1. PricewaterhouseCoopers Indian Telecom Sector Outlook  July 2010 Siddharth Vishwanath Associate Director, PricewaterhouseCoopers

2. PricewaterhouseCoopers 2 Telecom Sector – Overview

3. PricewaterhouseCoopers Indian market is full of opportunities…. 3 Population : 1.2 billion Increasing urbanization – Indians living in cities and towns generate over 2/3 of the country’s GDP and account for 90% of government revenues. (source: world bank) Relatively large youth population – it is estimated by 2015 the population in the 20-29 age group would have crossed 210 Mn. Growing middle class - the middle class presently is estimated to be over 300 Mn and growing. GDP growth (Real, 2009-10): 6.7% Second fastest growing economy GDP size (PPP adjusted, FY’09) : USD 3 trillion Fourth largest in the world Telecom subscribers (June’10) : 635.51 million Wireless penetration : 44.72% - The untapped mobile market in India is still more than 500mn Wire line penetration: 3.16% - one of the lowest in the world Broadband penetration: 0.6% - far beyond the Govt. target of 20 million in 2010 Telecom revenues of +US $ 25 billion in FY’09 Telecom sector continues to attract a significant portion (~8%) of the FDI Impending Growth Opportunities Low rural penetration Stagnant data usage over the years Limited broadband services Key Concerns Hyper competition - HHI Index of 0.15 Spectrum Management Declining ARPU Indian Economy KPIs Telecom Market KPIs Source: DoT & TRAI

4. PricewaterhouseCoopers The Indian telecom sector has charted an impressive growth trajectory. The telecom market has been growing at a CAGR of approximately 30 percent since 1995 Mobile services have grown at a CAGR of more than 117 percent during the period 1995-2009. More than 14 million subscribers added every month in the calendar year 2009 Extremely low tariffs, availability of ultra low cost handsets, encouraging regulatory environment, increasing income levels and change in consumer behaviour, have combined to produce remarkable growth in the last decade. Telecom leading infrastructure growth in India….. 4 Mobile Subscriber Growth ( in millions) Source: TRAI

5. PricewaterhouseCoopers The mobile services have been growing at CAGR of 65 percent over the last 5 years. Mobile services revenue contribution to the total telecom services revenue has increased over the years, contributing 90 percent in FY 2009. Wireline service revenues have not only declined in terms of overall contribution to the total telecom services revenue but also in absolute terms. Growth in overall teledensity is mainly attributable to the exponential growth of mobile services in both urban and rural areas. Mobile services driving telecom growth…… 5 Telecom Services Revenue (Rs. Billion)* *Including inter-segment revenue Teledensity Source: TRAI

6. PricewaterhouseCoopers 6 Challenges for Indian Telecom Sector

7. PricewaterhouseCoopers Mobile teledensity is lower in India in comparison to countries such as Indonesia, Philippines and Nigeria which have a similar level of GDP per capita (purchasing power parity) Only 21 percent of Indians living in rural areas have access to mobile phone connections. More than 500 million un-served population located mainly in rural areas with moderate to low capacity to pay for the telecom services Bridging the Rural-Urban divide… 7 India Nigeria China Egypt Indonesia Pakistan Sri Lanka Morocco Brazil South Africa International Precedent- Mobile Teledensity and GDP per Capita Source: PwC Analysis

8. PricewaterhouseCoopers Large number of operators per circle India has more operators per circle than other countries. While most countries have assigned spectrum to three to five operators to compete in a given area, the Indian government has assigned spectrum to as many as 11 or 12 operators which use a mix of GSM and CDMA technologies Mobile operators in India must use assignments which are around one quarter of the spectrum available to mobile operators elsewhere in the world Mobile operators in India are using their spectrum far more intensively than operators elsewhere. Indian operators are extracting much more capacity than operators in the developed nations through the deployment of a higher density of base stations per square kilometre and through the use of advanced technologies to maximise the traffic carrying capacity of the available spectrum. In the deployment of advanced technologies to maximise spectrum capacity the Indian operators are one of the leaders in using technologies such as AMR and synthesised frequency hopping. Despite these efforts, it has been claimed that there is scope for GSM operators to substantially increase the capacity of their networks through the further deployment of advanced technologies. Managing spectrum efficiently… 8

9. PricewaterhouseCoopers With rapid decline in ARPU due to the continuously falling tariffs and addition of marginal subscribers the telecom operators are focusing on value added services (VAS)/data services for bridging the ARPU gap However, the data revenues have remained stagnant at 11-12 percent of mobile services revenue in last 2-3 years. Stagnant data usage over the years… 9 International Benchmarking - Data Revenue Share Source: PwC Analysis

10. PricewaterhouseCoopers Broadband subscriber base in India is currently at a very low level. Total broadband subscriber number stood at 8 million as of December 2009, this is far less than the target set by the Government of India (20 million) for broadband by 2010. India continues to be one of the least broadband penetrated markets. High cost involved for both the operators and subscribers act as an impediment for growth of wireline based broadband services. Limited uptake of broadband services.. 10 Source: TRAI Broadband Subscriber Growth (Million)

11. PricewaterhouseCoopers 11 Mobile Services – Outlook

12. PricewaterhouseCoopers The growth of the mobile services is expected to continue for 3-5 years driven by high subscriber additions in mostly non-urban areas and multiple SIMs purchased by the existing subscribers in urban India. The majority of the next 500 million subscribers are expected to be added in the semi-urban and rural areas. The mobile subscriber base will cross 1 billion in 2014, growing at a CAGR of more than 9 percent (2010 to 2015). The mobile penetration in India is projected to cross 80 percent in next 4 years. The market will begin to saturate in terms of subscriber numbers starting 2013. The growth story of the mobile services is expected to continue for 3-5 years…… 12 Mobile Subscriber Projections - 2015Rural – Urban Teledensity - 2015 Source: PwC Analysis

13. PricewaterhouseCoopers Broadband volumes are likely to be driven on the mobile platform leveraging 3G Key Drivers - Introduction of new innovative applications, enhanced user experience and decreasing prices of 3G enabled handsets. Initially, the uptake of mobile broadband services will almost exclusively be in urban India; in 2015 rural subscribers are likely to comprise 24 percent of overall 3G subscriber base. 3G subscriber numbers are projected to cross 107 Mn by 2015 growing at a CAGR of 190% between 2011 and 2015 Over hundred million 3G broadband subscribers by 2015 and growing….. 13 100% 0.1mn 95% 1mn 86% 10mn 82% 18% 26mn 77% 23% 60mn 76% 24% 107mn 3G Subscriber Forecast* *Unique subscriber numbers. Figures are as of year end. Source: PwC Analysis

14. PricewaterhouseCoopers Open internet access allowing direct access to subscribers and increasing value proposition of content to customers, will reflect in the bargaining power of content developers and aggregators. Content will be the key differentiator which will see new alliances being forged between handsets vendors/ operators and application developers to attract new customers. Mobile operators will leverage proprietary content create customer stickiness. VAS revenue shares realign…. 14 Projected Revenue Shares in 2015 Source: PwC Analysis

15. PricewaterhouseCoopers 15 Imperatives for Telecom Sector

16. PricewaterhouseCoopers Margins Rural Focus Applications and Data driven Services Blurring of the lines between Value Chain players Carbon Footprint Spectrum Management Imperatives 16

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