1. CONFIDENTIAL
Penetration of Mobile Telephony in India
&
Value added services in Indian Mobile
Telephony market
October, 2006
This report is solely for the use of Zinnov client and Zinnov personnel. No
part of it may be circulated, quoted, or reproduced for distribution outside
the client organization without prior written approval from Zinnov LLC.

2. AGENDA
• Penetration of Mobile Telephony in India
• Value added services in Indian Mobile Telephony
market
• Zinnov Research Overview
1

3. India is one of the fastest growing mobile markets in the world,
in April 2006 mobile subscriber base crossed 100 million mark
Indian Mobile Telephony Market
26 million
mobile
subscribers
Around 2 added in the
million monthly last 9 months
mobile of 2005
Total mobile subscriber
subscribers additions
base of 10.5
0.05 to 0.1 million
million average
monthly
Mobile services subscribers
launched in India addition
commercially
August 1995 1995-2001 December 2002 2004 2005
2

4. Growth of mobile subscriber base has sky-rocketed in last 6
years
120
100.0
100
Mobile Phone Subscribers (millions)
80
76.0
60
48.0
40
28.0
20 10.5
5.5
1.1 1.6 3.1
0.0 0.2 0.8
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006*
*Data for 2006 is till April
3

5. Exponential increase in Mobile Tele-density is a strong
indicator of growing penetration
10.0
9.1
9.0
8.0
7.0 6.9
Mobile Tele Density*
6.0
5.0 4.4
4.0
3.0 2.6
2.0
1.0
1.0 0.5
0.2 0.3
0.0 0.0 0.1 0.1
0.0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006**
*Mobile Tele-density: the number of Mobile phones per 100 inhabitants
**Data for 2006 is till April 4

6. More than two-third of mobile subscriptions are with GSM
operators
Total Mobile Subscribers = 75.94 Million 100% = Total Subscribers in 2005
CDMA*
17.45 Million
CDMA,
GSM* 23%
58.49 Million
GSM,
77%
*Data till year 2005
5

7. The share of Mobile telephony has been increasing and is considered the
market of the future
millions
Mobile Phones (CAGR – 86%) Mobile telephones
will rule the Indian
Fixed Phones (CAGR – 11%) telecom market in
next five years
48.01
Mobile phones are no more
a luxury, but a necessity. 33.7
Even a auto rickshaw driver 13
owns a mobile now 6.43
3.58
1.88
1.2
38.59 41.31
0.88 35.29 34.27
32.7
0.34 26.65
21.61
17.8
14.54
1996 1997 1998 1999 2000 2001 2002 2003 2004
Source: Annual Report 2004-05, Department of Telecommunications (DOT), India 6

8. India is well poised for a strong growth in the telecom sector in the coming
years due to the expanding middle class
Illustrative
Mobile subscriber base (2004- 2010) Mobile Market Value (2004- 2009)
millions millions
200 24
CAGR: CAGR:
In the mobile space,
33.7% 36.9%
both GSM and
CDMA will co-exist
5
35
2004 2010 2004 2009
Tele-Density (2004- 2008)
22.5 India is expected
Indian cellular
market would to have the third
CAGR: account for 11% of largest mobile
33.8% the overall Asia user base,
7.02 Pacific and Japan behind China and
market by 2009 the US, by 2007
2004 2008
Source: Economic Intelligence Unit (EIU; Gartner; Telecom Regulatory Authority of India (TRAI) 7

9. AGENDA
• Penetration of Mobile Telephony in India
• Value added services in Indian Mobile Telephony
market
• Zinnov Research Overview
8

10. Indian mobile telephony market has seen explosive growth in subscriber
base but low tariffs keep building margin pressure on operators…
120 Per Minute Cellular Tarrifs (in US
cents)
100.0
Mobile Phone Subscribers (millions)
14.4
100
11 11.4
80
76.0
8.4
60
48.0 6.5 6.5
40 3.5
28.0
2.5
20 10.5
5.5
0.2 0.8 1.1 1.6 3.1
0.0
0 di
a na sh al n ka an
s
hi de ep ta an ut ve
In is di
C la N k iL Bh al
ng Pa Sr
95
96
97
98
99
00
01
02
03
04
05
*
M
06
Ba
19
19
19
19
19
20
20
20
20
20
20
20
*Data for 2006 is till April
Source: Telecom Regulatory Authority of India, Industry News, Zinnov Analysis
9

11. …this is because average revenue per user (ARPU) is going down due to
falling call prices
Effective margin/min, Effective Margin/min Illustrative
End 2005 Curently
1.6 1
ARPU (2005)
ARPU (2005)
1.4 0.9 0.08
0.25
0.8 •• India has one of the lowest mobile
India has one of the lowest mobile
1.2
0.7 phone tariffs in the world resulting in
phone tariffs in the world resulting in
1 low Average Revenue Per User
low Average Revenue Per User
0.6 (ARPU)
(ARPU)
0.8 0.5
0.95 •• The problem is that despite the
The problem is that despite the
1.5 0.87 average use of mobile phones being
0.4 average use of mobile phones being
0.6 1.25 the highest at 287 minutes a month,
the highest at 287 minutes a month,
0.3 India has an average rate per user
India has an average rate per user
0.4
0.2 (ARPU) of around $8 compared to
(ARPU) of around $8 compared to
0.2 global average ARPU of $ 21.
global average ARPU of $ 21.
0.1
•• There was a decline of 7.4% in
There was a decline of 7.4% in
0 0 ARPU in 2005 since 2004
ARPU in 2005 since 2004
Cost per Margin Effective Cost per Margin Effective •• The ARPU would continue to drop
The ARPU would continue to drop
by about 5% while tariffs will
by about 5% while tariffs will
minute rate per minute rate per decrease further by 15%
decrease further by 15%
minute minute
*Value are mentioned in Indian National Rupees
Source: Businessworld magazine, Industry News, Voice & Data, Zinnov Analysis
10

12. Value-added services (VAS) are likely to save the day for mobile service
providers
Lucrative for Operators
• At 14 cents per minute, some VAS services make
much more money than the average 3-4 cents per
minute that voice does.
• Typically, data sells at anywhere between 4-65
cents
• India’s churn rate is between 3.5 per cent to 6 per
cent per month, one of the highest in the Asia-
Pacific region
Many parties make money Customer is Ready
• Media companies e.g. Star, Sony and • More than 100 million people armed with
BCCL are betting big mobiles want to be entertained when
• Aggregators (mobile content providers or they are traveling, waiting or simply
mobile solutions companies) living
• Application Service Providers • And they are willing to pay for it
• Network infrastructure providers and Value Added
system integrators
Services
Mobile Music Booms Host of Hot services
• The mobile music industry is set to • The pushing and shoving to offer the next
overtake legal conventional music level of services -- mobile TV, Internet and
industry in India commerce -- has already begun
• Some examples are ring tones, caller • The demand for more localized, regional
ringback tones content is increasing
• Bollywood content download, and Mobile
Gaming is already big
Source: Businessworld magazine, Industry News, Zinnov Analysis
11

13. VAS is ringing in money for mobile operators and is expected to see high
growth
2006 2009-2010
VAS Discussion
COAI* has projected that
VAS will contribute up to
$ 500 million (This 20% of total telecom
includes texting and is revenue within three years
Revenues not just operator share)
Media, mobile
Parties operators and
involved aggregators
Today VAS contributes about
9-10% of total telecom revenues VAS Discussion
Revenues $10 billion (by 2010)
Media, mobile
Parties operators, aggregators,
involved banks, Enterprises
*Cellular Operators Association of India
Source: COAI, TRAI, Industry News, Zinnov Analysis, Lehman Brothers report
12

14. Mobile infotainment, gaming and email are the Killer Applications
Mobile Music Mobile Videos & Animation clips
Mobile music, comprising of Indians are crazy about Bollywood
ring tones, caller ringback movies and music. Today there are
tones and music clippings, is 10, 20, and 30 second music video
registering a growth of 40- clips available for download and
50%. Mobile music industry is will soon expand to include movie
expected to be $157 million trailers, sports highlights,
mid next year bigger than animation
conventional music industry
Mobile Gaming Mobile Contests/Voting
According to the projections, TV channels like Star and Sahara,
as many as 78.6 mn people announce short codes for SMS-
will be playing mobile games based contests based on their TV
by 2009, and game downloads serials. Also vote for the Miss
will have increased more than World, Indian Idol through your
tenfold from current levels mobile to choose winners is big
Mobile Email News Alert/Match Scores
Mobile users send and receive Mobile subscribers get news
email and hook into corporate alerts on the go. Cricket match
computer networks. Email is scores is another big
expected on every 4th phone to application in India
be sold in India in next 4 years
Source: Businessworld magazine, Industry news, Voice and Data 13

15. Mobile Music is set to take over the conventional music industry in India
Revenue Comparison
350
Discussion
Discussion
300
•• Mobile music comprises ringtones,
Mobile music comprises ringtones,
caller ringback tones and music
caller ringback tones and music
250 clippings.
clippings.
157
•• India is known for its strong affinity to
India is known for its strong affinity to
109 Bollywood music as well as
Bollywood music as well as
200
devotional music, is registering a
devotional music, is registering a
$ Million
healthy growth of 40-50% in the
healthy growth of 40-50% in the
150 mobile music segment
mobile music segment
•• These Revenue figures have been
These Revenue figures have been
estimated based on the assumption
estimated based on the assumption
100 that the use of is in direct proportion
that the use of is in direct proportion
152 157 to the number of subscribers.
to the number of subscribers.
50 •• Airtel has a subscriber base of 20
Airtel has a subscriber base of 20
mn, out of which six million use
mn, out of which six million use
mobile music services. During the
mobile music services. During the
0 last financial year, the company
last financial year, the company
2005-2006 2006-2007 registered about 50 mn downloads.
registered about 50 mn downloads.
Years
Conventional Music Industry Mobile Music
Source: Industry news, Voice and Data , TRAI, Indiatimes.com
14

16. Mobile Gaming is expected to be the next big thing
Revenue – Indian Mobile Gaming Discussion
Discussion
400
•• As the market for mobile gaming in India
As the market for mobile gaming in India
350 matures, consumers too are beginning to
matures, consumers too are beginning to
move beyond simple Java based games to
move beyond simple Java based games to
more exciting rich content and action
more exciting rich content and action
300
packed 3D games
packed 3D games
8%
•• According to the projections, as many as
According to the projections, as many as
11
250 78.6 mn people will be playing mobile
78.6 mn people will be playing mobile
GR
Million Dollars
games by 2009, and game downloads will
games by 2009, and game downloads will
CA
200 have increased more than tenfold from
have increased more than tenfold from
336
current levels.
current levels.
150 •• Its also evident that the mass-market
Its also evident that the mass-market
consumer is drawn by brands and popular
consumer is drawn by brands and popular
themes that they are familiar with, like
themes that they are familiar with, like
100
cricket and Bollywood movies.
cricket and Bollywood movies.
50
15
0
2005 2009
Years
Source: Economic Times, Web Search, Zinnov Analysis
15

17. Some of the major content providers, and application service providers
are benefiting from this VAS market…
Mauj.com Hungama Mobile IMImobile
Mauj Telecom is the #1 VAS Hungama Mobile is South India's leading mobile VAS
Company in India Asia's leading Mobile enabler and content aggregator
• Its wap portal wap.mauj.com is the Entertainment Company
leader in the mobile gaming, mobile • IMImobile is providing its content and
• It is the largest aggregator, publisher
music, mobile video space in India technology services to over 40million
and developer of Bollywood mobile
subscribers though its agreements
• Employs approximately 160 people entertainment and gaming content.
with operators
in its offices in Mumbai, Delhi, • It has developed over 350 Mobile
• It has developed its own Messaging
Chennai, Dubai, London, and New Marketing Campaigns for as many as
Centers, Gateways, Content
York 125 Fortune 1000 Brands. Management Systems, Service
• Mauj investors include Intel, Sequoia delivery platforms, client and server
and Westbridge capital side applications and Voice Portals
Mobile-2-win OnMobile Indiagames
It is into wireless content - Wireless Infrastructure It is a global mobile content
sourcing, creating & Software Provider publisher mainly focused on
distributing! . Gaming
• They provide technology, aggregated
• Mobile2win creates innovative content, and complete end-to-end
mobile marketing solutions for brands managed services to telecom • Indiagames' key investors
seeking to tap into the Indian operators, media houses, enterprise includes TOM Online Inc. which is
consumer markets. clients a leading wireless Internet
• Based in Mumbai, India, Mobile2win • OnMobile was incubated by Infosys company in China , Macromedia,
provides unparalleled reach to over to Technologies
Inc. , and Cisco Systems, Inc.
over 26 million mobile consumers
through its gateway (SMS)
Source: Telecom Regulatory Authority of India, Websites, Wireless forum 16

18. …Others are also riding the wave and tapping the opportunity
Smarttrust ACL Wireless Bharti Telesoft
Swedish Company is into It is the leading provider of Bharti Telesoft is the software
Mobile terminal management, wireless instant messaging venture of India's leading
value added services, Mobile application to mobile operators telecommunication group
business solutions Bharti Enterprises :
• Founded in early 2000, ACL has
• The company has implemented its its wireless R&D center in India • Architect and deploy operator’s
thin client software for Indian telecom • The company presently employs VAS service delivery platform and
operators such as Bharti, BSNL and over 60 people collaborate with key players in the
Escotel VAS value chain to operate and
• ACL has successfully marketed
its ACL Wireless Instant manage the service
Messenger to 11 leading mobile
operators in Asia
Jatayu Software Air2web.com Activemedia
The company produces telecom Wireless ASP and enterprise Activemedia Technology is a
products like Gateways/Servers development wireless marketing and
(WAP, SMS, SyncML, VoiceXML, technology solutions provider:
• The company offers networking
WTA), Browsers (WML, XHTML), • One of the leading providers of
and server software for delivering
Clients (SMS, e-Mail, Chat, mobile content , applications and
Web pages, e-mail, and other
SyncML), and Stacks (WAP2.0 marketing solutions to operators,
data to wireless devices
and TCP/IP) . brands and media in India
• Mobile Media Websites use
• It employs over 200 specialists in Air2Web Content Gateway to • Mobile operators like Hutch are its
mobile technology Offer Custom Designed Ring customers in India
• Jataayu Software is a subsidiary Tones, Games and Graphics
of Integra Micro Systems
Source: Telecom Regulatory Authority of India, Websites, Wireless forum 17

19. AGENDA
• Penetration of Mobile Telephony in India
• Value added services in Indian Mobile Telephony
market
• Zinnov Research Overview
18

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