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A STUDY ON The INDIAN TELECOM INDUSTRY

Guided by:

PROF. SAMIK SHOME

Submitted by Group 9 ANKIT PODDAR GOPI K PRACHETAS GUNAVATHI M K JEJI NOBY NITIN CHANDAN KUMAR 10SBCM0192 10SBCM0266 10SBCM0204 10SBCM0078 10SBCM0399

ACKNOWLEDGEMENT

At the successful completion of this project, we would like to extend our sincere gratitude to all the people without whose support this project would not have been completed.

We would also like to thank our institute, School of Business, Alliance University for giving us this wonderful opportunity to undergo such research project which is useful for our career. We would also like to acknowledge the constant help and guidance of our Prof. Samik Shome for providing his valuable support and encouragement at all times.

And last but not the least we would also thank all those who directly or indirectly helped us in preparation of our report.

DECLARATION
This is to declare that this report on The Telecommunication Industry in

India has been prepared by the members of Group 9 (July 2010-2012) in partial
fulfillment of the course Industry Analysis in Research Methodology.

The work was undertaken by the following members. The members express that the contents of the report have been done jointly and the views disclosed therein have been discussed and deliberated in full. The group takes responsibility of the contents and agrees to go through the review process.

Members

Signature

Ankit Poddar Gopi k Prachetas Gunavathi M K Jeji Noby Nitin Chandan Kumar

EXECUTIVE SUMMARY
Market segmentation of the leading telecom players based on subscriber base are identified and studied for different telecom circles. The current market shares of major players in telecom space are studied along with the study of development and growth of urban and rural telecom networks. The presence of various telecom players in different telecom circles of India are also studied Telecom industry is analyzed through PESTL analysis which is an acronym for Political, Economic, Social, Technological and Legal. A thorough analysis has been carried out, wherein the effects of all these factors are taken into consideration in our study of telecom sector. Some of the leading telecom players in India were evaluated through PESTL analysis. This study has given us enhanced and more realistic picture of the industry. The growth in infrastructure sector like telecom has a multiplier effect on the entire economy hence the Indian telecommunication industry has the potential to influence the future of Indian economy. Hence the critical agents required to propel future growth are rural telecom development, healthy competition, government support in terms of less tax and other levies, spectrum availability, introduction of 3G as well as further arrangements to be made for introduction of 4G, etc. The challenges to be faced are to ensure that while healthy competition stands out, the cost of heavy infrastructure can be shared among the telecom market players, ensuring availability of bandwidth and easy access from rural areas, as well as the language challenge faced in a country like India in terms of online content The Asia Pacific region will experience the highest growth rate in the next five years, lead by India and China. They together contribute around 31 percent of the worlds subscriber base; yet the mobile penetration are relatively low when compared to US or any other developed economies. Needless to mention, further growth is expected to be witnessed in this region. With the largest mobile and broadband subscriber base, the Indian telecom market has stayed relatively insulated from the global meltdown.

Technology forms the most vital ingredient for growth in any industry and telecom sector is no exception. Evolution of technology offers leading telecom players newer opportunities and threats. Various technologies driving the telecommunication and the broadband space and plethora of services offered by them are listed and discussed briefly. Also a special study on mobile number portability was performed. Importance of green telecommunication as a possible future development was studied. Telecom companies in order to increase their global presence go for mergers and acquisitions. There exists enormous opportunities to go internationally and tap the untapped market. Liberalization provided an opportunity for private players and foreign investors to look at India as one of the major market having huge latent potential. This FDI in turn generated lots of revenue for the country. Furthermore, Indian economy is expected to grow at 9% in the near future which, if supported by the political stability can be a hotbed for the investors and also for the telecom companies to go for more mergers and acquisitions thereby expanding the operations worldwide.

TABLE OF CONTENTS
SL.No.
1. 1.1 1.2 1.3 1.

Topics
Introduction Overview Objectives Conclusion Literature Review 2.1 2.2 2.3 Introduction Literature review Conclusion Industry Analysis 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10 3.11 3.12 Introduction Market shares and nature of competition Demographics of buyers market segmentation PESTL Analysis Business Diversification Consolidation Mergers and Acquisitions Global Presence Research and Development Marketing Initiatives Future Outlook Comparison with US and other countries Conclusion Conclusion Reference

Page No.
7 7 8 10 11 12 12 15 16 17 18 27 32 35 38 42 45 53 59 65 66 67 69

2.

4. 5.

CHAPTER 1

INTRODUCTION

1.1. OVERVIEW Telecommunication is a term coming from Greek and meaning communication at distance through signals of varied nature coming from a transmitter to a receiver. In order to achieve effective communication, the choice of a proper mean of transport for the signal has played (and still plays) a fundamental role. The history of telecommunication industry was started with the first with Morses electric telegraph, Baltimore to Washington in 1844. In 1876, Alexander Graham Bell filed his application and the first telephone patent was issued to Graham on 7th of March.

The Indian telecommunications industry is one of the fastest growing industries in the world. The industry having consistent growth during the last year on the rollout of newer circles by operators, successful auction of third-generation (3G) and broadband wireless access (BWA) spectrum, network rollout in semi-rural areas and increased focus on the value added services (VAS) market. According to the Telecom Regulatory Authority of India (TRAI), the number of telephone subscriber base in the country reached 742.121 million as on October 31, 2010, an increase of 2.61 per cent from 723.28 million in September 2010. With this the overall tele-density (telephones per 100 people) has touched 62.51. The wireless subscriber base has increased to 706.69 million at the end of October 2010 from 687.71 million in September 2010, registering a growth of 2.76 per cent. The Indian Global System of Mobile (GSM) telecom operators had 17.45 million new subscribers in Nov 2010, taking the all-India GSM cellular subscriber base to 526.18 million, according to the Cellular Operators Association of India (COAI). The GSM subscriber base stood at 508.72 million at the end of October 2010. Telecom Industry in India is regulated by Telecom Regulated Authority of India (TRAI). It has earned good reputation for transparency and competence. The wireless technology currently in use Indian Telecom Industry is:GSM (Global System for Mobile Communication)
1 TRAI annual report 2010

CDMA (Code Divisions Multiple Access)

Table 1.1: Evolution of Indian Telecom Industry

YE AR 1851 First operational land lines were laid by the government near Calcutta (seat of British power) 1881 1883 1923 1932 Telephone service introduced in India Merger with the postal system Formation of Indian Radio Telegraph Company (IRT) Merger of ETC and IRT into the Indian Radio and Cable Communication Company (IRCC) 1947 Nationalization of foreign telecommunication industries to form the Posts, Telephone and Telegraph, a monopoly run by the government's Ministry of Communications 1980 1986 Private sector had allowed in telecommunication equipment manufacturing Conversion of DOT into two wholly government-owned companies: the Videsh Sanchar Nigam Limited (VSNL) for international and Mahanagar Telephone Nigam Limited (MTNL) for service in metropolitan areas. 1990 1997 1999 Telecom revolution in many other countries which resulted in better quality of services and lower tariffs and finally resulting in opening for the private sector Telecom Regulatory Authority of India created. Cellular Services are launched in India. New National Telecom Policy is adopted. 2000 2004 DoT becomes a corporation, BSNL Broad Band policy

2006&2007 Years of dynamic growth for telecom sector

1.2 OBJECTIVES The primary objectives of this study are: 1) To study the recent scenarios of telecom companies in India with regard to : Market share Profitability Market Segmentation Growth 1) To study the nature of competition in the telecom industry within and outside India 2) To study the policy framework existing and driving Indian telecom industry 3) To study of leading companies in the telecom domain and the strategies adopted by them in their recent mergers and acquisitions 4) To study of various technology driving the telecom industry 5) The study of different strategies adopted by major telecom players with respect to : Advertising Marketing Pricing 1) To study the recent developments and possible future technological advancements in the telecom industry 2) To make a comparative study of Indian telecom companies with USA and other countries

1.3 CONCLUSION The overview of the telecom industry gives a brief synopsis of the recent developments in the telecom space like 3G & BWA auction and Value Added Services (VAS). It further provides information about the evolution of the telecom industry of India over a period of time. The section ends with a list of primary objectives which is also our purpose of study.

CHAPTER 2

LITERATURE REVIEW

2.1. INTRODUCTION
In order to obtain an intensive knowledge about the Telecom industry various reports and literature such as TRAI reports, reports and literature from ICRA have been reviewed. The T.R.A.I has been taken as a basis for obtaining various reports such as Green Telecom and issues with regard to pricing for offering financial services through mobiles. These are the recent and the future issues which are of concern to the telecom industry. Various reports concerned with issues with regarding to increase in average revenues, concerns with regard to infrastructure development in the country have been reviewed to find out the various challenges that the country faces in terms of development of the Telecom sector. Future Potential With regard to a study conducted on delivery of financial services using mobile phones in the context of pricing of services, it was stated that a large number of mobile subscribers in rural areas do not have access to banking facilities presents an opportunity for leveraging the mobile telephone to achieve the goal of financial inclusion. In this context, Government of India constituted an Inter-Ministerial Group (IMG) The IMG was required to submit a report and recommendations on framework for delivery of basic financial services using mobile phones. The IMG has suggested a shared delivery infrastructure and processes among the service providers in order to minimise the costs and to make the model viable for micro transactions. The framework envisages opening of mobile linked no-frills accounts, which shall be operated by using mobile phones. These accounts shall be held by banks and that money will be stored in the bank account. The customer shall be able to perform five basic transactions such as cash deposit, balance enquiry, credit (by transferring money from a regular bank account or for payments under various government schemes) and transfer money over mobile linked no-frills account. The framework also proposes equitable and adequate incentives to the key players after taking into account the actual costs incurred by them. In the framework suggested by the IMG, TRAI is one of the key stakeholders and is expected to provide the required regulatory

framework governing the quality of service, provisioning and pricing of mobile services for delivery of basic financial services. Accordingly, TRAI is requires to devise a mechanism in combination of market forces for ensuring that the charges levied for mobile services in this regard are cost oriented as well as reasonable. (TRAI, 2011) As per a study conducted with respect to fixed line services revenue, the rate of growth in service revenues is likely to be lower in comparison with the pace of increase in the number of fixed lines. This expectation is based on the likely increase in competition from cellular networks and the expected sharp decline in the prices of NLD and ILD services. However, in a competitive environment, slower revenue growth for incumbent operators from voice services could be offset by increased revenues from increasingly higher-speed data related services, and network access services. In cellular services, although subscription growth is expected to be high during the next few years, the rate of growth in revenues is likely to lag the growth in subscriptions because of declining prices, and reduced average revenues per user (ARPU). (ICRA, 2005) Technology Intensity A research was conducted wherein the scholars found that the development in telecommunications and networking technology plays a huge role a role in developing digital libraries. Digital library is acting as a portal site and it provides access to some digital collections holds. For the communication and transmission of information digital library operates with digital information and information technology. Digital libraries in India are functioning only in the urban areas and it is also used only by the urban people because of availability issues. Networking in the rural areas is difficult as the cost is very high. The success of digital library in the rural and urban areas is based up the accessibility of the people. And internet and networking thus makes this possible. (Reddy & Kumar, 2005) Another study was conducted with regard to the Indian market for Broadband and WiMax. It was found that both of them are most required for the global equipment vendors. India will become one of the largest market in broadband and WiMax. The higher officials have to introduce a plan to implement small technology start ups in the local market instead of competing with the global vendors. This will activate the wireless technology exports from India and become a good complement to the success of the telecom and software industry. (Maravedis Inc, 2007)

Technology & Future Prospects Another study was conducted on how far the mobile number portability would liberalise the existing competition scenario in the country. The study highlights about the history and evolution of MNP. It also identifies and explores its potential in India. The study does the SWOT analysis of MNP in India. It explains the changing characteristics of the competition in telecom sector in India as a result of the introduction of MNP in India since January 2011. The study further tries to explore the possible changes in strategies which the major telecom players in India will have to adopt to remain in business and to grow with the opportunity coming with MNP. It does an analysis as to the possible advantages and potholes for the industry players. It also highlights the way in which MNP will change nature of competition in India. It also speaks in detail as to in what way it will be beneficial for the customers. (Bhargava & Wei, 2011) As per a report on Green Telecommunication, the green trigger is all about reducing the carbon footprint in the telecommunication space. With India experiencing rapid growth in the telecom space, it will require massive expansion in its telecom infrastructure all over India, with special emphasis on the rural hinterland. Thus India would need many towers and necessary supporting infrastructure to be set up. This will consume significant share of our limited power resources. Thus the paper highlights several startling facts about the on-going and possible carbon footprints, if the trend continues. It is primarily a discussion paper wherein feedbacks are expected from all stakeholders like industry players, government departments, civil society etc. It also highlights some of the alternatives to deal with the problem. (TRAI, 2011) Global Scenario As per a study on the financial analysis of telecom industry of China and India, a comparative analysis on the status of telecom service sector of India and China was conducted. The comparison of indicators between two fast growing telecom markets helps to draw strategies for good investment and expansion of telecom networks, tariff and pricing of retail etc. The report starts with the overview of the Chinese telecom industry and compares both the Indian and Chinese Telecom Industry on factors such as Subscriber base, Average Revenue Per User (ARPU), MOU, EBITDA, Capital Expenditure, Corporate and Turn Over Tax, Employment etc

and also summarized the important performance indicators of Indian and Chinese telecom sector. (TRAI, 2007) As per an article on the telecom Sector with regard to the development of broadband and other new technologies the Telecom sector has great times ahead mainly due to the new recommendations from Telecom Regulatory Authority Of India, the trend and disruptive technologies that have begun to surface in the telecom sector. Describes in brief about the Indian telecom scene and also discusses how Indian telecom is positioning them well for changing trends. Discusses how the arrival of 3G and broadband wireless access (BWA) is expected to ring in revolution in the broadband access space. Also mentions the new technologies and services like Wi-Fi and Wi-Max, Mobile phone advertising, Tracking Stock quotes and mutual fund portfolios on mobile phones, Mobile messaging, Mobile/cell phone gaming and 4G technology making its appearance on the scene to be of benefit to the telecom industry. He also emphasises on tapping the rural growth market as it is an important growth driver. (Kewalramani, 2009) Market Segmentation & demographic profile The article basically highlights the demographic characteristic of telecom customers and market segmentation strategy adopted by the leading telecom players in Indian Telecom Space. One of the facets of the telecom revolution has been the phenomenal increase in the number of telephones in the country. This in turn has a number of effects and one of more important effects is its potential to create a major manufacturing hub in the country for the manufacture of telecom equipments and indeed for downstream industries such as semiconductor devices that are required for the manufacture of these equipments. (Mani 2006).

2.3 CONCLUSION
The review of the literature has therefore helped to provide an understanding of the existing state of the telecom industry. An insight has also been developed with regard to the various strengths and the weakness that the industry faces, the areas where the sector has excelled as well as the areas that pose a challenge to the development of the telecom sector. Certain reports have also helped in understanding whether the country can be developed as a hub for infrastructure development and thus help in the development of the Telecom sector as a whole.

Chapter 3

INDUSTRY ANALYSIS

3.1 INTRODUCTION
Telecom sector is one of the important sectors which have seen development at a very fast speed. Indian tele density has improved from 4% in March 2001 to around 53% by the end of March 2010. The subscriber base as well as the number of service providers has increased rapidly. Other important factors contributing to the growth of this sector are decline in the tariff plan by various cellular service providers from time to time as well as in the prices of handsets which have become extremely cheaper. Due to intense competition prompt service is provided to the subscribers by telecom companies. Competitive scenario along with wide choices available for the buyers has increased the bargaining power and decline in the market share of small companies. There is a considerable decline in the fixed line segment from 37.9 million (2009) to 36.96 million in (2010). Recently 3G services have been launched which is gaining popularity at a faster rate. During the year different policies by TRAI regarding mergers and acquisitions and increase in the spectrum fees have made it difficult for the GSM service providers to retain their market share and sustain growth. In the year 2010 Airtel was the market leader followed by Vodafone. Lots of ill practices were found out with respect to 2G spectrum. New technologies are coming in which will make the Indian telecom sector grow much faster and remain ahead of other countries. Recent merger in telecom industry was of Airtel with Zain of Africa followed by different mergers which will be dealt in later. Mobile number portability was launched which provides subscribers to change the network by without changing the number.

3.2 MARKET SHARE OF TELECOM COMPANIES IN INDIA


The Indian telecom industry is the second largest, in terms of number of subscribers in the world, is growing at the fastest rate (around 26%). Presently there are around 740 million subscribers in India and is expected to touch 21.159 billion by 2012 surpassing china to become the biggest market. In terms of revenue generation it is expected to reach a size of Rs 3, 50,000 crores by 2012. Indian telecom market is currently the most attractive telecom market in the world with a lot of attention being shown by global players. In India fixed line subscribers is very limited, it is not more than 10% of the total mobile subscriber base.

Source: TRAI website The above pie chart (figure-1) shows the market share of top seven telecom companies in India. We can easily observe that it is fragmented as the market leader Airtel has only 21% market share, which is closely followed by reliance and Vodafone with 18 and 17% respectively. It is also clear from the pie chart that 97% of the total operator market is shared only by 7 companies which makes it is an Oligopolistic Market, where few firms enjoy being at the top, entry barriers are high so it is very difficult for a new entrant to enter. There is high degree of market concentration, since the seven-firm concentration ratio is often used, where the market shares of seven largest firms are measured (as a percentage) since they form the major portion of the market share. The sellers use economies of scale to reduce cost. As a result Indian market is not only the most attractive but also the most competitive the innovations in this sector have helped reduced cost of holding a mobile phone. According to the Telecom Regulatory Authority of India (TRAI), as shown in figure 2, the number of telephone subscriber base in the country reached 3742.12 million as on October 31, 2010, an increase of 2.61 per cent from 723.28 million in September 2010. With this the overall teledensity (telephones per 100 people) has touched 62.51. The wireless subscriber base has increased
2 TRAI annual reports (official website) 3 TRAI annual reports (official website)

to 706.69 million at the end of October 2010 from 687.71 million in September 2010, registering a growth of 2.76 per cent. Meanwhile, Indian Global System of Mobile Communication (GSM) telecom operators added 17.45 million new subscribers in November 2010, taking the allIndia GSM cellular subscriber base to 526.18 million, according to the Cellular Operators Association of India (COAI). The GSM subscriber base stood at 508.72 million at the end of October 2010.

Growth of Telecom sector: The status of development of the various services of the telecom sector is outlined below: 3.2.1 Wireline The subscriber base of Wireline subscribers as on 31st March 2010 was 36.96 million as compared to 37.964 million as on 31st March, 2009 registering a decrease of 1.00 million subscribers during the year 2009-10. Out of the 36.96 million wire line subscribers, 27.03 million are urban wire line Subscribers and 9.93 million Rural Subscribers. The status of the wire line subscribers during the last six years are depicted in Figure 3.

Figure 3.3 Status of Wireline

3.2.2 Wireless The wireless subscriber base was 584.32 million as on 31st March 2010 in comparison to the subscriber base of 391.76 million as on 31st March 2009. It added 192.56 million subscribers in the financial year 2009-10 registering an annual growth rate of about 49.15%. The total subscriber base of wireless services has grown from 52.22 million in March, 2005 to 584.32 million in March, 2010 as depicted in Figure 4.

4 TRAI annual reports (official website)

When coming to individual market share of various telecom companies in both rural and urban sector as explained below: 3.2.3 Rural Telephone network: TRAI has always given emphasis to development of telecommunications services in the rural areas. During various consultations and separately in meetings with the service providers TRAI has deliberated on the issue of proliferation of services in rural areas. The position with regard to wireless, wire line and Internet / broadband services is given below. 3.2.4 Wireless As on 31st March 2010, the Wireless rural market has reached the 190.88 million mark as against 111.63 million as on 31st March 2009. Service providers reports indicate that 32.67%5 of total wireless subscribers are now in rural areas. The rural subscriber base is steadily increasing. The rural wireless subscriber base since March 2007 is indicated in Figure 5. The service provider wise rural wireless subscriber base & their market shares are shown in Table 1 below.

Table no 3.1: Service Provider-wise Rural Wireless Subscribers and Market Share

SL Wireless Group no

Total subscribers millions)

wireless Rural (in subscribers millions)

wireless Market (In wireless subscribers (in %)

share rural

March10 1 Bharti Airtel 127.62

March09 93.92

March10 48.09

March09 29.53

March10 25.19

March09 26.46

5 www.dot.gov.in

2 3 4 5 6 7 8 9 10 11 12 13 14 15

Reliance Vodafone BSNL Tata Idea/Spice Aircel MTNL Unitech Sistema Loop STel HFCL Videocon Etisalat Total

102.42 100.86 69.45 65.94 63.82 36.86 5.09 4.26 3.78 2.84 1.01 0.33 0.03 0.00 584.31

72.67 68.77 52.14 35.12 43.02 18.48 4.48 0.39 2.16 0.60 391.76

21.25 36.79 25.26 13.45 29.82 14.00 0.00 1.40 0.54 0.00 0.27 0.001 0.00 0.00 190.88

15.13 22.33 19.09 2.66 17.24 5.63 0.00 0.001 0.00 0.004 111.63

11.13 19.27 13.23 7.05 15.62 7.33 0.00 0.73 0.28 0.00 0.14 0.00 0.00 0.00 100.00

13.55 20.00 17.10 2.38 15.45 5.05 0.00 0.00 0.00 0.00 100.00

3.2.5 Wireline The rural wireline subscriber base is decreasing (Figure 4). As on 31.3.2010, the rural wireline subscriber base stood at 69.93 million and service providers reports indicate that 26.87% of total wireline subscribers are in rural areas. The service provider wise wireline rural subscriber base & their market share are shown in Table 2 and Figure.

6 TRAI annual reports (official website)

Table 3.2: Service Provider-wise Rural Wireline Subscribers and Market Share SL no Wireline Group Total wireline subscribers (in millions) March-10 1 2 3 4 5 6 7 BSNL MTNL Bharti HFCL Sistema Tata Reliance Total 27.83 3.50 3.07 0.17 0.05 1.16 1.18 36.9 March-09 29.35 3.57 2.73 0.16 0.13 0.92 1.11 37.96 Rural wireline Market share wireline subscribers (In millions) March-10 9.76 0.00 0.00 0.00 0.007 0.158 0.001 9.93 March-09 10.55 0.00 0.00 0.00 0.009 0.027 0.001 10.58 rural subscribers (in %) March-10 98.33 0 0 0 0.07 1.59 0.01 100 March-09 99.65 0 0 0 0.08 0.26 0.01 100

3.2.6 Urban Telecom Network: Wireline As on 31st March 2010, the total subscriber base of fixed (wireline) lines stood at 736.96 million. The incumbents BSNL and MTNL have 75.31% and 9.46% market share respectively in the subscriber base, while all the five private operators together have 15.23% share. As on 31st March 2010 the total urban wireline subscribers were 27.03 million and rural wireline subscribers were 9.93 million. The market share of wireline service providers in urban areas is depicted in Figure 7.

3.2.7 Expansion of Telephone Network: Wireless services The Wireless subscriber base was 584.32 million as on 31st March 2010 in comparison to the subscriber base of 391.76 million as on 31st March, 2009. It added 192.56 million subscribers in the financial year 2009-10 registering an annual growth rate of about 49.15%. The total subscriber base of wireless services has grown from 52.22 million in March, 05 to 584.32
7 TRAI annual reports (official website)

million in March 2010. Out of 584.32 million subscribers at the end of the financial year 200910, 478.68 million (81.92%) were GSM Subscribers and 105.64 Million (18.08%) were CDMA Subscribers. The subscriber growth of wireless services of both GSM and CDMA networks from March 2005 to March 2010 is depicted in Figure 8.

The subscriber base of individual wireless service providers (both GSM and CDMA) from March 2005 to March 2010 along with their percentage growth over the financial year 2008-09 is given in Table 3 given below. The market share of different mobile operators as on 31st March 2010 is displayed in Figure 9.

Table 3.3: Subscriber base of wireless (GSM & CDMA) services (in millions).

Service providers

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

%age 2009-10

growth

over 2008-09 in

Bharti Reliance Vodafone BSNL TATA Idea Aircel MTNL

10.98 10.45 7.8 9.9 1.09 5.07 1.76 1.08

19.58 17.31 15.36 17.65 4.85 7.37 2.61 2.05

37.14 28.01 26.44 30.99 16.02 14.01 5.51 2.94

61.98 45.79 44.13 40.79 24.33 24.001 10.61 3.53

93.92 72.67 68.77 52.15 35.12 38.89 18.48 4.48

127.62 102.42 100.86 69.45 65.94 63.82 36.86 5.09

35.87% 40.94% 46.66% 33.17% 87.76% 48.35% 99.46% 13.62%

In terms of subscriber base and market share of GSM services, Bharti with 127.62 million subscriber base remains the largest GSM operator followed by Vodafone, Idea/Spice, and M/s BSNL with subscriber base of 100.86 million, 63.82 million and 63.31 million respectively. The market share of various GSM operators as on 31st March 2010 is displayed in Figure 10.

In CDMA Services, in terms of subscriber base and market share, Reliance with 56.05 million subscriber base remains the largest CDMA operator followed by Tata and BSNL with subscriber base of 39.03 million, and 6.14 million respectively. The market share of different CDMA operators as on 31st March 2010 is shown in Figure 11.

As shown in table 3, that there is effective growth in both GSM and CDMA operators over the last few years, the major players like Bharti Airtel, Vodafone, and Reliance are increasing year by year along with these companies the small players are growing rapidly like Aircel and TATA which have growth % of 99% and 87% respectively. So this increases the market share of the players.

3.3 DEMOGRAPHICS OF BUYERS MARKET SEGMENTATION


The India's telephony regulators (TRAI) have divided the country up into a number of regions, called 'Circles' or 'Telecom Service Areas'. You will see reference to these telecom circles in various situations. For example: when you are in need for telephone numbers or directories you will generally need to search by telecom circle. Or when reviewing telephone service plans and coverage areas for the telephone companies, you will see these may vary by telecom circle. Also, if a telephone company wants to operate in a specific telecom circle, they must purchase a license for that circle, usually through an auction process. At present, there are 22 Telecom Circles or Service Areas. They are broken down into 4 groups: 'metro circles' and then 'A', 'B', and 'C' circles. The 'metro' circles cover very dense population centres in the very largest Indian cities: Delhi, Kolkata, and Mumbai. The 'A', 'B', and 'C' circles cover various geographic areas of varying population sizes. 'A' circles are the largest in terms of population coverage. 'C' circles contain the smallest population. The borders of the circles roughly correspond to the borders of the Indian states -- but there are exceptions. For instance, some smaller states are folded into larger neighbouring states, some other smaller states are combined together to form one circle, etc. 3.3.1: Indias Telecom circles/ service areas:

Here is a list of India's 22 telecom circles, including Metro, A, B, and C category service areas. Officially, telecom circles are now called telecom 'service areas', but both terms used to mean the same thing. The circles given below are the officially recognized circles as stated by the Indian Department of Telecommunications (DOT). India telephone companies may or may not conform to this exact usage.
Table 3.4: Telecom circles and Subscriber base in India

All Figures in Million

Population

Subscriber Base (As Penetration on 31st Aug10)

Metros Bombay Delhi Chennai Kolkata A Circles Gujarat Andhra Pradesh Karnataka Tamil Nadu Maharashtra & Goa B Circles Punjab Rajasthan MP & Chhattisgarh Kerala + Lakshadweep Haryana Uttar Pradesh West (UPW) 27.73 62.03 89.11 35.02 21.81 69.17 23.10 36.70 35.49 26.65 16.50 35.85 83.3% 59.2% 39.8% 76.1% 75.7% 51.8% 56.04 83.65 58.01 62.58 89.87 37.33 51.36 42.07 48.60 48.99 66.6% 61.4% 72.5% 77.7% 54.5% 17.95 18.20 6.99 14.43 30.30 32.62 12.04 18.56 168.8% 179.2% 172.4% 128.7%

Uttar Pradesh East (UPE) WB& AN, Sikkim C Circles Bihar & Jharkhand Orissa Assam North East Jammu & Kashmir Himachal Pradesh Total for India

120.98 74.56

51.40 30.06

42.5% 40.3%

120.68 40.40 29.26 12.80 11.13 6.67 1,129.09

42.91 17.91 9.93 5.88 4.59 5.80 664.63

35.6% 44.3% 33.9% 45.9% 41.2% 87.0% 58.9%

Source: http://www.telecomcircle.com/2009/06/india-telecom/

The subscriber base for Wireless services in various categories of service areas for the period March, 2005 to March, 2010 is indicated graphically in Figure 8,

Figure 3.12: Subscriber base for telecom services in metro and circle from March, 05 to March, 10.

(Figures in millions)

Source: TRAI official website.

From the above we can see that there is substantial increase in all the metros and circles areas of the telecom companies of India. The circle C which is a low population courage area but from the last five years there is a good increase in this circle. 3.3.2: Equipped switching capacity of each company: As on 31st March 2010 besides BSNL and MTNL 5 Unified Access Service Licensee (UASL) are providing fixed line services. Each telecom companies in India have different service area where they are operated in the country, with different equipped capacity and working connections. The total equipped capacity and service provider wise connections are shown in the table below:
Table 3.5: Service provider wise equipped switching capacity

Sl. No. 1

Name

of

the Service area

Equipped capacity

Working connections 2,78,30,560

service provider BSNL All India except Delhi

& 4,58,35,336

Mumbai 2 3 MTNL Bharti Airtel ltd. Delhi & Mumbai Andhra Pradesh, Delhi, Gujarat, Haryana, Karnataka, Kerala, Kolkata, Madhya Pradesh, Maharashtra, Punjab, Rajasthan Tamil Nadu including Chennai, UP(E) and UP(W) including Uttaranchal. Hexacom Ltd. 53,77,710 1,00,64,000 34,96,754 30,66,859

4 5

HFCL Infotel ltd. Reliance Communications

Punjab

3,28,835

1,73,407 11,77,412

Andhra Pradesh, Bihar, Chennai, 24,64,000 Delhi, Gujarat, Haryana, Himachal Pradesh, Jammu & Kashmir, Karnataka, Kerala, Kolkata, Madhya Pradesh, Maharashtra, Mumbai, Orissa, Punjab, Rajasthan, Tamil Nadu, UP(E), UP (W) and West Bengal.

Sistema

Shyam Rajasthan

5,12,000

49,416

Teleservices ltd. 7 TATA Teleservices ltd. Andhra Pradesh, Assam, Bihar, Delhi, Gujarat, Haryana, Himachal Pradesh, Jammu & Kashmir, Karnataka, Kerala, Pradesh, Maharashtra, Mumbai, Kolkata, Madhya 1,47,49,230 11,62,276

North East, Orissa, Punjab, Rajasthan, Tamil Nadu including Chennai, UP(E), UP(W) including Uttaranchal and West Bengal Source: http://www.indiacallinginfo.com/india-telecom-circles

3.4 PESTL ANALYSIS


PEST8 analysis is a technique of analysing the external macro environment in which a business operates. These are often factors which are beyond the control of or influence of a business and important to be aware when dealing with a business. The telecom industry is analysed with the PEST factors influences the useful way of summarizing the industry as a whole. 3.4.1 Political Analysis: Indian Telecom is the worlds fastest growing telecom expected to grow three fold by 2012. A tremendous stride in this industry has been facilitated by the supportive and liberal policies of the Government. The department of telecommunications (DOT) under the Ministry of Communications and Information Technology is responsible for taking all actions related to them. This department is in charge for formulating the developmental policy, granting licenses for various telecom services, promoting standardization, research and development as well as investment in the sector. In 1997 the TRAI (Telecom Regulatory Authority of India)9 was established under the Telecom Regulatory Authority Act 1997 which was amended by TRAI amendment act 2000. By the Amendment act an Appellate Tribunal Known as Telecom Disputes Settlement has been set to protect the interests of service providers and the consumers of telecom sector. In order to sustain
8 Political, Economical, Social, Technological Analysis 9 Telecom Regulatory Authority of India

the present highest growth of adding nearly eight million subscribers per month in India, the most important factors which stand out are low cost handsets and lowest tariff compared to anywhere in the world. Reorganization of Foreign Direct Investment (FDI) procedures and raising the limit of FDI from the earlier 49 percent to 74 percent10 has further encouraged faster infrastructure augmentation and upgradation to 3G services. FDI effect in telecom will allow multiple benefits such as technology transfer, market access and organizational skills. 3.4.2 Economical Analysis: Liberal economic policies of Indian government and the financial restructuring have also raised the level do average disposable income. Competition driven by regulatory initiatives and tech advancements and policy initiatives continue to push the growth to new levels. In 1992 the Indian Telecom market was opened to privatization and competition but the regulator Telecom Regulatory Authority of India (TRAI) was setup in 1997. Subsequently the new Telecom policy 1999 promulgated and under this policy, operators could use any technology. To the growth of Indias economy the contribution of telecom sector is huge. It is directly contributing more than 1.5% GDP11 of the country has a multiplier effect on the growth because of connecting the people and business around it. The competition has brought sharp drop in call rates and handset subsidies have fuelled the phenomenal growth of subscribers during the last two years. Cellular operators are upgrading their networks to provide services beyond basic connectivity. This also made the Telecommunications reforms to introduce competition in the interests of lower costs, lower prices and greater innovation, better services for consumers and increased investment in the sector. Telecommunications reforms were perhaps the second most successful reforms in India. There has been some discontent as the gap between the urban and rural tele density has risen. 3.4.3 Social Analysis: The countries cellular base witnessed close to 50 percent according to the growth in the year 2008 with an average 9.5 million customers added every month. The year 2009 saw a similar trend with mobile phone scribers rising to 427.2912 million driven by rising income, increased competition, and increased penetration in rural areas, falling rates, prepaid options, and
10 Indian Telecommunication Industry 11 Gross Domestic Product

aggressive market campaigns. With drop in prices of data plans, high end mobile phones and the introduction of 3G the stage is set for the smart phones to become the leading portable device in India. Due to the increased competition among the major players there are more number of opportunities in this sector and the advancement in telecommunications also will give way for new things to emerge in all terms. The driving forces for the increase in smart phones in the urban market was need for real time access for information and on demand access to applications such as email, contacts, calendar and other information round the clock by the people who are continuously on the move and those who want to keep in touch with the office mails. Another major thing is the value added services with overall wireless subscriber base almost up to 500 million; strong growth in the subscriber base in the telecom industry is also taking business of mobile VAS to new heights in the country. Mobile advertising in India can be said be still in nascent stage. Advertising will lightly shift from being a mass advertising medium to a selected targeting which will be based on subscriber profiling. In services where in like Mobile Banking, Mobile Money Transfers, Utility Bill payments, Payments of purchase of movie tickets are also likely to take off. 3.4.4 Technological Analysis: Technological advancements and innovations contributed largely towards the improvement of the telecom sectors in India. This sector faced fierce challenges in the 1990s due to the development in the technological field. The total government spending and the industry spending in the telecom for each research and development is vey huge. The main focus is on technological efforts. Bunch of changes are brought in new product development and patent protection. The time of telegraphs in Indian telecom sector has brought an immense growth and has diversified into various segments such as fixed line telephony, mobile telephony, GSM, CDMA and so on. The telecom industry is growing at a fast pace by bringing in newer technology. And now it is the time for 3G technology. Bharat Sanchar Nigam Limited has launched the 3G technology. It is not only the network providers but also the handset providers in India are expecting that the 3G will earn them very high. The speed offered is 3Mbps for downloading, which is very high as compared to that of the 2G. The 3G provides facility for

12 Telecommunication Predictions accessed on 15th march 2011

internet surfing, downloading, e-mails attachment downloading, audio video conferencing, fax services and many other broadband services. inl Analysis TRAI (Telecom Regulatory Authority of India) is an independent regulator which regulates telecom business in India. The various powers and functions of TRAI are the authority sees that conditions and terms that it has formulated are being followed, regulate the arrangements between the service providers in order to ensure that they share the revenue that are derived from supplying telecommunication services and suggest license revocation when there is non compliance of the conditions and terms of the license. The legal division of TRAI is responsible for rendering legal advice to Authority on all regulatory issues. The division manages all litigation issues in which the regulatory is a party.

3.5 BUSINESS DIVERSIFICATION


Business diversification is that extending business activities into different fields or distribute the investments in order to average risk of loss. Diversification can reduce risks in business mainly financial risks. It may have a prcised market opportunity. AIRTEL- Bharti Group 3.5.1 Bharti Airtel limited is a one of the emerging market telecom service provider with its operations in many countries across Asia and Africa. It operates the GSM network mostly in all countries providing 2G or 3G services based on the country of operation. Airtel is the fifth largest telecom operator in the world. The company is structured into no of strategic business units such as Bharti Airtel Ltd Bharti Reality Bharti Retail Bharti Teletech

Bharti AXA Life Insurance Company VODAFONE- ESSAR Group 3.5.2 Essar Group is one of the multinational conglomerate corporation in to various sectors headquartered in Mumbai. The Essar began as a Construction Company and diversified into manufacturing, communications and retail. The Vodafone Essar is a joint venture of the Essar communications Holdings Ltd and a UK based Vodafone group. Vodafone is Indias largest cellular services companies with subscriber base of 9013 million. Essar group is also venturing into emerging markets in Africa and South Asia. The different diversified sectors of Essar group are Vodafone Essar Essar Steels Oil and Natural Gas Shipping ports and Logistics Power BSNL 3.5.3 Bharat Sanchar Nigam Limited is standalone state owned company which is headquartered in New Delhi. BSNL is Indias largest cellular service providers with over 8.3million subscribers as of January 2011 and the largest landline telephone provider in India. In recent years companys revenue and profit plunged into heavy losses due to intense competition in the Indian telecommunications sector. It has footprints throughout India except metropolitan cities of Mumbai and New Delhi which are managed by MTNL (Mahanagar Telephone Nigam Limited). RELIANCE 3.5.4 Reliance is also a conglomerate company which is headed by Anil Ambani and it is among Indias top 3 private sector businesses with a market capitalization of US$ 81billion, net assets
13 ESSAR Group website

US$ 2914 billion. By its products and services Reliance Group touches the life of one in eight Indians every single day. Its business presence is extended to over 20,00015 towns and 4.5 lakhs villages across India and five continents across the world. The Companies the group has a customer base of about 130 million and shareholder base of more than 12 million among the largest in the world. Reliance main subsidiaries are Reliance Communications Reliance Capital Relianc Power Reliance Infrastructure Reliance Big Entertainment Reliance Health

TATA DOCOMO TATA Group 3.5.5 Tata Group an Indian multinational conglomerate company has its headquarter in Mumbai. As in terms of market capitalization and revenues the Tata Group is the largest private corporate group in India. Group has its operations in more than 80 16 countries over 6 continents and its companies export products and services are sent to nearly 80 nations. The Tata Group consists of 114 companies and subsidiaries in eight business sectors and some 27 are publicly listed. Their subsidiaries are Tata Telecommunications Tata Steel Tata Motors
14 Reliance Industries accessed on 15th march 15 Reliance Group 16 TATA Group of industries accessed on 15th march

Tata Consultancy Services Tata Tea Tata Chemicals Titan Industries Taj Hotels IDEA Aditya Birla Group 3.5.6 The Aditya Birla is a multinational conglomerate corporation having its subsidiaries that operate over different sectors which includes Hindalco, Idea cellular, Grasim, Aditya Birla Nuvo and Ultratech cement.

3.6 CONSOLIDATION MERGERS AND ACQUISITIONS


Mergers and acquisitions in telecom industry have seen a major growth since the mid 1990s after the economic reforms were undertaken. Due to liberalization the private investment in the telecom sector in India not only facilitated the rapid expansion of these sectors in urban and rural parts of the country but also provided ample opportunity for mergers and acquisitions. The only difference between mergers and acquisitions is the former refers to an agreement between two companies going forward as a single new company rather than remaining separately owned and operating while the latter means a company overtakes a particular company and establishes itself as a single entity. Foreign investors and telecom majors look at India as one of the fastest growing telecom markets in the world. Major reforms introduced by the successive government have changed the face of telecom industry. Indias telecom liberalization was noticed by the global investors in the year 1995 when the government permitted the entry of foreign telecom operators through Joint venture route. Some of these global players included Vodafone, AT&T, Hutchison Whampoa, Telstra Australia, etc 3.6.1Guidelines for Mergers and Acquisitions (M&A)

Various regulatory and statutory norms pertaining to mergers and acquisitions in Indian Telecom sectors have been laid down by the government of India and its authorized agencies such as Companies Act 1956; Income Tax Act 1961; MRTP Act; FEMA; etc... Guidelines by Department of Telecommunications (DoT)

It requires approval from the Department of Telecommunications (DoT). Mergers of licenses shall be restricted to the same service area. Mergers & acquisitions in the same service area should not lead to less than 3 operators in that area. M&A should not lead to monopoly.

3.6.2 Benefits of Mergers and Acquisitions


Building infrastructure for telecom telecommunications is not easy. It consumes lot of time and manpower, which can be ripped off by way of mergers and acquisitions. Benefits of existing network are available much easily through M&A. Also getting license for certain regions involve a lot of restrictions, in such a case mergers and acquisitions provide an option to run to run services in that region. It also helps in strengthening the customer base. Brand value of those particular company increases thereby generating more revenue. M&A is also driven by the new telecommunications technology. Acquisition of spectrum.

3.6.3 Steps for Mergers and Acquisitions Market valuation Before any M&A occurs it is important to know the present market value of the organization as well as its estimated future financial performance. Detailed information is collected about the organization, its history, products/services, facilities and ownership pattern. Exit planning The decision to sell business largely depends upon the future plan of the organization what is its objective and how is it going to handle wealth. Various issues like estate planning, debt resolution, tax related and business issues are considered while making exit planning. The form

of compensation (cash, convertible bonds, stock, and royalties) also plays an important role in determining exit planning. Structured Marketing Process This process involves marketing of the business entity. While doing the marketing, selling price is never divulged to the potential buyer. Seller agrees on the disseminated materials in advance and buyers need to sign a non disclosure agreement. It involves few points: Database of prospective buyers are searched. Assessment and screening of buyers are done. Special focus is given to the personal needs of the seller in structuring or finalizing the deal. Final letter of intent is developed after the negotiation.

Letter of Intent A letter of intent is issued whereby both the buyer and the seller take this to their respective authority to know if there is any further scope of negotiation. Various issues like price and terms, deciding on due diligence period, deal structure, etc are negotiated in the letter of intent. After reviewing a Definitive Purchase Agreement is prepared. Buyer Due Diligence In this phase buyer makes a deeper investigation of sellers business, its attorneys, bankers, accountants, etc Definitive Purchase Agreement Finally Definitive Purchase Agreement is made which states the transaction details including regulatory approvals, financing sources and other conditions of sale. 3.6.4 Impact of Mergers and Acquisitions Just as M&A are fruitful in some cases, it may have different impact on various companies. M&A are aimed at increasing the profits and improving the productivity of the firm but at same time it focuses on reducing the expenses of the firm. Not all the time M&A are successful, at

times it loses focus from the main purpose and affects the executives, shareholders, and the labor force. Impact on workers or employees M&A have a great economic impact on the employees as there are bound to be layoffs. If the merged company is pretty sufficient in business capabilities it is evitable that it doesnt need a larger workforce, as a result it leads to layoff. Moreover due to changes in the corporate culture, operating environment and the business procedures existing employees may suffer from physical and emotional problems. Impact on Management The percentage of job loss is more at top level than the general employees. There might be variation in the corporate culture of the two companies wherein a manager may be asked to implement such policies which he might not adhere to. In such a situation organization loses focus and gets diverted to a completely different direction. Impact on shareholders of the acquired firm The shareholders of the acquired firm benefit the most. The reason being acquiring firm usually pays in excess than what it should. Buying a company at a higher price proves to be beneficial for the local economy. Impact on shareholders of the acquiring firm They are most affected. In fact if we figure it out, it is seen that the proportion to which shareholders of the acquired firm are benefited is same to which the latter is harmed.

The first mergers and acquisition deal in the Indian telecom industry occurred in the year 1998 between Max Group of Delhi and Hutchison Group of Hong Kong wherein 41% of stakes of Orange services in Mumbai was acquired by Hutchison from Max for 560 million US dollars. This followed a series of M&A in the subsequent years.

Acquisition of Command Cellular Services in Kolkata by Hutchison from Usha Martin in 2000.

Acquisition of 79.24% stakes of Aircel, Chennai by Sterling group from RPG group for Rs.210 crores in 2003. Acquisition of 48% stakes in Idea cellular by Aditya Birla group from Tata group in the year 2005. Acquisition of Hutch services in India by Vodafone in 2006.

3.7 GLOBAL PRESENCE WITH REGARD TO TOP TELECOM ` COMPANIES IN INDIA


Bharti Airtel

BSNL
Vodafone Essar

Reliance Communications Idea Cellular Tata communications


Tata Teleservices

Aircel 3.7.1 Bharti Airtel Bharti Airtel limited one of the leading global telecommunications company has operations in 19 countries across Asia and Africa. It has been ranked among the six best performing technology companies in the world by business week. It has 200 million customers across its operations. They served an aggregate of 207.8 million customers as of December 31, 2010; of whom 199.6 million subscribe to our GSM services and 3.2 million use our Telemedia Services. The company also owned and managed passive infrastructure pertaining to telecom operations under its subsidiary Bharti Infratel Limited where it owns 42% of Indus Towers Limited. Global Presence

It launched Europe India Gateway (EIG) cable system to enhance its diversity and capacity between Europe and India. The 15,000 Km cable has received investment of around $700 million and has a capacity of 3.84 terabits per second.

Acquired 49% stake in Africa's largest Telco MTN to create an entity stretching from the Cape of Good Hope across the African continent, West Asia and the Indian Subcontinent with an estimated deal size of over $23 billion.

Acquired Zain Telecom's 15-country African operations for a total enterprise value of $10.7 billion.

3.7.2 BSNL BSNL has more than 2.5 million WLL subscribers and Internet customers. At present there are 0.6 million Data One broadband customers with 35.1 million Basic Phone subscribers i.e. 85 % share of the subscriber base and 92 % in revenue terms. 3.7.3 Vodafone Essar Vodafone Essar an Indian subsidiary of Vodafone Group commenced its operations in 1994 when its predecessor Hutchison Telecom acquired the cellular license for Mumbai. With a customer base of more than 343 million it is one of the worlds leading international mobile communications group.

Global Presence

Vodafone currently has its operations in over 30 countries across five continents and over 40 partner networks worldwide as on 30 June 2010. It completed the acquisition of controlling stake in Hutch-Essar from Hutchison Telecommunications International Limited (HTIL) for $10.9 billion.

3.7.4 Reliance Telecommunications ADAG Reliance Communications acquired US-based Ethernet services provider Yipes Holdings for $300 million (Rs 1,200 crores) in cash - a deal which gave a footprint in American market with a 22,000 km of optic fibre network. Global Presence

Reliance Communications IP enabled infrastructure comprising over 150000 kilometres of optic fibre network has operations in India, US, Europe, Middle East and Asia pacific region. 3.7.5 Idea Cellular IDEA Cellular an Aditya Birla Group Company has operaions in 26 countries and is anchored by over 130,600 employees belonging to 40 nationalities. It recorded a subscriber base of over 78 million as on end November '10. Global Presence Aditya Birla group's Idea Cellular acquired its rival mobile operator Spice Communications in a deal entailing purchase of a 40.8 % stake for over Rs. 2,700 crores in shares and cash. 3.7.6 Tata Teleservices The Tata Group of over 90 companies along with 395,000 employees worldwide and more than 3.5 million shareholders launched its mobile operations in January 2005 under the brand name Tata Indicom and today enjoys a pan-India presence through existing operations in India's 22 telecom Circles. It is the first Indian private telecom operator to launch 3G services in India.

Global Presence They entered into joint venture with NTT DOCOMO of Japan in 2008 and provide differentiated products and services under the Tata Docomo brand name.

3.8 TECHNOLOGY INTENSITY IN TELECOM SECTOR


The rapid growth in the telecom sector is possible due to various positive steps taken by the Government and also due to the steadfast participation by both Government and the Private sector. The policy liberalization has played an important role in the immense development of technology in the telecom sector. Various technologies driving the telecom sector can be broadly classified into two section broadband and telecom segments. Each of the segment implements certain key technologies

which act as the backbone of the entire infrastructure. Each of the technology in each of the segment drives certain important services. These services are appropriately integrated and sold to customers by the telecom service providers. The innermost ovals are the two primary segments into which the technologies and services are broadly divided. The inner semicircular arcs list the various technologies driving the entire telecom and broadband sectors. The outer semicircular arc identifies and lists various services that sits on the technologies as mentioned in the inner semi circular arcs.

Figure 3.13: Diagram showing the various broadband and telecommunications technologies

M-games GPRS WIMAX EDGE

E-mail

SMS Conferencing

GSM

CDMA 3G&BWA 3G&BWA 3G&BWA Telecommunication Tech. mmunication

Broadband DSL Technology Internet Digitization IP

VoD Ethernet LAN Next Generation Network Telephony

Above shown technologies and services are briefly explained below. Technologies & Services: GPRS: It stands for General Packet Radio Service. It is a standard for wireless communication which runs at speeds 115Kbps. It supports a wide range of bandwidths. It efficiently uses limited bandwidths and is particularly suited for sending and receiving small bursts of data, such as email and web browsing, as well as large volumes of data.

EDGE: It stands for Enhanced Data rates for GSM Evolution. It is a faster version of GSM. It is a high speed 3G technology built upon the GSM standard EDGE networks are designed to deliver multimedia applications such as streaming television, audio and video to mobile phones at speeds up to 384Kbps. The EDGE standard was first launched in US in 2003. GSM: It stands for Global System for Mobile Communication. It is a digital mobile telephony system that is widely used Europe and other parts of the world. It uses a variation of time division multiple access. It was first launched in 1991 in Finland. Today, more than 690 mobile networks provide GSM services across 213 countries and GSM represents 82.4% of all global mobile connections. Since many GSM network operators have roaming agreements with foreign operators, users can often continue to use their mobile phones when they travel to other countries. CDMA: It stands for Code Division Multiple Access. It refers to several protocols that are used in 2G and 3G wireless communications. It is a form of multiplexing, which allows numerous signals to occupy a single transmission channel, optimizing the use of available bandwidth. It is used in ultra high frequency cellular telephone systems in the 800MHz and 1.9GHz band. Next Generation Network: Present networks are virtually separated and provide fixed services, mobile services and internet services, the future convergence will happen on a common platform known as Next Generation Network (NGN). Using NGN, it will be possible to provide various services on a single IP backbone. DSL: It stands for Digital Subscribers Line. It is the most preferred technology by the service providers to offer broadband services in the country and this sector is growing rapidly. 3G and Broadband Wireless Access: 3G stands for third generation. 3G technology is used to enhance mobile phone standards. It helps to simultaneously transfer both voice data (a telephone call) and non voice data (such as downloading information, exchanging e-mail, and instant messaging). The highlight of 3G is video telephony. The BWA technologies provide broadband data access by wireless means to consumer and business markets. The most common example of BWA is Wireless LAN, but efforts are intensively continuing to deliver ubiquitous broadband network access by deploying adequate radio technologies like MAN, 3G and wireless LAN which can be even combined in a single device to ensure seamless operation.

IP: It stands for Internet Protocol. It specifies the format of packets and the addressing scheme. IP by itself is like a postal system. It allows you to address a package and drop it in the system, but there is no direct link between you and the receiver. TCP/IP on the other hand creates the connection between the two hosts so that they can send messages back and forth for a period of time. WiMAX: It stands for Worldwide Interoperability for Microwave Access. It is an IP based broadband access technology that provides performance similar to 802.11/Wi-Fi networks with the coverage and quality of service of cellular networks. It is a wireless digital communications system, also known as IEEE 802.16, that is intended for wireless MAN. It can provide BWA up to 50kms for fixed stations and 5-15kms for mobile stations. IPTV: It stands for Internet Protocol Television. In IPTV, same technology is used as that of internet services. In this the TV channels are encoded in IP format and delivered to TV using a Smart Electronic Device. It is a system through which internet television services are delivered using the architecture and networking methods of the internet protocol suite over a packetswitched network infrastructure. Video on Demand: It is an interactive TV technology that allows subscribers to view programming in real time or download programs and view them later. A VoD at the consumer level can consist of a standard TV receiver along with a set top box. The service can also be delivered over the internet to home computers, portable computers and high end cellular telephone sets. Internet Telephony: A category of hardware and software that enables people to use the internet as the transmission medium for telephone calls. However internet telephony does not offer the same quality of telephone service as direct telephone connections.

3.8.1 Future Prospects Green Communication


Indias telecom market is second largest and fastest growing in the world. Thus India will require a vast and massive tower and network infrastructure. To cater to such a huge infrastructure requires substantial amounts of power. India is one of the leading importers of petroleum products. With rapid increase in global petroleum prices, it is necessary for the

countries all over the world and India in particular to seek alternative renewable resources for meeting her growing energy demands. India has immense potential for utilizing her renewable resources of energy. Reduction of the Green House Gases (GHGs) produced or caused to be produced by the telecom sector is referred to as greening of telecom. It can be achieved individually or by adopting any combination of the following aspects greening of telecom networks, green telecom equipments manufacture, environment friendly telecom building design and safe telecom equipments disposal. Green Telecom Networks would imply minimizing consumption of energy through use of energy efficient technology and using renewable energy sources. Green telecom equipments manufacturing involves eco friendly components and energy efficient manufacturing equipments. The office design should be such that it conserves energy by optimum power utilization. Also its thermal emission should be less. Finally provisions should be there for efficient and environment friendly disposal of mobile phones and network equipments. Below mentioned pie charts and tables would help in better understanding of the importance of green communication. Information and Communication Technology (ICT) industry contributes around 860 million tons (2%) of total green house gases (GHG). Of this around 40% i.e. 344million tons are contributed by PCs and monitors. Data Centers and servers contribute another 23% towards GHG emissions. Telecommunication sector contributes around 24% i.e. 206 million tons which is approximately 0.7% of global GHG emissions.

For a telecom operator energy costs 25% of the total network operations costs. Network uses around 86% of the energy. The tower sites uses 65% and the core network uses 21% (thus 86%) of energy requirements. As compared to these two the corporate office uses 12% and vehicles still lower of only 1%.

Estimating Carbon Footprint - It is estimated by calculating the sum of all carbon dioxide (CO2) emissions by a person over a span of one year. All types of fossil fuels consumption is calculated in terms of carbon contents. A litre of petrol is equivalent to 2.3kgs of carbon while one litre of diesel is equivalent to 2.7kgs of carbon dioxide. The list above is only an illustrative one and not exhaustive. It is provided only to facilitate better understanding of calculating carbon footprints.
Table 3.6: Table showing carbon consumption

Telecom Towers Diesel Consumption

Rural Urban

217000 93000

70% 30%

2.63 kg/lit CO2 emission Total Consumption of Diesel 2billion litres Total Carbon emission(I) 5.3 million litres of CO2

Grid

0.84kg of CO2/Kwh of electricity Total(II) 8 million litres

Total

I + II = 13.8 million litres

India has a total of 310000 telecom towers. 70% of them are in rural areas. The power requirements of a telephone tower are catered by either a diesel set or grid power supply. The diesel generators are of capacity 10-15 KVA. The carbon footprint of a tower is around 2.63kg/lit of diesel. Total consumption of diesel by all the towers is around 2 billion litres which results in total emission of carbon dioxide of around 5.3 million litres. Every kilowatt hour of electricity emits 0.84kg of carbon dioxide. It results in a total carbon emission of around 8 million tones. Thus, implementing green communication is imperative for the sustenance of telecom industry in India and also around the world. India has already committed to reduce the carbon emission intensity by 20-25% by 2020. Also to adopt green communication is vital from the business point of view in terms of cutting costs. It is with these objectives that the Telecom Regulatory

Authority of India (TRAI) has released a discussion paper and has sought replies from all stakeholders.

3.8.2 Special Study on Mobile Number Portability Telecom Regulatory Authority of India (TRAI) first announced about MNP in 2007 and submitted its first recommendations in April 2008. It was however recently implemented on 20 January 2011. MNP is set to liberalize the frontiers of competition in the mobile telephony space in India. Most of the developed countries, around fifty in number have implemented MNP in their countries. Its implementation has received mixed outcomes. Singapore was the first country to implement MNP in 1997. India has a cell phone market of around 750 million subscribers. It is the fastest growing market offering very cheap tariffs and which is also getting closer to saturation. The prepaid customers happen to be the principal mobile phone subscribers contributing around 95% of the customer base. The post paid customers forms the remaining 5% of the customer base. Also the characteristics of these two segments of mobile service subscribers are fundamentally different. The prepaid customers are more price sensitive and less sensitive towards number retention. While the postpaid are less price sensitive and more sensitive towards retaining their numbers. Also the 5% postpaid customers contribute nearly 20% of mobile service providers revenue. The postpaid customers are more inclined towards services like coverage, quality, 3G offerings and brand rather than low tariffs. Thus many analysts dont foresee an exodus of customers across and towards any particular service provider. MNP service will not create any competition but it shall only improve it by making it more customer centric. Its direct impact on the customers would be to cut their switching costs by eliminating the necessity of changing their mobile phone numbers. Introduction of this service requires a major rethinking on the part of service providers in terms of their marketing, customer base expansion and customer retention strategies. MNP will certainly improve the quality of service (QoS) to be offered by the service providers. Another benefit could be that it will provide a level playing field for small and new entrants. Market asymmetries will naturally adjust towards equilibrium.

MNP will have a short and long term impact on telecom operators. On a short term, it will increase their Sales and Marketing costs, network expenses and churn rates. Churn rates indicate the number of mobile phone customers who are changing their service providers. Mobile phone service providers can bring down their post paid tariffs which are currently 25% more than their prepaid counterparts. The key to success seems to be that those service providers who can cater better data services and can also manage with the churn rates can succeed in this era of competition with consistently falling average revenue per user (ARPU). According to the latest report of TRAI, more than 17.11 lakh mobile phone subscribers across India have submitted requests for changing their service providers. It is further said that initially the churn rate would be around 4-5%. It will stabilize around 2-3% in the next 9-12 months. There are also certain potential downsides like high porting charges, long winded applications and lengthy porting times. Depending on the MNP ecosystem that will exist in India, porting times could be as small as 2hours as in USA or could be as high as 5days as in UK. It could be finally said that in the long run those service providers who offer quality customer service, innovative applications and more advanced data services shall be the winners in the post MNP game.

3.9 MARKETING INITIATIVES


According to Peter F Drucker The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself. In order to survive in this competitive world various marketing and promotional strategies have to been implemented by various organizations. Major telecom service providers in the market follow various promotional strategies. With the liberalization many private players entered into the market making the competition more stiff and cut-throat. So, in order to survive each has to come out with unique advertising campaign to retain and enhance their market share.

Some telecom companies go for celebrity endorsements, some offer low tariff plans & packages while others have different tools to push back the competition and increase the customer base. We shall look at the marketing initiatives taken by various cellular service providers in detail.

3.9.1 Airtel Airtel spends crores of amounts on advertising and sales promotional activities. The trust factor of Airtel amplifies greatly with the brand ambassadors like Sachin Tendulkar, Sharukh Khan, Saif Ali Khan, A R Rehman who at some point of time have been a great support for the company. Recently, Airtel launched a huge rebranding exercise where it changed its traditional logo to an altogether new logo where the name Airtel is written in a very trendy style which signifies the modernity and trendiness in the brand Airtel. Also using this whole new brand look Airtel promises its customers to deliver anything that they desire anywhere, anytime, with its new positioning statement, Dil Jo chahe pass laye.

Transition of logo

Message Strategy of Airtel

The message strategy of Airtel has been dynamic and kept on changing over the years. The change in the tagline, logo and the celebrity endorsing the products over the years tells us about the changing perceptions of the market by the company over the years.
Power to keep in Touch (1995)

Touch Tomorrow (1999)

Live every Moment (2002)

Express Yourself (2003)

3.9.2 Reliance Communications: KAR LO DUNIYA MUTHI MAIN Reliance communication ltd founded by the late Sri Dhirubhai H Ambani (1932-2002) is the flagship company of the Reliance Anil Dhirubhai Ambani Group. The reliance Anil Dhirubhai Ambani Group currently has a net worth in excess of Rs.64, 000 crore (US$ 13.6 billion), cash flows of Rs. 13,000 crore (US$2.8 billion), net profit of Rs. 8,400 crore (US$ 1.8 billion). Reliance Communications is the Company, which as a customer base of 110 million including over 2.5 million individual overseas retail customers ranks among the Top 4 Telecom companies in the world by number of customers in a single country. Reliance Communications corporate patrons includes 2,100 Indian and multinational corporations, and over 800 global, regional and domestic carriers.

Marketing Initiatives:
Reliance Mobile (formerly Reliance India Mobile), launched on 28 December 2002,

coinciding with the joyous occasion of the late Dhirubhai Ambanis 70th birthday, was among the initial initiatives of Reliance Communications.
Reliance communications pioneering price initiative, a local call now costs a mere 15

paise per minute, STD 40 paise and a call to US costs less than Rs 2 per minute. Quality initiatives at Reliance are closely integrated with R&D efforts, R&D is aimed at product quality enhancement, enhancing customer serve, new product developments, process improvement, and development of more environment friendly processes.
Reliance announced various initiatives to increase mobile telecom and internet

penetration in rural India, with the launch of three initiative known as Bharatnet plan, Grameen VAS and M2M(machine to machine) solutions for rural customers.
1. Bharatnet plan: The rural users are faced with an inherent limitation of dial-up

services on quality, speed and an effective broadband service, which are currently available only to urban territories. To address this clear need, RCOM is launching BharatNet plan, the high-speed wireless internet service in over 20,000 rural locations across the country.
2. Grameen VAS: Grameen VAS will be an integral part of their day-to-day lives.

Grameen VAS would cover several specialized services including Mandi Bhav, Agriculture & Animal Husbandry Updates, Weather Forecast, and etc. all in multiple Indian Languages. These solutions can be categorized broadly under mLearning, mUpdates and GroupSampark (Community Messaging). These services can be accessed via different modes i.e. Voice Portals, SMS, USSD, Data (R-World) etc.
3. Machine to Machine applications: The M2M opportunity for rural market

includes Automation of Agro & Irrigation services, water level monitoring, and data gathering for milk & agri-cooperatives, fisheries, poultry, and soil analysis.

3.9.3 Vodafone Vodafone entered India in December 2005 by successfully rebranding Hutch as Vodafone in 2007. Rebranding included the caption line change is good

the base line was Hutch is now Vodafone. The pug taken over from Hutch was the charm for Vodafone. Marketing Initiatives Vodafone has given birth to the zoo zoo, a special character created specifically to convey a value added service (VAS) in each of the newly released commercials. Vodafone has come with creative advertising campaigns for its various plans. This strategy has captured the imagination of millions. This strategy is a buzz that lives up to the brand image of great creative and clever marketing. In the first 10days of IPL (Indian Premier League) it has reached a cumulative of 89 million people. The ads were created by Ogilvy and Mather, an agency under Executive Creative Director, Rajiv Rao, and South Asia. Vodafones ad campaign has gained so much popularity all over the world. Global recognition of Vodafone brand is growing as the company rolls out its identity into new markets. It retains local names and imaginary in the markets where this is essential to maintaining the trust of customers. To help to promote worldwide, Vodafone uses leading sports stars from high profile global sports including David Beckham and Micheal Schumacher. Vodafones sponsorship of the Manchester United team appeals to a broad section of the global football sports audience, whereas aspects of Beckhams broader image have grown to appeal to a much wider section of the society. That suits Vodafone, who needs to appeal to different segments of the market. Recently Vodafone has tied up with ESPN Star sports to bring its customers ball by ball live coverage of all the 49 ODIs on their mobile phones via ESPN Mobile TV, these rights are exclusively with Vodafone also it has been named co-presenting broadcast sponsor for ESPN star sports coverage of the ICC Cricket World Cup 2011 making the company one of the biggest sponsors of Indias most popular sport this season.

3.9.4 Idea Cellular: Idea cellular was awarded with Economic Times Emerging Company in the year 2009. It was a joint venture between AV Birla Group, AT&T and TATA. The company was known as AT&T in Maharashtra and Goa, TATA Cellular in Andhra Pradesh, RPG cellular in Madhya Pradesh and Chhattisgarh till 2002. In May 2002 it

consolidated its brand under a single umbrella called Idea Cellular. They positioned themselves with the tagline of An Idea Can Change Your Life and identified their market segment in the age group between 16-35yrs. Their plan was to spend around 7% of their revenues for advertising, which was roughly around Rs63Crores. In 2003 they came out with the idea of Group SMS service for their pre paid and post paid customers aimed at making their SMS as a Value Added Service. The year 2006 saw Idea sponsoring mega events like International Indian Film Academy (IIFA) Awards and Citizen Journalist in CNN-IBN. In 2008, Idea signed in Abhishek Bachchan as their brand ambassador. They launched several highly successful campaigns like Education for All giving them a social flavor. Further in 2009 they came out with campaigns like Janta Ki Sunoge Toh Voh Aapki Sunenge (If you listen to the people, they will listen to you) and What an Idea Sirji-Use mobile, Save Paper. According to the Idea Cellular Annual Report, advertising and business promotion expenses constituted around 4.5% of their operating expenses. They have also partnered IPL 2020 teams like Mumbai Indians, Delhi Daredevils and recently Deccan Chargers. The Idea cup in January 2010 was a tri nation cup between India, Sri Lanka and Bangladesh and two Test Series between India and Bangladesh. Thus Idea Cellular is involved in a big way in brand building and promotional activities. All this has rightly brought Idea Cellular as one of the top notch player in the telecom industry. 3.9.5 BSNL: In an attempt to take on private competition BSNL, in 2006, decided to outsource part of its marketing activity to private agencies across the country. They appointed special business associates in all their 23 telecom circles to directly market and sell a range of its products including leased lines, broadband services; web hosting, server co-location, landline and mobile phones. This was the first attempt by the public sector major BSNL for direct marketing. In 2008, BSNL appointed Deepika Padukone as their brand ambassador. However, Preeti Zinta replaced her in 2009, which was followed by Beijing Olympic Gold Medalist Abhinav Bindra. In a bid to improve their market share, BSNL have recently tied up with Indian Railways. The train coaches will carry BSNL logos with them. The primary aim of BSNL is to promote their 3G service offerings. A total of 25000sq.ft promotional material was stuck on the train. The

operator also used the space available on 200 table tops and 400 brochure holders inside the compartments of the train, along with the audio announcements, contests etc by the in-train promoters which has an immense impact on their promotional strategies.

3.10 FUTURE OF INDIAN TELECOM INDUSTRY


The telecommunication industry has a vital role to play in todays age,. It is considered as the backbone of industrial and economic development, and the industry has been assisting delivery of voice and data services at rapid increasing speeds, and therefore has been revolutionizing human communication. The growth in an infrastructure sector like telecom has a multiplier effect on the entire economy hence the future of Indian telecom dictates the future of the Indian economy in specific.

3.10.1 Overview of existing scenario Although the telecom sector is the most vibrant sector with the highest growth rate where more than 1760 lakh customers are added every month, the current teledensity or telecom penetration is extremely low when compared with global standards. Indias teledensity of 36.98% in FY09 is amongst the lowest in the world. Further, the urban teledensity is over 80%, while rural teledensity is less than 20%, and this urban rural gap is increasing. Since majority of the population of the country is rural, it is important that the government takes steps to improve rural teledensity. Hence the government has taken certain policy initiatives, which include the creation of the Universal Service Obligation Fund, for improving rural telephony and the rural teledensity and therefore bridge the rural-urban gap in tele-density.

17 TRAI press release on Jan 2011

Table 3.7: Data of existing subscribers as on 31st Jan 2011

Source: Press release of TRAI as on 31st Jan 2011

The above table shows that the number of telephone subscribers in India increased to 806.13 million at the end of January 2011 from 787.28 million in December 2010 thereby registering a growth rate of 2.39%. With this, the overall Tele-density in India reaches 67.67 as on 31 st Jan 2011. Wireless Segment (GSM, CDMA): Total wireless subscriber base increased from 752.19 Million in Dec 2010 to 771.18 Million at the end of Jan 2011 registering a growth of 2.52%. The overall wireless Tele-density in India reaches 64.74 as on 31st Jan 2011.

3.10.2 Challenges to be faced Cost effective: The main challenge faced by the telecom sector is to search for new costeffective ways to roll out telecom services in rural areas. This can be done through effective technology required for deployment and leverage on the use of available infrastructure to reduce cost and time. Rural Access: Another challenge is with regard to the connectivity of networks and cost of bandwidth which are important to facilitate broadband usage. Availability of local application and content is another area of concern. The language of the content available online is English. The content in local and regional language will increase interest of the local population in broadband utilization. Wireless & Technology: Wireless technology is the future growth driver for which spectrum is the most important input. The convergence of technologies as well as emergence of new applications is another growth area with challenges ranging from spectrum management to multi usage scenario. Government and other authorities: Government taxes on the sector at their present level, over 30%, are substantially higher than the global average The Indian telecom sector is one of the highest taxed sectors in the developing world, through levies, which comprise service tax, revenue share, and spectrum cess, value added tax and so.

3.10.3 Critical agents required to propel future growth 3G and IPTV The new age launch of 3G and IPTV will also enhance the growth of the Indian Telecom sector in the coming years. Rural market penetration is also set to increase at a high rate due to the extreme prevailing competition between the market players and there is a huge scope for ultra development of the Indian Telecom industry.

3G fuels growth: According to the Wireless intelligence report WDMA i.e. 3G will account for
18

13% of total mobile connections by 2014 in India. The report also predicts that 3G connections

will surpass the mark of 10 million by 2011 mid and will hit mark of 150 million by 2014 year end. Rollout of 3G wireless broadband is critical. In one big leap, the internet has shifted from the PC and the laptop to the mobile phone. In fact, many first-time internet users will simply jump to mobile internet, completely bypassing PCs and laptops; quite similar to the way millions gave fixed-line phones the pass to go mobile. Spectrum availability: Hence a clear, long-term spectrum roadmap is essential for healthy growth of the sector. Globally, the average spectrum allocation per operator is 17-18 MHz. In India, it is less than half of it despite highest minutes of use (MoU) at over 450 minutes per month and the huge growth expected in future. In view of the above, it is surprising that TRAI has recommended reduction in spectrum per operator, which can adversely impact both the growth momentum and quality of service. Concentration on the Rural Telephone sector: As per the recent studies conducted on the sector Indian Telecom it is mobile telephony in specific which will drive the development of the Indian rural telecom sector. With its capacity to outreach the rural markets and increase the rural penetration, it is one of the main areas in the future where strong competition is predicted. Healthy Competition: From the viewpoint of the economys benefit, the ideal strategy is to allow free competition and the market forces would ensure healthy competition. The Indian telecom sector is the living example of healthy competition among telecom service providers. Since 2003, competition has been introduced in the access services. This has resulted drastic reduction in the tariff and exponential growth of the sector. The reduction in cost of the mobile handsets along with the low tariff has made this possible. The tariffs for telecom services in India are one of the lowest in the world. Tax and other levies: A moderate level of levies and taxes could better serve the twin objectives of government revenue growth and market expansion. The Government, the operators and the other authorities should realize that healthy margins and objective of affordability are not opposed to each other. To drive in this point, TRAI needs to evolve into a more developmental

18 Communication Ministry report as of 31 Jan 2011

role. Its focus needs to shift steadily from affordability to healthy a nd an all round development of the industry. 3.10.4 Projection of future scenario The telecom sector and adjacent business opportunities such as digital devices and services for enterprises will represent a
19

$100 billion market by 2015, according to management

consultancy firm Boston Consulting Group (BCG). The traditional market is currently worth about $32 billion according to BCG. But in its latest report, the consultancy takes a much broader view of market opportunity to include laptops, personal computers, software and applications, television sets, digital advertisements, as well as managed network and connectivity services offered to large enterprises or government. That the past year added about 200 million new subscribers, but earned only 2 to 3% additional revenue for telecom firms is misleading, because going forward the market will be driven by data-based services and devices used to consume such services. Therefore for Nokia, the worlds largest mobile handset maker, India is the second largest market after China. The worlds largest software maker, Microsoft, which currently sells about $800 million worth of software here, is aiming to make India their fifth largest market in the next three to five years. Along with the rollout of 3G and wireless broadband networks, which will over a period of time reach even smaller cities, the market will witness faster evolution of products, with better features such as touch screens and voice and gesture recognition, thus encouraging faster consumer adoption. And this increase in consumer adoption and stiff competition will drive prices down. Also the pricing of the telecom hard wares, phones in specific is tremendously expected to come down within 5 years from now. Smart phones whose prices were 20,000 rupees are expected to reach 3000 4000. The opportunity, however, also calls for huge investments from government as well as firms who would want to profit from the market and the investments required would easily be in the range of
20

$35-50 billion in order to develop the

backhaul, backbone, and data centers needed to power wireless-broadband networks that can
19 Boston Consulting group review as of Jan 2011 20 Boston Consulting group review as of Jan 2011

support these new services. As we move forward, telecom operators will have to heavily move towards sharing infrastructure so that the burden of investment can also shared. Sourced from the Boston Consultancy Review Group

3.11 COMPARISON WITH US AND OTHER COUNTRIES


The Indian Telecom service market from among the Global telecom service markets is one of the market which still remains as a silver lining in the dark clouds of recession that hover above the global market. Emerging economies like India still invest heavily in infrastructure, while the investment from recession hit economies will be delayed. 3.11.1 US comparison: The effects of the slowing US economy became more predominant with all operators reporting a decline in (ARPU Average revenue per user). However the prevalence of more sophisticated high end handsets has helped drive growth. An increased reliance on mobile content will be the defining the trends of the US mobile market in the next one year although the range of services on offer will be operator specific. While the economy is already negatively impacting the infrastructure and handsets segments, consumers have not yet begun cutting their overall mobile data spending. Hence US Telecom still has retained its rank in terms of largest number of users. 3.11.2 Rest of the world: The Asia Pacific region will experience the highest growth rate in the next five years, containing economies of China and India. In the Latin American part, the growth will reach
21

12% spurred on by the development of the middle class. For Europe, France leads

with regard to fiber deployment as well as in terms of broadband offerings, infrastructure and reduced price. In Kenya, triple play service consisting of TV, Internet and VOIP services under the brand Zuku. In the Middle East, Qatar has launched triple play under the brand MOSAIC. In Poland and in Russia the fixed broadband (ADSL, Cable) operators are increasingly looking to double- and triple-play packages, resulting in a number of IPTV deployments. 3.11.3 Global Rural Access through various schemes: M-PESA is an innovative new mobile payment solution which customers can use to make simple financial transactions. Here the scheme relies on an application in the mobile phone SIM card, supervised by a pin code.
21 Communication Ministry report as of 31 Jan 2011

Currently, the service is mainly for mobile customers who do not possess a bank account. The money is held safely in a bank account run by M-PESA on the users behalf and the user does not have any contact with the bank nor does the bank have the users details. The M-PESA system allows customers to deposit and withdraw cash via local agents and transfer money to other mobile phone users via SMS. In a country like Kenya where 90 percent people do not have a bank account, the M-PESA service has seen a dramatic take-up since its launch. As of March 2009, the service had over
22

6.5m registered users (vs. 2.1m in March 2008) with 2m daily

transactions in Kenya alone. M-PESA is distributed through 8,650 retail outlets countrywide (2,262 outlets in March 2008). This clearly demonstrates the demand for easily accessible and secure cash payment services in emerging markets. More recently, commercial M-PESA services have been introduced by Roshan, the leading mobile operator in Afghanistan, and by Vodacom in Tanzania. Money transfer services for handset owners without a bank account may bring in USD5bn of transaction fees and text message-linked revenue by 2012. Indirect revenue, including revenue from greater customer loyalty, will probably amount to 23USD2.9bn. China, the world's largest telecom market, attributes its super growth to rural areas. The country's largest operator, China Mobile, credits rural areas with contributing around 50 percent of its millions of new subscribers. Grameen Phone in Bangladesh provides microfinance options to set up Village Phone Operators Grameen Bank provide a loan package to select VPOs to purchase a handset and operate their VP business. In India, Qualcomms Fisher Friend BREW application has been implemented in coastal Tamil Nadu. This application works on 3G CDMA handsets and gives fisherman access to timely weather alerts, real-time data on fish migration, market prices and updates on relevant government schemes Setting up viable distribution and collection channels: Mobitel, Sri Lanka's National Mobile services provider, expanded its rural penetration with a tie-up with the Sri Lankan Postal Department. As per the deal, post offices and postmen could sell Mobitel prepaid cards to rural customers. 3.11.4 Conclusion: Asia is a booming market with countries like Japan and South Korea
22 Communication Ministry report as of 31 Jan 2011 23 Communication Ministry report as of 31 Jan 2011

implementing advanced technologies while the Chinese market is poised for growth after restructuring and 3G license auctions. India and China contribute 31 percent of worlds subscriber base; yet the mobile penetration rates are not as high compared to US or other developed economies. Needless to mention, further growth is expected to be witnessed in this region. Japan with over 2430 million broadband lines in place, is the third largest country in the world after the US and China in terms of broadband users. Much of the success of broadband in Japan is owed to the stunning growth surge that occurred back in 2003 on the back of DSL broadband technology. The restructuring of the Chinese telecom market has changed the competitive landscape of the country. With the largest mobile and broadband subscriber base, the market has stayed relatively insulated from the global meltdown.

3.12 CONCLUSION
Though Indian telecom sector is growing rapidly, lots of challenges are being faced by various companies in tapping the rural market thereby increasing their presence. It means one has to choose proper and effective technology for deployment and leverage on the use of available infrastructure to reduce cost and time of role out of services. According to Telecom Regulatory Authority of India (TRAI), the market would expand with further regulatory and structural reforms. The introduction of 3G and later 4G in future could well lend a helping hand in increasing Telecom sectors revenues. The churn rate is also not expected to shoot to a high level despite introduction of Number portability.

24 Communication Ministry report as of 31 Jan 2011

Chapter 4

CONCLUSION

India is a growing country and telecom sector plays a major role in its GDP and the market share of all the major players are increasing where in the number of players in service providing has also increased in 2010 than 2009. Its potential is very high in the market and telecommunications industry is growing in a very high speed. As there are huge population in the country the usage of mobile phones became frequent when compared to the past. This is the main advantage for telecom sector and has number of phases in its development. Mobile Number Portability (MPN) was implemented in 2011 recently which is not increase the competition to bring changes in the mobile service for customers and it is completely customer centric. It is not only the mobile services which gave way for telecom sector such as GSM,GPRS, and CDMA but even other services like internet, WiMax and broadband from BSNL which was followed by others then the 3G services which brought a drastic change in technology. The major mergers and acquisitions in the telecom industry was also an important factor for the development. This also gave way for telecommunications providers to provide their services in the urban and rural market. The development in the rural area was also very fast. Reliance introduced new products and plans with low rates made it possible for to make use of their services. Through different marketing and promotional strategies the players have increased their services to the country. As there is competition increasing in this sector Value Added Services must be provided and tariff plans can be introduced in different ways focusing on the rural market. The FDI entry and the spectrum licensing which was given by the Telecom Regulatory Authority of India (TRAI) will bring some enormous growth in the future of the telecom industry.

Chapter 5

REFERENCES

References

Sources of Data: 1. TRAI Annual Report 2009-2010 2. http://www.trai.gov.in 3. http://www.dot.gov.in/ 4. http://basicmarketingfundas4u.blogspot.com/2010/11/airtels-rebranding-initiative.html 5. http://www.tatateleservices.com/t-aboutus-ttsl-organization.aspx 6. http://www.tatadocomo.com/ 7. http://www.icai.org/resource_file/9846927-941.pdf 8. http://www.airtel.in/ 9. http://finance.mapsofworld.com/merger-acquisition/impact.html 10. http://business.mapsofindia.com/finance/mergers-acquisitions/impact.html 11. http://finance.mapsofworld.com/merger-acquisition/telecommunication-industry.html 12. Role of Telecommunication and Networking Technology in the Development of Digital Libraries (3rd International CALIBER - 2005, Cochin, 2-4 February, 2005). 13. India Broadband Wireless and WiMax Market Analysis & Forecasts 2007 2014 2nd Edition October 2007. 14. Country Industry Forecast Report Service The Indian Telecom Industry (1996 2006). 15. http://www.projectbaba.com/tellcom.php 16. Boston Consultancy group review as of 2010 17. Indian Telecom 2009 report issued by the Communication ministry in association with KPMG 18. http://www.telecomcircle.com/2009/06/india-telecom/ 19. http://www.indiacallinginfo.com/india-telecom-circles 20. APA Citation Style Cornell University Library 21. Telecom Sector In India: Vision 2020 by Manas Bhattacharya 22. Telecom Services Impact Analysis CRISIL Research 23. Consultation Paper On Green Telecommunications by TRAI 24. Indian Telecom Sector Department of Telecom 25. A Game Changer Sr. Research Analyst, SMC Global Securities Limited, India 26. Mobile Number Portability Pros and Cons by Hemant K Bhargava and Xiahua (Anny) Wei 27. Mobile Number Portability What Will Tomorrow Bring? By Jeff Kagan Last three articles published in The Analyst March 2011 issue