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Maldives6 Dec 2007

Workshop on ICT Indicators & Benchmarking

Comparative IndicatorsWhat is available? What are the problems?

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Table Of Contents

What’s available and what to use

What are some of the problems in comparative benchmarking?

Indicators are important not just to the regulator

What indicators should you focus on?

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There is a “lot” of data available from various official sources

Example: ITU data

– collected from member countries annually

– Available to anyone who purchases the database

– Some data available free via ITU’s ICTeye website.

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A small subset is reported on the TAM web-site. No historical data (growth) or comparative data (benchmarks) against other countries

Fixed Telephone lines

– Separate by region (large islands vs. other inhabited islands vs. resorts vs. un-inhabited islands etc)

Total number of mobile subscribers

– Post-paid vs. Pre-paid

Teledensity

– Fixed Only, Overall Fixed + mobile)

Internet subscription customers

– ISDN lines, ADSL lines6, Leased lines

Public (card) phones: by region

Other: Paging customers, Telex Numbers

From www.tam.gov.mv ; Nov 29 2007 data as reported on website

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Value of indicator data is to compare and benchmark: but need to use the RIGHT INDICATORS against COMPARABLE COUNTRIES

The Maldives needs to

– Pick the right indicators

– Track and benchmark yourselves against these

– Set targets (to beat the benchmark, perhaps)

– Report these benchmarks regularly (e.g. Pakistan PTA)

– Regulate based on the key indicators

What are the SUITABLE INDICATORS ?

– E.g. Does “market concentration” or HHI (which are measures of market power) make sense in micro-states like Bhutan?

– “Only” 2 mobile operators.

– But with around ½ Million people can the market support more than 2 mobile operators?

What are COMPARABLE COUNTRIES ?

– Who are comparable countries? What criteria do you use to select them?

– E.g. Indonesia? YES large number of dispersed islands). NO (much larger population)

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Table of Contents

What’s available and what to use

What are some of the problems in comparative benchmarking?

Indicators are important not just to the regulator

What indicators should you focus on?

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Definitions that leave room for interpretation – and errors

What is does Number of Mobile Subscribers mean?

– Most operators reporting SIM cards. Not # of human subscribers/users

– Many users own more than one SIM cards

– Some operators simply reporting all SIMs issued (irrespective of whether they are “active” or not).

– Stop referring to subscribers and talk about “# of mobile SIMs”.

– Should have a cut-off (i.e. SIM cards that have used a fee-paying service in the past 3 months)?

What is does Number of Fixed Lines/Phones mean?

– Is Fixed Wireless (e.g. CDMA) included?

– ITU includes CDMA on the fixed side

– India included CDMA under fixed till about 3 years ago, but now counts it under mobile (so historical graphs have a sudden “bump”)

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Different reporting time periods making comparisons difficult

Majority of countries on a Jan – Dec financial yea and the same reporting period. E.g. Sri Lanka

India on April – March financial year, and reporting period

Pakistan July – June financial year…etc.

Comparing annual data need the same “year”

One way to avoid the problem is to have countries report quarterly

– Pick the right quarters when comparing

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Lack of definitive authority for a particular indicator different data for the same indicator being reported by multiple sources

# of internet subscribers (millions) Difference between…

Year NASSCOM data TRAI DataMinistry of

Statistics & PI

NASSCOM & TRAI

numbers

TRAI & Ministry numbers

1999 0.35   0.23 - - 

2000 0.65 0.95 0.943 -46% 1%

2001 1.13 3.04 2.909 -169% 4%

2002 1.763 3.42 3.239 -94% 5%

2003 3.661 3.64 3.5 1% 4%

2004 4.403 4.55 4.05 -3% 11%

2005 6.674 5.55 5.3 17% 5%

2006   6.94 5.556  -  20%

Note: Based on Financial Year – e.g. “2000” refers to April 1999 – Mar 2000

Source: NASSCOM Strategic Review 2005; TRAI; Ministry of Statistics and Program Implementation, Govt. of India

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That problems exist is recognized. Significant international attention being given to this.

UN Partnership on measuring ICTs for Development

ITU regular updates

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Table of Contents

What’s available and what to use

What are some of the problems in comparative benchmarking?

Indicators are important - not just for the regulator

What indicators should you focus on?

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Market share matters to investors (therefore operators). But market share based on what?

Often the subscriber with the most subscribers (i.e. market share based on # of subscribers) is used

Why not Market Share based on Revenue or Minutes (traffic)?

In early 2007 , market analysts’ claim that “largest” mobile operator is “losing market share” to competition. Viewed negatively

But according to CEO, – “observed trends of consumer behavior show that if SIM is given free (or with pre-loaded

value), customer uses the value, discards SIM, gets a new one….”– [His company] “never does this” (i.e. always charges for the SIM). But competitors DO.– The “competitors count all SIMs when reporting subscriber base” (including discarded

ones) so there’s significant over counting– CEO “waiting” for regulator to “publish market share/growth by MINUTES, to prove that it is

the largest and growing

Method of calculating Market share even more important when Significant Market Power regulation is involved

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Table Of Contents

What’s available and what to use

What are some of the problems in comparative benchmarking?

Indicators are important not just to the regulator

What indicators should you focus on?

– Connectivity

– Industry structure, impact

– Price/affordability

– Revenue, profitability

– Quality of Service

– ICTs

– General

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Connectivity Indicators

Connectivity is perhaps the most important indicator of the sector

Equitable access, affordability and even quality are all reflected in growth (or lack of) the connectivity indicators

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A basic list could include:

FIXED

Number of fixed lines

Number of fixed wireline phones

Number of fixed wireless phones

Total fixed line subscribers per 100 inhabitants

MOBILE

Number of mobile SIM cards

Number of mobile SIM cards – prepaid

Number of mobile SIM cards – postpaid

Total mobile subscribers per 100 inhabitants

Total mobile subscribers per 100 inhabitants

Number of telephone connections per 100 inhabitants

DIGITAL DIVIDE

Number of urban telephone connections per 100 inhabitants

ICT

Number of rural telephone connections per 100 inhabitants

Total number of Internet connections

Number of broadband Internet connections

IN-COUNTRY ACCESS GROWTH

Backbone map for a country

Mobile coverage map per operator

Base station map per operator

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Problems

Subscriber/user vs. SIMs

– Admit we are reporting SIMs.

– Only a survey can reveal Subscribers (or average # of SIMSs per user)

Include CDMA in Fixed numbers?

Installed capacity or actual lines?

– Philippines reports both: result of USO policy where new entrants were required to install lines with 10:1 urban to rural ratio

– Thailand: measures/reports installed, has large number of unused lines under condominiums while having long waiting lists in rural areas

How is an “active” mobile user (SIM) defined?

– Indonesia: Indonesia uses a 1 year cut-off period

– Sri Lanka: Mobitel uses 3 months. Dialog varies by value of top-up-card.

– Philippines: previously 4 months. In June 2004 changed to 1 month. Suddenly growth rate graphs “slow” down due to definition/methodology change

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Change in “Active SIM” definition in the Philippines shows them in a negative light in comparative graphs

Mobile Subscribers (Pre+Post paid)

0.00

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2000 2001 2002 2003 2004 2005

mill

ion

Pakistan India Thailand Philippine Indonesia Sri Lanka

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Industry Structure and Industry Impact Indicators

Structure:

– monitoring for significant market power is important for regulators

Impact:

– telecom sectors often biggest contributor to GDP growth and biggest revenue generator to the government.

– Knowing this makes the sector more visible, less likely to be faced with negative policies (e.g. taxes that may slow growth).

– Important to Operators as well as regulators

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A basic list could include:

Total annual investment in the telecom sector

Foreign Direct Investment into the sector

Total tax paid by the sector

Total employment in the telecom sector

Market share

– Using the HHI (Herfindhal-Hershman Index)

Market shares

– In 3 ways: based on subscribers, based on minutes, based on revenue

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Investment should only include funds that improve network coverage and quality. Taxes should be disaggregated

Total Investment

– Only count investment made for acquiring property and network

– Only for services available to the public (not for private use)

– Sum of Foreign Direct Investment (FDI) + locally originated investment

Foreign Direct investment

– should relate to investments in physical infrastructure, such as investments in property, equipment and networks.

– Does not refer to (and should not include) monies injected from a foreign firm that acquires a lasting management interest in a firm or enterprise (because such funds do not go toward improving network coverage or costs or telecommunication services through other means).

Total tax paid by the sector

– Differentiate between that paid by company vs. taxes passed onto consumer

– Separate into: Corporate Income Tax, Sales Tax & levies, License Fees & Spectrum Tax

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Taxes vary significantly by country. Care is needed in comparing

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But can be a very useful tool for operators (to ask for lower taxes) and for policy makers (to ask for higher taxes?)

Source: GSM Association

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Investment is useful for benchmarking efficiency against other companies and countries

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Market share based on subscribers vs. minutes vs. revenue varies. All 3 needed before decisions (e.g. merger approvals) are made

Source: Wilson, Joseph, LIRNEasia 6 Country Study - Pakistan

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Price and Affordability Indicators

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Price Baskets are a good way to compare prices

ITU reports many micro-measures – E.g. “price of a 3 minute on-net call”

But in selecting an operator, consumers are likely to think about ALL costs– Connection charge– Monthly charge– What you get “free” (i.e. X SMSs per month and Y minutes per month included in package)– Cost of additional SMS or Cost of Minute– Their own consumption patterns (e.g. total minutes of calling per month, more friends on the

same network therefore…)

The OECD basket captures all the above and MORE

Proposed method for benchmarking prices across operators and countries

For benchmarking countries, need a representative price basket per country– Rule: chose the largest operator’s most popular plan

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ALL prices always need to be reported in a pure $ terms……

Cheapest prepaid Cheapest postpaid

2.894.20 4.06 4.61 4.39 4.06

5.83

7.876.96 7.23

9.7711.31 10.76

8.06

14.0214.67 14.76

12.99

20.18

23.9723.24

15.73

28.99

26.81

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BD PK LK IN BD PK LK IN BD PK LK IN

Low User Medium User High User

US

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…..as well as Purchasing Power Parity adjusted terms to understand relative affordability across countries

Cheapest prepaid Cheapest postpaid

14.73

108.54

117.35

59.65

88.14

74.64

62.8466.23

75.21

59.3856.75

30.55

40.8035.22

30.41

36.8735.5031.85

23.58

15.3916.63

14.3412.65

21.39

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Price of broadband services are key to larger ICT and ITeS sector growth and should be monitored.

Further details on Benchmarks and sources are available at : http://www.lirneasia.net/wp-content/uploads/2007/09/bbenchmarks-page1-v4.pdf.

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Revenue & Profitability

Measures the financial health of the sector

Gives an indication of how consumption is changing (e.g. comparing data vs. voice ARPU over time)

To be used with caution – operators express concerned that monitoring EBTIDA (or other profitability) margins may to “regulation” of profits

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A basic list could include:

Average Revenue per User (ARPU) [subscriber]

Fixed (wireline and wireless) ARPU per operator

Fixed (wireline and wireless) ARPU for industry

Mobile prepaid ARPU per operator

Mobile postpaid ARPU per operator

Mobile prepaid ARPU for industry (weighted by revenue)

Mobile postpaid ARPU for industry (weighted by revenue

Mobile data revenue

Roaming revenue earned per SIM

Industry revenue

Industry revenue as a % of GDP

EBITDA margin per operator

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Telecom sector revenue as a % of a country’s GDP is a powerful indicator of the importance of the sector

0

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2000

2001

2002

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as

% o

f G

DP

india

indonesia

pakistan

philippinessri lanka

Source: India- TRAI, Indonesia- calculated, Philippines: WDI online; Sri Lanka: TRC and CBSL AR

Sector Revenue as % of DGD by Country

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ARPU (or ARPS) together with Utilization indicate clear trends – and useful once again for proving the sector is doing well

0

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2000 2001 2002 2003 2004

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in U

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Ave minutes of usefor mobile subscriberper month

Ave minutes of usefor mobile postpaidsubscriber per month

Ave minutes of usefor mobile pre-paidsubscriber per month

Mobile pre paid ARPUfor Industry

Mobile post paidARPU for Industry

Source: TRAI

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Why EBITDA and not pure E (Earnings) for cross-country comparisons?

EBITDA = Earnings before Interest, Tax, Depreciation and Amortization

It’s the final list in the income statement that can effectively compare across countries because

– Taxes vary by country and distortionary

– Interest varies by company/country

– Accounting standards vary, therefore rules for Depreciation will vary by country

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Quality of Service

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A basic list could include

Telephony Quality

– Waiting list for main fixed lines

– Faults per 100 main (fixed lines) per year

– Percentage of telephone faults cleared by the next working day

– Call drop rates

– Percentage of connections with good voice clarity

– Call success rate

Broadband Quality

– Broadband download speed (kbps/Mbps)

– Broadband upload speed (kbps/Mbps)

– RTT (milli-second)- Round Trip Delay

– Jitter (milli-second)

– Packet- Loss (as a percentage)

– Broadband availability (as a percentage %)

Many of these indicators are reported regularly

already (through ITU etc

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ICT access and usage

Great interest to almost all countries

Specially in light of e-Government, telecenter and similar initiatives

Gets to the heart of the DEMAND side (previous indicators were largely on the supply side)

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Possible list of indicators, proposed international organizations

Percentage of population covered by mobile cellular telephony

Percentage of localities with public Internet access

– Urban vs. Rural

Percentage of households with:

– a fixed telephone, a mobile phone, a computer, internet access at home

Internet activities undertaken by individuals in the past 12 months

– See UN-Partnership’s list as starting point (page 4 of document)

Location of internet access of individuals on the last 12 months

– See UN-Partnership’s list as starting point (page 4)

Similar list of Use of ICT by businesses (see UN-ESCAP manual)

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General Definitions

The basic data on demographics and the economy

Needed to analyze many of the previously stated indicators

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The basic list should include:

Total Population of a country (from the NSO, preferably)

Number of households in a country

Number of Urban vs. Rural Households

Number of Urban vs. Rural population

Average number of people per household

GDP (from central bank or authoritative source)

Gross National Income

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Client Logo

Maldives6 Dec 2007

Workshop on ICT Indicators & Benchmarking

Which Indicators for the Maldives?Picking a core list

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YOU decide. Keep in mind...

The need is for indicators that: :

– Have definitions, collection frequencies, methodologies that can be agreed upon by everyone (operators, TAM, international standards)

– Give a comprehensive picture of the telecom/ICT sector in Maldives

– Enables meaningful comparison with chosen countries (no Maldives-only indicators)

Using benchmarks for regulation works with a list that is not too long.

– Track the key indicators regularly and benchmark

– Do collect a “longer” list for other purposes (e.g. the ITU list)

Strike the balance between getting perfect data vs. Imposing an overly heavy burden (cost) on collection

– Most likely the operators bear the cost of data collection/reporting

When reporting – use footnotes liberally