India Telecom 2010

g
Foreword
India is amongst the fastest growing telecommunications markets across the globe. The average monthly mobile subscriber
growth over the past year has been 15-17 million customers. Currently, the mobile subscriber base is approximately 671 million (as
of August 2010). The overall teledensity for India has already surpassed 60 percent and the market continues to exhibit unabated
growth1.
With the successfully concluded auctions of the 3G and BWA spectrum, this growth is set to become even more aggressive.
Indian telecom operators have very effectively worked with rest of the telecom ecosystem to enable India emerge as the country
which offers the lowest mobile tariffs across the globe2. All these achievements have helped India emerge as one of the most
attractive investment destinations for all international players looking to win a share of the second largest mobile market in the
world3. These players can also look at leveraging on the successful low-cost model that India has pioneered.
During the past year, several telecom players in India have made tremendous efforts to establish themselves on the global
level through cross border mergers and acquisitions. These strategic alliances are a step towards the globalization of the Indian
telecommunication industry.
The credit for the growth witnessed by the sector has to be attributed to the well-defined regulatory provisions designed by the
government. The government has been instrumental in making key policies to drive the rural growth which is expected to keep
this bullish phase going strong over the next decade. Within the rural area, there is additional focus to enhance the penetration of
broadband and data usage. The aim is to wirelessly connect villages and remote areas through broadband and provide access to
basic facilities for health, education, banking and others.
On the occasion of India Telecom 2010, the 5th International Conference and Exhibition, the Department of Telecommunications
is pleased to release this report on ‘Indian Telecom Success Story – Broadband for All’. Developed by KPMG in India and FICCI,
it provides an overview of the Indian telecommunications sector and will serve as a useful reference manual for all stakeholders
including regulators, policy makers, telecom operators and the general public.
R. Chandrasekhar
Secretary
Department of Telecommunications & IT
Government of India
New Delhi
1 ‘Monthly Telecom Scenario – August 2010’, DoT, October 2010

2 ‘Mobile tariffs in India to decline by 25 percent’, Silicon India, May 2009
3 ‘India becomes 2nd largest mobile market in the world’, The Hindu Business Line, April 2008
© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The Federation of Indian Chambers of Commerce and Industry (FICCI) and KPMG are proud to present this report on “India
Telecom 2010 – Broadband for All”, in association with the Department of Telecommunications (DoT).
The present phase is extremely exciting for the telecommunication industry which is looking forward to 3G and BWA rollout to
help re-invigorate the aggressive growth that the industry has witnessed in the past two years. Rapid swelling in the subscriber
numbers has resulted in urban teledensity exceeding 100 percent. The rural market is expected to drive the next round of growth
for the voice-based services, while data services will create the much needed churn within the maturing urban markets.
This report highlights the importance of broadband and data services market in India. Our aim has been to highlight the key
ecosystem requirements and strategies that telcos may follow in order to achieve the government targets of broadband
subscriptions. This report provides the reader an insight into how the telecom industry has evolved over the last decade. The report
also highlights the growing importance of broadband and how it has the potential to contribute to the overall socio-economic
development of rural India
We are extremely grateful to the Department of Telecommunications (DoT) for providing us with this opportunity to work with
them for the India Telecom 2010 event.
Amit Mitra Sean Collins Romal Shetty Arpita Pal Agrawal

Secretary General Global Chair National Head Head - Telecom
FICCI, India KPMG’s Communications Telecom Risk & Compliance
and Media practice KPMG in India KPMG in India
Executive
summary
Ranked amongst some of the fastest growing economies of The penetration of broadband in India has not been as
the world, India has registered steady growth over the last few aggressive as the wireless communication services. As
years, especially in comparison to the OECD and other similar of August 2010, the broadband subscriber base in India is
emerging economies1. The strengthening domestic market and approximately 10.08 million. The government, in recognition
enhanced domestic consumption helped India to successfully of the potential of broadband as a key enabler in furthering its
weather the global economic turmoil. growth agenda, has taken a strong stance to address the issue
of low penetration and enhance broadband coverage across
The Indian telecom sector particularly, witnessed aggressive the country. The recently concluded 3G and BWA auctions are
growth during the last two years, emerging as a global likely to be the catalyst that furthers the government’s agenda
benchmark for other developed countries as well. All major of providing broadband connectivity to the remotest parts of
international operators are exploring opportunities to make India. The government as well as other telecom stakeholders
inroads into the Indian telecommunication sector, both for believe that these wireless technologies will help overcome the
the vast customer base as well as to leverage on the low barriers of expensive wireline infrastructure, especially in the
cost outsourcing model which India has been successful in low revenue generating zones.
pioneering.
The primary aim of the ‘Broadband for All’ movement is to
As of August 31, 2010, the country’s subscriber base (wireline ensure that all Indians are able to connect with the world
+ wireless) stood at 707 million2, with the overall teledensity and are able to remotely access basic facilities like health,
reaching 60 percent. With increasing maturity of urban markets, education, banking, commerce, entertainment, utility and
the next round of growth is expected to be generated from the e-governance services to enhance their quality of life.
rural areas in the form of increased uptake of voice and data-
based services, as well as broadband services.
1 Ministry of Finance
3 ‘Consultation Paper on National Broadband Plan’, TRAI, Business Line, June 2010
The government, along with TRAI and DoT, has been making The private telecom players are also expected to play an
tremendous efforts to achieve the desired results. TRAI is important role to achieve the objective of ‘Broadband for All’,
considering plans to roll-out a national optical fiber cable network by covering the key aspects of relevant content, seamless
which will act as a backbone to broadband services across connectivity and affordable end user device by introducing
the country. The funding for this project is likely to be routed innovative business models for their broadband service
through the Mahatma Gandhi National Rural Employment offerings. Due to the rich diversity in India, locally relevant
Guarantee Scheme (MGNREGS) for non-skilled work and from content is essential to make an impact and enhance penetration
the Universal Services Obligation Fund (USOF) for material of telecom services, especially in the rural areas.
and equipment cost3. The Indian government has unveiled
a prototype tablet computer that would sell for a mere INR The regulatory environment in India has been extremely
1,500 or USD 354 thus increasing affordability of the end user supportive for the telcos to have achieved such phenomenal
device which is essential to access the broadband services. The growth in the past years. The industry is now eagerly awaiting
government is considering making broadband connections along the roll-out of 3G and BWA which is expected to have a
with other equipments such as computer, printer and telephone significant impact on the sector and its growth in the next few
more affordable to every gram panchayat. These initiatives, years.
which are intended to provide universal broadband access to
the rural residents of the concerned gram panchayats, are likely
to be funded through the Universal Services Obligation Fund5. The Indian telecommunication industry is at the brink of entering
All these steps are clear indicators of the efforts that are being a fresh round of growth, to be stimulated by the launch of
directed towards achieving strong broadband growth in India. wireless data services. The policy makers and the private
players have successfully come together with various initiatives
to ensure that the industry continues to remain a shining star for
India.
4 An IIT, IISc-designed laptop for just INR 1,500’, Times of India, July 2010
5 ‘Special purpose vehicle planned for broadband push’, Hindu Business Line, July 2010
Table of Contents
Macro-economic view of India 1
Global telecommunications market 7
Indian telecommunications market 13
Regulatory and policy environment 19
Broadband for all 25
Broadband infrastructure 34
Broadband - catalyst for convergence 39
Value added services in India 43
Connecting rural India 51
Telecom manufacturing 59
Telecom research & development 65
Emerging trends and technologies 69
Green telecom 73
Investment opportunities after broadband rollout 79
International best practices 83
Conclusion 89
About KPMG in India 91
About Department of Telecommunications (DoT) 92
About Federation of Indian Chambers

of Commerce and Industry (FICCI) 92
1
Macro-economic
view of India
India is one of the fastest growing economies across the globe. The economic size
of the country, at the end of the fiscal year 2010, is expected to be worth INR 49
trillion (GDP at market prices). It is also the fourth largest economy in PPP terms
after USA, China and Japan1.
The country experienced rapid economic growth between 2003 and 2007,
registering an average annual GDP growth rate of 8.8 percent. In fiscal 2009, the
country weathered the global downturn successfully and registered a GDP growth
of 6.7 percent, which is significantly higher than the performance of both the OECD
countries and emerging Asian economies. This performance was primarily driven
by the services sector, which posted a year-over-year growth of 9.7 percent. For
2010, the country is expected to post a GDP growth of 8.5 percent2. By 2020, the
economy is expected to quadruple its current size driven by nominal annual growth
of 13 percent3.
Progressive liberalization of government policies, rapidly expanding services sector,

FDI growth, rising global competitiveness and increasing domestic demand have
all contributed to a strong economy. India ranks as the number one FDI destination
among non-financial investors4.
1 CIA – World Fact Book 2009, The World Bank

2 Ministry of Finance
3 ‘GDP to quadruple to $ 4.5 trillion by 2020: Edelweiss’, Financial Express, March 20, 2010
4 A.T. Kearney’s 2010 Confidence Index
2
3
Key features of the Indian

economy
Favorable demographics: Currently the median age in India
is 24 years and the country possesses a working population
of close to 340 million5. This young and dynamic working
population of India is one of the biggest factors having a
positive impact on the consumption and investment pattern
of the country. For instance, in 2009-10, India became the
second fastest automobile market in the world, registering a
growth of 26.4 percent6.
Rising urbanization: Currently, India has 42 cities with a
population base greater than one million7. Widely believed to
be the centres of economic activity and wealth generation,
these cities are estimated to contribute 60-80 percent of the
total output in India8. Urbanization adds about one percent
each year, through productivity gains. The benefits from
urbanization to the economy come from the clustering of
firms and businesses which allow them to learn from each
other and attract workers. Examples include the clustering
of software firms in India’s Silicon Valley (Bengaluru) or auto Shift from an agrarian to a services-led economy: Over
component firms in Gurgaon9. the years, the Indian economy has transformed itself from
an agriculture-dependent economy to a services-driven
High savings ratio: The country has one of the highest economy. The share of agriculture, which comprised more
national savings ratio of 32.4 percent (2010E) as against 22.9 than half of the GDP in 1950-51, is now gradually shifting in
percent for Japan and 10 percent for USA10. Higher domestic favor of the services sector, which has currently got a share
savings has resulted in higher investment, making India less of 58 percent of GDP. The growth of the services sector
vulnerable to global situations. marks a watershed in the evolution of the Indian economy
and takes it closer to the fundamentals of a developed
economy.
GDP Mix of India and developed economies
2005 2010P 2010P Agriculture
Industry
14%
18% Services
81% 71%
58%
28%
28% 18% 27%
1% 2%
54%
USA Japan
India
Source: EIU
5 ’World Population Prospects: The 2008 Revision Population Database’, United Nations Population Database
6 ‘India India car sales are No. 2 in world’, Financial Express, April 09, 2009
7 ‘LIMITS OF PEOPLE’S WAR- Naxalism faces serious hurdles that can be used against it’, The Telegraph, January 21, 2010
8 ‘India’s urbanization bonus’, Mint, August 16, 2007
9 National Productivity Council
10 EIU
4
From survival to revival

The Indian economy, much like its global counterparts,
witnessed a substantial deceleration in growth in 2008,
consequent to the global financial and economic turmoil.
Towards the end of 2008, corporate profits deteriorated,
consumption and investment demand shrank, and there was
a shrinkage in employment opportunities. The manufacturing
sector’s slowdown was slightly more pronounced with growth
in the manufacturing output turning negative in December,
200811.
Economic indicators
Quarterly Net FII Inflows (USD Millions) Quarterly IIP (%)
17.6
6421 14.5
5428 14.8
4372
4017 3811
8.9 9.3
8 8.3 5.8
7
2199 2272 5.5 5.4 6 5.6
1417
824
407 357 114
-0.2 0.3
-236 -27
Dec-07
Dec-08
Dec-09
Sep-07
Sep-08
Sep-09
Mar-07
Mar-08
Aug-10
Mar-09
Mar-10
Jun-07
Jun-08
Jun-09
Jun-10
-1807
-2359
Dec-07
Dec-08
Dec-09
Sep-07
Sep-08
Sep-09
Mar-07
Mar-08
Mar-09
Sep-10
Mar-10
Jun-07
Jun-08
Jun-09
Jun-10
Source: Bloomberg, CSO
Though the growth momentum of the Indian economy was

substantially impacted with the onset of the global economic GDP growth
slowdown, the severity of the impact was considerably less GDP (%)
as compared to emerging Asian economies. The fiscal and
monetary stimulus announced in the latter part of 2008 helped 9.6 9.4 9.7 8.6 8.8
9.3
the economy to recuperate from the slowdown phase. 8.5 8.6
7.8 7.5
After witnessing deceleration in GDP growth for five 6.1 6
6.5
5.8
consecutive quarters, a notable turnaround in India’s real GDP
growth took place during April-June 2009 quarter, with the
GDP registering a growth of 6.0 percent (y-o-y) as against 5.8
percent during the previous quarter. The rise in GDP growth in
the third quarter of 2009 to 8.6 percent, which was viewed as
an initial sign of recovery in the economy, was primarily due to
Dec-07
Dec-08
Dec-09
Sep-07
Sep-08
Sep-09
Mar-07
Mar-08
Mar-09
Mar-10
Jun-07
Jun-08
Jun-09
Jun-10
the slow impact of increase in government spending and the

improved performance of the industrial sector12.
Notably, FDI in India remained resilient during the crisis. With Source: Bloomberg, CSO
most of the countries witnessing a downfall in the growth
of FDI between 2007 and 2009, India displayed a CAGR
growth of 16.5 percent for the same period13. India weathered
the global crisis comparatively well, in part due to the
government’s quick response in the form of stimulus which
encouraged foreign investors.
11 D&B Outlook, Q2 2010

12 Bloomberg
13 OECD
5
FDI inflows in selected countries Indian equity markets outperform EM
2007 2008 2009 CAGR 12 Months returns as on March 2010
Japan 22,548 24,418 11,939 (27.2)% MSCI India 113.6%
Korea 1,784 3,311 1,506 (8.1)% MSCI EMF 77.3%

MSCI EM Asia 70.0%
Russia 55,073 75,002 37,134 (17.9)%
MSCI Europe 48.3%
Brazil 34,585 45,058 25,949 (13.4)%
MSCI Asia Pacific 72.3%
China 138,414 147,791 78,200 (24.8)%
BSE Sensex 80.5%
India 25,483 41,315 34,577 16.5%
Dow Jones 42.7%
Source: OECD
NASDAQ 56.9%
Domestic industrial activity also witnessed a sustained Source: Morgan Stanley Research
improvement during April-December 2009, as evident
from the strong IIP growth figures. While this can partly be
attributed to the low base effect; restocking by manufacturers
following the earlier cutbacks in factory output and drawdown
Outlook
of inventories also aided the industrial production in the latter
The Indian economy is at its initial stages of economic
half of 2009. The other positive aspect of this rebound in
progress, as compared to some of the other emerging
the industrial activity was that it was broad based. As many
economies. The growth prospects of the economy
as 14 out of 17 major manufacturing sectors witnessed a
are expected to improve significantly in FY 2011 as the
positive growth during January-December 2009, thereby
domestic demand – driven by rising private consumption
strengthening the prospects of faster recovery in the
and investment - begins to gain momentum. However,
domestic industrial activity. The fiscal and monetary stimulus
the government consumption demand is expected to
measures announced earlier played a major role in stimulating
remain moderate on account of fiscal consolidation plan
consumption and investment demand in the economy during
and expected steady withdrawal of stimulus packages.
200914.
Nonetheless, the focus of government spending on
infrastructure sector would continue to support growth.
Government impetus
Growth would largely be driven by:
The fiscal stimulus
Favorable demographic profile
Impact Comments India’s high population growth has had a positive impact
(INR Billion)
on productivity gains over the last 10 years – a trend likely
Cenvat Cut 4%: to continue over the coming decades. It is expected that
Duty cuts 500 Excise duty to 8% the working age population will continue to grow to peak
Additional at roughly 70 percent by 2040, in contrast to much of the
1000 Increased allocation to
expenditure flagship programmes developed world and regional peers, such as China and
South Korea (which are already in de-growth phase)15. The
Sixth pay 157 A consumption kicker: to recent years have also seen considerable development in the
commission continue in FY10 education systems of the country, marked by the presence
Farm loan of world-class universities and management schools
600 Indirect impact including the Indian Institutes of Technology (IIT) and Indian
waiver
Institutes of Management (IIM). This is expected to further
% of GDP 4.0% strengthen India as a breeding ground for knowledge and
consequently innovation. The country scores 4.4 (where
Source: Report on India Strategy, IDFC-SSK, May 17, 2010
1= Not Well, 7 = very Well) on the Quality of Educational
Strong industrial and manufacturing performance, stimulus Systems Index performing close to Japan (4.5) and leaving
packages by government and growing confidence of foreign behind outsourcing competitor China (3.8) as per the Global
investors was well-supported by high-performing capital Competitiveness Report 2009-201016.
markets, indicated by growing market capitalization of the
Bombay Stock Exchange (BSE).
14 D&B Outlook, Q2 2010

15 The Reawakening of Domestic Demand, Business Monitor International, Q22010
16 ‘The Global Competitiveness Report 2009-2010’, The World Economic Forum
6
Improvement in private consumption Low labour cost

With rapidly waning uncertainty on employment and In recent years, the country has positioned itself as a
expected increase in disposable income due to measures preferred manufacturing and production centre owing to
like broadening of overall income tax slabs for individuals the abundance of skilled, cheap and English speaking labor,
with consequent reduction in effective individual tax, as a factor that helps India distinguish itself from its Asian
announced in the Union budget of FY11, private consumption contenders in the global outsourcing market. India has the
is expected to improve. Improvement in private consumption lowest labor costs (per hour) and the highest availability
will also result in increase in resumption of capital expansion of engineers and scientists (after Japan) in the world18.
plans by Indian corporations. NASSCOM estimates that an approximate 400,000 diploma
and degree engineers graduated in the year 2009 alone19.
Infrastructure development
The Government has put significant emphasis on developing
core infrastructure including roads and power with expected
investment of over USD 500 billion from the public as well as
the private sector over the next five years. This is expected to
result in enormous productivity benefits for the economy17.
Labor costs
India China Japan US France Germany UK

Labor Force (million) 478.3 815.3 65.6 154.9 28.2 43.4 31
Labor Costs per Hour (USD) 2.5 2.2 25.3 27.0 29.0 38.1 28.3
Labor Productivity Growth (%)* 6.5 9.5 3.7 2.3 1.7 2.8 -0.2
Source: Economist intelligence Unit; Data for 2010(Estimated); *Efficiency of labour measured in terms of output per worker (real GDP per person employed)
17 XIth Plan Documents, The Planning Commission

18 ‘Global Competitiveness Report 2009-2010’, The World Economic Forum
19 www.osec.ch
7
Global
telecommunications
market
Telecom services will continue to be one of the key growth sectors having
generated revenues of roughly INR 67 trillion in 2009. Global wireless subscribers
reached 4.6 billion1 in 2009 with a CAGR of 22 percent over 2004-20091. This
occurred despite some carriers experiencing marginal declines or flat trends
in revenues with enterprises and consumers exercising cut backs on telecom
spending during the global economic slowdown.
1 International Telecommunications Union database, June 2010
8
9
The continuing rise in affluence levels in emerging markets

and the resultant increase in the standard of living is expected
to have an increasing impact on the revenue per subscriber.
Telecom market revenue by sector
Telecommunications Market - 2009 Telecommunications Market - 2014
Enterprise Carrier Network Infrastructure Enterprise Carrier Network Infrastructure

Networking and Communications 4% Networking and 4%
2% Communications TOMS
TOMS
3% 2%
2%
Mobile Devices
Mobile Devices
11%
15%
Mobile Services
45%
Fixed Services
36%
Mobile Services Fixed Services
45% 31%
Revenues – USD 1.9 Trillion Revenues – USD 2.3 Trillion
Source: Market Trends: Global Telecommunications Market, Gartner, July 2010
The demand for applications with platforms such as Apple’s

Falling voice ARPUs in most App Store continued to drive new handset launches, adoption
countries; mobile data to drive of smartphones and increasing sale of data plans in the
developed markets. Mobile data represents a growing part
growth of overall ARPU as voice ARPU continues to deteriorate.
Globally, data ARPU (mobile data, fixed data and fixed
Wireless ARPU ranges from USD 54 per month in Japan to internet) constituted 34 percent of the total ARPU versus 31
under USD 5 per month in the Philippines, Indonesia and percent in 20083. The country with a relatively low wireless
India, evidently demonstrating the lower ARPU realization in ARPU, Philippines, generated the highest mix of mobile data
emerging countries2. The blended wireless ARPU is roughly services globally (52 percent2 of total wireless ARPU). Japan
USD 18 globally, declining at 10 percent per year (on a local had 43 percent of its wireless ARPU coming from mobile data
currency basis)2. services driven by early deployments of 3G services2.
Global wireless ARPU comparison (2009)

60
54
49
50 47 46
40
40
ARPU ($)
33
29
30
21
20 14
12
10 8
10 5 4 4
0
U.S.
Japan
Brazil
Australia
South Africa
India
China
Indonesia
Russia
France
Netherlands
Philippines
Germany
Italy
UK
Source: Global I/O: Wireless Services, UBS, October 2009
2 Global I/O: Wireless Services’, UBS, October 2009

3 ‘Market Trends: Global Telecommunications Market’, Gartner, July 2010
10
This quote style isecosystem

Convergence – shifting dynamics
in telecommunications
set in Univers 65 Bold The success of the Apple’s iPhone and the App Store is a case
in point of a wider ecosystem, where the device manufacturer
33pt on 36pt leading

has had a significant impact on the telecom carrier’s success.
As mobile devices become globally ubiquitous, faster
computing power and quick access to seamless information
via location-based services is likely to emerge as the norm of
the day. These devices are increasingly emerging as strategic
partners for telecom carriers.
Co-opetition (Cooperative Competition) and value creation
opportunities are likely to influence market direction,
technology decisions and solution offerings in the market.
Content providers are forming exclusive partnerships with
telecom carriers to create a marketing strategy to influence
consumer decisions. A good example has been MTV
Networks’ partnership with AT&T for the “MTV Vault” giving
AT&T subscribers exclusive access to archive content.
The telecom equipment sector is also offering new and
Value added services continue converged services, supporting CSP’s in the transformation
to increase its share in overall toward content-driven services and applications. These
converged solution offerings are expected to help equipment
telecom revenues players restore the dramatic collapse in sales witnessed in
2009, to renewed growth in 2010.
Uptake of mobile value added services has been on the
steady rise in most of the developed countries. Globally, This is increasingly evident in the areas of unified
Mobile Value Added Services (MVAS) accounts for more than communications and video management services, where
30 percent of the total telecom revenues as compared to 10 equipment players are positioning themselves to deliver new
percent in India4. Emerging economies such as China, India, value-added services.
Indonesia, South Africa, Nigeria, Egypt, Turkey, Israel, Saudi
Arabia, Brazil, Mexico, Argentina, Russia, Poland and the
Ukraine are expected to increase global MVAS revenues from
USD 200 billion in 2009 to USD 340 billion in 20145.
Increasing broadband adoption
High-end services such as Mobile Internet, Mobile Gaming,
with declining fixed line
GPS, Mobile Money, and other innovative mobile applications subscribers
are more popular in developed economies as compared
to SMS based and basic internet services in emerging Emerging nations in Asia like India, Indonesia, Bangladesh
economies. A key global trend observed is the shrinking of and other African nations like Ghana, Zambia have shown
MVAS value chain. VAS players such as Content Developers, tremendous growth in wireless penetration due to ease of
Content Aggregators, Platform Enablers, and Telecom rollout compared to wireline deployment. Consequently,
Operators have started growing into each others role6. global wireline subscription remained stable with 1.2 billion7
subscribers as a result of the negative growth in most
With the emergence of new technologies and more countries
developed countries such as US, UK and Japan and near static
advancing towards 3G & 4G provide a future path for MVAS
status in developing markets.
to grow exponentially. Moreover, declining voice tariffs across
the world, resulting in low ARPUs compels operators to focus
more on MVAS.
4 ‘MVAS: Where are we heading to?’ - CIOL, October 2008

5 ‘Global Mobile Data Market to be Worth USD 340 Billion by 2014’ - Informa Telecoms & Media. July 2009
6 ‘Global Mobile Value-Added Services (VAS) Market’ - Religare Info Service, March 2010
11
With software application surge and usage of advanced

devices for media rich services, users worldwide have been
Mobile payments to foster a trend
demanding higher speeds. The broadband penetration for cashless transactions
increased to 480 million7 subscribers globally with 25 percent
CAGR (2004-2009). Emerging countries in Asia, Middle East According to the GSM Association (GSMA), mobile money
and Africa have seen high growth in broadband subscription in emerging markets would bring in USD 7.9 billion of sales
while developed nations have witnessed a stable growth for operators by 20128. Of this, money transfer services for
pattern. handset owners without a bank account itself would result
in USD 5 billion of transaction fees and text message linked
Japan with over 30 million broadband lines, has the third revenues by 2012, with the remainder coming from indirect
largest broadband subscriber base and one of the widely cited benefits such as customer loyalty8.
broadband success stories, due to surge in adoption of DSL-
based broadband subscribers around 2003. In India, offerings from some operators enable a mobile
phone user to send or receive money instantly between their
In Africa, broadband penetration has been increasing, due to banking accounts, using their mobile phone to authorize the
lower tariffs as a result of the new submarine cables reaching transfer. However, changes in regulation could result in the
its shore and the rollout of wireless broadband services. In advent of end-to-end mobile payment solutions, enabling
South America, CSP’s are innovating by providing video-on- customers to make simple financial transactions through the
demand and other bundled services in order to increase mobile phone, furthering the objective of financial inclusion
broadband adoption. being targeted by the Government.
China has witnessed a blistering pace of PC-based broadband

connectivity, where near ubiquitous broadband availability and
low tariffs, have resulted in internet penetration levels close
to thirty percent, resulting in a large class of digital consumers
with strong adoption and exposure to the internet in the last
decade. India too is witnessing rapid growth in broadband
subscribers due to falling tariffs. However, there is potential
to significantly improve broadband penetration in the country
through investments in last mile connectivity such as fibre,
cable and DSL. The expected broadband wireless rollouts in
2010-11 would also provide an additional impetus towards
increasing broadband penetration in the country.
Mobile subscriber data (millions) Fixed line data (millions)

247 251 244 240
239 235
853
772
687 677 175 167 158
616 525 140
459 534 121
347 103
267 278 293 60 70
234 253 6352
205 150 233 105 110 115 119 50 5657 48
3744 3639
95 100
76
2005 2006 2007 2008 2009 2010
2005 2006 2007 2008 2009 2010
China India Japan USA
China India Japan USA
Source: Economic Intelligence Unit database, 2010
8 GSM Association 2009
12
M&A activity and diversification

in emerging markets has been a
vital component for success of
large CSPs
The world’s largest CSPs lost share in the global services
market as four of the top 10 lost their positions. Most top
CSPs from Western Europe are encountering difficulties with
competition, saturated markets and regulatory restrictions.
Acquisitions in developed markets were executed with
the primary objectives of consolidation, gaining cost
synergies and utilizing network capabilities. On the other
hand, emerging market acquisitions were mainly focused
towards tapping the growth in these areas. E.g. Frontier
Communications (US), acquired wireline operations of
Verizon’s 14 states to expand and achieve cost synergies
worth USD 500 million annually9. Mexico’s America Movil
acquired Telmex International for integrating players and
providing mobile and fixed line service across Latin America9.
Asia to continue to lead growth in

wireless services
The Asia Pacific region driven by growth in India and China will
continue to be the key growth market for global telecom over
the next few years. Developed markets such as Japan and
Korea, are witnessing the benefits of significant technology
investments and innovation. Meanwhile, India and China,
which constitute 28 percent10 of the global wireless subscriber
base today, are witnessing the benefits of significant growth
in income levels due to sustained economic growth.
Penetration figures in both countries continue to remain
significantly lower than developed economy levels, auguring
well for continued growth and development of the telecom
market in the region.
9 Mergermarket Database, September 2010

13
Indian
telecommunications
market
The Indian telecommunications market has continued to show consistent growth
during the last one year, with exciting developments such as rollout of newer
circles by operators, successful auction of 3G and BWA spectrum, growing push by
telecom operators to rollout network in semi-rural areas and increased focus on the
value added services market.
Telecom continues to be one of the fastest growing sectors of the Indian economy,
becoming a strong contributor to India’s overall GDP and is expected to grow
further.
Mobile subscribers (share of the world)
Others China
65% 16%
India
13%
USA
6%
Source: EIU’ 2010 estimates, International Telecommunications Union statistics

report - 2010
Overall teledensity in India has risen to the levels of ~59.6 percent (as of
August’10)1. With a large part of the population yet to obtain access to the
telecommunication market, there is immense potential for the sector to grow,
especially in non-urban areas, where wireline and internet services are yet to make
significant in-roads. Wireline services have shown relatively slow growth with
low teledensity of approximately 7.6 percent and 1.1 percent2 in urban and rural
regions respectively. Even the mobile services space which has seen exponential
growth in urban areas, has not yet reached the vast majority in rural areas with rural
teledensity of approximately 27.8 percent3, indicating huge untapped potential for
the sector.
1 ‘Telecom Subscription Data as on 31st August 2010’, TRAI, October 2010

2 ‘The Indian Telecom Services Performance Indicators January – June 2010’, TRAI, October 2010
14
15
Broadband is yet to reach a critical mass despite rapid growth; The Calling Party Pays regime was introduced in 2003-
the numbers have risen from 6.98 million in August 2009 04 which allowed free incoming calls for the subscribers.
to 10.08 million by August 2010, registering a growth of 55 This revolutionary change can be designated as one of the
percent on an annual basis4. With subscriber penetration watershed milestones in the growth of the Indian telecom
under 2 percent5, the sector has potential for aggressive sector.
growth in the future.
The 22 telecom circles in India have been classified into 4
Mobile services categories viz. Metros, Category A, B and C. With penetration
The Indian mobility market can be characterized as one with rates in metros touching 100 percent, the market in Metros is
a very large subscriber base4 (~671 million as of August nearly saturated. However, there is still immense potential in
2010), high growth5 (addition of 16-18 million subscribers other circle categories, particularly B and C.
every month in last six months), low ARPUs (~INR 122 per
month in June, 2010) and significant churn rates. In the pre- Mobile subscriber base and mobile teledensity across
paid segment, ARPU declined by 6.2 percent from INR 113 in telecom circles
March, 2010 to INR 106 in June, 20105.
J&K
4.68 mn
42.09%
Growth of wireless subscriber base (year end numbers)
HP
Punjab 5.86 mn Delhi
700 636 85.57 mn 32.76 mn
91.81%
69.86% 195.33%
600
Subscriber base in mn
525 Haryana North East

16.60 mn UP (W) 6.01 mn
500 68.66% 36.03 mn 48.14%
Rajasthan
UP (E+W) Assam
36.92 mn Bihar
400 347 43.23 % UP (E) 10.03 mn
57.03% 43.30 mn
51.88mn 34.82% 34.00%
300 Gujarat
229 MP West Bengal
37.64 mn 36.35 mn 30.21
200 142 67.02% 39.54% 41.28%
75 Orissa
Maharashtra Kolkata
100 47 18.13 mn
11 28 49.54 mn 18.61 mn
6 56.41%
46.11%
134.25%
0
Mumbai
2001 2002 2003 2004 2005 2006 2007 2008 2009 H1’10 30.46 mn Andhra Pradesh
161.74% 51.62 mn
Source: TRAI Annual Report and Quarterly Reports on Telecom Services 64.04%
Karnataka
Performance Indicators 42.52 mn
76.57% Metros
Tamil Nadu Circle A

Kerala 49.00 mn Chennai Circle B
The Government of India opened up mobile services to 27.21 mn 85.20% 12.08 mn
88.54% 156.37% Circle C
private participation in 1994-95 by inviting bids for providing
services in the four metropolitan cities and 18 non-metro
circles. Services were introduced in 1995 with the high tariffs
Source: ‘Monthly Telecom Scenario – August 2010’, DoT, October 2010
resulting in poor demand. The National Telecom Policy 1999
moved the industry to a revenue share model from the fixed
license fee and the lower tariffs resulted in the addition of ~ The current subscriber base of 707 million (August 2010)4
12 million subscribers during the 1999-03 period as compared comprises 476 million urban subscribers (teledensity of ~134
to less than a million subscribers added during the 1995-99 percent) and 230 million rural subscribers (teledensity of ~28
period. During this period the government also setup the percent)4. The market is highly competitive with some of the
Telecom Regulatory Authority of India (TRAI) in 1997 and telecom circles having more than 10 operators. Competitive
‘Telecom Dispute Settlement and Appellate Tribunal (TDSAT)’ intensity in the market has contributed to reduction in tariffs
in 2000. and launch of innovative schemes like lifetime prepaid and
low cost handset bundling which further reduced the entry

16
cost for a new subscriber. With downward spiraling ARPUs, However, the potential for wireline services remains large
changing economic profile of subscribers and the need to due to very low penetration in the wireline industry and the
meet the aggressive roll-out targets, the operators have ability of wireline to deliver broadband at lower operating
been under tremendous pressure to bring in operational costs than wireless broadband. New players in the telecom
efficiencies. Operators have been realizing efficiencies space had hitherto concentrated on wireless space leading to
through extensive outsourcing across the telecom value low competition and promotion of wireline services. Greater
chain. This has resulted in large scale opportunity for players pan-India expansion by private players can significantly lead
belonging to all the categories within the telecom ecosystem. to growth of wireline services. In addition, with combined
Some of the prominent categories include network offering of internet/ broadband and allied services like
equipment vendors, tower infrastructure companies, telecom IPTV, the sector can bounce back in the future. But, the
implementation vendors and IT vendors. Active sharing is a aggressiveness of mobile operators in rural areas due to
newer area which is being looked at by telcos to reduce costs easier and cheaper rollout and newer offerings on BWA
of rollout further. spectrum can further slow down the wireline penetration.
It has been observed that the past subscriber growth

has been skewed in favor of the urban market. The large Wireline subscriber base
rural population base of around 590 million5 and low rural 45 41 41 41 42 41
38 39 38
teledensity 27.76 percent4 indicates that there is still large 40 37 36 36
untapped opportunity in the Indian market. With urban 35 33
Subscribers in Mn
markets nearing saturation, operators are actively seeking 30
to tap growth in rural India. The entire telecom ecosystem 25
of operators, network equipment players and passive 20
infrastructure players are expected to evolve low-cost 15
delivery solutions such as significant reduction in telecom 10
network rollout costs as well as key operating costs such as 5
energy charges, which would make the business case for 0

1
gu 0
0
2
8
6
5
7
’0
’1
Au e’ 1
’1
serving the large but potentially low ARPU rural opportunity
’0
’0
’0
’0
’0
’0
’0
’0
ar
st
ar
ar
ar
ar
ar
ar
ar
ar
ar
n
M
M
M
M
M
M
M
Ju
increasingly viable. As a testimony to this growth potential,
rural teledensity has increased from 17 percent5 in June, 2009 Source: TRAI Annual Report and Quarterly Reports on Telecom Services
to the current 26 percent5 in June 2010 which translates into Performance Indicators
addition of 83 million rural subscribers in the last one year. We
expect to see continued heightened activity in this direction in
the near future as well.
Wireline services
While wireless has seen consistent growth over the years,
wireline over the last few years has actually seen a decline in
the subscriber base.
The total number6 of fixed line connections in India increased

from 5.81 million in 1991-92 to 40.8 million in 2006-07. During
1999-2000 to 2001-02, approximately 5-6 million customers
were added to fixed-line services each year. However, with
the drop in mobile tariffs and increase in coverage of mobile
services, net additions in fixed-line subscribers started
slowing down from 2.5 million in 2002-03 going down to
0.5 million in 2004-05. Due to mobile substitution and lower
tariffs, the fixed line subscriber base actually decreased by
3.5 million between 2006-07 and 2008-09. This decline was
aggravated by slow rollout of fixed line services by Telcos due
to the significantly higher total cost of service provision for
fixed line services compared to mobile wireless services.

6 Annual Report – 2006-07, TRAI, October 2007
17
Broadband and internet services Value added services

Internet subscriber base in India, though currently at a low Currently, the VAS market is worth INR 110-120 billion, which
level, has been experiencing significant growth over the translates into approximately 10 percent of wireless industry
last 2-3 years. This growth is being driven by the growing revenues. The share of VAS in wireless revenue is likely to
popularity of broadband, increasing user comfort with usage increase to 12-13 percent by 20118. This growth would be
of internet applications, continuous fall in PC prices and driven by increased operator focus on VAS due to continuous
decreasing costs of internet/broadband access plans. fall in voice tariffs, increasing penetration of feature rich
handsets, availability of vernacular content and increased user
Internet subscriber base adoption of VAS applications.
18 57% 60%
54%
51%
16 50% Growth of VAS revenues
46% 47% 50%
14 43%
40%
Subscribers in Mn
38% 140 12%

12 35% 40%
9.6%
10 30% 120 10%
28%
26% 30% 8.3%
8 100 7.5% 8%
6 20% 80
9.2 9.6 10.4 11.1 11.7 12.2 12.8 13.5 14.1 14.5 15.2 16.2 16.7 6%
4 119
10% 60
2 91 4%
40
0 0% 61
2%
20
0 0%
2008 2009 2010 (Estimated)
Internet Subscribers Share of Broadband
VAS Revenues Share of VAS

Source: TRAI Annual Report and Quarterly Reports on Telecom Services
Performance Indicators
Source: Industry consensus estimates, KPMG analysis
This growth has been accompanied by an associated increase Prior to 2008, majority of VAS revenues were attributable to
in the number of internet users which have attributed to the SMS and that too peer-to-peer (P2P) text messages. Over
growth of public internet cafes and multiple members of a the last few years, non-P2P SMS VAS has been gaining
household accessing internet. importance and is likely to become a dominant contributor
to VAS revenue over the next few years. In 2009, non-P2P
Access technologies play a crucial role in broadband SMS VAS accounted for 5-6 percent8 of operator revenues.
penetration. Right of Way (RoW) issues and costs of the This is expected to go up further, as operators focus more
existing broadband technologies has been a constraint for on VAS, especially with the launch of 3G services and with
the growth of internet. While there a number of technologies the availability of differentiated and customized content. The
being used by service providers to provide broadband addressable market for non-P2P SMS VAS has historically
services, DSL continues to be the most preferred technology been dominated by ringtones and caller ring back tones
and constitutes nearly 86.6 percent of total broadband (CRBT), but its contribution has been fading gradually and was
subscribers7. Cable modem technology follows with 6.9 within the range of 35-37 percent8 of VAS revenues in 2010.
percent connection. On an overall basis for accessing internet,
DSL leads with 51 percent while dialup stands second at 33.3
Market split for non-P2P SMS VAS
percent7. Wireless technologies have carved a unique niche
in terms of connectivity to internet with a share of nearly 7.6 Others
11% CRBT
percent which is a significant shift in the last two years.
37%
Newer access technologies like BWA and 3G can completely GPRS/ WAP Products
11%
transform the character of Internet/ broadband scenario in
India. BWA will overcome the key hindrance of RoW in India,
while 3G has the potential to make the mobile phone, a
ubiquitous device for accessing the internet.
P2A SMS & Alerts
18%
Voice Portals
23%
Source: Industry Estimates for calendar year 2010, Information Interviews
8 Industry consensus estimates, KPMG analysis
18
New frontiers for growth
3G and BWA
The last 5 years have been transformational for Indian telecom
industry and the next few years are expected to bring about
more stimulating and aggressive changes. One of the key
frontiers which would make the journey in coming years even
more exciting is the launch of 3G and BWA technologies.
The auction of 3G spectrum was concluded on May 19, 20109.

While commercial usage is only permitted from September
2010 onwards, the auction laid the groundwork for faster
internet connectivity and data transfer on mobile phones,
boosting usage of data services in the cellular market. This
was closely followed by auctioning of BWA spectrum which
also exceeded revenue expectations of the government. The
highly successful auctioning of 3G and BWA spectrums and
entry of new telecom players in BWA auction has ensured that
telecom market will see more exciting times going forward.
Total revenues which the government earned from these two
auctions stood at approximately, INR 1,063 billion10.
The market is likely to witness a wide variety of value added

services being offered, which were not possible over the
current 2G/2.5G network. The ARPU is expected to get a
boost given the increased revenue contribution from data
and value added services. Potential challenges that 3G
players could face would span across the value chain covering
innovative Product development, Network deployment and
management, Sales and Marketing etc.
In the first wave, operators would be able to provide rich

data services to HNI’s, working professionals, enterprise
customers and youth. They would be specifically targeting
current users of 2.5G and/or owners of 3G enabled handsets.
At the same time operators would be actively looking at
providing 3G services to other income groups, as this will
help spread the investment in technology/license over a wider
subscriber base.
The Ministry of Communications had specified that BWA

spectrum allocation would be technology neutral. High speed
broadband on BWA spectrum also has the potential to provide
connectivity for the growing small and medium enterprises
(‘SME’) segment; and be utilized for the return path bundled
with the DTH platform.
9 DoT press release dated, May 21, 2010

10 DoT press release dated, May 21, 2010 and BWA Auction- Final Results dated, July 12, 2010
19
Regulatory and policy

environment
Over the years, the Indian Telecommunication Policy and Regulatory framework has
evolved into a well developed framework that facilitates effective policy formation
and execution. The government has been making constant efforts to ensure that
the regulatory framework is beneficial for the consumers as well as the licensed
operators.
The policy and regulatory framework for telecommunications in India consists of,
among others, the following key bodies1:
• The Department of Telecommunication (DoT): DoT is the central governing body

for the telecommunication industry. It is entrusted with the task of formulating
policies for the development of the sector, awarding telecom licenses and
is also accountable for spectrum management. It also includes the Telecom
Commission, which is an exclusive policy-making function
• The Telecom Regulatory Authority of India (TRAI): TRAI is the Regulator for the
sector and has a mix of mandatory and recommendatory powers. It mandates in
areas related to tariffs, interconnection and standards for quality of service. TRAI
has recommendatory powers in areas related to licensing, timing, licensing
terms and conditions, license revocation, competition, facilitation
• The Telecom Disputes Settlement and Appellate Tribunal (TDSAT): The TDSAT
was set up to resolve all disputes between a licensor and a licensee; two
or more service providers; and between a service provider and a group of
consumers
• Wireless Planning Commission (WPC): WPC is primarily assigned the task of

spectrum management
• Group on Telecom and IT (GoT – IT): This was formulated to take care of ad-hoc
issues.
1 ‘Telecommunication Sector Report’, IBEF, September 2009
Section or Brochure name | 20
18
21
National Telecom Policy (NTP) A further addendum to NTP 1999 was made in November
2003. This amendment permitted a licensee to make available
The National Telecom Policy was instituted in 1994, to initiate wireline and wireless services using any technology in a
and sustain aggressive growth for the telecom sector and pre-determined license area after conversion to a Universal
ensure on-demand access to a telephone for every Indian. The Access Service License (UASL).
policy’s key objective was to establish telecom infrastructure
across all remote locations of the country. It also encouraged Key regulatory bodies
privatization of the telecom equipments industry to help India
emerge as a telecom manufacturing hub. World class service TRAI4
quality and special redressal of customer complaints are the
other essential pre-determined objectives of the policy2. Telecom Regulatory Authority of India was established as an
independent body under the TRAI Act of 1997. The act was later
A fresh round of reforms was introduced by the government amended in 2000. The entry of private players into the industry
in 1999 when it enforced the New Telecom Policy. This policy prompted the establishment of the act to effectively regulate the
was an improvisation over the NTP 1994, to help achieve telecom players.
stronger growth by escalating the control to a regulatory body.
The key objectives of the policy were3: TRAI safeguards the interests of the consumers through
transparency, ensuring conformity with service quality
• Availability of affordable telecom services for all. Ensure benchmarks, enforcing measures to safeguard national security,
penetration of integrated multimedia services including fixing tariffs for players, counseling the government on matters
ISDN services, remote database access, and government relating to telecommunication development and tracking
and community information systems performance and efforts of all players within the industry.
• Ensure coverage of all areas including rural, for universal DoT5

services. Services should encompass high-level services
and endeavor to achieve economic development DoT is accountable for policy formulation, monitoring performance
reviews, ensuring international co-operation, overlooking research
• Set up a modern integrated infrastructure which would and development and granting licenses to operators, allowing
enable the convergence of IT, media, telecom and them to provide basic and value added services in various cities
consumer electronics and telecom circles as per the approved government policies.
The Department also allocates spectrum and manages radio
• Build world-class telecom facilities in India by encouraging communications in close coordination with the International
privatization and offering a level playing field bodies. It is also responsible for enforcing wireless regulatory
• Safeguard the national security of the country. measures and monitoring the wireless transmission of all users in
the country.
Regulatory evolution
ILDservices Calling Party Pays Proposed MNP
Attempt to
opened to (CPP) boost Rural implementation
competition implemented telephony
TRAI Number
MVNO
established as BSNL Intra-circle merger portability
guidelines for
Private players Independent established guidelines proposed Discussions
Go-ahead to 3G as well
allowed in VAS regulator by DoT the CDMA established on 3G as 2G
technology spectrum bid disclosed
process
1994 1999 2002 2003 2004 2005 2007 2009 2010 2012 2013
1992 1997 2000 2006 2008 2011
Unified Access DoT to
Internet Licensing regime release
telephony introduced guidelines
initiated Decision on VOIP
NTP-99 led to on 3G Proposed
FDI limit was
National migration from services auction of 4G
Reduction of from 49 to 74
Telecom Policy high-cost fixed (awaited) spectrum
(NTP) licence fees Reference Broadband percent
license fee to low
- policy 2004
formulated cost revenue Interconnect ADC Completed the
order issued formulated auction of 3G
sharing regime abolished
and BWA
spectrum
Reduction in
IUC
Source: Press Search, KPMG Analysis
2 Department of Telecommunications website 4 ‘About Us’, TRAI Website

3 New Telecom Policy 1999, TRAI Website 5 ‘Annual Report 2009 – 10’, DoT
22
Telecom FDI policy Recent reports revealed that during the first two months of
this financial year, India’s telecommunication sector attracted
India is the fastest growing telecommunications market almost USD 891 million in FDI, the highest amongst all
across the globe. The urban teledensity has already breached sectors. On the other hand, during the same period last year,
the 100 percent mark5. Rural India, which has nearly 27.76 the sector attracted USD 612 million worth of FDI8. Overall,
percent teledensity as of August 2010, has shown impressive this sector has attracted FDI of about USD 9.98 billion (from
growth over the past6. April 2000) as of June, 20109.
India has achieved such aggressive growth primarily through The regulations governing Foreign Direct Investments have
urban areas, which account for only 30 percent of the total gone through different phases of transition to ensure market
population. Rural India, which accounts for 70 percent of the attractiveness for globally recognized players along with
population, holds immense potential and remains relatively safeguarding the interests of the Indian counterparts. The
untapped. This makes the Indian telecommunications sector well-defined regulatory policy has been the fundamental
one of the most attractive investment destinations for global reason for the inflow of huge international investments into
players7. the Indian telecommunication sector.
India’s FDI regime
Sr.
Sector/Activity FDI Cap/Equity Entry route
No.
74% (including
FDI, FII, NRI,
FCCBs, ADRs,
Basic and cellular, Unified Access Services, National/
GDRs, convertible
International Long Distance, V-Sat, Public Mobile Radio Trunked - Automatic upto 49%
1 preference shares,
Services (PMRTS) Global Mobile Personal Communications - FIPB beyond 49%
and proportionate
Services (GMPCS) and other value added telecom services
foreign equity in
Indian promoters /
Investing Company)
- Automatic upto 49%
2 ISP with gateways, radio-paging, end-to-end bandwidth 74%
- FIPB beyond 49%
a) ISP without gateway*
b) Infrastructure provider providing dark fibre, right of way, duct - Automatic upto 49%
3 100%
space, tower (Category –I) - FIPB beyond 49%
c) Electronic mail and voice mail
- Automatic upto 49%

4 Manufacture of telecom equipments 100%
- FIPB beyond 49%
Source: ‘FDI Policy’, DoT Website

* The government has revised guidelines for ISP’s on 24-8-2007 and new guidelines provide for ISP licenses with 74 percent FDI only.
6 ‘The Indian Telecom Services Performance Indicators’, TRAI, January - March 2010
7 ‘India Telecoms - Positives priced in, tougher road ahead’, JP Morgan, August 16, 2010
8 ‘Telecom most favored FDI sector’, Press Trust of India, September 01, 2010
9 ‘Fact sheet on FDIs’, Department of Industrial Policy & Promotion Ministry of Commerce and
Industry, August 2010
23
New and upcoming regulations education, finance and healthcare in rural areas.
The Indian Telecommunication sector has seen remarkable
growth and is designated as one of the fastest growing
markets in the world. It is also the second largest wireless MVNO
network across the globe, after China10. The aggressive
The Indian Government is in the process of reviewing the draft
growth has resulted in saturation of the urban markets and the
guidelines for the introduction of MVNO. TRAI had issued a
Indian telecommunication authorities are looking to introduce
draft proposal for MVNO in August, 2008 and the DoT had
new technologies to sustain the market growth rate.
accepted the proposal in February, 2009.
3G Services
The present landscape is considered to be ripe for MVNOs to
The government recently concluded the 3G and BWA auctions be introduced in India since it will allow the telcos, who did not
in June, 2010. The auctions were initially estimated to raise manage to win any 3G spectrum, to offer these data services
INR 350 billion and help the government contain the fiscal via the MVNO route.
deficit11. However, the government received approximately
A few companies have already made inroads into the MVNO
INR 1,060 billion as spectrum fees for 3G and BWA,
market by leveraging the franchise agreements.
cumulatively.
VoIP
3G technology has been highly anticipated over the past few
years and is expected to drive the next round of sustainable The growing telecommunication industry has necessitated
growth for the Indian telecom market through convergence of the demand for low cost domestic and international calls.
entertainment, infotainment and voice communications into This is where Voice over Internet Protocol (VoIP) will make
one single device. The anticipation around 3G services can its impact with a technology that allows the exchange of
be gauged from the fact that the 3G auctions was concluded voice over internet protocol packet switches. The primary
after 183 rounds of bidding over a period of 34 days12. Inspite requirement for this low cost option to deliver impeccable
of a huge amount being generated through the auctions, none quality is high bandwidth.
of the participating operators were able to win a pan-India
license. Many of the spectrum winners have announced that This technology can be used to effectively communicate
they will be ready to roll out 3G services within the next few between two personal computers, a personal computer and
months. a conventional phone as well as between two conventional
phones.
The key drivers for the growth of 3G in India will be innovative
content, improved customer services and increased Recent reports reveal that the internet subscriber base in
affordability of handsets as well as availability of VAS. These India has risen from 13.54 million in March 2009 to 16.72
drivers will help ensure growth of 3G not just in urban areas million in June 201016. These numbers suggest a 23 percent
but in rural areas as well. The rural expansion will help in the growth in internet subscriber base, which also implies greater
progression of tele-density and broadband penetration which propensity to utilize VoIP based services. The only major
will in turn have a positive impact on the overall economic deterrent for the adoption of these services will be the costs
growth of the country. involved in setting up these services, especially in rural areas
across the country.
Broadband Wireless Access (BWA)
VoIP has received significant regulatory attention over the
The auction of the BWA spectrum helped the government past decade. In 2002, TRAI had recommended to DoT to open
raise as much as INR 385 billion after 117 rounds of bidding up this sector in a restricted manner. In 2005, DoT permitted
that lasted 16 days. At the end of the auction, only one unlimited internet telephony to all access providers in India.
company managed to successfully bid for a pan-India license13. In 2006, limited access was also given to internet service
providers, who were asked for 6 percent of their revenues as
Broadband Wireless Access is expected to provide an
license fee and were restricted from termination and carriage
effective solution to the challenge of low broadband
in India17.
penetration. The launch of this technology is expected to bring
India closer to the achieving the target broadband connectivity
to Gram Panchayat level by 201214. Presently, India has a
broadband subscriber base of only 10.08 million15.
BWA is expected to bridge the urban-rural digital divide and

help address concerns of delivering essential services like
10 ‘Annual Report 2009 – 10’, DoT 16 ‘The Indian Telecom Services Performance Indicators’, TRAI, April - June 2010
11 ‘3G sale nets Rs. 67,710 cr.’, The Hindu, May 20, 2010 17 DoT; TRAI; ISPAI; ‘VoIP Market-India’, Research on India, August 2009
12 ‘3G Auction - Final Results’, DoT Press Release, May 21, 2010
13 ‘BWA Auction- Final Results’, DoT Press Release, June 12, 2010
14 www.indiatelecom.org
15 ‘Telecom Subscription Data as on 31st August 2010’, TRAI, October 2010
24
New security requirements

On July 28, 2010, DoT released a set of amendments to the • Location Details: Operators would be required to ensure
telecom licenses, under which certain specific obligations upgradation of existing equipment within one year from
were imposed upon the operators in the interest of the the date of notification, in order to ensure that the telecom
national security of the country. This move was intended to operators are able to provide location details of mobile
address the security concerns that were raised by the Home customers within a precision of upto fifty meters
Ministry, regarding the telecom equipment being imported
• Security and Business Continuity: DoT has approved the
from other countries.
template of a Security and Business Continuity agreement
Some of the key points covered in the notification were18: which will need to be executed by the telecom operators
and their vendors. The agreement requires the vendors
• Security Policy: Within thirty (30) days of the date of
to transfer their intellectual property to a third party. The
the Notification, the telecom operators were asked to
telecom operator and the vendor are required to enter
submit their organizational policy on security and security
into an agreement with an escrow agent authorized by
management to DoT
Controller of Certifying Agencies (CCA) or the National
• Network Audit: Telcos were asked to engage international Informatics Centre, Department of Information Technology,
accredited agencies to conduct audit and certify core Government of India. As per the terms of the agreement,
equipment such as routers, switches, firewall, intrusion CCA will create an encryption key for the escrow materials
detection and prevention systems and all software and the decryption key will remain with the escrow agent.
associated with telecom operations and services. If the vendor fails to provide support and DoT feels it is
Operators are also required to ensure that such audit necessary to release the source code they may obtain the
agencies should not be from the same country as that of same from the agent.
the vendors of the telecom operators
• Minimal dependence on foreign engineers: Telcos were
asked to ensure that dependence on foreign engineers
would be made minimal and/or almost nil within a period of
two (2) years from the date of the Notification
18 ‘Amendment to UAS license agreement for security related concerns for

expansion of telecom services in various zones of the country’, DoT Press
Release, July 28, 2010
25
Broadband for all

Various studies have credited broadband as a catalyst for economic and social
development of a country. Availability of broadband services at affordable price
levels contribute to higher GDP growth rates1, provide for a larger and more
qualified labor force, and make that labor pool more efficient. It has been proven
that the multiplier impact of broadband growth on GDP is significantly higher than
mobile telephony growth.
Growth effects of ICTs: Percentage point increase in GDP

per capita for every ten percentage point increase in ICT
penetration, 1980-2006
1.6
1.38
1.4
1.21
1.2 1.12
1
0.81 0.77
0.8 0.73
0.6
0.6
0.43
0.4
0.2
0
Fixed Mobile Internet Broadband
High-Incom e Econom y Low -Incom e Econom y
Source: Qiang and Rossotto, World Bank, Information and Communication for
Development Report 2009
The successful auction of 3G and BWA spectrum has laid a good foundation for a
push towards achieving pan India broadband infrastructure; which will lead us to
the dream of providing “Broadband for all”. This vision demands a synergetic push
across technologies (DSL, Fiber, Cable, and wireless), amongst telecom operators
(public and private) and across the broadband value chain (device manufacturers,
service providers, content providers & regulators); so as to provide this “universal
service” to residents living anywhere in the country (urban or rural) and to the
match the customer expectations across all segments (Enterprise, Government and
Retail).
1 Consultation Paper on National Broadband Plan, TRAI, June 10, 2010
24
27
The key challenges in broadband Quality of Service (QoS)
adoption Broadband growth has been partly constrained owing to

poor QoS in terms of throughput speeds experienced by
The broadband penetration in India has been low despite customers. The contention ratio4 (number of subscribers
the presence of 104 broadband service providers. The accommodated in a given bandwidth) in India is high i.e.
broadband penetration is less than 1 percent2, which is low service providers provision an average 130 subscribers in 52
compared with overall tele-density of 59.63 percent3. Of the Kbps bandwidth, whereas internationally the same ratio is
approximately 17 million (fixed) internet subscribers only not more than 50. Due to this phenomenon, bandwidth per
10.08 million are broadband users3. This implies that India still subscriber reduces dramatically, especially when several
has some way to go in terms of achieving the original target subscribers log in at the same time.
of 20 million broadband subscribers by the end of 2010, as
set by the Broadband Policy 2004. The number of broadband Contention ratio (number of subscribers accommodated
additions is only 0.1 to 0.2 million compared to 16-18 million in given bandwidth)
per month for mobile additions2.
140 130
Uptake of broadband has been limited so far on account of
120
multifarious factors:
100
Inadequate wireline infrastructure
80
Inadequate wireline infrastructure has resulted in the “last
60 50 50
mile” challenge in providing access. The absence of local 45 48
loop unbundling (LLU) further restricts competition in this 40

space by not allowing a regulatory framework wherein 20
alternative service providers can use the existing local loop of
licensed service providers to offer broadband services. Both 0
Czech Slovakia UK Ireland India
these factors have predominantly undermined the growth Republic
of fixed broadband services currently being provided using Czech Republic Slovakia UK Ireland India
DSL technology. Global examples suggest that the DSL
penetration has been significantly higher in countries adopting Note: The contention ration specified are for download speed of 512 Kbps except
for Slovakia for which 1.5 Mbps has been considered
LLU:
Source: TRAI, CRISIL Research, May 2010
DSL Coverage2 Broadband

1
GDP per capita
Country Year of LLU penetration
(USD PPP, 2008)3
percentage Source year (Dec 2009)
France 2001 98.5% End 2008 30.4 43,453
Germany 1996 95.0% End 2008 30.3 43,484
Italy 1998 95.7% End 2008 20.5 37,936
Netherlands 1997 100.0% End 2007 37.1 50,868
UK 2000 100.0% End 2008 29.5 42,275
Australia 1999 91.0% June 2008 23.3 44,223
Canada 2001 89.3% End 2007 29.6 42,945
Japan 2001 98.6% Sept 2008 24.8 39,081
United States 2003 82.0% End 2007 26.4 46,008

Source:1 OECD, Working Party on Telecommunication & Information Services Policies, Developments in Local Loop Unbundling, 2003
2 OECD, Indicators of broadband coverage, 2010
3 OECD, December 2009
2 Consultation Paper on National Broadband Plan, TRAI, 10th June 2010

4 TRAI, CRISIL Research, May 2010
28
Support for efficient broadband infrastructure

Growth of internet and broadband users (in Millions)
deployment
180 10.5
Right of Way (RoW) procedures and charges are fairly 160 9.47
9.5
140
complicated and have concerned the service providers to 120
8.77 8.5
7.82
venture into creation of new infrastructure (especially optical 100 7.21 7.5
80 6.62 6.62 6.5
fiber cables) for broadband and telephony services. Lack 60 5.52 5.5
of adequate power supply (or alternative energy sources) 40 4.9
4.5
20 4.38
especially in the rural areas has also been one of the key 0
3.87
3.5
factors for the sluggish penetration. Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun-
08 08 08 08 09 09 09 09 10 10
Cost of customer premise equipment (CPE) Fixed Internet Subs Wireless Internet Subs
Fixed Broadband Subs
The relatively higher cost of CPE is another hindrance for
broadband penetration. Also, the PC penetration in the Source: Indian Telecom Services Performance Reports, TRAI, 2008-2010
country, especially in the rural sector, is low. In the wireless
space, while CDMA operators have launched EVDO based
services that provides high speed access, the uptake has
been limited due to expensive end user device. Key drivers of broadband
acceleration
Notebook sales in India (in thousands) It is broadly accepted and proven internationally, that
Broadband growth depends on availability, affordability and
3000
perceived useful applications or usage.
2500
2000 Availability
1410
1500 795
770
1000
318
500 55 1027 1099
22 747
377 532
0 155
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
E st abl i shment Househol ds
Source: IT Industry Performance Annual Review: 2009-10, MAIT-IMRB, 28th July

2010 Applicability Affordability
The falling prices of laptop and greater availability in terms

of features and pricing has led to a 65 percent growth in sale
Availability – broadband services at the right
of notebooks. In 2009-105, the household users accounted
for a modest 56 percent of the sales; while the rest was places
contributed by business users. Also, the consumption in Although 70 percent of Indian population lives in rural areas;
household users has grown by 83 percent. This is expected broadband facility is limited to metros and major cities.
to have a continued positive impact on uptake of broadband Availability of broadband is critical for development of rural
services. areas as much as it is for the urban areas. Out of total 10.08
million broadband subscribers6, mere 5 percent are rural
subscribers. The low broadband penetration in rural areas is
attributed to unavailability of transmission media connectivity
up to village level. Due to high initial investment and expected
low returns, operators are hesitant to invest in small cities/
villages or remote areas. Considering the enormous power of
broadband, it is essential to concentrate on availability of the
broadband to every citizen.
5 ‘IT Industry Performance Annual Review: 2009-10’, MAIT-IMRB, 28th July 2010
29
Affordability – Broadband tariffs at the right price Internet is largely in English and to an extent in Hindi, and is
not customized as per local needs and diversity. The content
The entry level tariff7 for broadband services has come down in Indian vernacular languages will increase relevance and
drastically from INR 1,500 per month in 2004 to INR 200 consequently interest of the local population in broadband
a month in 2007, which is still higher than most countries. uptake and utilization. Therefore considering specific regional
The ICT Development Index report of the International requirements, content development in vernacular languages
Telecommunications Union (‘ITU’) indicates that the needs to be encouraged. Large numbers of softwares
Broadband rates are higher at 7.7 percent of GNI as compared are available to translate the content from one language
to the price basket for mobile telephony which stands at 2.2 to the other. Conversion from speech to text and text to
percent. speech is also available for different languages. Though the
High Cost of PC and other access devices commonly accuracy of such software depends on the product and
known as CPEs is one of the major impediments in spread actual requirement, there is sufficient scope to further work
of broadband. Economical options like use of thin client, on these areas to boost the development of the content
recycling of old PCs / Laptops will make CPEs more affordable in Indian vernacular languages. Given India’s strengths in
for the masses. One of the measures to make CPEs more IT and the recent trend in the traditional entertainment
affordable may be to provide incentives through fiscal policies. industry, infotainment can be a big booster for broadband.
Incentives could be in the form of reduction of taxes and Entertainment content can be targeted to boost broadband
levies on CPEs and financial incentive in terms of rebate in demand. This can be a high growth driver which may require
income tax to encourage affordability of CPEs. The broad some initial nurturing but may enhance broadband demand
objectives of providing fiscal incentives are to make CPEs especially to the non English literate subscribers.
affordable to the consumers and to stimulate investment Accessibility to applications - Increasing the scope of
for the domestic manufacturers for boosting indigenous broadband from just e-mail to more value added applications,
production. effective use of broadband in automation of operations and
functions, innovative use of technology in imparting education
Growth of internet and broadband users (in Millions) and increasing literacy is likely to drive the penetration of
broadband in India. Few of the areas/applications which hold
United States Canada UK Netherlands Japan India France Brazil Russia
significance to the broadband popularity and growth are:
Mobile cost as %age of per capita GNI
8
Overall telephony cost
7
(as a %age of GNI) high in Brazil
6
5 Email Internet Surfing
High
Significant difference in
4
Broadband and Cellular costs broadband cost and
3
Uptake/Popularity
are similar for most of the cellular cost for India

developed markets Voice Clips
2
Moderate Voice Chat
1
Video Video
0 Gaming
Voice & Streaming
0 2 4 6 8 10 12
Video Chat
Broadband cost as %age of per capita GNI Low
Tele-Education HD
Tele-Medicine Video
Source: ‘ICT Development Index Report’, ITU, 2009
0 64 Kpbs 256 Kpbs 512 Kpbs 2 Mbps >4Mbps
Minimum Bandwidth Required

Applicability – broadband services supporting the
right applications
• Education: In education, virtual classrooms (Tele
Localized Content - India poses a unique challenge in terms Education), where students do not have to travel distances
of diversity in spoken languages. Though Hindi and English are to schools and colleges, will be in demand. Online
principal and secondary official language respectively, there courses, tutorials and examinations will be necessary
are 22 official languages recognized by the Constitution, and for empowering universal education where broadband
hundreds of additional languages and dialects spoken across can be used to impart knowledge. Video conferencing is
the county8. To ensure end-to-end local language delivery, a very useful tool, however initial equipment cost is still
applications as well as content need to be provisioned in viewed as prohibitively high. In keeping with the “Right
local languages. The content that is available today on the to Education Act” of the Government of India that came
into force on April 01, 2010, broadband can help in bridging
this scarcity of adequate schools and teachers to provide
effective education at affordable costs
7 Consultation Paper on National Broadband Plan’, TRAI, June 2010

8 ‘Constitution of India’, National Portal of India, http://india.gov.in
30
• Healthcare: Another sector which can be benefited from Hence, the scope of broadband can be enhanced from
broadband penetration is healthcare. A significant problem just e-mail to more value added applications. Effective use
plaguing the nation’s health care system is the fact that of broadband in automation of operations and functions,
there are significant disparities in availability of reliable innovative use of technology in imparting education and
health care facilities between urban and rural areas. Rural increasing literacy will drive the penetration of broadband in
India, for example, experiences higher mortality rates due India.
to non-availability of expert advice and timely treatment.
A lot of development is taking place within the e-health
field. Many gadgets are now available, which can assist
in remotely capturing vital parameters of the body which
can be utilized by people living in rural areas to provide
information and seek timely expert advice of doctors
available in any corner of the world at a fraction of the costs
• E-Banking & E-Commerce: Broadband is also useful for
various utility services like online banking, bill payment,
rail ticket booking, online application filing and trading. It
allows job seekers to effectively search for employment
opportunities. New content creation and distribution
systems have enabled millions of people to distribute
their contributions online with least expenditure. There
are significant financial as well as social benefits of online
shopping. It helps ensure the cheapest deal and also helps
to save time when using price comparisons on the web.
Broadband services in rural and remote areas can also be
a very cheap and effective medium for providing banking
services to the “unbanked” population of India and further
the financial inclusion agenda of the Government
• Entertainment: There is dramatic increase in consumer
behavior towards real-time applications i.e. “experience
now”. Share of real-time entertainment traffic (video and
audio streaming, Flash media, peer casting, place shifting)
is increasing. Thus, entertainment seems to be key driver
for generating huge demand for broadband especially in
rural and computer literate population
• Utility: Remote management of security for homes
and business premises, and an increasing number of
household appliances and machines communicating
over IP networks, is expected to drive the demand for
broadband
• E-governance: For any technology to go main stream
and find maximum applications and utility, one of the
biggest customers is the government. Broadband can
be an important lever in helping government realize its
objectives laid out under “National E-governance Plan”.
With e-governance being the new mantra, it has significant
potential to bring about convenience, transparency and
efficacy in government functions and take these services
to the doorstep of the citizens.
31
Achieving the vision of The rural push
“Broadband for All” To support the broadband infrastructure roll-out in the rural
areas, the Department of Telecommunications (DoT)11 has
Despite the historical challenges identified so far, the regulator also proposed to offer a slew of freebies at the panchayat
as well as the government has shown willingness to reignite level. This includes giving three broadband connections to
the broadband growth, and provide a platform to support every gram panchayat free of charge for three years along
“Broadband for all”. with free installation of computer and printer; three telephone
connections and one cable TV connection without any charge.
National broadband plan
The incentives will cost about INR 2,000 crore, which will be
TRAI has suggested the roll-out of a national optical fiber cable funded through the Universal Services Obligation Fund.
network which will act as a backbone to broadband services
across the country. The robust national infrastructure would
be scalable to cater to our future requirements not only in
urban areas but also in the villages. For making all villages Conclusion
broadband-enabled, an option is being explored to take optical Broadband is the much needed catalyst to bring about the
fiber cables to 3.74 lakh villages having a population of 500 or socio-economic growth in the country. India, therefore, needs
more (basis Census 2001 data). The regulator has suggested a National Broadband Plan encompassing initiatives across
that funding for such a project could be considered from the various ministries which would provide a platform for provision
Mahatma Gandhi National Rural Employment Guarantee of quality broadband services across the country. It would
Scheme (MGNREGS) for non-skilled work and from the take a holistic view covering various aspects like customer
Universal Services Obligation Fund (USOF) for material and requirements (demand drivers), customer segment (urban
equipment cost9. India is taking a step in the right direction as well as rural), technologies (wireline as well as wireless);
as global references suggest that developed countries like nature and type of CPE; regulatory aspects. The regulators
Japan, Singapore and Australia have taken similar initiatives to as well as the government and the industry players across
proliferate high-speed broadband services to their masses. the value chain need to join hands so as to provide the best
3G/BWA spectrum auction possible support to this national vision of “Broadband for All”.
India is poised to see both 3G and BWA services before

the close of 2010, BWA services like WiMax (or LTE) has an
opportunity of reaching out to the rural masses in a cost-
effective manner. WiMax and 3G will help in delivering the
government’s target of achieving 100 million broadband
subscribers by 2014. Wireless Broadband technologies by
leveraging (or sharing) the existing wireline infrastructure
(available to the public and private operators) can immensely
contribute to the broadband proliferation in the country.
Low cost tablet PC

Indian government (Ministry of HRD) has unveiled a prototype
tablet computer that would sell for an affordable INR 1,500 or
USD 3510. This highly affordable touch-screen device would
in times to come, play a critical role in providing high-quality
consumer broadband experience across the country. The
tablet also comes with a solar-power option that could make
it more feasible for rural areas. The Linux-based Tablet PC
features most of the basic functions one might expect in a
Tablet: Web browser, multimedia player, PDF reader, Wi-Fi,
and video conferencing ability.
9 ‘Consultation Paper on National Broadband Plan’, TRAI, June 2010

10 ‘An IIT, IISc-designed laptop for just INR 1,500’, Times of India, 23rd July 2010
11 ‘Special purpose vehicle planned for broadband push’, Hindu Business Line, 24th July 2010
30
33
Broadband
infrastructure
Out of the total telephone subscriber base (wireline and wireless) of over 706
million and total internet connections of approximately 17 million, India has only
10.08 million broadband connections. Hence, availability of broadband services in
India is still at a nascent stage, and enormous opportunity exists in provisioning
broadband services to current telephone users1.
Unlike telephony that has primarily ridden on mobile telecom infrastructure,

broadband has traditionally been driven by wireline infrastructure. India is a vast
country and rolling out wireline broadband network expeditiously in a cost effective
manner is a significant challenge. Some of the challenges are unavailability of last
mile connectivity, unavailability of Right of Way (RoW), land charges, requirement of
multiple permits and clearances. Considering these impediments, the Government
of India (GoI) is supporting increased penetration of wireline and broadband
connectivity in rural and remote areas through its Universal Service Obligation Fund
(USOF) activities. In 2009, it signed an agreement with BSNL to provide 861,459
wireline broadband connections to individual users and public institutions over a
period of next 5 years2.
Wireless broadband has emerged as an exciting alternative to wireline primarily

due to the fact that nearly 25 percent of the country’s over 650 million wireless
subscribers have successfully transitioned to become mobile internet customers.
The interest in wireless broadband has now gained further momentum given
the auction and allocation of 3G and BWA spectrum to private operators. These
operators are expected to roll out 3G services by Q4 FY 2010 and BWA services
after another 12 to 18 months3. GoI expects wireless broadband to significantly
grow the broadband connections to 100 million by the end of 20154.
1 ‘The Indian Telecom Services Performance Indicators January – June 2010’, TRAI, October 2010 and
‘Telecom Subscription Data – August 31, 2010’, TRAI, October, 2010
2 ‘DoT USOF website
3 Bharti Airtel, Tata DOCOMO Press Releases, 2010
4 ‘National Broadband Plan Consultation Paper’, TRAI Release, June 10, 2010
32
35
Current state of telecom Optical fibre connectivity
infrastructure Given the factors of capacity and cost effectiveness, OFC has
emerged as one of the preferred medium of transmission
Network architecture globally. On the last mile network, various countries have
adopted different OFC based deployment methodologies,
A broadband infrastructure consists of three layers of
primarily to serve the growing capacity need of customers.
network i.e. core, access and last mile network. The last mile
In the US, Verizon Communications provides a Fibre-to-the-
network consists of Customer Premise Equipments (CPE)
Home (FTTH) service to select high ARPU markets within its
such as wireless or wireline routers, modems, switches and
existing territories. AT&T leverages Fibre-to-the-Node (FTTN)
the medium of transmission between the base station and
service with twisted pair to the home. Japan, South Korea and
subscriber. In case of wireless medium, radio frequencies
most recently China have emerged as countries having largest
are transmitted from the base station through the antennae
deployments of FTTH services. The above countries are also
hosted on the towers. Hence, tower infrastructure is a critical
extensively using OFC for broadband access network. Various
component of last mile wireless network. The access network
standards such as Ethernet Passive Optical Networking
consists of equipments such as the base station, base
(EPON), Broadband PON (BPON) and Gigabit PON (GPON)
station controller, gateways, mobile switching center and is
have been adopted and are supported by standards
responsible for managing and routing the traffic within a zone
organizations such as International Telecommunication Union
or a circle. The core network typically consists of the backbone
(ITU) and Full Service Access Network (FSAN).
network, which is primarily responsible for interconnection
and switching traffic across multiple access networks/zones/ India is a unique market with both affordability and capacity
circles. being the key drivers for demand of services. Emergence
of DTH and IPTV services, e-governance initiatives of state
Technologies
governments and impending launch of 3G services are drivers
The capacity and coverage requirement for the network that are expected to shoot up the demand for bandwidth. OFC
increases manifold with the rise in consumer interest for rich based transmission is expected to emerge as the primary
data usage. The choice of technology further takes account solution and India is expected to witness large scale FTTN/
of parameters such as cost efficiency, coverage, and the FTTH deployment going forward. In fact, India and China
availability of resources like frequency spectrum and optical currently account for about one-third of the global optical fibre
fibre. Hence, operators are opting for new technologies demand. However, cost effectiveness of such large scale
across the core, access and last mile networks for offering OFC deployment needs to be ensured, especially for last mile
broadband. network. In this regard, wireless infrastructure especially for
last mile network could be a viable alternative for offering
Transmission in core network is shifting towards packet based broadband.
technologies such as IP/Ethernet/optical primarily on Optical
Fibre Cables (OFC), which results in efficient handling of vast
amount of voice, video and data. In case of access network,
the traffic is presently handled on both wireline (OFC, DSL)
and wireless (RF, Microwave) media, and like the core
network, it is also moving towards packet based technologies.
The last mile connectivity is provided either through wireline
(OFC, DSL) or wireless (RF, satellite) media, but is currently
dominated by the former. In wireline network, OFC is
replacing DSL as a more efficient solution, but is saddled with
the usual challenges of deploying wireline infrastructure.
Given the above, it is clear that OFC and wireless based

technologies are emerging as preferred medium for data
transmission.
36
Wireless infrastructure
Cumulative BTS rollouts (FY08-10E)
Given that wireless broadband network shall be overlaid
on an existing 2G footprint, most of the existing wireless
infrastructure is expected to be used for broadband
deployment, thus reducing time-to-market and improving
affordability of services.
Operators have rolled out approximately 140,000 and 159,000

BTSs in FY 2009 and FY 2010 respectively, driven by factors
such as growth in 2G wireless subscriber base and new circle
rollouts by incumbent operators, coverage rollout by new
operators and the launch of 3G services by BSNL and MTNL5.
Moreover, few operators have already deployed 3G-ready
infrastructure (i.e. BTS, dual-port antennae) in their recent 2G
rollout, which would further expedite deployment of wireless
broadband.
Operator-owned tower companies, operator owned

alliances and independent tower companies have rolled out
around 337,000 towers as of March 31, 2010, to support 2G
subscriber growth momentum. Going forward, these tower
Source: B&K 2007, Citi 2007, IDFC 2009, Industry discussions, KPMG Analysis
companies are expected to discipline the roll out of new
towers as they expect large sharing of future BTSs (including
those from wireless broadband) to be hosted on existing Nonetheless, operators are overcoming deployment issues
infrastructure. This sharing is not expected to get constrained by exploring unique business models to reduce the cost of
by tenancy capacity and mix of RTT (Roof Top Tower) and GBT serving the rural consumers, such as increased adoption of
(Ground Based Tower) and types of tower. Moreover, such active and passive infrastructure sharing and also forming
infrastructure sharing shall help operators reduce their capital strategic alliances with TEMs.
expenditure and operating expenses.
Coverage
Outlook for evolution of wireless
All the operators together have around 1.15 million route
km of wireline deployed, which is largely OFC based and broadband
covers almost all the inter and intra cities and towns in India.
Technologies such as WiMax and/or LTE in the BWA spectrum
However, there is limited availability of last mile OFC based
and CDMA-EVDO, HSPA+ in 3G are expected to enable
network in villages and it is estimated that an additional
wireless broadband. The coverage led roll out from operators
quarter of the existing wireline network would be required to
based on such new technologies will drive the roll out of
cover 80-90 percent of these villages. GoI’s ‘Broadband for All’
active and passive infrastructure in the near future. Within the
project involves laying optic fibre backhaul network to ensure
technologies, 3G is expected to provide wireless broadband
that broadband connectivity reaches every panchayat in the
access to mobile users in the coming 12 – 18 months.
country by 20126.
India’s wireless operators have managed to provide coverage Cumulative BTS rollouts (FY08-12F)
to a vast majority of the country7, indicating that wireless
infrastructure is now available almost everywhere in India.
However, there still exists a significant urban-rural difference
in terms of return on investment (RoI); it takes approximately
twice the time to achieve positive ROI from rural areas vis-à-
vis urban areas, primarily driven by lower subscriber uptake8.
Other reasons for a lower ROI in rural areas include escalation
in costs and delays in setting up infrastructure in rural areas
due to slow process of leasing and purchasing land from local
panchayats, irregular and non-availability of power supply.
5 ‘GIL Annual Report 2010’, GIL company website, March 2010; KPMG Analysis
6 Common Service Center Scheme, Government of India website
7 ‘Bharti Annual Report 2010’, Bharti Company Website, March 2010
Source: B&K 2007, Citi 2007, IDFC 2009, Industry discussions, KPMG Analysis
8 ‘5th Telecom Summit’, Assocham 2009
37
Out of c. 260,000 BTSs that are expected to be added in FY

2011 and FY 2012, 3G is expected to contribute to c. 100,000.
Conclusion
Few of the private operators in India plan to launch 3G by the India is one of the most compelling telecom markets in
current year end. It is expected that most of the 3G BTSs the world. Due to its exponential growth, large scale and
would be deployed in metros and key towns of Circle A and affordability, the country’s telecom business model is a
B categories, primarily to service coverage requirements of model of efficiency in global telecom industry. The continued
operators. Post FY 2012, capacity requirements for 3G and success in wireless telephony has helped the country build
coverage requirements for BWA are most likely to drive the adequate telecom infrastructure. While broadband would
BTS demand9. require some amount of network upgrade and deployment
of active infrastructure, existing telecom infrastructure
This wireless broadband rollout is expected to follow 100 would expedite rollout of affordable wireless broadband.
percent tower infrastructure model, similar to the one Moreover, ongoing cost reduction initiatives and expanding
followed in recent 2G rollouts. Also, since operators get a rural coverage would further enable operators to increase
huge discount, more than 70 percent on the infrastructure affordability and provide broadband to all.
fee for dual tenancy on a particular tower, they are likely to
co-locate their 3G and BWA BTSs along with 2G10. Hence,
wireless broadband is not expected to drive building of new
towers, at least in the first few years of its launch. However,
to make broadband available for all, the economics of wireless
broadband rollout may have to be made further favorable
through India-specific initiatives focusing on reducing cost of
delivery.
Operators have identified reduction in energy consumption

as a primary way to reduce total cost of operation. According
to industry estimates, there is a lot of scope for energy
rationalization at tower sites. Given the power outage in India,
each tower currently consumes an average of 4,000 litres of
diesel every year, implying the telecom industry consumption
of about 1.8 billion liters of diesel every year11. Hence,
operators are sharing telecom sites and influencing tower
companies to build innovative Energy Management (EM)
products and solutions based on renewable sources of energy
that can bring down the energy consumption. TEMs have
also taken the lead in this area by supplying outdoor BTSs in
India, which do not require air conditioned environment. These
companies have recently deployed low-power/next generation
green BTSs in countries such as China, and one can expect
them to come out with similar solutions for India.
Operators have faced and would continue to face significant

challenges in penetrating rural markets, despite their
attractiveness. In this regard, GoI initiatives such as USO
Fund and push for infrastructure sharing were claimed to be
instrumental in increasing the coverage of telecom services
in the far flung areas. The fund has already provided support
for setting up and managing 6,956 towers spread across 500
districts in 27 states. Also, BTSs are being commissioned
and mobile services started in a phased manner. Given the
fund’s support, BSNL has already rolled out 1,000 WiMax BTS
and is in process to deploy 7,000 more BTS in rural area12. The
government is also giving due consideration to offering USOF
support to the BWA spectrum auction winners to support the
business case and provide a level playing field in the rural area13.
9 IDFC 2009, Industry Discussions, KPMG Analysis

10 Industry Discussions, KPMG Analysis
11 ‘GIL Annual Report 2010’, GIL Company Website, March 2010
12 ‘BWA winners likely to get USO Fund support’, CIOL, May 2010
13 ‘Universal Service Obligation Fund Implementation Status’, Department of Telecom, September 2010
36
39
Broadband - catalyst
for convergence
Convergence is generally defined as the ability of different networks to carry similar
kinds of services (e.g., voice over Internet Protocol (IP) or over circuit switched
networks, video over cable television or Asynchronous Digital Subscriber Line
(ADSL). It can also be defined as the ability to provide a range of services over a
single network, such as the so-called “triple play.”
Convergence opportunities have seen a major growth as existing networks are

modified to offer new services (e.g., upgrade of telephone networks to offer ADSL,
rollout of urban optic fibre networks, and the modification of cable networks to
offer interactive services). Convergence is also possible with wireless broadband
technologies. As a result, different network infrastructures provide a plethora
of services as depicted in the table below. Cable television providers can offer
consumers voice, Internet access, and broadcast services over the same network
as one bundled package of services at a fixed monthly rate. Likewise, a mobile
service provider may be able to offer a subscriber data and video services, along
with traditional voice services, and digital television (DTV) providers can offer
interactive services.
Viable business models with convergence
Operators Converged services
Broadband and DSL Operators (e.g IPTV, Multi-player Games, Music,

Airtel Telemedia) using Copper line Ringtones, Ringback tones, Internet
Internet Services, Digital and Analog

DTH and Cable Operators (e.g Hathway,
TV, Interactive Services like (Movies,
Comcast)
Ticket-booking, etc), time-shift TV
Mobile TV, Mobile Radio, Music

Download, Mobile Gaming,
Wireless Operators (e.g Vodafone, Video Calling, Internet Services,
Airtel, NTT Docomo) ecommerce, pushed content,
mobile ticketing, news content,
Ringtones, Ringback tones
Fixed Wireless Operators (e.g AT&T,

VOIP, IP Phones, Internet Services
Covad Wireless)
Source: Telecommunications Management Group, Inc, Press Reports
40
41
International scenario - Data over Cable Service Interface Specification (DOCSIS) is

an international telecommunications standard that permits
convergence the addition of high-speed data transfer to an existing Cable
TV (CATV) system. It is employed by many cable television
In Europe, the focused efforts of incumbent and second-tier
operators to provide Internet access over their existing hybrid
operators in developing the bundled services has significantly
fibre coaxial (HFC) infrastructure, effectively provide internet
expanded the triple play model in last 2 years thereby
services at speed upwards of 100Mbps.
reducing the churn as well. To meet the increasing demands
of triple play, the network capacity to carry these services
has been improved through upgrades using ADSL2+, hybrid
VDSL/fibre and DOCSIS 3.0 technologies. Converged services in India
France has been one of Europe’s key markets for telecom Indian Multi System Operator (MSO), Hathway Cable and
convergence. The consolidated cable sector is now dominated Datacom Ltd were the first Cable ISPs in India. Hathway
by Numericable, which manages an upgraded network provides broadband services through its cable network on
capable of competing effectively with DSL offerings. subscriber’s PC or Corporate LAN using a cable modem /
As of end 2010, in North America, the fastest deployment of router. Hathway uses its fibre-optic backbone and internet
convergence is expected to be Videotron’s announced 120 nodes and data centres to provide 365X24X7 high speed
Mbit/s download / 30 Mbit/s upload service in Quebec City1, internet service. Based on the DOCSIS (Data over Cable
followed closely by existing 107 Mbit/s deployments in the Services Interface Specifications) protocol, it provides a level
USA. The U.S. Federal Communications Commission (FCC) of security equal to or better than that provided by dedicated-
urged U.S. providers to make 100 Mbit/s a standard speed line network access services, like the telephone, ISDN or
available to 100 million households before the end of the DSL. Hathway’s customer service is localised to each city and
decade. always on call. The helpdesks are manned and active round
the clock.
Bharti Airtel and Radio Mirchi have envisaged possibilities of

convergence targeting FM Radio listeners over mobile phone
Indian scenario - leveraging (20 percent of the listeners) and come up with Mirchi Mobile
existing cable TV networks which provides Airtel customers 12 regional Radio Mirchi
stations irrespective of where they live in the country. This
As discussed in the previous chapter, better access of service has been based on IRS figures of diverse population
broadband infrastructure in the country is needed to provide base in some particular states like Karnataka. According to
converged offerings such as triple play. The number of IRS, out of the 46 million people in Karnataka, 2.1 million
broadband connections in the country is approximately 10.08 have Marathi as their mother tongue, 2.4 million Telugu and
million. With the continued growth in the mobility market, the 1.16 million Tamil. We felt the need for entertainment in these
relative focus on fixed line investments has been limited. In languages. The IRS figures have been synchronized with
this scenario, significant progress can be made in increasing STD calling patterns on Airtel network and thus Karnataka
the quantum of broadband connections by focusing on the Radio Mirchi Pune, Radio Mirchi Hyderabad and Radio
relatively large cable television market (CATV) in India. Mirchi Chennai are put up for offering for Karnataka Airtel
In India, the cable homes are currently numbered at 83 million subscribers.
as on 20092. Multi System Operators (MSO) like Hathway Similarly, Big FM has partnered with VAS provider OnMobile
Cable and Datacom Ltd use DOCSIS standard and control Global to launch the radio experience on its mobile platform
about a fifth of their subscriptions’ last miles – with the rest called BIG Mobile Radio.
controlled via franchise deals with independent local cable
operators (LCOs). Though, the MSOs are steadily upgrading
their directly owned networks to offer cable-modem services,
still the services could be made available to only 20-25
percent of cable TV homes in the near term. However, this
still equates to a potential cable-modem market of about 15
million homes – which would give the MSOs a sizeable market
for converged services with relatively lesser investment.
1 Press Reports
2 KPMG Analysis
42
Convergence network Regulatory challenges

requirements Some of the potential regulatory issues facing converged
services are:
Typically to provide such converged services of voice and
data on the same network, it would require transition from • Single Regulator - Establishment of a single Regulatory
separate circuit-switched voice networks and packet- authority to oversee converged services spanning
switched data networks, to a single packet-switched Telecom, Broadcasting, Media and IT
network, supporting both voice and data protocols. The use
of multiple communication modes in a single network offers • Advertising: Targeted advertising and Next generation
convenience and flexibility which is not possible with separate business models for advertising
infrastructures.
• Time shifted TV: Legal framework to support content
Packet switching has always excelled at handling messages of storage, redistribution and super-distribution (for example,
different lengths, as well as different priorities whilst providing access from multiple devices)
required quality of service (QoS) attributes. However, packet
• Privacy: Protect privacy of user content (with
switching was designed for data. Today, using the IP protocol,
consideration for lawful intercept)
packet networks are becoming the norm for voice as well as
video. IP-based packet switching is expected to be the next • Piracy: Provide a framework for detection and
generation transport for converged traffic, including voice and prosecution.
video. For voice conversations especially, analog and digital-
based circuit switching waste as much as 75 percent of the It is amply clear that the market and customers are moving
bandwidth due to one person listening and pauses in speech. towards a converged scenario which necessitates requisite
changes in regulatory oversight framework. The need for
Towards incorporating the requirements of converged a converged regulatory framework is highlighted by the
services, Next Generation Networks (NGN) have been defined following illustrations. For example, Voice over Internet
by ITU as a packet-based network that can provide services Protocol (VoIP), in some countries is considered as a data
including Telecommunication Services and able to make use services and regulatory frameworks are built around that
of multiple broadband, Quality of Service-enabled transport whereas in some, it is considered a basic voice service.
technologies and in which service-related functions are However, arguably, neither category is completely satisfactory
independent from underlying transport-related technologies. because VoIP has elements of both. Regulators have had to
It offers unrestricted access by users to different service interpret VoIP to fit within one of these categories, or create a
providers. different category specific for VoIP.
In the cable access network, NGN convergence implies In Australia, telecom industry representatives under the NGN
migration of constant bit rate voice to CableLabs PacketCable Future Operations Group have discussed and analyzed issues
standards that provide VoIP and SIP services. Both services relating to NGN implementation such as VOIP, and submitted
ride over DOCSIS (as explained in the previous section) as the a policy report on regulatory considerations for new and
cable data layer standard. emerging regulatory frameworks for converged services.
Conclusion
While, India is one of the most compelling telecom markets
in the world, better telecom infrastructure is needed towards
achieving the wide availability of converged services in the
country. In this chapter, we reviewed the successful rollout
of converged services in Europe, utilizing a wide range of
infrastructure such as DSL and fibre, as well as upgrading
infrastructure such as analogue cable networks.
In India too, true convergence would require significant

upgrade of existing infrastructure and deployment of
affordable wired and wireless broadband, including already
available infrastructure such as cable networks with optimum
policy and regulatory oversight and interventions.
43
Value added services

in India
The importance of VAS as a part of the telecom ecosystem may by measured from
the trend that the largest global device manufacturers have tweaked their business
models to address the diverse and growing need for a variety of content. In India,
elements of this trend manifested in ways such as in-sourcing of VAS by operators
not just to drive EBITDA, but also to differentiate themselves as a service provider
of choice.
As the mobile subscriber base has grown by over 50 percent over last year, the
growth opportunity for the VAS industry in India has remained relatively intact
in 2010. This aggressive increase in the subscriber base is one of the significant
reasons that helped maintain the momentum in mobile VAS revenues. This year
also saw a strong interest in 3G and BWA auctions by both domestic and global
investors, raising hopes for an increase in demand of data and content based
services.
Even so, VAS operators in particular have faced the growing challenge of reducing
revenue shares as a direct fall out of pressure wielded by telecom operators. The
entry of a number of new 2G telecom license holders in 2008 and 2009 took tariff
wars to a whole new level, with MNOs frantically trying to garner customer base
through nation wide advertising campaigns of potentially attractive plans and
freebees.
In addition, a variety of other factors have become critical for VAS service providers
to become successful, key among which include innovation, scale, value chain
supremacy, insight into the evolving VAS user base and creating real pull factors.
In a post convergence paradigm, the value chain at an industry level may need to
transcend towards content, broadcast mediums and distribution platforms. In
addition to the above success factors, in the long run, VAS service providers may
need to evaluate their strategy in terms of higher focus either on platform or on
content, in order to remain sustainable and ahead of the competition.
44
45
Illustrative: Platform agnostic value chain
The Mobile VAS business is more B2B in nature, thus a VAS businesses would focus on developing and aggregating
significant share of revenue is retained by telecom Operators content which can be streamed across a multiplicity of
(55-75% of revenue). On the other hand, purchase of platforms. These businesses would also undertake requisite
application / content through platforms such as internet technology platform development so as to be able to deploy
or device tends to be more B2C in nature, thus the VAS the content. In order for VAS companies to create relevance,
provider is able to garner a greater share of revenue (90- the mobile would need to become one of the numerous
95% of revenue). In a platform agnostic scenario, mobile channels on which they have the capability of streaming
content
Illustrative: Content agnostic value chain
Presently, Most VAS players focus on a niche set of A content agnostic value chain is a resemblance of what some
technology or content to provide services to MNO’s. For industry protagonists have termed a “managed services
instance few players are focusing on services based around model”. Such a scenario is relevant if companies in the VAS
music and entertainment content, while others may be space intend to continue to restrict themselves to the mobile
focusing on m- advertising or enterprise VAS etc. delivery platform. Under this circumstance, businesses may
need to become proficient in delivering all forms of content
under each VAS mode of delivery i.e. whether it be Music
delivered through IVR or SMS or Games and Data delivered
via GPRS or 3G or BWA, each facet must fall under the same
umbrella thereby making VAS players a one-stop-shop for
MNOs.
46
Market size and growth

The overall non voice services revenue has grown over the relatively lower ARPUs. In addition, the growth in overall non
last year primarily fueled by increase in subscriber base voice services has been offset by decline in revenue shares
and a greater share of non voice services in the overall for non SMS based VAS providers. Despite of lower ARPUs
telecom revenues. While the subscribed base has increased and lower revenue shares, the share of Non SMS VAS of the
significantly over the last one year, a significant portion of overall telecom revenues has continued to remain stable at
new subscribers are from semi-urban / rural areas with around 50 percent. Thus the addressable market for Mobile
VAS players remained relatively stable at around INR 16 billion
between 2009 and 2010.
Non voice revenues as % of telecom revenues Non voice revenues break-up
Source: “Indian Telecoms – Positives Priced in, tougher road ahead”, JP Morgan Research, 16, August 2010
In the wake of continued tariff pressures and falling margins, decline. The industry as a whole may have gained impetus,
revenue shares of VAS service providers have continued to however the addressable market for Mobile VAS players came
under pressure.
Comparison of average revenue per minute
Mobile tariff’s across incumbents

have declined significantly over the
last couple of years as a result of
price wars thus putting pressure on
revenues and profitability
Source: “India Wireless Sector”, Macquarie Equities Research, 17 May 2010
47
Revenue share of mobile VAS players
Revenue shares for Mobile VAS players

have also continued to decline as a result of
pressure on MNO’s
Source: “OnMobile – Market leader now spreading its wings abroad”, Deutsche Bank
– Global Markets Research , 26 Feb 2009 “OnMobile Global”, IIFL, 4 Aug 2010
Although relatively stable, the non-SMS VAS market in India World over, consumers are beginning to transition
continues to be dominated by Music – Ring-tones (RT) towards using their mobile devices for retail purposes i.e.
and Caller Ring Back Tones (CRBT). Together, RT and CRBT m-commerce. KPMG’s global Consumers and Convergence
continue to account for over 40 per cent of non-SMS VAS. 2010 survey noted that the percentage of consumers
surveyed that say they used an online retailer’s site from their
Source: “OnMobile Global”, IIFL, 4 Aug 2010
mobile phone jumped 18 percentage points, from 10 percent
in 2008 to 28 percent in 2010. The Asia Pacific region emerged
a leader, with 41 per cent of the surveyed population saying
they had used their mobiles to buy a product/service. Another
Growth drivers key finding of the survey was that age plays a significant role
in outlining the success of m-commerce, younger consumers
A number of factors are expected to provide a fillip to the in all parts of the globe readily engage with retailers through
their mobile phones.
sector in the coming months, some of which include:
Given the growing penetration of mobile devices, there is a
• Buoyancy in subscriber additions
significant opportunity for businesses to use this medium as
• Importance of m-commerce and m-advertising a mode to increase awareness around their brand and product
portfolio. It has also been noted that consumers in BRIC
• Service innovation driven by consumer preferences. economies are far more amenable to getting mobile ads in
exchange for a wide range of cheaper or free mobile content
or services1. These trends may perhaps auger significant
Subscriber additions service innovation thereby enabling players to address the
India continues to remain one of the fastest growing mobile market opportunity.
markets globally. Subscriber additions have followed an
exponential trend over the last five quarters and recently the
subscriber base has crossed the 650 million mark. As the end-
user base for Mobile VAS companies continues to expand, the Service innovation driven by consumer
addressable population and thus product penetrations may preferences
benefit. One of the biggest challenges being faced by the industry
today revolves around understanding customer preferences
Source: Press Release, TRAI , September 2010 in terms of the type of VAS they would be most likely
to consume. Presently, the telecom operators lack the
information on customer preferences. This coupled with poor
Importance of m-commerce and m-advertising understanding of customer preferences leads to generic VAS
Mobile commerce, outside of mobile banking transactions, products instead of targeted products for different customer
and mobile advertising continue to represent growth groups. Certain independent research bodies have put
opportunities in the Indian market. If global experiences are significant effort to assess the same; however, significantly
anything to go by, then India does possess the necessary greater research is required so as to generate a greater
characteristics for these services to succeed. customer pull for VAS.
1 KPMG Consumers and Convergence IV 2010 - global survey findings
48
Agents of change
The larger challenge lies in identifying the players in the value A constant need to sustain and grow business in this space
chain who would deal with this particular issue. It would be is forcing VAS service providers to think innovatively to stay
fair to assume that in a walled-garden MNO led VAS scenario ahead of the curve. These strategies are interesting because
a certain degree of this research may be commissioned they are seemingly aimed at de-risking the fundamental
by them. However, given the tariff war and a race to add business issues.
incremental subscribers MNO’s may rather initiate marketing
Some incumbents have set-up their own developer networks
spend in garnering additional subscribers as against trying to
whereby they provide the seed capital for niche product
understand what type of VAS will sell. For the VAS industry
centric businesses thereby allowing them to grow and
to develop targeted products for end user there is a need for
eventually leverage the incumbent’s operator relationships to
partnering between MNOs and MVAS providers to conduct
make products/services successful. Although nascent from
research/ maintain database on consumer preferences for
an India perspective, this business model shift does auger
gaining an insight on the customers preferences.
well for the creation of intellectual property that may bring in
Given the above, the onus of creating relevance from a the necessary balance in the revenue sharing regime.
customer perspective lies with the aggregator/developer
A number of incumbents have also started to explore
and technology enabler community in the value chain. These
geographies outside India as an avenue for growth. In
businesses may need to set-up innovation cells and invest
this respect, Africa and the Middle East are among the
in adequate customer research so as to produce products
geographies that are being examined closely by Indian
and services which can create stickiness of the customer for
business houses. As their platforms have matured in India,
the MNO’s. In such a scenario not only could revenue shares
VAS service providers may reap benefits by deploying them in
improve, MNO’s may also be willing to put more advertising
other markets as well. Targeting the Indian diaspora with local
dollars behind relevant services.
content is another strategy that these players are examining
to achieve an immediate footprint in the new geographies.
Non voice revenue mixes of Indian

operators remain low in comparison
with global peer. Thus new geographies
may provide a larger addressable market
for MVAS providers.
Source: “Indian Telecom Services”, Motilal Oswal, April 2010
49
Service led innovation strategies Impact of 3G

Globally, consumers are increasingly turning to their mobile
devices for a number of activities and perhaps this trend shall
With 3G mobile services expected to make their presence felt
be repeated in one of the world’s largest markets especially
in India, the mobile data service market is set to grow. 3G is
with the advent of 3G and BWA.
expected to enrich media experience, such as; enable video
calls and high-speed data transfer, potentially giving birth to a
Usage of mobile devices whole new set of revenue streams.
Activity 2007 2008 2010 On the other hand, MOU’s in India currently stand at an
average of about 385 minutes per subscriber per month2.
Chatting or instant Incumbents however, operate at MOUs of over 400 minutes
6% 5% 29%
messaging per subscriber per month3. Taking into account that a typical
cell site at full capacity may support up to 350 minutes per
Talking (e.g. Skype) - - 29%
subscriber per month (working on the industry average of
Accessing maps/Directions - 4% 23% 1,150 subscribers per site), this strain on the networks may
directly result in poor Quality of Service (QoS).
Reading a book - - 21%
Therefore whilst, Video on demand and other live streaming
Playing games 6% 7% 17% services may gain prominence amongst the high ARPU
Accessing news and customers, enhanced bandwidth may also simply lead
1% 2% 13% to increased usage of existing mobile VAS services and a
information
consequent augmentation of voice capacity.
Social networking 3% 1% 11%
E-mailing - - 10%
Banking/personal finance - 2% 8%
Browsing the web - - 6%
Watching TV/Movies/
7% 5% 5%
Video’s
Shopping 1% 2% 5%
Source: KPMG Consumers and Convergence IV 2010
Some of the aforesaid trends have already started to play out

in India as well – social networking and the increased bundling
of applications on mobile phones is becoming more and
more “standard”. The advent of instant messaging services
by handset manufacturers especially in smart phones
segment is revolutionizing the types of VAS that individuals
are consuming. Rollout of 3G and BWA based services in
India may also witness the increase in VAS services such as
video streaming as well as increased usage of GPS based
applications.
2 “Quarterly Performance Indicator”,TRAI, 13 Oct 2010

3 “ India Wireless Sector, Macquarie Equities Research, 17 May 2010
50
51
Connecting rural India

As one of the world’s fastest growing economies, India has been growing at a
consistently high rate over the past decade. Inspite of the rapid industrialization
and aggressively growing services industry, 70 percent of the population still
lives in rural areas, spanning 590,000 villages, and is predominantly dependent on
agriculture for survival1.
Further, rural India contributes close to 45 percent of India’s total GDP2. Thus the
significance of development of rural India cannot be underestimated in the pursuit
of the achievement of socio-economic growth targets for India.
This necessitates increased government focus to enhance rural development. In

the union budget for 2010-11, the government allotted close to INR 401 billion for the
Mahatma Gandhi National Rural Employment Guarantee Scheme. The government
also set aside INR 480 billion to enhance rural infrastructure under the Bharat
Nirman Program. Another INR 100 billion was set aside under the Indira Awas Yojana
to create rural employment.
In terms of telecom connectivity, the urban teledensity across all metros has
crossed 100 percent3 and the market for voice services is tending towards
saturation. However, the rural teledensity is still below 30 percent4 and the rural
market is expected to drive the next round of aggressive growth. The government
has set a target for 40 percent teledensity by May 2014 for this market5. This rural
teledensity target seems achievable but a lot more needs to be done to reduce the
widening urban-rural telecom divide.
A number of initiatives have been undertaken by the government to improve the

telecom penetration in rural India. Government’s Bharat Nirman programme is
aimed at intensifying rural infrastructure development. The subsidy support for
mobile towers in the rural areas through the Universal Service Obligation Fund
(USOF) is another example of the Indian government’s commitment to rural
telecom.
2 ‘India Market Strategy’, Credit Suisse, June 17, 2009
4 ‘The Indian Telecom Services Performance Indicators’, TRAI, April - June 2010
5 ‘Annual Report 2009 – 10’, DoT
52
53
Rural vs. Urban Population Rural vs. Urban (Private Consumption)
Source: ‘The Indian Telecom Services Performance Indicators’, TRAI, April – June 2010, KPMG Analysis, ‘India Telecoms - Positives priced in, tougher road ahead’, JP
Morgan, August 16, 2010
Rural - urban telecom divide Rural vs Urban Market – Key Indicators (As of August,
2010)
The Indian telecom sector has seen aggressive growth
over the past decade. The urban market in India is tending Total population 1,183.39 millions
towards saturation in terms of voice based services. The
operators have been constantly reducing tariffs to enhance Urban population 30.00% 355.02 millions
penetration which has resulted in multiple connections being Rural population 70.00% 828.38 millions
held by a single customer to take advantage of the various
innovative pricing schemes offered by operators. Presently, Total subscribers - 706.37 millions
the operators are awaiting the launch of 3G and WiMAX to
ensure sustainable growth in the urban markets through data Urban subscribers 67.70% 476.17 millions
services. Rural subscribers 32.30% 230.20 millions
The rural market too, has shown tremendous growth over the Total teledensity 59.63 percent
past decade with rural teledensity going up from 1.21 percent
in March 2002 to 27.76 percent as on August 31, 20106. Urban teledensity 134.08 percent
Despite this growth, the rural market still remains largely Rural teledensity 27.76 percent
under-penetrated7.
Rural subscribers 230.20 millions
According to TRAI, 91 percent of the villages in India are
covered by at least one operator. Overall, 51 percent of the Rural wireline 4.35% 10.01 millions
villages in India are covered by three operators and 31 percent Rural wireless 95.95% 220.19 millions
of the villages are covered by four operators8.
Source: TRAI, DoT, Monthly Telecom Scenario – August 2010
Rural vs Urban teledensity
Source: Monthly Telecom Scenario – August 2010’, DoT, October 2010

7 ‘Annual Report 2009 – 10’, DoT
54
Key challenges in rural

penetration
In spite of the rural market being a key growth segment Lack of distribution network
for the telecom industry, there are several challenges that India is the seventh largest nation in the world9 and has a
operators need to overcome to leverage the potential of this population base which is large enough to be spread across
segment. the entire expanse. Considering that 70 percent of India still
lives in rural areas10, which may not be as well connected as
Inadequate telecom infrastructure the metros and tier-1 cities, there is a critical requirement for
One reason for the relatively low rural penetration has been a well designed distribution network to penetrate into the
the lack of telecom infrastructure in these areas. Operators market segment which holds the maximum potential in the
have to incur higher costs to set up infrastructure which tends future.
to decrease the financial attractiveness of this segment.
Currently, the lack of infrastructure and delays in regulatory
Setting up the infrastructure requires acquisition of land, approvals has been the key reasons for the sluggish growth
which is a slow process as most of the land is owned by of this network. However, the government has been
the government or gram panchayats. There is also difficulty concentrating efforts for rural upliftment and is making
in laying down the fibre cable network due to ‘right of way’ considerable contributions from the union budget every year
issues. for the same.
Further, lack of amenities such as water and electricity tends

Wide variation in population density
to increase the cost of maintenance for the tower sites
The population density across India is extremely speckled,
in these areas. Having a battery backup to overcome the
making it less viable for the telcos to setup infrastructure
problem of power shortage further increases the cost of
across the sparsely populated areas. The return on the
providing the connection per user, which at times may not
infrastructure might not be feasible in terms of the APRUs
feasible in terms of the revenue generated per user.
generated through the customers in these areas. The table
Lack of availability of skilled labor is an additional challenge in below gives a snapshot of the population density across this
supervising these sites effectively. country.
Lack of education and awareness

Population density across states in India
The uptake of data services is relatively slow in rural areas
because of the illiteracy that prevails amongst the majority. Density No. of States
The government and private sectors’ efforts will have
maximum impact once the rural communities can understand Greater than 1,000 person per sq.km 5
and effectively use all the information available through
their mobile phone. The literacy rate in India is relatively low; Greater than 500 person per sq.km 4
hence, it is important to develop applications which are easy
to understand and operate by a local user based in a remote Greater than 100 person per sq.km 21
village of India. It is therefore, important to develop content
Less than 100 person per sq. km 5
in vernacular language and design the application software
such that it is user-friendly and menu driven, with innovative
Source: Census India Report 2001
graphics to overcome the limitations of illiteracy.
Lack of vernacular and customized content

India’s diversity in terms of culture and language creates Population density across villages India
a need for regional content in order to ensure penetration
Village Density No. of Villages
of telecom services among the masses. Most operators
have already begun to cater to regional needs through caller Between 1,000 - 2,000 129,000
ringback tones, devotional messages and other vernacular
content. Operators are also looking to offer regional and Between 500 - 1,000 144,000
national news, weather forecasts and market prices for crops
in regional languages to help improve mobile uptake in rural Between 0 - 500 219,000
areas.
Source: IMA India Report, 2006
9 ‘Presentation by Ministry of Environment and Forests, India’, September 02, 2009

55
Sustained government efforts to

enhance rural connectivity
The government has been making conscious efforts The government also setup the Universal Service Obligation
to connect rural India to the world at large. However, Fund in April 2002, to allow people in the rural and remote
the limitations of low population density and difficult areas to access telegraph services at affordable/reasonable
topographical and climatic conditions have been the key prices. The ultimate intent is to offer basic telegraph services
reasons for the slow penetration of telecom services. There to all. The fund has already extended tremendous support
are several other reasons which are adding to the scarcity of towards the growth of telecommunication in India, as
communications infrastructure in such areas; irregular supply discussed later in the report.
of power, few fixed-line telephones and low income levels are
some of the key factors. The Ministry of Commerce & Industry along with the
Ministry of Communications & IT, has been instrumental
The advent of wireless technologies has made it possible to in setting up the Telecom Equipment and Services Export
overcome a part of these difficulties. While launching wireless Promotion Council, to aggressively promote the export of
technologies in rural India, operators are required to focus on telecom equipment and services from India. The council
service availability, affordability, acceptability and awareness. will be involved with organizing seminars and facilitate the
Operators need to create and implement business models participation of India exporters in various overseas exhibitions.
capable of driving profitable growth through a rural expansion It also makes necessary recommendation to the government
strategy. While the voice connectivity is important, the real to make necessary changes in various policies and procedures
value addition will be in the form of tailored local solutions for promotion of Exports and Services.
like applications and value added services made available in
local language. Business models will therefore have to focus
on providing various packages of voice/VAS-services that are Rural telecom snapshot
user-friendly for the rural consumer. Mobile operators will
have to focus on exploring options of satisfying the cost-
• Target of 80 million rural connections by 2010 was
conscious and value-conscious rural customers looking to
achieved in 2008
reduce their call charges. Operators also need to develop
innovative ways to provide post-sales support for rural • As on August 31, 2010, rural India accounted for 230.30
customers. million fixed and WLL connections
• 5,70,000 uncovered VPTs (Village Public Telephone)

were setup by June, 2010 covering 96 percent of the
Indian villages
• More than 3 lakh PCOs have also been installed in rural

areas
• 40,694 villages out of 40,705 villages having more than

2,000 population have been provided rural community
phones
• Mobile Gramin Sanchar Sewak Scheme (GSS) – a

mobile PCO service is also being provided at the
doorstep for villagers. As of March 31, 2010, there
were 2,772 GSSs covering 12,043 villages across the
country
• Sanchar Dhabas (Internet Kiosks) have been provided

in more than 3,500 block headquarters out of the total
6,337 existing blocks in the country
• Under the Bharat Nirman Programme, 61,186 villages

have been covered out of the remaining 62,302 as on
December 31, 2009
• Infrastructure sharing scheme is required to set up

7,436 towers spread over 500 district across 27 states
in India
Source:‘India Telecom Sector Brochure’, DoT Website; ‘Annual Report 2009 – 10’, DoT
56
Potential areas that can grow Healthcare

80 percent of doctors, 75 percent of dispensaries and 60
significantly through combined percent of hospitals in India are situated in urban areas,
whereas a large majority of India’s population still lives
wireless and wireline based in villages. Mobile broadband services could be used to
telecom connectivity in rural empower more than 50,000 Primary Health Centers and
6,000 Community Health Centers available in rural areas11.
sector Telemedicine can possibly transform the Indian health care
sector as India faces a scarcity of both hospitals and medical
Telecom and network connectivity have widely been seen specialists.
as enablers of a nation’s socio-economic growth. Provision
Mobile services are also playing phenomenal role in
of mobile as well as broadband services is not only seen
healthcare industry. It allows people to easily disseminate
as a wealth enabler but also as a step towards creating a
locally-generated and locally-relevant health information to
revolution in the field of education, heath and technology. The
rural masses. M-health is another promising area that allows
government looks forward to provide access to services and
organization to treat patients through mobile phones through
information which otherwise will be unavailable in rural areas.
online chat using mobile phones.
Successful broadband wireless projects Pilot projects for healthcare
• In a pilot project of The Byrraju Foundation, the wireless • In late 2007, as a part of Gramjyoti project, Ericsson
network created using smartBridges radios currently in partnership with Apollo hospitals provided ECG,
connects 12 villages. blood pressure and heart beat measurements,
teleconsultation and basic medical check ups, including
• The Bhimavaram network potentially impacts 500,000
live interactive check ups and reporting.
lives in 32 villages in the Bhimavaram district.
• A Real-Time Bio-surveillance Programme was piloted
• The Ashwini Centers established in each village provide
in the Sivaganga District of Tamil Nadu. The aim of the
video-conferencing and Internet access for all the
program is to use sophisticated analytical tools on data
villagers
sent on mobile phones by village level nurses, there
• IGNOU has started SMS service to send SMS alerts to by harnessing mobile technology for disease reporting,
students about various developments surveillance and health strategy planning in Tamil Nadu
Education
Financial services
The importance of mobile medium in education is slowly but
India has one of the most expansive banking systems in
steadily being realized by players in the telecom industry,
the world. A combination of scheduled commercial banks,
who are now developing the necessary applications to work
regional rural banks and specialized financial institutions cover
towards mobile education (m-education or m-learning).
a large section of society in India. Despite these focused
Several operators have started offering m-education
efforts, only 31 percent or little over 20,000 of the total bank
services such as English lessons, dial-in tutorials, school
branches in India are in rural areas. Access to basic financial
syllabi, question sets, vocabulary general knowledge
services remains elusive to millions of Indians in rural areas.
tutorials, exam tips, exam result alerts and education for the
physically challenged. These operators usually partner with In rural areas, a larger number of people subscribe to mobile
VAS companies to develop the applications. Some such services than banking services; thus mobile phones can be
applications are m-Gurujee, English Seekho service and Learn used as platform to provide a variety of services such as long
English. distance remittances, micro payments and informal airtime
bartering schemes. Mobile banking will likely also help in
Additionally, mobile broadband can help expand tertiary
bringing down costs for other channels, such as microfinance,
education especially among low and middle-income students.
since utilizing mobile phone technology significantly lowers
With increased 3G network coverage and decreasing cost
transaction costs while expanding outreach to rural areas.
of mobile broadband access, tele-education will likely see
greater adoption both in rural and semi-urban areas. Video
conferencing also allows the qualified teachers based in
towns or cities to teach several classrooms simultaneously,
thereby bringing quality higher education to the village level.
11 ‘Telemedicine takes world-class healthcare to rural India’, ZDNetAsia, June 2008
57
However, while mobile phone banking has the potential to Agriculture

extend financial services through virtual accounts to millions Deficits in physical infrastructure, problems with availability
of poor people globally, there are a also number of challenges of agricultural inputs and poor access to agriculture-related
and risks involved in universal adoption such as reasonable information are the major constraints in the growth of
affordability of GPRS based internet cost, IT and other security agricultural sector in India. As mobile penetration continues to
risks such as Trojans and viruses, lack of support for all increase among rural India, rapid growth of mobile telephony
handsets, regulatory restrictions on limits on transactions and and the recent introduction of mobile enabled information
lack of mass adoption. services provide a means to overcome existing information
asymmetry. It also helps, to bridge the gap between the
The success of rural mobile banking initiatives in other availability and delivery of agricultural inputs and agriculture
countries also bodes well for India’s aspirations to make it a infrastructure.
success in the country’s rural areas. M-Pesa and G-Cash are
two universally known mobile banking initiatives undertaken Mobile services could help farmers to access real-time
in Kenya and Philippines respectively. These initiatives helped information on crop choice, seed variety, weather, plant
counter the infrastructure, banking and technology constraints protection, cultivation best practices, market information such
in these nations, due to which large sections of the country as market prices, demand and logistics. It helps to provide
had remained ‘unbanked’. consistent and reliable information as compared to other
information sources such as TV, radio and newspapers.
Mobile broadband will further help to widen markets,

Mobile applications for rural India create better information flows, lower transaction costs
and substitute for costly physical transport. It would help
rural regions to integrate with other parts of the country
• A USA-based mobile-payment service provider, has
in numerous ways. Mobile broadband can also facilitate in
entered into an alliance with Bangladesh based
increasing the penetration of rural internet kiosks based
Grameen Solutions, a subsidiary of the Grameen Bank
services such as ITC’s e-choupal, which are currently
to deliver mobile banking services to the economically
available over limited geography mainly due to lack of wireline
marginalized people in Bangladesh and India. The
infrastructure.
project aims at providing affordable financial services
like cross border remittances, credit and savings
accounts and money transfer to the poor people.
Successful Rural Projects
• One of the leading service providers has partnered with
Indian Farmers’ Fertilizer Cooperative Limited (IFFCO)
to set up IFFCO Kisan Sanchar Limited in Rajasthan. In • As per research done by ICRIER, ITC’s echoupal led to
this initiative, the cooperative department will provide productivity gains between 10–40 percent primarily
mobile handsets to farmers at marginal price through due to adoption of hybrid seed varieties and new
its outlets in the rural areas. These handsets would farming practices by farmers. In addition, by providing
be loaded with green SIM cards, which will flash daily the farmers access to information about prices not only
updates on agricultural practices and weather forecast in their local mandi but across the region, the echoupal
free of cost. saves the farmer approximately INR 250270 per ton
through reduction in transportation, baggage and
• New Delhi-based Ekgaon Technologies too has commission costs.
developed a system for tracking transactions made
by self-help groups. It has partnered with the likes of • mKRISHI, an initiative that provides personalized
CARE, WorldVision and the World Bank to conduct a information and expert advice to rural farmers by
pilot, which it plans to extend to 14 Indian states. answering unique queries that farmers face and also
provides up to date weather and pricing information
through text-messaging on cell phones.
58
Government services
Mobile technology can help drastically improve the access to Successful Rural Projects
government services in developing countries. According to an
estimate provided by Department of Information Technology, • In July, 2008, HDFC bank setup a BPO centre at
Government of India, approximately 50 to 60 percent of Tirupati in Andhra Pradesh through its subsidiary Atlas
government services in India can be delivered through mobile Documentary Facilitators. The centre employs 550
channels. 12Launch of mobile broadband will allow citizens people who are entrusted the task of data capturing
to access government services virtually in any place covered and indexing of customer details. This same job was
by high speed mobile network. By leveraging connectivity, being handled by more than 1,000 people in Chennai
the government can process Government to Citizen (G2C) and Mumbai.
transactions such as the filing of tax returns, death and birth
registration, land records, as well as receive feedback helping • The Tata group company, Tata Chemicals, has also
enhance the level of Governance. setup two BPOs at Mithapur in Gujarat and Babrala
in Uttar Pradesh. The centre in Babrala functions as a
back office logistic support for Tata Indicom customers
Media/Entertainment in Uttar Pradesh.
Broadband wireless access (BWA), using technologies
like WiMAX/LTE, provides high-speed internet access, IP
telephony, TV services and other voice and data multimedia
services in regions where there is no suitable wireline
alternative. The high speed broadband access will enable
value added services tailored to local rural needs and
requirements.
The characteristics and orientation of Indian rural populace

towards consuming print, audio and visual communication is
regional and localized in nature. For the vernacular industry
to take-off, there is a need for digital content that is designed
to serve daily and important informational needs of rural
population in their own language. Research and development
efforts are also needed to provide predictive translation
initiatives such as context-specific literal translation as well
as advanced solutions such as Optical Character Recognition
(OCR) and Text-to-Speech.
Content, application and infrastructure would determine

how easily vernacular content would penetrate the masses.
Infrastructure comprises access points, such as kiosks,
public access, mobile phones and enabling devices such as
keyboards and peripheral devices. To ensure an end-to-end
local language delivery, applications as well as content also
need to be provisioned in localized language.
Employment
The Business Process Outsourcing (BPO) creates
employment by allowing rural citizens to participate in the
economic growth brought by outsourcing of manufacturing
and back-office functions to low cost regions which is
currently driving the economy of India. Availability of reliable,
quality and cheap telecom connectivity is an essential
requirement for setting up BPO operations in rural India.
12 ‘m-Government: The New Frontier in Public Service Delivery’, World Bank, 2007
59
Telecom manufacturing
The year 2009 was a tough year for telecom equipment manufacturers globally, with
the infrastructure and handset segment registering a decline of 3.6 percent and 9.9
percent, respectively1. India too, has witnessed slower growth in telecommunication
equipment, especially compared to the aggressive subscriber growth that has been
observed during the previous year. While the equipment market’s growth stood at 20
percent in 2008, it declined to 18.6 percent during 2009. However, compared to global
peers, this was still a positive reflection on the sector considering the impact of global
recession as well as the loss of incremental growth due to delay in the roll out of 3G
services2.
Over the past year India has shown tremendous growth in terms of subscriber
numbers. This aggressive growth has laid the path for development of the
telecommunication equipment industry in India as well3.
Several home-grown handset manufacturers have begun to take control of the market
and these incumbents have been playing a crucial role in promoting the use of mobile
VAS among people in lower income groups. These players at this point in time control
close to 14 percent2 of the handset market. The numbers suggest that the home grown
manufacturers have registered explosive growth during the past year4.
The recently concluded 3G auctions are likely to further enhance the role of mobile
VAS to compliment the growth of the handset market in India. Many multinational
corporations have already or are in the process of setting up a manufacturing facility
in India. The success of the 3G auctions may also encourage international as well as
domestic players to start manufacturing 3G mobile communications infrastructure
within the country as well. The government has also made tremendous efforts to
establish India as the hub for telecom manufacturing through incentives as well as
supporting R&D efforts through low cost labor.
1 ‘World Telecom Equipment Market and expected USD 370 billion in 2013’, Cellular
News, June 30, 2010
2 ‘India’s telecom equipment industry grew 18.6% last fiscal’, The Economic Times,
June 10, 2010
3 TRAI Subscriber Numbers, KPMG Analysis
4 ‘India: the next mobile manufacturing hub’, Telecom Yatra, July 20, 2010
60
07
61
Key milestones Along with this growth there is growing emphasis on export
of telecom equipment from India as well. With multinationals
setting up base in India, India is emerging as a manufacturing
The foundations of developing the telecom equipment
hub which aims at enhancing its telecom exports each year.
manufacturing industry in India were laid in 1999.
In 2006-07, India exported equipment worth INR 18.98 billion
• 1999: Opening up the industry to private sector and as of 2009-10 this number has gone up to INR 135 billion;
participation a growth of almost 600 percent5.
• 2005: These numbers clearly highlight the significant growth

potential of this sector. Considering the aggressive growth
- FDI ceiling across telecom services was raised from
of telecom subscribers in India, the pace of growth for the
the existing 49 percent to 74 percent
telecom manufacturing is expected to further accelerate over
- The Union Ministry of Communications and the next three years. As per DoT estimates it is said telecom
Information Technology initiated the process to equipment worth INR 3,500,000 million – 5,000,000 million
promote India as a viable option for setting up will be required by 2015.
manufacturing units. This was strongly supported by
its fast growing telecom market, its talent pool and the
success of the Business Process Outsourcing (BPO)
industry. Telecom equipment production
• 2006: Policy reforms and government initiatives such as

100 percent Foreign Direct Investment (FDI) in the sector
through the automatic route
• 2008: Allowing service providers to share active

infrastructure
• 2010:
- The Union Budget decided to eliminate the Special
Additional Duty of Customs (SAD) of four percent on
parts imported for manufacturing mobile handsets
from July 06, 2010 to March 31, 2011
- The Budget also implemented a tax concession for Source: TEPC

mobile accessory manufacturing in India. The twenty
four percent import duty on components/raw material
imported for manufacture of batteries, chargers and
other part and accessories was also removed.
Telecom equipment exports
These positive and proactive decisions by the government
have set the momentum for the growth of the telecom
manufacturing in India. The government has also setup
Telecom Export Promotion Council (TEPC) for promoting
the export of telecom equipment and Telecom Centre of
Excellence, through public private partnership mode for
promoting innovation and research in telecom.
In the past greater emphasis was being laid upon import

of telecom equipment. However, lately the trend has been
initiated to build in-house expertise for indigenous growth
within the telecom manufacturing sector. In 2002-03, India
produced telecom equipment worth INR 144 billion. This Source: TEPC
number has swelled up to INR 520 billion as of 2009-10. This
implies a growth of 260 percent5.
5 TEPC
62
India – progression towards global • Meeting at least 70 percent of Indian domestic telecom
demand from Indian manufactured products
manufacturing hub • At least a few IPR-driven, billion dollar Indian product
companies.
India is fast emerging as a hub for global telecom
manufacturing. The production and exports of telecom Indian government has been taking initiatives and doing
equipment have been on a steady rise in the last few years. As timely policy changes to ensure the achievement of the above
per industry estimates, India is expected to gain a third spot ambitious targets. The long term goal of the government is
by capturing 8.5 percent of Asia-Pacific’s telecom equipment not only to become a global telecom manufacturing hub but
production revenue of INR 12,465 billion by 2014 as compared also focus on the inclusive growth for the country by focusing
to that of 5.7 percent share of INR 8100 billion in 20096. on areas like employment generation.
India is likely to be the fastest growing telecom equipment
production market in this region over the next five years. This In order to attract more investment in the country, Indian
is evident from: government has recently announced the exemption of basic
duty, countervailing duty (CVD) and special additional duty
• A large and booming domestic telecom equipment market (SAD) of about 24 per cent on components/raw material
of over INR 450 billion with Indian operators reaching imported for manufacture of batteries, chargers and other part
out to the global market providing wider access to Indian and accessories in budget 2010-119.
telecom companies7
• Anticipated investment of INR 450 billion in telecom

infrastructure is needed every year to cater to fast growing
telecom subscriber base
Friendly government policies –
• High skills and strong management experience in critical
case study
functions such as supply chain management, high tech
manufacturing systems, operational management, value Indian government has been taking various initiatives to
chain with EMS companies, captive facilities of MNCs transform India as a global manufacturing hub. A case-in-point
(Continuously investing in India), auxiliary component is Sriperumbudur in Tamil Nadu. It is India’s leading initiative
manufacturing base (e.g., for cables, cabinets, shelves, to become a global telecom manufacturing hub. Due to the
power electronics, tooling, bare PCBs, etc.) government’s progressive policy, Sriperumbudur is reported
to be today producing more mobile phones than Shenzhen in
• Strong talent base of highly experienced technical and southern China. This is not a small achievement, considering
R&D experts from various multi-national companies in Shenzhen makes one out of eight handsets sold anywhere in
India as well as abroad. Large IT service companies doing the world.
telecom projects, strong academic and research labs
The government is promoting SEZ units in Sriperumbudur
• Skilled and trained shop floor workforce for electronics which need to be supported with suitable tax breaks, world-
circuit assembly, testing and integration from Industrial class public infrastructure such as expressways, railway
Training Institutes and Polytechnics links and an airport, and private amenities, including hotels,
apartments, shopping malls and entertainment sites. After
• Capability to move up the value chain by offering design the tax breaks announced on the mobile accessories in
capabilities and not merely low cost facilities budget 2010-11, both Indian and international component
• Cost arbitrage arising from competitive labor costs and manufacturers have begun work in Sriperumbudur to
lower cost of establishing a manufacturing plant in India make parts and components for the cell phone industry.
Approximately 20,000 people are estimated to be working in
• Easy availability of capital from a well established financing the area10.
industry as well as private equity network.
Globally, it has been proved that SEZ model has supported
The Telecom Equipment and Services Export Promotion manufacturing industry. The governments have encouraged
Council (TEPC) have set the following milestones to achieve a strong R&D infrastructure to facilitate the growth in this
by the year 20148. sector. They have introduced special fiscal measures, tax
breaks and incentives such as subsidies, easy credit, and use
• Exports to grow at 25 percent CAGR to reach over INR 450 of bilateral trade to attract foreign investment and provide
Billion boost to the domestic manufacturing industry.
• Domestic telecom products to grow at 18 percent CAGR
• Employment generation (direct and in-direct) of more than

20 million
6 IBEF, Telecommunications Report, July 2010 9 Voice & Data, “Finally, TRAI pushes telecom manufacturing”, February 27, 2010
7 TRAI, Presentation - 2010 10 TEMA press release, “Telecom Equipment Production to Cross Rs. 50,000 Crores in
8 TEPC, Policy recommendation to increase domestic telecom growth in exports of 2008-2009”, November 20, 2008
telecom equipment and services
63
Indian government has also been promoting its export sector • In 2005, Elcoteq had started manufacturing facility
by establishing special economic zones (SEZs), which led in Bangalore. It is one of Elcoteq’s three volume
exports grow by 33 percent in 2008-2009 as compared to manufacturing plants in the Asia-Pacific region and the first
just 4 percent elsewhere in India. Thus, in recent times SEZs one in India
has been one of the primary drivers for India’s increasing
manufacturing capability11. • In 1994, Ericsson India established a manufacturing unit at
Kukas, Jaipur (Rajasthan), producing AXE Digital Switching
Indian government has been facilitating more and more System, EDGE Based GSM Radio Base Station
telecom specific SEZs to promote India as a hub for telecom
manufacturing. Moreover, it has also allowed 100 percent • Many other major companies such as Foxconn, Aspcom,
FDI in manufacturing sector under automatic route. This has Solectron, etc. have decided to set up their manufacturing
resulted in foreign players investing more than INR 450 billion bases in India
as FDI in Indian telecom sector in last 10 years.
Going forward, looking at the large geographical diversity

and spread of India, India may adopt the phased and planned Advantage India – emerging as a
expansion strategy. Private SEZs in strategic locations will
foster an enabling environment for global and domestic manufacturing hub
manufacturing majors to set up plants. High quality
infrastructure at SEZs will further provide the necessary push India has seen a tremendous growth in the last two decades.
which the telecom equipment manufacturing majors require. Though, it has witnessed faster growth in urban areas, as
compared to rural areas. Thus, in order to attain inclusive and
balanced growth across the country, the Indian government
had adopted a theme of ‘faster and more inclusive growth’ in
Telecom manufacturing in India11: its eleventh five year plan that runs from 2007-2012. Inclusive
growth is understood by different people in different ways. For
some key milestones growth to be inclusive it should involve key attributes such as:
• In October 2010, Huawei confirmed its plans to set up an • Creating new and varied opportunities to earn a livelihood
INR 22,500 million state-of-the-art telecom equipment • Provide ways to enhance capabilities to exploit varied
manufacturing facility near Chennai. It has invested opportunities
approximately INR 6,750 million per year over the past
decade. The company employs more than 6,000 people, • Providing security against a permanent loss of livelihood
while creating indirect employment for 20,000 additional
people through its partner ecosystem12. Telecom manufacturing is one such industry that could
contribute in providing this inclusive growth that India is
• In 2010, Wynn Telecom plans to set-up a facility at looking for. Manufacturing units in rural area would help
Himachal Pradesh, that will churn out 1.2 million handsets provide employment and income generation opportunities
every month thereby aiding in reducing the dependence of people on
agriculture. This would help rural people to access better
• In 2008, Motorola started manufacturing facility at education facilities for their children and in turn is likely to
Sriperumbudur, Chennai. It manufactures products that improve country’s literacy rates and employability.
includes GSM and CDMA mobile devices and networking
equipment such as base stations and system controllers Better telecom connectivity and other innovative applications
can play a vital role in extending health care services to the
• In January 2006, Nokia had earlier started manufacturing remotest part of the country. For instance, a hospital can
facility near Chennai. It has increased employee base from employ telemedicine to assist doctors in rural areas as they
500 to more than 8000 today. This facility has reached a analyze and treat patients.
milestone of production volumes of 350 million handsets
in April 2010. It exports to more than 70 countries now. Apart from benefiting the rural areas, telecom manufacturing
The current production in this facility caters to the demand can also bring a lot of positives for the country as a whole.
of both the domestic market as well as that of countries
in the Middle East and Africa, Asia, Australia and New Employment generation – Telecom manufacturing industry
Zealand, besides North America and Europe will enable the ancillary and other related components
industries to grow. Currently, telecom sector employs over 1
• In 2005, LG has set up plant of manufacturing capacity for million directly and is estimated to employ another 4 million
20 million GSM mobile phones near Pune. people indirectly.13
11 TRAI, Presentation - 2010

12 Press Release - The Economic Times, January 2010
13 TEPC, Policy recommendations to increase domestic telecom growth in exports of
telecom equipment and services
64
Large export potential – Apart from the strong domestic Increased competitiveness – Growing Indian telecom
demand, telecom equipment industry offers a tremendous manufacturing industry will not only make telecom services
potential for increasing India’s exports. Indian players or affordable in India but also make this industry competitive
MNCs based in India have exported telecom equipments to across the globe. This will in turn helps in bridging the rural
other countries at a CAGR of more than 22 percent over 2008 urban divide and reduce the socio-economic barriers of the
- 2011.14 country. The competitive industry will also enable new related
industries to emerge and provide employment
Creation of Intellectual property (IP) – Heavy investment in
R&D by players in telecom manufacturing sector creates the
opportunity for Indian IP rights which can in turn lead to value
additions and innovations in other related industries such as
components and semi-conductors.
Conclusion
Self-reliance in Strategic sectors – Increased capabilities in India’s telecom equipment production as well as its exports
telecom manufacturing will help India to become a self reliant has been on the steady rise for the last few years. Various
in strategic sectors such as defense and internal security, favorable policies and initiatives implemented by the Indian
e-governance, education and research, and others. government over the last few years have gone a long way in
promoting the country’s indigenous telecom manufacturing
sector.
14 TEPC, Policy recommendations to increase domestic telecom growth in exports of
telecom equipment and services; KPMG Analysis
65
Telecom research
& development
Government of India has set an agenda in terms of pre-eminence of India as a
technology solutions provider. India has the potential of converting its strong
R&D infrastructure into a global research, design and development platform.1 This
includes R&D and installation of comprehensive security infrastructure for telecom
networks. Moreover, as India gears up for access to next generation networks, R&D
on advanced testing mechanisms is another focus area to ensure interoperability
amongst these networks, related services and devices.2
Modern technology inductions are being promoted by the Government of India. Pilot
projects on the existing and emerging technologies have been undertaken including
WiMax, 3G and those having the potential to improve rural connectivity.
Telecom centres of excellence

To boost R&D infrastructure in the telecom sector and bridge the digital divide,
cellular operators, top academic institutes and the Government of India together
have set up the Telecom Centres of Excellence (COEs). The main objectives of the
COEs include: secure information infrastructure that is vital for country’s security,
reduce rural-urban digital divide to reach out to masses and management of National
Information Infrastructure (NII) during disaster, amongst others. The seven COEs
have been established in a Public Private Partnership (PPP) mode involving leading
telecom companies and educational and research institutions across the nation.
Associate
S. No. Sponsor Areas of focus
institute
Next Generation Network (NGN) &

1 IIT Kharagpur Vodafone Essar
Network Technology
Telecom Technology &

2 IIT Delhi Bharti Airtel
Management
Information Security & Disaster

3 IISc Bangalore Aircel
Management of Infrastructure
Technology Integration, Multimedia

4 IIT Kanpur BSNL
& Computational Mathematics
Reliance
5 IIT Chennai Telecom Infrastructure & Energy
Communication
6 IIT Mumbai Tata Rural Applications

Teleservices
IIM Policy, Regulation, Governance,

7 Ahmedabad Idea Cellular
Customer care & Marketing
1 ‘India Vision 2020’, Planning Commission, Government of India, December 2002

2 ‘Indian Telecom Sector’, Department of Telecom (DoT) Targets, 2010
66
67
Apart from application oriented research, the centres have Indian IT companies have considerable number of engineers
been designed to assist and offer training to corporate working in VLSI design and embedded systems as well. The
managers for the management of networks and services focus of embedded system R&D has shifted from products
as well as decision makers of telecommunication entities to end-to-end solutions, associated services and applications.
to manage sector reforms. Each centre has a focused area These companies have begun to solve key issues related
of excellence, thus the seven centres cover all aspects to security in telecom equipments, energy efficiency, and
of telecom from technology to disaster management of convergence across devices, networks and services, and also
telecom infrastructure to customer care and business model the availability of VAS on mobile devices including handsets,
innovation. Projects currently on across the COEs include tablets and net books.
use of non-conventional sources of energy and energy
efficient power conversion and devices for rural applications,
promoting broadband wireless access, rural education
and livelihood related applications, VAS such as mobile Designed for India
based video conferencing and development work on next
generation networks. In addition, the TCOE at IIT Chennai The unparalleled growth of the Indian telecom market,
has been accepted by ITU-R as an evaluator for International innovative telecom business models, and challenging
Mobile Telecommunication- Advance (IMT-A) proposal for 4G environmental conditions, make it ideal for innovation and a
networks. focus area for global telecom original equipment manufacturer
R&D. The idea of ‘reverse innovation’ from India has started
with vendors starting to believe that the knowledge gained
from the Indian market is invaluable, and gives them a
Contract R&D: Laying the significant edge, improving their product offerings to global
customers. Telecom vendors in India are able to increase
foundation scalability and add newer functionalities on existing platforms
without the need to replace legacy equipments. This lowers
There is a rising trend for contract R&D moving out of the the total cost for the solution, which makes them a valuable
headquarters of Telecom Equipment Manufacturers (TEMs). proposition to be deployed in other telecom markets.
This is because of companies looking for more cost effective, For example, products developed with the Indian market
faster and innovative models of product development, and in mind are capable of expanding their capacity fourfold
to leverage the expertise available elsewhere, in order to simply by swapping the platform’s line cards. In response
achieve cheaper, faster and unique product differentiation. to India’s harsh environmental and climatic conditions and
India has come out as a favorable R&D destination for many the resulting local and international standards, vendors
of such companies. The Economist Intelligence Unit3 (EIU) have begun applying anti-sulphur coating to cards deployed
global survey in September 2004 has defined India as an in India to protect them from chemicals in the country’s
R&D hotspot: a place where companies can tap into existing ambient polluted air. In addition, the chip packaging for critical
networks of scientific expertise; which has good links to components is upgraded to industrial-grade to sustain a
academic research facilities; and provides an environment wider range of temperature levels ranging from -5 C to 80
where innovation is supported and easy to commercialize. C degrees. Hence, the reliability and flexibility that these
Moreover, India is a large country where English is spoken, solutions bring will help increase a vendor’s success around
wages are modest and western education is available. The the globe offering operators the same benefits of scale and
availability of quality talent is bolstered by the presence adaptability dictated by the India market.
of numerous higher educational technological institutes Vendors working in India believe that their presence here and
and a large network of government research labs. The best relationship with Indian companies will eventually benefit all of
results for outsourced R&D have been most evident in the their customers globally. Multinationals are increasingly taking
technology – VLSI and embedded systems. These outsourced notice of India beyond just its talent pool and viewing it as a
R&D initiatives have enabled TEMs, its suppliers, and mobile key development ground for their R&D efforts.
device players to effectively target their global markets
Within the technology sector, VLSI design or design of chips

is an area where multinationals came to India a long time
ago, and it remains a growth area for R&D outsourcing.
Many large semiconductor companies, including Texas
Instruments, National Semiconductors, Intel, Freescale, ST
Microelectronics, Cadence, and Motorola have established
R&D facilities in India.
3 ‘Contract Research for Global Firms Creates Hotspots for IT, Telecom & Biotech’,
Knowledge Wharton, November 2005
68
69
Emerging trends and

technologies
Over the past decade, the Indian telecommunication sector has witnessed
growth at an impressive rate. The sector has contributed, in a very real way, to the
Government’s agenda of inclusive growth. Not only has the sector contributed to the
generation of millions of jobs, it has also made essential services like banking and
healthcare available to the remotest parts of the country.
What has made the Indian telecom sector an incredible growth story is the fact
that inclusive growth has been achieved and the growth momentum is being
sustained even though urban market is increasingly getting saturated, with the urban
teledensity already at 134.08 as on August 31, 20101. The industry has witnessed an
aggressive tariff war in the previous year, with the maximum correction happening in
Q3, FY 2010 and Q4, FY 2010. There has been a 30 percent decline in tariffs and as a
result the aggressive growth has not been reflective in the profit margins2.
With the changing landscape of the sector in the form of rural expansion, increasing
competition and the ever-declining ARPUs, operators are experiencing rate erosion
and are now finding it difficult to sustain the profit margins they enjoyed over the
last few years. Coupled with the Government’s vision of providing quality telecom
services to the remotest parts of the country and facilitating its social agenda
through widespread availability of broadband services, the time is now ripe to
explore and evaluate next generation technologies which will help drive the next
phase of growth for the sector.
Due to the euphoria surrounding the 3G rollout, the Indian consumer has awakened
to the advantages offered by these advanced technologies in the form of improved
quality and reliability at reduced costs, and is eagerly waiting for their introduction in
the country.

2 ‘India Telecom Sector – Overview’, Centrum, September 14, 2010
70
71
Global technology evolution 3G - The technological revolution

Globally, mobile technologies have matured significantly With margins and profitability under strain, operators
over last two decades. Mobile phones have evolved from are increasingly embracing 3G technology as a means to
being simply voice call enablers to personal devices providing sustaining the current growth trends. 3G technology is viewed
advanced facilities like internet access on the go and location the world over as an efficient enabler for not only reducing
tracking. costs associated with delivery of voice and data services,
but also for enhancing the delivery and uptake of value added
The inception of wireless telephony was initiated through services. Industry estimates suggest that the growth rate of
the introduction of 1G, a wireless analogue standard that 3G subscribers worldwide could be greater than 10 percent
came in as early as 1980. The 1G standard was replaced over the next three years.3
by the 2G standard in 1991. The key difference between
the two standards was that 2G network allowed digital After some delays, 3G reached the Indian shores with
encryption of the communication. In the run-up to transition the successful completion of the 3G auctions earlier this
to 3G technology, the 2G standard went through two rounds year. Recognizing the potential of 3G services, bidding for
of development. The 2.5G standard, commonly known as spectrum was aggressive enough that not a single operator
GPRS, was introduced mainly for voice services and slow was able to win a pan-India license. While some private
data transmission. However, with a constant demand for players have indicated plans to roll out 3G services by the end
improvement, 2.75G (EDGE) was introduced to ensure faster of the year, government-owned BSNL and MTNL successfully
data transmission speeds. EDGE and GPRS were initially launched their services last year.
being propagated as 3G technologies but considering the
present speed of 3G services they have been earmarked as 3G uptake and future growth will be driven primarily by the
2G transitional technologies. development of innovative, locally relevant and vernacular
content, faster internet access enabling audio and video
The constant demand for innovation resulted in launch of streaming, and increased affordability of 3G-handsets. 3G
3G technologies across the globe. This technology would handsets from established brands are available in the sub
allow simultaneous flow of data as well as voice services. 50 USD categories now, infact; a handset market leader in
It was expected to revolutionize the wireless broadband India has recently launched the cheapest 3G handset costing
space because of the extremely high data speeds capabilities INR 4,700 only4. Additionally, the rapid growth in sale of
that it possesses. The development of 3G has also resulted 3G-enabled handsets, which accounted for 16.7 percent of
in the inception of LTE and WiMax, are often referred to total handset sales in 2010, promises a strong latent demand
as 4G technologies, but none of them meet the criteria of for 3G services in the country5.
International Mobile Telecommunications-Advanced (IMT-A)
requirements. LTE is a 3.9G technology and WiMax is
categorized as a 3G transitional technology.
3G rollout is expected to enable operators penetrate
These technologies are still within the growth phase and
rural market and bridge the urban-rural digital divide
the transition towards 4G has already begun. 4G will induce
at a fast pace. It is also expected to revolutionize
flexible and wider bandwidth channels; peak stationary
the mobile VAS industry in India. It will enable
data rates of 1 gigabits per second and global data rates of
operators to provide high data transfer rates, efficient
100 megabits per seconds; better link and system spectra
bandwidth usage, map and positioning services
efficiencies in the downlink; better interoperability and
and multiplayer gaming services. This technology
smooth handoff between different networks; seamless
will help the subscribers to access entertainment,
connectivity and high quality of service for bandwidth-
infotainment and voice communications through a
intensive web applications. In other words, 4G will quadruple
single device.
data speeds for the end consumer.
WiMax and LTE – The key to

reducing the digital divide6
The Indian Government has successfully concluded BWA
auctions in June 2010 in order to enable operators to offer
broadband services in Indian market. Both WiMax and LTE
are now being evaluated as deployment options on the
3 ‘3G Market Forecast to 2013’, RNCOS Industry Research, February 2010 BWA spectrum. This will further the Government’s vision of
4 ‘Nokia Launches Nokia 2730 Classic: Cheapest 3G handset in India’, Press Release,
providing broadband connectivity to the remotest parts of the
February 16,2010
5 Indian Mobile Handset Sales, Gartner, July 29, 2010
country.
6 Press Search; KPMG Analysis
72
Broadband connectivity will fulfill the growing demand for

high quality e-Governance services, online commerce, online
5G Technology
banking, online insurance, online financial market transactions
5G development is currently at a nascent stage globally.
and other such services.
However, the Indian government has already started taking
WiMax (Worldwide Interoperability for Microwave Access) is proactive steps in terms of testing and competing for newer
a telecom protocol providing both fixed and mobile internet technologies as compared to many developed nations.
access. WiMax can be effectively used to provide last mile
broadband connectivity since it is a scalable wireless access
technology which can provide high throughput over long Technology Description
distances. This essentially translates into cost savings while
increasing coverage to large areas. This feature of WiMax can 1G networks use analogue signals and is
be leveraged by countries like India to enhance broadband 1G modulated to higher frequency, typically
penetration in rural and sparsely populated inaccessible areas. 150 MHz and up
Wimax is India’s best answer for it to overcome sluggish
2G is a digital network built mainly for
broadband growth, considering it helps overcome the voice services and slow data transmission
limitations of wireline infrastructure.. WiMax reportedly has
more than 5 million subscribers worldwide and is expected to 2.5G (GPRS) is a technology between
reach 92 million subscribers by 20157. 2G and 3G cellular wireless technologies
offering cellular services combined with
LTE (Long Term Evolution) is an alternate telecom 2G enhanced data transmission capabilities.
technology which provides wireless broadband services Offers data rates from 56 kbit/s up to 115
kbit/s and can be used for WAP, MMS
for voice and data transfers. LTE does not transmit signals services, as well as Internet access
through microwaves, but instead uses a radio platform for
transmission. This technology provides peak download 2.75G (EDGE) is an upgradation of the
rates of upto 100Mbps and is also considered an effective 2.5G offering higher data-rates of up to
alternative to cable and DSL networks. LTE is expected to 236.8 kbit/s
grow at a phenomenal rate of 404 percent to reach 136 million
International Mobile
by 20148, as per industry estimates. Telephonicommunications-2000
(IMT--2000) is better known as 3G or 3rd
Generation. Application services include
WiMax and LTE have the potential means to bridge wide-area wireless voice telephone,
mobile Internet access, video calls and
the urban-rural gap and help in effectively delivering mobile TV. 3G allows simultaneous use of
essential services like education, finance and speech and data services, and offers peak
healthcare in rural areas. data rates of at least 200 kbit/s as per IMT-
2000 specifications
3.5G and 3.75G, also provide mobile

3G broadband access of several Mbit/s to
4G – A comprehensive IP solution laptop computers and smartphones.
Pre-4G systems like LTE and mobile

4G encompasses a comprehensive IP-based solution WiMAX have also been introduced across
providing features like IP telephony, ultra-broadband Internet different parts of the globe. The 3GPP
access and streamed multimedia at data rates that are higher Long Term Evolution (LTE) standard does
not comply with the ITU 4G requirements
as compared to previous generations of technology6. Industry called IMT-Advanced. LTE is not backwards
reports estimated that 4G rollout could translate into 150 compatible with 3G, but is often referred
million subscriptions by 20149. to as a pre-4G or 3.9G technology, and
sometimes branded “4G” by the service
Not resting on their laurels, the Indian government has providers
proactively started exploring 4G technology, soon after the
success of 3G auctions. TRAI has already floated consultation 4G refers to the fourth generation of
papers regarding 4G and this technology is likely to make cellular wireless standards. It is an all-IP
headway into India by 2013.10 4G packet-switched networks, mobile ultra-
broadband (gigabit speed) access and
multi-carrier transmission
Source: Wikipedia
7 ‘WiMAX Poised for Portable Broadband Success’ , Yankee Group, Nov 11, 2009
8 ‘LTE’s Five-Year Global Forecast: Poised to Grow Faster than 3G’, Pyramid Research,
May 2009
9 ‘2012 Will Be a Bellwether Year for 4G’, ABI Research, May 13, 2010
10 ‘Consultation Paper on National Broadband Plan’, TRAI, June 10, 2010; KPMG Analysis
73
Green telecom
Since the late 1900s, the Telecommunications industry has played a major role
in shaping how we live, and today it is the backbone of the global economy, with
total revenues in excess of INR 84 trillion1. The growth in the industry is led by the
increase in wireless subscription expected to continue and cross 82 billion by 2020
from current subscriber base of 4.61 billion globally.
With increase in demand for telecom services, the energy consumption has also
grown significantly and poses an environmental challenge in terms of larger carbon
footprint of the telecommunication industry. The total global carbon footprint
of the ICT industry as a whole is in the order of 8003 million ton CO2 which is
approximately 2 percent3 of global emissions. Of this, the contribution from global
telecommunication systems - mobile, fixed and communications devices are around
2303 million ton CO2 or approximately 0.7percent3 of global emissions.
The Greenhouse Gas (GHG) emissions from the mobile industry arise mainly from
sources like:
• Energy consumed by the network operation
• Emissions of the embedded network equipment,
• Energy consumed by mobile handsets and other devices, when they are
manufactured, distributed and used
Direct emissions of the mobile industry4
1 Market Trends: Global Telecommunications Market, Gartner, July 2010

2 GSMA, 2009
3 TRAI Pre-Consultation on- Green Telecom Inputs, Alcatel-Lucent, 2010
4 Mobile’s Green Manifesto, GSMS, 2009
74
75
Additionally the discarded mobile phones are among the industry consumption of c. 1.8 billion litres of diesel every
fastest growing waste streams worldwide and the rate of year9. With each liter of diesel used, 2.488 kg of CO2 is
increase is about 6505 million units per annum. Mobile phones emitted and for every KWH of electricity consumed 0.848
and the various network devices contain substances that kg of CO2 is emitted leading to emissions of around 5
are potentially hazardous which may be released into the million tons of CO2 due to diesel consumption and around
environment if they are mismanaged at the end of their life 8 million tons of CO2 due to grid power per annum
cycle.
• Operators spend around 25 percent5 of their network
operating costs on energy. The high transportation cost of
diesel in remote areas, where the physical infrastructure
Green telecom – India perspective like roads is underdeveloped, adds to the overall
operational expenditure. Also there is significant pilferage
of fuel in these remote areas
India is ranked 5th6 amongst the countries in the list of
global GHG emission, contributing 4.7 percent6 of the global • Economic viability of renewable sources of energy is very
emissions. In December 2009, the Minister of State for less especially in remote areas where the ARPU is less
Environment and Forests announced the Indian Governments than INR 90. For example the initial investment for a solar
commitment to reduce 20-25 percent6 of carbon intensity solution will be around INR 40-455 lakh per site depending
from 2005 levels by 2020. Indian Government is already on power supply required as compared to the DG set
providing various incentives for the initiatives involving the use which costs lesser.
of renewable energy resources.
Government has also offered the Universal Obligation

Services Fund (USOF) support to encourage operators
to opt for green energy and Bio- fuel as an alternative for
Current initiatives by the telecom
powering base stations. Telecom Regulatory Authority of industry
India (TRAI) has also initiated a consultation process in May
2010, requesting inputs from players across the telecom Mobile operators and players across the value chain are
value chain to provide recommendations on framework and working on a number of initiatives to develop energy efficient
implementation for Green Telecom in India. networks and energy-efficient handsets. Examples of these
Besides the governmental efforts, green telecom initiatives activities include:
in the form of efficient power management is becoming a • Designing low energy base station sites
business necessity for mobile operators in Indian market
where margins are nose diving as a result of tariff wars, • Deploying base-stations powered by renewable energy
reducing the profitability of the service providers. At present
the energy expenses (opex) is nearly 25 percent5 of the total • Implementing infrastructure sharing
network operating costs. It is all the more imperative that • Reducing mobile device life cycle emissions through
efficient power management mechanism be adopted to recycling
reduce the operating costs.
• Other initiatives – Community power and low power
handsets.
Challenges in India
Low energy base station sites
The significant challenges for the India telecom industry are: Considerable improvements in energy efficiency of base
stations have been realised in recent years. For example10,
• A large part of the country (rural areas) is power-starved,
Ericsson has reduced the annual direct CO2 emissions per
especially regions like Uttar Pradesh, Bihar, Orissa, North
subscriber in the mobile broadband base stations from 31
East, and Rajasthan. As per GSMA, India has only 56
kg in 2001 to 17 kg in 2005 and eventually to 8 kg in 2007.
percent electrification rate. With increasing coverage
Nokia Siemens Networks in 2009 developed a new cabinet-
of mobile services in off grid areas, the cost of network
based BTS with a power consumption of 790 W, versus 4,100
operations through alternate energy (diesel and battery) is
W in 2005. Alcatel-Lucent has also developed innovative
very high
techniques such as the dynamic power save feature for mobile
• India has over 300,0007 telecom towers with an average network, which reduces power consumption when the traffic
power consumption of 5-68 KW and average 88 hrs of drops with no impact on service quality. This enhancement
diesel generator running to provide back-up during power reduces average power consumption by 25-30 percent.
outages. Each tower currently consumes an average of
c. 4,000 litres of diesel every year, implying the telecom
5 Green Telecom – Indian Perspective, COAI, 2010 8 ACME

6 Ministry of Environment and Forest, Government of India 9 ‘GIL Annual Report 2010’, GIL Company Website, March 2010
7 Green Telecom Way Forward in ICT Sector, Indus Towers, 2010 10 Mobile’s Green Manifesto, GSMA, 2009
76
Cooling systems are an integral part of the telecoms • China Mobile has one of the world’s largest deployments
infrastructure and consumes significant amount of power. In of green technologies to power its base stations. China
the past, the operating temperature of the BTS equipments Mobile had 2,135 base stations powered by alternative
was required to be around 25°C. But now BTS are deployed energy in 2008. Of these, 1,615 are powered by solar
having passive cooling components as opposed to air energy, 515 are powered by solar and wind energy and 5
conditioning, thereby reducing the power requirement. are power by alternative sources
Examples11 include:
• In Vanuatu, an island nation located in the South Pacific
• Airtel has also been rolling out its “Green Shelter” concept Ocean east of northern Australia, Digicel is working with
leading to major savings in energy consumption by its the GSMA Development Fund to assess and develop
network in India commercial scale roll outs of green power technology.
There are currently 24 live sites in the Digicel Vanuatu
• Ericsson has developed the Ericsson Tower Tube, which network running on green power, including eight mission-
uses natural convection cooling, to greatly reduce feeder critical backbone sites carrying up to 60 percent of
loss, resulting in a reduction of up to 40 percent in power Digicel’s traffic
consumption. Furthermore, the Tower Tube is designed so
that backup-batteries can be placed below ground, thus • In India, Idea Cellular and Bharti Infratel have started
lowering their operating temperature and increasing their deploying solar and bio-fuel resources on trial basis for
lifetime significantly their base stations.
• Swisscom has successfully implemented its “Mistral-

Mobile” cooling system at 30 of its BTS, leading to a
reduction of up to 80 percent in the energy needed for
cooling mobile network equipment.
Base stations powered by renewable energy

With increase in price of diesel and environmental concern
about GHG emissions, operators have begun experimenting
with solar and wind powered base stations in both remote off-
grid areas and in on-grid areas prone to blackouts. There are
various technology options for reducing dependence on diesel
generators as an alternative source of energy and thereby
reducing the carbon footprint. These include:
• Solar Energy - Solar energy can be used to power telecom

towers. Solar energy solutions would be the optimal
choice for alternative energy in remote sites that are not
connected to the power grid directly, thereby reducing the
need for prolonged use of diesel generators
• Wind Energy – There are solutions under various stages

of development which convert wind energy into electrical
energy which could power telecom towers
• Fuel Cells – One of the widely emerging alternate

energy solutions is the use of fuel cells for powering
telecom towers. These cells rely on hydrogen and other
hydrocarbons and have close to zero emissions
• DC Based Generators – DC generators save a significant

amount of energy by reducing conversion losses. These
generators come with a variable speed engine that
delivers major fuel and carbon saving options at lower
loads
Examples11 for use of renewable energy resources include:
11 Mobile’s Green Manifesto, GSMA, 2009
77
Infrastructure sharing • Vodafone has phone and accessory collection schemes in

Infrastructure sharing provides excellent opportunity for place across virtually all of its markets, which resulted in
mobile operators to reduce their costs and their emissions. collectins of 1.8 million devices in 2008-09. Many of these
There are two levels of infrastructure sharing: passive and schemes are linked to charitable donations, including
active. Passive sharing is becoming increasingly common and a scheme in Italy where the proceeds from selling
reduces the environmental footprint of mobile networks by refurbished phones funds installation of solar panels for
cutting the number of tower sites required by each company. schools
In March 2009, Telefonica and Vodafone announced that
they would share network infrastructure in Germany, Spain, • Nokia has launched a recycling initiative in India and many
Ireland and the UK. Active sharing, which shares the site other countries by placing kiosks at public places. The
electronics, can have a much larger impact on the networks’ kiosks are used to collect old phones to be recycled and
carbon footprints, but it has only been implemented in a few also act as a convenient, automated facility for customers
mature markets to date. Active sharing agreements include to drop-in phones for service. Nokia plants a tree for every
T-Mobile and 3 Group in the UK, Telstra and 3 Group, as well as phone dropped and provides the consumer with a unique
Vodafone and Optus, in Australia, Tele2 and Telia in Sweden. URL and instructions with which to view their tree through
Google Earth.
In India the average tenancy for the tower has currently
increased to 1.5 tenants per tower from about 1.2 two years
back leading to cost saving including the energy cost. Other initiatives – community power and low
power handsets
As per GSMA estimates, nearly 639,000 off-grid base stations
Mobile device life cycle emissions will be rolled out across the developing world including India
Mobile Phone Partnership Initiative (MPPI) was created in by 2012. This presents both challenge and opportunity for
2002 under the framework of Basel convention. The MPPI the mobile operators to sustain their growth in these off grid
aims to address the issue of environmental impact of the areas. The opportunity exists for mobile operators to provide
management of end-of-life mobile phones. Several major electricity beyond the base station to the local communities
initiatives through MPPI are underway to reduce emissions for small needs like charging up mobile handsets, household
from mobile devices. These include a universal charging batteries and rechargeable lanterns by the excess power
solution; production of green handsets; and improved industry generated at the base stations.
recycling.
Implementing handset charging for local communities off-grid
The GSMA and 23 leading mobile operators and areas is not only important for community welfare but it is also
manufacturers have committed to implementing a cross- strategic to operators. As per the GSMA’s report on ‘Charging
industry standard for a universal charging solution for new Choices’ the availability of off grid charging options can
mobile phones. This will enable the mobile industry to adopt increase mobile operator ARPUs by 10-14 percent.
a common format for mobile phone charger connections
and energy-efficient chargers, resulting in an estimated 50 Many operators globally have implemented mobile handsets
percent12 reduction in standby energy consumption, the charging options on their base stations, but very few are
potential elimination of up to 51,00012 tonnes of duplicate running on green power. For example Grameenphone
chargers every year, and the enhancement and simplification Community Power Site based on biomass at Gazipur,
of the end-user experience. Bangladesh is operated by a third party providing electricity
to local community as well as the Grameenphone BTS.
A number of mobile operators and vendors have launched Going forward, with increased implementation of renewable
initiatives to encourage consumers to increase handset resource of energy in remote areas, operators can develop
recycling. Examples12 include: similar operating model leading to better economic viability for
the operator and benefit for the local community.
• Telenor has teamed up with the Red Cross to recycle
mobile phones. For each user returning a mobile phone, India’s rural markets pose unique challenges to handset
the user will receive 50 free SMSs and the Red Cross vendors. Most areas in rural India do not have a continuous
will plant 25 trees in Asia. Of the phones collected, those supply of electricity. Multiple vendors have recognized this
damaged will be recycled and those that can be repaired peculiarity with respect to rural India and have taken steps
will be sold in Asia with the proceeds going to the Red to address them. For instance, all the handsets vendors
Cross have developed phones to work around the challenge. The
new handsets available in the market especially the low cost
handsets are designed to have long battery life requiring less
frequent charging and save power thus indirectly contributing
to reduction of carbon footprint.
12 Mobile’s Green Manifesto, GSMA, 2009
78
Mobile services to enable

significant GHG emission
reductions in other sectors
The mobile industry is enabling significant reductions
in GHG emissions and costs across a range of sectors
of the economy, using Machine-to-Machine and other
communications to deliver smart solutions like smart grid,
teleconferencing, smart logistics and transportation.
“Carbon Connections” a report released by Vodafone in

2009, assessed initiatives related to dematerialization
(teleconferencing, teleworking), smart grids, smart logistics,
smart transportation and smart manufacturing, in which
existing mobile technologies are abating GHG emissions in
Europe. As per this report, such existing technologies can be
put in use to reduce GHG emissions in multiple sectors of the
economy and estimates that 113 million ton CO2 can be saved
by 2020 through these set of initiatives.
As per the report, in India, 25 percent of electricity is lost

during transmission and distribution. Potential savings
through smart grid using mobile technology can be significant.
Smart grid opportunities in India could achieve a total potential
abatement of more than 80 million ton of CO2 and projected
savings of around EUR 6 billion.
With high growth of Indian telecom industry

and corresponding environmental challenges
there is urgent need to tackle the increasing
carbon emissions and manage environmental
sustainability (e-waste management). Many
players across the telecom value chain already are
taking several initiatives including their corporate
social responsibility program for green power
and e-waste management. However enabling the
industry with sustainable frameworks through
effective government policy and regulatory
interventions will generate a larger interest in
stakeholders to move to the next step in achieving
carbon reduction and reducing the harmful
environmental impacts on a larger scale towards
addressing this critical issue.
79
Investment
opportunities after
broadband rollout
The Indian broadband landscape of 2010 with a large addressable population and
around 10.08 million broadband subscribers is quite similar to the Indian cellular
market of 1997, with a large addressable population and only 340,000 subscribers1.
In the backdrop of broadband penetration in excess of 25 percent in the developed

world and an overall global penetration of around 7 percent, India ranks significantly
low with less than one percent broadband penetration.
The growth opportunity in India from a broadband perspective is clearly defined,

with the country having only about 10.08 million broadband customers as against
over 650 million mobile subscribers. In the last few years, nearly 25 percent of the
country’s wireless subscribers have successfully transitioned to become mobile
internet customers, thus bearing out the opportunity for these services in India2.
The recently concluded BWA auctions witnessed a significant quantum of capital

being committed towards furthering the broadband agenda in India. The process
caught the attention of both Indian and global investors with diverse strategies,
looking to offer wireless broadband services in the country. Worldwide, mobile
network operators (‘MNO’) have historically taken a lead in rolling out BWA networks
in order to tap an additional stream of revenues. In India as well, almost all incumbent
MNOs participated through the stages of the auction process highlighting the need
for spectrum and quality of service (‘QoS’) in one of the world’s fastest growing
telecom markets.
Company Circles Investment (USD Million)
Infotel 22 2,733
Broadband
Qualcomm 4 1,045
Bharti Airtel 4 705
Aircel 8 731
Tikona 5 225
Augere 1 27
Source: Press release BWA Auction - Final Results, Department of Telecommunications,

June 12, 2010 – USD 1 = INR 47, KPMG Analysis
1 Subscriber Database, COAI

2 Quarterly Performance Indicator, TRAI, October 13 2010
80
81
Opportunities for investment Transaction activity4

Having committed capital to the sector, service providers will • Subsequent to the conclusion of the auction, Reliance
now consider rolling out operations relatively quickly, to garner Industries acquired 95 percent equity stake in Infotel
high value customers and gain leadership positions in their Broadband Services for a consideration of approximately
respective circles. Industry analysts peg the cost of a pan- INR 45 billion
India BWA roll-out at around INR 90 billion3. This may translate
into an extremely high roll-out cost per circle, thereby implying • Earlier this year, Qualcomm divested a 26 percent holding
a consolidated funding requirement of about INR 178 billion to Global Holdings (shareholders in GTL) and Tulip Telecom
across all operators. for around INR 2.8 billion. This transaction is a global
first wherein a technology developer (Qualcomm) has
Investments may also be in the form of joint developmental partnered with telecom infrastructure players (GTL and
and go-to-market strategies by operators, device Tulip Telecom) for kick-starting an operator model.
manufacturers as well as value added service providers to
build a sustainable ecosystem around technologies, customer
acquisition and services.
3 Estimated based on analyst commentary with respect to RIL’s BWA network Capex, 4 RIL – Infotel: Reliance Industries, BWA Analyst Presentation, June 12 2010;
’India Telecoms – The night is darkest before dawn’, Credit Suisse, July 2010 ‘Qualcomm seals stake sale deal’, The Telegraph,, July 31, 2010
82
Critical success factors Government initiatives

Unlike the developed world, where first broadband services In order to fuel the success of new entrants and foster a
got introduced as part of 3G technology, followed by the favorable investment climate, the Government, through
advent of WiMax and LTE technologies for high speed mobile various agencies, has undertaken a number of initiatives in the
data access; India is likely to witness a concurrent roll-out of broadband space.
all these services.
Some of these include subsidy schemes (on active
As a result, while WiMax networks have been launched infrastructure components) under the USOF to further the
across 149 countries worldwide, covering a population of development of rural wireless broadband infrastructure6.
around 621 million, the overall subscriber base on these
WiMax networks globally is pegged at around 9 million • Intends to provide 888,832 broadband connections in rural
subscribers, representing a penetration of approximately areas by 2014
one percent5. The India story may however, turn out to be • Considering subsidized broadband services along with
fundamentally different if some of the following factors are subsidized computing devices to enhance rural broadband
considered: penetration
• Non-voice services still contribute a much lower share • The USOF has identified 5,000 villages which have no
of revenues in India compared to the global average. terrestrial connectivity and is in the process of developing
Whilst 3G and BWA may be key drivers for rapid growth a scheme to connect these villages
of advanced data services, it may be expected that BWA
will have a decisive competitive edge due to significantly • The USOF is expected to extend financial support to
high data speeds as compared to 3G networks. Further, encourage active infrastructure sharing
in India, pushing voice services may also continue to be a
priority for MNOs on 2G and 3G networks • USOF has also taken the initiative to strengthen the OFC
network in rural and remote areas.
• Growth in broadband connections may witness an
exponential trend given the availability of BWA spectrum Additionally, the Department of Information Technology
and related services rollout intends to setup over 1 million internet enabled Common
Service Centres (CSC) across India as per the National
• The extension of fixed BWA to mobile BWA through the e-Governance Plan (NeGP). The Department of Education has
manufacture of compatible mobility devices – Partnerships also embarked upon an initiative under the National Mission
between broadband service providers and device for Education through Information and Communication
manufacturers may thus become critical to the success of Technology, to provide broadband connectivity to 20,000
the platform colleges in the country for enabling the use of e-content for
education.
• Launch of services in areas where costs of laying a
fiber network outweighs returns. For example, rural Heightened transaction activity, immense scope for
connectivity through fixed BWA may be appropriate to expansion and a hitherto underdeveloped market coupled
enhance penetration. From an urban perspective, tariff with aforesaid Government initiatives would create an
plans and speed of data download may become integral environment suitable for development of innovative services,
to defining BWA’s acceptance over traditional cable new content and integration of devices.
broadband services already being offered by numerous
operators The market may witness a coming together of tailored
devices with specific content that may be monetized via a
• Effective use of BWA networks as a substitute for BWA platform. An environment driven by convergence and
telecommunications back-haul may be very relevant in the backed by a strong government focus may lead to enhanced
Indian context, given the large number of new MNO’s that transaction activity in near future.
need to still create sufficient back-haul infrastructure for
the rising traffic requirements beyond plain vanilla voice
traffic needs
• Aligning content providers, aggregators and platform

developers towards the BWA paradigm may also prove
important from a profitability perspective. BWA operators
may need to tailor value added services and content from
a customer-pull perspective in order to generate usage and
traction in the urban environment.
5 ‘Monthly Industry Report’, Wimax Forum, October 2010; Maravedis - 4G Counts,

October 2010
6 Government Initiatives, DoT
83
International best
practices
This chapter will entail key initiatives, best practices, exemplary developments and
milestones achieved in telecom sector largely in developing countries for the growth
of the telecom services especially among economic backward section of the society
and remote areas. Through various case studies we would bring up the context and
reasons why these initiatives have been successful and its overall impact.
There have also been a large number of pilot and commercial initiatives globally
to deliver the wide spectrum of benefits of mobile based services with green and
renewable power resources at the base.
Bridging digital divide: Delivering mobile

broadband services in semi-urban and rural
areas
The evolving telecommunication revolution has essentially been an urban
phenomenon till now. In India, the urban centers and especially metros are
approaching over 100 percent penetration levels, while the rural penetration levels
are still single digits in most of the villages with several thousand villages yet to see
the connectivity. Even with thousands of subscribers being added every day in rural
areas which are getting connectivity, there is still a wide disparity in the telecom
penetration levels.
Sri Lanka’s leading mobile operator has leveraged HSPA mobile broadband
technology for bringing affordable internet access to bottom of the pyramid.
To address the bottom of the pyramid in the villages where PC penetration is
extremely low, the operator started the Last Mile initiative ‘Easy Seva’1 developed in
partnership with Qualcomm, the US Agency for International Development, the Sri
Lankan National Development Bank and Synergy Strategies Group.
Through shared-access Easy Seva centres, the operator has been able to bring data
services to remote villages. Operator and its partners provide local entrepreneurs
assistance to set up internet cafes. Each Easy Seva centre has multiple PCs,
IP handsets, a router, and a 3G modem that utilizes HSPA for fast broadband
connectivity. The franchisees are selected following an extensive review process
to make sure that Easy Seva is the right fit for the local community and businesses.
They then receive comprehensive training, marketing support, 24/7 help desk
and preferred data pricing. The Easy Seva partnership also provides loan and lease
facilities for the franchisees to help purchase the equipment and pay for the lease
on the premises. The low hardware and operational costs ensure that prices for
end users, who are the ultimate beneficiaries of the project. Users have access to
information on jobs, educational tools and micro-loans.
1 Mobile Broadband Case Study, GSMA, 2008
84
85
Similarly in South Africa, the community in Alexandra (Sub Thus, the increased use of mobile technology can help reduce
urban area in Johannesburg) now has access to fast, reliable health care costs by improving efficiencies in the health care
internet access through HSPA network from an innovative system and houses the idea that there exists a powerful
Internet cafe concept. One of the largest operators of South potential to advance clinical care and public health services
Africa founded a community payphone kiosk, which offers by facilitating health professional practice and reducing health
the very poor community access to voice telephony services, disparities.
and for the first time, cheap access to the Internet. The
kiosk belongs to local entrepreneur with support from local Education
operator, and the GSM Association’s Development Fund. The In the Philippines, a local mobile operator is helping public
Alexandra Community Payphone2 site is part of a nationwide elementary schools access educational materials through the
project, to bring broadband to low-income townships, ‘Text2Teach program’4. Text2Teach is a project that focuses on
boosting education and healthcare and providing a platform the 11 to 13 year old age group. In the first phase, Text2Teach
for entrepreneurship. The community Internet cafe enterprise enables teachers to simply use the mobile phone to order
offers convenient access to health and education information video clips, which are then delivered via satellite, stored in
as well as job vacancies and advice for finding employment. the media master, and viewed on TV. The second phase, the
It is supported by a dedicated online portal developed by local teacher were able to just plugs the mobile phone pre-loaded
operator, which features a wealth of valuable, up-to-date local with educational videos to a TV set and plays the video lesson.
information. New videos are accessed by downloading them through the
mobile phone.
Agriculture
Proliferating citizen and Google Trader4 is a marketplace mobile application used in
governance services through Uganda to buy and sell goods and services using SMS. This
application was developed in response to challenges faced by
mobile the Uganda’s rural producers and consumers in reaching out
to the markets, due to inefficient transport network and lack
Healthcare of knowledge of market conditions. This application ensures
While the health community debates whether a specialized transparency and enables small producers to realize higher
field of ‘M-Health’ exists and how to define it, most people prices when dealing with larger traders, thus increasing
will agree that individuals around the world are using mobile their incomes. Google Trader is primarily in English but also
technologies to access health services and information responds to the primary commands in three local languages.
and that health professionals are formally and informally The initial pilots of Google Trader in banana-producing
integrating mobile technologies into public health and clinical regions of Western Uganda appealed to small producers,
activities. As mobile phones and other mobile devices who felt more confident about their ability to reach buyers
become part of everyday life, people become better equipped and receive better compensation for their produce. The
to respond to emergencies, consult with peers and health widespread adoption of the application is expected to lead to
professionals about health issues as they arise, and access lower transaction costs, greater efficiencies and higher price
health services that are increasingly being delivered through transparency across various markets; resulting in increased
mobile phone based systems. incomes to small farmers as well as other traders and buyers
in the value chain, enabling them to save time and transport
Government of Uganda spends a substantial amount of the costs, which will result in greater wealth for all involved.
health budget in finding a cure for diseases like AIDS. A new
healthcare awareness program, ‘Text to Change’3 (TTC) was
recently introduced. The program is spearheaded by a local M-Commerce
mobile operator, a Dutch non-profit organization, sponsored In 2007, only one out of five people in Kenya had access to
by the UN’s Department of Economic and Social Affairs banking facilities, mainly due to the high transaction fees and a
and Uganda’s Ministry of Health. The program offers text scarcity of bank branches. In March 2007, Vodafone launched
message based multiple choice interactive quizzes which an M-commerce system in Kenya with its local partner Safari.
are administered to mobile phone subscribers in the rural com called M-PESA4. The service enables its users to deposit
region. Free airtime is offered to the users to encourage them and withdraw money, transfer money to other users and non-
to participate in the program; this was determined to be a users, pay bills, and purchase airtime through a network of
powerful incentive since users were allowed to exchange the agents that includes airtime resellers and retail outlets acting
airtime with other subscribers as a type of currency. as banking agents. Teaming up with Kenya Commercial Bank
and Western Union, M-PESA has become a market leader,
acquiring just under six million users — one in six Kenyans
— since its launch. M-PESA is so popular that more than 10
2 Mobile Broadband Case Study, GSMA, 2008

3 mHealth For Development, United Nations Foundation, 2009
4 Mobile Government: 2010 and Beyond, European Union Regional Development Fund,
January 2010
86
percent of Kenya’s GDP passes through it. Following on the

success in Kenya, the M-PESA solution has been replicated
Mobile solutions for making
in Tanzania through its partnership with Vodacom and was enterprises more efficient
recently launched in Afghanistan as well.
Leveraging on the developments in Telecommunications
M-Governance Media and technologies (TMTs) and Information and
A part of a broader phenomenon of mobile-enabled Communication Technologies (ICTs) also emerged as one of
development or leveraging the mobile revolution to enable the most cost-effective solutions for corporate houses where
development impact is attributed to M-governance. The Collaboration lies at the heart of their business.
process takes electronic services and makes them available
via mobile technologies using mobile phone devices. These In China, China Southern Power Grid8 (CSG) has installed
services bypass the need for traditional physical networks for an automated meter reading solution from China Mobile,
communications and collaboration. M-Governance is a sub- Huawei, and Hongdian, in order to improve efficiency in
domain of e-governance which simply extends the reach of meter reading. Given its vast infrastructure, meter reading for
e-governance. utilities players has typically been an arduous, inaccurate and
expensive process. However, with the automated system,
• In Finland, SMS5 tickets can be used for Helsinki’s public which uses 1 million remote monitoring devices, CSG is now
transport system. These tickets can be ordered by sending able to track end-users’ electricity usage in real-time, allowing
a text message and the user is billed through his or her it to accurately bill customers and optimize demand planning.
regular mobile phone bill. The ticket itself is also delivered
to the commuter via SMS. CSG is also using mobile technology to monitor other parts
of its electricity network. By connecting the communications
• Philippines – PAYBIR6: The Bureau of Internal Revenue in module to additional equipment, such as cameras or
the Philippines offers a service called “PAYBIR,” where monitoring equipment, CSG can obtain real-time information
a taxpayer can file his or her income tax returns by SMS. to support remote troubleshooting and maintenance. The
Through the PAYBIR service, taxpayers can now pay automated solution has provided to CSG significant benefits:
their tax of R 10,000 (USD 281) and below through a text reduced data collection, maintenance and troubleshooting
message. The BIR has forged a partnership with Land costs; improved data accuracy through automation; easier
Bank of the Philippines as the accredited agent bank and deployment; a more reliable power network; and considerable
Globe Telecom as the taxpayer agent. Globe Telecom uses carbon reduction through automated meter reading and fault
its G-Cash facility to make tax payments on behalf of its detection.
subscribers.
In Bangladesh, Grameenphone’s CellBazaar9 is one popular
7
• Dubai eGovernment’s SMS service : Dubai Public success story; it allows users to buy and sell goods and
Prosecution has adopted Dubai eGovernment’s SMS services through SMS, WAP or the internet using their mobile
service. This SMS integrated service allows clients, phones. This platform allows traders to find others, and
including the transacting public, lawyers and prosecutors, post information about their businesses. This service also
to inquire about cases, times of sessions, resolutions, and provides regular market information about price, quantity and
the status of proposals and requests drafted by the Public suppliers on a pay-as-use basis. Grameenphone users can
Prosecution. buy any agricultural product, such as rice, fish, or chicken,
as well as large-scale purchases like an apartment, land, or
car, and consumer goods such as a television or refrigerator.
The service is run by the customers: they post items for sale,
delete items after they are sold, adjust prices if items fail to
sell, and do much more besides. CellBazaar has grown rapidly
over the years; it now has 1.5 million users and averages
90,000 hits a day (including page views and SMS messages).
Its registered seller base is 51,000 and its unregistered user
base is thirty times that size.
5 m-Governance-Leveraging Mobile Technology to extend the reach of e-Governance, 7 http://www.mdubai.ae/

2009 8 Asia Pacific Mobile Observatory, GSMA, 2009
6 Mobile Government: 2010 and Beyond, European Union Regional Development Fund, 9 Case Study, Mobile World Congress, 2009
January 2010
87
Green power for telecom

The future growth of the highly competitive Indian telecom
sector will come from the relatively untapped and uncovered
rural market and the key issue influencing roll-out in rural areas
is power. Decentralized and distributed power generation
technologies based on renewable energy (RE) resources
are considered as emerging alternate power solutions for
the telecommunications networks. Operationally, network
‘uptime’ is an important Quality of Service parameter from
the point of view of consumer choice and it is the single most
important factor driving the use of RE applications in both
urban and rural India.
Orange won a major telecom industry award at the Global

Telecoms Business Awards 201010 for its solar base station
program in emerging markets. After successful trials at
numerous sites in Senegal, Orange replicated the program
in other countries in 2008. This program became Orange’s
engineering blueprint for the creation of off-grid radio sites
in Africa and the Middle East. The Orange solar deployment
program now covers more than 900 base stations across
13 countries. The Orange solar base station development
program is the most iconic part of a wider green strategy
committed to achieving 20 percent reduction of CO2
emissions by 2020 and 15 percent reduction of the company’s
energy consumption.
India can use these excellent examples to deliver government

and citizen services, targeted particularly at the bottom
of the pyramid which have revolutionized the speed and
effectiveness of service delivery in the area of healthcare,
education, financial services, agriculture and overall
government administration to bridge the digital divide. The
adoption of various mobile based enterprise applications
leading to better services delivery with better efficiencies also
gives an equal edge to India Inc.
Also, with increased focus on green power, mobile operators

and vendors are using new and innovative ways to improve
energy efficiencies and reduce their carbon foot print.
10 Press Release, Orange, June 2010
88
89
Conclusion
The Indian telecom sector has proved to be an international success story. Nearly all
major international telecom operators have made significant efforts towards making
inroads into the Indian market in order to tap the immense potential offered as well
as to leverage on the low cost outsourcing model which has been pioneered in India.
The sector has witnessed a commendable growth over the past 2 years. At present
there are 15 operators in the market offering the lowest mobile tariffs across the
globe. With an overall subscriber base of 706.3 million and a teledensity of about 60
percent, the sector continues to growth from strength to strength.1
With the urban teledensity crossing 100 percent, the market has been showing
signs of maturity, especially in case of the uptake of voice-based services. The urban
markets may continue to add more users; however, usage of multiple SIMs, multiple
tariff corrections and swelling competition continues to exert immense pressure
on the operator margins. Rural India is the key target market likely to drive the next
round of growth, particularly for voice-based services. 3G and BWA are expected
to reinvigorate the maturing urban markets and help the telcos to achieve margin
enhancement.
The aggressive growth observed by mobile services is yet to be replicated in case of

broadband services, where the subscriber base currently stands at 10.08 million as
on August 31, 20101. However, the broadband sector can expect tremendous growth
in the future, considering that there are more than 650 million potential customers
waiting to be tapped. The successfully concluded auction of the BWA and 3G
spectrum will enhance the wireless broadband penetration across the country and
help connect the remotest locations across India.
The government appreciates the importance of broadband for India and how
this technology can help the rural population across the country to leverage the
advantages of modern education, healthcare, commerce and banking. To further this
agenda, the government has setup a robust regulatory environment to work towards
the development of the sector. This proactive regulatory environment will also be the
harbinger for the next phase of development for the telecommunications sector.
1 Telecom Subscription Data as on 31st August 2010, TRAI, October 05, 2010
90
91
About KPMG in India

KPMG is a global network of professional firms providing Audit, Tax and Advisory
services. We operate in 146 countries and have 140,000 people working in member
firms around the world. The independent member firms of the KPMG network are
affiliated with KPMG International, a Swiss cooperative. Each KPMG firm is a legally
distinct and separate entity and describes itself as such.
The Indian member firms affiliated with KPMG International were established in
September 1993. As members of a cohesive business unit they respond to a client
service environment by leveraging the resources of a global network of firms,
providing detailed knowledge of local laws, regulations, markets and competition.
We provide services to over 2,000 international and national clients, in India. KPMG
has offices in India in Mumbai, Delhi, Bangalore, Chennai, Hyderabad, Kolkata,
Pune, Kochi and Chandigarh. The firms in India have access to more than 5000
Indian and expatriate professionals, many of whom are internationally trained.
We strive to provide rapid, performance-based, industry-focused and technology-
enabled services, which reflect a shared knowledge of global and local industries
and our experience of the Indian business environment.
92
About Department of Telecommunications (DoT)

The Department of Telecommunications of the Government of India is
responsible for telecom policy formulation, telecom licensing, wireless spectrum
management, universal service obligation, promotion of International co-operation
in telecommunications, promotion of private investments in telecom sector,
standardization and research in the field of telecommunications and administration
of:
• Indian Telegraph Act, 1885
• Indian Wireless Telegraphy Act, 1933
• Telecom Regulatory Authority of India Act, 1997
About Federation of Indian Chambers

of Commerce and Industry (FICCI)
FICCI, set up in 1927 is the largest and oldest apex business organization of Indian
business. With a nationwide membership of over 1500 corporates and over 500
chambers of commerce, FICCI espouses Indian businesses and speaks directly and
indirectly for over 2,50,000 business units. FICCI maintains the lead as the proactive
business solutions provider through research, interactions at the highest political
level and global networking.
FICCI organizes a large number of exhibitions, conferences, seminars and business

meets for promoting business.
91
Contact Us
Department of The Telecom Regulatory Telecom Disputes Settlement

Telecommunications Authority of India & Appellate Tribunal
Ranjan Khanna Mahanagar Doorsanchar Bhawan Room No.482 & Room No.478, Hotel Samrat
Director Jawaharlal Nehru Marg Chanakyapuri, Kautilya Marg
Room No.303, Sanchar Bhawan New Delhi: 110 002 India New Delhi - 110 021 India
Ashoka Road, New Delhi -110 001 Tel: 91-11-2321 1934, 2323 3466, Tel: 91-11-2687 6882, 2687 3411, 2410 2563
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E-mail: ranjan.khanna@gmail.com Fax: 91-11-2321 3294 Website: www.tdsat.nic.in
Website: www.dot.gov.in Website: www.trai.gov.in
Telecommunication Engineering Centre for Development of

Centre Telematics (C-DOT)
Gate No. 5 C-DOT Campus

Khurshid Lal Bhavan, Janpath Mandi Road, Mehrauli
New Delhi – 110 001 India New Delhi-110 030 India
Tel: 91-11-2371 7138 Tel: 91-11-2680 2856
Website: www.tec.gov.in Fax: 91-11-2680 3338
Website: www.cdot.com
Federation of Indian Chambers of

Commerce and Industry
Sarika Gulyani
IT & Telecom Division
Federation House, Tansen Marg,
New Delhi -110 001
Tel: 91-11-2373 8760-70, 2373 6190
E-mail: ficcitelecom@ficci.com
Website: www.ficci.com
KPMG
Sean Collins Romal Shetty Arpita Pal Agarwal

Global Chair - Communications and Media National Head - Telecom Head - Telecom R&C
seanacollins@kpmg.com romalshetty@kpmg.com arpita1@kpmg.com
Tel: 91-65-6213 7302 Tel: 91-80-3065 4100 Tel: 91-124-307 4588
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This knowledge document has been developed by KPMG and FICCI for providing an overview of the Indian telecommunications
sector. It is meant to be used for the limited purpose of ‘India Telecom 2010’ only. It may not be considered, in any form, as a policy/legal
document of the government, directly or indirectly.

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1 ‘Monthly Telecom Scenario – August 2010’, DoT, October 2010

Amit Mitra Sean Collins Romal Shetty Arpita Pal Agrawal

Global telecommunications market 7

Indian telecommunications market 13

Regulatory and policy environment 19

Broadband for all 25

Broadband - catalyst for convergence 39

Value added services in India 43

Connecting rural India 51

Telecom research & development 65

Emerging trends and technologies 69

Investment opportunities after broadband rollout 79

International best practices 83

About KPMG in India 91

About Department of Telecommunications (DoT) 92

About Federation of Indian Chambers

Progressive liberalization of government policies, rapidly expanding services sector,

1 CIA – World Fact Book 2009, The World Bank

Key features of the Indian

GDP Mix of India and developed economies

2005 2010P 2010P Agriculture

From survival to revival

Source: Bloomberg, CSO

Though the growth momentum of the Indian economy was

the slow impact of increase in government spending and the

11 D&B Outlook, Q2 2010

FDI inﬂows in selected countries Indian equity markets outperform EM

2007 2008 2009 CAGR 12 Months returns as on March 2010

Japan 22,548 24,418 11,939 (27.2)% MSCI India 113.6%

Korea 1,784 3,311 1,506 (8.1)% MSCI EMF 77.3%

14 D&B Outlook, Q2 2010

Improvement in private consumption Low labour cost

India China Japan US France Germany UK

17 XIth Plan Documents, The Planning Commission

1 International Telecommunications Union database, June 2010

The continuing rise in afﬂuence levels in emerging markets

Telecom market revenue by sector

Telecommunications Market - 2009 Telecommunications Market - 2014

Enterprise Carrier Network Infrastructure Enterprise Carrier Network Infrastructure

Revenues – USD 1.9 Trillion Revenues – USD 2.3 Trillion

Source: Market Trends: Global Telecommunications Market, Gartner, July 2010

The demand for applications with platforms such as Apple’s

Global wireless ARPU comparison (2009)

Source: Global I/O: Wireless Services, UBS, October 2009

2 Global I/O: Wireless Services’, UBS, October 2009

This quote style isecosystem

33pt on 36pt leading

4 ‘MVAS: Where are we heading to?’ - CIOL, October 2008

With software application surge and usage of advanced

China has witnessed a blistering pace of PC-based broadband

Mobile subscriber data (millions) Fixed line data (millions)

China India Japan USA

Source: Economic Intelligence Unit database, 2010

8 GSM Association 2009

M&A activity and diversiﬁcation

Asia to continue to lead growth in

9 Mergermarket Database, September 2010

Mobile subscribers (share of the world)

Source: EIU’ 2010 estimates, International Telecommunications Union statistics

1 ‘Telecom Subscription Data as on 31st August 2010’, TRAI, October 2010

525 Haryana North East