SEGMENT ANALYSIS: Extrapower Mobile


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It was harvest time for the Indian communications industry, and in FY 2003–04 they reaped a good harvest. The industry grew by around 20 percent unlike the previous year when the growth was about five percent. Cellular services remained the star attraction and will continue to remain so in the years to come. It contributed more than a quarter of the overall revenues.

In terms of tele-density, India moved to 7.12 on 31 March 2004, in comparison to 5.35 on 31 March 2003, an increase of 1.77. The key for such an excellent growth was low pricing and the calling-party pays (CPP) regime. If low tariffs continue, India will overtake other giants on the numbers front, but it still has a long way to go on quality of service (QoS), which is still far below TRAI´s benchmark. It seems that the service providers should focus more on quality than just on quantity in FY 2004–05.

V&D estimates

CyberMedia Research

India´s communications industry was pegged at Rs 56,367 crore ($12.25 billion) in comparison to Rs 47,121 crore ($10.24) in FY 2002–03. The cellular segment grew by around 72 percent in revenue terms and 135 percent in terms of subscribers. The cellular services segment netted revenues of Rs 14,748 crore ($3.2 billion) in FY 2003–04. This fast growing segment will give a good fight to basic services and will overtake fixed services in the next 2–3 years. On the mobile front, Reliance Infocomm made history by getting a subscriber base of 6.9 million subscribers and taking the overall tally of its cellular subscribers to 7.2 million.

However, though the Reliance Group led in the numbers game, Bharti group retained its position as the No. 1 player in revenue terms with a total of Rs 3,261 crore. It will be interesting to see how Bharti and Reliance fight for supremacy in FY 2004–05. In the meanwhile, Hutch is also fighting hard for a bigger share of the pie. It has already increased its service areas. With operators moving to new untapped geographies, good growth is likely in 'B´ and 'C´ circles. Meanwhile, 'A´ category and metro circles are moving to 2.5 G and more feature-rich technologies.

With costs reducing on the mobile front, service providers are looking at avenues of sharing infrastructure. One such development was the VSNL deal with Bharti for sharing of NLD infrastructure. The deal, worth Rs 500 crore, is for 15 years. We might see an increase in infrastructure sharing in days to come. All this will help in boosting profit margins of service providers.

Indian Communications (Services) Industry at a Glance (FY 2003–04)
Services Turnover (in Rs crore)
Fixed Services 30,164
Cellular Services 14,748
NLD Services 5,141
ILD Services 4,346
Internet Services 1,573
VSAT Services* 320
Radio Trunking Services 55
Others** 20
Total 56,367
* Excludes revenues from VSAT equipment

**Others includes paging, unified messaging/voicemail/audiotex services

V&D estimates

CyberMedia Research

V&D estimates

CyberMedia Research

The fixed-access services were badly affected as all the major operators like BSNL and Tata Teleservices have been focusing more on mobile services than on fixed services. BSNL and MTNL, the incumbent operators, were trying hard to retain their existing base.

With competition creeping in, both BSNL and MTNL became more customer friendly and there was a sea change in their service quality. On the private front, both Tata Teleservices and Bharti increased their revenues significantly and also increased their coverage in respective circles. The fixed-access service market was estimated to be around Rs 30,164 crore, registering a growth of 16 percent. This year, the focus on fixed was more on selling FWTs (fixed-wireless terminals), by private operators like Tata Teleservices and Reliance Infocomm and it was helpful in increasing their ARPUs to a sizable extent. Tata Teleservices was the numero uno player on the FWT front and is doing quite well.

Indian Communications (Services) Industry Break Up (FY 2003–04)
Services Turnover (in Rs Crore) Growth (% age) Includes
  FY 2003–04 FY 2002–03    
Fixed Services 30,164 25,941 16.3 Fixed and fixed wireless terminals
Cellular Services 14,748 8,599 71.5 GSM plus CDMA mobile
NLD Services 5,141 5,988 –14.1 IP-II players
ILD Services 4,346 5,001 –13.1 Intl. voice plus data revenue
Internet Services 1,573 1,285 22.4  
VSAT Services* 320 225 42.2 Services revenue only
Radio Trunking 55 47 17 Handsets revenues
Others** 20 35 –42.9  
Total 56,367 47,121 19.6  
* Excludes revenues from VSAT equipment

**Others includes paging, unified messaging/voicemail/audiotex services

V&D estimates

CyberMedia Research

Long distance continued its southward journey in FY 2003–04 too. From a negative growth of about 20 percent in FY 2002–03, it has come down to about 14 percent. It is very possible that long distance will grow positively in FY 2004–05 and this should be fueled by enterprises. Broadband will also act as a catalyst for this growth. The long distance market was put at around Rs 9,487 crore ($2.06 billion) in FY 2003–04, of which NLD contributed 54 percent.

V&D estimates

CyberMedia Research

Both on NLD front as well as ILD, the focus was on setting up more MPLS networks. BSNL plans to go for an expansion while Bharti and Reliance have already launched their MPLS services. Even on the international front, all the international connectivity service providers have tied up with ILD service providers for providing MPLS-based services in India. It seems all service providers-AT&T, Sprint, Cable & Wireless, SingTel, MCI, Equant, PCCW, Orient, and BT-are in the process or have already set up MPLS networks in India.

On the NLD side, India has a large infrastructure to the tune of 572,675 Rkm. To leverage on it, service providers have to promote broadband services (triple-play). All large integrated service providers have mega plans for this front. On the international front, there is a good growth on the data front where growth is estimated at around 65 percent. There was also good growth on the on the international voice minutes, by around 22 percent, but a drop in prices led to a downward fall in revenues, which finally stabilized at Rs 4,346 crore in FY 2003–04.

Indian Communications (Services) Industry at a Glance (FY 2002–03)
Services Turnover (in Rs crore)
Fixed Services 25,941
Cellular Services 8,599
NLD Services 5,988
ILD Services 5,001
Internet Services 1,285
VSAT Services* 225
Radio Trunking Services 47
Others** 35
Total 47,121
* Excludes revenues from VSAT equipment

**Others includes paging, unified messaging/voicemail/audiotex services

V&D estimates

CyberMedia Research

There was a price drop of around 20 percent both on the domestic and international bandwidth. In the years to come, one might see a good drop in international bandwidth prices with the deployment of three new undersea cables-Tata Indicom, Sea-Me-We-4, and Falcon. All this will result in a bandwidth glut thereby driving prices down.

V&D estimates

CyberMedia Research

FY 2003–04 was a good year for the ISP industry as it registered a 24 percent growth in terms of subscribers reversing last year´s negative growth of –2 percent. Revenues have grown by around 22 percent to reach Rs 1,573 crore ($341 million). There was a shuffling of positions at the top with BSNL replacing VSNL both in terms of revenue as well as subscribers. Internet density in India was estimated to be around 0.38 and broadband was at around 0.018, whereas TRAI has set an ambitious target of 0.6 for Internet and 0.3 for broadband by 2005.

Indian Communications (Services) Industry at a Glance
(FY 2002–03)
Services Subscribers
Fixed Services 43.08 mn
Cellular Services 34.42 mn
ILD Services 4,500 mn*
Internet Services 4.15 mn
VSAT Services 27,870
Radio Trunking Services 30,000
* Measured in minutes
V&D estimates

CyberMedia Research

VSAT and radio trunking services together account for 0.7 percent of the total services industry. In terms of numbers, VSAT had a cumulative base of 27,870 as on 31 March 2004 and had added around 8,769 VSATs in FY 2003–04. The radio-trunking base has, meanwhile, come down and is officially around the 30,000 mark. But there is a twist to the tale. Stiff competition from mobile operators, high royalty, and unclear government policies have led to under reporting of units in use, which are estimated to be above 50,000.

Introduction of the unified license, albeit, in a limited way, has helped but one has to see how TRAI works out the broader picture so that the country realizes the targets of NTP ´99. If FY 2003–04 was the year of mobile, there is no doubt that FY 2004–05 will be the year of 'creating broadband infrastructure.´ TRAI has taken some good steps on the broadband front and now it is up to the government to implement the TRAI recommendations so that India can move up the Digital Access Index (DAI) set up by ITU.

Pravin Prashant and Anurag Prasad

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