Internet Marketing Indian Telecom Sector

Internet Marketing: Indian Telecom Sector 2009-2010

Internet Marketing

Indian Telecom Sector

An Initial Project report submitted to the University of Manchester

For the Degree of Master of Science in

The Faculty of Engineering and Physical Science

Year 2009-2010

Mahwash Goni

School of Computer Science

UNIT COMP60990 Research Methods and Professional Skills

STUDENT ID 75296660

SUPERVISOR Prof. Christopher Holland

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Text Box


ABSTRACT

A research is being conducted towards the completion of a dissertation on the topic “INTERNET

MARKETING: INDIAN TELECOM SECTOR”. The aim of this research is to carry out an in-depth analysis

of the online market for mobile phone services in India. This involves application of the Internet marketing

framework to two major competitors for the assessment of the contribution of Internet Marketing towards the

organization’s Business effectiveness, Marketing effectiveness and Internet effectiveness. Following this a

competitor analysis will be done to monitor the use of e-commerce in order to acquire and retain customers.

The significance of Internet Marketing in context of the overall marketing strategy of the companies will also

be assessed to understand the importance of the Internet as a marketing channel. The research will also

include a global comparison of the Indian scenario with that of the UK and USA telecom sector.

This research requires the analysis of both qualitative and quantitative data which will be a combination of

secondary data, independent research and interview data.

The Deliverables of this research will be a report covering the analysis of the growth and development of the

online market, general market trends, a profile of each company’s performance and Internet Marketing

Strategy and a forecast of the future likely developments including new technology innovations.


Declaration

No portion of the work referred to in this report has been submitted in support of an application for

another degree or qualification of this or any other university or other institute of leaning.

Copyright

i. Copyright in the text of this report rests with the author. Copies (by any process) either in full, or of

extracts, may be made only in accordance with the instructions given by the author. Details may be

obtained from the appropriate Graduate Office. This page must form part of any such copies made.

Further copies (by any process) of copies made in accordance with such instructions may not be made

without the permission (in writing) of the author.

ii. The ownership of any intellectual property rights which may be described in this report is vested in the

University of Manchester, subject to any prior agreement to the contrary, and may not be made available

for use by third parties without the written permission of the University, which will prescribe the terms

and conditions of any such agreement.

iii. Further information on the conditions under which disclosures and exploitation may take place is

available from the Head of the School of Computer Science.


Table of Contents

1. Introduction and Overview...............................................................................................................1

1.1. Research Focus..........................................................................................................................2

2. Literature Review.............................................................................................................................3

2.1. Internet Marketing.....................................................................................................................3

2.2. Online Marketing Domains.......................................................................................................3

2.3. Internet Marketing benefits for Marketers................................................................................4

2.4. 6 C’s of Internet Marketing.......................................................................................................5

2.5. Internet Marketing Strategy Framework...................................................................................6

3. Research Methodology.....................................................................................................................8

3.1. Project Plan................................................................................................................................8

3.2. Potential Problems.....................................................................................................................9

3.3. Importance of Research.............................................................................................................9

4. Background and Initial Data Results..............................................................................................10

4.1. Historical Background.............................................................................................................10

4.2. The Story of Growth................................................................................................................12

4.3. Regulatory Framework............................................................................................................13

4.4. Market Structure......................................................................................................................13

4.5. Services Provided by the Telecom Sector...............................................................................14

4.6. Market Data: Performance Indicators.....................................................................................15

4.6.1. Data Interpretation..........................................................................................................16

4.7. Competition Overview............................................................................................................18

4.8. Conclusion...............................................................................................................................19

5. List of References...........................................................................................................................20

6. APPENDIX

List of Figures

Figure 1. Online Domain......................................................................................................................................3

Figure 2. Market and Product Strategy Grid.........................................................................................................4

Figure 3. Internet Marketing Strategy Development Framework.........................................................................6

Figure 4. Regulatory Framework........................................................................................................................13

Figure 5. Telecom Circles in India......................................................................................................................13


Figure 6. Wireline Market Shares Dec 09...........................................................................................................14

Figure 7. Market Shares GSM and CDMA.........................................................................................................15

Figure 8. Subscriber Growth...............................................................................................................................15

Figure 9. Trends in Overall Subscriber Growth

And Teledensity in India (2008-09) ...................................................................................................16

Figure 10. Composition of Telephone Subscribers.............................................................................................17

Figure 11. Market Share: Rural and Urban ........................................................................................................17

Figure 12. Composition of Wireless and

And Wireline subscribers in India (2008-09)....................................................................................17

Figure 13. Wireless Subscribers and Teledensity...............................................................................................17

Figure 14. Wireline Subscribers and Teledensity...............................................................................................17

Figure 15. Wireless Subscription: GSM vs. CDMA...........................................................................................18


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1. INTRODUCTION AND OVERVIEW

The Indian Telecom Sector is the fastest growing Telecommunications market in the world and hence the

centre of everyone’s attraction today. Supporting 621.28 Million subscribers, it is the third largest in the world

and second largest in terms of wireless connections (Source: Telecom Regulatory Authority of India, Press

Release 20/2010). This sector has undergone major transformations through significant reforms, initiated by

the Government of India, which started in the 1980’s. Today the sector boasts an exceptional growth rate with

about 15 million new subscribers added to the telecom subscriber base every month (Source: TRAI). The

mobile phone market in India is dominated by certain key players. The tremendous growth in this sector can be

attributed to the efforts of The Department of Telecommunications of India, which is striving hard to provide

world-class infrastructure, at globally competitive tariffs. Major reforms have been taken to increase the

teledensity by extending the connectivity to the unconnected rural India and hence their efforts to reduce the

digital divide have made India the most attractive telecom market in terms of foreign investments. In addition

to this, the Information Technology advancements and innovations in India have landed it among the top 10

Internet using nations of the world with 52 million “active” internet users. (Source: www. ComScore.com,

Economic Times Exclusive: annual survey by market research agency IMRB and Internet and Mobile

Association of India). As such this scenario provides a huge opportunity for the Telecom companies in India to

escalate their online presence and exploit the potential of the unconventional INTERNET MARKETING

strategies to their advantage.

The Internet is believed to be the most transforming invention in the human history and rightly so. Internet

today has changed everything- our style work, the way we learn, way of playing, the way we communicate and

most significantly the way we do business. The factor that has enabled this is the ease of accessibility of the

internet anywhere any time. With most of the mobile companies now providing mobile internet, anything in the

world is now just a click away. Moreover with about 27% of the world’s population online (Source:

http://www.internetworldstats.com/stats.htm), we can only begin to imagine the huge potential Internet has to

offer for the businesses to market their products and services. The cut-throat competition clubbed with the

dynamic market conditions has made Internet Marketing a business imperative because the Internet is an

indefeasible trend. Under the existing circumstances a business that follows only the traditional and

conventional marketing methods is bound to lose valuable customers without an online presence. People

normally search for products and services with their computers and if a business is not on the web the usual

perception is that it cannot be trusted and they are more likely to choose another company to do business with.


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1.1. REASEARCH FOCUS

The Internet Marketing suite is ideal marketing tools in a broad range of industries, butere is its

relevance as apt as it is in the technology-driven, early adopter environment of the Indian

telecommunication Sector. The companies in the telecom sector thrive not only based on, how

innovative technology and applications they develop but also, the tools they use to communicate that

innovation to their potential and existing customers. I have come across several research papers that

analyse the imperativeness, interaction and implications of Internet for Marketing; however, no

particular effort has been made to understand its role in the Indian Telecom sector. My research

therefore aims at understanding whether or not the Indian Telecom companies consider Internet as an

important marketing channel in the ambience of huge and dynamic Indian market and if they do, it

would be interesting to know the importance of Internet Marketing in context of their overall

marketing strategy and how the Internet is influencing the marketing strategies of the Indian Telecom

companies and the effect those strategies have on the company’s growth and reputation among the

general public.


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2. LITERATURE REVIEW

2.1. INTERNET MARKETING

The economies across the world are witnessing an era of rapid globalization and this has opened vast

opportunities for businesses around the world. More opportunities result in higher competition and to

survive it the firms need to improve their performance and be better than the best. Such a scenario

forces the firms to find unique ways to create their ground in the market and to make their presence

felt. Thanks to the various digital technologies this task doesn’t seem so daunting anymore. The

information superhighway consisting of digital telephone networks, interactive TV (ITV), mobile

phones and most importantly the Internet allow the marketers to reach and interact with consumers on

a local, regional and global basis. (Paul, 1996). According to Philip Kotler, “the online marketing is

the fastest growing form of direct marketing”. The customer’s perception of convenience, price,

product information and service has been significantly affected by the internet and modern marketing

requires businesses to be committed to customer orientation (Jaworski and Kohli, 1993). Therefore a

substantial web presence is absolutely essential for all the companies today.

So, What is Internet Marketing? (Chaffey et.al, 2003) defines Internet Marketing as “The use of

Internet and the related digital technologies to achieve marketing objectives and support the modern

marketing concept. These technologies include the Internet media and other digital media such as

wireless mobile, cable and satellite media.”

Basically the companies should have a website and make use of search engines, pop up ads, banners,

E-mail, links, and web 2.0 which includes social networks, blogs, wikis, podcasts, videocasts, forums

and RSS feeds. This will help the companies to generate trust and loyalty among the customers and

will help them in maintaining their customer relationships. A research conducted by a student at The

University of Manchester develops a framework that shows how the customer satisfaction is directly

influenced by the website design and its information content. (Elia, 2008)

2.2. ONLINE MARKETING DOMAINS

(Kotler and Armstrong, 2008) states that there are four major online marketing domains. They are

business-to-consumer (B2C), business-to-business (B2B), consumer-to-consumer (C2C) and

consumer-to-business (C2B).

Targeted to consumers Targeted to business

Figure 1. Online Domains Initiated by

Source: Kotler and Armstrong, 2008 business

Initiated by

consumer

B2C

Business-to-Consumer

B2B

Business-to-Business

C2C

Consumer-to-Consumer

C2B

Consumer-to-Business


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The B2C online marketing domain is the most famous one. It deals with the selling of the goods and

services directly to the customers. People are ready to buy anything online. Products ranging from the

very cheap compact discs to the high street fashion brands are available at the click of a mouse. The

organizations such as DELL and Amazon fall under this category. According to Philip Kotler and Gary

Armstrong the B2B Online marketing “Uses B2b websites, e-mail, online product catalogs, online

trading networks and other online resources to reach new business customers, serve current customers

more efficiently and obtain buying efficiencies and better prices” (Kotler and Armstrong, 2008). In this

domain apart from selling their products companies also develop relationships with the business

customers and in some cases they even customize their websites for individual clients. C2C online

marketing is “the online exchange of goods and information between final consumers” (Kotler and

Armstrong, 2008). The classic example of this domain is EBay. Its success in the C2C market is now

pulling in businesses who find it the perfect platform for liquidating their excess inventory. Apart from

this the C2C market also consists of information sharing. The consumers communicate with each other

by means of the web 2.0 suite. The most commonly used means being the blogs and forums which can

be either commercial or non-commercial. Many companies use these blogs to research about their

target customers because often they indicate the consumer’s preferences, likes and dislikes. Some even

set up their own blogs and use them to reach the fragmented audiences. Finally, the C2B domain

includes “Online exchanges in which consumers search out sellers, learn about their offers, and

initiate purchases, sometimes even driving transaction terms.” (Kotler and Armstrong, 2008). This

domain involves the communication that is initiated by the customers. The consumer uses the company

website to search for an item, initiate the transactions, ask questions, give suggestions and get

feedback.

2.3. INTERNET MARKETING BENEFITS FOR MARKETERS

Internet is a marketing channel that provides an additional source of revenue for the marketer. Chaffey

et al. (2003) shows the marketing opportunities provided by the Internet by applying the strategic

marketing grid (Ansoff, 1957) which shows four strategic directions.

New

Market

Existing

Existing New

Product

Figure 2. Market and Product Strategy grid

(Source: Chaffey et al., 2003)

Market Development

Diversification

Market Penetration

Product Development


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The Market development and the Market Penetration provide a more conservation approach to the use

of Internet whereas; Diversification and Product Development are innovative in nature.

The Market penetration strategy represents a conservative use of the internet where it is used to sell

the existing products into the existing markets. This can be done by online advertisements by using the

various online promotion techniques which include banner advertisements, pop ups e.t.c. this strategy

mainly focuses on increasing the awareness of the product and the company among the customers. In

the Market Development strategy, the internet is used to develop a new market for an existing

product. This strategy takes the advantage of the low advertising cost and the global reach of Internet.

The Product Development strategy aims at developing new products and services for the existing

market and using the Internet for their delivery.

2.4. 6 C’s OF INTERNET MARKETING

According to Bocij et al. (2003) in Chaffey et al. (2003) the following benefits of the presence of

Internet have been given:

1. Cost Reduction: Internet reduces the need for sales and marketing enquires and also for

printing and distributing the marketing communication material. All this can be published on

the website. It therefore significantly reduces the advertising costs for a company.

2. Capability: Internet provides opportunities for exploiting new markets.

3. Competitive Advantage: A company can achieve a competitive advantage by introducing a

new tool before its competitor and can retain that advantage until its competitor has the same

capability.

4. Communications Improvement: Internet is an excellent medium to improve the

communications with the customers, staff, suppliers and distributors.

5. Control: Better marketing research can be done with the help of the internet by tracking the

customer behaviour and the staff response to the customer queries and problems.

6. Customer Service Improvement: provided by interactive queries of the data base containing

customer information. Personalization of the websites for the individual users also helps in

achieving high customer satisfaction.


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2.5. INTERNET MARKETING STRATEGY FRAMEWORK

Chaffey et al. (2003) defines the Internet marketing strategy as “the definition of approach by which

the internet marketing will support the marketing and business objectives of the organizations.” Many

marketing researchers believe that the companies do not require a separate Internet marketing strategy.

They argue that the Internet marketing plan should be incorporated within the overall marketing

strategy of the organisations. Chaffey et al. (2003), however, argues that the significance of a separate

internet marketing strategy depends on the relevance of the internet to the particular organisation. It

warrants a separate strategy where the Internet generates huge revenues by contributing significantly to

the sales and by reducing the cost. It further states that since the internet is a relatively new medium of

marketing, it should be given special attention, though the Internet strategy should be a part of the

marketing plans and should be governed directly by the marketing strategy.

The following figure gives a framework for the Internet Marketing strategy development:

Figure 3. Internet Marketing Strategy Development Framework

Source: Chaffey et al. 2003

This framework shows that the Internet marketing strategy is developed with the help of inputs from

the environment analysis and the overall marketing plan. This strategy should consist of clearly defined

goals. Once the strategy is in place the next step is to define the Internet marketing plan which consists

of the details of creating and executing the online presence. After the creation of the site and the online

promotions, it is important to monitor it continuously to make sure that the strategic objectives are

being achieved. The strategy analysis can be used as a feedback to influence future strategies.


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Chaffey et al. (2003) states that, the analysis can be done by measuring the contribution of Internet

marketing to the organisations:

Business effectiveness- This is determined by measuring the web site’s online revenue contribution

and profitability and comparing that to the cost of producing updating and promoting the site. A cost-

benefit analysis is done.

Marketing Effectiveness- these measures include

• Leads

• Sales

• Customer retention and loyalty

• Market share

• Brand enhancement

• Customer service

Internet Effectiveness- These measures access the success of the website and the characteristics of the

visitors. According to Smith and Chaffey (2001) in Chaffey et al. (2003) the Key Performance

Indicators (KPI’s) are:

• Unique visitors- the number of separate, individual visitors who visit the site.

• Total number of visits to the website.

• Repeat visits- average number of visits per individual.

• Duration- average length of time the visitor spends on the website.

• Subscription rates- number of visitors subscribing for the services such as the newsletters.

• Conversion rates- percentage of visitors converting to subscribers.

• Churn rate- percentage of the subscribers withdrawing

• Click-through-rate (CTR) from banner adds or web link on another site.


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3. RESEARCH METHODOLOGY

3.1. PROJECT PLAN

The following objectives have been identified for this research:

1. Understanding the Indian Telecom market structure and identifying the scope of internet

marketing for the same.

2. Applying the Internet Marketing framework to two major competitors.

3. Evaluation of the nature of online competition in context of the development of the overall

market by using competitor analysis.

4. International comparison.

To achieve the first objective of the research I had to do some literature review. Business articles and

academic papers were used to examine and understand the theories related to the topic being

investigated. Both primary and secondary data has been gathered. The introduction of empirical data at

the later stages of this research will also be required to effectively apply the Internet Marketing

framework to the chosen companies.

The project plan is developed to follow a systematic approach to achieve the objectives of this research

within the given time frame. So far the main focus of this research has been literature review. Initially

some general literature was consulted and this also included regular discussions with the supervisor.

Once the objectives of the research were identified more specific literature was consulted to further

understand the problem and the feasible domain of research. The Grey literature was used as the major

source of such information. The literature review will be followed by Data Collection. The data will

include the secondary data such as the industry intelligence data, and data regarding unique visitors

from website sources such as ComScore.com and wireless intelligence. Primary data will also be

collected by means of online surveys. The survey will intend to find the importance of online presence

of the telecom company to the Indian customer. The data collected so far will be understood and will

be used in formulating the interview questionnaire for the Telecom company representatives. The

Interviews will be conducted and their response will enable me to understand the importance of the

Internet Marketing strategies from the company’s perspective.

Once all the data from different sources has been collected, the data will be thoroughly analyzed and

the findings of the research will be summarized in the form of outcome and recommendations. The

research strategy will be the collection of primary and secondary data about the performance indicators

of the Internet Marketing in the Indian Telecom sector and comparing them to the UK and USA

statistics. The statistical data will be analysed using established frameworks and theories of Internet

Marketing.


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The following figure shows the Gantt chart for the project plan:

3.2. POTENTIAL PROBLEMS

The major limitation during this research will be the unavailability of accurate internet data. The

internet data includes the data about the websites unique visitors, its web visibility and search. The data

will be collected from the sources such as the Google ad planner, Google trends for websites and

ComScore.com. Although many efforts are put to ensure that the data on these websites is accurate as

far as possible still these figures are mainly estimates and may not be absolutely accurate.

3.3. IMPORTANCE OF RESEARCH

The findings of this research will enable us to understand the impact of internet as a marketing tool on

the Indian Telecom companies, and thus will enable us to sketch a global comparison. It will also

measure the importance of the internet in context of the overall marketing strategies of the companies.

Hence this research can be useful to companies who want to exploit the potential of this indispensable

channel for their benefit. It will also be useful to practising managers in mobile communication firms,

marketing managers and strategy researchers interested in market intelligence. Today companies lay a

lot of emphasis on their online presence and their internet marketing strategies, so much so that the

overall marketing strategy sometimes revolves around it, this research can therefore be very helpful in

strategy development in a rapidly evolving high-tech market. Apart from this, this research can also be

used as a basis for further research by academic researchers and the research can be extended to

different markets.


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4. BACKGROUND AND INITIAL DATA RESULTS

Before venturing into the Internet marketing strategies of the telecom companies an understanding of the

Indian Telecom Sector and its market structure together with the regulatory framework surrounding it is

important. To understand the market structure a research was done into the academic and grey literature and

various topics were explored.

4.1. HISTORICAL BACKGROUND

Indian telecommunication sector has undergone a major process of transformation. The Govt. has

brought about significant policy reforms. As indicated on the official website of The Department of

Telecom, this revolution in the field of telecom began with the announcement of NTP 1994 (National

Telecom Policy) which was further emphasized and carried forward under NTP 1999 (New Telecom

Policy). There were three main occupants of the fixed service sector before the reforms started in 1994.

They were, DoT (Department of Telecom), MTNL (Mahanagar Telephone Nigam Limited) and VSNL

(Videsh Sanchar Nigam Limited). MTNL specifically operated in two metros Delhi and Mumbai,

VSNL provided international telephony and DoT had an all India presence except Delhi and Mumbai.

DoT enjoyed the policy making powers and therefore had a monopoly over the telecom sector. The

Telecom reforms of 1999 restructured DoT to separate its service providing sector from the policy-

maker. The service provider was initially called DTS (Department of Telecom Services) which was

later corporatized and renamed as BSNL (Bharat Sanchar Nigam Limited). The Govt. further

emphasized private participation in this sector. Although the coming in of the private players has

tremendously increased the competition, it has also significantly improved the quality of service

bringing it to international standards. Another initiative that requires special mention here is the

Government’s “Bharat Nirman” Program that aims at bringing the rural teledensity to 40% by 2014

and Broadband coverage of all 250,000 villages.(Source: www.dot.gov.in)

The Indian Telecom sector has achieved a phenomenal growth during the last few years and is primed

to take a big leap in the future also. The chart on the following page shows the major milestones in the

development of the Indian Telecom Sector over time.

Internet Marketing: Indian Telecom Sector

SOURCE: TRAI (TELECOM REGULATORY AUTHORITY OF INDIA)

1947

•All the foreign telecommunication companies were nationalized to form the Posts, Telephone and Telegraph (PTT), a monopoly run by the government's Ministry of Communications. Telecom sector was considered as a strategic service and the government considered it best to bring under state's control.

1980•The private sector was allowed in telecommunications equipment manufacturing.

1985

• Department of Telecommunications (DOT) was established. It was an exclusive provider of domestic and longdistance service that would be its own regulator (separate from the postal system).

1986

•Two wholly government-owned companies were created: the Videsh Sanchar Nigam Limited (VSNL) for international telecommunications and Mahanagar Telephone Nigam Limited (MTNL) for service in metropolitan areas.

1991 •Telecom equipment manufacturing was delicensed .

1992•value added services were declared open to the private sector.

1994

•A major breakthrough was the clear enunciation of the government’s intention of liberalizing the telecom sector in the National Telecom Policy resolution of 13th May 1994.

1997•Telecom Regulatory Authority of India (TRAI) was fromed.

1999

•New telecom Policy was formed.opening up of all the segments of the telecom sector for private sector participation.

2000

•The Government of India corporatized the operations wing of DoT on 01 October 2000 and named it as Bharat Sanchar Nigam Limited (BSNL).

2003•CDMA was launched.

2004•Calling Party Pays (CPP) inttroduced.

2009

•For three months in a row India beats China for the number of subscribers added every month.

•The turnover of the telecom sector in India increased by 4% to reach nearly USD 8 billion during last quarter (Q4) of 2009

•The sector is facing intensive price war among the various telecom companies operating in the country.

•The revenue generated in Q4 of 2009 is less than the revenue generated in Q1 of 2009, although 133 million new customers were added during this 9 month period.



www.trai.gov.in

All the foreign telecommunication companies were nationalized to form the Posts, Telephone and Telegraph (PTT), a monopoly run by the government's Ministry of Communications. Telecom sector was considered as a strategic service and the government considered it best to bring under state's control.

The private sector was allowed in telecommunications equipment manufacturing.

Department of Telecommunications (DOT) was established. It was an exclusive provider of domestic and longdistance service that would be its own regulator (separate from the postal system).

owned companies were created: the Videsh Sanchar Nigam Limited (VSNL) for international telecommunications and Mahanagar Telephone Nigam Limited (MTNL) for service in

Telecom equipment manufacturing was delicensed .

value added services were declared open to the private sector.

A major breakthrough was the clear enunciation of the government’s intention of liberalizing the telecom sector in the National Telecom Policy resolution of 13th May 1994.

Telecom Regulatory Authority of India (TRAI) was fromed.

New telecom Policy was formed.NTP-99 laid down a clear roadmap for future reforms, contemplating the opening up of all the segments of the telecom sector for private sector participation.

The Government of India corporatized the operations wing of DoT on 01 October 2000 and named it as Bharat Sanchar Nigam Limited (BSNL).

Calling Party Pays (CPP) inttroduced.

For three months in a row India beats China for the number of subscribers added every month.

The turnover of the telecom sector in India increased by 4% to reach nearly USD 8 billion during last quarter

The sector is facing intensive price war among the various telecom companies operating in the country.

The revenue generated in Q4 of 2009 is less than the revenue generated in Q1 of 2009, although 133 million new customers were added during this 9 month period.

2009-2010

Page | 11


All the foreign telecommunication companies were nationalized to form the Posts, Telephone and Telegraph (PTT), a monopoly run by the government's Ministry of Communications. Telecom sector was considered as a strategic service and the government considered it best to bring under state's control.

Department of Telecommunications (DOT) was established. It was an exclusive provider of domestic and long-

owned companies were created: the Videsh Sanchar Nigam Limited (VSNL) for international telecommunications and Mahanagar Telephone Nigam Limited (MTNL) for service in

A major breakthrough was the clear enunciation of the government’s intention of liberalizing the telecom

99 laid down a clear roadmap for future reforms, contemplating the

The Government of India corporatized the operations wing of DoT on 01 October 2000 and named it as Bharat

For three months in a row India beats China for the number of subscribers added every month.

The turnover of the telecom sector in India increased by 4% to reach nearly USD 8 billion during last quarter

The sector is facing intensive price war among the various telecom companies operating in the country.

The revenue generated in Q4 of 2009 is less than the revenue generated in Q1 of 2009, although 133 million


Page | 12

4.2. THE STORY OF GROWTH

The story of growth of the Telecom Sector over the past two decades can be divided into three phases.

(Arvind 2004 and Indian Telecom Sector: Brochure www.dot.gov.in )

The first phase of reforms began in the 1980’s. It is during this period that the private sector was

allowed in the telecommunications equipment manufacturing. Mahanagar Telephone Nigam (MTNL)

and Videsh Sanchar Nigam (VSNL) were created. A high-powered telecom commission was set up in

1989.

The second phase of reforms started in 1990’s. The Indian economy stared growing and this benefitted

the telecom sector as well. During this phase many countries of the world had started reforms in the

telecom sector which greatly influenced then Indian policy makers and the reforms that followed

opened up the telecom sector for the private sector. In 1991 telecom equipment manufacturing was

delicensed. Six private companies namely Bharti Telenet, Essar Commvision, Shyam Telecom, Hughes

Tele.com, Tata Teleservices and Reliance were given operating licenses in 1994, thereby opening the

basic telephony to private sector. The NTP 1994 and NTP 1999 encouraged full competition and

allowed unrestricted entry of private players in all service sectors. This phase also saw a migration

from the fixed license fee to a revenue sharing regime. Yet another milestone during this phase was

corporatisation of the operations wing of Department of Telecommunications (DoT) under the name of

BSNL (Bharat Sanchar Nigam Limited). Eight cellular licenses were finalized for four metros.

The third phase of reforms in this sector started at the beginning of this decade and has resulted in

exponential increase in the growth rate. This phase saw the restructuring of tariff rates and termination

of monopoly of VSNL in International Long Distance services due to its privatisation.

September/October 2001 saw the issuing of 17 fresh licenses to private companies. Wireless in Local

Loop (WLL) was introduced for providing telephone connection in urban, semi-urban and rural areas.

Government allowed CDMA technology to enter the Indian market. Unified Access Service Licenses

regime for basic and cellular services was introduced in October 2003. This regime enabled services

providers to offer fixed and mobile services under one license. Consequently 27 licenses out of 31

licenses converted to Unified Access Service Licenses. In 2005 the FDI was hiked to 74% and in 2007

the GOI permitted the providers to apply for cross over spectrum as a result of which new licenses

were issued. Today every circle in India has 12 players. The story of reforms continues with the 3G

and 4G spectrum auctions going on in India and Mobile Number Portability is set to hit the scene by

30th June 2010. This will allow the companies to further diversify their offerings and will directly affect

their marketing strategy.


4.3. REGULATORY FRAMEWORK

The Regulatory framework provides a level playing field for all the players in India. The main

governing body for the industry is the Department of

(Telecom Regulatory Authority of India) assists the Government to take timely decisions and introduce

a new technology. The following figure gives an overview of the governing bodies. The fun

performed by each of the bodies

(Source: www.dot.gov.in; Official website Department of Telecommunications, Govt. Of India)

4.4. MARKET STRUCTURE

The country is divided into 23 Circles which include

Delhi, Mumbai, Chennai and

on economic parameters and revenue potential. Each circle has a license and twelve operators are

allowed per circle.

Figure 5.

Government bodies

Wireless planning and coordination

(WPC)

Department of telecommunication

(DOT)


REGULATORY FRAMEWORK


governing body for the industry is the Department of Telecommunication, Mi

Regulatory Authority of India) assists the Government to take timely decisions and introduce

The following figure gives an overview of the governing bodies. The fun

ch of the bodies are briefly described in APPENDIX

Figure 4. Regulatory Framework


MARKET STRUCTURE

The country is divided into 23 Circles which include 4 metros and 19 circles. The Metros include

Delhi, Mumbai, Chennai and Kolkata. The 19 circles are further classified into A, B, C category based


Figure 5. Telecom circles in India (Source: www.dot.gov.in

Framework

Government bodies

Telecom commission

Group on telecom and IT (GOT –IT)

Independent bodies

TRAITelecom Disputes

and Appellate Tribunal (TD SAT)

2009-2010

Page | 13


Telecommunication, Ministry of India. TRAI

Regulatory Authority of India) assists the Government to take timely decisions and introduce

The following figure gives an overview of the governing bodies. The functions


circles. The Metros include

. The 19 circles are further classified into A, B, C category based


www.dot.gov.in)

Independent bodies

Telecom Disputes and Appellate

Tribunal (TD SAT)


4.5. SERVICES PROVIDED BY THE TELECOM

The Telecom sector in India is divided into two segments based on the kind of services that it provides.

They are the Fixed Service Providers

services and the Cellular Service Providers who provide the wireless serv

telecom sector also provides the Internet and Broadband Services

Website, Department of Telecom, Government of India)

The FSP’s provide the basic services

long distance services and WLL (Wireless in Local Loop) services.

the overall telecom subscribers and

account for about 90 % of revenues from these services. Apart from the state owned companies the

following 5 private operators provide these services: Reliance communications Ltd., Tata Teleservices,

Bharti Airtel Ltd., Shyam Telelink Ltd. and H

business/corporate sector and hence are presently available in selective urban areas. They offer services

such as leased line, ISDN, videoconferencing and closed user groups. Inspite of all this they

collectively account for only 5 percent of the total

Source: TRAI (The Indian Telecom Services Performance Indicators:

Cellular services on the other hand are completely dom

account for 93.4% of the total Indian telecom subscriber base

Indian Telecom Sector is growing at a stupendous rate.

based on the technology used i.e.

Division Multiple Access (CDMA).

sector is dominated by the players like

sector is dominated by Reliance and Tata Indicom.

advantage of the low teledensity in India by extending

the country. The Govt. of India has brought about reforms for the reduction in tariffs for airtime,

9.42%

8.06%3.14%


OVIDED BY THE TELECOM SECTOR

in India is divided into two segments based on the kind of services that it provides.

They are the Fixed Service Providers (FSPs or Wireline Service Providers) who provide the basic

Cellular Service Providers who provide the wireless services.

telecom sector also provides the Internet and Broadband Services. (Source:

Website, Department of Telecom, Government of India)

The FSP’s provide the basic services that consist of, national or domestic long distance, international

long distance services and WLL (Wireless in Local Loop) services. This market

the overall telecom subscribers and is largely controlled by the state operators BSNL and


5 private operators provide these services: Reliance communications Ltd., Tata Teleservices,

Shyam Telelink Ltd. and HFCL Infotel Ltd. These companies focus on the



ely account for only 5 percent of the total Wireline subscriptions.

Figure 6. Wireline Market Share Dec. 09

Indian Telecom Services Performance Indicators: October - December 2009)

on the other hand are completely dominated by the Private Companies and they

account for 93.4% of the total Indian telecom subscriber base (Source: TRAI).

is growing at a stupendous rate. There exists a division i

based on the technology used i.e. Global System for Mobile Communications (GSM) and Code

Division Multiple Access (CDMA).The GSM technology being the dominant among the two. This

the players like Airtel, Vodafone-Hutch, and Idea Cellular, while the CDMA

sector is dominated by Reliance and Tata Indicom. All these companies are striving hard to take the

advantage of the low teledensity in India by extending their networks to the deepest most rural areas

India has brought about reforms for the reduction in tariffs for airtime,

75.80%

9.42%

2.98% .0.46%0.14%

Wireline Market Share Dec 09

2009-2010

Page | 14

in India is divided into two segments based on the kind of services that it provides.

(FSPs or Wireline Service Providers) who provide the basic

ices. In addition to these the

(Source: www.dot.gov.in, Official

national or domestic long distance, international

This market forms only 6.6 % of

is largely controlled by the state operators BSNL and MTNL, who


5 private operators provide these services: Reliance communications Ltd., Tata Teleservices,

These companies focus on the



December 2009)

inated by the Private Companies and they

TRAI). This market in the

There exists a division in the wireless market

Global System for Mobile Communications (GSM) and Code

technology being the dominant among the two. This

Hutch, and Idea Cellular, while the CDMA

All these companies are striving hard to take the

networks to the deepest most rural areas of

India has brought about reforms for the reduction in tariffs for airtime,

BSNL

MTNL

Bharti Airtel

Reliance

TATA

HFCL


national long distance, international long distance, and handset prices and this has driven demand

Cellular operators generate their

international telephony, which are there major growth drivers.

Source: TRAI (The Indian Telecom Services Performance Indicators:

4.6. MARKET DATA: PERFORMANCE INDICATORS

The Indian Telecom Sector has seen phenomenal growth over the last decade. The total subscribers

have grown from a mere 22 Million in 1999 to 562.16 Million as on December 31

TRAI Annual Report 2008-

growth of the subscribers during 1999

28.19%

22%

14%

14%

9%7%

4%

1% 0.63%

GSM Service Market Share

1999 2000 2001

22.81 28.53 36.29

Growth of Subscriber base from 1999 to 2009 (in millions)


national long distance, international long distance, and handset prices and this has driven demand

Cellular operators generate their revenue from the rentals and the long distance national and

international telephony, which are there major growth drivers.

Figure 7. Market Shares GSM and CDMA

Indian Telecom Services Performance Indicators: October - December 2009)

MARKET DATA: PERFORMANCE INDICATORS


have grown from a mere 22 Million in 1999 to 562.16 Million as on December 31

-09) and the numbers are still growing. The following graph shows the

growth of the subscribers during 1999-2009:

Figure 8. Subscriber Growth

Source: TRAI Annual Report 2008-2009

28.19%

GSM Service Market Share

Bharti

Vodafone

BSNL

Idea/Spice

Reliance

Aircel

TATA

MTNL

Loop Mobile

Others

53.71%37.33%

5.44%

2.98% 0.33%

0.30%

CDMA Service Market Share

2001 2002 2003 2004 2005 2006 2007

36.29 44.97 54.62 75.54 98.41140.32

206.83

300.49


2009-2010

Page | 15

national long distance, international long distance, and handset prices and this has driven demand.

ls and the long distance national and

December 2009)


have grown from a mere 22 Million in 1999 to 562.16 Million as on December 31st 2009 (Source

nd the numbers are still growing. The following graph shows the

53.71%

0.33%

CDMA Service Market Share

Reliance

Tata

Teleservices

BSNL

Sistema

HFCL

MTNL

2008 2009

300.49

562.16



Page | 16

4.6.1 Data Interpretation

A snapshot of the figures as on 31st December 2009 is shown in APPENDIX. A comparison is made

with the figures of Sept-09 hence depicting the performance of the last quarter of the previous year.

(Source: TRAI)

• The Telecom subscribers registered a growth rate of 10.4% growing from 509.03 Million in

Sept-09 to 562.16 Million at the end of Dec-09.

• The overall teledensity has reached 47.88.

Figure 9.Trends in Overall Telecom Subscribers and Teledensity in India (2008-09)

Source: TRAI (The Indian Telecom Services Performance Indicators: October - December 2009)

• The figures clearly show a divide between Urban-Rural subscribers and Wireless-Wireline

subscribers.

• The Urban teledensity 110.96 is very large as compared to the Rural teledensity of just 21.16.

This indicates the huge potential Rural Telephony holds for the Indian Telecom Companies.

• According to TRAI (Telecom Regulatory Authority of India) there have been 57% of total net

additions in the urban areas as compared to 65% in the previous quarter. This implies there has

been a rapid increase in the rural subscriptions. These subscriptions however have been in the

wireless segment. The overall share of the rural subscribers has increased to 31% from 29.8%

in Sept-09.


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Figure 10 Figure 11. Market Share: Rural and Urban


• We can also see that the wireless market is very large as compared to the Wireline. The total

wireless (GSM + CDMA) subscriber base has reached 525.09 Million bringing the wireless

teledensity to 44.72. On the other hand the Wireline teledensity has gone down to 3.16 from

3.29 in Sept-09, indicating that more and more people of India are shifting from Wireline to

wireless services.

Figure 12. Composition of Wireless and Wireline Subscribers in India (2008-09)

Figure 13. Wireless Subscribers and Teledensity Figure 14. Wireline Subscribers and Teledensity


• The figures indicate that within the wireless market the GSM subscription is growing at a

faster rate and this has resulted in widening the gap between the growth rates of GSM and


Page | 18

CDMA. The TRAI Performance Indicator report of the last quarter of 2009 states that the

growth rate of GSM is 5.6 times in comparison to CDMA and the GSM subscribers constitute

80.3% of the wireless market. These figures also direct us to the fact that although Reliance

controls more than half of the CDMA market share, it has still a long way to go in terms of the

overall wireless market.

Figure 15. Wireless Subscription: GSM vs. CDMA


• The Internet and Mobile Association of India press release states that India has 52 million

active mobile users. In context of the gigantic number of the telecom subscribers this numbers

looks like a dwarf. Hence it would be interesting to see how far internet goes to suffice the

marketing plans of the companies in India.

4.7. COMPETITION OVERVIEW

The market data suggests that there are three types of major players in the telecom services. They are

the state owned companies like BSNL and MTNL, the Indian owned private companies like Reliance

and Tata Teleservices and the companies with foreign investment like Vodafone, Bharti Tele-ventures

(Airtel), Idea cellular, Aircel and Spice Communications. The state owned companies clearly dominate

the fixed line market. Bharti Airtel is the market leader in the wireless segment. However, according to

the TRAI data Vodafone is much ahead in terms of share of monthly net additions to the subscriber

base. For the month of March 2010 the share of net additions of Vodafone was 17.8% as compared to

the 14.77% of Bharti Airtel( Source: TRAI ,Press Release April 2010), indicating that Vodafone is

proving to be a strong competitor for Airtel and clearly is becoming the more preferred choice.


Page | 19

4.8. CONCLUSION

“Marketing is the process by which companies determine what products or services may be of interest

to customers, and the strategy to use in sales, communications and business development. It is an

integrated process through which companies create value for customers and build strong customer

relationships in order to capture value from customers in return”(Kotler and Armstrong, 2008).

The analysis of the data shows that as huge as the Indian Telecom market seems to be, it still has an

enormous potential to grow and this can be attributed to the low teledensity in the country. The

companies can explore the growth avenues like infrastructure sharing, enterprise telecom services,

virtual private networks and most importantly rural telephony. All these avenues can be fully exploited

only if the consumers are aware of the kind of services provided by the companies and this is possible

by having a sound marketing strategy and the internet boom means that they need to have an online

presence and use it in t he best possible way to attract customers.


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5. LIST OF REFERENCES

1. Ansoff, H. (1957), Strategies for Diversification, Harvard Business Review, September- October, 113-

24.

2. Bocij, P., Chaffey, D., Greasley, A. And Hickie, S. (2003), Business Information Systems. Technology

Development and Management in E-business, 2nd edn. Financial Times, Prentice Hall, Harlow.

3. Chaffey, D., Mayer, R., Johnston, K., Chadwick, F.E., (ed) (2003), Internet Marketing. Strategy,

Implementation and Practice. Financial Times, Prentice Hall, Harlow.

4. Department of Telecom (DoT), Ministry of India, Official Website, www.dot.gov.in

5. Dossani, R. (Ed.) 2002, Telecommunications reform in India. Quorom Books.

6. Elia, M., (2008), Internet Marketing, Website Design and Consumer Behaviour.

7. Jaworski, B., and Kohli, A., (1993), Market Orientation: Antecedents and Consequences, Journal of

Marketing, July 53-70.

8. Kotler, Philip, Principles of Marketing/Philip Kotler, Gary Armstrong, (2008), 12th ed. Prentice Hall.

9. Panagariya, Arvind (2004). "India in the 1980s and 1990s: A Triumph of Reforms".

10. Paul, P., (1996), Marketing on the Internet, Journal of Consumer Marketing, 13, 27-39.

11. Smith, P.R. and Chaffey, D. (2001). E-Marketing: Excellence at the Heart of E-Business. Butterworth

Heinemann, Oxford.

12. Telecom Regulatory Authority of India (TRAI), Official Website, www.trai.gov.in .

13. TRAI Press Release No. 20/2010, Telecom Subscription Data as on 31st March 2010,

26th April, New Delhi, India.

14. TRAI, Annual Report 2008-09.

15. TRAI, The Indian Telecom Performance Indicators, October-December 2009, 6th April 2010, New

Delhi, India.

16. www.ComScore.com

17. www.internetworldstats.com/stats.htm


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APPENDIX

1. Telecom Data



Page | 22

2. Regulatory Framework

Wireless Planning & Coordination

(WPC)

“The WIRELESS PLANNING & COORDINATION (WPC) Wing of the Ministry of

Communications, created in 1952, is the National Radio Regulatory Authority responsible

for Frequency Spectrum Management, including licensing and caters for the needs of all

wireless users (Government and Private) in the country. It exercises the statutory

functions of the Central Government and issues licenses to establish, maintain and operate

wireless stations. WPC is divided into major sections like Licensing and Regulation (LR),

New Technology Group (NTG) and Standing Advisory Committee on Radio Frequency

Allocation (SACFA). SACFA makes the recommendations on major frequency allocation

issues, formulation of the frequency allocation plan, making recommendations on the

various issues related to International Telecom Union (ITU), to sort out problems referred

to the committee by various wireless users, Sitting clearance of all wireless installations in the country etc.”

Source: http://210.212.79.13/

Department of Telecommunications

(DoT)

“The Department of Telecommunications is part of the Ministry of Communications

and Information Technology in the executive branch of the Government of India. It has

been formulating developmental policies for the accelerated growth of the

telecommunication services. The Department is also responsible for grant of licenses for

various telecom services like Unified Access Service Internet and VSAT service. The

Department is also responsible for frequency management in the field of radio

communication in close coordination with the international bodies. It also enforces

wireless regulatory measures by monitoring wireless transmission of all users in the country.”

Source: Wikipedia

Telecom Commission

“The Telecom Commission and the Department of Telecommunications are

responsible for policy formulation, licensing, wireless spectrum management,

administrative monitoring of PSUs, research and development and

standardization/validation of equipment etc.”

Source: http://www.dot.gov.in/profile.htm

Group on telecom and IT

(GOT –IT)

“Handles ad-hoc issues of the Telecom Industry.”

Source: www.dot.gov.in

Telecom Regulatory Authority Of India

(TRAI)

“It is an independent Regulatory body. The main objectives of TRAI are to provide a fair

and transparent policy environment, which promotes a level playing field and facilitates

fair competition. In pursuance of above objective TRAI has issued from time to time a

large number of regulations, orders and directives to deal with issues coming before it and

provided the required direction to the evolution of Indian telecom market from a

Government owned monopoly to a multi operator multi service open competitive market.

The directions, orders and regulations issued cover a wide range of subjects including

tariff, interconnection and quality of service as well as governance of the Authority.”

Source: http://www.dot.gov.in/osp/Brochure/Brochure.htm

Telecom Disputes Settlement and Appellate

Tribunal (TD SAT )

“Set up under Section 14 of the Telecom Regulatory Authority of India Act, 1997 by

TRAI (Amendment) Act, 2000 (hereinafter called the “Act”) to adjudicate disputes and

dispose of appeals with a view to protect the interests of service providers and consumers

of the telecom sector and to promote and ensure orderly growth of the telecom sector.”

Source: http://www.tdsat.nic.in/profile2.htm

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