India Telecommunications Industry Update Quarter 3 2012

• Publication date: July 2012
• Report size: 149 pages

Includes 3 FREE quarterly updates BMI's latest report on the Indian telecoms industry provides a comprehensive overview of the latest developments in the mobile, fixed-line telephony and internet segments . We have incorporated latest data from the country's largest mobile operators, Bharti Airtel, Vodafone India and Reliance Communications, and the Telecommunication Regulatory Authority of India into our projection scenarios. ...

Includes 3 FREE quarterly updates

BMI's latest report on the Indian telecoms industry provides a comprehensive overview of the latest developments in the mobile, fixed-line telephony and internet segments . We have incorporated latest data from the country's largest mobile operators, Bharti Airtel, Vodafone India and Reliance Communications, and the Telecommunication Regulatory Authority of India into our projection scenarios.
The Indian mobile industry experienced a rise in growth rate in Q112, although it remains significantly below levels reached one year ago. The industry added 25.3mn subscribers in Q112, up from 20.2mn in Q411. This is despite a number of hurdles encountered in the industry this quarter.
In April, Vodafone began taking action towards international arbitration of a dispute with India's government over a retroactive tax code change. The Indian government plans to issue Vodafone a demand notice for tax owed after the finance bill is passed by Parliament, according to local press reports citing two senior officials. The government had been pursuing Vodafone for taxes relating to the 2007 take over of a 67% stake in Hutchison Essar from Hong Kong-based Hutchison Whampoa for US Dollar 11.2bn. However, in January 2012 India's Supreme Court ended the four-year legal battle in Vodafone's favour. BMI expects Vodafone to battle against the renewed attempts to tax the transaction and we expect a lengthy legal process. The finance bill has wider implications for India's economy, with potential negative implications for foreign investment as long as uncertainty continues.
In April 2012, the regulator announced 2G spectrum would be auctioned at US Dollar 687mn per MHz, 13 times the price it was auctioned for in 2008. The Supreme Court followed the announcement with a call to hold the auction by August 31 2012, far sooner than early 2013, which had originally been requested.
The telecom secretary stated that the breakdown over the 20-year life of the licences justified the price.
However, the industry s and telecoms operators greeted the news badly. Further, the revocation of a number of 2G licences caused a series of disputes.
In May 2012 Augere decided to withdraw from the industry due to difficulties in raising funds. The drawnout investigations and contentious measures to resolve issues have not aided investor confidence.
Worryingly, BMI believes that the situation will continue to cast a shadow on the segment in 2012. According to Augere CEO Lars Henrick Stork, the firm's investors have been ruffled by the 2G scandal, in addition to the repeated delay in the unveiling of the New Telecom Policy, which was scheduled to be announced in 2011. As a result, its investors have halted funding.
In the fixed-line segment, we have witnessed further declines as these are replaced by more convenient mobile phones. At the end of Q112, there were 32.2mn fixed-line subscribers in the industry, down from 34.7mn in Q111. In 2012 we projection that India's fixed-line industry will shrink by around 7%, with the number of lines expected to fall to 30.402mn at the end of the year. We expect an average annual decline of 3.25% between 2013 and 2016. This will result in the number of fixed-line connections falling to 26.617mn in 2016, a penetration rate of 2.0%.
LTE was introduced in Kolkata and Bangalore by Bharti Airtel, which also chose China's Huawei to implement its TD LTE network in Karnataka. However, we believe that the potential of 4G-speed mobile broadband will not materialise in the near future, especially when the 3G market is still in its infancy and cannot be deemed as successful.
India retains 10th place in our Asia Pacific Risk Reward Ratings (RRRs), despite falls in Country Risk and Market Rewards scores. The business environment in the telecoms segment has deteriorated in the past quarter, putting downward pressure on our RRRs. New Delhi's proposed introduction of retrospective taxation of cross border flows and a General Anti-Avoidance Rule (GAAR) on investment from traditional tax havens is another blow for foreign investors, and highlights the cracks appearing between the judiciary and the legislature. While we would not be surprised to see these proposals eventually watered down, we believe that such policies would further dampen the country's already unattractive business environment.
We have once again downgraded India's ratings to reflect the deteriorating risk profile.

Telecommunication Services Industry in India

Executive Summary ...7
Mobile SWOT ...9
Wireline SWOT ...11
Industry SWOT Analysis ...13
Mobile SWOT ...13
Wireline SWOT ...15
Political...17
Economic...19

Environment Overview ...21
Risk/Reward Ratings ...23
Risk/Reward Ratings...23
Data : Asia Pacific Telecoms Risk/Reward Ratings...28
India...29

Market Projection Scenario ...31
Mobile...31
Data : Mobile - Historical Data & Projections ...31
ARPU...32
Data : Mobile ARPU - Historical Data And Projections (INR), from 2009 to 2016 ...33
Fixed-Line ...35
Data : Fixed-Line - Historical Data & Projections, from 2009 to 2016 ...35
Internet...37
Data : Internet - Historical Data And Projections, from 2009 to 2016 ...37
Market Data Analysis ...39
Mobile ...39
Data : Indian Mobile (GSM/CDMA) Industry, March 2012...40
Data : Quarterly Mobile Net Additions ('000), March 2012...41
3G...48
Spectrum Sharing...53
Data : Selected Mobile Contract Wins ...54
Data : India Mobile Industry Overview...55
Data : Bharat Sanchar Nigam (BSNL) ...56
Data : Bharti Airtel...57
Data : Reliance Communications ...58
Data : Vodafone India...59
Industry Trend Analysis...60
Data : Selected NFC Developments, 2011...63
Country Outlook...68
Data : Selected Value-Added Services...71
Fixed-Line ...72
Data : India Fixed-Line Industry Operators, March 2012...72
Broadband...78
Data : India Internet Industry, December 2011...78
Data : India Broadband Industry, December 2011...80
Data : Selected Fixed-Line Contract Wins...88
Regulatory Development ...90
Data : India: Regulatory Bodies And Their Responsibilities...

Competition Overview ...100
Data : Key Players - Indian Telecoms Industries...100
Data : Selected Operators Annual Revenue (INRbn) ...100
Vendor Profile ...101
Data : Samsung Electronics Financial Performance (KRWbn) ...101
Company Profile ...107
Bharat Sanchar Nigam Ltd (BSNL) ...107
Mahanagar Telephone Nigam Ltd (MTNL) ...113
Bharti Airtel...118
Vodafone India...125
Reliance Communications ...130

Industry Analysis ...136
Mobile ...136
Data : Regional Mobile Penetration Overview...136
Fixed-Line ...137
Data : Regional Fixed-Line Penetration Overview...137
Broadband...138
Data : Regional Broadband Penetration Overview ...138
Demographic Projection ...139
Data : India's Population By Age Group, 1990-2020...140
Data : Export this table as seen...141
Data : India's Population By Age Group, 1990-2020 (% of total) ...141
Data : Export this table as seen142
Data : India's Key Population Ratios, 1990-2020...142
Data : Export this table as seen...143
Data : India's Rural And Urban Population, 1990-2020...143
Data : Export this table as seen...143
Glossary ...144
Data : Glossary Of Terms ...144
Methodology ...146
Data : Key Indicators For Telecommunications Market Projections ...146
Telecoms Business Environment Ratings...147
Data : Ratings Indicators ...148
Data : Weighting Of Indicators ...149