1. Indian Telecommunication Sector August 2007

2. Presentation Plan Telecom Industry Overview Emerging Trends in Telecom Market Regulatory Framework and Its Impact Telecom – Investment Attracting Sector Major Players in Telecom Sector Growth Avenues 1 5 3 4 2 6

3. Presentation Plan Telecom Industry Overview Emerging Trends in Telecom Market Regulatory Framework and Its Impact Telecom – Investment Attracting Sector Major Players in Telecom Sector Growth Avenues 1 5 3 4 2 6

5. Revenues of Indian Telecom Industry: 2002–07 (USD billion) The Indian telecom services can be divided predominantly into basic, mobile and Internet services. It also comprises smaller segments, such as radio paging services, Very Small Aperture Terminals (VSATs), Public Mobile Radio Trunked Services (PMRTS) and Global Mobile Personal Communications by Satellite (GMPCS). The growth witnessed in the mobile services and Internet services segments was higher as compared to other services, such as basic services and radio paging services. Registered an annual growth of 33 percent in 2006–07 The Indian telecom market generated revenues of approximately USD 20 billion in 2006–07. It registered a CAGR of approximately 22 percent from 2002–03 to 2006–07. The CAGR from 2006–07 to 2009–10 is expected to stabilise at 21 percent. Apart from mobile telephony services, other value-added services are also gaining importance. Telephony services (mobile and basic) and Internet services dominate the Indian telecom services Telecom Services – India Internet Mobile Services Basic Services PMRTS VSATs GMPCS Radio Paging

7. Mobile telecom services provide an unprecedented growth opportunity for companies Minutes of Usage per Month – Mobile Services The declining ARPU implies that India Inc. is tapping a large market at the bottom of the pyramid by reducing tariffs; thereby, enhancing affordability. ARPU* in India – Mobile Services Mobile services have led to a spectacular growth in the Indian telecom industry. Currently, 12 players are active in this segment. The total number of wireless subscribers escalated to 185.13 million at the end of June 2007, with a monthly addition of more than 6 million wireless subscribers. Despite the decreasing ARPU*, the minutes of usage is on a rise, which provides impetus to the mobile services growth in India. Despite a low teledensity of approximately 19 percent, India has the second highest minutes of usage per month. This offers huge growth opportunity to telecom companies. * Average Revenues per User

9. GSM surpasses CDMA in number of additions to subscriber base Market Share* of Wireless Operators (as of quarter ending March 2007) Reliance Communications and TTSL dominates the Indian CDMA mobile services segment. Bharti Airtel dominates the GSM segment with a market share of approximately 31 percent for the year ending March 2007, followed by BSNL with a share of approximately 23 percent subscribers. * In terms of Subscriber Base GSM surpasses CDMA segment by a large margin in terms of subscriber numbers. Market Share* CDMA Service Providers (as of quarter ending March 2007) Market Share GSM* Service Providers (as of quarter ending March 2007)

10. Various other services emerged by leveraging the telecom services industry GMPCS services were launched in India in 1999. These services allow a subscriber to communicate from any point on earth through a handheld terminal. Moreover, the telephone number remains unchanged, irrespective of the subscriber’s location. Public Mobile Radio Trunked Services PMRTS have not grown to their expected potential in India. The high licence fee leaves a very thin margin for services providers; thereby, inhibiting its growth. About 31,000 subscribers are currently availing this service in India from 12 different operators. In 1995, radio paging services emerged as a promising segment in India. However, this segment could not compete with cellular services in general and SMS technology in particular, and is currently shrinking. At present, only four radio paging service providers are present in the Indian market. Very Small Aperture Terminals (VSAT) The market for VSAT services increased by 5.73 percent during the quarter ending in December 2006, and the segment had a total subscriber base of 55,070. HCL Comnet is the largest of the eight players functioning in the market. GMPCS* Radio Paging Other Telecom Services * Global Mobile Personal Communication by Satellite

11. The emergence of private players and new technologies have provided a strong impetus to the growth of Internet and broadband services. The quality and penetration of these services have undergone changes, with significant improvement in the telecom infrastructure. The Internet subscriber base registered a CAGR of 60 percent f or the period 1997–98 to 2006–07. BSNL and MTNL caters to more than two-thirds of Internet subscribers in India. Private players are catching up fast due to increased penetration of Internet and broadband services in India. The telecom market will experience high penetration of Internet services with the support from government policies and introduction of novel technologies in India. Broadband services to drive Internet penetration in India India had 2.52 million broadband connections at the end of June 2007. Market Share of Top Five Internet Service Providers (as of quarter ending March 2007) Internet Subscribers: 1998–2007

12. Presentation Plan Telecom Industry Overview Emerging Trends in Telecom Market Regulatory Framework and Its Impact Telecom – Investment Attracting Sector Major Players in Telecom Sector Growth Avenues Telecom Handset Market 1 5 3 4 2 6

14. Presentation Plan Telecom Industry Overview Emerging Trends in Telecom Market Regulatory Framework and Its Impact Telecom – Investment Attracting Sector Major Players in Telecom Sector Growth Avenues 1 5 3 4 2 6

17. Presentation Plan Telecom Industry Overview Emerging Trends in Telecom Market Regulatory Framework and its Impact Telecom – Investment Attracting Sector Major Players in Telecom Sector Growth Avenues 1 5 3 4 2 6

18. Indian Telecom Industry Framework Indian Government Bodies Independent Bodies Wireless Planning and Coordination (WPC) Department of Telecommunications Telecom Commission Group on Telecom and IT (GoT-IT) Telecom Regulatory Authority of India (TRAI) Telecom Disputes Settlement and Appellate Tribunal (TDSAT) Handles spectrum allocation and management DoT – Licensee and frequency management for telecom Exclusive policy making body of DoT Handles ad hoc issues of the telecom industry Independent regulatory body Telecom disputes settlement body Regulatory Framework provides level playing field for all operators They formulate various policies and pass laws to regulate the telecom industry in India. They undertake various research activities and monitor the quality of service provided in the Indian telecom industry. They also provide various recommendations to improve the status of telecom operations in India. The Department of telecommunications (Government of India) is the main governing body for the industry. Telephone Regulatory Authority of India (TRAI) assists the Government of India (GoI) to take timely decisions and introduce new technologies in the country.

19. Go-ahead to the CDMA technology INDIA Private players were allowed in Value Added Services National Telecom Policy (NTP) was formulated 1992 1994 1997 Independent regulator, TRAI, was established NTP-99 led to migration from high-cost fixed license fee to low-cost revenue sharing regime 1999 2000 2002 BSNL was established by DoT ILD services was opened to competition Internet telephony initiated Reduction of licence fees 2003 Calling Party Pays (CPP) was implemented Unified Access Licensing (UASL) regime was introduced Reference Interconnect order was issued 2004 Intra-circle merger guidelines were established Broadband policy 2004 was formulated—targeting 20 million subscribers by 2010 2005 FDI limit was increased from 49 to 74 percent Attempted to boost Rural telephony 2006 Number portability was proposed (pending) Decision on 3G services (awaited) 2007 Department of Telecommunication (DoT) is the main body formulating laws and various regulations for the Indian telecom industry. Various important regulations and laws have been passed in the Indian telecom industry post-liberalisation era ILD – International Long Distance

20. Important regulations and their impact on the Indian telecom industry Access Deficit Charges (ADC) ADC makes it mandatory for a service provider at the caller’s end to share a percent of the revenue earned with the service provider at the receiver’s end in long-distance telephony. This subsidises the infrastructure costs of the service provider enabling access at receiver’s end, especially because rental for fixed-line services is low. Revision in the ADC regime is expected to be followed by further tariff reduction in telecom services. Unified Access Service License Regime (UASL) Unified licensing marked the end of the license regime in the Indian telecom industry. It helped in aligning convergent technologies and services. The establishment of the Unified Access Licensing Regime (2003) eliminated the need for different licenses for different services. Players are now allowed to offer both mobile and fixed-line services under a single license after paying an additional entry fee. This does not take into account national and international long-distance services and Internet access services. Universal Service Obligation (USO) The USO policy was laid along with NTP ’99 to widen the reach of telephony services in rural India. All telecom operators are bound to contribute 5 percent of their revenues to this fund. This system was put in place to bridge the wide gap between urban and rural teledensity, bringing it down from the current 31 percent. Initially, only basic service providers were under the purview of USO. Later, its scope was expanded to include mobile services also. Although it increases the cost burden for the telecom companies, USO helps in building the telecommunication infrastructure in the rural areas. NTP 99 Telecom Tariff Order WLL UASL, CPP Lowering of ADC

21. Presentation Plan Telecom Industry Overview Emerging Trends in Telecom Market Regulatory Framework and Its Impact Telecom – Investment Attracting Sector Major Players in Telecom Sector Growth Avenues 1 5 3 4 2 6

22. Vodafone purchased stake in Hutch from Hong Kong's Hutchison Telecom International for USD 11.08 billion. Telekom Malaysia acquired a 49 percent stake in Spice Communications for USD 179 million. Maxis Communications acquired a 74 percent stake in Aircel for USD 1.08 billion. Ericsson to design, plan, deploy and manage Bharti Airtel network and facilitate their expansion in the rural areas, under a USD 2 billion contract. Recent Deals in Telecom Sector FDI in Telecom Sector The Indian telecom industry has always attracted foreign investors. In fact, the cumulative FDI inflow, during the August 1991 to March 2007 period, in the telecommunication sector amounted to USD 3,892 million. It is the third largest sector to attract FDI in India in the post-liberalisation era. FDI calculation takes into account radio paging, cellular mobile and basic telephone services in the telecommunication sector. FDI and other M&A activities increasing in number Reliance Communications Limited has sold a five percent equity share capital of its subsidiary Reliance Telecom Infrastructure Limited to international investors across the US, Europe and Asia. The deal was worth USD 337.5 million. The Indian telecom industry has a 74 percent FDI limit in the telecom services segment. The GoI has permitted 100 percent FDI in manufacturing of telecom equipment in India. Major trends in the telecom sector is increasing M&A activity, de-regulation of telecom policies and growing interest of international investors.

23. Presentation Plan Telecom Industry Overview Emerging Trends in Telecom Market Regulatory Framework and Its Impact Telecom – Investment Attracting Sector Major Players in Telecom Sector Growth Avenues 1 5 3 4 2 6

24. Basic Services Operators BSNL MTNL Major Players in different segments of Indian telecom industry Reliance TTSL GSM Services Operators Airtel Vodafone Idea Reliance TTSL BSNL CDMA Services Operators Reliance Internet Services Operators BSNL MTNL Reliance TTSL BSNL Airtel TTSL – Tata Teleservices Ltd. MOBILE SERVICES BSNL – Bharat Sanchar Nigam Ltd. MTNL – Mahanagar Telecom Nigam Ltd.

25. Presentation Plan Telecom Industry Overview Emerging Trends in Telecom Market Regulatory Framework and its Impact Telecom – Investment Attracting Sector Major Players in Telecom Sector Growth Avenues 1 5 3 4 2 6

28. Value-Added Services and Rural Telephony holds large market potential in India The VAS industry was worth USD 632 million in 2006–07. The industry is estimated to grow by 60 percent in 2007–08 and become an USD 1,011 million opportunity. As the government targets to increase rural teledensity from the current 2 percent to 25 percent by 2012, rural telephony will require major investments. This segment will boost the demand for telecom services, equipment, Internet services and other value-added services; thereby, offering great market opportunities for telecom players. The VAS industry is currently focussing on the entertainment sector, such as the Indian film industry and cricket; however, there is scope for growth in other avenues as utility-based services, such as location information and mobile transactions. Rural Telephony 7 8 Value-Added Services in India (2006–07) Urban Rural Teledensity in India

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