Prevision

P R É V I S I O N
SITM Annual Telecom Forecast ‘07
Symbiosis Institute of Telecom Management

PRÉVISION
SITM Annual Telecom Forecast
Oct 06 - Sept 07
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India
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Analyst Report
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Index
Executive Summary .............................. 5
Methodology ......................................... 7
List of Figures ....................................... 9
Abbreviations ....................................... 10
Global Economy .................................... 11
Global Telecom ..................................... 14
Indian Economy .................................... 17
Indian Telecom ..................................... 19
Telecom Technologies .......................... 21
Mobility ................................................. 23
Broadband ............................................. 26
Telecom Software .................................. 28
Communication Infrastructure ............ 30
Consumer Electronics ........................... 32
References ............................................. 34
About SITM .......................................... 35
Team Prevision ...................................... 36

All truths are easy to understand
once they are discovered ;
the po int discover is to them.
PRÉVISION
SITM Annual Telecom Forecast ‘07
Executive Summary
Global Economy Indian Telecom
The overall scenario seems to be very promising for The telecom industry has seen rapid growth in the
the majority of the world. US consumerism will last few years due to various factors like government
remain strong but the economy will slow down as regulations, improved incomes, changed customer
Central Bank prepares for a soft landing. US's GDP behavior etc. The Urban and Rural tele-densities
will be hit adversely by the high oil prices while will move northwards. NLD/ILD tariffs will see a
Canada will benefit. Brazil's GDP will be positively down slide. On the FDI front, India will remain a
affected by rising coffee prices. For oil-exporting lucrative destination for the investors.
countries like Ecuador and Venezuela, rising oil Telecommunication manufacturing will see a major
prices will help boost growth. Western European investment this year. VSAT and DTH market will be
countries will grow at a slower pace. South East Asia on an upswing. Government polices will see further
will be witnessing stagnation in growth due to high liberalization so as to boost Rural
crude oil prices. China is going to witness the same Telecommunication.
high growth pattern despite government's attempt in
cooling down the economy; China's trade surplus
with US will increase further. Japan is going to
witness economic recovery led by private
investment and consumption. Middle East may
emerge as next big investor but continue to lag in
political instability. Countries like Morocco, Egypt,
Algeria and Nigeria are going to be the preferred
investment destinations in Africa.
11 19
Global Telecom Telecom Technology

Telecom market in developed countries will grow Wi-Max rollouts are expected in the second quarter
with the rise of MVNO's and in developing countries of the next year, subject to spectrum clearances. In
with increase in penetration. India is set to topple W-CDMA, heavy investments are likely to continue.
China in net additions in subscribers in 2007. In DSL will gain grounds in India, and ADSL2+ will be
North America, market will see an inclination of the preferred technology. Investments in MPLS will
operators to move towards 4G technology. IPTV is continue. Metro Ethernet will gain marginally over
set for a roll out next year. Wi-Max will be adopted as the next year. Wi-Max will be experimented because
a backhaul technology. In Latin America, with it is cheaper and more efficient backhaul
strong growth in mobile markets, mobile networks technology. Existing users and falling equipment
will continue to upgrade to GSM. In Europe, the prices will contribute to VSAT growth. In Mobile
ARPU for mobile operators will decrease but data operating Systems, established players like
services will grow. There will be a mass adoption of Symbian are expected to face tough competition
3G and IMS will mature by the end of 2007. In from open source operating systems like Linux and
Africa, market will see strong growth in both mobile also from Windows as a Mobile OS. In IPTV, the
and broadband; In Middle East, operators will investments will be committed to the technology
upgrade their networks to HSDPA to offer VAS like front in the next one year.
Video Conferencing. Asia Pacific region will
continue to add maximum number of subscribers.
Wi-Max is expected to come in a big way and make
way for pilot testing.
14 21
Indian Economy commodities will keep a tight watch on inflation

Indian economy in the past quarters is singing the levels but financial markets are expected to grow.
melody of fundamentally strong sectoral growth Effect of global forces will impact the Indian markets
backed by increase in consumer demand from various but with monetary and fiscal policy right in place the
spheres. Growth is expected to flow in moderate levels impact will be normalized. The economy will make
in agriculture and manufacturing. Services will drive further milestones in terms of growth and will pose
the GDP closer to last fiscal's levels. Price index of another strong fiscal in the year 2007.
17
5
Mobility Communication Infrastructure
The growing telecom sector in India will attract The infrastructure market will see a change over.
another US$ 855 million as foreign investment over The operators will primarily invest in GSM rather
the next two years. The most promising circle is than CDMA. Also deployments in WCDMA are
circle C. The overall mobile density for quarter expected, which will have to compete with WI-MAX
ending September 2007 is expected to be 19.2. This 802.16e in the 3.3 GHz spectrum. VSAT will
ever increasing market will amount to revenue of continue to move upwards. The structured cabling
$1214Mn while ARPU will come down by 28% to industry will garner increased revenues with
$5.8 by quarter ending September 2007. It is less companies going in for heavy deployments as a
likely that 3G will be introduced as a service even result of reduced capex. IP telephony will move
though some infrastructure deployments might from being a niche application to mainstream
happen in some pockets of the country. The application with a shift from TDM to IP. 1G switch
revenues from VAS sector is forecasted to be 22% of will lead the growth of soft switches deployment.
the total revenues generated from the mobile With the new announcements made in the DTH/FM
operators and will reach around $255.5Mn in 2007. radio industry and an expected reach of about 400
million people the market for both is going to boom
with huge revenues from advertising alone.
23 30
Broadband Consumer Electronics

The Broadband market in India will see high growth The Consumer Electronics vertical identifies
rate in the next one year. PC penetration will be one leading trends and offers strategic analysis of key
of the major impediments in the adoption of factors influencing the market based on scientific
broadband. The retail broadband market is all set to models and past trends. The scope of the vertical is
have a re-launch and the BWA sector will see an restricted to the following popular consumer
exciting time ahead. The major impetus for the electronic devices: Mobile handsets, Personal
Broadband adoption process will come from the computers & laptops and Portable multimedia
incumbent. The enterprise segment will have its devices. With rapid consumerism sweeping the
own drivers for the adoption of broadband. nation, 2007 will see companies defining clear
strategies to target India as a consumption as well as
a production center.
26 32
Telecom Software
The telecom software market is expected to grow at a along with emergence of a new set of software like
better pace than before due to coming up of new antivirus & versatile mobile OS. The expected rise in
technologies. Legacy based system will be replaced by demand for data will drive the OSS/BSS market in the
next generation framework to support the complex coming year.
networks being deployed. There will be convergence
28
6
Methodology
Student Research
SITM Research
Projects
Wing
800 Alumni
Mentorship Analysis
Industry
Focus Inputs
Industry Industry
Interaction Watch
Prévision - SITM Annual Telecom Forecast is in its 4th Following are the major forecasting models, which
year, initiated in the year 2003, with the purpose of have been used in this report:
providing the industry a neutral and insightful single
point of view regarding the emerging trends in the The Gompertz Model
telecom sector for the forthcoming year, after The Gompertz model forms an S-shaped curve, but it
accumulating inputs from detailed research into is asymmetric, with the adoption slowing down as it
contemporary telecom technologies, telecom progresses. The formula for the Gompertz model can
business and other determinants of change. be written:
-b(t-a)
Prévision is a culmination of the collective endeavor -e
y(t) = e
of SITM students with 1500 man hours of efforts put
in by them. The student forecast team is guided by the Where;
SITM faculty and some of our esteemed alumni. It is a is the year the substitution reaches 37%
the only effort of its kind in the telecom domain at b measures how fast the adoption progresses
this level, which provides comprehensive coverage
over various domains in the telecom sphere. This model is used to forecast the future course of a
partially complete substitution variable. Using
The success of Telecommunications in any country regression methods, the model is fit to the historical
depends upon its reach and acceptance by the data to obtain best-fit estimates of the parameters a
masses. On the same lines, the consumer spending and b; which can then be used to obtain projections
has a major impact on telecom spending across for future years.
geographies and hence the forecast begins with an
economic analysis of geographies across the world.
The derived consumer spending is then used to study
Time Series Model
the telecom spending across the major markets. The Another graphical form is a time plot; where data are
challenges posed by upcoming technologies and the plotted over time and it reveals any trends over time,
migrations of existing technologies to newer versions any regular seasonal behavior, and other systematic
are also studied. With strong focus on supply side and features of the data. Technically Time Series is
demand side drivers for various technologies, an defined as “an ordered sequence of values of a
economic analysis coupled with an in depth study of variable observed at equally spaced time intervals.”
potential regulatory changes and market forces, has Often historical data will consist of a sequence of
resulted in creating a vision of future trends. The observations over time that is a “time series”. In
developments across the value chain with respect to forecasting we are trying to estimate how the
the supply-demand equations in the country are sequence of observation will continue into the future.
studied in order to project the scenario in these Here we assume that the time of observation is
domains over the next one year. equally spaced. As most of the series are measured
7
daily, monthly, quarterly, or yearly; therefore they are y = a(x) + b; linear
equally spaced. log(y) = log(a) + x *log(b); non linear
Extrapolation Regression is most often used for medium term,
Statistically extrapolates established pattern and/or followed by long-term predictions as for medium and
existing relationship in order to predict their long term forecasting more emphasis is placed on
continuation, assuming that such pattern understanding the variables to be forecast and the
relationship will not change during the forecasting factors influencing those variables.
phase. Majority of judgmental forecasts are based on A correlation coefficient is the covariance between a
extrapolating patterns/relationships. pair of standardized variables.
Trend Analysis PPP model

Trend analysis represents long-term changes in the This model is being used for currency convertibility
level of series and it sometimes consist of trend and calculation. A unit of home currency should have
cyclical components. same purchasing power worldwide. Inflation here is
Trend data = pattern + error = f (trend-cycle, taken as expansion of money supply in excess of real
seasonality, error) output growth.
Formula: e1/e0 = {(1+ ih )/ (1+if )}
Where; e1 = Spot exchange rate
Regression & Correlation
e2 = Dollar value of home currency
Regression analysis helps to find a function that best
ih = Inflation in home country
describes the relationship between causal variable
if = Inflation in foreign country
and dependent variable.
8
List of Figures
Figure 1.1 Global Economic Model..................................................................................................... 11
Figure 2.1 Global Telecom Model....................................................................................................... 14
Figure 3.1 Economic Outlook for 2007............................................................................................... 18
Figure 4.1 Fixed Line & Cellular Subscriber growth......................................................................... 19
Figure 4.2 Tele-density Projection for 2007........................................................................................ 19
Figure 4.3 Mobile as a % of total telephone subscribers.................................................................... 19
Figure 5.1 Telecom Technology Drivers.............................................................................................. 21
Figure 6.1 Indian Mobile Industry Outlook 2007.............................................................................. 23
Figure 6.2 ARPU Projection 2007....................................................................................................... 24
Figure 6.3 VAS Scenario..................................................................................................................... 24
Figure 7.1 Broadband Value Matrix Outlook for 2007....................................................................... 26
Figure 7.2 Industry-wise drivers of broadband consumption........................................................... 26
Figure 7.3 Broadband as a % of total internet subscribers................................................................ 27
Figure 8.1 Telecom Software Revenue Projection for 2007................................................................ 28
Figure 8.2 Future Trends in OSS / BSS Market.................................................................................. 28
Figure 9.1 Service Provider CAPEX / OPEX Distribution....................................................................... 30
Figure 9.2 Base Station Average Price Projection 2007...................................................................... 30
Figure 9.3 2G & 3G CAPEX Projection for 2007................................................................................. 30
Figure 10.1 PC Market Determinants.................................................................................................... 33
Figure 10.2 Desktop, Laptop & PC Market Projection for 2007............................................................ 33
9
Abbreviations
ADC Access Deficit Charge ISP Internet Service Provider
ADSL Asymmetric Digital Subscriber Line ITES Information Technology Enabled Services
AGR Adjusted Gross Revenue IUC Interconnect Usage Charge
ARPU Average Revenue Per User LBS Location Based Services
ASEAN Association of South East Asian Nations LCD Liquid Crystal Display
ATM Asynchronous Transfer Mode LLU Local Loop Unbundling
BFSI Banking, Financial Services & Insurance MOD Music On Demand
BOP Balance Of Payment MPLS Multi Protocol Level Switching
BPO Business Process Outsourcing MTNL Mahanagar Sanchar Nigam Ltd
BSE Bombay Stock Exchange MVNO Mobile Virtual Network Operator
BSNL Bharat Sanchar Nigam Ltd NLD National Long Distance
BSS Business Support System NMS Network Management Solution
BT British Telecom OFC Optical Fiber Cable
BWA Broadband Wireless Access OFDM Orthogonal Frequency Division
CAGR Compound Annual Growth Rate Multiplexing
CDMA Code Division Multiple Access OSS Operation Support System
CMSP Cellular Mobile Service Provider PBX Private Branch Exchange
CRM Customer Relationship Management PMR Public Mobile Radio Trunked Services
CRR Cash Reserve Ratio RA Revenue Assurance
DEL Direct Exchange Lines SDR Software Defined Radio
DSL Digital Subscriber Line SENSEX Sensitive Index
DTH Direct To Home TCO Total Cost of Ownership
DVB-H Digital Video Broadcasting-Handheld TDM Time Division Multiplexing
DWDM Dense Wavelength Division Multiplexing TDMA Time Division Multiple Access
EDGE Enhanced Data Rate for GSM evolution TRAI Telecom Regulatory Authority of India
ERP Enterprise Resource Planning VAT Value Added Tax
FDI Foreign Direct Investment VOD Video On Demand
FED Rate Federal Rate VOIP Voice over Internet Protocol
FII Foreign Institute of Investors VPN Virtual Private Network
FTTH Fiber To The Home VPT Village Public Telephone
FWP Fixed Wireless Phone VSAT Very Small Aperture Terminal
GDP Gross Domestic Product VSNL Videsh Sanchar Nigam Ltd
GPRS General Packet Radio Service W-CDMA Wideband Code Division Multiple Access
GSM Global System for Mobile Wi-Fi Wireless Fidelity
Communication Wi-MAX Wireless Microwave Access
HSDPA High Speed Downlink Packet Access WLAN Wireless Local Area Network
ILD International Long Distance WTI World Trade Institute
IMS IP Multimedia Subsystems YOY Year on Year
IP Internet Protocol
IPTV Internet Protocol Television
10
Global Economy
Economy
Macro Micro
Interest Rates Government Profitability Disposable

Expenditure Income
Employment Government Wages

Policies
Investment Consumption
Impact on Telecom
Figure 1.1 Global Economic Model
Scope and more as a tool to attract investment in the US to

Economies of major countries and areas of the world settle current account claims. The main concern
are interdependent on each other and this though, is the impact of rate hikes on US consumer
interdependence forms what we can call the Global demand, which drives many economies world over.
Economy. This vertical aims to forecast the global We anticipate US Fed rate to remain in the range of
economic trends of the major contributors of 5.25%, as long term rates differential with short term
economy and to predict trend of geo-political areas fed rates has reduced to less than 1%.
and specifically of countries that are growth drivers.
Currency Convertibility
Analysis The US Dollar will continue to loose against the Yuan
The major catalysts behind global economic growth, (renminbi) and the exchange rate is expected to be
i.e. consumption and investment, are the major 7.64CYN for $1 (plus minus 0.3). The Euro will also
impacting factors for the telecom sector. Both continue to strengthen against dollar and trade at
investment and consumption will continue to remain 0.7953euro per $ (plus minus 0.0447).
strong. High oil prices, increasing interest rates and
imbalance in trade will continue to be the worrying Crude Oil
factors in the path of global growth. Following are the Crude oil is the most important commodity that
key parameters that impact the global economic depends on the three global exchanges. We predict
scenario: the WTI Crude oil prices to reach $84 per barrel (+/-
5%) which looks quite realistic owing to the Middle
US Fed Rate East crisis.
Seventeen consecutive rises in the fed rate saw
ripples being created across many emerging markets. Regional Analysis
The rising current account deficit and high global North America
liquidity forced the central bank to raise short term The US economy expansion will continue in 2006-
rate. The move is less likely caused by inflation fears 2007. The economy will grow by 3.5% in 2006, the
11
same pace as in 2005 and will come down to 3.0% in expected to grow 1.6%, but 2007 will witness some
2007. Employment will continue to rise through 2007 decline.
and the nation's unemployment rate will stabilize
near the level of 4.6% in 2007 down from 5.1% of Stronger first quarter growth in the UK of 2.2% in
2005. Inflation will escalate at 3.4 % rate in 2006 2006 has shown some positive signs after sluggish
before decreasing to 2.6% in 2007. Not much relief is growth during last year. The U.K. would be
expected from high energy prices. particularly exposed to a slowdown in the U.S.
economy next year, as 15% of British exports head to
The Canadian economy will continue to grow around the U.S. Hence we forecast the growth for the next
3%, continuing the trend of past two years. Inflation year to be 2.4%.
will remain well in control and is expected to be 2.5 %
in 2007 a little higher than 2.2% of 2006. The GDP of France is expected to grow by 1.8% and
Unemployment rate will reduce from 6.8% in 2005 to 1.9 % in 2006 and 2007 respectively, largely driven by
around 6.3% in 2007 due to potential job creation. domestic demand. Private consumption is expected
The rise in energy prices (pre- and post-Katrina) to increase in line with households' disposable
benefitted Canada as an energy exporter (natural gas income and a benign inflation rate vis-à-vis growth of
and electricity to the United States. GDP per capita.
Latin America Private consumption was very weak and investments

The GDP growth will be driven by a combination of contracted in 2005 for Italy. GDP grew by 0.1% and in
factors. For oil-exporting countries like Ecuador and year 2006 it is expected to grow by 1.3%. The
Venezuela, rising oil prices will help boost exports, recovery is expected to be largely driven by domestic
but net importers of oil - especially in Central demand. Private consumption is going to increase
America - will be adversely affected. Chile will underpinned by the revival of job creation and
benefit from rising copper prices, while countries like nominal wages growing above inflation.
Argentina, Brazil and Peru will continue their
successful exports of agricultural products. Central and Eastern Europe
Colombia, Costa Rica and other coffee-exporters As net oil exporter Russia will be benefitted from high
should benefit from tighter coffee futures prices. crude prices and will drive the growth in Central
Europe. The high corruption and double digit
The top three economies - Brazil, Mexico and inflation are causes for concern with inflation
Argentina - accounted for a whopping 73.5 % of the estimated at 11%. Growth rate will slow down
region's GDP. Brazil's economy, Latin America's slightly in 2006 to 6% from 6.5% in 2005.
largest, is expected to expand by 3.5 % in 2007, a
slight improvement over 2006 growth of 3.3 %. Turkey's growth in 2005 was 7.4% and is expected to
Inflation is set to fall to 4.4 % in 2007 - from 4.9 % in reach 7.2%. Recent strengthening of currency with a
2006 and 6.8 % in 2005. Relatively good economic tight fiscal policy will support the current
results are forecasted to come despite of uncertainty disinflation process in spite of pressures arising from
surrounding the outcome of the October 2006 high oil prices. Elections, due in 2007, will positively
presidential elections. Unlike in the past, political affect public spending supported by a decreasing
uncertainty has not weakened the economy. Much of inflation rate.
Brazil's GDP is driven by booming exports, especially
to China. Higher commodity prices and improving Poland's GDP is expected to grow by 4.8% in 2007
domestic demand further backed by rising incomes with domestic demand being the main driving force.
has aided growth. Investment is likely to pick up strongly due to a low
interest rate and private consumption due to
Western Europe lowering of effective personal income tax rate due in
In Germany high household savings due to 2007.
unemployment have not translated into investments.
The FIFA World Cup has lead to an increase in Asia Pacific
economic activity. The consumer sentiments have ASEAN countries have reduced fuel subsidies to
seen some revival in 2006 and will rise further. avoid further fiscal aggravation and monetary policy
Increase in VAT rate from 16% to 19% in 2007, will has been tightened to reduce inflation. South Korea is
negatively impact consumption. It will see a dip in expected to maintain steady growth rate of 4%
current account surplus due to rising crude prices supported by private consumption. Indonesia which
and the likely slow down in US economy which is a performed well with above average growth rate of
net importer for Germany. In 2006 Germany is 5.6% will slow down due to rising inflation and
12
interest rate rise. Malaysia is also expected to suffer Middle East, particularly in Iran, Iraq, Palestine, and
due to lack of external demand. In the Pacific region Israel. There is no sign of a restoration of public order
Vietnam will be the star performer, attracting foreign yet in Iraq. In Saudi Arabia, Iran, and other oil-
investment. The growth rate of Vietnam will be producing countries, the international balance of
around 8% due to domestic demand and exports. payments and fiscal balances have continued to
improve due to sharp rise in oil prices. These
The fastest growing major economy, China, will countries have concentrated investments on
continue to drive global demand and supply. The economic and industrial development, using
GDP expanded by 11.6% in Q2 2006 and is further increased oil revenues. On the premise that political
expected to grow at 9.5% in 2006. The Yuan stability will continue in Saudi Arabia and Iran, we
revaluation will not be able to reduce current account expect that they will continue to achieve strong
surplus with developed economies (mainly US), and economic growth in 2006 and 2007.
surplus will expand further to $173.3 billion. Trade
surplus with US, where the government is Africa
threatening to impose tariffs on Chinese import, will Northern Africa is the most promising belt consisting
expand by 13% to $227.67 billion. Excessive liquidity of fast growing countries of Morocco, Egypt and
has already found its way into asset prices which Algeria. A lot of growth will be seen in the African
have inflated in some cities. This has forced the continent due to high investments in these
central bank to curb lending and raise interest rates, economies ranging at around 20% of GDP. Oil-
which is dampening consumption. Thus the exporting countries, however, are outpacing others
economy will be driven by foreign sponsored by a substantial margin. Moreover, some countries
investment and export, troubled by widening income continue to face serious problems like conflicts and
disparity, lack of transparency in financial sector and political unrest, drought and food crisis affecting
mounting environmental pressure. several areas in a number of East, West, and Southern
African countries. Oil rich country like Nigeria is also
In Japan the recovery of economy will continue to be facing problems due to security threats.
led by global demand, private investment and South Africa is the largest economy in the African
consumption. Current account surplus will decline continent. The GDP has been growing at an
from 3.6% in 2005 to below 3% due to rising crude increasing rate since 2001. Unemployment is a
prices and high consumption (non oil imports). concern hovering around 26%. Fairly strong global
Domestic demand though, has started showing demand and high commodity prices will help to
decline in 2006 and seems to have pulled down real boost exports and hence drive the economy that
growth. For 2007, we expect growth to be led by exports commodities like platinum and gold.
private consumption in anticipation of tax hike in
2008. Interest rates (short term) have been lifted from Conclusion
0% in 2006 indicating a solid recovery of demand in The overall scenario seems to be very promising for
the economy and we predict a subsequent rise in the majority of the world, except terrorism and
rates in 2007. turmoil in Middle East. For telecom, South Asia, Latin
America and African Countries will continue to be
Political situations are becoming more severe in the the attractive markets.
13
Global Telecom
Scope North America
Global Telecom encompasses the telecom industry in Both U.S. and Canada are expected to see their mobile
countries and major regions across the globe. The penetration numbers skyrocket now that 50%
vertical aims to cover major regions of the world i.e. thresholds have been breached; thanks partly to the
North America, South America, Europe, Asia Pacific, MVNO burst which is helping both countries grow
Middle East and Africa. Focus on these regions will their mobile subscriber bases.
evaluate the trends for the next year in terms of
technological changes and to evaluate the changing Unicast based Mobile TV failure is prompting mobile
market dynamics of telecom globally. companies to adopt multicast broadcast based
Mobile TV technology like DVB-H and Mediaflo.
Analysis Market adoption for value added services will
Driving the path breaking global trends for 2007 will increase due to greater penetration of video capable
be: handsets with further integration to HSDPA and Rev-
i. Mobile subscriber base set to reach 2.9 billion A transmission technologies.
mark by the end of 2007. We expect six markets,
notably-China, India, Russia, USA, Brazil to Recent consolidation in the equipment vendor
account for more than 50% of the total net market trend shows that in the near future there will
additions in 2007. be only 3 to 4 major vendor groups serving the
telecom operators with their rationalized operations
ii. The difficulty of the mobile operator business and product portfolios. These vendor groups will
model formed on high subscriber acquisition form segments to support 3G and 4G technology.
costs (principally handset subsidies), high churn
levels and falls in the price per minute of mobile The IMS adoption will initially be by fixed operators
voice telephony. to converge their IP Services offerings but later will
also be adapted by the mobile operators. However,
iii. The rapid evolution of the MVNO concept and maturity of IMS will take time, may be by the end of
operators' realization that a wholesale strategy 2007. The GSM operators like T-Mobile and Cingular
can, in some cases, will be more profitable than a Wireless will enhance their HSDPA coverage to larger
retail business. markets with further investments in network. Public
announcements of large carriers like Sprint Nextel
iv. The impact of IP, in particular, web based indicate adoption of OFDM technologies. Wi-Max
alternate service providers is rapidly driving will compete with technologies like FTTH and DSL.
down the price of voice telephony. One thing is Even Laptop vendors like Dell, HP and Lenovo will
clear – mobile voice prices are on the slide. integrate HSDPA, Rev – A and Wi-MAX technologies
in their equipment.
v. Walled Garden Approach of Mobile operators in
Europe will see a significant change forced by In broadband, the system integrator market is heating
premium content operators. up with the introduction of IPTV. Tie-ups are being
done between system integrators and equipment
vi. The telecom industry is moving away from a vendors to offer end to end solutions to the service
royalty based model to an open source based providers. We see very slow adoption rate of IPTV at
model. least next year.
North
America Latin America
South America is one of the fastest growing mobile
markets in the world driven by growth in Brazil,
s
Ec
r
to
on
la
Argentina and Venezuela. Many CDMA operators in

gu
Service
om
Re
Providers
y this region are moving towards GSM. As many as 40
operators out of 48 of existing operator in CDMA
Asia Pacific
Europe
Equipment Consumers service providers are declaring changeover from

Vendors
CDMA to GSM. 3G still seems to be a distant prospect
Content
Te i on for South America mainly because of two reasons:
ch Providers
d at
n ol oli Spectrum issues and low operator interest for further
og ns
y Co investment for enhancement of infrastructure.
Migration from TDMA network to GSM technology
will continue. 2007 will see consolidation similar to
Middle East & Africa
past trends. There could likely be entry of new
Figure 2.1 Global Telecom Model
14
external global operators through acquisition. primarily from the ISP investment point of view. The
fixed line operators like BT will further integrate Wi-
Latin America is also the third fastest growing Max into their 21C network. We don't see the trend of
broadband market in the world with many countries mobile operators shifting their focus from WCDMA /
reporting more than 50% growth rate. Wi-Max trial HSDPA to Wi-Max anywhere in Europe. However
runs are likely to be done in almost all major South they will keep evaluating their 4G options.
American countries. Operators like Telefonica will
focus on broadband penetration and grow in the EU pressure on operators regarding reduction of
market with further investments in Latin America. roaming prices will lead to reduction in Operator's
The stability in the political scenario adds a further ARPU which is already being challenged as a result of
positivity to the growth. saturation in the market. The MVNO market in
Europe will be more conducive rather than the
Europe approach followed in US.
Europe is one of the toughest markets for a mobile
operators to survive. Heavy spectrum license fee and The Eastern European market presents clear growth
slow adoption of 3G has made most companies show potential as the penetration there is much less as
heavy losses on their balance sheets. 3G will deliver compared to the Western European nations. In
on its promise of significantly increasing data ARPU. Russia, after saturation of subscriber growth, a high
However, 3G is set for explosive growth in this region growth in VAS market is expected.
in the coming year. Mobile Operators will continue to
cut down operating costs to survive and show Middle East and Africa
meaningful profit to their investors. Following the Africa is the fastest growing region in terms of
most recent mergers, where we have seen KPN telecommunications services. With liberalization yet
acquiring Telfort in Netherlands, T-Mobile acquiring to happen in most of the African nations, the growth
Tele.ring in Austria, France Telecom taking over rate is expected to increase further. The low
Amena in Spain, Eircom taking over Meteor in penetration of African markets and high growth
Ireland and Orascom moving in to acquire WIND in potential sets Africa as a prime target for investment.
Italy, we expect further activity in other key western Subscriber base is set to explode to nearly 400 million
European mobile markets in 2007. The vendors' subscribers by the end of 2007 and nearly 20% of
solution will largely focus on the total cost of contribution is expected from Nigeria which will
ownership. reach around 50 million subscribers. The countries
like Nigeria, Kenya, Morocco and South Africa will
The handset subsidy will drive the replacement drive the growth of the market with larger growth
market for handset sales; we predict more than 95% contribution. There will be a quantum increase in the
of the new handsets sold in the replacement market to acquisition interest for the African operators looking
be W-CDMA, though HSDPA handsets and Data card to the future potential. Africa will be the investment
sales will increase in the last two quarters of the next destination for successful Asian players especially
year. The terminal applications will be more from India and China who are looking for expansion.
integrated with Mobile TV solutions like DVB-H. In Players like China Mobile will continue to pursue the
the Capex portion, the Handset subsidy is going to operators for investment even after the fall of their
play a larger role pressuring the operators to reduce Millicomm project. Broadband market is also
their infrastructure cost savings. growing at extraordinary rate. Morocco is going to see
highest growth among peer countries.
Fixed Mobile Convergence which started with BT's
Fusion is expected to spread all over the Europe, Extensive liberalization and increased private sector
adopted by mobile operators like Vodafone. funding in the majority of the Middle-East nations is
Traditional networks will continue to grow with LLU going to further increase the telecom penetration in
based ADSL network. The operators will further the region. 3G penetrations will increase and more
consolidate their fixed mobile operations with investments from European operators will boost the
further migration to IMS. We believe the BT 21st market as it is identified as the high ARPU market
Century Network and the growing number of HSDPA mainly driven by voice. There will be more operators
networks will drive the network architecture migrating to HSDPA networks to offer value added
changes. However the killer application will be services like video conferencing, mobile TV etc.
Mobile TV and IPTV.
Asia - Pacific
Wi-Max adoption will be considerably slower in The most populous region of the world which at
Western Europe but will be higher in Eastern Europe present contributes around 40% of the total mobile
15
subscribers is expected to cross personal 1bn mark in Broadband through DSL is the fastest growing
the early 2007. China is going to award three 3G technology in Asia. Broadband players are going for
licenses by mid 2007. The subscriber base in China is Wi-Max in a big way and we foresee lot of pilot tests
expected to cross 475 million subscribers by the end being conducted by most operators.
of 2007 but the rate of increase in subscribers will
constantly decrease. Wi-max is seen as next big thing in this market and
will be preferred technology for investment by major
India will probably sort out the Spectrum allocation service providers. Service Providers are seen tying up
issues in 2007 and we will see some activity in the with vendors for pilot tests of Wi-max next year
deployment of 3G by the end of 2007. India will before they could commercially launch it. Wi-Max
continue to be the centres of fastest growing areas. We adoption will be more in developing countries like
also see 3G rollout in Indonesia in the early part of India with low broadband penetration.
2007. Japan, followed by Australia and Hong Kong
will continue to be the main drivers of WCDMA Conclusion:
growth. Japan will introduce Mobile Number There will be tremendous growth in mobile
Portability next year. subscribers especially in developing countries across
the world. ARPU are to is going down, so focus is
Many operators despite limited spectrum are shifting towards VAS. IPTV, Wi-Max and IMS roll
migrating towards IP based HSDPA networks purely outs and pilot tests will be done across major
because of spectrum constraints and increasing voice economies. Equipment Vendors across the world will
traffic. consolidate to form 3-4 vendor groups, focusing on
different technologies.
16
Indian Economy
Scope liberalization of the communications sector. From
The Indian economy is affected by many micro and 2001-06 services sector contribution has been 52% of
macro economic factors and is dependent on GDP with major investments in hotel, transport &
different sectors, which includes manufacturing, communication areas and this trend is bound to
agriculture and services, and their performance. This continue. Banking & financial services will grow
paper covers Sector-wise predictions and economic considerably. IT companies are expected to account
outlook for the year 2007. It also deals with the Fiscal, for 8-10% of GDP by 2008. We forecast the services
Monetary, Inflation, BOP and Financial Markets. sector to grow at around 11 to 13%.
Analysis Monetary Policy

Indian Economy in its transitional phase has been In its first quarter review of the annual monetary
creating new milestones and outperforming itself in policy 2006-07, the RBI further raised reverse repo
every quarter. The Indian economy achieved the and repo rates by 25 bps each to 6.00 % and 7.00%
growth rates 8.1% in 2005-06, despite rising oil prices respectively, whereas the central bank however, kept
and decreasing operating margins. The economy is the Bank Rate(at 6%) and cash reserve ratio (CRR)
will operate under global pressures of tightening of unchanged. The steps taken are to make the economy
liquidity and growing interest rates, whereas on the attuned to global movements based mostly on the
supply side, growth will continue to be fuelled by the Federal rates, LIABOR and Bank of Japan where the
opening up to private investment and good increase in repo rates will cause tightening of
performance of the economy. liquidity but it is unlikely to affect the demand for
long-term credit rate or the long-term fixed rate for
Agriculture corporate borrowing.
The agriculture sector, with a share of about 20% of
GDP in the year 2005-06, registered only a 2.3% Fiscal Policy
growth rate. Government's Policy initiatives have During 2006, there has been a reversal of the
been announced for enhancement of accessibility to phenomenon of consumer prices lagging wholesale
Farm Credits and the banks have been working prices, indicatinf of the increase in food prices which
towards micro-credit facilities for the farmers. We constitute a relatively larger share in the consumer
predict that with a good monsoon and introduction of price basket. In the last year fiscal deficit fell to 4.1%
concept of corporate farming in different areas of the of GDP, but this year's target of 3.8%, as set by the
country will add to growth in this sector to around 2.3 budget, looks tough as we have already reached 75%
to 2.6%. of the planned expenditure of the year in the 1st
quarter.
Industry
The industrial sector, which accounts for Financial Markets
approximately 26% of GDP, grew by 9.0% in 2005-06. The Bombay Stock Exchange's Sensitive Index
A strong performance in this sector will be driven by (SENSEX) crossed the 10,000 mark in February 2006
manufacturing. Investor concern over India's and the 11,000 mark in March 06. This is attributed to
infrastructure deficit continued to mount especially strong fundamentals of the economy and large
with regard to a shortage of power generation purchases by mutual funds and international
capacity and continued financial problems of many investors. Due to the liquidity contraction in the
state electricity boards. Urban planning remains global markets, indices all over the world seem to
worrisome with shortcomings in transport, have stagnated. Investments by FIIs been hit after this
sanitation, hotel accommodation, and other facilities scenario and even retail investors may prefer not to
usually required by investors. In spite of the listed invest their money in equity. The index might lean to
problems we expect the manufacturing sector to 13500 levels by 2007.
drive growth and is expected to grow by around 10 to
12%. Bank Credit
Bank deposits and credit recorded strong growth
Services during the first quarter of 2006-07. Scheduled
This sector accounts for 54% of economic output and commercial banks' non-food credit, on a year-on-year
grew by an unprecedented 9.8%. The export-oriented basis, registered a growth of 32.9 % as on July 7, 2006
Information Technology (IT) and Business Process on top of a high base of 31.0 per cent a year ago.
Outsourcing (BPO) sectors also continue to perform Deposits have not kept pace with credit growth.
very well due to substantial investment in There have been changes in the composition of loan
telecommunications infrastructure and the phased portfolios to include higher-yield, though riskier,
17
loans. Banks increased their deposit rates by about Inflation
25-100 basis points across various maturities and it Due to sustained high levels of raw material costs,
might well lead to more credit generation eventually corporate are facing pressure to increase prices and
in this tight liquidity scenario. some increase in oil prices is expected in the coming
year. With the apt preventive measures initiatives
taken by the government we see inflation levels to
linger around 5% levels.
GDP- 7.8%
Agriculture Industry Services

2.3-2.6% 10-12% 11-13%
Rupee Exchange
Inflation Real Output Rate
Growth
Interest Financial Bank

Rate Market Credit
Consumer Balance of
Investments
Spending Payment
Risk
Figure 3.1 Economic Outlook for 2007
Conclusion rise. Controlling the rise of inflation and taking

The efficiency of investment in the economy has preventive measure to keep it around 5%, average
grown steadily, as private investors have been monsoon and reasonably decisive action will
allowed to invest in more sectors of the economy, and improve both urban planning and incentives for
public investment projects have become more private expansion of physical infrastructure are also
selective and better managed. On the strength of predicted, including headway toward expanding
growing domestic demand and of high world oil power supplies and improving the power industry's
prices, the trade deficit is expected to grow faster than financial efficiency. With preventive measures to
GDP. Fuel, manufacturing intermediates, and counter global dynamics RBI has done an effective
consumer durables are likely to be the biggest job to a great extent and the economy should be seen
contributors to import growth. Spending will also driving itself to another strong and fundamental
growth year. We forecast a GDP growth rate of 7.8%.
18
Indian Telecom
Scope Indian Tele-density growth
Indian telecom envelops the entire telecom value
chain, from manufacturers to service providers, in Rural Urban
Year Tele-density
India including Fixed line, Cellular networks, (fig as on Tele-density Tele-density
March XX)
Regulatory issues, Rural Telecommunications , ILD,
NLD, and VSAT'. The aim of this vertical is to forecast 2004 7.02 1.55 20.79
the variables pertaining to the above mentioned areas
including fixed and cellular subscriber growth, 2005 9.11 1.74 26.20
ARPU trends, urban and rural tele-density, expected
trends in ILD/NLD market and VSAT market's. 2006 14.8 2.1 32.40
2007
Analysis Dec 22.1 4.8 41.20
Fixed line & cellular subscriber growth Figure 4.2 Tele-density Projection for 2007
Year Fixed Mobile Ratio

Subscriber Subscriber Mobile : Fixed
Base (mn) Base (mn) Mobile as a % of total telephone subscribers
2004 42.84 33.70 0.786 Year Mobile Total Telephone Mobile as a %

(fig as on Subscribers Subscribers of total telephone
March XX)
(mn) (mn) subscribers
2005 46.19 52.22 1.130
2004 33.70 76.54 44.029
2006 47.80 113.40 2.372
2005 52.22 98.41 53.063
2007
54.95 190 3.457
Dec
2006 113.40 161.20 70.347
Figure 4.1a Fixed Line & Cellular Subscriber growth
2007
190 244.5 77.709
Dec
Fixed line & cellular subscriber growth Figure 4.3 Mobile as a % of total telephone subscribers
200 Mn
190
180 Tele-density will reach 22.1% by December 2007
160 with urban and rural tele-density being 41.2 and 4.8
respectively. VAS revenue as a percentage of total
140
Service provider's revenue will continue to grow at a
120 CAGR of 29.8% and will reach $212 Million in
100 December 2007.
80
54.95 The major driving factors for this growth will be:
60
Reducing Tariffs
40 Handset prices
20 Increasing Per Capita Income
New Subscribers in the lower income segment
2002 2003 2004 2005 2006 2007 Government Regulations
Mobile Subscribers Growth

VSAT
Fixed Line Subscribers Growth VSAT Market will grow at 19.5% in 2006-07, with
many organizations adopting the technology. The
Figure 4.1b Fixed Line & Cellular Subscriber growth total subscriber base will reach 57,500 by December
'06 and 68,500 by December '07. The government's
Fixed subscribers will reach 54.95 million by focus will increase on rural connectivity,
December 07, showing a growth of 14.95% over 2006. contributing towards VSAT operators getting a share
The cellular subscriber number will reach 190 from the USO fund.
million, in the same period, exhibiting a growth of
67.54%. The total telephone subscribers in India will The major business segments and applications
reach a figure of 245 million in December 2007. targeted by the VSAT providers will be SMEs, Tier B
However, TRAI estimates this to be at 250 million. cities, Telemedicine, Oil & Gas, Backhaul, distance
19
education and entertainment. Failure of INSAT 4 The implementation of Number Portability in India
series will cause a slow down in DTH Market which will continue to remain ambiguous. There may be an
will surge back in the second half of 2007. intervention from the regulator so as to clear that who
will bear the cost of the setup.3G would finally see
NLD/ILD the its first implementations; however its rollout will
The government has reduced the revenue share fee not be before the third quarter of 2007.
(6% from 15%) & Entry fee for NLD & ILD licenses
(Rs25 million & Rs 250 million from Rs 1 billion Investment Scenario
respectively).The roll out obligations for future NLD The Indian Telecom sector is still far from saturation,
licensees as well as existing NLD licensees have also thus making it lucrative for investments. This year
been waived off. we will see the investments crossing the $ 1 billion
mark. We expect that FDI will be driven mainly for
New players will roll-out services (with as many as 13 rural telecom and by GSM deployments. After Nokia,
new players applying for licenses) which in turn will Motorola and Ericsson, other handset and equipment
result in STD & ISD tariffs dropping. ILD & NLD call manufacturers will set up manufacturing units to
charges will reduce by 26 % and 30 % respectively in counter the pressure of lowering margins. This in
2007-08. turn will see the component suppliers for these
manufacturers getting into India with major
Rural Telecommunications investments being made to complete the entire
Rural Tele-density will reach 4.8 by December '07, manufacturing ecosystem. The Telecom Software
showing 123.25% growth from the current tele- segment will see capital being invested in the form of
density 2.15. The focus on Rural Telephony will be FDIs. Large telecom software vendors from India will
high in the coming year, which is evident from the look at acquiring smaller companies worldwide to
fact that the operators are geared up with their cater to niche segments, like Fraud Management,
expansion plans. Operators will see major subscriber Revenue Assurance and Analytics.
growth in C circles. Aggressive expansion plans,
effective distribution channels and drop in handset Conclusion
prices (low cost handsets: below US $20) will be the Tele-density will reach 22.1 by December ‘07 mainly
drivers of Rural Telecommunications. The Business driven by mobile subscriber growth. 3G rollout will
Models for Rural Telecom would be based on risk only happen towards the third quarter of 2007.
optimization and revenue sharing. We predict the Areas of substantial growth over the next one year
rural connectivity will be catered by Rural DELs, will include VSAT market, ILD & NLD services and
which will reach a figure of 16.2 million by December telecom equipment manufacturing. Government
'07, a growth of 14.2%.VPTs, will reach 592 thousand initiatives and entrance of new players will propel
by December 07, a growth of 9.83% over the previous the developments across these areas.
year. Rural telecommunications will exhibit the much
awaited growth driven primarily by the untapped
The new revenue share regime will aim to exempt the subscribers in C circles and lower income segments.
fixed operators of ADC charges in rural revenues. The
exemption given to CMSPs will further drive the rural
penetration and make services more affordable in the
rural areas.
Regulatory issues
We expect fall in tariff as a direct consequence of
change in ADC\IUC charge structure from per min
basis to 1.5% revenue sharing on AGR. Infrastructure
sharing will improve utilization & reduce
investments in the urban areas, while on the rural
front it will increase penetration. Bundling FWP with
services like broadband will help sustain the growth
in the market. PMRTS market, which is planning to
go digital, will witness a growth as soon as the license
regime is relaxed.
20
Telecom Technology
Scope WCDMA
In the Telecom Technology vertical we focus on We predict WCDMA to be the preferred 3G
underlying technologies that are the backbone for Technology for Indian operators. However the
telecom applications. The vertical primarily lesser availability of spectrum with comparatively
concentrates on technologies that enable the telecom higher investment in the license fee might create
infrastructure at the back-end networks and at the barrier for growth. We expect W-CDMA to be the
consumer facing level. main stream technology for 2007 and this
The vertical focuses on the market trends of the technology will continue to gain mindshare and
existing technologies and the impact of the upcoming board room investments, as a road map for
technologies on the telecom domain over the coming migration. Both incumbents and large private
year. operators will invest heavily in WCDMA,
committing towards this technology in the next
Access Core one year. However commercial rollouts will
happen only in the next 2-3 years, as indicated by
Wireless PBT the initial trials carried out by the operators.
a
WCDMA, IP / MPLS EvDO
WiMax (BWA), IMS We predict TTSL will look into CDMA technology
EVDO, EDGE/GPRS Metro Ethernet migration to EV-DO Rev-0 as possible upgradation
Wireline OFC & DWDM to 3G. The availability of the 800 MHz Spectrum
DSL & Copper for CDMA 3G will further help them in migration.
Last Mile The option of adapting CDMA EV-DO Rev-A may
not take place soon until the technology adoption
Transmission Application by the top operators and availability of Rev-A
handsets. However we will still see a shift of
CDMA operators moving from CDMA to other
WiMAX Mobile OS BWA technologies. WCDMA will be the
VSAT IPTV technology of choice for large operators. With
Mobile TV Reliance Communications moving towards a pan
India GSM network, we see only TTSL may not
bring a very good Ecosystem to support CDMA 3G.
a
DSL and Copper Last mile
Like all geographies worldwide, DSL will gain
ground in India, and we predict ADSL2+ to be the
Figure 5.1 Telecom Technology Drivers preferred technology of choice. The incumbents
Analysis (particularly BSNL & MTNL) in India have not
1. Access taken very aggressive stance in the introductory
stage. They will be making a broad based market to
WiMAX
uptake the triple play applications on their
WiMAX shall be the preferred “new” technology to
network. MTNL has already pioneered in this area
be implemented by operators in the next one year.
indicating commitment to invest in network
We expect WiMAX rollouts to happen in the
upgrade to deliver the services.
second quarter of the next year, subject to spectrum a
clearances. Large operators and new players will EDGE/GPRS
enter this segment, using this technology as an GPRS and EDGE will continue to gain market
alternate to terrestrial networks for triple play share in the next one year. This is because of the
services. Indian telecom operators do understand wide and increasing availability of multimedia
the ability of WiMAX as a suitable BWA technology and data enabled handsets. Operators will further
option and will be looking for both as 802.16d & introduce lucrative options for consumers to
802.16e deployment. The opening of 2.3 and 2.5 increase the usage of the data enabled services. We
MHz band will further boost the Mobile Wi-MAX. see further penetration of this technology in the B
Operators will look at entry strategies like and C circles in the next year. The World Cup
equipment and PC bundling on a leased/ funded Cricket will have its impact on GPRS usage, and if
platform to make the technology affordable for the the operators strategy to get the premium content
mass market right in the beginning. works right, we will see a good uptake of sports
We predict a slow uptake in the next one year content on GPRS / EDGE in the country in the next
because of deployment issues, and the one year, though the price points will be
unorganized content industry, that would enable significantly below that of the world average. The
triple play content services through WiMAX. WCDMA operators will be planning their network
21
mapping the demand of GPRS and EDGE Microwave Links connecting BSC to BTS or BSC to
Networks. BSC or BSC to MSC, helping present cellular
a
service providers in planning their transmission
2. Core network with the benefit of Non-Line of site and
PBT & IP/MPLS broad band network capabilities.
With the expected change of core network strategy a
from IP/MPLS to PBT (Provider Backbone Broadband over Power Lines

Transport) by operators like BT, who are leading We see very ambitious broadband rollout by large
the Next Generation Network investment will put power companies providing internet over state
PBT in a preferred technology for core network to power grid lines. Though we do not see any proven
be considered by other operators also. We predict field trials that technically show the availability of
major telecom operators will consider the core this technology. Also the challenge of how power
network strategy in PBT over IP/MPLS next year. companies will transform the monolithic
Wireless carriers will look at the IP/MPLS options distribution channels of small fragmented power
beyond SMS / Data looking at smarter networks to corporations, some early action is expected in
support their WCDMA roadmap in the next one Andhra Pradesh over the next one year.
a
year. We also see the consideration of PBT
positioning next to IP-MPLS.
4. Application
a Mobile Operating System
OFC and DWDM Established players like Symbian will face tough
Large and significant investments in both footprint competition from open source operating system
and capacity are seen in the OFC and DWDM like Linux and also from Windows as a Mobile O S .
segments. We see fresh rollouts in excess of 5000 Symbian will continue to enjoy the major market
kms of coverage area, to be rolled out in the next share in excess of 50% in the next one year, with
one year. Carriers like Bharti, VSNL and BSNL will Microsoft gaining ground because of its wide
drive the investments in this segment. DWDM support for enterprise applications on its platform.
a
based networks will be preferred for all fresh
investments in the next one year. IPTV
a We see IPTV emerging as an application driving
Metro Ethernet investments in the next one year. However, the
Metro Ethernet will be a strong contender for mind investments will be committed to the technology
share as a technology for distribution of in the next one year, and we do not see major
broadband. This technology has not seen its wide network expansions happening to enable this in a
uptake in India, ever since its introduction in early major way in the first two quarters of the next
2002. We see this technology gaining marginally in year. Early uptake would start towards the end of
the next one year, though it will be evaluated by all the next year, and the technology will also move
players looking at network expansion and thicker towards maturity, covering some of the problems
last miles for the triple play services. faced during the field trials.
a a
IMS Mobile TV
We see that convergence is gaining momentum in We feel that the Mobile TV standard will go in line
applications and networks as the operators are with the MBMS road map by the operator. We do
going for IP backbone. The current trends also see few commercial trails for MBMS and
shows non-real time IMS based applications like DVB-H and Media Flow technologies.
a
Push-to-Talk, Instant Messaging, Video Sharing to
take momentum. So we predict a promising future Conclusion:
for IMS as a technology as the operators are moving The overall scenario in telecom technology seems to be
towards IP backbone to give real time services like promising. We predict that WiMAX and WCDMA will
IPTV. The maturity of IMS will be in line with the be the preferred technologies in the telecom industry
maturity of Network elements like Access, Devices for the next year. Established players will commit
and application supporting SIP based services. heavy investments on networks to enable triple play
The IMS strategy will be looked differently by Only applications like IPTV.
Wireless Players, Only Wire line players and Fixed The year will remain bullish with wireless operators
Mobile Converge players. looking to expand coverage in the C circles and
a Capacity in the Metro's with focus on 3G. Wireline
3. Transmission operators will expand their fiber optic networks and
WiMAX invest in overseas capacity.
WiMAX will be experimented as a cheaper and Overall we see a rise in the per-capita bandwidth
more efficient backhaul technology in the rural availability in the next one year increasing, enabled by
areas. We also see WiMAX as an emerging these technologies and applications.
technology in comparison to 14GHz and 15 GHz
22
Mobility
Indian Telecom Growth
ARPU
Mobi Subscriber
density Revenue VAS Base
Supply Side Changes Demand Side Changes
Equipment Price Coverage Extended

to Rural
Handset Price Disposable Income
Indian
Mobile Rural urbanization
Further Shift of
Competition in Rural Industry with new investment
Figure 6.1 Indian Mobile Industry Outlook 2007
Scope command a premium valuation. We expect Global

The Mobility vertical deals with Indian Mobile operators like Telefonica and T-Mobile showing
Industry, its growth, drivers and future trends. The interest in Indian Market. The Mobile subscriber
scope of this vertical includes analysis of the Indian base and mobile tele-density will grow up to 172.3
mobile industry describing the telecom circle trends million by 2nd quarter of 2007 with GSM being
and predicting the growth of Indian mobile industry 121.57 million and CDMA being 50.87 million
on the basis of subscriber numbers, mobidensity, subscribers respectively. The overall Mobidensity for
revenues and average revenue per user(ARPU). The quarter ending September 2007 will be at 19.2.
analysis further includes the future 3G issues and
VAS Scenario. Telecom Circle Trends
The most promising telecom circle is circle C, which
Analysis: will show a YoY growth of 70.6% followed by circle B
We find supply side changes and demand side that is estimated to grow by 42.2%. The circle A will
changes conducive and will drive India ahead in the be the slowest performer growing at 34.8% only. The
Global Mobile Growth. already saturated Metro Circle will grow by mere 33.6
% YoY with value added services driving the growth.
Country Trends We expect the differential growth in the circles wise
The growth statistics of the sector combined with the primary additions of customers to be from the low
government's decision to increase the foreign direct ARPU segment, however the growth for the C circles
investment cap in the sector to 74 % will continue to will be driven by the coverage expansion by the
generate interest among global investors. India, will operators and the existing low penetration in the
continue to be one of the fastest growing countries in areas.
telecom manufacturing in the world, and will attract
another $ 855 million as foreign investment over the Revenue and ARPU
next two years. On the fund investment we do find This ever-increasing market will amount to revenue
the valuation for GSM operators to rise, operators of $ 121.52 million while the blended ARPU will
with allocation of W-CDMA license will further come down by 28% to $ 5.82 by quarter ending
September 2007.
23
Revenue / ARPU Vs Time VAS Scenario
$ 140 In the urban markets, where the voice mobile
120
$ 121.5 telephony is reaching its saturation levels the
operators are looking at VAS as the new source of
100 income. Currently VAS accounts for 16.4 % of total
80 revenue and this figure will rise up to 22% of the total
mobile revenue.
60
40 VAS Scenario
20
100
$ 5.8 99%
90
2000 2001 2002 2003 2004 2005 2006 2007
80
ARPU ($)
Revenue (million $) 70
63%
60
Figure 6.2 ARPU Projection 2007
50
46%
39% 38%
40
3G 30 29%
It is less likely that 3G will be introduced as a service
19%
in the next year even though some infrastructure 20 17%
13%
deployments might happen in some pockets of the 10% 12% 8%
10 7%
country, particularly in the Metros and high end 1.1%
cities. The GSM networks will migrate towards
WCDMA, however there will be continued
skepticism on the CDMA migration to EV-DO Rev-0 SMS / Text messaging Clip downloads
or Rev-A networks. WiMAX 3.3/3.5 GHz, 806.16d Roaming Game downloads
investment will continue, with the fixed operators as Voice mail / Voice messaging Ring tone downloads
a fixed broad band non line of site technology led by Call waiting Internet access
VSNL, Reliance and few fragmented niche players. Call forward Data service / ticketing
WiMAX will be explored as an alternate technology Dial in service Mobile banking
by operators who miss the W-CDMA licenses. Caller tune Background tones
WiMAX will establish itself as a Fixed Broadband
Wireless technology in the form of 802.16d in next 1- Figure 6.3 VAS Scenario
2 years. Despite the availability of Mobile WiMAX
technology in India W-CDMA 3G networks will get GPRS which accounts for 5% of the Non-Voice
positive support for mobility. But knowing the Revenue will increase its share partly because of
strength of OFDMA technology, operators will watch wider reach and also because of a gradual shift to a
and evaluate Mobile WiMAX technology for the Flat Rate Unlimited option given by operators.
future. We do not see any threat to 3G by WiMAX even We have evaluated value added services into four
if 802.16e fulfills its claims on the mobility front, services
atleast in the next 1-2 years. On the contrary WiMAX l SMS
will compliment 3G in following two ways. l Data
l Infotainment
Operators will prefer 3G for voice with enhanced
l l Roaming and voice based
mobility and adopt WiMAX as a best broadband
technology offering limited mobility. Infotainment contributes 52 % of the total revenue
Operators will prefer WiMAX for backhauling
l share. The demand for ring-back amounts to over 8 to
their 3G network as laying cost will be less as 9 million downloads per day with over 20 million
compared to fiber. subscribers, which will further grow at an increasing
rate, with organized music industry and clarity in
We predict the introduction of WCDMA along with copyright acts supporting it.
handset bundling towards the last quarter of the
Year'2007. Cricket, Racing, Bollywood and Religion will be the
main areas from which operators will gain high
24
returns. We expect Delhi, Rajasthan, Punjab, market. The operators will continue to experiment
Karnataka, Andhra Pradesh to be the top circles for with VAS services like background tunes, and tie-ups
gaming content. The revenues from VAS sector is with enterprises for advertising, using sponsored
forecasted to be 22% of the total revenues generated, voice calls.
continuing the CAGR of 29.8 %, from the mobile
operators and is expected to reach around $ 255.55 Conclusion
million in 2007 from its earlier $120.22 million. VAS The Mobile subscriber base is expected to grow up to
demand will continue to increase in rural areas with 172.3 million by 2nd quarter of 2007 with GSM share
the introduction of multilingual capabilities in the being 121.57 million and CDMA being 50.87 million.
VAS services. Interconnect charges have been The overall Mobidensity for quarter ending
slashed to half; fueling a reduction in SMS prices. September 2007 is expected to be 19. 2. As it is
The Introduction of the India One plan will have its evident from the predictions VAS will be the biggest
effects on various factors. The Premium SMS pricing driver Indian mobile industry in future and total
will decline as direct result. Further, Incumbent revenues generated from the mobile VAS is expected
operators like BSNL and MTNL are expected to book to reach around $ 255.55 million in 2007. There is a
losses in excess of $ 666.67 million. This will further huge untapped area in VAS, which when fully
lead to an overall reduction in pricing points in the exploited will bring big bucks for operators
25
Broadband
Scope the coming months will pave the way of entry of
This vertical aims to cover the broadband segment in WiMAX in the Indian market. Principle
India, with focus on both Wireless and wired frequency bands which will facilitate the
broadband growth The Broadband ecosystem, deployment of WiMAX will be in 3.3 MHz to 3.4
covering the demand and supply side of broadband, MHz. WiMAX will be used as an alternate
with its impact on the Broadband Equipment market. technology to deliver triple play services across
The coverage includes the applications that would India. We will witness the fixed access and
drive the changes in the market, and key technologies portable access flavours of WiMAX as part of the
that are emerging in the Indian broadband landscape. initial deployments.
WLAN deployments will focus on providing
Analysis: mesh networking solutions in India along with
1. Fixed Broadband Access WiMAX and other BWA technologies. The
DSL will be the dominant access technology for number of WiFi hot spots will increase as the
broadband in India. Within DSL, ADSL2+ will incumbents plan to set up more hot-spots in
be the preferred technology various locations across India.
Cable broadband will see an upsurge in demand. VSAT will find its niche in providing e-
However, differential duty structures for cable governance and corporate connectivity at places
equipment will prove to be impediment for cable where other Broadband Access technologies
as an access technology. have not proved cost effective.
Metro Ethernet deployment will gain impetus as 3. Industry wise demand for Broadband
Telcos like Reliance and VSNL expand their The table below mentions the key factor which
reach in India. will drive the consumption of broadband by
various industry verticals.
BSNL and MTNL will be the key players who will
drive the broadband access in India leveraging Industry-wise drivers of broadband consumption
their last mile infrastructure in India.
Sector Applications / Solutions
2. Broadband Wireless Access(BWA) and Satellite Manufacturing ERP Solutions, VPN

communication
BFSI ATM networks, inter-bank connectivity
Release of Spectrum for 3G and BWA services in and e-banking
Broadband Value Matrix for the next one year ITES Voice over broadband solutions
Services Voice over broadband solutions
Government E-Governance
DSL
Figure 7.2 Industry-wise drivers of broadband consumption
Metro Ethernet
4. Broadband VAS
Multi-lingual and regional content will find favor
Wi-Max with major service providers, with players like
Cable
Sify already micro-segmenting this domain. Tele-
medicine, tele-education and other multimedia
Wi-Fi content like gaming, VOD, MOD will be the
applications in the broadband VAS package.
VSAT
Triple Play Services (IPTV, Telephony and
Multimedia) investments have already gathered
Low High momentum In the next one year we see
commercial deployments, of networks catering
Value for money for Consumer to this application across metros and other Tier-1
Note: WiMax is a spectrally efficient technology which facilitates cities.
cost effective, simple and flexible deployments of BWA networks. In future
it has the potential to offer value exceeding that of existing broadband technologies .
However, for the next one year its value proposition will be low.
Figure 7.1 Broadband Value Matrix Outlook for 2007
26
5. Retail Broadband market
Poor last-mile connectivity, lack of a wireless
Broadband as a % of total internet subscribers
60 %
alternative, and low personal computer
penetration will continue hamper the growth of 50
retail broadband in India, however decreasing
40
prices of 25% of the last years figures, make it
more affordable to the consumer. We will 30
continue to see the lowering down of the prices, 20
as indicated above, but at a lesser extent and
finally stabilising at level which is also profitable 10
to the service provider, however we see large
players continuing the subsidize bandwidth to
Mar-05 Jul-05 Nov-05 Mar-06 Jul-06 Nov-06 Mar-07 Jul-07 Nov-07
acquire customers, and later leverage the base for May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07
VAS services
Figure 7.3a Broadband as a % of total internet subscribers
Cyber cafes will increase driven by deployment the traditional means of accessing the internet.
plans of players like VSNL/Railtel and emerge as The exhibit below shows the trend which
competitors to established players like Sify I- represents the above fact.
ways and Reliance web world. The table below gives the values predicted for the
next one year:
6. Broadband Equipment Market
The Broadband equipment market will continue Broadband as a % of total internet subscribers
to grow beyond the existing levels of 35%, with Percentage of broadband subscribers w.r.t
tenders for broadband equipment already Month / Year
total internet subscribers in India
indicating the bullish behavior of the major May 2005 5.7%
telco's. The major chunk of the investments will
be in DSL(ADSL2+) and Ethernet deployments. May 2006 19.7%
The Indian market will also see the BWA

May 2007 43.2%
equipment market size increase fuelled by WiFi
and WiMAX network deployments.
October 2007 52.3%
7. IP/MPLS : December 2007 55.8%
With the expected change of core network Observed Values (TRAI)

strategy from IP/MPLS to PBT(Provider Backbone Predicted values
Transport) by operators like BT, who are leading Figure 7.3b Broadband as a % of total internet subscribers
the Next Generation Network investment will
put PBT as a preferred technology for core Conclusion
network to be considered by other operators also. PC penetration in India will be one of the major
We predict that major Broad Band Players in impediments in the adoption of broadband, at
India will also follow the similar strategy for core present the figure stands at around 18 per thousand
network preferring PBT over IP/MPLS in the next which keeps the broadband dream a distant one. The
year retail broadband market is all set to have a re-launch
with new players coming in and also implementation
8. Broadband Subscribers Vs Total Internet of newer business models. Overall the broadband
Subscribers: market will see high growth rate wherein both in the
Broadband as a cost effective solution for internet retail and the corporate customers will contribute
access will increase its presence as compared to equally.
27
Telecom Software
Scope to buy billing systems for their revenue-generating
Telecom software are used at the back end of the IT direct marketing skills, and not just for their
infrastructure of telecom companies. It also includes accounting dexterity. Several billing vendors will
mobile OS. In this the latest trends in the telecom leverage from merchandising and contextual
software market, including OSS/BSS & software for advertising techniques to boost the bottom lines of
3G, Triple play, IPTV, Wi-Max, VOIP, SDR and Mobile their clients.
OS, are predicted under the scope of this vertical.
Future trends in OSS / BSS market
Analysis
The Telecom software market will show phenomenal BI RA
growth this year. Almost every telecom company is
either investing in new software or spending in
upgrading its IT backbone to meet the anticipated NMS
boom.
Bi
Overall, the telecom software market will grow FM
around 25.1 % in the year 2006-2007 as compared to
22% in the previous year. It will grow from $ 2581.1 CC
million to $ 3229.96 million. As the telecom Industry
is on high growth not only in India but around the
world, new technologies are ready to replace the
older ones in a shorter span of time as compared to
the time taken by the earlier technologies to get
popular. With infrastructure in place, the regulations
are being molded and the market is getting ready for a Low High
new wave.
Operator Priority
Revenue (in Million US $)
3500
3000
2500
2000
1500 Figure 8.2 Future trends in OSS / BSS market
1000
500 Converging Postpaid and Prepaid Billing — Real time

pre-paid and post-paid billing system will grow due
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
to rising number of “dual use” phones and the
advantages of pricing from a single consolidated
Figure 8.1 Telecom Software Revenue Projection for 2007 database. This will force the pre-paid and post-paid
billing markets to converge in the coming year.
Fig-Forecasted Telecom Software Revenue
The Software providers in India mostly had The Rise of Virtual Network Operators — Uptake of
International players to cater to but now Indian CSP's customer management software and billing
will also upgrade their IT software to cater to rising reconciliation is a critical need for emerging MVNOs.
demand and will not only invest in OSS/BSS but also This will drive the demand for a prepackaged
on the CRM and Business Intelligence front. software framework for this market.
OSS/BSS Wireline Billing Consolidation — While wireless

markets is where we feel most of the billing growth
We are expecting the following market trends in the
will be, large basic service operators such as AT&T
coming year:
and BT are making great progress in billing system
consolidation. We forecast that this trend will
Real-time Revenue Generation —the explosion of
accelerate.
data services in mobile markets is prompting Telcos
28
3G investing in it consist of Nokia, Hutchison 3G, Nortel,
The market is all set to deploy 3G in India and 3G Fujitsu & NEC. SDR mobiles are also in the pipeline.
(WCDMA) ready handsets are already in the market.
We expect the major areas for investment in terms of SDR's compund market will see a high growth rate in
software will be in the fields of Video Conferencing, the year 2006-07 along with the shipment of
LBS (Location Based Services), Mobile banking, equipment.
Mobile trading, Ticketing and Push & pull adds. Out
of these, Video Conferencing is expected to come out OS and Security Issues (Operating System)
as a killer application for 3G followed by Location As the market is expected to see a significant growth
based services. in the smart phones, the Mobile OS which will offer
the most versatility will emerge as a winner. The fight
Triple play and IPTV (Internet Protocol TV) is tough between Symbian and Microsoft. Linux
A new set of software billing for content based billing based mobile OS are in the nascent stage.
is likely to evolve in the next year to support complex
billing requirement of triple play and IPTV. We will But this sector will also give a new target for the virus
see large operators and incumbents launching their and hacker community. As mobile data is considered
services by 2nd quarter of 2007 in select cities. to be more precise and personal, security measures
are also likely to be developed to handle the same.
Wi Max McAfee and F-secure are ready with their mobile anti-
virus software. We forecast more players to emerge in
Complex real-time data application supported by Wi-
this market.
MAX will fuel the uptake of complex billing software
for the same. Investments will grow not only in the
Conclusion
OEM sector but also in the software sector supporting
Overall, the telecom software market will be busy in
this new technology.
coping up with the new technologies coming up and
the increasing subscriber base. We will see large
VOIP ( Voice Over Internet Protocol) operators migrating from legacy-based systems to a
Enterprises will migrate from TDM to VOIP fueling next generation framework to support the complex
the growth of IP-based control, management and networks being deployed. More and more
billing software. The softphone market, though convergence will be witnessed. A lot of Indian
young, will continue to grow along with VoIP. Software giants will also start catering to the Indian
market along with the rest of the world in the telecom
SDR ( Software Defined Radio) domain.
Global telecommunication industry will be taking
SDR as a new field to go for. The companies already
29
Communication Infrastructure
Scope Service Provider OPEX Distribution
The telecom Infrastructure segment includes the
Infrastructure across various segments of network
including access, transmission and core. The overall 30%
Technical Operations
forecast is based on the understanding from the 43%
operators' investments and capacity and coverage Customer Care
expansions. We have also considered the technology Costs of Goods Sale
migration level integration.
Marketing Sales and Admin
7%
Analysis
The telecom industry comprising services and 20%
equipment will increase to $24.29 billion by 2006. Figure 9.1 Service Provider CAPEX / OPEX Distribution
India's rapidly expanding telecommunications will
procure equipment worth $22 to $28 billion in the Base Station Average Price
period ending 2007 to meet rising demand for new 80
telephone services. The above investment includes
US$(000s)
innovative business models and sharing risk between 60
Vendors and Operators. The selection of investment 40 36

will focus on the Total Cost of Ownership (TCO).
20
Mobile Infrastructure and broadband access 20
technology will drive the investments in the
communications segment. 2002 2003 2004 2005 2006 2007
GSM/GPRS/EDGE CDMA 1X/ CDMA 2000

Mobile Infrastructure
The mobile infrastructure investment will primarily Figure 9.2 Base Station Average Price Projection for 2007
be around the GSM networks, as in line with the global
trend, of declining market share of CDMA networks. We are seeing that the base station price will continue
Bharti, Idea, Hutch and Aircel in GSM and TTSL in to come down. There will be slight increase in the
CDMA will drive the investments. Reliance will divert managed capacity based pricing calculated per Erlang
its investments from CDMA to GSM network. In line as operators will continue to invest in rural areas.
with their migration to ALL-IP IMS based network Though the prices will be high for base station in this
operators will adopt the R4 based Call Server and region as the ROI expected is low; driving the per
Media Gateway based architecture, signifying the Erlang Price higher. But in the case of urban areas the
beginning of the next generation networks. same will remain lower
W-CDMA/HSDPA will increase as mobile operators
upgrade their networks with BSNL and MTNL leading
in the investments. Operators will start with limited India 2G and 3G CAPEX by Technology
3000
indoor trials of W-CDMA network; however the actual
investment will be after the clarity of 3G commercial
licensing of services. In Wi-MAX 16e technology will
Annual Radio Network
see new development but the unavailability of 2.3GHz 800

2000
CAPEX($mn)
and 2.5GHz will limit the Wi-MAX mobility broadband 750

opportunity. 3.3 GHz and 3.5GHz will be the new
investment avenues for operators with VSNL and 400
Reliance in the lead. 300
1250
1000
The graphs below depict how the service providers 300 1000
would direct their investments. 800 800
Capex Distribution 500
3%
4% New BTS Transreceivers
2003 2004 2005 2006 2007
5% New Base Stations
34% GSM/GPRS/EDGE CDMA 2000/CDMA 1X
Professional Services
5%
Micro Wave Backhaul Figure 9.3 2G & 3G CAPEX Projection for 2007
7% BSC, RNC Equipment
HLR and IN We expect that GSM and CDMA will expand equally
16% Other Infrastructure which will be more in the rural areas by investing in
Switching the network coverage and operators like Tata and
26%
30
Reliance will be leading. In 2006 we expected the GSM With revenues of $ 105 million in 2006, the revenues
and CDMA operators will invest aggressively in rural will touch $ 123 – 127 million by the end of 2007.
for expanding coverage and in urban for improving the Fiber-optic adapters will see a moderate increase in
quality of service. However we have seen in 2006, the demand.
CDMA investment was not on line of our prediction,
but the GSM investment was in line. It's largely VOIP and PBX
because of Reliance holding its investment with End of 2007, will see 25% of the PBX lines shipped to
possible option to migrate to GSM. Even we have not be IP based compared to the 15 percent today. Medium
seen a large investment from TTSL in terms of Wireless businesses will increasingly use IP-PBX and this will
Infrastructure. In 2007 the GSM investment will be grow by 18% from the current 6%.
more than CDMA to cover more villages.
We expect the technology changes of migration to 3G
Routers/Switches
network will also drive the Wireless Equipment
The Demand for routers and switches will continue to
Investment in 2007. The CDMA operators are in
grow steadily. Switch market, will have a steep growth
advantage position with the 3G spectrum in the 800
both by value and unit shipment, with the preference
MHz. They need to upgrade their BTS with CDMA EV-
being towards Layer 3 switches. 1G Switches would
DO Rev-0 or Rev-A optimizing their Investment to 3G.
primarily drive this growth. Year 2007 is targeted as the
However in case of GSM migration to 3G, WCDMA
year of heavy-duty soft switch deployment, which is in
investment needed for complete migration of the
the trial phase right now.
Access Network in terms of hardware and software
(Node B and RNC). We also believe that Call Server and
Media gate way based architecture will be adapted by DTH/FM Radio
both GSM and CDMA operators with a long term The DTH broadcasting segment is set to see major
support to IMS. growth. The total investments will be $ 56 - 66 million
in the next year. The number of households with DTH
will be 0.75 - 1.25 million by 2007.
VSAT FM radio will see its coverage expanding to nearly 90
Despite alternate technologies like MPLS, substituting cities, 280 frequencies and 400 million people in the
VSATS on the wireline side and CDMA or GPRS-EDGE coming year. The entry of new players in this segment
on the wireless. We predict the number of VSAT will increase the investments to $ 18 – 23 million. The
terminals to reach around 67000-70,000 from existing advertising revenue generated by radio will be 800-900
58,000 by the end of 2007, a growth of 19.5%. The million by 2006-2007.
investments in the sector will grow between 20-25% to
be in the region of 330-3400 million. The major sectors
driving the growth will be in DTH and Broadcasting, Wi-Fi
Digital Cinema, Distance Education, Retail Chains, The Wi-Fi penetration will be an increase by 73%. Wi-
Hospitality Sector. Fi phone units grew 151% in 2006 and will grow 182%
Equipment prices would drive the competition as the by 2007. There will be an increase in access points,
bandwidth prices, regulated by ISRO are unlikely to switches and routers, as a direct result of this increase.
come down with no signs of an Open Sky Policy. VSAT
terminal and hub prices will further nosedive, as Conclusion
operators adopt this strategy to remain competitive. To sum up, India's rapidly expanding telecom market
is expected to show upsurge in the equipment
Fiber Optic Cable procurement to meet rising demand for new telephone
Fiber revenue in 2006 will significantly grow, as we services where in Mobile Infrastructure and
predict fresh investments by large operators, scaling broadband access technology will drive the
from deployments in the range of 5000-10000 km of investments. VSAT will show escalation due to drivers
fiber optic cable within the country. Bharti will be the like DTH Broadcasting, Digital Cinema, Distance
major investors, driving the investments, with other Education, etc. Fresh investments in Submarine
operators following suit. Fiber optic cable, vendors cables, with Incumbents and new players investing in
revenues will increase and cross $ 445 million. There international capacity would increase fiber optic cable
will be fresh investments in Submarine cables, with demand by 20-25%. VOIP and PBX will see 25% of the
Incumbents and new players investing in PBX lines shipped to be IP based. Overall, the DTH
international capacity. The structured cabling broadcasting segment is set to see major growth and
industry will continue to grow in the range of 20-25%. the entry of new players in the FM radio segment will
increase the investments to $18-20 million.
31
Consumer Electronics
The Consumer Electronics vertical is being advanced technologies like GPRS/ EDGE/W-CDMA.
introduced for the first time in Prévision. In India we believe the mid range and high-end
handset growth will be with replacement of the low-
Scope end handsets. Features like Slimmer Size, Camera,
Consumer electronics refer to a broad range of audio capabilities and high resolution screens will
electronic equipment intended for everyday drive the market. With the introduction of W-CDMA
domestic use by people. This segment delves into networks towards the last quarter of next year we
the global and Indian Consumer Electronics space. expect a lot of handset bundling with call features in
Some categories of consumer electronics include the market. However we don't expect the actual
mobile phones, audio equipment, televisions, PCs growth of handsets within the next year though there
and laptops. will be a larger network adoption of W-CDMA by
operators.
The primary focus of this vertical is on the following
consumer electronics categories : Market Drivers
l Mobile handsets India is a very price sensitive market. However, we do
l Personal computers and laptops find there is a large supply side push for the handset
l Other Consumer Electronics (Portable music/ bundling by operators particularly in the CDMA
video players, Plasma TV) segment. Inflexion points are expected at certain
points of the standard prevailing handset price. It is
Analysis expected that handsets will be available in the market
The consumer electronics industry both globally as for as low as Rs. 800 ($17.7) which would see the
well as within India has witnessed a phenomenal penetration increase substantially. Some of the
growth over the past few years. The global sales of factors affecting the rise in the number of mobile
consumer electronics will touch an all time high of phone users include bundling offers, intensified
$135.4 billion by the end of 2006, an 8% increase competition, rise in the level of disposable income,
from 2005. We predict a steady rise in the uptake of technology substitution, government policies etc.
the electronics starting 2006-07 However the high end handset will have demand side
The Indian consumer electronics market was worth interest with focus on value added features.
$3.4 billion in 2005, a 14% growth from the previous
year. By 2007, sales are forecasted in the range of Future Trends
$3.89 billion, given the CAGR projection of 11 per We predict the total number of handsets (including
cent. If grey market sales are included, the Indian refurbished) to be close to 200 million in 2007.
consumer electronics market would be far higher
than the recorded numbers. Emphasis will be towards multi media content.
Hence it is expected that Integrated Digital Camera,
The following are some of the major factors FM Radio and Speaker Phones will continue to
attributed to the growth of the consumer electronics remain the features which will drive up-gradation of
market in India: mobile handsets this year. Features like quad-band,
l Increasing disposable income available to the Bluetooth, infrared etc. have also observed growing
middle class demand, but have yet to develop any mass appeal to
l Greater acceptance of newer technologies and drive the market.
products
l Large scale promotional offers during festivals, The handset players will move towards development
sporting events of handsets to cater to the low and middle segment, to
l Domestic manufacturing of products/ drop in maintain market share. With the purported exit of
the hardware export duties Reliance from the CDMA space, there will emerge
clear strategies for companies to target and market
However rural uptake of products however is slow. their handsets. However the general trend will be in
the multi-media segment.
Mobile Handsets
With rapid consumerism sweeping the country, Introduction of WCDMA by the end of next year
India has emerged as the second largest mobile would witness emergence of White Label handset
handset market, worldwide, and is poised for manufacturers similar to European countries; like
explosive growth. The Indian market is seen best for Vodafone has introduced in collaboration with
the low-end phones, but simultaneously there is a Huawei.
huge rise in the demand for costlier phones,
particularly in segments migrating to GSM based
32
PC Market Key trends in 2007
The term PC Market comprises both the Desktops as Organized
l selling of branded PC's by vendors
well as Laptops. Presently only 10 percent of the moving towards smaller cities
population has access to a Personal Computer and the Mobile computing (notebooks) growing at an
l
market will continue to grow with a CGAR (2000-05) increasing rate
of 21.28%.India will continue to add approximately 2 E-governance will spur growth in rural areas
l
million PC's per annum. This figure will increase to Large enterprises will increasingly sub-contract
l
around 2.65 million units with aggressive pricing of or fully outsource their IT needs
sub 200 units in the market, which will be the prime Wireless technology will boost the PC segment
l
factor for the increase. As a result assembled PCs will
loose market share to branded PC's. Other Consumer Electronic Equipments
The Indian TV market will have an exponential
The growth drivers for the Indian PC market are growth in the LCD TV category driven by consumers
shown in the figure below. who already have large screen flat or conventional
Growing Internet TV's. Plasma TVs will grow at the rate of over 100%.
and The projection TV category however will be
Broad Band
Bundling with Connections Innovations in
shadowed by the above mentioned technology and
Software and Processor field the growth rate will be negligible.
Networking for Low cost
Vendors Systems
It is expected that the LCD TV market in 2007 would
Going toward
be close to 0.15 million units with the Plasma TV
Growing Internet
Increasing
Better Supply and
Demand from
market not far behind at 0.05 million units
Chain PC Market Broad Band
Various Sectors
Management Connections
In the portable media segment the iPod will see
further competition in the form of multimedia
Opening up
R&D and Government enabled mobile handsets.
Manufacturing Policies
Units in India
Aggresive
Advertising
Conclusion
Policies Overall consumer electronics industry both globally
as well as within India would show steady rise in the
uptake of the electronics. Increase in disposable
Figure 10.1 PC Market Determinants
income, acceptance of newer technologies, domestic
manufacturing and products promotional offers are
Growth of Desktop, Laptop & PC Market major factors driving consumer electronics. Large
55,21,633 supply side push for the handset bundling by CDMA
23.07%
and multi-media segment would show upsurge.
50,00,000
32.47% 46,14,724 Further selling of branded PC's towards smaller cities,
growing mobile computing, large enterprises fully
40,00,000 23.43%
36,32,619 outsourcing IT needs and wireless technology will
32%
30,35,591 boost the PC segment.
30,00,000
-10.4% 35.7%
22,93,643
20,00,000 18,81,640
16,70,880
10,00,000 6,89,311
41,670 52,375 44,745 50,974 1,77,105 4,31,834
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
Desktop Laptop and Notebook Growth of PC Market
Figure 10.2 Desktop, Laptop & PC Market Projection for 2007
33
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34
About SITM
our students and faculty work closely together for

various committees. Every student has an active
exposure to committee activities. Hence we have
ample opportunity to refine crucial managerial
and organizational skills like accountability,
teamwork, work breakdown / allocation, business
communication, contingency planning, and change
and crisis management. This ability is put to test and
refined to the utmost in all SITM events.
We regularly participate in many regional and

national level Business School competitions with a
very good track record of emerging as winners. SITM
students are also taught the value of their social
obligations and actively participate in social work
activities.
Our motto is “Be the Best” and it is our constant

endeavour to improve upon our past performances,
which is the reason for our quick progress, and so
We are a techno-management business school that shall it remain.
has remarkably evolved into a centre for learning
excellence in the Information and Communication
Technology (ICT) domain. We have a short history of
no less than ten evolving years which had made our
presence felt in the ICT industry. Over nine hundred
of our alumni are tirelessly contributing to the growth
of organizations throughout the ICT value chain in
India and abroad. The intensive course framework
designed to equip future managers with the
knowledge of General Management, Telecom
Technologies, Finance, Software, Marketing,
Branding and a deeper understanding of Market
Dynamics so that we evolve in perfect managers with
ability to handle the work effectively.
The learned and eminent members of our Board of

Studies keep our curriculum contemporary through
biannual revisions. The gurus of SITM are a potent
mix of academicians, domain experts and practicing
professionals.
The future managers are endowed with experiences

beyond knowledge by being exposed to workshops,
moral rearmament camp, industry exhibitions and
various national level events. Apart from academics,
35
Team Prévision
Faculty in Charge Verticles Members
a
Mr. Giri Hallur, (Faculty, Telecom)
Global Economy Sanjeev Nawani
Samarth Pandey
Industry Mentors Ajay Sharma
Kundan Das (Huawei Technologies) Pankaj Chawla
Rahul Sharma (TechMahindra) Nitin Khanna
Aniruddha Harne (TechMahindra) a
Indian Economy Shwetank Tamer
Ankur Gupta
Student in Charge Gareth Mascarenhas
Manish Juneja a
Global Telecom Aditya Arora
Student Editor Sudhir Jain
Gareth Mascarenhas Amitesh Kumar
Tanuj Arora
Chandan Pandey
Bhavneesh Mahajan
a
Indian Telecom Saurabh Mishra
Ashish Bajaj
Vaibhav Narang
Divya Tuteja
Shumita Kakkar
George Ninnan
a
Mobility Soumya Mishra
Krati Laad
Maulik Trivedi
Triyanka Nayak
Neha Agarwal
Madhur Deshpande
a
Broadband Ashish Chandrashekhar
Somil Mittal
Deepshikha Garg
C. Shailaja
Umang Garg
a
Telecom Software Akash Pethiya
Vishal Sethi
Parikshit Parashar
a
Telecom Technologies Vikas Sharma
Shashwat Virmani
Ashwini Shrimali
Bhaskar Maheshwari
a
Communication Infrastructure Gaurav Khera
Sanjay Aggarwal
Kanika Jain
Aniket Joshi
Nahush Vaidya
Prashant Kumar
Nitin Hedau
a
Consumer Electronics Deepak John
Vaibhav Aggarwal
Ankur Sharma
Girish Dixit
36
Symbiosis Institute of Telecom Management
Atur Centre, Gokhale Cross Road,
Model Colony, Pune - 411016
Phone: 020-25674150, 25671911
Fax: 020-25675953
Email: sitm@vsnl.com www.sitm.ac.in
Prévision - SITM Annual Telecom Forecast,

provides a holistic and equitable view of the
forthcoming telecom sector developments
taking into account all the macro
and micro economic factors. The essence of this
forecast report lies in the fact that it keeps us in
sync with the changing dynamics of the telecom
domain which is transforming itself and now
stepping into the third generation technologies.

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P R É V I S I O N

SITM Annual Telecom Forecast ‘07

Symbiosis Institute of Telecom Management

All rights reserved. This document is

© Copyright 2006, Symbiosis Institute of Telecom Management, Pune.

© Copyright 2006, Symbiosis Institute of Telecom Management, Pune.

the po int discover is to them.

Global Telecom Telecom Technology

Indian Economy commodities will keep a tight watch on inflation

Broadband Consumer Electronics

Trend Analysis PPP model

Figure 2.1 Global Telecom Model....................................................................................................... 14

Figure 3.1 Economic Outlook for 2007............................................................................................... 18

Figure 4.1 Fixed Line & Cellular Subscriber growth......................................................................... 19

Figure 4.2 Tele-density Projection for 2007........................................................................................ 19

Figure 4.3 Mobile as a % of total telephone subscribers.................................................................... 19

Figure 5.1 Telecom Technology Drivers.............................................................................................. 21

Figure 6.1 Indian Mobile Industry Outlook 2007.............................................................................. 23

Figure 6.2 ARPU Projection 2007....................................................................................................... 24

Figure 6.3 VAS Scenario..................................................................................................................... 24

Figure 7.1 Broadband Value Matrix Outlook for 2007....................................................................... 26

Figure 7.2 Industry-wise drivers of broadband consumption........................................................... 26

Figure 7.3 Broadband as a % of total internet subscribers................................................................ 27

Figure 8.1 Telecom Software Revenue Projection for 2007................................................................ 28

Figure 8.2 Future Trends in OSS / BSS Market.................................................................................. 28

Figure 9.1 Service Provider CAPEX / OPEX Distribution....................................................................... 30

Figure 9.2 Base Station Average Price Projection 2007...................................................................... 30

Figure 9.3 2G & 3G CAPEX Projection for 2007................................................................................. 30

Figure 10.1 PC Market Determinants.................................................................................................... 33

Figure 10.2 Desktop, Laptop & PC Market Projection for 2007............................................................ 33

Interest Rates Government Profitability Disposable

Employment Government Wages

Scope and more as a tool to attract investment in the US to

Latin America Private consumption was very weak and investments

Argentina and Venezuela. Many CDMA operators in

Equipment Consumers service providers are declaring changeover from

Analysis Monetary Policy

Agriculture Industry Services

Interest Financial Bank

Figure 3.1 Economic Outlook for 2007

Conclusion rise. Controlling the rise of inflation and taking

Year Fixed Mobile Ratio

2004 42.84 33.70 0.786 Year Mobile Total Telephone Mobile as a %

Mobile Subscribers Growth

from IP/MPLS to PBT (Provider Backbone Broadband over Power Lines

Supply Side Changes Demand Side Changes

Equipment Price Coverage Extended

Figure 6.1 Indian Mobile Industry Outlook 2007

Scope command a premium valuation. We expect Global

2. Broadband Wireless Access(BWA) and Satellite Manufacturing ERP Solutions, VPN

Services Voice over broadband solutions

Figure 7.1 Broadband Value Matrix Outlook for 2007

The Indian market will also see the BWA

7. IP/MPLS : December 2007 55.8%

With the expected change of core network Observed Values (TRAI)

1500 Figure 8.2 Future trends in OSS / BSS market

500 Converging Postpaid and Prepaid Billing — Real time

OSS/BSS Wireline Billing Consolidation — While wireless

Vendors and Operators. The selection of investment 40 36

GSM/GPRS/EDGE CDMA 1X/ CDMA 2000

see new development but the unavailability of 2.3GHz 800

and 2.5GHz will limit the Wi-MAX mobility broadband 750

Capex Distribution 500