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A

PROJECT REPORT ON

TELECOM INDUSTRY IN INDIA

(INDUSTRY ANALYSIS)

BYANKIT SAMOTA

TELECOM+IT(2009-2011)

1999/09010009

SURYADATTA INSTITUTE OF BUSINESS

MANAGEMENT AND TECHNOLOGY

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CONTENTS

S.No CHAPTER PAGE No.

1. INTRODUCTION 4

2. SEGMENT ANALYSIS 6

3. TELECOM INDUSTRY GOVERNMENT 13

4. 3RD GENERATION TECHNOLOGY 15

5. PORTER ANALYSIS 18

6. SWOT ANALYSIS 26

7. FUTURE OF INDIAN TELECOM INDUSTRY 29

BIBLIOGRAPHY 31

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INTRODUCTION

Low-cost, High-Quality networks & Innovative Marketing

Telecom Industry in India is the fastest growing markets in the World and become the second

largest mobile market in the world just after China. India has added around 13 million new

mobile subscribers to the network each month for the year 2008. 3G has been launched.

Upcoming services such as 4G and WiMax (Worldwide Interoperability for Microwave Access)

will help for further growth rate. The service providers are offering services at cheap call rates,

low-cost handsets and network expansion is fuelling the boom for the industry.

The sector ranks second in the world, with over 509.03 million telephone subscriptions by Sep

2008 end. The fast track growth of the Indian telecom industry has made it a key contributor to

Indias progress. India adopted a phased approach for reforming the telecom sector right from

the beginning. Privatization was gradually introduced, first in value-added services, followed by

cellular and basic services. An independent regulatory body, Telecom Regulatory Authority of

India (TRAI), was established to deal with competition in a balanced manner.

This gradual and thoughtful reform process in India has favored industry growth. Today, there

are more than 509 million telecom subscribers in India. Every month, 10-14 million new

subscribers are added. Upcoming services such as 3G and WiMax will help to further augment

the growth rate. Furthermore, the Indian economy is slated to sustain its 7-9 per cent growth rate

in the near future. This is supported by the political stability that the country is experiencing

currently. Indias demographic outlook makes it one of the largest markets in the world. A

conducive business environment is also created by a favorable regulatory regime. There exists

enormous business potential for telecom companies on account of the countrys low tele-density,

which is close to 19 per cent presently. Indian Telecom sector, like any other 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 advanced technologies like GSM, CDMA, and WLL to the much awaited great 3G

(Third Generation) Technology in mobile phones.

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There exists enormous business potential for telecom companies on account of the countrys low

teledensity, which stand at 40.31 for September 2009. Every day there is an addition in Value

added Services (VAS), technology advancement and reduction in traffic charges. Increase in

private and public players in the sector has enhanced the telecommunication technology to give

the maximum benefits to their customers.

Year

1851First operational land lines were laid by the government near Calcutta(seat of British power)

1881Telephone service introduced in India

1883Merger with the postal system

1923Formation of Indian Radio Telegraph Company (IRT)

1932

Merger of ETC and IRT into the Indian Radio and Cable Communication Company(IRCC)

1947

Nationalization of all foreign telecommunication companies to form the Posts,

Telephone and Telegraph (PTT), a monopoly run by the government's Ministry ofCommunications

1985

Department of Telecommunications (DOT) established, an exclusive provider ofdomestic and long-distance service that would be its own regulator(separate from the postal system)

1986

Conversion of DOT into two wholly government-owned companies: the VideshSanchar Nigam Limited (VSNL) for international telecommunications and

Mahanagar Telephone Nigam Limited (MTNL) for service in metropolitan areas

1997 Telecom Regulatory Authority of India created.

1999Cellular Services are launched in India. New National Telecom Policy is adopted.

2000 DoT becomes a corporation, BSNL

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SEGMENT ANALYSIS

India's growth story in the telecom space shows no signs of slowdown. The country added

113.26 million new customers in 2008, the largest globally. To put this growth into perspective,

the countrys cellular base witnessed around 48.50 per cent growth in 2008, with an average 9.5

million customers added every month. The country had 471.7 million mobile phone users as of

September 2009 compared to 346.89 million in the corresponding period a year ago and the total

number of telephone connections (wireless and wireline) is 509.03 million as of September end,

taking the telecom penetration to over 36 per cent. It implies that one out of every three Indian

has a telephone connection.

The Indian telecom industry has been growing rapidly at a CAGR of 40.63 per cent from 2003 to

2008. Telecom sector contributed 3.4 per cent to Indias gross domestic product in for the year

2008 and is expected to contribute 5.4 per cent by 2010. There is still a big room for further

growth. The growth will primarily driven by the rise in communications demand from semi

urban and rural India. The teledensity in rural areas being a little more than 10 per cent against

the national average of 33.23 per cent, there is huge untapped potential for mobile phone

penetration in rural India.

The total Broadband subscriber base has reached 7.21 million by the end of September 2009 as

compared to 6.98 million by the end of August 2009. Even there is a huge potential in broadband

segment.

The growth in 2008 was led by Bharti Airtel, the countrys largest communications provider.

Bharti had 110.51 million customers as of September end, Vodafone had 82.84 million and

BSNL of about 53.35 million. In fact, Bharti has more customers than the state-owned BSNLs

mobile and landline users combined.

India's telecom services industry revenues is projected to reach $54 billion in 2012, as

compared with $31 billion in 2008 according to the CII Ernst & Young report titled 'India

2012: Telecom growth continues.' According to Capitaline Data-base, total revenue for

Tele-com industry for current year is around 100,000 Crores.

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As on sep 30, 2010

Recent updates in Telecom Industry

Around 15 million mobile subscribers added in the month September

According to telecom regulator TRAI, 14.98 million mobile subscribers were added in the month

September, the highest monthly addition, against 14.12 mobile subscribers in the month August.

3G Auction

With the announcement of a 3G policy on 1 August 2008, India joined a select list of countries

to have a policy on the much-hyped 3G revolution. Third generation mobile services which

would offer voice, video, data and downloading services on mobile phones has at last been

launched in the earlier days of September 2009. The launch of 3G and WiMax (Worldwide

Interoperability for Microwave Access) services is expected to drive the data revolution. Mobile

entertainment and mobile banking are likely to be the biggest drivers for data services.

3G and WiMax services are expected to gain popularity initially in the top 20 cities in India and

then gradually penetrate to the rest of the country. By 2012, India could have around 25-30

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million 3G subscribers and around $4-5 billion 3G revenues. WiMax, on the other hand, could

attract about 8-10 million subscribers and could account for about $1-1.5 billion by 2012. The

average revenue per user per month is likely to drop further since most of the growth in

subscriber additions is coming due to expansion in non-metro regions.

Mobile number portability gets nod and bid invited for mobile number portability

Department of Telecommunications (DoT) has invited bids for mobile number portability.

Mobile Number Portability (MNP) will provide the customer the facility to retain the same

number while switching over from one operator (service provider) to another within the same

service area. A recent study pointed out that having to give up their mobile numbers was the

single most reason that subscribers did not want to change their operator despite poor quality of

services. This will be an advantage for the customer.

99 per cent of new mobile connections in India are pre-paid

Call it the death of post-paid mobile user in the worlds fastest-growing mobile market. Out of

new mobile user additions in the country, pre-paid connections accounts for around 99 per cent.

Telecom Industry on robust expansion plans

The total outstanding investment in the telecom industry at the end of December 2008 quarter

stood at $3.27 Billion spread over 140 projects. Of these, close to 70 projects entailing an

investment of $1.68 Billion are under implementation and seven projects encompassing an

investment of $0.015 Billion are stalled. Most of the existing telecom companies have robust

expansion plans out of which majority have not witnessed any delay in execution.

According to Gartner Inc., India's mobile subscriber base is projected to exceed 737 million

connections by 2012 growing at a CAGR of 21 per cent. The Government has plans to raise

teledensity to 40-45 per cent by 2010, thereby offering greater growth opportunities for

service providers.

Facts & Figures of Telecom Industry

Total mobile phone subscribers: 509.03 million (Aug 2010)

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Teledensity: 43.5 % (Aug 2010)

Average Addition of new mobile subscribers per month: 12.43 Million (Year 2010)

Fastest growing cellular telephony markets in the world

Average Revenue per User (ARPU) for GSM: INR 304 per month (September 2010)

Average Revenue per User (ARPU) for CDMA: INR 194 per month (September 2010)

More Wireless subscribers than Wireline subscribers

Minute of Usage (MoU) for GSM: 546 Minute per month (September 2010)

Minute of Usage (MoU) for CDMA: 425 Minute per month (September 2010)

Of the wireless operators GSM continues to dominate with a healthy 76% lead. CDMA users

have crossed 110 million after March 2010.

The Telecom sector in India has witnessed unparalleled growth by global standards. In a little

over a decade of wireless telephony, India has moved from a subscriber base of zero to

becoming the second-largest market in the world after China. Rural telephony, 3G, WiMax and

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data services will drive sector growth in 2012. The industry will witness sustained growth in

mobile services and data revenues. Network expansion will continue in order to support the rural

growth. It is imperative for the government to revisit high levies on the telecom sector and lay

down a clear roadmap for future spectrum allocation.

Subscriber base to grow

Further growth will be primarily driven by a rise in communications demand from semi urban

and rural India. Over past few years, Circle B and Circle C have witnessed the highest growth

rate as compare to Metros and Circle A.

The availability of adequate spectrum could remain a hurdle for wireless growth. The telecom

sector could witness another round of Mergers & Acquisitions. As new operators roll-out

networks, there could be 10-12 operators in each circle. However, by end of 2012, industry

consolidation will result in about five to seven large operators.

According to Springboard Research, India will become the leading market for WiMAX in

the Asia pacific region and is expected to have 15.8 million WiMAX subscribers by 2012,accounting for 46.7 per cent of total subscribers in Asia-Pacific and 35.7 per cent of

revenues from the region. According to Gartner, the value-added services (VAS) market in

India is expected to grow to about US$ 5.6 billion by 2011.

Segment

Mobile Services

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India's telecom growth pattern continues with mobile operators adding 509.03 million

subscribers in the year 2010 to the world's second largest wireless market.

GSM

The GSM subscriber base has reached to 297.26 million in March 2009. Bharti with 110.51

million subscriber base remains the largest GSM mobile operator followed by Vodafone, BSNL

and Idea with subscribers base of 82.84 million, 53.35 million, and 51.45 million respectively.

CDMA

The CDMA subscriber base has reached 94.50 million in March 2009. Reliance remains the

largest CDMA mobile operator followed by Tata Teleservices and BSNL with subscriber base of

55.52 millions, 34.28 million and 4.70 million respectively.

Wire line

Wire line services subscriber base stood at 37.96 million for the financial year ended March

2009 compared to 39.42 million last year. The Wire line has registered a decline of 3.63 per cent.

The market leader in wire line is BSNL and market follower is MTNL. The fixed (Wire line)

subscriber base registered a decline of 1.52 million in the year 2009. Reduction in the subscriber

base of wire line is mainly due to switching to wireless which is more convenient and cheaper.

Other Telephone Services

Public Call Offices

Number of Public Call Offices (PCOs) has reported a positive number over past few years. In

Public Call Offices, BSNL is market leader with a share of little more than 30 per cent. MTNL

market share is a little less than 4 per cent and the rest of market is capture by other private

operators.

Village Public Telephones

Number of Village Public Telephones (VPT) has decreased from 5.63 lakh in quarter ending

June 2009 to 5.61 lakh in quarter ending March 2010. There are around 6 lakh villages in India.

More than 85 per cent of the villages have VPTs. 100 per cent of Villages in Haryana and Punjab

have access to Village Public Telephone.

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Wire line internet subscriber

Broadband Growth: Total Broadband subscribers base has reached to 7.22 million by the end of

September 2009 as compared to 6.98 million last month August 2009 to register a growth of

3.03 per cent.

Non Voice Services

Value added service has registered a robust growth rate. It contributes more than 10 per cent of

the total revenue.

According to Gartner, India's mobile subscriber base is projected to exceed 737 mil-lion

connections by 2012 growing at a compound an-nual growth rate (CAGR) of 21 per cent

and India is likely to remain the world's second largest wireless market after China in terms

of mobile connections. The overall cellular services revenue in India is projected to grow at

a CAGR of 18 per cent from 2008-2012 to exceed US$ 37 billion.

TELECOM INDUSTRY GOVERNMENT

Government Policy Initiatives

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The Government has taken many proactive initiatives to facilitate the rapid growth of the Indian

telecom industry. The Indian telecom industry has a 74 percent FDI limit in the telecom services

segment. The Government of India (GOI) has permitted 100 percent FDI in manufacturing of

telecom equipment in India through the automatic route.

Foreign investors are rushing to India, which is coming out of the economic slowdown very fast, and

giving a strong signal of recovery. Foreign direct investment (FDI) inflow in August has gone up by

40.4% to $3.27 billion as against $2.3 billion in the same period last year.

FDI inflow got a push since July 2009, when it rose 55% to $3.5 billion over $2.25 billion in

July 2008, according to RBI data. Because of the global financial crisis and economic slowdown,

FDI fell sharply in the first two months of the current financial year by over 37% to $2.3

billion in April 2009, from $3.8 billion in the same month last year.

In May, 2009, the dip was even steeper by 46% to $2.1 billion from $3.9 billion in May 2008.

However, the inflow picked up after that. In June, it increased by around 7%.

A senior investment banker said as Indian economy is not very badly affected due to global

recession, foreign investors have started coming back to invest. Even in the present slowdownscenario, India is providing them a good opportunity for growth, he added.

The double digit growth in the industrial production would further improve the sentiments.

HDFC Bank economist Jyotinder Kaur said as the recovery becomes stronger, FDI inflows are

likely to rise in the coming months. According to RBI data, in 2009-10, the country received an

FDI of $35.2 billion including the reinvested earnings and inter-company debt transactions that

qualify for FDI. The net pure FDI, however, was around $27.3 billion, which fell short of

governments projections of $35 billion.

For 2010-11, investment bankers felt that the total FDI inflow may cross $35 billion. In the first

five months (April-August) so far, India's total FDI touched $16.2 billion including the

reinvested earnings and intercompany debt transactions.

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However, the pure inflows, without taking into account these two factors, contracted by about

6% to $13.8 billion, from $14.7 billion in same period of 2008-09. In 2009-10, India may attract

a pure FDI of $35 billion, bankers added.

Since 2000, FDI witnessed a huge jump. According to data, while in 2000 India attracted FDI of$4 billion only, in 2008-09, it went up to over $27 billion. Portfolio investment in August also

increased by 56.2% to $926 million compared to $593 million in the corresponding period of the

last year. During the first five months of the current financial year, portfolio investment

increased to $11.23 billion from $4 billion in the same period last year.

According to an IMRB paper for the Internet and Mobile Association of India, VAS, or the sale of

ring tones, caller tunes, wallpapers, SMSes (for contests and communica-tion), among other non-voice

services, generated Rs 7,500 Crores in revenues in 2008

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3RD GENERATION TECHNOLOGY

What is 3rd Generation Technology (3G)????

The 3rd generation technology (3G) represents a shift from voice centric services to mul-timedia

oriented services like video, voice, data and fax services. 3G networks have po-tential transfer

speeds of up to 3 Mbps (about 15 seconds to download a 3-minute MP3 song). For comparison,

the fastest 2G phones can achieve up to 144Kbps (about 8 min-utes to download a 3-minute

song). The high speed of data transfer can accommodate broadband applications like video

conferencing, receiving streaming video from the internet, sending and receiving faxes, instantly

downloading e-mail messages with at-tachments and international roaming.

What will be the impact on Revenue????

We have seen a decline in Average Revenue per User (ARPU) and the decline is due to

continuous fall in the tariff charges as competition in the industry increases. There is substantial

rise in subscriber base from Circle B and Circle C compare to Metros and Circle A. The usage is

less in Circle B and Circle C as compare to other circle.

Around 129.79 million GSM subscribers are from Metros or Circle A. It accounts for more that

50 per cent of the total GMS subscriber base. We expect atleast 5 per cent of the customer to opt

for 3G within 2 years. This could result for 3G subscriber base of more than 10 million. This

would leads to sharp rise in ARPU from this Circle. Recently Mahanagar Telephone Nigam

Limited (MTNL) has become the first telecom operator in the country to launch 3G mobile

services. Although the service is on the higher side as mobile users will have to pay a one-time

fee of INR 500 as activation charges and a monthly rental of INR 599, but the company has

receive good response from the customer. Apart from the rental charges, there will be an

increase in revenue from usage of the service.

Although we expect a decrease in the tariff charges, there would be an increase in Aver-age

Revenue per User. There is a constant rise in subscriber base of wireless where as there has been

a con-stant decrease in wireline subscriber.

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Wireless Vs Wireline

Figures are in millions

Wireless subscribers saw an impressive growth while the wire line subscribers were stagnant and

contribute to only 9% of the total telephone subscribers as in march 2010.

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According to a report by industry body FICCI and telecom consulting firm BDA, "3G

subscriber base will reach 90 million by 2013 and the revenue from 3G is expected to reach$ 15.8 billion by the same year." Even introduction of 3G would also in-crease the Average

revenue per users (ARPU).

Value-added Services (VAS) brings in 9 per cent of telecom industry revenues. As average

revenues per user (ARPU) fall, the pressure on making more money from VAS will keep

going up.

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PORTER ANALYSIS OF INDUSTRY

It uses concepts developed in Industrial Organization economics to derive five forces that

determine the competitive intensity and therefore attractiveness of a market. Porter referred to

these forces as the micro- environment, to contrast it with the more general term macro-

environment. They consist of those forces close to a company that affect its ability to serve its

customers and make a profit. A change in any of the forces normally requires a company to re-

assess the marketplace.

1. Rivalry among Competing Firms

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Competition in Indian Telecom Industry Major Players

There are three types of players in telecom services: State owned companies (BSNL and MTNL).

Private Indian owned companies (Reliance Infocomm, TataTeleservices. Foreign invested

companies (Vodafone, Bharti Tele-Ventures, Idea Cellular, Spice Communications).

BSNL:

On October 1, 2000 the Department of Telecom Operations, Government of India became a

corporation and was renamed Bharat Sanchar Nigam Limited (BSNL). BSNL is now Indias

leading Telecommunications Company and the largest public sector undertaking. It has a network

of over 45 million lines covering 5000 towns with over 35 million telephone connections. The

state-controlled BSNL operates basic, cellular (GSM and CDMA) mobile, Internet and long

distance services throughout India (except Delhi and Mumbai). BSNL will be expanding the

network in line with the Tenth Five-Year Plan (1992-97). The aim is to provide a telephone

density of 13.6 per hundred by March 2008. BSNL, which became the third operator of GSM

mobile services in most circles, is now planning to overtake Bharti to become the largest GSM

operator in the country. BSNL is also the largest operator in the Internet market, with a share of 21

per cent of the entire subscriber base

BHARTI:

Established in 1985, Bharti has been a pioneering force in the telecom sector with many firsts and

innovations to its credit, ranging from being the first mobile service in Delhi, first private basic

telephone service provider in the country, first Indian company to provide comprehensive telecom

services outside India in Seychelles and first private sector service provider to launch National

Long Distance Services in India. Bharti Tele-Ventures Limited was incorporated on July 7, 1995

for promoting investments in telecommunications services. Its subsidiaries operate telecom

services across India. Bhartis operations are broadly handled by two companies: the Mobilitygroup, which handles the mobile services in 16 circles out of a total 23 circles across the country;

and the Infotel group, which handles the NLD, ILD, fixed line, broadband, data, and satellite-

based services.

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Together they have so far deployed around 23,000 km of optical fiber cables across the country,

coupled with approximately 1,500 nodes, and presence in around 200 locations. The group has a

total customer base of 110.51 million, of which 95.86 million are mobile and 14.65 fixed line

customers, as of September 30, 2009. In mobile, Bhartis footprint extends across 15 circles.

Bharti Tele-Ventures' strategic objective is to capitalize on the growth opportunities the company

believes are available in the Indian telecommunications market and consolidate its position to be

the leading integrated telecommunications services provider in key markets in India, with a focus

on providing mobile services.

MTNL :

MTNL was set up on 1st April 1986 by the Government of India to upgrade the quality of telecom

services, expand the telecom network, and introduce new services and to raise revenue for telecom

development needs of Indias key metros Delhi, the political capital, and Mumbai, the business

capital. In the past 17 years, the company has taken rapid strides to emerge as Indias leading and

one of Asias largest telecom operating companies. The company has also been in the forefront of

technology induction by converting 100% of its telephone exchange network into the state-of-the-

art digital mode. The Govt. of India currently holds 56.25% stake in the company. In the year

2003-04, the company's focus would be not only consolidating the gains but also to focus on new

areas of enterprise such as joint ventures for projects outside India, entering into national long

distance operation, widening the cellular and CDMA-based WLL customer base, setting up

internet and allied services on an all India basis. MTNL has over 5 million subscribers and

329,374 mobile subscribers. While the market for fixed wireline phones is stagnating, MTNL

faces intense competition from the private playersBharti, Hutchison and Idea Cellular, Reliance

Infocommin mobile services. MTNL recorded sales of Rs. 60.2 billion ($1.38 billion) in the

year 2002-03, a decline of 5.8 per cent over the previous years annual turnover of Rs. 63.92

billion.

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RELIANCE INFOCOMM :

Reliance is a $16 billion integrated oil exploration to refinery to power and textiles conglomerate.

It is also an integrated telecom service provider withlicenses for mobile, fixed, domestic long

distance and international services. Reliance Infocomm offers a complete range of telecom

services, covering mobile and fixed line telephony including broadband, national and international

long distance services, data services and a wide range of value added services and applications.

Reliance IndiaMobile, the first of Infocomm's initiatives was launched on December 28, 2002.

This marked the beginning of Reliance's vision of ushering in a digital revolution in India by

becoming a major catalyst in improving quality of life and changing the face of India. Reliance

Infocomm plans to extend its efforts beyond the traditional value chain to develop and deploy

telecom solutions for India's farmers, businesses, hospitals, government and public sector

organizations. Until recently, Reliance was permitted to provide only limited mobility services

through its basic services license. However, it has now acquired a unified access license for 18

circles that permits it to provide the full range of mobile services. It has rolled out its CDMA

mobile network and enrolled more than 6 million subscribers in one year to become the countrys

largest mobile operator. It now wants to increase its market share and has recentlylaunched pre-

paid services. Having captured the voice market, it intends to attack the broadband market.

TATA TELESERVICES:

Tata Teleservices is a part of the $12 billion Tata Group, which has 93 companies, over 200,000

employees and more than 2.3 million shareholders. Tata Teleservices provides basic (fixed line

services), using CDMA technology in six circles: Maharashtra (including Mumbai), New Delhi,

Andhra Pradesh, Tamil Nadu, Gujarat, and Karnataka. It has over 800,000 subscribers. It has now

migrated to unified access licenses, by paying a Rs. 5.45 billion ($120 million) fee, which enables

it to provide fully mobile services as well. The company is also expanding its footprint, and has

paid Rs. 4.17 billion ($90 million) to DoT for 11 new licenses under the IUC (interconnect usagecharges) regime. The new licenses, coupled with the six circles in which it already operates,

virtually gives the CDMA mobile operator a national footprint that is almost on par with BSNL

and Reliance Infocomm.. The circles include Bihar, Haryana, Himachal Pradesh, Kerala, Kolkata,

Orissa, Punjab, Rajasthan, Uttar Pradesh (East) & West and West Bengal.

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VSNL:

On April 1, 1986, the Videsh Sanchar Nigam Limited (VSNL) - a wholly Government owned

corporation - was born as successor to OCS. The company operates a network of earth stations,

switches, submarine cable systems, and value added service nodes to provide a range of basic and

value added services and has a dedicated work force of about 2000 employees. VSNL's main

gateway centers are located at Mumbai, New Delhi, Kolkata and Chennai. The international

telecommunication circuits are derived via Intelsat and Inmarsat satellites and wide band

submarine cable systems e.g. FLAG, SEA-ME-WE-2 and SEA-ME-WE-3. The company's ADRs

are listed on the New York Stock Exchange and its shares are listed on major Stock Exchanges in

India. The Indian Government owns approximately 26 per cent equity, M/s Pantone Finvest

Limited as investing vehicle of Tata Group owns 45 per cent equity and the overseas holding

(inclusive of FIIs, ADRs, Foreign Banks) is approximately 13 per cent and the rest is owned by

Indian institutions and the public. The company provides international and Internet services as

well as a host of value-added services. Its revenues have declined from Rs. 70.89 billion ($1.62

billion) in 2001-02 to Rs. 48.12 billion ($1.1 billion) in 2002-03, with voice revenues being the

mainstay. To reverse the falling revenue trend, VSNL has also started offering domestic long

distance services and is launching broadband services. For this, the company is investing in Tata

Teleservices and is likely to acquire Tata Broadband.

HUTCH (Vodafone) :

Hutchs presence in India dates back to late 1992, when they worked with local partners to

establish a company licensed to provide mobile telecommunications services in Mumbai.

Commercial operations began in November 1995. Between 2000 and March 2004, Hutch acquired

further operator equity interests or operating licenses. With the completion of the acquisition of

BPL Mobile Cellular Limited in January 2006, it now provides mobile services in 16 of the 23

defined license areas across the country. Hutch India has benefited from rapid and profitablegrowth in recent years. It had over 27.8 million customers by the end of June 2008.

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IDEA :

Indian regional operator IDEA Cellular Ltd. has a new ownership structure and grand designs to become

a national player, but in doing so is likely to become a thorn in the side of Reliance Communications Ltd.

IDEA operates in eight telecom circles, or regions, in Western India, and has received additional GSMlicenses to expand its network into three circles in Eastern India -- the first phase of a major expansion

plan that it intends to fund through an IPO, according to parent company Aditya Birla Group Potential

2. Entry of New Competitors

Indian telecom sector offers unprecedented opportunities for foreign companies in various areas,

such as 3G, virtual private network, international long distance calls, value added services, etc.

The market is witnessing M&A activities that are leading to consolidations in the industry. This

trend has assisted companies in expanding their reach in the Indian telecom market to offer better

services to customers.The Indian telecom industry has always allured foreign investors. In fact, the

cumulative FDI inflow, from August 1991 to March 2007, in the telecommunication sector

amounted to US$ 3,892.19 million. This makes telecommunication the third-largest sector to

attract FDI in India in the post liberalization eraIn India large numbers of players are emerging in

the market on the national level from its state level existence such as:

Aircel

Virgin

Spice

Idea

Unitech etc..

3. Potential Development of Substitute Products

PRODUCT Telecom sectors offers a wide range of services in India, such as wireline, CDMA

mobile, GSM mobile, internet, broadband, carrier, MPLS-VPN, VSAT, VoIP, IN, etc. Internet

telephone It is emerging as a best option in place of because it is cheaper and video as an added

advantage.

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Internet service providers Market share (%)BSNL 45.2

MTNL 19

SIFY 8.9

BHARTI AIRTEL 6.8

RELIANCE 6.1

As we can see that use of internet in our country is on growing rate. As there are many tools which

can be accessed through internet like video conferencing other important tool is talking through

internet for eg. Google talk, rediff bol, yahoo messenger. Important thing is that internet is cheaper

medium of communication and one can have many facilities if he/she is connected to the world

through the internet.

4. Bargaining Power of Suppliers

As far as telecom industry is concerned, it is service based industry which is intangible, so in this

case there are less suppliers or we can say the role of suppliers are almost negligible in the case of

telecom industry. We are trying to analyze that minor role

1. Mobile hand set suppliers: - There can be many suppliers for handset, some of them are Nokia,

Sony Ericsson, Motorola, and Siemens etc. Many big telecom giants have their own handset

manufacturing (back ward integration) like Reliance Classic, Tata Indicom or they have

collaboration with some known companies like Reliance communication have tie ups with

Samsung and LG for their CDMA services

2. Some other suppliers for this industry can be the Optical fiber suppliers, Aluminum suppliers

(aluminum is required for the tower) but their bargaining power is limited.

3. Other important parameters can be the software assistance where suppliers can have the edge

some of the main software solution provider are TCS, Infosys, Wipro, Satyam etc. Again one thing

is noticeable that big giants like Reliance and Tata have their own units for software solution and

companies like Vodafone, Spice are taking services from above stated companies. So here

software providers have bargaining power because suppose Vodafone cant go to Reliance info for

their software solution so here suppliers can have edge over the companies

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5. Bargaining Power of Consumers

Recent Status: 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 bythe companies. Airtel, Reliance, Tata and Sterlite are some of the companies that are expected to

spur the growth in 2008, as compared to AMJ07. According to Cygnus estimates, telecom industry

was expected to grow by 25% in 2008 as compared to AMJ07, in terms of sales. EBDITA and

PAT are expected to grow by 32% and 34% respectively in 2008 as cost expenses are being

control by major companies like Airtel and Reliance. The major booster is the wireless mobile

subscriber base; crossing over 261m in March 2008. Other services like Internet subscriber base

has also provided significant impetus with its subscriber base reaching over 11m in March 2008.

The total subscriber base of Wireline services stood at 39.42 million as on 31st March 2008. The

incumbents BSNL and MTNL have 80.05% and 9.33% market share respectively in the subscriber

base, while all the five private operators together have 10.62% share. Wireline subscriber base has

been declining in the last few years. Subscriber base for some of the companies like Bharti, Tata

(Tele & Communications), MTNL and Reliance increased marginally. On the other hand, BSNL,

Shyam and Telelinks have lost marginal subscriber base in 3rd QUARTER OF 2008, as compared

to the previous quarter.

Porter's Five Forces model outlines the primary forces about competitiveness within the

industry.

. The intensity of rivalry among competitors is very high

. Potential Entry of New Competitors is very low

. Product development and enhancement is serviced by the market player

. Medium to low bargaining power of suppliers

. Bargaining Power of Consumers is little high

SWOT ANALYSIS

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Strengths:

Technology Advancement has offered enhanced services

Widening of network coverage to rural areas also

Low Operational Costs

Demand of Mobile Commerce

Weaknesses:

High start-up cost

Reducing ARPU

Reducing MoU

Opportunities:

Large domestic market over a billion populations

Low Teledensity as compare to other developed countries

Potential in rural market

3G and WiMax to be launched

Threats:

Higher bidding cost for 3G

Government control companies get regulatory benefits over private player

Net-phone

Key Take Away for Investors

Rapid CAGR of more than 40 per cent over last from few years

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Low Teledensity as compare to other developed countries leave place for future growth

Upcoming 3G and WiMax Technology to result in high ARPU

Telecom Industry Whats Road Ahead

Growth Potential

The Indian rural market is going to be the next big thing for wireless telecom providers. With the

teledensity in rural areas being a little more than 10 per cent against the national average of 33.23

per cent, there seems to be huge untapped potential for mobile phone penetration in rural India.

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The much awaited Third Generation (3G) Auction has been delayed. As per Depart-ment of

Telecom (DoT), set a base price of INR 2,020 crore for a pan-India 3G spectrum where as the

Union Finance Ministry stepped in with a recommendation to double this price to INR 4,040

Crore.

The Cabinet Committee on Economic Affairs (CCEA) is likely to consider the proposal to set INR

3540 crore by the means of doubling the reserve price for Delhi, Mumbai and category A circles

and increasing it by 1.5 times for Kolkata and category B circles and retaining the current base

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price for category C circles. This could again put off the much-awaited roll-out of advanced

mobile services.

WiMax, Broadband Wireless Access (BWA), which was been proposed at INR 1,010 Crore could

be doubled to INR 2,020 Crores as recommend by ministry of finance.

Mahanagar Telephone Nigam (MTNL) becomes the first telecom company to launch third-

generation (3G) mobile services in India on 5th February 2009. MTNL competes with private

firms, including Bharti Airtel, Vodafone, Reliance Communications, Idea Cel-lular and Tata

Teleservices, in India. State-owned telcos MTNL and BSNL were given 3G spectrum last year

before the private players, giving them the first mover's advan-tage.

According to a report by in-dustry body FICCI and tele-com consulting firm BDA, "3G

subscriber base will reach 90 million by 2013 and the reve-nue from 3G is expected to reach $

15.8 billion by the same year." Even introduc-tion of 3G would also in-crease the Average

revenue per users (ARPU).

FUTURE OF INDIAN TELECOM

INDUSTRYIndustry on High Growth Track

The telecom industry has been growing at a CAGR of 40 per cent during 2003-2008, with total

subscriber growing at an average of 9.5 million subscribers per month over the last year. The

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subscriber base totaled to 346.89 million in December 2008, and is ex-pected to be 500 million

and 800 million by 2010 and 2012 respectively as per TRAI. The ARPU for the industry is INR

240, which is among the lowest in the world.

Rural Expansion & Services Abroad

The number of mobile users per 100 persons is described by teledensity. Currently, the teledensity

of the Indian telecom sector is 33.23 per cent, whereas the TRAI expected it to reach around 60

per cent by 2012.

Falling Handset Prices and Youth Population

Falling handset prices along with added features, makes the market more attractive. Today, the

handsets are available in just three-digit figures with all necessary facilities. Young generation and

living standard is also one of the factors for the increase in sub-scriber base.

Alarming Competition

The rising competition from new entrants in the industry, both domestic and foreign play-ers along

with new technologies and their core competencies, will heat up the competition in the industry.

Availability of Spectrum

The Government has allowed and framed the policies for introduction of new technologies in the

Indian telecom sector in the form of 3G and Wimax. The Department of Tele-com and TRAI are

about to auction the required 3G spectrum to various service providers. The scarcity of spectrum

and the price to be charged at the auction will purely be a matter of time.

Passive Infrastructure Sharing

The infrastructure sharing will encourage more efficient operations, thereby resulting in significant

cost savings. The company is also willing to explore and share active infra-structure, based on

guideline issued by TRAI.

Mobile Commerce to Become the Next Big Thing

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Mobile commerce is the upcoming and growing trend. The increased use of mobile phones for the

purpose of banking, tele-booking, inquiries, and other commercial ser-vices will lead to further

increase in the revenues of the companies. The increased use of such services is welcomed by the

users as it offers high utility and value for money.

Mobile Number Portability to Become a Reality Soon

Indian mobile users will soon have the option to switch their service providers without changing

their mobile numbers. Implementation of mobile number will motivate and stimulate the service

providers to constantly endeavor to further improve their quality of service in order to retain

existing customers and attain new subscribers.

Falling ARPUs Margins under Pressure

The revenues are showing a fall because of declining call tariff. However, the profit mar-gins are

stable because of rising subscriber base in the industry. Every month, more than 9.5 million

subscribers are added in the last year.

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BIBLIOGRAPHY

www.coai.com

www.trai.gov.in

www.google.com

www.wikipedia.org

http://www.coai.com/http://www.trai.gov.in/http://www.google.com/http://www.wikipedia.org/http://www.coai.com/http://www.trai.gov.in/http://www.google.com/http://www.wikipedia.org/