Indian Telecommunication

8/14/2019 Indian Telecommunication

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Chapter 1

INTRODUCTION


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HISTORY OF T ELECOMMUNICATION

INDUSTRY

The history of telecommunication industry started with the first

public demonstration of Morses electric telegraph, Baltimore

to Washington in 1844. In 1876 Alexander Graham Bell filed his

patent application and the first telephone patent was issued tohim on 7th ofMarch.

In 1913, telegraph was popular way of communication. AT&T

commits to dispose its telegraph stocks and agreed to provide

long distance connection to independence telephone system.

In 1956, the final judgment limited the Bell System to Common

Carrier Communications and Government projects but

preserving the long-standing relationships between themanufacturing, researches and operating arms of the Bell

System. In this judgment AT&T retained bell laboratories and

Western Electric Company. This final judgment brought to a

close the justice departments seven year-old antitrust suit

against AT&T and Western Electric which sought separation of

the Bell Systems Manufacturing from its operating and

research functions. AT&T was still controlling the

telecommunication industry.

In 1982 , AT&T was requested to divestiture its stock

ownership in Western Electric; termination of exclusive

relationship between AT&T and Western Electric; divestiture by

Western Electric of its fifty percent interest in Bell Telephone

Laboratories, AT&T s telecommunication research and


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development facility, is a jointly owned subsidiary in which

AT&T and Western Electric each own 50% of the stock;

separation of telephone manufacturing from provision of

telephone service and the compulsory licensing of patents

owned by AT&T on a non-discriminatory basis.

It was telecommunication act of 1996 that true competition

was allowed. The act of 1996 opened the market to all

competitors. AT&T being the first telecommunication company

paved the road for the telecommunication industry as well as

set the policy and standards for others to follow.

Beginning of telecommunication in India

1851 First operational land lines were laid by thegovernment near Calcutta

1881Telephone services introduced in India

1883 Merger with postal system

1923 Formation of Indian radio Telegraph Company

1932 Merger of ETC and IRT into Indian Radio and CableCommunication Company

1947 Nationalization of all foreign telecommunicationcompanies to form the posts, telephone and telegraph, amonopoly run by the governments ministry ofcommunications

1985Department of telecommunication established , an

exclusive provider of domestic and long-distanceservices that would be its own regulator

1986 Conversion of dot into two wholly government owned companies the VSNL for internationaltelecommunication and MTNL for services inmetropolitan areas


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1997 Telecom regulatory authority created

Telecommunication is important not only because of its role in

bringing the benefits of communication to every corner of India

but also in serving the new policy objectives of improving the

global competitiveness of the Indian economy and stimulating

and attracting foreign direct investment.

Indian Telecom industry is one of the fastest growing telecom

markets in the world. In telecom industry, service providers are

the main drivers; whereas equipment manufacturers are

witnessing growth and decline in successive quarters as sales

is dependent on order undertaken by the companies.


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INTRODUCTION OF INDIAN

TELECOMMUNICATION

Today the Indian telecommunications network with over 375

Million subscribers is second largest network in the world

after China. India is also the fastest growing telecom market

in the world with an addition of 9- 10 million monthly

subscribers. The tele-density of the Country has increased

from 18% in 2006 to 33% in December 2008, showing a

stupendous annual growth of about 50%, one of the highest

in any sector of the Indian Economy. The Department ofTelecommunications has been able to provide state of the

art world-class infrastructure at globally competitive tariffs

and reduce the digital divide by extending connectivity to

the unconnected areas. India has emerged as a major base

for the telecom industry worldwide. Thus Indian telecom

sector has come a long way in achieving its dream of

providing affordable and effective communication facilities

to Indian citizens. As a result common man today has accessto this most needed facility. The reform measures coupled

with the proactive policies of the Department of

Telecommunications have resulted in an unprecedented

growth of the telecom sector.

The thrust areas presently are:

1. Building a modern and efficient infrastructure ensuringgreater competitive environment

2. With equal opportunities and level playing field for all

stakeholders.

3. Strengthening research and development for

manufacturing, value added services.


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4. Efficient and transparent spectrum management

5. To accelerate broadband penetration

6. Universal service to all uncovered areas including rural

areas.

7. Enabling Indian telecom companies to become globalplayers.

Recent things to watch in Indian telecom sector are:

1. 3G and BWA auctions

2. MVNO

3. Mobile Number Portability

4. New Policy for Value Added Services5. Market dynamics once the recently licensed new

telecom operators start rolling out

6. Services.

7. Increased thrust on telecom equipment manufacturing

and exports.

8. Reduction in Mobile Termination Charges as the cost

per line has substantially reduced

9. Due to technological advancement and increase intraffic.

India's telecom sector has shown massive upsurge in the

recent years in all respects of industrial growth. From the

status of state monopoly with very limited growth, it has

grown in to the level of an industry. Telephone, whether

fixed landline or mobile, is an essential necessity for the

people of India. This changing phase was possible with theeconomic development that followed the process of

structuring the economy in the capitalistic pattern. Removal

of restrictions on foreign capital investment and industrial

de-licensing resulted in fast growth of this sector. At present

the country's telecom industry has achieved a growth rate of


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14 per cent. Till 2000, though cellular phone companies were

present, fixed landlines were popular in most parts of the

country, with government of India setting up the Telecom

Regulatory Authority of India, and measures to allow new

players country, the featured products in the segment camein to prominence. Today the industry offers services such as

fixed landlines, WLL, GSM mobiles, CDMA and IP services to

customers. Increasing competition among players allowed

the prices drastically down by making the mobile facility

accessible to the urban middle class population, and to a

great extend in the rural areas. Even for small shopkeepers

and factory workers a phone connection is not an

unreachable luxury. Major players in the sector are BSNL,MTNL, Bharti Teleservices, Hutchison Essar, BPL, Tata, Idea,

etc. With the growth of telecom services, telecom equipment

and accessories manufacturing has also grown in a big way.

Indian Telecom sector, like any other industrial sector in the

country, has gone through many phases of growth and

diversification. Starting from telegraphic and telephonic

systems in the 19th century, the field of telephoniccommunication has now expanded to make use of advanced

technologies like GSM, CDMA, and WLL to the great 3G

Technology in mobile phones. Day by day, both the Public

Players and the Private Players are putting in their resources

and efforts to improve the telecommunication technology so

as to give the maximum to their customers.

TELECOM SUBSCRIBER BASE IN INDIA


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Indian telecommunication Industry is one of the fastest

growing telecom market in the world. The mobile sector

has grown from around 10 million subscribers in 2002

to reach 150 million by early 2007 registering an

average growth of over 90%. The two major reasons thathave fuelled this growth are low tariffs coupled with falling

handset prices.

Surprisingly, CDMA market has increased its market share

up to 30% thanks to Reliance Communication. However,

across the globe, CDMA has been losing out numbers to

popular GSM technology, contrary to the scenario in India.

The other reason that has tremendously helped the telecom

Industry is the regulatory changes and reforms that have

been pushed for last 10 years by successive Indian

governments. According to Telecom Regulatory Authority of

India (TRAI) the rate of market expansion would increase

with further regulatory and structural reforms.

Even though the fixed line market share has been dropping

consistently, the overall (fixed and mobile) subscribershave risen to more than 200 million by first quarter of

2007. The telecom reforms have allowed the foreign

telecommunication companies to enter Indian market which

has still got huge potential. International telecom companies

like Vodafone have made entry into Indian market in a big

way.

Currently the Indian Telecommunication market is valued ataround $100 billion (Rupees 400,000 crore). Two telecom

players dominate this market - Bharti Airtel with 27% market

share and Reliance Communication with 20% along with

other players like BSNL (Bharat Sanchar Nigam Limited) and

AT&T. One segment of the market that has been puzzling is


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broadband Internet. Despite the manner in which the

countrys Internet market has been booming, Indias move

into high-speed broadband Internet access has been

distinctly slow. And, while there appears to be considerable

enthusiasm amongst the population for the Internet itself,this has not been reflected in broadband subscription

numbers. In 2006 India witnessed a good surge in broadband

users with the total subscriber base in the country

expanding by almost 200% to just over 2 million by

years end. Despite this surge, broadband penetration in

India still remains around only 0.2%; broadband

services still account for only 25% of the total Internet

subscriber base, still in itself comparatively low. So, if 70% oftotal population is rural, the scope for growth in this Industry

is unprecedented

The Ministry of Communications and Information Technology

(MCIT) is has very aggressive plans to increase the pace of

growth, targeting 250 million telephone subscribers by end-

2007 and 500 million by 2010. Most of the expansion in

subscribers is set to occur in rural India. Indias ruraltelephone density has been languishing at around 1.9%. The

subscriber addition rate has been strong in the last 12

months but the regulatory developments will increase

competition and thus curtail the long-term growth rates of

individual companies. The savings through the setting of

tower companies will partly go towards the higher capex and

opex costs from more stringent spectrum allocation norms

for the incumbents.

The Telecommunications sector has been consistently

adding more than 7 million subscribers for the last 6 months,

a very healthy net addition rate infact. All the private

operators GSM as well as the CDMA operators have been


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very consistent in their performance. The sector provides

very strong revenue as well as earnings visibility over the

next 12 months. However the recent regulatory

developments are seem to be negative for the telecom

companies as it will increase the number operators per circlewhich will intensify competition.

Chapter 2


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Review ofbasic

services

Review of basic services


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As on 31st March 2008, wireline connections are being

provided by 5 licensed private operator groups in addition to

the incumbent BSNL and MTNL. The list of Service Providers

providing wireline services along with their area of operation

is given in the table below. The subscriber base of basicservices (Wireline) recorded a decrease of 3.28% in 2007-08

over the previous year. In comparison, the private BSOs,

recorded an annual increase of 43.14% in the subscriber

base during the year 2007-08. As on 31st March 2008, the

incumbents BSNL and MTNL had 80% and 9% market share

respectively in the subscriber base, while all the five private

BSOs had only 11% of the total subscriber base. During the

previous year, at the end of March 2007, the market share ofthe BSNL and MTNL was 83% and 9% respectively, while the

share of all the private operators taken together was 8%.

Thus the market share in terms of subscriber base of the

incumbents BSNL and MTNL has slightly decreased, whereas

the market share of private BSOs has increased by 3%. The

5 private BSOs have added 8.96 lakhs new Direct Exchange

Lines (DELs). However, BSNL has recorded a reduction of

21.86 lakhs DELs, whereas MTNL has also registered anannual decline of 0.47 Lakhs DELs. Thus Private operators

have contributed to provide most of the new additions in

DELs. The total subscriber base however has been recorded

an annual decline of 13.37 lakhs DELs in comparison to

previous year.

Companies and No. of Circles covered

BSNL 21 Circles (Except Delhi &Mumbai)

MTNL 2 Circles (Delhi & Mumbai only)

Bharti Airtel Ltd. 17 Circles Except Assam, Orissa,Jammu & Kashmir, Bihar, NorthEast and Himachal Pradesh


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TataTeleservices(Maharashtra)Ltd.

2 Circles Only Maharashtra &Mumbai

TataTeleservicesLtd.

20 Circles Except Assam,Jammu & Kashmir and North East

HFCL Infotel Ltd. 1 Circles (Punjab Circle only)

Shyam TelelinkLtd.

1 Circles (Rajasthan Circle only)

RelienceCommunicationLtd.

21 Circles Except Assam andNorth East

Review of Wireless (GSM and CDMA)

Services

The Wireless Industry crossed 261 million-subscribers mark

at the end of the financial year 2007-08. This total

subscribers base of 261.07 million comprise of 192.7 million

GSM and 68.37 million CDMA subscribers. During thefinancial year 2007-08 around 95.96 million subscribers were

added with a growth rate of 58.12% as compared to 67.17%

growth during the year 2006-07. In the wireless segment,

GSM services has reached the 192.70 million subscriber

mark at the end of financial year 2007-08, as compared to

120.47 million during the previous year. It added around

72.23 million subscribers during the year, registering an

annual growth of 59.96%. In terms of subscriber base andmarket share of GSM services, M/s Bharti with 61.98 million

subscriber base remains the largest GSM operator followed

by M/s Vodafone, M/s BSNL, and M/s Idea with subscriber

base of 44.13 million, 36.21 million and 24.00 million

respectively. The market share of different GSM operators as


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on March 2008 is displayed in Figure 1.12. In Cellular CDMA

services, in terms of subscriber base and market share, M/s

Reliance Infocom with 38.78 million subscriber base remains

the largest CDMA operator followed by M/s Tata and M/s

BSNL with subscriber base of 24.33 million, and 4.58 millionrespectively.


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Market share of wireless service providers (as on 31st March 2008)

Subscriber growth of wireless services (GSM and CDMA)

Public and Private Sector

Contribution in the Growth of Fixed

and Mobile Services

Before opening up of the Telecom Sector for the private

players, growth in telecom services was primarily driven by

public sector monopoly, showing very marginal growth, as

the incremental tele-density between 1948 and 1998, a 50

year period, was only 1.92%. Cost-oriented Telecom tariffs

were also introduced by TRAI in 1999.

During the period 1998-2008, the absolute growth insubscriber base of PSU operators was 61.7 million

comprising of 19.5 million fixed subscribers and 42.2 million

mobile subscribers. The PSU (Public Sector Undertakings)

Operators have shown remarkable growth in the competitive

environment, while in the pre-reform non-competitive

environment, their performance was slow. Private operators

have also shown remarkable growth in a highly competitive

environment. The overall growth in the subscriber base ofprivate operators during 1998-2008 was 220.94 million

comprising of 9.81 million fixed subscribers and 211.13

million mobile subscribers. Private operators have

contributed very largely to post 1998 growth primarily in


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mobile services due to the obvious cost and fast deployment

advantages.


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PSU Operators Subscriber Base

Private Operators Subscribers Base


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Public Mobile Radio Trunked Services

Public Mobile Radio Trunked Service (PMRTS) was opened for

private sector in the year 1995. As on 31st March 2007,

PMRTS is being provided by 12 operators. The subscriber

base of PMRTS has recorded a growth rate of 15.04% during

2007-08 over the previous year. Its subscriber base

increased from 31501 at the end of March 2007 to 36240

at the end of March 2008.

Internet Services

TRAI is constantly monitoring the growth of the Internet and

Broadband services in the country by way of Performance

Monitoring Reports being submitted by Internet Service

Providers (ISP). Issues raised by ISPs, from time to time,

were successfully resolved by TRAI to create conducive

environment and to encourage the growth of the service

during the financial year. Total 138 ISPs reported data to

TRAI, which indicates 11.09 million Internet Subscribers atthe end of 31st March 2008. There was an increase of

19.63% in the subscribers base as compared to March 2007.

The distribution of Internet Subscribers among Govt. ISPs &

Private ISPs as on 31st March 2008 is as below. The BSNL

has maximum of 50.82% of total internet subscriber base.

Among PSUs owned ISPs, M/s BSNL and M/s MTNL have

reported a subscriber base of 5.64 Million and 1.89 Millionrespectively. Amongst the Private Sector ISPs M/s Bharti

Airtel Limited has a subscriber base of 0.81 Million and stood

third overall.


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Share of public and private sector I SP (in lakhs)

Broadband

The number of Broadband subscribers (with a download speed

of 256 kbps or more) was 3.87 Million on 31st March 2008 as

compared to 2.34 Million subscribers on 31st March 2007

registering an annual growth of 65.38%. The distribution of

Broadband subscribers among Government ISPs and Private

ISPs as on 31st March 2008 is as below:


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Internet TelephonyOn the recommendation of TRAI (Telecommunications

Regulatory Authority of India), Government issued the

guidelines on 24th August 2007 for further opening of

Internet Telephony by permitting all ISPs signing new ISP

License to provide Internet Telephony. The restrictions on

devices being used for Internet Telephony have also been

removed. As on 29th February 2008, DOT has givenpermission to 149 ISPs (Category A 56; Category B 64;

and Category C 29) to offer Internet Telephony services.

At the end of 31st March 2008 30 ISPs have reported the

provisioning of Internet Telephony Services. The total

minutes of usage of internet telephony are 115 million at the

end of 31st March 2008.

Broadband Casting and Cable TV

Services


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In order to regulate the carriage of Broadcasting and Cable

Services, the Government of India issued a Notification dated

9th January, 2004 by which broadcasting and cable services

have been brought within the purview of TRAI in terms of

section 2(k) of the Telecom Regulatory Authority of India Act,1997. The Government also issued an order dated 9th

January, 2004 under section 11(d) of the TRAI Act, which

mandated TRAI to make recommendations regarding terms

and conditions on which the Addressable Systems shall be

provided to the customers and the parameters for regulating

maximum time for advertisements in pay channels as well as

other channels. The order also entrusted to TRAI, the

function of specifying the standard norms for, and periodicityof revision of rates of pay channels, including interim

measures.

(a) Cable TV Service

At present, as per latest estimates there are 127 millionhouseholds in India having television sets. Out of this, there

are 71 million household subscribers of cable television

services. The maximum number of Free-to-Air (FTA)

Channels, pay channels and local channels being carried by

MSOs in their networks across the country as on Quarter

ending 31st March 2008 was 133, 95 and 8 respectively.

These figures are based on the reports received from some

of the major service providers regarding the number ofchannels being carried by them in their Networks, analog

and / or in digital form. These channels have been reported

across different networks of the service providers having

different combinations of pay, FTA and local. As on 31st

March 2008, the total number of set-top box installed in the


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CAS notified areas of Delhi, Mumbai, Kolkata and Chennai

was 6,07,883. A break-up of the set top boxes in the four

metropolitan cities has been depicted in the graph below:

Set top boxes in CAS notified area

(b) Satellite TV Channel

At the end of March 2008, there are reportedly 114 pay

channels in existence and these channels are being

broadcasted / distributed by 17 broadcasters or their

distributors

(c) DTH Services

Apart from Free-to-Air DTH service of Doordarshan, there

were six private DTH licensees and out of these six


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beating other sectors in the manufacturing as well as

services.

FDI Inflows into Indias Telecom Industry (1991-2007, in Rs million)

According to the numbers published by Investindiatelecom,

an on-line agency which tracks developments in the Indian

telecom sector, Indian telecom has grossed actual FDI worth

Rs 9,576.40 crore during the period starting from late 1991

to early 2003. In absolute terms, this is the highest inflow of

FDI into the telecom sector in the world. Mauritius, which

houses a number of holding and investment companies,emerges as a distant second with FDI grossing Rs 6,855.83

crore during the period.

The Mauritius numbers may be deceptive as it is one of the

last tax havens in the region and may include money

actually invested elsewhere. Though data for several

important countries are not included, the FDI inflow into

India telecom sector is impressive, a senior analyst who

tracks the telecom sector says.

Of the total FDI inflow into Indian telecom sector, the lions

share has gone into investment in holding companies

followed by cellular network and manufacturing and

consultancy. The total foreign money invested in the holding

companies stood at Rs 4,813.3 crore or 50.26 per cent of the


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total inflow, cellular telephony attracted Rs 2,332.8 crore

accounting for 24.36 per cent during the period.

The foreign capital inflow into the manufacturing and

consultancy segment stood at Rs 1,578.4 crore or 16.48 per

cent of the total inflow.

On an inter-sectoral comparison, telecom sector is the

second largest recipient of FDI with 19.79 per cent of total

inflow.

The numbers are a clear indication of the foreign

companies perception about the prospects in Indian telecom

sector. So far, the investment is mainly confined to cellular

telephony. However, with recent changes, basic telephonytoo will start attracting foreign capital in a big way,

Chapter 3


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PERFORMANCE

& TARGET,

PER FORMANCE OF TELECOM

EQUIPMENT MANUFACTURING

SECTOR

As a result of Government policy, progress has been

achieved in the manufacturing of telecom equipment in the

country. There is a significant telecom equipment-


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manufacturing base in the country and there has been

steady growth of the manufacturing sector during the past

few years. The figures for production and export of telecom

equipment are shown in table given below:

Year wise production and export of telecom equipment-manufacturing sector

(Rs. in crore)

Year Production Export

2002-03 14400 402

2003-04 14000 250

2004-05 16090 400

2005-06 17833 1500

2006-07 23656 1898

(Source: www.dot.gov.in)

Rising demand for a wide range of telecom equipment,

particularly in the area of mobile telecommunication, has

provided excellent opportunities to domestic and foreigninvestors in the manufacturing sector. The last two years

saw many renowned telecom companies setting up their

manufacturing base in India. Ericsson set up GSM Radio Base

Station Manufacturing facility in Jaipur. Elcoteq set up

handset manufacturing facilities in Bangalore. Nokia and

Nokia Siemens Networks have set up their manufacturing

plant in Chennai. LG Electronics set up plant of

manufacturing GSM mobile phones near Pune.Ericsson launched their R&D Centre in Chennai. Flextronics

set up an SEZ in Chennai. Other major companies like

Foxconn, Aspcom, Solectron etc have decided to set up their

manufacturing bases in India.


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The Government has already set up Telecom Equipment and

Services Export Promotion Council and Telecom Testing and

Security Certification Centre (TETC). A large number of

companies like Alcatel, Cisco have also shown interest in

setting up their R&D centers in India. With above initiativesIndia is expected to be a manufacturing hub for the telecom

equipment.

TARGETS SET BY THE GOVERNMENT

1. Network expansion

a. 500 million connections by the year 2010b. Provision of mobile coverage of 90% geographical

area by 2010

2. Rural telephony

a. One phone per two rural households by 2010

(about 80 million rural connections)

b. Reduce urban-rural digital divide from present

25:1 to 5:1 by 2010

3. Broadband

a. Broadband with minimum speed of 1 mbps

b. Broadband coverage for all secondary & higher

secondary schools and public health care centres

by the end of year 2008

c. Broadband coverage for all Grampanchayats by

the year 2010

4. Infrastructure Sharinga. USO subsidy support scheme for shared wireless

infrastructure in rural areas with about 18,000

towers by 2010

b. Increase sharing in urban areas to 70% by 2010

5. Introduction of Spread of IPTV and Mobile TV


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a. IPTV in 600 towns by 2010

6. Manufacturing

a. Making India a hub for telecom manufacturing by

facilitating more and more telecom specific SEZs

b. Quadrupling production in 2010

c. Achieving exports of 6 times from present level of

0.5 billion in 2010

7. Research & Development

a. Pre-eminence of India as a technology solution

provider

b. Comprehensive security infrastructure for telecom

networkc. Tested infrastructure for enabling interoperability

in Next Generation Network

d. Doubling the telecom equipment R&D by 2010

from present level of 15%

8. 8.International Bandwidth

a. Facilitating availability of adequate international

bandwidth at competitive prices to drive ITES

sector at faster growth


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Indian Telecommunications at a glance

(As on 30th September 2008)

Rank in world in network size 3rd

Teledensity (per hundred populations) 30.64

Telephone connection (In millions)

Fixed 38.35

Mobile 315.31

Total 353.66

Village Public Telephones 5.6 lakh

Foreign Direct Investment (in millions) (from

January 2000 till August 2008)

182042 million

Licenses issued

Basic 2CMTS 60

UAS 224

Infrastructure Provider I 177

ISP (Internet) 382

ISP with Telephony (Broadband) 125

National Long distance 24

International Long Distance 19

REVENUE AND GROWTH

The total revenue in the telecom service sector was Rs.86,720 crore in 2005-06 as against Rs. 71, 674 crore in2004-2005, registering a growth of 21%. The totalinvestment in the telecom services sector reached Rs.200,660 crore in 2005-06, up from Rs. 178,831 crore in theprevious fiscal.

Telecommunication is the lifeline of the rapidly growingInformation Technology industry. Internet subscriber basehas risen to 6.94 million in 2005- 2006. Out of this 1.35million were broadband connections. More than a billionpeople use the internet globally.


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Under the Bharat Nirman Programme, the Government ofIndia will ensure that 66,822 revenue villages in the country,which have not yet been provided with a Village Public

Telephone (VPT), will be connected. However doubts have

been raised about what it would mean for the poor in thecountry.

It is difficult to ascertain fully the employment potential ofthe telecom sector but the enormity of the opportunities canbe gauged from the fact that there were 3.7 million PublicCall Offices in December 2005 up from 2.3 million inDecember 2004.

The value added services (VAS) market within the mobile

industry in India has the potential to grow from $500 millionin 2006 to a whopping $10 billion by 2009.

Rural Telephony

Telecom development in rural areas assumes special

significance as more than 70% of India's population lives invillages. There is a strong two-way co-relation betweentelecom development and overall economic development ofa region. Telecom services are important drivers fordevelopment, delivery of public services such as education,health etc. and integration of rural areas with the rest of thecountry. Recognizing this, Government had announced theUniversal Service Support Policy on 27th March 2002 underwhich a separate fund for providing access to telegraph

services to people in the rural and remote areas was set up.The resources for implementation of USO are raised througha Universal Service Levy (USL) which is part of the LicenseFee being paid by service providers. The USL has presentlybeen fixed at 5% of the Adjusted Gross Revenue (AGR) of alltelecom service providers except the pure value addedservice provider like Internet, Voice Mail, email service


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providers etc. The activities being undertaken byDepartment of Telecom under USO are geared towardsaugmenting the infrastructure and increasing telecomcoverage in the rural and remote areas.

Public Access

Initially the emphasis was on provision of access to publictelephones through installation of Village Public Telephones,Rural Community Phones and replacement of MARRtelephones. The VPT component is covered under theflagship Bharat _irman Programme of Government of India66822 uncovered villages had been identified for provision ofVPTs. By 31st of March, 2009, VPTs have been provided in57181 uncovered villages.

Individual Access

The scheme covers installation of Rural Household DirectExchange Lines (RDELs) during the period 1.4.2005 to31.3.2007. The cut-off date of installation of RDELs has been

extended upto 31.3.2010. Under the scheme, about 63 lakhRDELs have been installed upto 31st of March, 2009. Subsidysupport is also being provided towards18.6 lakh RDELsinstalled between 1.4.2002 and 31.3.2005.

Other USOF activities

Mobile telephony has brought about a revolution in theurban areas. This has resulted in a rapid growth in the

teledensity in the urban areas. The difficult topography andthe high expenses involved in laying landlines encouragedUSOF to consider the mobile option for the rural areas. TheIndian Telegraph Act, 1885 has been amended in December,2006 to enable USOF to support mobile telephony in therural and remote areas. Agreements for setting up andmanaging infrastructure sites and provision of mobile


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services in rural and remote areas have already beenentered into and the scheme has been launched on01/06/2007. The original scheme envisaged setting up of7871 towers in rural and remote areas in 81 clusters spread

over 500 districts all over the country. The number of towersto be set up has now been restricted to 7440. Each tower willbe shared by a maximum of 3 telecom service providers. By31st of March 2009, 4755 towers have been set up under thescheme.

TELEPHONY SERVICES (MOBILE AND

BASIC) AND INTERNET SERVICESDOMINATE THE INDIAN TELECOMSERVICES

The Indian telecom market generated revenues of

approximately USD 32 billion in 200708. It registered a

CAGR of approximately 32 percent from 200203 to 2007

08. The CAGR from 200808 to 201112 is expected to

stabilize at 21 percent. Apart from mobile telephonyservices, there value-added services are also gaining

importance.

Revenues of Indian Telecom Industry: 200208 (USD billion)


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TELECOM SERVICES IN INDIA

India's 21.59 million-line telephone network is the largest inAsia, 3rd largest among emerging economies (after China

and Republic of Korea) and the 12th largest in the world.

India's telecom network comprises of 27,753 telephone

exchanges, with a total equipped capacity of 272.17 Lakh

lines and 226.3 Lakh working telephones.

In the field of inter-national communications, India's

overseas service carrier Videsh Sanchar Nigam Ltd. (VSNL)has made tremendous progress by using extensive

infrastructure of satellite earth stations, state-of-the-art

digital gateways, Optical Fiber Multi Media submarine Cables

and Multi Media Data Switches.

1.Cellular and Paging Services

Cellular and paging services though not a very old means of

communication in India has very rapidly caught the

imagination of the people. The revolution that started with

pagers soon gave way to Mobile phones. Pagers being one

way and with limited application have almost disappeared,

as mobiles became the favorite. With more and more

innovative offers like prepaid cards from telecom service

operators, the mobile culture is growing. With more players

entering the market, the competition has grown stronger,

catering to the demands of consumers. Hutch, Airtel, Idea

and Reliance are doing very well and are always coming up

with new schemes and plans.SMS is a raging favorite among

both the young and the old. A shift towards mobile telephony

is apparent from the fact that the share of cellular


35/80

connections in new connections is steadily going up and had

reached 63% in December 2002.

Cell phones now come cheaper and so does the monthly bill.

As a result one can still hear some grudges from service

providers as they claim lack of use of enough airtime tomake it a profitable business.

Today, India has more than 22 private companies providing

cellular services in 18 telecom circles and 4 metro cities

(Delhi, Mumbai, Chennai and Calcutta). Ever since their

introduction, cellular services have shown a fair growth with

the subscriber base crossing the 1 million mark by the first

quarter of 1999.India has adopted the Global System of

Mobile Communication (GSM) for provision of cellularservices.

2.Letters and Telegrams

Letters have been written from ages and the Indian Postal

service is one of the biggest and most experienced services.

About 90% of the postal outlets are in rural India. On anaverage a post office covers an area of about 21 sq. km and

a population of about 6,600 people. The Indian postal system

currently provides 38 services which can be categorized as

Communication: letters, postcards, newspapers

Transportation: parcels, money orders etc.

Other services: resource mobilization, postal lifeinsurance

For providing postal services, the whole country has beendivided into twenty-two postal circles. Each Circle is

coterminous with a State except for some. Besides these

twenty-two circles, there is another circle, called Base Circle,

to cater to the postal communication needs of the Armed

Forces.


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Telecommunication infrastructure was established in India in

1856. They were telegraphic data communication links

principally for government and military use. Telegrams being

the fastest means of communication in areas where phone

lines did not reach, led to its use by the common man. Evennow phone lines do not connect many interior regions of

India and the telegram is used to fill in the gap. However it is

a fast disappearing means of communication, as connectivity

in India both in terms of telephone lines and wireless

communication has rapidly grown.

1.Courier ServicesTime was when one had to wait for weeks together to see

the other person receive important document. The common

man had no access to fax machines nor was he aware of its

utility. Then came along the speed post, which too took

about a week to deliver. The start of private courier services

however changed all that. Documents could now reach

within the day or by the next day. Moreover they are more

reliable as chances of misplacement are minimal. Today

businesses as well as individuals are increasingly dependent

on the courier service.

2.InternetOnce the Internet market space was opened up to private

Internet Service Providers (ISPs) in 1998, the market has

witnessed phenomenal growth. In certain states there has

been a high percentage in penetration, but in others it has

been slow due to low telecom penetration, low bandwidthand above all illiteracy.

All tourist spots however are more or less connected to the

net. Cyber cafes are as common a sight as telephone booths

and connectivity in India has arrived for the common man.

One need no longer invest in a computer, which is still a


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costly commodity. Though email and Internet browsing

remain the favorite purposes e-commerce and e-business

have put their foot in. Banks have now facilitated Internet

banking. The Indian Railways offers a computerized

reservation system which enables a person to book histickets online and from anywhere. It also provides other

services like railway timetables and ticket availability.

Airlines bookings, Movie ticket bookings, hospital

appointments and even consultations are widely available.

Connectivity is fast spreading in all areas and the Internet is

becoming more and more user friendly. Facilities in

connectivity are easily available even though not a very high

percentage of Indians use these facilities.

Chapter 4


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SCOPE OF

TELECOMINDUSTRY

SCOPE OF TELECOM INDUSTRY

The telecom industry is growing at a great pace and thegrowth rate is expected to double with every passing year.

There are many new developments in the telecomm sector,

including the ingress of 3G technology that the Indian

market is witnessing at present.


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Public and Private Players

MTNL, BSNL, VSNL are the major Public Players, whereas

Airtel, Idea, Hutch, Tata, Reliance, BPL are the leading

Private Players in the country. Some of them are enteringforeign markets as well. The Bharti Telecom will be

launching its services for the NRIs in the US with the help of

Airtel CALLHOME service.

(The market shares of the leading public and Private Players)


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INVESTMENT AND GROWTH

In 2005-2006, the telecom industry witnessed a growth of 21%with a total revenue of Rs. 86,720 crores, and the total

investment rising to Rs. 2,00,660 crores. It is projected that the

telecom industry will be enjoying over 150% growth in the next

4-6 years. The growth also requires a huge investment by the

players in the sector. Bharti Airtel is planning to invest about

$8 billion by the year 2010.

Liberalization policy and some socio-economic factors are

mainly responsible for the immense growth in the salesvolumes. The lifestyle of the people has changed. They need to

be connected to the other people all the time. With the

lowering down of the tariffs the affordability of the mobile

phones has increased. The finance sector has also come up

with loans for handsets on 0% interest. Mobile services

providers are also expanding their coverage area by installing

more and more antennas and other equipments.

The telecom sector in the country has already adopted thelatest technological advancements to cater to the demands of

the growing market. Telecom Expo India, Convergence India,

VAS India and IPTV India being organized year to year are all

efforts in this direction.

Budget 2007 has brought disappointment to the telecom

sector. Mobile service providers have been asked to cut down

their roaming rentals as well as their long distance and

international call tariffs. This has led to discontent on the partof the service providers. However, Telecom Regulatory

Authority of India (TRAI) is of the opinion that this will lead to

increased use of roaming, which will ultimately lead to more

revenue generation. Moreover, with cheaper handsets and


41/80

lesser tariffs, it is expected that by the year 2010 there will be

over 500 million subscribers in the Indian telecom market.

Also, the telecom industry this year will be focusing more on

rural areas to connect them with the urban areas so that the

farmers and the small-scale industries can have faster access

to information related to weather and market conditions.


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GROWING NETWORK COVERAGE IS

TRIGGERING FURTHER MARKET

EXPANSION

Segment Cellular reach (2003-04) Cellular reach (End 20

- Est.)

Locations Population Locations Popul

on

Urban ~ 1700 of

5200 towns

200 million ~ 4900 towns

out of nearly

5200 towns

300

millio

Rural Negligible Negligible ~ 350,000 out

of 607,000

villages

450

millio

EMPLOYMENT STATUS

With the coming of more and more projects, the telecom

industry is going for high scale recruitments. There is a huge

demand for software engineers, mobile analysts, and

hardware engineers for mobile handsets. Besides, there are

ample opportunities for marketing people whose services arerequired to capture more and more customer base.

The new projects, setting up of new service bases, expansion

of coverage areas, network installations, maintenance, etc

are providing more and more employment opportunities in

the telecom sector.


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Human Resource Development by

Centre for Development of Telematics

(C-DOT)

1.Women Empowerment

C-DOTs management has always been sensitive togender issues and has consistently worked towardscreating organizational culture reflecting gender equality.Presently, about 33 % of staff in C-DOT is women.

2.Existing Policies

All female staff members are allowed to avail up to 135

days maternity leave for delivery and up to 270 days

leave subsequent to that (inclusive of 135 days maternityleave). For miscarriage/abortion, leave of a total of 45

days in the entire service is permissible.

C-DOT offers accommodation and transport benefits to all

its women employees with different options that maybe

availed as per individual suitability. This ensures the

safety and security of all women employees in the

company.

Career growth opportunities for women are available to

women employees in CDOT. In the last financial year, of

the total employees promoted to higher grades, 40% of

them were women. In management cadres (Team


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Leaders, Group Leaders, Technical Experts and Sr.

Technical Experts) about 30% are women.

1.Library

The collection of C-DOT Library consists of more than 20,000 books which includes Reference Books, ConferenceProceedings, Hindi Books and over 100 periodicals,magazines and leading English & Hindi Newspapers. Theentire collection of Library is accessible through OPAC(Online Public Access Catalogue) with the help of LibraryIntranet site. Digital information resources & services areavailable on server as well as online.

Chapter - 5


45/80

OVERVIEW OF

TELECOM

INDUSTRY

OVERVIEW OF TELECOM INDUSTRY

Indian Telecom sector, like any other industrial sector in the

country, has gone through many phases of growth and

diversification. Starting from telegraphic and telephonic

systems in the 19th century, the field of telephonic

communication has now expanded to make use of advanced

technologies like GSM, CDMA, and WLL to the great 3G

Technology in mobile phones. Day by day, both the Public

Players and the Private Players are putting in their resourcesand efforts to improve the telecommunication technology so

as to give the maximum to their customers.

Investment The Indian telecom sector can be broadly classified into
http://www.naukrihub.com/india/telecom/overview/investment/http://www.naukrihub.com/india/telecom/overview/investment/


46/80

Fixed Line Telephony and mobile telephony. The major

players of the telecom sector are experiencing a fierce

competition in both the segments. The major players like

BSNL, MTNL, VSNL in the fixed line and Airtel, Hutch, Idea,

Tata, Reliance in the mobile segment are coming up withnew tariffs and discount schemes to gain the competitive

advantage. The Public Players and the Private Players share

the fixed line and the mobile segments. Currently the Public

Players have more than 60% of the market share.

Market shares of public and Private

Players

Both fixed line and mobile segments serve the basic needs

of local calls, long distance calls and the international calls,

with the provision of broadband services in the fixed line

segment and GPRS in the mobile arena. Traditionaltelephones have been replaced by the codeless and the

wireless instruments. Mobile phone providers have also

come up with GPRS-enabled multimedia messaging, Internet

surfing, and mobile-commerce. The much-awaited 3G mobile

technology is soon going to enter the Indian telecom market.

The GSM, CDMA, WLL service providers are all upgrading

them to provide 3G mobile services.

The leading cellular service providers have the following number of

subscribers:

Service Provider No. of CDMA Subscribers No. of GSM Subscribers

Reliance 2.75 crores 38.76 lakhs


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Tata 1.07 crores

Airtel 3.37 crores

MTNL 5 lakh 24.98 lakhs

BSNL 2.25 lakh 2.44 crores

Hutch (vodafone) 94.5 million 2.44 crores

Idea 1.3 crores

Spice 25.56 lakhs

BPL 10.62 lakhs

Aircel 48 lakhs

Bharti Airtel has the largest customer base with 31% market

share, followed by Hutch and BSNL with each holding 22%

market share.

The 2007 budget has brought further relief to the customers

with the reduction in the tariffs, both local and long distance,and with slashing down the roaming rentals. This is likely to

lead to even more people going for cellular services and

more and more use of the value added services. However,

landline telephony is likely to remain popular, too, in the

foreseeable future. MTNL, the largest landline service

provider, has recently taken some bold initiatives to retain

its market share and, if possible, expand it.

Vibrant and competitive telecom

market


48/80

Compan

yPresence

Subscriber

s Jul 06

(mn)

Share (%

Fixed

Mobile

Fixed

Moe

BSNL

Government owned.

Has ramped up GSM

services. National

presence (except

Mumbai and Delhi)

37.

417.7

74.7

%

19

%

MTNL

Government owned.

Operates in Delhi and

Mumbai.

3.8 2.07.7

%2.3

Bharti

Integrated operator,

with presence in all

sectors. Largest mobile

services provider.

1.4 19.62.7

%

21

%

Reliance

Integrated operator.

Plans expansion of

GSM network apart

from being the largest

private CDMA

operators.

3.0 17.36.0

%

19

%

Hutch Pure play GSM operatorin 11 circles.

15.4 17%

IDEAPure play GSM operator

in 6 circles7.4 8.2


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Tata

Teleserv

ices

Integrated operator

(along with VSNL) with

presence in all

segments. Provides

CDMA services in 20

circles

4.0 4.98.0

%5.4

Aircel

Operates in 2 circles.

Announced Plans to

expand GSM footprint

in North and North east

2.6 2.9

Spice Pure play GSM playerin 2 circles

1.9 2.1

Others 0.4 1.4

Total 50 90

Fixed Line Telephony

Fixed Line Telephony can be further categorized as fixed

wire line telephony and fixed wireless telephony (known as

WLL (F)). Fixed Line Telephony provides services such as

local calls and long distance calls- national and international.


50/80

The Government of India is now taking actions to convert all

national long distance calls to local calls. In this regard,

Public Players have already started their 1Rs. call service. In

India at present, fixed line telephone numbers are of 8 digits,

(initially 5 and 7 digits). The sector is in the process ofconverting all fixed line numbers to 10 digits. Both Public

Players and Private Players are competing hard to capture

more and more market share. MTNL and BSNL are the

leading public sector players, whereas Reliance Infocomm,

Tata Teleservices and Touchtelare the leading private sector

players.

Market shares of public and Private Players

During financial year 2005-06, Fixed Line Telephonysegment

in Indian telecom sector witnessed a growth of 8.64%. The

total subscriber base of fixed lines including WLL(F) touched

the figure of 50.2 million and was showing an upward trend.

PUBLIC PLAYERSThe Government of India has played a major role in the

development of telecommunication sector. Established in

1985, Department of Telecommunications (DOT) was the

first government division to provide domestic and long-

distance telephone service in India. In 1986, DOT created

Mahanagar Telephone Nigam Limited (MTNL) for telephoneservices in metropolitan cities and Videsh Sanchar Nigam

Limited (VSNL) for international telecommunications as its

wholly owned subsidiaries. Later on, in 1997 Telecom

Regulatory Authority of India was formed. DOT has now

become a corporation named BSNL.


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Along with Fixed Line Telephony, Public Players also provide

Internet Services like broadband, Tri Band service, dial up,

pre paid and post paid Internet, Wi-Fi, etc.

Growth of Public Players in Fixed LineTelephony

In India, Public Players in Fixed Line Telephony are

dominating the telecom market with 82% market share.

MTNL (providing services in Delhi and Mumbai) and BSNL

(providing services in the rest of India) are the two Public

Players in the country.

Growth trend of Public Players of Indian fixed line telephones

Financial Year Subscriber Base

(in millions)

Growth

(over preceding FY)

2001-02 37.83 1.66%

2002-03 40.53 7.13%

2003-04 40.47 -0.14%

2004-05 41.10 1.55%

2005-06 41.38 0.68%

Public Players Subscribers

The two Public Players, Mahanagar Telephone Nigam Limited(MTNL) and Bharat Sanchar Nigam Limited (BSNL), are

providing services to the whole of India. The companies are

serving both urban and rural areas. MTNL is providing

services to two metropolitan cities, Delhi and Mumbai,

whereas BSNL provides services to the rest of India.


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Market shares of Public Players in Indian Fixed Line Telephony

Since, Private Players entered Indian Fixed Line Telephony,

market shares of Public Players started declining. This can

be easily seen by the trend of number of subscribers

(increasing or decreasing) of Public Players. MTNL has

showed a declining trend in the last three years. BSNL is

adding new customers but with a declining growth rate.

Subscriber trend of MTNL in Fixed Line Telephony


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Subscriber trend of BSNL in Fixed Line Telephony

PRIVATE PLAYERS

Many Private Players have entered Fixed Line Telephony.Private Players have brought WLL (F) Fixed Line Telephonyto

Indian telecom sector. They are also providing Internet

Services like broadband, dial-up, pre paid and post paid

Internet, Wi-Fi, etc.

Touchtel, Reliance Infocomm, Tata Teleservices, Shyam

Telelink Ltd (Rajasthan), HFCL Infotel Ltd. (Punjab), etc. are

leading Private Players in Indian Fixed Line Telephony.

Growth of Private Players

Private Players have shown a high growth rate, adding more

and more customers every year, taking the total subscriber

base to 8.79 million.


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Growth trend of Private Players of Indian fixed line telephones

Financial Year

Subscriber Base

(in millions)

Growth

(over preceding FY)

2001-02 0.58 1.32%

2002-03 0.95 63%

2003-04 2.36 148.4%

2004-05 5.09 115.6%

2005-06 8.79 72.6%

Private Players are expanding their networks providing more

coverage areas. They are offering special rentals and tariff

plans to capture a larger customer base

Private Players Subscribers

Private Players are providing services to the whole of India.The companies are serving both urban and rural areas. Tata Teleservices, HFCL, Shyam, Reliance, Touchtel are theleading Private Players in fixed line segment.

With more than 80% share with Public Players, Private

Players are now striving hard to capture more and morecustomers. Since 1997, the year they entered Fixed Line Telephony, they have been increasing their market shareevery year.


55/80

Market shares of Private Players (18%) in Fixed Line Telephony

Subscriber base of Private Players in Fixed Line Telephony

Mobile telephony

Mobile telephony was introduced in Indian markets in mid-

1990s. In the last few years, the sector has witnessed

tremendous growth. The subscriber base is adding more and

more customers every year. Mobile telephony recorded more

than 52.2 million users in FY 2004-05, exceeding fixed line


56/80

telephone subscriber base. Also, mobile segment has

welcomed more and more players every year. Liberalized

policies have ensured lower tariffs and reduced roaming

rentals. This will lead to increased usage of mobile phones.

Mobile telephony can be further categorized into WLL, CDMAand GSM. The much-awaited 3G mobile technology is going

to enter soon in Indian telecom sector.

Mobile telephony provides services such as messaging- text

and multimedia- mobile commerce through GPRS enabled

mobile Internet, with local calls and long distance calls-

national and international.

Not only service providers but also equipment manufacturersare contributing towards the growth of the sector. Mobile

telephony started up with bulky handsets and has now

reached to smart phones with cameras, radio facility and lots

of other multimedia applications. Also, PDAs have entered

Indian markets with operating systems that make it a pocket

PC.

Both Public Players and Private Players are competing hard

to capture more and more market share. Leaders in Fixed

Line Telephonyhave now started providing mobile services,

such as MTNL's Garuda and Dolphin. Private Players capture

most of the market share in Indian mobile segment.


57/80

Market shares of Private Players and Public Players in mobile telephony

During financial year 2005-06, mobile telephony segment inIndian telecom sector witnessed a growth of 72%. The total

subscriber base of mobile phones touched a figure of 90.14

million in 2006.

Subscriber trend of mobile telephony in Indian market

PUBLIC PLAYERS


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The Government of India has played a major role in the

development of telecommunication sector. Established in

1985, Department of Telecommunications (DOT) was the

first government division to provide domestic and long-

distance telephone service in India. In 1986, DOT createdMahanagar Telephone Nigam Limited (MTNL) for telephone

services in metropolitan cities and Videsh Sanchar Nigam

Limited (VSNL) for international telecommunications as its

wholly owned subsidiaries. Later on, in 1997 Telecom

Regulatory Authority of India was formed. DOT has now

become a corporation named BSNL.

Growth of Public Players in MobileTelephony

In India, Public Players in mobile telephony have 22% market

share. MTNL started its mobile services in 2000, with its

Garuda telecom service. It now owns three brands i.e.

Garuda, Trump and Dolphin in mobile segment. BSNL

entered mobile segment in 2001 with Cellone and Excel

mobile services.

Growth trend of Public Players of Indian mobile telephony

Financial YearSubscriber Base

(in millions)

Growth

(over preceding FY)

2001-02 0.26 12%

2002-03 2.64 915.38%

2003-04 5.99 126.89%

2004-05 10.98 83.30%

2005-06 19.7 79.41%


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Public Players are in the process of expanding their networks

to provide more coverage. They are focusing on providingservices to the innermost parts of the country.

Public Players- Subscribers

The two Public Players, Mahanagar Telephone Nigam Limited(MTNL) and Bharat Sanchar Nigam Limited (BSNL), areproviding mobile services in India. MTNL's Garuda, Trumpand Dolphin and BSNL's Cellone and Excel are runningsuccessfully on CDMA, WLL and GSM technologies.

Market shares of Public Players in Indian mobile telephony

Since, Private Players entered Indian Fixed Line Telephony,

market shares of Public Players started declining. This can

be easily seen by the trend of number of subscribers

(increasing or decreasing) of Public Players. MTNL has

showed a declining trend in the last three years. BSNL is

adding new customers but with a declining growth rate.


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Subscriber trend of

MTNL in mobile telephony BSNL in mobile telephony

PRIVATE PLAYERS

Private Players are dominating the mobile segment with 78%

market share. With technological advancements, Private

Players have brought in WLL, CDMA, and GSM mobile

telephony in Indian telecom sector. They are now in the

process of launching 3G technology in India.

Bharti Airtel, Reliance Infocomm, Tata Teleservices, IdeaCellular, Hutchison Essar, etc, are the leading Private Players

in Indian mobile telephony. They are capturing more and

more customers with their special discount schemes and

lower tariffs. They are also offering many value added

services in special rental schemes.


61/80

Growth of Private Players

Private Players have shown a high growth rate, adding more

and more customers every year, taking the total subscriber

base to 70.44 million.

Growth trend of Private Players of Indian fixed line telephones

Financial YearSubscriber Base

(in millions)

Growth

(over preceding FY)

2001-02 6.158 120.71%

2002-03 8.948 45.30%

2003-04 27.36 205.76%

2004-05 41.24 50.73%

2005-06 70.44 70.80%

Private Players are expanding their networks providing more

coverage areas. They are offering special rentals and tariff

plans for value added services and outgoing calls to widen

their customer base.

Private Players' Subscriber Base


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Private Players are providing services to the whole of India.

Tata Teleservices, Reliance Communications, Bharti Airtel,

Idea cellular, Hutch, etc are the leading Private Players in

cellular services. They are providing cellular services through

CDMA, GSM and WLL networks.With more than 70% share in market, Private Players are

introducing more and more discount schemes and tariff

plans and call rentals to capture more and more customer

base. Even the handset manufacturers are coming up with

advanced multimedia applications to attract customers.

Market shares of Private Players (78%) in mobile telephony


63/80

Subscriber base of Private Players in mobile telephony

Internet services

There are Public Players and Private Players providing the

Internet Services such as broadband, dial-up, pre paid and

post paid Internet, Wi-Fi, etc. Subscriber base of Internet

Services provided by Public Players is showing an upward

trend.

Internet subscriber base of Public Players


64/80

Private Players are also adding more and more customers

every year showing an upward trend.

Internet subscriber base of Private Players

Investment in Telecom Sector

Both Public Players and Private Players are investing hugesums to expand their network and provide more coverage inFixed Line Telephonyas well as mobile telephony.Facing stiff competition from private sector, Public Players aretaking up measures to increase their customer base of fixedlines and Internet Services. MTNL and BSNL are investing in

Internet infrastructure to provide much reliable network.Capital investment of Public Players in Fixed Line Telephony


65/80

Private Players are striving hard to capture more and morecustomers. They are introducing low-cost tariff plans anddiscount schemes in Fixed Line Telephonyand Internet Services

to increase their customer base. They are also in the process ofenlarging their network area providing more coverage in urbanas well as rural areas.

Annual investment of major Private Players in Indian telecom sector

Chapter 6


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COMPETITION

AMONGSERVICE

PROVIDER


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PAY PER SECOND PLAN: AIRTEL VS

TATA DOCOMO

The equal competitors are coming up with their new tariffs,

plans ,special packs and their varying services to prove

themselves to be much competitive and trying to anchor

them firmly in thismobile sector. Still many new operators

are yet to launch their services in days to come but existing

ones dont seem to leave a bit of it.

They convinced the people by their VAS plans and tariffs too.

Currently the Tata Docomo came up with its services with an

all new tariff scheme of pay per second which has broughtout a massive revolution in the market. DOTs mandatory

urged every operator to go with pay per second scheme.

On 30th Oct the leading mobile service provider Bharti Airtel

launched their much awaited Pay Per Second tariff all

throughout India.The tariff comparison with Airtel and TATA

Docomo is as follows,

* Airtel with its inception on 2001 renders number ofcustomers but their tariff, call rates to different network

makes confusion and remains unstable. But Docomos

1p/sec throughout India makes consumers to keep track of

their account and controls expenses.

* Airtel has kept different SMS charges even in their Pay Per

Second plan with local sms being charged at Re.1 and

National sms at Rs.1.50, whereas Docomo introduced SMS

charges based on the number of characters. No rechargesare needed to opt for per second calling after one year.

* Package activation of Airtel ranges from Rs.64 to Rs.99 and

varies from circle to circle. Docomos does not charge


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anything extra for activating the per second pack since the

tariff plan by default is on per second basis.

* The Airtel tariff calculation is hard ranging from 1p/sec to

1.2p/sec, but 20% higher to other operators whereas A2Acalls are kept at 1p/sec and that to other operators are

charged at 1.2p/sec. But Tata Docomo is offering a limited

period offer of STD calls at 1p/sec.

* Post paid customers are abandoned from VAS, IVR calling,etc .Docomo is quite opposite to this post paid subscribersenjoy those services.

* But Airtel is older than Docomo so it has compact network

links than Docomo , so this is the place where Docomo hasto establish itself.

Meanwhile it is found that Docomo with both GSM and CDMAnetwork added over 4 million subscribers in September,beating market leader Bharti Airtel yet again. Airtel had 2.5million new users in September.

BSNL and MTNL fail to attract 3GsubscribersBharat Sanchar Nigam (BSNL) and Mahanagar TelecomNigam (MTNL), the state run telecom operators managed toattract just 11,000 customers for 3G in six months of theiroperations. BSNL and MTNL, who were pre-awarded 3Glicenses, rolled out 3G services in 70 (BSNL) and two (MTNL)cities nationwide respectively. The private telecom operatorsare in the process of planning their 3G networkinfrastructure and awaiting final approval from theDepartment of Telecommunication (DoT) auction to startrolling out their networks.

"Despite the hype around 3G, MTNL and BSNL haveattracted only a few thousand subscribers for theseservices," said Dilip R Mehta, Mentor and Advisor, N S


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Raghavan Centre for Entrepreneurial Learning (NSRCEL), IIMBangalore, in the panel discussion organized by MobileMonday in IIM Bangalore. MTNL managed to attract just1,000 subscribers in six months of its operations, whereas

BSNL could muster only 10,000 3G subscribers in sixmonths. Due to the failure of these two state ownedcompanies in attracting customers to use 3G services,analysts feel that Indian government is not yet ready for 3Gphones. Prabha Aithal, CTO, CanvasM Technologies said,"When 3G was launched in Europe, similar type of questionswas raised."

Both these operators have been underperforming in themarket despite the fact that what they offer is not muchdifferent from the offerings of the private mobile operators.BSNL was able to add only 26 percent more mobilesubscribers in 2008 while MTNL grew its base by 32 percent,the two lowest growth rates in an industry, where almost allothers grew their base by 50 percent or more. There is morepressure on the average revenue per user (ARPU) of BSNLand MTNL than those of the private operators. Privateoperators have 14-15 percent higher ARPU than the twogovernment companies. Given all that, will 3G help the twoto fast track their growth and bring in more subscribers?

After all, private operators are still months away fromlaunching their own 3G services. Mehta says, "Thesubscribers of these two operators are at the extreme end ofthe society and it is highly unlikely that these companies canmake any significant gains in market share with their 3Gservices, unless they position and market their servicesright. They can definitely use the next few months of nocompetition (in 3G from private operators) to create demandand develop a market for their newest offering."

However, Chandrasekhar, General Manager for Mobility,Marketing and Sales, BSNL says, "Market is growing slowly.

The customer base has grown by a good rate in the month ofMay and June. We are also collaborating with many handsetproviders to avail the 3G mobile phones in market at theaffordable price." BSNL tied up with Nokia, Sony andSamsung for handset bundling, the cheapest of which is


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priced at Rs.7000. In the first year of 3G operations, theoperators are expecting 3G subscribers to pay about fivetimes of the current 2G or 2.5G tariffs. This is a steepincrease and will target only niche demographics. Voice tariff

schemes begin from a fixed monthly charge of Rs.350 forprepaid, and Rs.500 for postpaid. "90 percent of mobileusers in India use prepaid service," said Ashish Sinha, ChiefCatalyst, Pluged.in.

On the application of 3G, Sujai Karampuri, CEO, Sloka said,"3G makes possible video streaming applications such asLive TV, movie downloads, high speed data download onmobile phones. With 3G services enabled, callers can alsosee each other on their mobile phone screens." But analystsfeel that more than all these applications, the challenge foroperators will be to offer wide coverage (including roaming),high quality service and attractive content in the initial yearsto sustain high-paying subscribers long enough to reach thetipping point of growth. Operators can easily provide theservices in metro regions but the biggest challenge is tomake these services available in rural India. Aithal said, "Theconsumers in rural market are waiting for 3G services." Itwould be really interesting to see as how these 3Gapplications help farmers in forecasting weather for crop

protection and educating their children. "Currently, we aremainly focusing on community connection to individualconnection in rural areas. Once the price range of 3G mobilecomes down to Rs.2000-3000, we will start focusing onindividual connections."

Price war hots up: MTNL calls at

half a paise The government-owned Mahanagar Telephone Nigam Ltd(MTNL) on Tuesday, December 01, 2009 took the ongoingtariff war in telecom sector to the next level. The companyreduced its tariff to half a paise per second for calls made


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within its own network and 1 paise per second for calls madeto other networks.

MTNL has a subscriber base of around 8 million, out of which4.4 million are mobile subscribers. The rest are landline

subscribers. A subscriber based in Delhi can call to anotherMTNL subscriber in Mumbai at half a paise per second. Thebilling will be on per second basis.

We are committed to providing our customers the bestservices at the most competitive rates, said R.S.P. Sinha,chairman and managing director of MTNL. Our pay per planis the most affordable in the industry and directly benefitsour 4.4 million GSM subscribers and another 1.4 lakhsubscribers of 3G services.

MTNLs new tariff plans are valid for both its subscribers of2G and 3G services.

Chapter 6


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RESEARCHANALYSES

Research analysesA market survey on

How people select Telecom Company?

1. Do you select the telecom service provider just becauseof its Brand Name?

Yes

No

2. Are you influence by the presence of celebrity in anadvertisement of Telecom Company?

Yes No


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3. Do you see the tariff plan before selecting the telecomcompany?

Yes No I might

4. Will you compromise on your current preference if thecompetitor gives better tariff plan, compare to yourservice provider?

Might be No

5. Do you leave your service provider if competitor givesbetter plan?

Definitely yes. Will not I might

6. What are the reasons you prefer a particular telecomcompany.

1._________________________________________________________________________________________________________________________________

2.______________________________________________________

____________________________________________________________________________

1.Do you select the telecom serviceprovider just because of its BrandName?

It is found that most of the peoplesee the service, feature, call rate(tariff plan) etc before selectingparticular brand. These peoplefirstly find out the cheapest plan


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provided by different company than select the product theywant. Whereas some people use brand name for selectingservice provider.It is found that 85% people give importance to products

feature and 15% people prefer due to brand name.

2.Are you influence by the presence ofcelebrity in an advertisement of

Telecom Company?

Interpretation.

From the curved conducted it isevident that almost 60 percent donot blindly believe or get totallyinfluenced by the presence of acelebrity. However 30 percent areof the view that the presence of a

celebrity will get them to go and ask for the product. This isan aspect due to which celebrities are used by telecomcompanies in advertising.

For exampleAirtel--- Shahrukh khanAircel--- M S Dhoni

3.Do you see the tariff plan before

selecting the telecom company?

Most of the people select thetelecom operator on thebasis of tariff plan. Theoperators who provide


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cheep call rate become more successful in Indian market.Some time people see the other promotional strategy ratherthan call rate of particular network operator. Like inVodafone: - Customer prefer it because it gives one free

movie ticket on purchase of one movie ticket.But in case of Tata Docomo: - Customer prefer it because ofits plan Pay per SecondIt is shows that 66% people see the tariff plan. 28% peoplesee other features and 6% purchase due to Brand loyalty.

4.Will you compromise on your currentpreference if the competitor gives

better tariff plan, compare to yourservice provider?

When such situation comes in marketthan large number of customermigrate from one service provider toother. But there are many customerwho are continuously use service of

same operator, may be because ofBrand loyalty or if they dont want tochange their number.

The collected data shows that 58% people agree with thisquestion and 42% people are not.

5.Do you leave your service provider ifcompetitor gives better plan?

Basically people say Yesif they select theservice operator on the


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OPPORTUNITIES To offer value added services

on GSM, CDMA and IP Language independent

services Mobile Marketing concepts Content influenced by local

culture and Global successstories

M-Commerce Unified messaging platforms Foreign investment in form of

equity or technology

THREATS Low cost service providers

possibility of Breaking eveshort term

Weak IPR protection Software and digital conte

Piracy Political instability Regulatory interference


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CONCLUSION

Indian telecommunication Industry is one of the fastest

growing telecom markets in the world. The mobile sectorhas grown from around 10 million subscribers in 2002

to reach 150 million by early 2007 registering an

average growth of over 90% y-o-y. The two major reasons

that have fuelled this growth are low tariffs coupled with falling

handset-prices

Surprisingly, CDMA market has increased it market share upto

30% thanks to Reliance Communication. However, across the

globe, CDMA has been losing out numbers to popular GSMtechnology, contrary to the scenario in India. The other reason

that has tremendously helped the telecom Industry is the

regulatory changes and reforms that have been pushed for last

10 years by successive Indian governments. According to

Telecom Regulatory Authority of India (TRAI) the rate of market

expansion would increase with further regulatory and

structural reforms. Even though the fixed line market share has

been dropping consistently, the overall (fixed and mobile)

subscribers have risen to more than 200 million by first

quarter of 2007. The telecom reforms have allowed the

foreign telecommunication companies to enter Indian market

which has still got huge potential.

International telecom companies like Vodafone have made

entry into Indian market in a big way. Currently the Indian

Telecommunication market is valued at around $100 billion

(Rupees 400,000 crore). Two telecom players dominate this

market - Bharti Airtel with 27% market share and Reliance

Communication with 20% along with other players like BSNL

(Bharat Sanchar Nigam Limited) and AT&T. One segment of the

market that has been puzzling is broadband Internet. Despite

the manner in which the countrys Internet market has been

booming, Indias move into high-speed broadband Internet


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access has been distinctly slow. And, while there appears to be

considerable enthusiasm amongst the population for the

Internet itself, this has not been reflected in broadband

subscription numbers. In 2006 India witnessed a good surge in

broadband users with the total subscriber base in thecountry expanding by almost 200% to just over 2 million

by years end. Despite this surge, broadband penetration

in India still remains around only 0.2%; broadband

services still account for only 25% of the total Internet

subscriber base, still in itself comparatively low.

The Ministry of Communications and Information Technology

(MCIT) is has very aggressive plans to increase the pace of

growth, targeting 250 million telephone subscribers by end-2007 and 500 million by 2010. Most of the expansion in

subscribers is set to occur in rural India. Indias rural telephone

density has been languishing at around 1.9%; So, if 70% of

total population is rural, the scope for growth in this Industry is

unprecedented.


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Bibliography

Web sites :-1. www.dot.gov.in

2. www.naukriblog.com

3. www.indiatelecom.org

Book for reference :-

1. Business Communication
http://www.dot.gov.in/http://www.naukriblog.com/http://www.indiatelecom.org/http://www.dot.gov.in/http://www.naukriblog.com/http://www.indiatelecom.org/

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