2011

Indian Telecommunication Industry

A Strategic Management Assignment
Submitted By: Anurag Dikshit JIML-10-027 Gaurav Tandon JIML-10-059 Prerna Tandon JIML-10-097 Samarth Sinha JIML-10-121 Ayushi Khare JIML-10-FS-010

Submitted To: Dr. Vir Ved Ratna, Faculty SMGT 9/21/2011

Table of Contents
Introduction ................................................................... 2 INDUSTRY STRUCTURE.................................................... 4 INDUSTRY SETTINGS AND ATTRACTIVENESS ................. 14 MAJOR PLAYERS ........................................................... 18 PORTERS 5 FORCES MODEL........................................... 23

Introduction
With a subscriber base of more than 811 million the Mobile telecommunications system in India is the second largest in the world and it was thrown open to private players in the 1990s. The country is divided into multiple zones, called circles (roughly along state boundaries). Government and several private players run local and long distance telephone services. Competition has caused prices to drop and calls across India are one of the cheapest in the world. The rates are supposed to go down further with new measures to be taken by the Information Ministry. In September 2004, the number of mobile phone connections crossed the number of fixed-line connections and presently dwarfs the wireline segment by a ratio of around 20:1 The mobile subscriber base has grown by a factor of over a hundred and thirty, from 5 million subscribers in 2001 to over 826 million subscribers as of Apr 2011 (a period of 10 years) . India primarily follows the GSM mobile system, in the 900 MHz band. Recent operators also operate in the 1800 MHz band. The dominant players are Airtel, Reliance Infocomm, Vodafone, Idea cellular and BSNL/MTNL. There are many smaller players, with operations in only a few states. International roaming agreements exist between most operators and many foreign carriers. India is divided into 22 telecom circles. They are listed below

Assam Andhra Pradesh Bihar Delhi & NCR Gujarat Haryana Himachal Pradesh Jammu and Kashmir Karnataka Kerala Kolkata Madhya Pradesh Maharashtra & Goa Mumbai North East (Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, & Tripura) Orissa Punjab Rajasthan Tamil Nadu Uttar Pradesh (East)

Uttar Pradesh (West) West Bengal

List of States with largest subscriber base in India

State Uttar Pradesh Maharashtra Tamil Nadu Andhra Pradesh West Bengal Bihar Karnataka Gujarat Rajasthan Madhya Pradesh Delhi Kerala Punjab India

Subscriber base 112,193,095 98,469,453 70,872,739 61,826,969 63,538,180 54,742,871 50,157,913 47,995,018 43,731,458 46,767,687 39,957,798 31,817,137 29,096,660 826,930,916

Population (01/03/2011) 199,581,477 112,372,972 72,138,958 84,665,533 91,347,736 103,804,637 61,130,704 60,383,628 68,621,012 72,597,565 16,753,235 33,387,677 27,704,236 1,210,193,422

Mobile phones per 1000 population 562 876 982 730 696 527 821 795 637 644 2,385 953 1,050 692

INDUSTRY STRUCTURE

The Indian telecom industry has undergone significant structural transformation since its liberalization in the 1990s. During the last decade, the Indian telecom industry has evolved into a multi-segment, competitive market from a small supplier-dominated market having public sector monopoly. Coherent Government policies have played a crucial role in shaping the structure of the Indian telecom sector.

Structural Evolution of the Indian Telecom Industry

Telecom Sector in the Pre-liberalisation Era (1980-1990): Before liberalisation, the public sector held a monopoly in provision of telecom services. The entire telecom services operation in the country was carried out by the Department of Telecommunication (DoT), a public sector entity established in 1985. It managed the planning, engineering, installation, maintenance, management, and operations of telecom services for the whole of India. In order to ease out its operations, two new public sector corporations viz. MTNL and VSNL were set up under the DoT in 1986. Thus, before the entry of the private players, the telecom services were provided by three public entities viz. DoT, MTNL and VSNL. While MTNL primarily looked after the operation of basic telephony services in Delhi and Mumbai, VSNL provided international telecom services in India. DoT looked after basic telephony operations in regions other than Delhi and Mumbai. Prior to liberalisation the telecom services were broadly classified as domestic basic (which included basic telephony, telex and fax), domestic value-added services (VAS) which covered all other services such as paging, cellular, data services, VSAT and international basic and VAS. Telecom Sector in the Post-liberalisation Era: Private sector participation in the Indian telecom sector has been a gradual process, wherein the government initially permitted players from the private sector to provide Value Added Services (VAS) such as Paging Services and Cellular Mobile Telephone Services (CMTS), followed by the Fixed Telephony Services (FTS) or Basic services. Eventually the private sector has been allowed to provide almost all telecom services. Liberalisation process in the telecom services market began in 1992, with the unbundling of the domestic basic services and the domestic VAS and entry of private players for providing the VAS such as cellular and paging services. During this period, the government provided licenses to private players according to the services that were to be provided in the specified areas of service provision. The country was divided into circles (or categories) on the basis of economic potential. Thus, primarily these divisions were mostly adjoining the states of India. Such demarcations were primarily responsible for existence of various regional players in provision of telecom services. During 1994, through a competitive bidding process, licenses were granted to 8 CMTS operators in four metros, 14 CMTS operators in 18 state circles, paging operators in 27 cities and 18 state circles.

After the domestic VAS, the basic services were opened up to private players. The National Telecom Policy (NTP) 1994, which endeavoured to build world-class telephone services in India and aimed at providing telephones on demand, enabled the entry of private players in the provision of basic services. Given the need for resources in addition to government sources for achieving the targets of NTP-94, private investments and involvement of the private sector was considered inevitable to bridge the resource gap. Thus, the private operators were allowed to render basic services in the local loop. Initially, the provision of basic services had been deliberated as a duopoly between a selected service provider and the DoT. In line with this, policy licences were awarded to 6 BTS operators in 6 state circles. The need for independent regulation had risen with the entry of private players. Also, to fulfil the commitments made when India joined the World Trade Organisation (WTO) in 1995, the Telecom Regulatory Authority of India (TRAI) was established in 19971 to regulate telecom services including fixation/revision of tariffs. The establishment of TRAI was a positive step in terms of separation of regulations from policy making and operations, which continued to be under the purview of the DoT2. Further, in 1998, the Government also declared the policy for Internet Service Provision (ISP) by private operators and had even begun licensing of the same around that time. Subsequently the Global Mobile Personal Communications by Satellite (GMPCS) was also opened up for the private players. Although the private players had been allowed to participate in many telecom services segments, the results of privatisation had not been satisfactory entirely. Thus, a New Telecom Policy (NTP-99) was announced on March 26, 1999, which came into effect from April 1, 1999. The NTP 1999 not only provided a major fillip to private sector participation in this industry but also laid down the path for significant development of the Indian telecom industry. The NTP 1999 allowed private operators providing cellular and basic service to migrate from a fixed licence fee regime to a revenuesharing regime to make the operations of the private players financially viable. This policy change provided the muchneeded relief to private players who were earlier burdened with huge debts that they had to service owing to their licence fee commitments. Another notable provision of the Act had been the entry of multiple private sector operators in the sector in contrast to the policy of duopoly practiced earlier. This not only increased competition in the industry but also assisted the private players to attract new investment and augment their subscriber base. The entry of private operators in the cellular sector helped to reduce the operational cost of the industry. It also reduced the mobile tariffs and provided a much needed boost to the industry. The Act also made the following provisions: it permitted interconnectivity and sharing of infrastructure among various service providers within same areas of operations; it allowed both voice and data traffic by service providers; it opened up national long distance (NLD) and international long distance (ILD) services to competition et al. Thus, the NTP 1999 can be viewed as the genesis of the cellular revolution being witnessed in India.

Current Structure of the Indian Telecom Industry: Currently, both public sector players as well as the private sector players are actively catering to the rapidly growing telecommunication needs in India. Private participation is permitted in all segments of the telecom industry, including ILD, DLD, basic cellular, internet, radio paging, et al. The broad structure of the telecom industry (in terms of service providers) is depicted in the diagram below:

Public Sector: After the privatisation of VSNL in 2002, only two premier PSUs, MTNL and BSNL operate in India and provide various telecom services. As noted earlier, MTNL operates in Delhi and Mumbai and BSNL provides services to the remaining country. In the postliberalisation era, these PSUs not only have made significant progress but also have provided stiff competition to their private counterparts.

Private Sector: Private operators have played a very crucial role in the growth of the telecommunication industry, primarily in the mobile services. With the liberalisation of the telecom industry, the private sector has been increasing its foothold in the telecom services space. After the introduction of NTP-99, the contribution of private players towards telecom services has witnessed rapid strides. While the private sector is instrumental in providing both fixed line as well as wireless services, it is mainly active in the wireless segment. The fixed lines account for only about 2% of private sector's total subscriber base. While some private players have a pan-India presence, there are many regional players that cater to only certain service areas.

Change in Market Share: The subscriber base of the public as well as private players has grown rapidly postliberalisation. The subscriber base of telecom industry grew from around 18.68 mn during FY98 to 429.72 mn during FY09 and a significant proportion of this growth has emanated from the private sector. The private players registered an absolute growth of around 339.30 mn in subscriber base during FY98-FY09. This could be largely attributed to rapid growth in mobile subscriber base of the private players. With the gradual opening up of the telecom industry, the private players have been able to garner strength and improve their hold on the telecom service provision. Further, the introduction of the New Telecom Policy (NTP-99), which enabled migration in the license fee payment mechanism from a fixed regime to a revenue-sharing regime, provided a major boost to private sector players. Moreover, initiatives such as allotting third and fourth cellular licenses, shifting to a unified access licensing regime, execution of calling party pays (CPP) regime, making incoming calls free, also drew significant growth in the cellular subscriber base.

Although the subscriber base of public entities has also expanded, it has grown at a much lower rate as compared with private players. During 1998-2008, the subscriber base of PSU operators grew by merely 71.72 mn. The public sector has witnessed sustained depletion in its share in the total subscriber base over the years, as it has been on a comparatively lower growth trajectory. The share of private sector in the total subscriber base has increased substantially from 4.7% in FY98 to 79.2% in FY09. Even though these figures signify the dominance of the private sector in terms of subscriber base, it is important to note that the prominence of private and public sector service providers varies in different segments of the telecommunication industry.

Segments in the Telecommunication Industry: Telecommunication services in India can be divided into two broad segments, Wireline services Wireless services

While the wireline services include the fixed line telephony, wireless services comprise mobile. On the whole, the Indian telecom industry has made significant progress; however, the source of emergence of this growth in terms of wireless and wireline segments has undergone substantial change in the past few years. The wireline segment, which accounted for a major share of the telecom industry during beginning of the current decade, has witnessed a decline in its subscriber base in the last 2 years. The subscribe base of the wireline segment, which reached a peak of 41.54 mn during FY06, has witnessed a declining trend since then. The subscriber base of the wireline segment has declined to 37.96 mn in FY09 from its peak in FY06. On the other hand, the growth in subscriber base of the wireless segment has increased substantially over these years. The subscriber base of the wireless segment has increased from around 6.70 mn in FY02 to as much as 391.76 mn in FY09. Over these years, not only the number of wireless subscribers but also the pace of its growth has increased substantially.

Wireline Services The wireline segment includes basic wireline services rendered to households, commercial units and to service providers such as public call offices. While the incumbent PSUs have been the dominant players in wireline service, some private players have been gradually making their presence felt in this segment. As on March 31, 2008, 5 licensed private operator groups were providing wireline connections in addition to the incumbent BSNL and MTNL.

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Market Share in Terms of Subscriber Base BSNL and MTNL have been key players in the wireline service. Even though private players have been allowed to participate in fixed services since 1994, they only have around 13% contribution in the fixed line subscriber base (as on March 31, 2009). Though private players like Bharti and Reliance have registered notable growth, the Government-owned BSNL dominates the segment in terms of subscriber base. The public sector companies enjoy a first-mover advantage in this segment and this is likely to have helped them seize a substantial share in the wireline market and maintain their dominance in this segment. The public sector accounts for almost 87% of the subscriber base of the fixed line services (as on March 31, 2009); however, over the years, the share of private sector has witnessed some improvement.

Wireless Services Wireless services can be further divided into Global System for Mobile Communications (GSM) and Code Division Multiple Access (CDMA). The WLL (F) is operated under the CDMA technology. The GSM services, which account for 73% of the total subscriber base of the wireless service, dominate the wireless segment. Wireless Subscriber Market Share: Service Wise (GSM & CDMA) The wireless services have witnessed significant growth in the past few years. India primarily follows the GSM mobile system, in the 900 MHz and 1800 MHz band. The 900 MHz band has greater transmission characteristics, thereby enabling lower capital expenditure for expansion of coverage area as the number of towers and base stations required are lesser as compared to the 1800 MHz band. The wireless services segment of the telecom industry clocked an annual average growth of around 63.79% during FY05- FY09. India has overtaken the USA to become the

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second-largest wireless network in the world, and is second only to China, with the addition of about 8 million subscribers every month in the recent times. By end of FY09, the wireless industry had touched the 391.76-mn-subscriber-mark. This total subscriber base of FY09 comprise of 297.26 mn GSM subscribers and 94.50 mn CDMA subscribers. During FY09, around 130.69 mn subscribers were added in the wireless segment of the telecommunication industry.

Private sector players have played an important role in the rapid growth of the wireless segment. The private players account for around 86% of the total wireless subscriber base. While public sector has been instrumental in the development of the wireline service, the growth in wireless subscriber base for these entities has been relatively slower compared to the private players. Currently 12 wireless service providers (including 2 PSUs) exist and compete in different regions. However, only 2 private players, Bharti and Reliance Communications, have nationwide presence along with state-owned entities, MTNL and BSNL, which together represent an additional pan-India presence. Many players have been taking initiatives to expand operations across the country. The GSM sector is dominated by players such as Airtel, Vodafone-Essar, and Idea Cellular, while the CDMA sector is dominated by Reliance and Tata Indicom. Bharti Airtel is the largest GSM mobile operator in India and has a subscriber base of 93.92 million followed by Vodafone-Essar, BSNL and Idea Cellular with a subscriber base of 68.77 mn, 46.71 mn and 38.89 mn, respectively. Reliance Communication is the largest CDMA mobile operator with a subscriber base of 52.65 mn followed by Tata Teleservices and BSNL that have a subscriber base of 35.12 million and 5.44 million, respectively. Only Reliance Communication and Tata Teleservices offer both GSM and CDMA networks. 12

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INDUSTRY SETTINGS AND ATTRACTIVENESS

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The telecom industry in India is in a Growth stage. After successfully establishing the infrastructure for 2G services, the industry embarked on an ambitious project of bringing 3G services in India.
The telecom sector has been one of the fastest growing sectors in the Indian economy in the past 4 years. This has been witnessed due to strong competition that has brought down tariffs as well as simplification of policy environment that has promoted healthy competition among various players. The mobile sector alone has been growing rapidly and has emerged as the fastest growing market in the whole worlds. Currently of a size nearing 70 million (GSM and CDMA), this sector is expected to reach a size of nearly 200 million subscribers by financial year 2008.The government has eased the rules regarding inter circle and intra circle mergers. This has led to a slew of mergers and acquisitions in the recent past. Also as the sector is moving closer to maturity, further consolidation is a reality and this will lead to the survival of more profitable players in this segment In order to further promote the use of Internet in the country the government is taking proactive steps to develop this sector with the help of the various players in this segment. For this purpose, the use of broadband technology is being mooted and this will go a long way in improving the productivity of the Indian economy as well as turn out to be the next big opportunity for telecom companies after the mobile communications segment Non-voice services and VAS are the gold mines. The big takeoff is expected with the rollout of 3G services in early 2007, once the spectrum issues are sorted out. Internet users base fast reaching near the English speaking population base. Local language and content required for further growth Infrastructure equipment cost is down to a fraction of what prevailed just a few years ago. Operators can plan better expansion plan now Increased viability for the operators to expand to semi-urban and rural markets, hence, accelerate growth further Its not without reason that India is tipped to be the worlds third-larges economy by 2050! No wonder if it happens much earlier Investors can look to capture the gains of the Indian telecom boom and diversify their operations outside developed economies that are marked by saturated telecom markets and lower GDP growth rates. At a time when global telecom majors are struggling to cope with their losses and the rollout of 3G networks, which has been a non-starter for close to a year now; India, with its telecom success story, represents an attractive and lucrative destination for investmen.

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Launch of 3G services in India

On 11 December 2008, India entered the 3G arena with the launch of 3G enabled Mobile and Data services by Government owned Mahanagar Telephone Nigam Ltd MTNL in Delhi and later in Mumbai.MTNL becomes the first 3G Mobile service provider in India. After MTNL, another state operator Bharat Sanchar Nigam Ltd. BSNL launched 3G services on 22 Feb 2009 in Chennai and later launched 3G as Nationwide. The auction of 3G wireless spectrum was announced in April 2010 and 3G Spectrum allocated to all private operators on 1 September 2010. The first Private-sector service provider that launched 3G services is Tata DoCoMo, on November 5, 2010. And the second is by Reliance Communications, December 13, 2010. Vodafone Launched their 3G by mid of March,2011 . Then, Bharti Airtel launched their 3G services on 24 January 2011 in Bangalore and also launched in Delhi & Jaipur on March 4, 2011(not GSM but only USB estick). Aircel also launched 3G in Kolkata in the month of February.Idea also launched its 3G services in mid April. Other providers like Virgin are expected to launch 3G services by Q1 2011. All the operators provide 3G services on the 2100 MHz band. As of now, the Government owned BSNL is the most successful company with the subscribers of 3G service. It has more than 3 million subscribers of its 3G service. It also has the widest coverage with around 826 cities across the country. The private operators like IDEA and Reliance are increasing their 3G coverage as well as the number of subscribers. The 3G service is used by the minority users in the country who own 3G handsets and the prices of the 3G services are currently out of reach of the pockets of most Indians. This led to the slow adoption of 3G. but the scenario is changing quickly with the introduction of cheap 3G handsets. All the major telecom providers like Airtel Idea cellular Vodafone India Tata Docomo BSNL Uninor Reliance communications have launched their 3G services in numerous telecom circles across India.

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Mobile Number Portability

Number Portability allows consumers and businesses to keep their existing telephone numbers when they switch operators. It, literally, means that numbers are portable from operator to operator - whether that operator is a mobile, wireline, or VoIP service provider. Mobile number portability gives benefit to everyone. It gives subscribers the freedom to choose operators based on criteria like services, price, and customer service. Their freedom of movement is not influenced by the inconveniences and costs that come with changing numbers. It also makes it easier for operators to compete for customers, precisely because it eliminates a major barrier to churn - that is, reluctance to change numbers. Although this increased risk of churn is a concern among some operators, number portability has been a huge success around the world, because it helps to level the playing field, giving all operators more opportunities to grow their subscriber bases and revenues.

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MAJOR PLAYERS

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There are three types of players in telecom services: State owned companies (BSNL and MTNL) Private Indian owned companies (Reliance Infocomm, Tata Teleservices,) Foreign invested companies (Hutchison-Essar, Bharti Tele-Ventures, Escotel, Idea Cellular, BPL Mobile, Spice Communications)

Bharat Sanchar Nigam Limited (BSNL)

Name Bharat Sanchar Nigam Limited (BSNL) Year of Establishment 2000 Company Profile Bharat Sanchar Nigam Ltd. is World's 7th largest Telecommunications Company providing comprehensive range of telecom services in India: Wireline, CDMA mobile, GSM Mobile, Internet, Broadband, Carrier service, MPLS-VPN, VSAT, VoIP services, IN Services etc. Within a span of five years it has become one of the largest public sector unit in India. Global Presence/ Marketing It has a network of over 45 million lines covering 5000 Network towns with over 35 million telephone connections. Acquisitions / Strategic Alliances Future Prospect BSNL plans to expand its customer base from present 47 millions lines to 125 million lines and infrastructure investment plan to the tune of Rs. 733 crores (US$ 16.67 million) in the next three years. Mahanagar Telephone Nigam Limited (MTNL) Name Mahanagar Telephone Nigam Limited (MTNL) Year of Establishment 1986 Company Profile MTNL was set up by the Government of India to upgrade the quality of telecom services, expand the telecom network, introduce new services and to raise revenue for telecom development needs of India.s key metros. MTNL with a market share of about 13% of the National telecom Network has a customer base of 5.92 million. The Govt. of India currently holds 56.25% stake in the company. Acquisitions / Strategic Alliances MTNL has formed a Joint Venture company in Nepal by the name of United Telecom Ltd. (UTL) in collaboration with Telecom Consultants India Limited (TCIL) in 2001 for providing WLL based basic services in Nepal. MTNL has set up its 100% subsidiary .Mahanagar Telephone Mauritius Limited. (MTML) in Mauritius, for providing basic, mobile and international long distance .

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Videsh Sanchar Nigam Limited (VSNL) Name Videsh Sanchar Nigam Limited (VSNL) Year of Establishment 1986 Company Profile The Videsh Sanchar Nigam Limited (VSNL) a wholly Government owned corporation. The company operates a network of earth stations, switches, submarine cable systems, and value added service nodes to provide a range of basic and value added services and has a dedicated work force of about 2000 employees. VSNL's main gateway centers are located at Mumbai, New Delhi, Kolkata and Chennai. Global Presence/ Marketing Network The company has 52 subsidiaries in 21 countries as well as operations across four continents. Acquisitions / Strategic Alliances VSNL acquired Nasdaq-listed Teleglobe International Holdings Ltd for $239 million in 2005 Videsh Sanchar Nigam Ltd acquired Tyco Global Network, submarine cable system, for USD 130 million in 2005 Future Prospect The company plans to expand its wholesale voices services across the EU, to effectively enable enterprise customers and retail voice carriers to connect to India. VSNL is adding its capacity to meet the overwhelming demand for connectivity to India in the wholesale voice services domain. The company is also offering flexible agreements and charging methods to meet the growing demands of the wholesale voice market

Bharti Airtel
Company Profile Bharti Tele-Ventures Limited was incorporated on July 7, 1995 for promoting investments in telecommunications services. Its subsidiaries operate telecom services across India. Bhartis operations are broadly handled by two companies: the Mobility group and the Infotel group. Global Presence/ Marketing Network The mobile business provides mobile & fixed wireless services using GSM technology across 23 telecom circles while the Airtel Telemedia Services business offers broadband & telephone services in 94 cities. Strategic target: targets the entire industry. Acquisitions / Strategic Alliances Bharti Telecom and British Telecom formed a 51%:49% joint venture, Bharti BT Internet for providing Internet services, in 1998 Bharti Tele-Ventures acquired an effective 32.36% equity interest in Bharti Mobile (formerly JT Mobiles), the cellular services provider in Karnataka and Andhra Pradesh circles in 1999 Bharti Telesonic entered into a joint venture, Bharti Aquanet, With SingTel for establishing a submarine cable landing station at Chennai in 2001. A 50:50 joint venture between Bharti and SingTel, to undertake the largest infrastructure project between Singapore and Indian companies in 2001 Future Prospect Bharti Airtel company is planning to set up 3000 more towers as part of enhancing their rural coverage and will now focus on rural and semi-urban areas.

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Reliance Communication
Name Reliance Communications Year of Establishment 1999 Company Profile Reliance Telecom's cellular services are available in 340 towns within its eight-circle footprint. Reliance Infocomm also offered for the first time in India, mobile data services though its RWorld mobile portal. This portal leverages the data capability of the CDMA 1X network. Reliance Infocomm offers a complete range of telecom services covering mobile and fixed line telephony including broadband, national and international long distance services, data services and a wide range of value added services and applications aimed at enhancing productivity of enterprises and individuals. Global Presence/ Marketing Network Reliance Communications has IP-enabled connectivity infrastructure comprising over 150,000 kilometers of fiber-optic cable systems in India, the US, Europe, Middle East, and the Asia Pacific region. Acquisitions / Strategic Alliances International wholesale telecommunications service provider, FLAG Telecom amalgamates with Reliance Gateway, a wholly owned subsidiary of Reliance Infocomm in 2004

Tata Teleservices
Name Tata Teleservices Year of Establishment 1996 Company Profile Tata Teleservices is a part of the $12 billion Tata Group, which has 93 companies, over 200,000 employees and more than 2.3 million shareholders. Tata Teleservices bouquet of telephony services includes Mobile services, Wireless Desktop Phones, Public Booth Telephony and Wireline services. Other services include value added services like voice portal, roaming, post-paid Internet services, 3-way conferencing, group calling, Wi-Fi Internet, USB Modem, data cards, calling card services and enterprise services. Global Presence/ Marketing Network Tata Teleservices has presence in across 19 circles that includes Andhra Pradesh, Chennai, Gujarat, Karnataka, Delhi, Maharashtra, Mumbai, Tamil Nadu, Orissa, Bihar, Rajasthan, Punjab, Haryana, Himachal Pradesh, Uttar Pradesh (E), Uttar Pradesh (W), Kerala, Kolkata, Madhya Pradesh and West Bengal. Acquisitions / Strategic Alliances Tata Teleservices has acquired Hughes Tele.com (India) Limited [now renamed Tata Teleservices (Maharashtra) Limited] in 2002 Future Prospect The company is also expanding its footprint, and has paid Rs. 4.17 billion ($90 million) to DoT for 11 new licenses under the IUC (interconnect usage charges) regime.

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Vodafone India
Name Vodafone Year of Establishment Acquired majority stake in Hutch Essar in India, by buying out complete stake of Hutch in 2007, Essar is still minority stakeholder in company Company Profile Vodafone Essar in India is a subsidiary of Vodafone Group Plc and commenced operations in 1994 when its predecessor Hutchison Telecom acquired the cellular licence for Mumbai. Vodafone Essar now has operations in 16 circles covering 86% of India's mobile customer base, with over 45.78 million customers. Vodafone Essar, under the Hutch brand, has been named the 'Most Respected Telecom Company', the 'Best Mobile Service in the country' and the 'Most Creative and Most Effective Advertiser of the Year'. Global Presence/ Marketing It has operations in 25 countries across 5 continents and 40 Network partner networks with over 200 million customers worldwide. Acquisitions / Strategic Alliances Future Prospect Vodafone Essar is expecting to touch over 35 million customers across 400,000 shops and thousand of hutchs own employees along with employees of its business associates.

Idea cellular
Name Idea Year of Establishment 1995 Company Profile Idea Cellular is part of the Aditya Birla Group, which is India's first truly multinational corporation. Aditya Birla Nuvo Ltd. holds 35.7 per cent, Birla TMT Holdings Ltd. 44.9 per cent, Grasim 7.5 per cent, and Hindalco 10.1 per cent in Idea. Global Presence/ Marketing Network Has a customer base of over 17 million, IDEA Cellular has operations in Delhi, Maharashtra, Goa, Gujarat, Andhra Pradesh, Madhya Pradesh, Chattisgarh, Uttaranchal, Haryana, UPWest, Himachal Pradesh and Kerala. Acquisitions / Strategic Alliances Merged with Tata Cellular Limited in 2001, thereby acquiring original license for the Andhra Pradesh Circle Acquired RPG Cellular Limited and consequently the license for the Madhya Pradesh (including Chattisgarh) Circlein 2001 In 2004 acquired Escotel, incumbent cellular service provider in Haryana, UP(W) & Kerala and new licensee in HP Acquired Escorts Telecommunications Limited (subsequently renamed as Idea Telecommunications Limited) in 2006 Merger of seven subsidiaries with Idea Cellular Limited in 2007 Future Prospect Idea also plans to enter rural and neglected circles as a strategy to gain subscribers. Other advancements in the telecom industry will help it cut costs - use of email to send bills to customers; sharing cell sites; smaller base transmission stations that will mean lesser infrastructure requirements and expenses and independent tower operators. Along with its plan to go for a national long distance licence, it will also look at international long distance in the near future. 22

PORTERS 5 FORCES MODEL

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PORTER`S 5 FORCES MODEL (FOR TELECOM INDUSTRY )

THREAT OF NEW ENTRANTS (MODERATE ):

It comes as no surprise that in the capital-intensive telecom industry the biggest barrier to entry is access to finance. To cover high fixed costs, serious contenders typically require a lot of cash. In addition, it is important to remember that solid operating skills and management experience is fairly scarce, making entry even more difficult. But still Threat of new entrants is always there for any company.

POWER OF SUPPLIERS (LOW):

At first glance, it might look like telecom equipment suppliers have considerable bargaining power over telecom operators. Indeed, without high-tech broadband switching equipment, fiber- optic cables, and mobile handsets and billing software, telecom operators would not be able to do the job of transmitting voice and data from place to place. But there are actually a number of large equipment makers around. There are enough vendors, arguably,to dilute bargaining power. A company will have a variety of suppliers to choose from, because most of the suppliers would be eying to get the contract to be the supplier of the company.

POWER OF BUYERS (HIGH):

Lack of differentiation amongst the service providers has led to sort of commoditization of the product. A company provides the same service as others provide, this lack of differentiation gives customer an edge to bargain with service providers, they can switch to any other provider any time they want. Fierce competition among the competitors also offers a great deal to bargain. As the switching cost is also very low, all these situations are creating problems in the growth of many companies.

AVAILABILITY OF SUBSTITUTES (HIGH):

Products and services from non-traditional telecom industries pose serious substitution threats. Cable TV and satellite operators now compete for buyers. The cable guys, with their own direct lines into homes, offer broadband internet services, and satellite links can substitute for high-speed business networking needs. The threat of the substitutes for any company is very high in Indian market as the already existent players have a huge market share and better brand perception among the consumers, making it tough for a comapny to win the trust of its customer and increase its market share.
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COMPETITIVE RIVALRY (HIGH):

Competition is "cut throat". The wave of industry deregulation together with the receptive capital arkets paved the way for a rush of new entrants. New technology is prompting a raft of substitute services. Nearly everybody already pays for phone services, so all competitors now must lure customers with lower prices and more exciting services. This tends to drive industry profitability down. In addition to low profits, the telecom industry suffers from high exit barriers, mainly due to its specialized equipment. A new company will face a cut throat competition from its well established competitors

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