Innovation and Entrepreneurship in the Indian Market

5/5/2009
Presentation on
Innovation and Entrepreneurship in the
Indian Market
to
Cambridge Wireless International
Conference
30th April, 2009 Duxford Cambridge
By
N K GOYAL
President,
Communications and Manufacturing Association of India, CMAI
Founder Member, Chairman Emeritus,
Telecom Equipment Manufacturing Association of India, TEMA
Council of Electronic Hardware Association of India
Vice Chairman, ITU APT India, Chairman CTIA
Member Governing Council
Telecom Equipment & Services Export Promotion Council (TEPC)
Chairman, ITPS, Dubai
Director, NFL, Government of India
nkgoyals@nkgoyals.com +91 98 111 29879 www.nkgoyals.com
CES, 2009 being inaugurated and ribbon cutting at Las Vegas on 8th January, 2009 by NK Goyal with Sir
Howard Stringer, Chairman & CEO of Sony Corporation, Mr. Tom Hanks, the American movie star,
Mr.Gary Yacoubian, Chairman CEA & President of Myer-Emco AudioVideo, Mr. Gary Saprio, Vice
President of CEA, Ms. Qu., Presixdent, CECC China, Mr. Patrick Lavelle, President and CEO of Audiovox,
Mr. Peter Lesser, President and CEO of X-10 (USA) Inc, Mr. Loyd Ivey, Chairman and CEO of MiTek
Electronics and Communications, Mr. Jay McLellan, President and CEO of Home Automation, Inc. (HAI),
Mr. Mike Mohr, President of Celluphone, Mr.Grant Russell, President of Kleen Concepts
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5/5/2009
AGENDA
- India’s Growing Indian Economy
- India Electronic & Telecom Potential
-Innovative Ways in India
-Entry Strategy for Telecom
Dr Manmohan Singh
Hon’ble Prime Minister of India invites
India has got off to a good start….
savor the wonderful journey of creativity and
enterprise taking place in the country.
India is a nation on the move, set to regain its
place in the community of nations as a plural,
secular and liberal society with an open
economy.
Address at McKenzie Board Meeting in India
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5/5/2009
Diverse and Unique India
Jammu
and
Himachal
Kashmir
Pradesh (C)
(C)
(B)
Punjab
Haryana (B)
Delhi
NEPAL
Uttar
Pradesh(B)
Rajasthan
(B)
Maharashtra (A)
Orissa (C)
Bombay
(A)
Andhra
Pradesh
Goa
(A)
Kerala
(B)
MALDIVES
m
Madras
Karnataka
Tamil
Nadu
(A)
- NORTH EAST (C)
BHUTAN
Sikkim
r
Assam (C)
Bihar
(C) West
Bengal B)
Madhya
Prades
h(B)
Gujarat
(A)
•28 States & 6 federal
territories (U Ts)
•37 official languages and
1652 languages &
dialects. Most Indians
speak either English or
Hindi (More Indians
speak English than the
entire population of
USA)
•Largest Democracy in
the world; very strong
legal system
•Federal and provincial
Governments elected by
the people.
Monetary Unit: Rupee
1.1 Billion People
a
CalcuttaBANGLADESH
Andaman and
Nicobar
Islands
(C)
1 US$ ~ 50 Rupees (INR)3.3 million sq. kms area
India …..known for
Invention of Number system, concept of zero, Chess.
Origination of Algebra, trigonometry and Calculus
Largest democracy in world and one of the most ancient & living
civilizations at least 10,000 years old.
Largest postal network in the world
Largest railway network in the world.
Ayurveda, the oldest school of medicine in world, Chakra known as
father consolidated this school 2500 years ago.
Only source for diamonds in world till 1896
Never invaded any country during last 1,000 years.
Sanskrit, according to Forbes magazine as most suitable language for
computer software.
Harappa culture (Indus Valley Civilization) established much before
when most of countries had nomadic tribes in forest dwellings.
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5/5/2009
Growing Indian Economy
8 out of Top 10 EMS companies have already set up shop in
India
Contract manufacturing business expected to nearly triple in
revenue over the next 5 years
India is amongst 6 countries that launched satellites and among
the 3 countries in the world to build Supercomputers
100 of fortune 500 are now present in India compared to 33 in
China
India adds 10-15 million new telephone subscribers every
month
India’s Electronics Potential
Current India market size about US $ 34 Bill. out of which
production $16.1 Bill.
Demand to grow from 4% of GDP to 12% by 2015 i.e.. 320 Bill.
Total production may go up to $ 150 Bill. with employment
potential of 21 mill.
Indian ICT spending is expected to grow at 19% from $ 29.5 Bill.
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5/5/2009
BELL’S TELEPHONE
Alexander Graham Bell, keenly interested in the
education of deaf people, invented the
microphone and in 1876 his "electrical speech
machine," ie today’s telephone. Bell set up the
first telephone exchange in New Haven,
Connecticut in 1878. By 1884, long distance
connections were made between Boston,
Massachusetts and New York City.
Since his death in 1922, the telecommunication
industry has undergone an amazing revolution.
Today, non-hearing people are able to use a
special display telephone to communicate.
Bell's "electrical speech machine" paved the way
for the Information Superhighway. Fiber Optics
are improving the quality and speed of data
transmission.
Indian Telecom
World’s fastest Growing Telecom Market – 10-15 Mn. subscriber
addition per month
Second largest in the world after China
430 Mn . Telecom Subscribers, Including wireless = 392 Mn.
Retail Market for Mobile Phones – handsets, accessories etc. is
worth over US$ 15 Billion and growth 15%
Internet Subscribers 10 Mn. Internet Mobile 31.30 Mn.
Broadband 6.22 Mn.
Projected
650 Mill by 2012 out of which fixed line hardly 49 Mill.
Increase of wireless internet users from 58 Mill out of 237
Mill during 2007 to 196 Mill out of 650 Mill by 2012
Increase of broadband subs. from 3.1 Mill out of 10.4 Mill
internet sub during 2007 to 27.3 Mill out of 45 Mill internet
sub by 2012.
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5/5/2009
Indian Telecom Sector at a Glance
279 state-of-the art Networks (GSM+CDMA)
24 National Long Distance & 19 ILD Licensees
>430 million Telecom subscribers including 392 Mn. wireless
subscribers
Roll out of services in more than 8000 towns & cities and over
500,000 villages
Over 6 cellular mobile service providers in most of the circles
6 new operators coming up
Indian Telecom Growth
Characterized by
Mostly Voice based
Predominantly urban centric
Limited by slow broadband growth
Wireless growing landline decreasing
Prepaid driven market
Spectrum Constraints on wireless
World’s cheapest mobile handsets
Innovative way of doing business
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5/5/2009
Continued Wireless Growth Expected
Booming economy, rising income, increasing available
disposable surplus
Continued big demand, rural potential
Introduction of Number Portability by mid 2009
New Operators bringing in competition, spread and cheaper
tariffs
Introduction of 3G, Wimax technologies
Operators allowed intra service roaming
Operators scouting cheaper handsets e.g.. Spice with IDH
Media Tek, Taiwan for $15 handset. Also sets without screens
being considered.
Key Drivers for the India Telecom Growth
FDI to
74%
NTP 99
CPP
No ADC
UASL
OEM
Initiative
Local Mfg Initiative
Local Presence in India
Presence of System Int.
Growing India Market
Low cost Handset supply
Regulation
4 to 5 Operator/Circle
UASL Regime
Mergers & Acquisition
Foreign Investment
Subscriber
Telecom
Operator
Big addressable
Market
Growing PPP
“Willingness to
adopt”
Increasing demand
of
Services
“Growing India”
Growth Rate of 9% PA
Service based Economy
High FDI inflow
Huge Market Segment
Govt. initiative for
Telecom
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5/5/2009
Innovation- Technology
Business Model Evolution
Technology Innovation
Wireline Segment
OEM
POTS -> DSL -> PON Technology
Upgradation of existing System for VAS offering
Independent
Software
Vendor
Wireless Segment
Adoption of 2.5 G Wireless Standard for GSM
Directly hopping to IS 95 standard for the CDMA
Evaluation amongst 3G & 4G standard for future
Optimization of the Available Spectrum
Invitation to Global Operators for World Class Service
System
Integrator
Content
Provider
Network
Operator
OEM
Future Road Map
Wireline – Last Mile on Fiber
Wireless – High Mobility & Good Coverage option
Convergence – Femtocell Concept, LTE, IMS
Common Platform for Content, Infrastructure , Format
Managed Service
Provider
Managed Service Model – Network
TRANSFORMATION
Historic
Transition
Radio
Paging
Legacy
Telecom
Wireless
Telecom Service
Focused Business
Mobile Wallets
and Payment
Early Vertical
Specific
programs
E/M
Third-party
Payment
consumer and
early enterprise
Solutions
Applications Diversified
Telecom
Access and early
applications
Wireless
Future
Fixed
Line
Telecom Service Blended
with Emerging Areas like
VAS & Mobile Applications
New
Telecom Business
Ecosystem
Transform to be Telecom Ecosystem Enabler
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5/5/2009
NEW ECOSYSTEM – Feeder Model
Active & Passive
Infrastructure
Providers
Application &
Content
Providers
Drive Indian Economy
Towards the 10%
Economy Growth
Target
New
Telecom Business
Ecosystem
Telecom Transmission
Equipment
Manufacturers
Wireless Service
Provider
Fixed Line Service
Provider
Telecom Handset
Manufacturers
Telecom Network
Equipment
Manufacturers
Fisherman
Vegetable Vendor
Checking best rates
“Mobile” Vendor
Blind Students
Adult Education
Lapping up Mudras
I am in Queue
Textile Merchant
Rediscovering Life
E-Medication
Matter of Heart
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5/5/2009
Where are we heading to…
Youngest Website Designer of the World – is an Indian Boy!
Challenges for India
One of the fastest growing economy in the world, BUT
Rural Connectivity
More than 300 Mn people still living below 1US$ a day
About 800 Mn people have no access to secondary and
tertiary health care
Education in rural areas significantly lagging
Lack of teachers and appropriate facilities
Very limited access to governance
Very few have birth certificates, land records, ration cards
Continuous dropping ARPU & increase MOU
Spectrum constraints
Lower broadband penetration
Focus areas are rural connectivity and broadband for the masses…
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5/5/2009
Indian VAS Market
SMS continues world over as highest revenue generator across
all messaging categories, providing global service revenues of
$177 billion in 2013 as per ABI Research
In India Revenue from VAS presently is 10-14% of total revenue,
expected to grow 30% within next 5-7 years.
Rs. 28.5 Bill. as of Dec. 2006, slated to grow to Rs 42 Bill.
VAS core component of operators revenue
High end users....video on demand, user generated content
ie. interface between web and mobile
Long tail users, who focus on contents subsidized by ads.
Ring tones and SMS account for large portion of VAS market.
About 8,00,000 ring tones downloaded daily
Good scope for utility based services eg. Location information,
M commerce etc.
Indian Mobile VAS…Way Forward
Indian mobile VAS industry would go more global and would
emerge as leader rather than follower.
India already having led in software, the innovations in mobile
VAS are going to come from India.
Mobile VAS heading evolution like a PC from personal
computer to a device to access to everything and anything you
want to know. So Mobile VAS would lead to Access to wireless
world for everything.
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5/5/2009
Indian Operators Business Plans
Indian momentum in subscriber addition continues to be
strongly primarily driven by better coverage & fierce tariff
competition. The sector is undergoing capex intensive cycle due
to launches by new players and expansion of existing players.
Each player is trying to grab market share ahead of others.
In anticipation of the huge potential in both mobile penetration
and the coverage area of the networks, operators are planning a
total capital expenditure of about US$20 billion during 2009.
Innovative ways
Most economical way of doing business, lowest tariff highest
profitability
Managed services contract for network and IT services
Lowest recharge less than 20 cents
Missed call concept
SMS based earnings due to TV games, greetings, jokes, social
networks, VAS contents
Lowest acquisition cost for new connection ..half dollar for life
time
92% prepaid connections....low cost of recovery
Multiple choice of technology and vendors
Agricultural service, tele education M Commerce
Strong incumbent behaviours
Excellent roaming policies
Handset bundling…...handset less than ten dollars
Broadband bundling…PC on loan
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5/5/2009
Some Operators Innovative schemes
BSNL
Handset bundling Rs 1458/- 15 months free talk time. Handset
colored screen, secret SMS, Call blacklist, polyphonic ring tones,
built in games, FM Radio etc. weighing 68 gms and rubberized key
pads.
Spice
Launched rural handset 11 US$ with two local language and
audio interface system for illiterate people. With Radio, life
time activation but no Screen/SMS
Planned street plays and public announcements for rural areas
Tata
Launched ZTE Colour handset for 20 US$ with sms in two
language,700 Kb Memory, 1.5 “ screen weighing 70 gms.
Fisherman’s CSR services for coastal areas.
Some Innovative…contd.
Tele education with Mumbai University
Tata Tele services is giving prices from over 3,000
Mandis as VAS Mandi Bhav to farmers in rural market.
Farmers gets information on 500 commodities in nine
regional languages
Bharti
Tie up with farmers organization IFCO for updates on
wolesale prices for rural areas.
Microfinance, bill payment facility on mobile
Tie up with Western Unions for money transfers
M Commerce
Reliance
Lowest Life time GSM connection
Lowest recharge
Well defined in built VAS services
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5/5/2009
Some Innovative…contd.
VIRGIN MOBILE
First to offer 10 paisa credit for every in coming minute call
from any network
First to offer SIm based CDMA Phones
After first 2 minutes call each day, calls to any network @50
paisa per minute
On payment of Rs 18/-, free 100 Local SMS and mobile calls
@ 30 paisa per minute Friday to Sunday
Innovation means changed life style….
Traditionally we were taught to talk less, brief, keep
shut….NOW TALK MORE
Social changes…no time for family, personal…becoming more
machine rather than good human….Delhi Univ. survey Feb.08
70% internet chatting.
First we gave cell phone to younger generation and ….now
ways and means to keep them away from MMS, prone films
Increased accessibility and reach…hours of wait for calls gone.
From Radio to TV one channel ..eager wait for Chitrahaar…now
hundreds of TV channels, plenty of music, pictures, video on
every device….almost to the extent of irritating AND also non
clarity on rates to pay AND even live Darshan (Shirdi, Golden
Temple, Tirupati etc.)
Multiple task being done simultaneously by us...talking,
browsing, viewing etc.
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5/5/2009
Changes in life style….
Earlier we used to send letters, greeting cards. Now SMS culture
even though network jams on high load.
Earlier payments made & deliveries assured, failing which
complaint redressed. Now pay for SMS whether received or not
and no way to find out.
Entertainment Tax…payable at Cinema, Theatres, not paid for
TV, internet entertainment, Mobile TV, Cable TV, CAS,
DVD/CVD. Again payable by DTH WHY?
Weights & Measures….we pay for exact quantity of goods,
sweets without box…but mobile we pay fixed for call, SMS
irrespective of actual use.
MRP mentioned on all products….tempting SMS for polls…no
rates indicated…forbearance.
Broadband means ~256 mbps, but customer pays and gets less.
Airwaves nature’s largest offering to mankind & free for Radio,
Mikes, TV…..but paid for mobile
Innovations also means Legal puzzle...
Spectrum...most talked word in public, everybody wants more
yet goes on increasing subscribers. …thanks to innovative
technologies.
Who owns mobile display space…...mobile manufacturers,
content provider, service operator or CUSTOMER?
Trans countries transactions…internet payments issues of …..
Jurisdictions, acquisitions and mergers capital gains.
On Internet/VOIP customer can call anywhere in world but
not within Country…restricted.
International Card seller has to certify to use authorised ILD
operator. No such condition for foreign operator.
Foreigner can use foreign mobile in India on roaming, but
Indian cannot use foreign SIM card within India.
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5/5/2009
Concerns for public safety…
Changing Skylines….we hardly see telecom towers in advanced
countries….no guidelines in India.
Radiations - Ultrasound, Invertors, X-ray, Mobile devices,
Towers….BUT no advice on prevention or protection.
Towers…safety guidelines non existent for safe use and regular
verifications audit.
Over exposure, Media cloning makes all channels look the same
with everything on earth as BREAKING NEWS….tiring
experience.
Intrusion in privacy, data theft, increasing spam, virus, Email &
SMS with wrong identity.
Hello tunes and incriminating use in public places on several
occasions irritating
Increasing use by antisocial elements, sting operations.
Entry Strategy for Telecom
Zero Import Duty on components and finished material in
Telecom
100 % FDI Allowed in Equipment Manufacturing
49% permitted out rightly and up to 74% FDI Allowed with
approval for Telecom Services
No License required for Manufacturing
Value Added Services & IT enabled Services permitted
Infrastructure facilities available for Telecom
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5/5/2009
Entry Route to Indian Telecom Market
3G Auctions likely to be held shortly.
Infrastructure Licenses available.
Acquisitions and Mergers
Venture Capital funding
UASL licenses allowed. Presently about 300 pending.
GSM/CDMA Spectrum constraints. Fixed line, Wimax in
delicensed band permitted.
ISP Licenses available for entire Country or State or District
Level. ISPs permitted Voice over internet besides data.
National Long Distance & International Long Distance (NLD&
ILD licenses). Recently licenses issued to France Telecom,
Orange Business Services, AT&T , Verizon, British Telecom,
Cable & Wireless
MVNO
Entry Route…cont
Capital expenditure per site decreasing
Established operators still showing good profitability
Chinese vendors pushing hard to enter the market
Telecom vendors looking for export (Africa, SE Asia)
If subscriber base increases to 500 million another
150.000-200.000 sites required
Interesting opportunities: power saving solutions,
long lasting batteries, shared networks, combiners,
shared antennas, capacity enhancing equipment
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5/5/2009
Indian Company
A foreign company can commence operations in India by
incorporating a company under the Companies Act,1956
through
Joint Ventures; or
Wholly Owned Subsidiaries
Foreign equity in such Indian companies can be up to
100% depending on the requirements of the investor,
subject to equity caps in respect of the area of activities
under the Foreign Direct Investment (FDI) policy
Import Duty Structure
The peak rate of customs duty in India is @ 10%.
217 items listed in ITA-1 are allowed at basic duty of 0%.
Electronic components and parts of telecom equipment are also
at Basic Duty of 0%
Imported Goods, other than the Basic Customs Duty, are levied
Countervailing Duty (CVD) which at present is @ 14%.
Special Additional Duty of 4% is also levied in all imports
which is reimbursable subject to certain conditions.
Educational Cess @3%.
Concluding Products listed in ITA-1 will attract a total duty of 21.139%
Product not listed in ITA-1 will attract a total duty of
31.703% (for finished/semi-finished/components)
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5/5/2009
CMAI
CMAI the Indian trade and business association offers one
window service for information dissemination, guidance
on setting up businesses in India.
It also offers consultancy services on turn key basis
through its member companies
CMAI… your dependable partner in India
www.cmai.asia
CMAI
Case Study: Onyx Handsets in India
Goal: Onyx of Switzerland to enter the Indian Mobile market
offering premium branded ‘bespoke’ handsets.
Onyx is a Swiss DUAL SIM Handset manufacturer with UK based handset
design and
subcontracting services for customised low volume premium handsets.
www.onyxinnovation.com
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5/5/2009
Action Taken: Onyx approached Cambridge Wireless (CW) and the
Communications and Manufacturing Association of India (CMAI)
8 weeks ago for introductions and market research.
Results:
- 10 Million Euro Contractual Negotiations with two of the largest
mobile operators in India.
- Onyx opened Sales office in New Delhi appointing local Telecomm
Expert.
MOU Signing Between CMAI and Cambridge Wireless Today
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5/5/2009
Where is my cell phone mama..
I want to SMS to God that I have reached safely!
GIO Factor
In Hindi – GIO means Live Long
Come…..explore….and be a part of the….
Great Indian Opportunity
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