1. India - A Potential 3G Market A Feasibility Study Arnab Sinha Sudipta Ray Indian Institute of Technology, Kharagpur

2. Service Promotion 3G SERVICES & INDIAN MARKET Market Trends Existing Market Competition Business Base Evaluation of Policies Cost Structure Technology Requirements

3. Service Promotion 3G SERVICES & INDIAN MARKET Market Trends Existing Market Competition Business Base Evaluation of Policies Cost Structure Technology Requirements

4. Expected Usage in 2007: 111 million (from CAGR of 94%) Market Trends Cheaper Infrastructure Cost

5. Service Promotion 3G SERVICES & INDIAN MARKET Market Trends Existing Market Competition Business Base Evaluation of Policies Cost Structure Technology Requirements

6. Existing Market Competition Stake in Existing Market : Technology relied upon : Total Investment : Analyzing the predicted Market Revenue Trends, expected Break Even Period for Vodafone BHARTI (10%) GSM (Larger service range in India) 1.5 billion USD Our Target Break Even before February 2008 Vodafone Break Even

7. Service Promotion 3G SERVICES & INDIAN MARKET Market Trends Existing Market Competition Business Base Evaluation of Policies Cost Structure Technology Requirements

8. Business Base Current Position of Reliance in market - 20.3 % of the subscriber population - Largest CDMA provider in India - 54% of the population is below the age of 24 1 1 - Estimated youth’s annual spending  US$10.5 billion 1 1 Collaboration with Reliance! Targeting the Youth Section! Launching the service on Valentine’s Day! Customer Base

9. Service Promotion 3G SERVICES & INDIAN MARKET Market Trends Existing Market Competition Business Base Evaluation of Policies Cost Structure Technology Requirements

10. Increased talk time Superior Power Control Lowest radiation level Hi-Speed Internet Access –India has less than 0.4% penetration CDMA1x handsets (140 kbps) Most successful 3G Tech –CDMA2000 controls 85% of the World’s 3G market –Adds 15 million new users per quarter Worldwide Better Voice & Consistent Quality Advanced platform supporting innovative applications GSM 3G evolution relies on CDMA Technology Requirements Hence CDMA – choice for the 3 rd generation!

11. Service Promotion 3G SERVICES & INDIAN MARKET Market Trends Existing Market Competition Business Base Evaluation of Policies Cost Structure Technology Requirements

12. Cost Structure Total Reliance Revenue = Normal Revenue + 3G Revenue Young Reliance Customers Reliance Subscriber Accessing Internet Estd. Avg Packet Consumption per month (APC) Charge (C) Packet wise Billing

13. Cost Structure 50p for each 128 Bytes packet Billing Structure Following Japan’s estimate 5 5 APC=8192(1MB) Reliance Customer Base  20.3% of 38.5 Mn 6 = 7.82 Mn 6 Target 54% 1 1 Young Customer = 4.22 million Total Reliance Revenue = Normal Revenue + 3G Revenue Young Reliance Customers Reliance Subscriber Accessing Internet Estd. Avg Packet Consumption per month (APC) Charge (C) Packet wise billing Target Break even  December 2007 COMPUTATION STEPS

14. Estimated Breakup of Expenses Estimated cost for infrastructure, planning services, site civil works (based on other countries’ statistics) 14 14 106.4 billion INR Licensing fees, sales and marketing cost (26% 15 of the acquired revenue) 15 7.49 billion INR Total Expense (Approx) 115 billion INR Feb, 2006 Dec, 2007 Estd. Revenue Earned 143 billion Large Profit Margin

15. Service Promotion 3G SERVICES & INDIAN MARKET Market Trends Existing Market Competition Business Base Evaluation of Policies Cost Structure Technology Requirements

16. Service Promotion Attractive Rate Utilities as per demand Handset Cost Communication Entertainment Information Services Agro-business Optional Commercial Services Communication Entertainment Information Services Agro-business Optional Commercial Services Average Handset Price 19, 448 INR Average Handset Price 19, 448 INR ARPU 1475 INR only ARPU 1475 INR only Advertisement

17. Service Promotion 3G SERVICES & INDIAN MARKET Market Trends Existing Market Competition Business Base Evaluation of Policies Cost Structure Technology Requirements

18. Largest CDMA Provider Defeat Vodafone Lucrative Offers after Dec’07 Appeasement of Government Adaptive to Market Forces Evaluation of Policies Reliance Target Break Even – Dec’07 Survival of Competition Early Start Beneficial Utilities Wider Estd. Profit margin

19. Thank You! Service Promotion Market Trends Existing Market Competition Business Base Evaluation of Policies Cost Structure Technology Requirements

20. References 1. Statistical Outline of India 2002-03 2. http://www.indiadaily.com/editorial/5826.asp,Dec 7, 2005 Media Release 3. http://www.stylusinc.com/internet_potential_india.htm 4. http://www.hardwaresecrets.com/article/151 5. http://ojr.org/japan/wireless/1084495929.php 6. http://www.indiadaily.com/editorial/5826.asp,Dec 7, 2005 Media Release 7. http://shopping.yahoo.com.au/ 8. http://www.umtsworld.com/umts/faq.htm#f3 9. http://blogs.zdnet.com/ITFacts/?p=9065 10. http://www.w2forum.com/item/us_wireless_market_reach_neartotal _saturation_2009 11. http://www.mouthshut.com/review/GSM_Mobile_Technology_Vs_ CDMA_Mobile_Technology-34613-1.html 13. http://www.businessworldindia.com/sep2004/news08.asp 14. http://www.umtsworld.com/umts/faq.htm#f36 15. www.auspi.org/presentation/AUSPI-press-conference.ppt

21. Backup Slides

22. The Average International Market Price of 3G mobile Handsets =  World market share i x Avg. handset cost x conversion factor i = 19,448 INR Source: Gartner, 2003 Back

23. Computation Steps under Packet-Wise Billing Current Internet User Count=38.5million 2 Reliance Subscriber Count=20.3%of 38.5=7.82million Targeted Youth Population=54%of 7.82=4.22million Customer Base for Reliance=11.65million(data provided) Ratio for Target Customer for 3G= 4.22/11.65 = 0.36 Considering this ratio remaining constant, Revenue earned within the breakeven period limits::  Revenue earned by telephony  Revenue earned by internet usage

24. Computation Steps cont.. Revenue earned by telephony: ∫ ARPU(t)xsub.population(t) = Area under the Revenue Curve  = 1485.76 billion INR Revenue earned by internet usage: =Charge per packet ( C ) x Avg.Packetconsumption (APC) x Ratio of Target Customers x ∫Sub.population(t) = 0.5x8192x0.36x{Area under the Subscriber Poplulation Curve}  = 5558.501 billion INR Total Revenue = 7044.26billionINR

25. Computation Steps cont. Total Revenue = 7044.26 billion Total Reliance Revenue = 20.3% of 7044.26 = 1429.99 billion If acquired a 10% stake, Returns to the company = 10% of 1429.99 ≈ 143 billion >> 115 billion (investment cost) Back

26. Vodafone’s Returns: Computation steps for the Breakeven Based on the Plot  Returns(t) = Area Under the Plot = 10667.93 +89.71 t 2 +833.56 t (billions ) Returns till Breakeven period = 1.5 billion USD = 63000 million INR * Solving for t: t =19.95 months ≈ 20 months  By February 2008. *Exchange rate =Rs 42/- Back

27. Aiming the technology Aiming the technology Source: CDG, AUSPI, TelecomWatch,COAI, TRAI Wireless growth after introduction of CDMA 4 : 4 Subscriber growth in GSM: CAGR of 74% * Subscriber growth in CDMA: CAGR of 205% * Increase in Teledensity: 6% * Decrease in tariff: 75% *

28. Indian Market Feasibility

29. TARGETED CUSTOMER : THE YOUTH? 54% of the population is below the age of 24 Estimated youth’s annual spending  US$10.5bn with growth rate of 12% 1 1 55% of young India opts for career in web related activities 3 3 Demand for internet access (38.5 Mn currently) may shoot up to 100 Mn in 2 years.