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Introduction

The Indian telecommunication industry is one of the fastest growing industry in the world, with 621.28 million
telephone (landlines and mobile) subscribers and 584 million mobile phone connections as of March 2010, is
the second largest telecommunication network in the world and the second largest in terms of number of
wireless connections in the world. Telecommunication activities saw rapid growth in India starting at the
dawn of the 21st century and since then, efforts have been made from both governmental and non-
governmental organizations to further improve the telecommunication infrastructure. The eventual goal is to
foster the development and widespread use of modern telecommunication technologies that will serve all
segments of Indiaǯs culturally diverse society, and to transform it into a country of technologically aware
people. The Indian Mobile subscriber base has increased in size by a factor of more than one-hundred since
2001 when the number of subscribers in the country was approximately 5 million to 584 million in March 2010.
In the first quarter of 2010 there have been a record breaking 59.18 million mobile subscriber additions - More
than twice as many added in China during the same period (29.5 million), which is currently leading with 780
million mobile subscribers as of March 2010.

As the fastest growing telecommunications industry in the world, it is projected that India will have 1.159
billion mobile subscribers by 2013. Furthermore, projections by several leading global consultancies indicate
that Indiaǯs the total number of subscribers will exceed China by 2013. The industry is expected to reach a size
of Rs 344,921 crore (US$ 76.92 billion) by 2012 at a growth rate of over 26 per cent, and generate employment
opportunities for about 10 million people during the same period.

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‰elhi 239.44 230.78 -3.61%
Mumbai 226.52 226.05 -0.21%
Kolkata 144.41 142.26 -1.49%
Chennai 128.64 137.12 6.59%
Maharashtra 170.79 168.61 -1.28%
Gujarat 159.10 148.82 -6.47%
Andhra Pradesh 173.26 162.00 -6.50%
Karnataka 184.94 168.58 -8.85%
Tamil Nadu 146.73 138.23 -5.79%
Kerala 162.04 155.06 -4.31%
Punjab 195.07 179.17 -8.15%
Haryana 135.80 121.01 -10.89%
Uttar Pradesh(W) 141.70 129.25 -8.78%
Uttar Pradesh(E) 146.32 136.18 -6.93%
Rajasthan 133.22 127.32 -4.43%
Madhya Pradesh 128.54 130.70 1.68%
West Bengal 106.70 109.53 2.65%
Himachal Pradesh 135.37 127.25 -6.00%
Orissa 122.83 118.37 -3.63%
Bihar 117.24 120.41 2.71%
Assam 150.09 149.59 -0.33%
NE 162.09 160.27 -1.13%
Jammu and Kashmir 118.85 134.04 12.79%
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metres.

WiMax has several potential areas of growth:

Ȉ The IT industry can expand to other cities as well

Ȉ It can support the nation-wide literacy programme withvideoconferencing playing a vital role in the education
ofrural students

Ȉ Voice over Internet Protocol (VoIP) will make it possible to telecast entertainment programmes in remote areas

Ȉ Improved communication could integrate remote villageswith the world economy

Ȉ It can enhance labour productivity through rapidcommunication, e.g. easy and frequent interactionsbetween
producers and suppliers could increase the demand for Indian products

It is estimated that India will have 13 million WiMaxsubscribers by 2012. Aircel is the pioneer in WiMaxtechnology in
India. The state-owned player, BSNL, aims to connect 74,000 villages through WiMax. Unwilling to be leftbehind,
Bharti, Reliance, and VSNL have already acquiredlicenses in the 3.3GHz range.

Infrastructure Sharing Ȃ Optimising Costs

In the midst of the telecom boom, common infrastructure will improve coverage and quality of calls andreduce
costs.

In order to curtail their network deployment costs, many service providers are considering infrastructure sharing. It
isa giant leap towards Indiaǯs ambitious target of 500 million subscribers by 2010. Infrastructure sharing promises
several advantages:

Ȉ Significant reduction in initial set up costs

Ȉ Increased environmental aesthetics

Ȉ Lower operating costs for service providers

Ȉ Improved service quality

Ȉ Increased affordability for customers

Ȉ Faster roll out of services in rural and remote areas

Since one tower costs around US$ 77,500, the industry canregister considerable savings by sharing infrastructure.

Passive Infrastructure (for sharing)

Ȉ Physical sites and buildings

Ȉ Shelters

Ȉ Towers

Ȉ Power supply and battery back-up

Active Infrastructure (for sharing)

Ȉ Antenna systems

Ȉ Cables and transmission systems

Ȉ Backhaul (core infrastructure with switches and networking)

A step forward in infrastructure sharing is TRAIǯs proposalto include those rural and remote areas in its purview
thatare not covered by wireless signals with assistance from the Universal Service Obligation Fund (USOF). The
regulator has also recommended sharing both passive and activeinfrastructure though the current licensing
agreement does not allow sharing of active infrastructure.

Managed Service Ȃ Outsourcing in Telecom

Nokia offers different services such as remote care, remoteintegration, consulting, planning and optimisation
throughits managed service division.

Managed service is another segment that is attractingtelecom companies. On account of the rapidly
growingsubscriber base, service providers find it difficult to manage their infrastructure and network. In such cases,
theycompletely or partially outsource their infrastructure ornetwork management operations.

A case in point is Nokia which is managing the network for Hutchison Essar Limited in 19 circles in India.
Havingsuccessfully capitalised on the business potential of managed service, Nokia is already earning 30 per cent
ofits total revenue from this segment. The company has alsoshifted its first Global Network Solutions Centre
(GNSC) to India. The company manages 39 cellular networks in 30countries. Its Indian centre will act as a global hub
for otherNokia operation centres.

Advantages of Managed Service

Ȉ Smooth management of technological complexity

Ȉ Opportunity to strengthen core competency

Ȉ Reduction in financial outlay

Ȉ Touching base with new processes and technologies

Virtual Private Network (VPN) Ȃ % #   %

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Telecom policies have reiterated the need for expanding telecom coverage to include even inaccessible and as yet
unconnected rural areas. Further, the Governmentǯs special mechanisms, such as Universal Services Obligation
(USO) fund and Access ‰eficit Charges (A‰C), are making a serious effort to empower rural India with mobile
telephony. Sharing of infrastructure is a crucial initiative towards accomplishing this goal.

Enterprise Telecom Services

Telecom service providers are increasingly targeting enterprises by providing them with dedicated services. Some
of the key services include voice over internet protocol, dedicated telecom communication systems, IT
infrastructure enabled unified communication services, etc. This segment is expected to witness major
developments as the demand for enhanced telecom infrastructure is increasing along with thegrowth in the
Information and Communication Technologies (ICT) industry.
COMPETITION OVERVIEW
There are three types of players in telecom services:

Ȉ State owned companies (BSNL and MTNL)

Ȉ Private Indian owned companies (Reliance Infocomm, Tata Teleservices,)

Ȉ Foreign invested companies (Hutchison-Essar, Bharti Tele-Ventures, Escotel, IdeaCellular, BPL Mobile,
Spice Communications)

#$%
&'& (#$%')

Year of Establishment - 2000

Company Profile - Bharat Sanchar Nigam Ltd. is World's 7th largest Telecommunications Company providing
comprehensive range of telecom services in India: Wireline, C‰MA mobile, GSM Mobile, Internet, Broadband,
Carrier service, MPLS-VPN, VSAT, VoIP services, IN Services etc. Within a span of five years it has become
one of the largest public sector unit in India.

Sales/Revenues/Turnover - US‰ 8 billion (Turnover)

Global Presence/ Marketing Network - It has a network of over 45 million lines covering 5000towns with over
35 million telephone connections.

Acquisitions / Strategic Alliances - Future Prospect BSNL plans to expand its customer base from present 47
million lines to 125 million lines and infrastructure investment plan to the tune of Rs. 733 crores (US$ 16.67
million) in the next three years.


*  %
&'& (*%')

Year of Establishment -1986

Company Profile - MTNL was set up by the Government of India to upgrade the quality of telecom services,
expand the telecom network, introduce new services and to raise revenue for telecom development needs of
Indiaǯs key metros. MTNL with a market share of about 13% of the National telecom Network has a customer
base of 5.92 million. The Govt. Of India currently holds 56.25% stake in the company.

Sales/Revenues/Turnover - US‰ 2.47 billion (Revenue)

Global Presence/ Marketing Network - It has a customer base of 5.92 million

Acquisitions / Strategic Alliances - MTNL has formed a Joint Venture company in Nepal by the name of United
Telecom Ltd. (UTL) in collaboration with Telecom Consultants India Limited (TCIL) in 2001 for providing WLL
based basic services in Nepal. MTNL has set up its 100% subsidiary .Mahanagar Telephone Mauritius Limited.
(MTML) in Mauritius, for providing basic, mobile and international long distance services in 2004.

MTNL-STPI IT Services Ltd. is a 50:50 Joint Venture between Software Technology Parks of India (STPI) and
Mahanagar Telephone Nigam Limited, (MTNL). The JV formed in 2006.

MTNL has restructured Millennium Telecom Ltd. (MTL) as a Joint Venture company of MTNL and BSNL with
51% and 49% equity participation respectively. The company will now be entering into new business stream
of international long distance operations and will be executing a project of submarine cable system, both east
and west from India.
v +  With the increased economic activity due to liberalization, growth of lines is expected to be
around 400,000 a year. MTNL is also making its entry in the field of M-commerce too, which will enable the
customers to transact business with the help of his mobile phone or similar hand held devices. MTNL is adding
nearly 450 more Base Transceiver Stations (BTS) in ‰elhi and Mumbai.

ü $%
&'& (ü$%')

, -./ &  1986

&0+-  The Videsh Sanchar Nigam Limited (VSNL) - a wholly Government owned corporation.
The company operates a network of earth stations, switches, submarine cable systems, and value added
service nodes to provide a range of basic and value added services and has a dedicated work force of about
2000 employees. VSNL's main gateway centers are located at Mumbai, New ‰elhi, Kolkata and Chennai.

$ 1ã   1*  US‰ 1.084 billion (Revenue)

2 / +   13 
% 43 The company has 52 subsidiaries in 21 countries as well as

operations across four continents.

41$
4   VSNL acquired Nasdaq-listed Teleglobe International Holdings Ltd for
$239 million in 2005 Videsh Sanchar Nigam Ltd acquired Tyco Global Network, submarine cable system, for
US‰ 130 million in 2005.

v +  The company plans to expand its wholesale voices services across the EU, to effectively
enable enterprise customers and retail voice carriers to connect to India. VSNL is adding its capacity to meet
the overwhelming demand for connectivity to India in the wholesale voice services domain. The company is
also offering flexible agreements and charging methods to meet the growing demands of the wholesale voice
market

#
 

, -./ & 51985

&0+-  Bharti Tele-Ventures Limited was incorporated on July 7, 1995 for promoting investments
in telecommunications services. Its subsidiaries operate telecom services across India. Bhartiǯs operations are
broadly handled by two companies: the Mobility group and the Infotel group.

$ 1ã   1*  Rs. 1.73 billion (Turnover)

2 / +   13 
% 43 The mobile business provides mobile & fixed wirelessservices using
GSM technology across 23 telecom circles while the Airtel Telemedia Services business offers broadband &
telephone services in 94 cities.

41$
4   Bharti Telecom and British Telecom formed a 51%:49% joint venture,
Bharti BT Internet for providing Internet services, in 1998 Bharti Tele-Ventures acquired an effective 32.36%
equity interest in Bharti Mobile (formerly JT Mobiles), the cellular serv ices provider in Karnataka and Andhra
Pradesh circles in 1999 Bharti Telesonic entered into a joint venture, Bharti Aquanet, With SingTel for
establishing a submarine cable landing station at Chennai in 2001 A 50:50 joint venture between Bharti and
SingTel, to undertake the largest infrastructure project between Singapore and Indian companies in 2001

v +  Bharti Airtel company is planning to set up 3000 more towers as part of enhancing their
rural coverage and will now focus on rural and semi-urban areas.

ã  &&

, -./ &  1999

&0+-  Reliance Telecom's cellular services are available in 340 towns within its eight -circle
footprint. Reliance Infocomm also offered for the first time in India, mobile data services though its R-World
mobile portal. This portal leverages the data capability of the C‰MA 1X network. Reliance Infocomm offers a
complete range of telecom services covering mobile and fixed line telephony including broadband, national
and international long distance services, data services and a wide range of value added services and
applications aimed at enhancing productivity of enterprises and individuals.

$ 1ã   1*  US‰ 767 million (Revenue)

2 / +   13 
% 43 Reliance Communications has IP-enabled connectivityinfrastructure
comprising over 150,000 kilometres of fiberoptic cable systems in India, the US, Europe, Middle East, and the
Asia Pacific region.

41$
4   International wholesale telecommunications service provider, FLAG

Telecom amalgamates with Reliance Gateway, a wholly owned subsidiary of Reliance Infocomm in
2$$Reliance Communication acquired a US based YipesHoldings, Inc. ("Yipes"), the leading provider of
managedEthernet services in 2007

v +  The company plans to concentrate on mobile content services other than voice. It also
plans to spend Rs 5 billionevery year for the next three years. This CAPEX will be used for network expansion
of its C‰MA business to over4,500 towns from the present 2,000 towns and expansion of its GSM operations.
The company also plans to launchinternational data roaming facility in Canada, followed byLatin America and
then to Asian countries like Japan, South Korea, China and other countries.

**   

, -./ &  1996

&0+- Tata Teleservices is a part of the $12 billion Tata Group, which has 93 companies, over
200,000 employees and morethan 2.3 million shareholders. Tata Teleservicesǯ bouquet of telephony services
includes Mobile services, Wireless‰esktop Phones, Public Booth Telephony and Wireline services. Other
services include value added services like voice portal, roaming, post-paid Internet services, 3-
wayconferencing, group calling, Wi-Fi Internet, USB Modem, data cards, calling card services and enterprise
services.

2 / +   13 
% 43Tata Teleservices has presence in across 19 circles thatincludes Andhra
Pradesh, Chennai, Gujarat, Karnataka,‰elhi, Maharashtra, Mumbai, Tamil Nadu, Orissa, Bihar, Rajasthan,
Punjab, Haryana, Himachal Pradesh, Uttar Pradesh (E), Uttar Pradesh (W), Kerala, Kolkata, MadhyaPradesh
and West Bengal.
41$
4  Tata Teleservices has acquired Hughes Tele.com (India) Limited [now
renamed Tata Teleservices (Maharashtra)Limited] in 2002

v + The company is also expanding its footprint, and has paid Rs. 4.17 billion ($90 million) to ‰oT
for 11 new licensesunder the IUC (interconnect usage charges) regime.

ü- 

, -./ & Acquired majority stake in Hutch Essar in India, by buying out complete stake of
Hutch in 2007, Essar is still minoritystakeholder in company

&0+- Vodafone Essar in India is a subsidiary of Vodafone Group Plc and commenced operations in
1994 when itspredecessor Hutchison Telecom acquired the cellular licence for Mumbai. Vodafone Essar now
has operationsin 16 circles covering 86% of India's mobile customer base, with over 45.78 million customers.
Vodafone Essar, underthe Hutch brand, has been named the 'Most Respected Telecom Company', the 'Best
Mobile Service in the country' and the 'Most Creative and Most Effective Advertiser of the Year'.

$ 1ã   1* US‰ 69,378.08 million (Revenue)

2 / +   13 
% 43It has operations in 25 countries across 5 continents and 40partner
networks with over 200 million customers worldwide.

v + Vodafone Essar is expecting to touch over 35 million customers across 400,000 shops and
thousand of hutchǯs own employees along with employees of its business associates.

 
 

, -./ & 1995

&0+- Idea Cellular is part of the Aditya Birla Group, which is India's first truly multinational
corporation. Aditya Birla Nuvo Ltd. holds 35.7 per cent, Birla TMT Holdings Ltd. 44.9 per cent, Grasim 7.5 per
cent, and Hindalco 10.1 per cent in Idea.

$ 1ã   1* Rs. 24,005.50 million (Sales Turnover)

2 / +   13 
% 43

Has a customer base of over 17 million, I‰EA Cellular has oper ations in ‰elhi, Maharashtra, Goa, Gujarat,
Andhra Pradesh, Madhya Pradesh, Chattisgarh, Uttaranchal, Haryana, UP-West, Himachal Pradesh and
Kerala.

41$
4  Merged with Tata Cellular Limited in 2001, thereby acquiring original
license for the Andhra Pradesh Circle Acquired RPG Cellular Limited and consequently the license for the
Madhya Pradesh (including Chattisgarh) Circlein 2001.In 2004 acquired Escotel, incumbent cellular service
provider in Haryana, UP(W) & Kerala and new licensee in HP Acquired Escorts Telecommunications Limited
(subsequently renamed as Idea Telecommunications Limited) in 2006 Merger of seven subsidiaries with Idea
Cellular Limited in 2007

v + Idea also plans to enter rural and neglected circles as a strategy to gain subscribers. Other
advancements in the telecom industry will help it cut costs - use of e-mail to send bills to customers; sharing
cell sites; smaller base transmission stations that will mean lesser infrastructure requirements and exp enses
and independent tower operators. Along with its plan to go for a national long distance licence, it will also
look at international long distance in the near future.

3G
International Mobile Telecommunications-2000 (IMT-2000), better known as 3G or 3rd Generation, is a family
of standards for mobile telecommunications fulfilling specifications by the International Telecommunication
Union,which includes UMTS, and C‰MA2000 as well as the non-mobile wireless standards ‰ECT and WiMAX.
While the GSM E‰GE standard also fulfils the IMT-2000 specification, E‰GE phones are typically not branded
3G. Services include wide-area wireless voice telephone, video calls, and wireless data, all in a mobile
environment. Compared to 2G and 2.5G services, 3G allows simultaneous use of speech and data services and
higher data rates (at least 200 kbit/s peak bit rate to fulfill to IMT -2000 specification). Today's 3G systems can
in practice offer up to 14.0 Mbit/s on the downlink and 5.8 Mbit/s on the uplink.

History
y The first pre-commercial 3G network was launched by NTT ‰oCoMo in Japan branded FOMA, in May
2001 on a pre-release of W-C‰MAtechnology.

y The first commercial launch of 3G was also by NTT ‰oCoMo in Japan on 1 October 2001, although it
was initially somewhat limited in scope; broader availability was delayed by apparent concerns over
reliability.

y The second network to go commercially live was by SK Telecom in South Korea on the 1xEV-
‰O technology in January 2002.

y By May 2002 the second South Korean 3G network was by KTon EV-‰O and thus the Koreans were
the first to see competition among 3G operators.

y The first European pre-commercial network was at the Isle of Man by Manx Telecom, the operator
then owned by British Telecom, and the first commercial network in Europe was opened for business
by Telenor in ‰ecember 2001 with no commercial handsets and thus no paying customers. These
were both on the W-C‰MA technology.

y The first commercial United States 3G network was by Monet Mobile Networks, on C‰MA2000 1x
EV-‰O technology, but this network provider later shut down operations.

y The second 3G network operator in the USA was Verizon Wireless in October 2003 also on
C‰MA2000 1x EV-‰O.

y In ‰ecember 2007, 190 3G networks were operating in 40 countries and 154 HS‰PA networks were
operating in 71 countries, according to the Global Mobile Suppliers Association (GSA).

y In Europe, mass market commercial 3G services were introduced starting in March 2003 by 3 (Part
of Hutchison Whampoa) in the UK and Italy. The European Union Council suggested that the 3G
operators should cover 80% of the European national populations by the end of 2005.

y By June 2007 the 200 millionth 3G subscriber had been connected. Out of 3 billion mobile phone
subscriptions worldwide this is only 6.7%. In the countries where 3G was launched first Ȃ Japan and
South Korea Ȃ 3G penetration is over 70%. In Europe the leading country is Italy with a third of its
subscribers migrated to 3G. Other leading countries by 3G migration include UK, Austria, Australia
and Singapore at the 20% migration level. A confusing statistic is counting C‰MA2000 1x RTT
customers as if they were 3G customers. If using this definition, then the total 3G subscriber base
would be 475 million at June 2007 and 15.8% of all subscribers worldwide.
 y In Canada, Rogers Wireless was the first to implement 3G technology, with HS‰PA services in
eastern Canada in late 2006. Their subsidiary Fido Solutions offers 3G as well. Because they were the
only incumbent carrier (out of 3) with UMTS/HS‰PA capability. Realizing they would miss out on
roaming revenue from the 2010 Winter Olympics, Bell and Telusformed a joint venture and rolled out
a shared HS‰PA network using Nokia Siemens technology. Bell launched their 3G wireless lineup on
4 November 2009, and Telus followed suit a day later on 5 November 2009.

y Mobitel Iraq is the first mobile 3G operator in Iraq. It was launched commercially on February 2007.

y China announced in May 2008, that the telecoms sector was re-organized and three 3G networks
would be allocated so that the largest mobile operator, China Mobile, would retain its GSM customer
base. c

y In November 2008, Turkey has auctioned four IMT 2000/UMTS standard 3G licenses with 45, 40, 35
and 25 MHz top frequencies. Turkcell has won the 45 MHz band with its ͂358 million offer followed
by Vodafone and Avea leasing the 40 and 35 MHz frequencies respectively for 20 years. The 25 MHz
top frequency license remains to be auctioned.

y In 2008, India entered into 3G Mobile arena with the launch of 3G enabled Mobile and ‰ata services
by Bharat Sanchar Nigam Ltd (BSNL) in Bihar (Patna). BSNL is the first Mobile operator in India to
launch 3G services. After that (MTNL) launched 3G in Mumbai & ‰elhi. Government owned Bharat
Sanchar Nigam Ltd (BSNL) has already been provided with a 3G license and has been operating its
services in 380 cities by the end of March 2010. Nationwide auction of 3G wireless spectrum in April
2010 was announced. The Auction was a great success for Government of India, as it collected triple
the amount it was expecting. The estimation for both 3G and BWA was around Rs 35,000/- Crore.
Total revenue the Government collected was nearly Rs 1,06,000 Crore. Private providers are
expected to provide its 3G service from September 2010.

Features
‰ata rates
It is expected that 3G will provide higher transmission rates: a minimum data rate of 2 Mbit/s for stationary or
walking users, and 384 kbit/s in a moving vehicle.
Security
3G networks offer greater security than their 2G predecessors. By allowing the UE (User Equipment) to
authenticate the network it is attaching to, the user can be sure the network is the intended one and not an
impersonator.

Applications
The bandwidth and location information available to 3G devices gives rise to applications not previously
available to mobile phone users. Some of the applications are:

m Mobile TV Ȃ a provider redirects a TV channel directly to the subscriber's phone where it can be watched.
m Video on demand Ȃ a provider sends a movie to the subscriber's phone.
m Video conferencing Ȃ subscribers can see as well as talk to each other.
m Tele-medicine Ȃ a medical provider monitors or provides advice to the potentially isolated subscriber.

m Location-based services Ȃ a provider sends localized weather or traffic conditions to the phone, or the
phone allows the subscriber to find nearby businesses or friends.

3G-IN‰IA
India's 3G auction, which kicked off on April 9 after a delay of over a year, is more than just incomprehensible
numbers and tech jargon. Beyond added features on your mobile phone, the 3G story carries the potential to
impact more citizens socially and economically than any other single policy move in India's telecom history.

For starters, 3G is the third generation of wireless mobile technology - a revolutionary step ahead of the
existing 2G services we are used to. It essentially pushes broadband growth helping in the proliferation of
information and vital communication services. In 132 countries across the world, it is enabling the
convergence of mobile communications, computing and consumer electronics. Now it is set to introduce
Indians to the cellular world of rich voice, super-fast connectivity, customised infotainment and high-
resolution videos.

And you won't have to break the bank for all this - competitive market forces will ensure that the price of 3G
services is pegged at par with prevailing 2G tariffs for voice and SMS."If operators launch 3G services at high
prices, they will be saddled with empty networks. It is in their interest to promote usage though lower prices.
This will also compensate consumers for higher costs of 3G handsets," 

There are other significant aspects of the arrival of next-gen telephony in India.

y Within four years, mobile handsets will connect nearly 800 million Indians, making it the largest
connected group of humans anywhere in the world. The experience and benefits of 24x7 superfast
connectivity will change the world of millions of Indians.
 y Even as high-speed data access makes urban office-goers more productive, the experience will be far
more life-altering for rural consumers. Telecom operators will be forced to roll out networks in yet
unserved territories to recover additional 3G spectrum costs. The technology is expected to bridge
the urban-rural digital divide.

y Access to 3G mobility will address policy concerns by delivering essential services like financial,
healthcare and education.

y 2G networks are already playing a vital role in expanding access to essentially voice and valueadded
SMS services.India's adoption of 3G will further improve the level of teledensity,especially broadband
penetration.This,in turn,leads to enhanced G‰P and job creation opportunities

y Several studies,including one by the International Telecommunications Union (ITU),indicate that

every 1 per cent increase in the country's broadband internet penetration increases G‰P by about 10
per cent,while a similar increase in mobile penetration increases G‰P by roughly 5 per cent. 


A‰VANTAGES 

y The reason why 3G networks are seen as India's best bet to address its extremely low penetration of
broadband services is because it has the advantage of being backward-compatible with existing 2G
networks.
y It also provides increased capacity network and other efficiency elements that enable operators to
deliver more competitive mobile broadband services,while ultimately reducing their investments.
y Two big advantages of 3G for India would be in the areas of healthcare and m-commerce.In a country
where basic medical provisioning has had difficulties reaching people in isolated locations,the
technology could be a much-needed shot in the arm.Services ranging from medication reminders to
remote diagnostics and monitoring services have the potential to improve and extend life.
y Meanwhile,financial services and mobile commerce using 3G have already reached a new level of
convenience,visibility and safety around the world and are just getting off the ground in India.3G can
make banking and payment solutions convenient and secure.
y Even businesses in India will benefit.Mobile broadband will allow Indian employees real time access
to remote desktop enterprise solutions and increasing a company's response time to
customers,leading to increased productivity,while high data rates and optimised quality of service
would increase the country's competitiveness.
y India also seems to be a big market for entertainment services with elements of social networking.In
such a movie-crazy nation,citizens could take to 3G for watching films and serials like fish to water.In
fact,most 3G handset operators consider entertainment as potentially India's biggest revenue
spinner driven by 3G services. 

3G-Risky

y The 3G track record doesn't inspire confidence. In Europe, overbidding nearly bankrupted many
operators.
 y India's state-owned BSNL, which the government allowed to launch 3G a year ago, now offers service
in 300 cities, has just 700,000 customers, and has cut tariffs at least twice.

y To raise cash for the auctions, Essar Group, which owns a third of No. 2 carrier Vodafone Essar, is in
talks to sell an antenna tower subsidiary to Boston-based American Tower (AMT) for $420 million.

y Aircel, a smaller player controlled by Malaysia's Maxis Communications, on Jan. 14 sold 17,500 of its
towers to a Mumbai company for $1.8 billion.

y Idea Cellular, the third-largest carrier, says it has raised $2 billion in cash and loans for the auction Ȅa
move designed in part to squelch rumors that the company may be a takeover target.

y Most Indians seem content to use phones for voice calls and texting. Only 40,000 or so iPhone
(AAPL)s are being used in the country, and smartphones make up well under 5% of the handset
market, India's government estimates.

y Of India's 530 million-plus subscribers, only 2 million regularly use the mobile Net, mostly to
download pictures of cricket players and Bollywood stars, according to the Internet & Mobile
Association of India, a trade group.

Should India Have Bypassed 3G And Moved ‰irectly To 4G

y India will be among the last countries to access 3G technology. Nearly 132 countries across the world
already have 3G technology and mobile services in form or the other.
y Even in the poorest region of Africa, 31 countries already have access to 3G. Emerging economies like
Brazil, Argentina, Mexico and Indonesia among other countries had access to 3G services for many
years now.
y So the question really is -Is it too late for India to usher in 3G technology? Should India have directly
leapfrogged to 4G?

What is 4G Technology

Fourth-generation (4G) mobile wireless broadband services, also known as Long Term Evolution (LTE), are
designed for services such as high-speed internet connectivity, streaming multimedia services such as TV
broadcasting and high-definition video conferencing, media mobility and even online gaming.

4G technology allows more data to be transferred and at a higher speed than 3G technology. A number of
developed countries such US and Japan have started initiatives to move towards 4G technology.

Comparing 3G and 4G
 y Unlike 3G technology which requires a minimum of 2×5 MHz carrier, a superior 4G technology can
operate using a minimum 2×1.25 MHz carrier, although both the technologies are focused on
ramping up internet data usage but at a different speed altogether.
y While the speed of mobile telephony under LTE is a more than three times faster along with ease in
compatibility with older phone models and networks. Compared to 3Mbps speed offered by 3G
services, LTE can offer speeds of up to 10 Mbps.
y In the current bidding process, the 3G spectrum is allotted for only 3 slots in all circles. This would
lead to issue of spectrum at higher prices to limited players leading to a monopoly like situation.
y In a competitive environment, the prices are market determined and demand-supply oriented. Thus,
3G allocation would prove out to be a costly service to the final subscribers due to limited spectr um
availability with only three slots being offered per circle.

Finance
y Every year, telecos guzzle roughly $6-7 million of bank loans. For some time now, banks have been
concerned about their creditorsǯ falling ARPUs and rising subscriber acquisition costs (from Rs.100 in
2005 to Rs.1000 now).
y RCom board has approved diluting 26% in favour of a new partner to raise capital. Reports say it has
restarted discussions with Africaǯs MTN for merger.
y Bharti Airtel has bought Zain Africa BV for an enterprise value of $10.7 million.
y By the next two months, Airtel, Vodafone Essar, RCom, Tata Tele, Idea Cellular, Aircel, S -Tel, and
BSNL & MTNL will spend close to Rs.1,00,000 crore in capital expenditure. This includes the
Rs.67,719 crore towards the 3G auction, and over Rs.30,000 crore more towards the rollout of 3G
networks.
y Airtel, Vodafone and Idea reportedly drew down on term-loans from SBI. RCom reportedly drew
Rs.8,000 crore from the firmǯs reserves. Whereas, Aircel acquired Rs.8,500 crore by selling its tower
business.

Annual Total Profit/Loss Borrowings Interest ‰ebt/Equity PB‰ITA ‰ebt/EBIT‰A

Consolidated Income (Rs. crore) Paid
Bharti Airtel 38,181 8,044 13,517 278 0.46 14,296 0.95

RCom 27,204 6,249 39,162 1,212 0.93 11,017 3.55

Idea Cellular 10,775 882 9,039 906 0.68 3,375 2.68

Vodafone 7,180 -264 5,920 352 16.97 1,448 4.09

Essar (S)
Tata 6,790 -1,814 11,692 964 1.14 716 16.33
Teleservices

y Rs.67,719 crore for 3G licences for 20 years translates to just Rs.28 a month per subscriber, assuming
there are 100 million subscribers.
y Telecom operators bid the way they did because there hasnǯt been a spectrum allocation since 2
years and nobody wanted to be left out.
List of 3G Operators

‰elhi: Bharti Airtel, Reliance communications and Vodafone

Mumbai: Bharti Airtel, Reliance communications and Vodafone

Kolkata: Aircel, Reliance communications and Vodafone

Tamil Nadu (including Chennai): Aircel, Bharti Airtel and Vodafone

Andhra Pradesh (including Hyderabad): Bharti Airtel, Aircel and Idea

Karnataka (including Bangalore): Aircel, Bharti Airtel and Tata

Maharashtra: Idea, Tata and Vodafone

Gujarat: Idea, Tata and Vodafone

Kerala: Aircel, Idea and Tata

Punjab: Aircel, Idea, Reliance communication and Tata

Haryana: Idea, Tata and Vodafone

Uttar Pradesh east: Aircel, Idea and Vodafone

Uttar Pradesh west: Bharti Airtel,, Idea and Tata

Rajasthan: Bharti Airtel, Reliance communications and Tata

Madhya Pradesh: Idea, Reliance communications and Tata

West Bengal: Aircel, Bharti Airtel, Reliance communications and Vodafone

Himachal Pradesh: Bharti Airtel, Idea, Reliance communications and S Tel

Bihar: Aircel, Bharti Airtel, Reliance communications and S Tel

Orissa: Aircel, Reliance communications and S Tel

Assam: Aircel, Bharti Airtel and Reliance communications

North East: Aircel, Bharti Airtel and Reliance communications

Jammu and Kashmir: Aircel, Bharti Airtel, Idea and Reliance communications

Overview- 3G
y The winning bids for 3G spectrum totalled Rs. 67,710 crore (US$15 billion, at Rs. 45 to a dollar),
against the government's original expectation of Rs. 35,000 crore (US$7.78 billion).
y Also ready are mobile device manufacturers with a slew of 3G handsets; providers of hosting, billing
and network management services with expanded offerings; and content providers selling cell phone
ring tones, wallpapers and graphics.
y Amid that euphoria, industry observers worry about the "winner's curse" of successful bidders paying
too much for the licenses, which ultimately could decrease margins and dampen future investment
enthusiasm. Intense price competition is steadily eating into mobile operators' earnings, and that
could force marginal players in the 3G market to eventually succumb to a wave of consolidation, they
say.
y Mobile operators Bharti Airtel, Vodafone Essar and Reliance Communications agreed to pay Rs.
3,317 crore (US$737 million) and Rs. 3,247 crore (US$722 million) each for the coveted ‰elhi and
Mumbai markets. The government had set a base price of Rs. 320 crore (US$71 million) for each of
those two markets. Bharti, Vodafone and Reliance shared licenses for the remainder of the 22
telecom zones on offer with six other bidders that included Idea Cellular and Tata Teleservices.
y The winning bidders could repeat the disaster that followed the U.K.'s 3G spectrum auction in 2000.
At that time, the U.K. raised £22.5 billion (U S$34 billion) for five 3G licenses, but the participants paid
too much and didn't have the infrastructure to get started. However, that India's 3G operators will
have a support system of compatible mobile devices and a range of applications at affordable prices,
which the British operators didn't have a decade ago.
y Take an operator like Bharti [which has 128 million mobile phone subscribers], even if they tap into
1% of their subscriber base in the first year, and steadily increase that by 0.5% each year i n the next
six to eight years, they will actually more than break even. Estimating operating expenses at 30% and
taking into consideration investments in applications, marketing and other services. TRAI has
allowed 3G operators to launch their services after September 2010.
y To recover their investments, the 3G spectrum winners will have to focus on customers with high
ARPUs, or the top 100 million subscribers who want more data services. The voice ARPU has an
upper threshold, so if the operators have to generate higher revenues, it has to come from data and
other value-added services. But to achieve that, mobile operators would need to incentivize start-ups
to create 3G applications.
y The telecom operators are not capable of driving the innovation themselves; they need to create an
ecosystem for it. They could do that by outsourcing their billing function to application developers
and incentivize them by sharing up to 80% of the revenues with them. With value added services, the
current ARPU of Rs. 100 will go up to Rs. 300 or Rs. 400, voice-based services alone will not lift ARPUs
 so high. Japanese mobile operator NTT ‰oCoMo has done precisely that to spur development of
applications.
y India's overall teledensity is 53%.. Pyramid Research of Cambridge, Mass., forecasts India's mobile
penetration rate at 80% by 2014. In fact, India's net subscription additions forecasts over the 2009-
2014 period put it above all other countries in the world, including China, in terms of subscription
additions over the next five years."
y Bharti Telecom leads India's wireless phone services market with a 22% share, followed by Reliance
and Vodafone at above 17% each and Idea Cellular at 11%, according to TRAI data as of March 2010.
Nine other providers, including the public sector Mahanagar Telephone Nigam Ltd (MTNL) and
Bharat Sanchar Nigam Ltd (BSNL), share the rest of the market. In landline services, BSNL and
MTNL have 37 million subscribers, or 85% of the market, but they account for a tele-density of just
about 3%, according to TRAI.
y The stakes, however, are getting bigger as India's mobile operators see their ARPUs decline steadily
under severe price competition. The monthly ARPU was Rs. 150.23 in the quarter Jan-Marǯ2010,
down 3.45% from the previous quarter, for the majority of the industry that uses the so-called GSM
technology (or global system for mobile communications), according to TRAI data.
y Nokia, which leads the market for mobile devices with a share of nearly 60%, has a portfolio of more
than 20 3G-enabled handsets, says V. Ramnath, head, operator channel for Nokia India. The most
affordable 3G device in that range is the Nokia 2730, priced at Rs. 4,689. A recent report by research
services firm Evalueserve predicts that the Indian market is likely to have 395 million 3G handsets by
2013; about 20 million Indians currently use 3G-enabled handsets. Services such as video downloads,
music downloads, Internet applications and search will see an upsurge. The urban markets would
account for 80% of the total 3G customer base in the next three years according to the Evalueserve
report.
y Others that have unveiled new device offerings include Sony Ericsson, Spice Mobile and Taiwan's
High Tech Computer Corp.; the latter is marketing a smart phone in partnership with Bharti Airtel
and Qualcomm. Bharti Airtel and Vodafone Essar have launched Apple's iPhone 3G handsets with
their mobile services. The country has more than 50 mobile phone marketers, many of them recent
entrants such as Micromax, Karbonn and Lava.
y Everybody is hungry for spectrum; everybody is running at 95%-plus capacity of the network, he
says. If they have to add more subscribers, they don't have spectrum available in 2G. They will use
the 3G spectrum to vacate some of the subscribers from 2G networks and move high-end subscribers
to 3G networks. That also explains the peaking of bids for 3G spectrum in the major metros of New
‰elhi and Mumbai. Every operator would start with 3G in the urban market, and as they start seeing
subscription rates go up, they might extend their 2G networks to the rural markets. The pricing for
3G licenses has gone so high partly because of a scarcity of spectrum.