VoIP Market India July 2014
Executive Summary Market Overview The Indian VoIP market is currently valued at INR x1 mn and is expected to attain a CAGR of x2% to reach INR x3 mn by 20-- Mobile VoIP market will evolve to reach the mark of INR x4 tn by 201- - 1- Primarily, factor1 is considered to be the most appropriate for the Indian VoIP market Drivers & Challenges Drivers: Burgeoning Broadband Penetration Rising Mobile Device & Service Adoption, and Availability of 3G Network Cost Advantage Over Traditional Calling Services Burgeoning PC Penetration Soaring Enterprise Demand Challenges: Security Issues Associated with VoIP Inconsistent Internet Services Lack of Awareness Key Players Competitive Landscape Bharti Airtel Ltd. Mahanagar Telephone Nigam Ltd. Reliance Communications Ltd. Tata Communications Ltd. Aircel Cellular Ltd. Microsoft Corporation India Pvt Ltd. 2
Macro Economic Indicators Introduction Market Overview Drivers and Challenges Competitive Landscape Recent Developments Market Opportunities Strategic Recommendations Appendix 3
Economic Indicators (-/-) GDP at Factor Cost: Quarterly INR tn 15 14 13 12 d1 c1 b1 a1 d2 c2 b2 a2 c3 b3 a3 c4 b4 a4 11 Q1 Q2 Q3 Q4 2010-11 2011-12 2012-13 2013-14 Inflation Rate: Monthly % 2.0 p 1.5 s 1.0 q t 0.5 r 0.0 Jun 2013 - Jul 2013 Jul 2013 - Aug 2013 Aug 2013 - Sep 2013 Sep 2013 - Oct 2013 Oct 2013 - Nov 2013 4
Introduction Voice over Internet Protocol (VoIP) Overview VoIP or Internet Telephony is a term that refers to the collection of technologies that utilizes the packetswitched connections that are a part of the Internet to exchange voice data It uses the more efficient route of the Internet to transmit voice calls after breaking the data into numerous digital packets unlike Public Switched Telephone Network (PSTN) which uses a dedicated line This technology allows numerous users to send information over the same line, leading to more efficient utilization of the telecommunications infrastructure Due to its effective line capacity and use of the Internet, additional features such as call conferencing and roaming do not involve any extra charges for the consumer VoIP telephones and multimedia PCs convert analog voice signals into digital data streams Telephone signals are routed over IP networks instead of over circuit-switched networks A call path usually consists of contacting a target PC on the Internet or connecting to a standard telephone set via a gateway between the Internet and the PSTN Original VoIP signaling standard was ISH H.323 but now most networks use Session Initiation Protocol (SIP) as a signaling standard IP Telephones can be categorized in two segments, Hard and Soft phones Hard phones are hardware-based and a VoIP enabled telephone set is used for communication Soft phones are software-based and reside on desktops, laptops, tablets, handhelds, mobile phones or other computer platforms 5
Key driver in segment1 is expected to be the aspect1 in the coming years Market Overview India Market for consumer VoIP comprised around x1 mn subscribers in 20-- and it is expected to grow at a CAGR of x2% till 20-- Mobile VoIP market will evolve to reach the mark of INR x3 tn by 20-- - 20-- Also segment1 market size is expected to be worth INR x4 bn by 20--, with contribution of segment2 of around INR x5 bn VoIP and segment3 are becoming popular as they offer feature1 at a predictable and considerable aspect1 VoIP in India is yet to gain wide-scale acceptance, but its future prospects are high and significant adoption is predicted over the next 5 years with the introduction of technology1 and technology2 in India Government of India has mandated for all the VoIP service providers to follow mandate1 for purpose1 in India Internet Telephony Usage mn a1 a2 a3 +y% a4 a5 a6 20-- 20-- 20-- 20-- 20-- 20-- 6
Drivers & Challenges Summary Drivers Burgeoning Broadband Penetration Rising Mobile Device & Service Adoption, and Availability of 3G Network Cost Advantage Over Traditional Calling Services Challenges Security Issues Associated with VoIP Inconsistent Internet Services Lack of Awareness Burgeoning PC Penetration Soaring Enterprise Demand 7
Porter s Five Forces Analysis SAMPLE Threat of New Entrants Text text text text text text text text text text text text text text text text text text text text text text text text text Impact Medium Impact Medium Impact Medium Impact High Bargaining Power of Suppliers Text text text text text text text text text text text text text text text text text text text text text text text text text Competitive Rivalry Text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text Bargaining Power of Buyers Text text text text text text text text text text text text text text text text text text text text text text text text text Threat of Substitutes Text text text text text text text text text text text text text text text text text text text text text text text text text Impact Low 8
Competitive Benchmarking (-/5) Key Ratios of Top 4 Companies Operational Basis (FY 2013) (1/3) SAMPLE % Operating Margin Net Margin b1 c1 d1 a1 c2 d2 0 company1 a2 company2 b2 company3 company4 Company1 recorded operating margin of -%, higher than that of company2, company3 and company4 which recorded operating margin of -%, - and -% respectively Thermax however recorded the highest net margin of -% higher than that of Ion Exchange, SPML and Va Tech Wabag which recorded net margins of -%, -% and -% respectively 9
Public: Domestic Company Company SAMPLE 1 (1/4) Company Information Offices and Centres India Corporate Address Tel No. Fax No. Website Year of Incorporation Ticker Symbol Stock Exchange Head Office Products and Services Category Sectors (EPC) Products/Services Key People Name Designation 10
Public: Domestic Company Company 1 (2/4) Financial Snapshot SAMPLE Key Ratios INR bn 0 s1 t1 2010 Financial Summary The company incurred a net loss of INR - bn in FY 2013, as compared to net profit of INR - bn in FY 2012 The company reported total income of INR - bn in FY 2013, registering a decrease of -% over FY 2012 The company earned an operating margin of -% in FY 2013, a decrease of - percentage points over FY 2012 The company reported debt to equity ratio of - in FY 2013, an increase of - % over FY 2012 Key Financial Performance Indicators Indicators Value (17/01/2014) Market Capitalization (INR mn) Total Enterprise Value (INR mn) EPS (INR) PE Ratio (Absolute) Total Income s2 t2 2011 Net Profit/Loss s3 t3 2012 s4 t4 2013 INR bn Particulars Profitability Ratios Operating Margin Net Margin Profit Before Tax Margin Return on Equity Return on Capital Employed Return on Working Capital Return on Assets Return on Fixed Assets Cost Ratios Operating costs (% of Sales) Administration costs (% of Sales) Interest costs (% of Sales) Liquidity Ratios Current Ratio Cash Ratio Leverage Ratios Debt to Equity Ratio Debt to Capital Ratio Interest Coverage Ratio Efficiency Ratios Fixed Asset Turnover Asset Turnover Current Asset Turnover Working Capital Turnover Capital Employed Turnover y-o-y change (2013-12) 2013 2012 2011 2010 Improved Decline 11
Public: Domestic Company Company 1 (3/4) Key Business Segments SAMPLE Key Geographic Segments Construction and Engineering India Overseas g1 e1 e2 e3 e4 0% 2013 0% f1 2010 f2 2011 f3 2012 f4 2013 Business Highlights Description News Overview Text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text Text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text Extensive Product Portfolio Text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text 12
Public: Domestic Company Company SAMPLE 1 (4/4) S W O T 13
Private: Domestic Company Company SAMPLE 2 (1/5) Company Information Offices and Centres India Corporate Address Tel No. Fax No. Website Year of Incorporation Products and Services Ahmedabad Head Office Category Products Products/Services Key People Name Designation 14
SAMPLE Private: Domestic Company Company 2 (2/5) Shareholders of the Company as on 28.09.2012 Ownership Structure Name No. of Shares held Corporate Bodies Foreign holdings X X 30% Total 70% 15
Financial Snapshot SAMPLE Private: Domestic Company Company 2 (3/5) Key Ratios INR mn 0 u1 v1 2010 Financial Summary Total Income u2 v2 Net Profit/Loss u3 v3 2011 2012 2013 The company earned a net profit of INR - mn in FY 2013, as compared to net loss of INR - mn in FY 2012 The company reported total income of INR - mn in FY 2013, registering an increase of -% over FY 2012 The company earned an operating margin of -% in FY 2013, an increase of - percentage points over FY 2012 The company reported debt to equity ratio of - in FY 2013, a decrease of -% over FY 2012 u4 v4 INR mn Particulars Profitability Ratios Operating Margin Net Margin Profit Before Tax Margin Return on Equity Return on Capital Employed Return on Working Capital Return on Assets Return on Fixed Assets Cost Ratios Operating costs (% of Sales) Administration costs (% of Sales) Interest costs (% of Sales) Liquidity Ratios Current Ratio Cash Ratio Leverage Ratios Debt to Equity Ratio Debt to Capital Ratio Interest Coverage Ratio Efficiency Ratios Fixed Asset Turnover Asset Turnover Current Asset Turnover Working Capital Turnover Capital Employed Turnover y-o-y change (2013-12) 2013 2012 2011 2010 Improved Decline 16
SAMPLE Private: Domestic Company Company 2 (4/5) Business Highlights Description Overview News Text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text Text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text Extensive Product Portfolio Text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text 17
Private: Domestic Company Company SAMPLE 2 SWOT Analysis (5/5) S O W T 18
Recent Developments VoIP in India (-/-) Development1 text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text Development2 text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text Text text text text text text text text text text text text text text text text text text text text text text text text text text text text Development3 text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text Text text text text text text text text text text text text text text text text text text text text text 19
VoIP companies can leverage the wide opportunities created by factor1 Market Opportunities text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text VoIP Revenue Opportunity Growth INR mn +X1% 20--e 20--e 20--e 20--e 20--e 20--e text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text text 20
Strategic Recommendations (-/-) Companies need to focus on specific1 and specific2 early to leverage on specific3 Recommendation1 Recommendation2 21
Appendix Ratio Operating Margin Calculations (Operating Income/Revenues)*100 Net Margin (Net Profit / Revenues) *100 Profit Before Tax Margin Return on Equity (ROE) Return on Capital (ROCE) (Income Before Tax / Revenues *100 (Net Income / Shareholders Equity)*100 EBIT / (Total Assets Current Liabilities)*100 Return on Working Capital (EBIT / Working Capital) *100 Return on Assets (EBIT / Total Assets)*100 Return on Fixed Assets (EBIT / Fixed Assets) *100 Operating Costs (% of Sales) Administration Costs (% of Sales) (Operating Expenses / Sales) *100 (Administrative Expenses / Sales) *100 Interest Costs (% of Sales) (Interest Expenses / Sales) *100 Ratio Current Ratio Cash Ratio Debt to Equity Debt to Capital Ratio Interest Coverage Ratio Fixed Asset Turnover Asset Turnover Current Asset Turnover Working Capital Turnover Capital Employed Turnover Calculations Current Assets / Current Liabilities {(Cash & Bank Balance + Marketable Securities) / Current Liabilities)} Total Liabilities / Shareholders Equity {Total Debt / (Shareholders Equity + Total Debt)} EBIT / Interest Expense Sales / Fixed Assets Sales / Total Assets Sales / Current Assets Sales / Working Capital Sales / (Shareholders Equity + Total Debt) 22
Sources of Information PRIMARY RESEARCH Interviews Leading Industry Experts Print Media Leading Newspapers Magazines and Journals Annual Reports of Companies SECONDARY RESEARCH Electronic Media Telecom Associations in India Online Telecom & IT Magazines Company Websites Premium Databases Open Sources 23
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