenues

Ecosystemm-advertising (1/3)4

• The mix of mobile advertising is likely to change, as larger-screened mobile devices facilitate more search-related

Global Online Advertising Revenues by Platform

100 8%

advertising revenue

• Mobile advertising achieves much higher click-through rates than the 1–2% from60

80

on

6%

click-through rates than the 1–2% from most online ads

• Although advertising revenues should 40

60

US

D b

illio

2%

4%

continue to grow, increasing fragmentation of audiences present a challenge to service providers, leading to increasing use of pay models

0

20

2009 2010 2011 2012 2013 20140%

increasing use of pay-models

Fixed Mobile Share of Mobile

ConfidentialSource: PWC, 2009

78

The nascent mobile advertising market in India will benefit from the development of a robust ecosystemfrom the development of a robust ecosystem

Ad Server / Mobile


Advertiser Ad Agency Ad Network Ad Server / Platform

Mobile Publisher Operator

• Initiates the demand through promotion, sales and lead generation

• Assists advertisers with their media buying strategy

• Develop creative

• Ad aggregation

• Ad inventory management

• Offer consumer profiling & targeting engine

• Perform ad response

• Content delivery platforms

• Enables ad insertion

• Ad delivery over different bearer channels

• Owns subscriber data

ditio

nal R

ole

Valu

e C

hain

for ads monitoring

Trad in V

• Will use mobile advertising for b d & d t

• Evolution of performance b d t i

• Building up of in-house, dedicated

l t f

• Enhanced targeting and

d ti

• Building large user database th t b

• Enabling rich media based ads b d ti f 3Gle

s

brand & product promotions, CRM and couponing

based metrics sales teams for handling branded inventory

recommendation capabilities across various bearer channels and platforms

that can be profiled & targeted

by adoption of 3G

• Seamless sharing of subscriber database across th l h i

Evol

ving

Rol

the value chain

Wireless broadband will enable delivery of rich media based ads, and enhance the role of the advertising ecosystem in addressing the growing opportunity as well as shift to better revenue shares from the operator


from the operator

79

m-advertising can be INR 28 bn value chain opportunity contributing to about 0 02% of GDPcontributing to about 0.02% of GDP

m-advertising Revenue Realization on


• With increasing number of mobile data active users, WAP inventory (page views per month) is likely to grow from 5 bn in

m advertising Revenue Realization on Wireless Broadband (INR bn)

2015: 2010: CAGR 94%2010 to over 40 bn by 2015, with over 70% contribution of 3G subscribers

• With better profiling information available28

0. 02% of GDP<0.01% of GDP CAGR: 94%

With better profiling information available with telcos ecosystem participants through deployment of profiling platforms will enhance CPMs (cost per thousand 14

22

impressions)

• Growth in demand for infotainment content and corresponding growth in ad-1

3

8

content and corresponding growth in ad-subsidies will further enhance the mobile advertising market

1

2010 2011 2012 2013 2014 2015



80

The global mobile apps market is already a billion-dollar industry and is expected to grow significantlyindustry, and is expected to grow significantly

Ecosystemm-apps (1/3)5

Global App Store Revenues• The global apps market is growing rapidly

• Estimates for total app store revenues in f S S29 479

35,000

Global App Store Revenues

2009 range from USD2 billion to USD9 billion

• Apple accounts for ~95% of the market,

25,000

29,479

21,000

28,000

milli

on)

ppdemonstrating that consumers are willing to pay for mobile apps

• Currently apps are offered primarily by9,000

6,770

14,000

Rev

enue

(USD

• Currently, apps are offered primarily by smartphone OEM and OS vendor app stores, who retain 30% of the revenues and transfer the rest to developers

4,237

2,8063420

7,000

2008 2009 2010 2011 2012 2013 2014 2015 p

Juniper (Global) Gartner (Global)

AdMob (Global) Yankee (US Only)


81

With the launch of operator app stores, there is significant potential for Indian app developers to achieve scalepotential for Indian app developers to achieve scale

Operator App / Platform # A


Operator App Store

App / Platform Providers # Apps

71,000 (July 2010)

• Currently, the Indian mobile apps market is estimated at less than 1% of the global market, limited primarily by penetration of

t h d d t i( y )

800(March 2010)

smartphones, and poor data experience for users

• Launch of app stores by Indian operators i t d t d i d ti f ilit t d

~70,000

(April 2010)

is expected to drive adoption, facilitated by launch of 3G services

• This will provide opportunity for the large and fragmented local app developer

14 Services across 7 Categories (July 2010)

and fragmented local app developer community to develop India specific apps for the mass market and grow to the scale of global players( y )

-

• This will also help Indian platform providers such as Spice and Infosys to address the global mobile apps market


82

m-apps can be INR 6.6 bn value chain opportunity for domestic market contributing to less than 0 01% of GDPdomestic market, contributing to less than 0.01% of GDP

m-apps Revenue Realization on Wireless


m apps Revenue Realization on Wireless Broadband (INR bn)

2015: 2010: CAGR 102%

• With launch of high speed 3G data services by private operators by 2010 end, user experience is expected to i i ifi tl d th d i

6.6

<0.01% of GDP<0.01% of GDP CAGR: 102% improve significantly and thus drive adoption of rich video based applications

• With increasing penetration of t h & f t h t k f

3.3

5.1smartphones & feature phones, uptake of apps will increase

• Moreover, availability of free apps are expected to facilitate customer

0 20.6

1.7

expected to facilitate customer experimentation and eventually lead to regular usage of app store, thus increase data service adoption

0.2

2010 2011 2012 2013 2014 2015



83

Users of mobile banking and related services is forecasted to grow at a CAGR of 59 2 % to reach 894 million users in 2015grow at a CAGR of 59.2 % to reach 894 million users in 2015

Ecosystemm-banking (1/3)6

Initiatives Around the World wrt Mobile Banking


84

Smaller player will benefit with enhanced broadband coverage for transaction authentication in the rural areascoverage for transaction authentication in the rural areas

Financial Inclusion Value Chain and Revenue Share1


B k Banking

Business Correspondent

Customer

7%

Banks Banking Solution Provider

• Indian Banks expanding • Banking solutions for the • The BC is an agent of a • Outlets to provide

Micro Finance Institute

CustomerService Point

Per txn. fees

Rol

e

p gto the unbanked population

gunbanked consumer; additional capabilities such as mobile payment, money transfer may be

gspecified bank and is authorized to undertake transactions on behalf of the bank

MFI id l t

pvarious kinds of transaction services such as cash deposit, cash withdrawal, transfer of money andtransfer may be

supported• MFI provides loans to

the unbanked population

transfer of money and payment of utility bills

yers • Government banks • Eko

• Fino• Retail Outlets• India Post

Maj

or P

lay Fino

• A little world• India Post• SKS Microfinance

• India Post

Confidential

Note: 1. Mobile banking model is emerging. Currently Eko offers mobile banking for the unbanked. Banks pay 7% commission on the deposits. The arrangement between banks and BC varies on a case by case basis


85

m-remittance can be INR 205 bn value chain opportunity for domestic market contributing to about 0 14% of GDPdomestic market, contributing to about 0.14% of GDP

Service Description


m-banking & remittance on Wireless Service Description

• Domestic and overseas remittance service from/ to mobile

• Can be transfers to and from linked bank t dit / d bit d id d

m banking & remittance on Wireless Broadband (INR bn)

2015: 2010: CAGR 67%

Remittance

accounts, credit / debit cards, prepaid cards, stored value wallets, or at retail outlets e.g. Obopay

• Unofficial channel also used for small transaction values by overseas worker due205


transaction values by overseas worker due to convenience; for smaller transaction values, mobile remittance will be preferred

• Banking penetration remains concentrated in urban areas124

172

Financial Inclusion

Only 41% of bank branches are located in rural areas though 65% of population is rural

• Banks are offering mobile banking to profitably serve rural areas in partnership

16

38

75

with business correspondents (BC)

Eko as SBI BC has launched banking services; mobile number is treated as account number and money can be deposited / withdrawn from an Eko cash-point

16

2010 2011 2012 2013 2014 2015

Confidential

p



86

Increased adoption of mobile devices will help mLearning to gain popularity within the learning education segmentsgain popularity within the learning education segments

Ecosystemm-learning (1/3)7

Target Users of Mobile LearningDrivers for Mobile Learning

• Collaborative projects and fieldwork

• Organization-wide policies proceduresService and fieldwork

• Podcastingpolicies, procedures

• Compliance trainings• Sales material

Corporate Education

Service Suppliers

Large Growing

• Literacy initiatives• Training on new

arms & weapon for defence

Defense NGO / RuralBuyer Demographic

Powerful Internet Connected Convergent

Mass Market

Content Distribution

Channel Mobile

• The growth of mobile learning is being driven by

Convergent Devices

New Mobile Learning Dev Tools & Delivery

Explosion of New Learning Apps &

Learning Adoption

• The growth of mobile learning is being driven by emerging innovations in both hardware and software as well as by changes occurring in the training field, such as reorganizing training to fit mobile abilities and managing the resulting virtual teams

Content Suppliers

Technology Suppliers

Dev Tools & Delivery Platforms

Content

Confidential

g g g

Source: TCS White Paper

87

Companies offering online learning can scale with increased benefits to massesbenefits to masses

Preliminary EstimatesTech Enabled Learning Value Chain and Revenue Share1


Content Providers / Aggregators

ContentR i / A th i

PortalsLearning Management Systems / Delivery and

Infrastructure12%

Tech Enabled Learning Value Chain and Revenue Share

Aggregators Repurposing / Authoring

Services2

• Distribution and

• Delivering, tracking & managing education systems range from

• Create and package content customized by device to create

• Provide the backend content for courses

y yCollaborative Tools

40% 10% 3%

25%20%

Rol

e

and delivery channel for content

education systems – range from managing content to distributing courses & offering features for online collaboration

customized by device to create e-learning modules (online and/or mobile)

content for courses

• Provides consulting technical and support services

• Govt. UniversitiesIGNOUSNDT

• Elicitus• authorGen• Educomp

• 24x7Learning • EnableM• Educomp

• Carriers• Institutions• Handsetrs

• Provides consulting, technical and support services

• EnableM

• Private UniversitiesAmity

• Training InstitutionsNIIT

Educomp Educomp Handset OEM

• D2C portalsPlay

e

Confidential

Note: 1. Infrastructure includes both hardware and software solutions and support2. Services refers to hosting and managed services, consulting and other technical support services


88

m-learning can be INR 18 bn value chain opportunity for domestic market contributing to about 0 01% of GDPdomestic market, contributing to about 0.01% of GDP

Preliminary Estimates


m-learning Revenue Realization on Wireless Market Growth Driversm learning Revenue Realization on Wireless Broadband (INR bn)

2015: 2010: CAGR 107%

Government Focus:

• Increasing spend on ICT1 and other t h l bl d i iti ti h


18

0.01% of GDP<0.01% of GDP CAGR: 107% technology enabled initiatives such as the National Knowledge Network

Educational Institutes:

12

7

• Educational institutions increasingly moving towards online courses and multimedia aids in teaching

7

4

2

• Market is currently very underpenetrated

User Convenience:

• End user flexibility in terms of time0

2010 2011 2012 2013 2014 2015

• End user flexibility in terms of time, duration and location of study

• Multimedia enabled teaching makes learning more interesting for kids


Note: 1. ICT: Information and Communication Technology; 2. ‘m’ refers to wireless broadband enabled services accessed through mobile handsets or dongles

learning more interesting for kids

89

m-health applications vary from remote data collection to clinical applications in healthcare managementclinical applications in healthcare management

Ecosystemm-health (1/3)8

Global m-health Market ProjectionsGlobal m health Market Projections(USD billion) • There are many m-health applications but

they can be grouped as follows:

remote data collection and disease monitoring –li ti th t l i f ti ( h

6

e.g. applications that relay information (such as vital indicators) from patients’ monitoring devices to a central server via a mobile network

treatment compliance – e.g. SMS-based applications to remind patients to take drugs

4

applications to remind patients to take drugs

diagnostic and treatment support – e.g. consultations over mobile phone; this application targets rural areas in developing countries with lack of access to medical

2

countries with lack of access to medical services

education and awareness – e.g. SMS-based applications to dissemination information re health

02009 2010 2011 2012 2013 2014

clinical applications – e.g. those which assist in healthcare management, e.g. Vodafone’s SMS for Life in Tanzania service – a mobile stock ordering system that ensures supplies of anti-

ABI Research ON WorldCSMG Parks ResearchJuniper Research


malaria drugs at rural healthcares centres

90

In India, operators have launched basic services, and government bodies are using mobile primarily for health datagovernment bodies are using mobile primarily for health data collection & treatment support Ecosystemm-health (2/3)8

Area Provider Service Offerings Monetization Partner Description

• Doctor on Call

• Transaction (Reliance subscribers - INR 15/min, • HealthcareMagic • Provides consultation on

acute chronic andO2

C

• Doctor-on-Call ,Tata Indicom subscribers –INR 9/min )

g.com acute, chronic and

emergency cases

• Virtual Blood Bank S i • Blood Banks

B2

O2

C

Service

• VacciDate (Vaccination Alert System)

• Freeood a s

such as Jeevan

• Hospitals

• Toll free number to get information on blood bankG

2O

2

• Open source software application on PDA to collect medical and demographic data

• Funded• Dimagi, Inc

• AIIMS

• System currently records and manages data from over 70,000 patients G

2B

2C

• Jiva Institute -TeleDoc

• Prescription and treatment to patients in remote villages through the use of mobile phone

• Funded

• INR 70 per consultation• Soros

Foundation • More than 1,500 patients

B2B

2C

ConfidentialSource: Analysys Mason, News Articles, Industry Inputs

91

m-health can be INR 26 bn value chain opportunity for domestic market contributing to about 0 02% of GDPdomestic market, contributing to about 0.02% of GDP

Ecosystemm-health (3/3)8

m-health Revenue Realization on Wirelessm health Revenue Realization on Wireless Broadband (INR bn)

2015: 2010: CAGR 125%

• It was estimated that out 828 million of rural population only 27% is using mobile services in 2010 generating a 225 million

dd bl k t f t t t t

26

0.02% of GDP<0.01% of GDP CAGR: 125% addressable market for treatment support m-health applications

• Wireless remote monitoring services remain restricted due to high cost of

16

remain restricted due to high cost of device and service charges, making it affordable to very high income end-users only

9

4

1

Biotronik, a home monitoring system for patients with Biotronik implantable cardiac devices was recently launched in India. Only CardioMessenger device alone costs

0

2010 2011 2012 2013 2014 2015

INR 150,000 (USD3000) and there are also additional services charges

ConfidentialSource: Analysys Mason; (1) http://openmed.nic.in/1265/01/skm12.pdf


92

m-government services offer a plethora of applications

Transactions

Ecosystemm-govt (1/3)9

• Norway and Sweden – the respective tax authorities introduced a service that

• Estonia – in December 2008, the parliament passed the bill which

• Singapore – SMS alerts for a variety of e-services such as: renewal of road tax,

• UK – a number of towns and cities are adopting the pay-by-phone scheme

Communication Transactions and Payments Public Sector Operations Citizen Participation

introduced a service that allows taxpayers to file tax returns by SMS. Tax Authority personnel fills the forms and send them to taxpayers for confirmation;

passed the bill which enabled electorate to vote via mobile phones in national elections in 2011.

as: renewal of road tax, medical examinations for domestic workers, passport renewal notifications, season parking reminders, and parliament notices and

pay by phone scheme when motorists can pay for parking via SMS

• Oman – Municipality of Muscat introduced m-parking services in 2007 tax payers can confirm by

SMS, which the authority counts as filing electronically.

• Philippines – PAYBIR

alerts

• Dubai (UAE) - Dubai Public Prosecution offers an SMS service that allows clients, including the transacting

parking services in 2007

• Johanessburg (South Africa) - Motorists can find out if they have outstanding traffic fines, summonses or warrants of arrests through service allows a taxpayer to

file income tax returns by SMS. Taxpayers can also pay tax of up to R10,000 via SMS

public, lawyers and prosecutors, to inquire about cases, times of sessions, resolutions, and the status of proposals and

t d ft d b th

warrants of arrests through SMS.

requests drafted by the Public Prosecution.


93

The Indian government is focusing on e-governance & mobile enablement is only a small element of the project roadmapenablement is only a small element of the project roadmap

Banking


• Government of India have launched a National e-Governance Pl t id

Income Tax

Central Excise & Customs

InsurancePlan to provide governance services as part of 27 Mission Mode Projects (MMPs)

Central MMPs Passport, Immigration, Visa

MCA21

National Citizen Database (NCD)

Agriculture

e-Districts

Commercial Taxes

+ j ( )and 8 components

• However, from the 27 MMPs only agriculture-

E-Governanc State

MMPs+

Pension

e-OfficeLand Records

Employment Exchange

Municipalities+

related MMP include elements of m-governance

CSC

Integrated

e-Biz

e MMPs MMPs

e-Courts

Panchayats

Police

Property RegistrationIntegrated

MMPs e-Procurement

EDI

NSDG

Road Transport

Treasuries

+


India Portal

94

m-government can be INR 19 bn value chain opportunity for domestic market contributing to about 0 01% of GDPdomestic market, contributing to about 0.01% of GDP


m-govt Revenue Realization on Wirelessm govt Revenue Realization on Wireless Broadband (INR bn)

2015: 2010: CAGR 82%

• M-government segment is a subset of e-government market and the letter is a part of the total government IT spend.

19

0.01% of GDP<0.01% of GDP CAGR: 82% • The government IT spend is estimated to constitute 1% of the total state budget expenditure

An annual IT spend per capita is INR 110

11

9 An annual IT spend per capita is INR 110 (USD 2.4) in 2010

• Currently, m-government applications contribute a miniscule amount of total IT spend As discussed previously the

24

7

spend. As discussed previously, the government focuses more on the e-government than m-government applications

1

2010 2011 2012 2013 2014 2015

• However, we expect that the situation is set to change and more transaction and information related mobile applications will be adopted in India


be adopted in India


95

The global enterprise applications market is huge and is shifting fast towards network technologiesshifting fast towards network technologies

Global Enterprise Application Software

Ecosystemm-enterprise (1/3)10

• Enterprise spending priorities are shifting from cost optimization to supporting business growth led by emerging

Global Enterprise Application Software Market (USD billion)

112economies

• Growth is driven by innovation in applications like telephony, messaging

10599

938986

and conferencing based on fast-moving networking technologies (such as SIP) that will facilitate UC and enhance business processesbusiness processes

• The market structure is increasingly being influenced by market-disrupting i fl f S S l d b dinfluences of SaaS, cloud-based services, open-source software and Web 2.0 technologies

2009 2010 2011 2012 2013 2014


96

Emergence of system integrators & device capabilities will drive Indian enterprise mobility apps marketdrive Indian enterprise mobility apps market


Sys

tem

In

tegr

ator

s • System integrators are emerging in India to help guide enterprise organizations on the integration of mobile and workflow

System integrators are partnering with industry specific mobile app developers & network providers to offer customized mobility applications to enterprises

Agno

stic

at

ions

• Platform agnostic applications solve the issues on interoperability and allow the enterprise to choose the operator, vendor and the type of handset

• Nokia & Microsoft, tied up in March 2008 to provide Silverlight* on S60 and

Pla

tform

AAp

plic

a Nokia & Microsoft, tied up in March 2008 to provide Silverlight on S60 and S40 enabled devices

Silverlight is a cross-browser, cross-platform plug-in for delivering next-generation rich interactive applications

Current EMA Implementation by Enterprises in India

• Productivity applications such as SFA and CRM have the potential to drive substantial growth, as h i hi h d i51%

79%

they constitute higher spend per enterprise• Emergence of system integrators coupled with

better device / smartphone and data ecosystem will help grow these segments

28%16% 21% 19%

51%


p g gRAN ERP CRM SFA E-Mail Messaging

97

m-enterprise can be INR 35 bn value chain opportunity for domestic market contributing to about 0 02% of GDPdomestic market, contributing to about 0.02% of GDP


m-enterprise Revenue Realization on• Productivity: Enterprise focus on

productivity will drive investment in various systems and tools

m enterprise Revenue Realization on Wireless Broadband (INR bn)

2015: 2010: CAGR 49%

• Connectivity: Employers are also on the lookout for better ways to keep them connected to their workplace

35


• Competitive advantage: With increasing competition, companies are looking for ways to improve their

24

execution speeds and customer response times

Currently under-penetrated applications

15

106

5

such as CRM and ERP will benefit from this trend and enhance overall market growth2010 2011 2012 2013 2014 2015



98

m-farming applications are increasingly popular in many countriescountries

SENEGAL PHILIPPINES

Ecosystemm-farming (1/3)11

S G

• Manobi and a mobile operator Sonatel launched an SMS-based service that provides market price and meteorological information to farmers and fishermen.

• It was extended to include geolocation and GPS mapping

S

• The Department of Agriculture launched the PRESYO & PANAHON to provide farmers and fishermen with a five-day weather forecast and information on prices of basic commodities in the Manila metro area

It was extended to include geolocation and GPS mapping services, for example, fleet vehicle tracking, search and rescue services.

• The service costs around USD5 per month, plus the cost of SMS. The company claims its overall monthly ARPU is around USD30 f hi h USD12 t M bi d USD18 t S t l

• The Department also funded a Nutrient Manager tool which allows to get farming advice and recommendations on the types and amounts of fertilizer needed. The services is based on IVR and generates an automated SMS with the relevant information.

USD30, of which USD12 go to Manobi and USD18 to Sonatel.

KENYA UGANDA

• SMS Sokoni project provides commodity price information via SMS for a fee. The project is run by the Kenya Agricultural Commodities Exchange(KACE), a private firm, in partnership with mobile operator Safaricom

• DrumNet - Transaction platform linking small holder farmers to

• Google Trader - A user-generated trading bulletin that via SMS matches buyers and sellers of agricultural produce and commodities as well as other products. Developed by MTN Uganda and AppLab.

• RATIN SMS - Commodity prices from various terminal p gmarkets, finance and information.

y pmarkets within East Africa visa SMS. Currently, it is available in Kenya, Uganda and Tanzania but will soon be available in Rwanda and Burundi too.

• INFOTRADE Mobile - Up-to-date agricultural prices via SMS


99

Multiple types of m-farming apps are being introduced and are gaining adoptiongaining adoption

Service Description


Service Description

Reuters - Market Light

• ‘Reuters Market Light’, a mobile information service for Indian farmers, offers commodity pricing information for nearby markets, news and weather updates; It had 0.25 mn subs in 12 000 villages in Dec 09 in 13 states, including Maharashtra, Punjab and Haryana

Rcom Commodity • ‘Commodity Quotes ’ an application that provides information on commodities across CommodityRcom - Commodity Quotes

• Commodity Quotes, an application that provides information on commodities across Commodity exchanges and ‘mandis’ in India

HFCL Infotel -Mandi Bhav

• Provide commodity rates such as vegetables, fruits, food grains, pulses and spices from 12 major wholesale markets across Punjab. Available to both landline and mobile users

Tata Indicom –Mandi Bhav

• Provides details on trading platform, weather information and expert advice to rural consumers; offers information collated from around 3,000 local commodity markets in India on around 500 products; it delivers information in 9 languages including Hindi, English and Marathi

Lifelines India

• Voice based service, provides information on various farming needs such as seeds, fertilizers etc; Offers expert advice to farmers on ways of improving input efficiency by encouraging Integrated Pest Management (IPM) methods; it is implemented in 700 villages across 4 states in India and is used by 100 000 farmers; on average, it receives 450 calls per day

IKSL provided by Airtel and IFFCO

• Provides information on farming techniques, weather forecasts, dairy farming, animal husbandry, rural health initiatives and fertilizer availability etc.

• Sends 5 voice based sms/day related to mandi prices; 48,000 farmers enrolled for the service as of April 08


100

m-farming can be INR 6 bn value chain opportunity for domestic market contributing to less than 0 01% of GDPdomestic market, contributing to less than 0.01% of GDP


m-farming Revenue Realization on Wirelessm farming Revenue Realization on Wireless Broadband (INR bn)

2015: 2010: CAGR 209%

• In India, 68% of total households depends on farming for their livelihood

• Our estimates show that at least 300,000 farmers used m-farming applications in

6

<0.01% of GDP<0.01% of GDP CAGR: 209% farmers used m farming applications in India at the end of 2009

This implies that 0.2% of households dependant on farming, and where at least one member of the household was

4

one member of the household was consuming mobile services, were using m-farming applications

• Users of m-farming applications claim to hi i ifi t t i d t

2

1

achieve significant costs savings and to generate additional revenues as a direct result of using the applications

• Utility will drive the adoption. We expect100

2010 2011 2012 2013 2014 2015

Utility will drive the adoption. We expect that 31 million farmers will use m-farming services by 2015, bringing the total market value to INR 6.3 billion (USD 0.15 billion)



101

m-utilities market segment is dominated by such applications as smart meters and telemetricsas smart meters and telemetrics

Cellular M2M Market Size

Ecosystemm-utilities (1/3)12

• The M2M market is diverse and consists of many technologies and applications that enable machines and other traditionally non-computing remote devices and sensors to interconnect with back end IT infrastructure

Cellular M2M Market Size

2.0

2.5

3.0

EU

R b

illio

n)

120

150

180 M2M

SI interconnect with back-end IT infrastructure

in a largely automated fashion• Statistics quoting the size of the M2M

market vary hugely owing partially at least to variations in the definition of M2M The

0.0

0.5

1.0

1.5

Mar

ket v

alue

(E

0

30

60

90

Ms (m

illion)

variations in the definition of M2M. The revenue calculations traditionally include M2M hardware, M2M communications and M2M services

• In Europe M2M deployments werePotential Market Size by M2M Deployment

Type (Total Units in Europe 2008 )

2009 2010 2011 2012 2013

Market Value M2M SIM Module

• In Europe, M2M deployments were dominated by energy meters and telematics applications

• IDATE reports that cellular M2M market stood at EUR14 billion in 2009 and will grow

Type (Total Units in Europe, 2008 )56%

36%

stood at EUR14 billion in 2009 and will grow at a CAGR of 23% to reach EUR32 billion in 2014

M2M SIMs are forecast to represent 2.5% of all mobile SIMs in 2014

5% 1% 1% 0.50%

EnergyMeters

PassengerCars

CommercialVehicles

MonitoredAlarm

Systems

POSTerminals

Parking andVendingMachines

ConfidentialSource: IDATE (2009); Analysys Mason

102

In India such M2M applications as smart meters and remote video surveillance have seen some adoptionvideo surveillance have seen some adoption


• Power utility companies such as Reliance Infrastructure and Tata Power are deploying CDMA-enabled smart meters

• In India, most of the current CCTV installations are being carried out in urban areas and within a premise such as shopping mall, commercial complex,

These companies are expected to deploy such meters for high usage industrial and commercial subscribers

As of June 09 Reliance Infra has deployed

pp g , p ,business establishments and schools

• To strengthen the security of the metropolis after the 26/11 terror attacks, Maharashtra

As of June 09, Reliance Infra has deployed CDMA-based modems, serially attached to digital meters for 4,916 substations / distribution transformers, 2,687 streetlights, 12 590 high-value customers and 57

Government is considering to install 5,000 CCTV cameras across Mumbai

• Using high speed 3G HSUPA connectivity combined ith the latest compression 12,590 high-value customers and 57

receiving stations / grid stations

• In Delhi, Grinpal Energy Management is deploying smart meters and advanced

combined with the latest compression technologies, CCTV solution companies can provide rapid access to good quality recordings from any location deploying smart meters and advanced

metering infrastructure. It aims to have 500,000 meters installed in the Tata region by the end of 2010

MEL Secure Systems, one of the leading developer of CCTV surveillance and security solutions, has launched a new range of 3G rapid deployment CCTV cameras

Confidential

y


103

m-utilities can be INR 19 bn value chain opportunity for domestic market contributing to about 0 01% of GDPdomestic market, contributing to about 0.01% of GDP


m-utilities Revenue Realization on Wirelessm utilities Revenue Realization on Wireless Broadband (INR bn)

2015: 2010: CAGR 85%

• We expect that for every mobile service user (voice and data), there will be 1.3 SIM cards by 2015

19

0.01% of GDP<0.01% of GDP CAGR: 85% • M2M SIMs in India are expected to contribute 2.3% of all SIMs by 2015, which is in line with the global estimate of 2.5% in 2014

15

10

• The growth will be primarily driven by applications such as smart meters, video surveillance and such telemetry

5

2

yapplications as vehicle tracking

• We expect that by 2015 the Indian market for M2M applications will grow to INR 19

1

2010 2011 2012 2013 2014 2015

pp gbillion (USD 0.43 billion)



104

In summary, mobile access will remain the main source of revenue for operators – VAS will be a key differentiatorrevenue for operators – VAS will be a key differentiator

Ecosystemm-access

3)

Mobile Data

Messaging

• Operators are diversifying their non-voice portfolio

• Voice and messaging services will

re o

f Val

ue (2

01

VoiceMobile

Banking

Voice and messaging services will continue to account for a majority of revenue, however, mobile data access services will enable a host of new

Ope

rato

r Sha

r

Media Content & Entertainment Mobile TV

applications

• Global industry trends show the growing importance of non-voice services

20% 30% 80%

Mobile AdvertisingDevice Sales

Applicationsimportance of non voice services including content and entertainment, financial services and advertising

-20% 30% 80%

CAGR 09–13


105

The development of a wireless broadband ecosystem will have a significant revenue impacthave a significant revenue impact

Wireless Broadband Ecosystem

Mobile Service Delivery

Consumers / Retail

Financial Services

Social Services


1 7 10

m- devices

m-commerce m-banking m-learning m- enterprise

m-content m-health m-farming

m- access1

2

6 7

8

10

11

m-government m-utilities

m-apps

m-gaming3

4

9 12

m-advertising5

INR 787 bn

INR 187 bn

INR 205 bn

INR 63 bn

INR 60 bn

2015 2015 2015 2015 2015


0.55% of GDP 0.13% of GDP 0.14% of GDP 0.04% of GDP 0.04% of GDPNote: 1. ‘m’ refers to wireless broadband enabled services accessed through wireless broadband connection over mobile

handsets or PCs

106




DeliveryConsumers /


Social Services






Confidential



107

Contents

Executive Summary

Overview of Broadband Services in IndiaOverview of Broadband Services in India




Confidential

108

Wireless broadband will have an industry productivity impact of INR 888 bn (0 62% of GDP) in 2015of INR 888 bn (0.62% of GDP) in 2015

Estimation of Impact on Productivity due to Industry-wise Impact on Productivity due to

2nd Order Impact

Estimation of Impact on Productivity due to Wireless Broadband

Industry Industry Share of Increase

Industry wise Impact on Productivity due to Wireless Broadband (2015)

Working population with wireless broadband connectivity1 Industry

Vertical

yContribution to

GDP in 2015in Productivity in

2015

Manufacturing, Mining & Industry 17% 11%

5 mn

2010 2015

27 mn

connectivity1

CAGR:Government & PSUs 3% 1%

Services (excluding IT / ITeS)

57% 75%

5 mn 27 mn39%

ITeS)

IT / ITeS 11% 11%

Agriculture 12% 2%

Increase in industry productivity in 2015

g

Total 100%(INR 143 trillion)

100%(INR 0.89 trillion)

INR 888 bn(USD 21 bn)

0.62% of GDP

ConfidentialSource: Analysys Mason, EIU, Euromonitor, Frost & Sullivan, NASSCOM, CII-PWC Report on IT/ITeS Industry

Note: 1. Includes retail wireless broadband connections used for official / business purpose and corporate connections

109

The service industry including IT/ITes will benefit the most from wireless broadband services

Industry Vertical

Penetration of Wireless Broadband and User Base (in Parentheses) Productivity Gain in 2015 (INR bn)

from wireless broadband services2nd Order Impact

Vertical and User Base (in Parentheses)

Manufacturing, Mining & Industry

(0.6 mn users)1

(3.0 mn users)1


5%

21%

2010

2015

932015

Government & PSUs

(0.7 mn users)


4%

20%

2010

2015

132015

Services (excluding IT /

ITeS)

(1.9 mn users)1

(9.2 mn users)1


9%

39%

2010

2015

6632015

IT / ITeS(1.9 mn users)


21%

40%

2010

2015

1022015

Agriculture(0.0 mn users)


0%

2%

2010

2015

172015

ConfidentialSource: Analysys Mason, EIU, Euromonitor, Frost & Sullivan, NASSCOM, CII-PWC Report on IT/ITeS Industry

Note: 1. Comprises organized sector employees only (employees with enterprises for which statistics are available from budget documents or reports, or whose activities or data collection are regulated under legal provision)

110

Wireless access system will be significant contributors to India economic growthIndia economic growth

• Incremental broadband spend on wireless systems is expected to reach ~USD 20 billion in 2015 growing at a CAGR of 82% over the next 5 years.

• Incremental revenue for the broader wireless ecosystem is projected to exceed USD 12 billion by y p j y2015

• 120,000 to 140,000 new employment opportunities are expected to be created by the telecom industry (service providers handset vendors equipment vendors and VAS value chain players) byindustry (service providers, handset vendors, equipment vendors and VAS value chain players) by 2015

• The overall contribution of the wireless broadband industry will reach 2.3% of GDP over the next five years with an incremental contribution close to 1%

• The indirect contribution to economic growth through productivity increase will reach close to USD 80 billion

• The projected impact cannot be fulfilled with the current spectrum allocation – operators will experience capacity constraints by 2013

Confidential

111

Contents

Executive Summary



S i i I t f Wi l B db dSocio-economic Impact of Wireless Broadband


Confidential

112

The contribution of wireless broadband is in line with international experienceinternational experience

• Recent economic surveys have assessed the impact of the broadband industry on the economy

• Based on the literature reviewed, the wireless broadband industry will have an impact of over USD100 billion over the next five years or 0.8% of GDP

Broadband Penetration Country Type Economic Growth (GDP) Source

10-percentage-point increase in High income economy 1.21%World Bank 2009broadband penetration World Bank 2009

Medium-low income economy 1.38%

Broadband-related growth in 2006 in European countries

Less-developed knowledge societies 0.47%

European CommissionQuickly developing countries 0.63% European Commission 2008

y p g

Large industries 0.70%

Advanced knowledge societies 0.89%

70% h h ld t ti 1%70% household penetration15 EU countries

1%TRA 2008

90% household penetration 1.6%

10-percentage-point increase in mobile penetration India 1.2% ICRIER, 2009

Confidential

mobile penetration

113

Indirect benefits will be significant as broadband is a key driver of change for productivity improvementsdriver of change for productivity improvements

• The broadband market has a multiplier effect on the overall economy, as presented below

• Based on the literature reviewed, the wireless broadband industry could deliver productivity increase in the order of USD 80 billion over the next five years

Broadband Penetration Country Type Increase in Productivity Source

1-percentage-point increase in M di hi h ICT 0 1% LECG 20091 percentage point increase in broadband penetration Medium or high ICT 0.1% LECG, 2009

10% increase in broadband penetration US 0.46% Crandall, Jackson - “Net

Impact Study” 2008penetration Impact Study , 2008

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114

However, the lack of spectrum will be a formidable constraint to realizing the broadband potentialto realizing the broadband potential

Spare Spectrum Availability Based on• The current spectrum allocation will not

support the projected number of broadband users

Spare Spectrum Availability Based on Existing Spectrum Allocation2

51%41%

• A high level analysis based on projected demand per user, available spectrum and current network coverage indicates that the

%

21%

current network coverage indicates that the operators will not be able to serve more than ~65 million subscribers without significant additional investments in sites

-34%

-7%

The associated investments for smaller cell size and more dense coverage is unlikely to make the take-up of broadband in suburban and rural

Assumptions2010 2011 2012 2013 2014 2015

-56%

areas economically viableBandwidth per user1 (Kbps) 383 570 916 1,414 1,978 2,476




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Additionally, lack of backbone infrastructure severely restricts deployment of broadband servicesrestricts deployment of broadband services

Number of Cities Covered with Fibre• All the service providers have extensive

coverage of fibre backbone in metros / tier I cities1 (top 8 cities)

Number of Cities Covered with Fibre Backbone by Service Providers in India

• With the exception of BSNL (which covers all the 700 cities) and Railtel, all the other service providers have extremely low coverage in other cities

700

600

• Rural areas have extremely poor coverage, with only BSNL and Railtel covering a few thousand gram panchayats2200 g p y

BSNL covers about 28,000 gram panchayats out of a total 265,0003

130 11060 44

BSNL R ilT l GAILTEL Ai t l P G id T t R li All mid-sized / small villages currently remain uncovered by any service provider

BSNL RailTel GAILTEL Airtel PowerGrid Tata Reliance

ConfidentialSource: Analysys Mason, Company Websites

Note: 1. Includes top 8 cities with population > 4 mn and total income > INR 100 bn; 2. Gram panchayats are local governments at the village or small town level in India with minimum population of 300; 3. 2002 estimate for total gram panchayats

116

A clear policy roadmap for allocation of additional spectrum is required to help achieve this growth potentialrequired to help achieve this growth potential


3.3GHz Existing Allocation and Availability

Future Roadmap1 / Satellite

• Future Roadmap: Future allocation of various frequency bands is not clear making it difficult for carriers to plan network rollout and establish their technology roadmap for


2.5GHz Future Roadmap / Satellite Interference

2.3GHz Capacity Constraint2

Capacit Constraint / F t re

and establish their technology roadmap for services

• Digital Dividend: Lower frequency bands such as 450 MHz and 700 MHz are best suited for providing rural broadband services2.1GHz Capacity Constraint / Future

Roadmap


suited for providing rural broadband services and can substantially reduce roll-out cost

• Existing Allocation & Availability: Better coordination between different Govt d t t t ki h / h h900MHz Capacity Constraint


departments tracking where / how much spectrum is being used, and thus support re-farming to increase total capacity available and allow more efficient allocations

700 MHz Future Roadmap Digital Dividend Spectrum450MHz Future Roadmap

• In addition, there are other policy constraints such as Right of way, active infrastructure sharing, mandate provision of fiber capacity and inclusion of Microwave for backhaul


Note: 1. Future Roadmap refers to frequency band with no existing allocation for commercial usage and can be used for offering wireless broadband services; 2. Capacity constraint refers to frequency band already allocated and with no spare capacity available

117

Analysys Mason Limitedy y

BD - 4th Floor, Big Jo's Tower

Netaji Subhash Place, Pitampura

N D lhi 110034New Delhi 110034

India

Tel: +91 11 4700 3100

Fax: +91 11 4700 3102

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