Indian Telecom Sector by Suresh

United world school of business [mumbai]
Indian Telecom
Industry
Suresh Solanki (50)
Term II
international business
BONAFIDE CERTIFICATE
Certified that this project report “……INDIAN TELECOM
SECTOR… ……………..”
Is the bonafide work of “…………..

SURESH SOLANKI (50)
Who carried out the project work under my supervision”
DR. PRIYA M KENKARE

HEAD OF THE DEPARTMENT
United World School of Business (Mumbai)

Major Players in the Indian Telecom Sector
Network Services
International Business: Term II

Table of Contents
Executive Summary
1 Indian Telecom Industry
1.1 History
1.2 Quick Facts
1.3 Telecom services
1.4 Industry Sectors
1.5 Growth Avenues
1.6 Industry Revenue (2002-2010)
1.7 Subscriber Growth
1.8 Major Players
1.8.1 Wireless Service Providers (Market share)
1.8.2 Handset Manufacturers (Market share)
1.9 Major Investments
1.10 Rural Telephony
1.11 Exploring the rural telecom opportunity
1.12 Policy Initiatives
1.13 India’s Subscriber base comparison with world

2 Telecom Regulatory Authority of India (TRAI)
2.1 Mission
2.2 Role of TRAI
2.3 Recommendatory Functions
2.4 Mandatory Functions
2.5 Other functions
3 Scenario of Indian Telecom Sector
3.1 Liberalization
3.2 National Telecom Policy 1994
3.3 Telecom Regulatory Authority of India
3.4 New Telecom Policy 1999
3.5 Performance of Telecom Equipment Manufacturing Sector

3.6 Opportunities
3.7 Network Expansion
4 India’s Competitive Advantage

4.1 Stable Economic Outlook
4.2 Large Market Potential
4.3 Large Talent Pool
4.4 Low Labour Cost
5 The Road Ahead

5.1 Gradual Progression in Telecom Sector
5.2 Acquiring New Subscribers through expansion in Rural India
5.3 Selling More to Existing Subscribers
5.4 Government Initiatives
5.5 The reasons for the increasing importance of MVAS can be classified as
5.6 Defining VAS
5.6.1 Basic definition of a VAS
5.6.2 Definition as per TRAI
5.7 Mobile VAS in rural market
5.8 Access devices for MVAS
5.8.1 GPRS Handsets
5.8.2 3G Handsets
6 Key trends in telecom industry

6.1 Mobile Number portability (MNP)
6.1.1 The Inhibitors
6.1.2 MNP Implementation globally
6.2 Wimax v/s 3G
6.3 Mobile Virtual Network Operator (MVNO)
6.4 IPTV
6.5 Telecom penetration in rural India faces challenges

6.6 TRAI fixes MNP charges at RS 19

6.7 Telecom tariff war in India reaches new heights
6.8 IT telecom to scale new heights in 2010
7 Industry Updates
7.1.1 Idea Cellular’s Acquisition of Spice Telecom

7.1.2 Vodafone’s entry into India
7.1.3 Telenor-Unitech Deal
7.1.4 TTSL – Do Como Deal
7.1.5 Bharti-MTN deal (in talks)
7.2 FDI Investments in the Telecom Sector in India
7.3 Outsourcing by Telecom Service Providers in India
7.3.1 Hutchitson Essar (now Vodafone) and Nokia Deal
7.3.2 Bharti Airtel’s IT Outsourcing to IBM
7.3.3 Bharti’s Outsourcing to Alcatel-Lucent

7.3.4 Bharti Outsourcing Deal with Nokia & Ericsson
7.4 Entry of MTS & Videocon in the Indian market
8 Future Technology Trends

8.1 IP Multimedia Subsystems (IMS)
8.2 High Speed Downlink Packet Access (HSDPA)
8.3 4G or Fourth Generation Networks
9 Targets set by the government

9.2 Rural Telephony
9.3 Broadband
9.4 Infrastructure Sharing
9.5 Introduction of Spread of IPTV and Mobile TV
9.6 Manufacturing
9.7 International Bandwidth
9.8 Research & Development

10 Indian Telecommunication at a glance
11 Conclusion
12 References
Appendix A

Executive Summary
The rapid growth in Indian telecom industry has been contributing to

India’s GDP at large. Telecom industry in India started to set up in a phased
approach. Privatisation was gradually introduced, first in value-added
services, followed by cellular and basic services. Telecom Regulatory
Authority of India (TRAI), was established to regulate and deal with
competition (the service providers). This gradual and thoughtful reform
process in India has favored industry growth. Upcoming services such as
3G and WiMax will help to further augment the growth rate. The Indian
telecommunications industry is one of the fastest growing in the world and
India is projected to become the second largest telecom market globally by
2010.
This is evident from the facts of Telecom Industry for example, India
added 113.26 million new customers in 2008, the largest globally. The
country’s cellular base witnessed close to 50 per cent growth in 2008,
with an average 9.5 million customers added every month. This would
translate into 612 million mobile subscribers, accounting for a tele-density
of around 51 per cent by 2012. It is projected that the industry will
generate revenues worth US$ 43 billion in 2009-10.
In this report we have tried to capture most of the areas of Telecom

Industry. Major highlights of the report are History of Telecom Industry,
Current Industry Analysis, Role of TRAI, Scenario of Indian Telecom, FDI
Regulation, Competitive advantages, Outsourcing in Telecom, Emerging
Technologies, Latest Innovation, and Growth Trends, Mergers and
Acquisitions.

1 Indian Telecom Industry
1.1 History
1851 • Introduction of Telegraph services

1947 • Foreign Telecom Companies nationalized to form
PTT
1980’s: The Beginning • Tele-density in 1980-81: 0.3%
• Introduction of public pay phones
• Private Sector
allowed
• DOT, MTNL and VSNL formed
Early to Mid • Telecom policy 1994
90’s: a Messy - Basic telephony service to private
Affair operators
- 49% FDI
- 8 licensees began operations in
Aug 1995
Late 90’s • Birth of a regulator:
• TRAI NTP 1999
• (New Telecom Policy)
2000+ • CAGR of around 85% since 1999

• FDI: 74% (2005)
2007-2009 • having the world's lowest call rates the fastest
growth
the in of subscribers (45 million in 4
number
• months),
• fastest sale
the world's of million
cheapest mobile
mobile phones (in a
handset
• the world's most affordable colour phone
1.2 Quick Facts

Total telecom subscribers:
429.72 million (March 2009) Wireless
subscribers: 391.76
million
Wire line subscribers: 37.94 million
Tele density: 36.98 per cent
India’s service providers’ revenue in Q1 (2009):
$8.2 billion
India’s Rural Mobile Phone Users: 100 Million
1.3
Teleco
m
service
s
Telecommunication sector in India is primarily subdivided into two
segments, which are Fixed Service Provider (FSPs) and Cellular
Services. Telecom industry in India constitutes some essential
telecom services like telephone, radio, television and Internet.
Telecom industry in India i s specifically emphasizing on latest
technologies like GSM (Global System for Mobile Communications),
CDMA (Code Division Multiple Access), PMRTS (Public Mobile Radio
Trunking Services), Fixed Line and WLL (Wireless

Local Loop) India has a prospering market specifically in GSM mobile service
and the number of subscribers is growing very fast.
Intern
et
PMRTS
VSATs
Radio
Paging
GMPCS
Basic
Services
Mobile
Services
1.4 Industry Sectors
Network Telecom Service

Infrastructure Providers: Bharati-
Companies: Airtel, Vodafone,
Alcatel-Lucent, Idea, Reliance.
Cisco, Ericsson
T
e
l
e
c
o
m
Telecom Solutions
Telecom Equipment
Providers: Tech-
Manufacturers:
Mahindra, Aricent,
Nokia, Motorola,
IBM Indi Wipro,
Samsung
Sasken
From holistic point of view telecom industry can be divided to four

sub-sets. The major forces in Indian telecom industry are Service
providers. All major telecom equipment suppliers have their R&D
centers in India. In last 5 years, global giants in mobile devices
have set up their manufacturing facitilities in India. The discussion
in this document is mainly restricted to only Telecom Service
Providers.
1.5 Growth Avenues
• Managed services is another segment that is attracting telecom companies.

On account of the rapidly growing subscriber base, service providers find it
difficult to manage their infrastructure and network management operations. In
such cases, they completely or partially outsource their infrastructure or
network management operations.
• To reduce their network deployment costs, many service providers are

considering infrastructure sharing offers the following advantages:
 Improved service quality
 Increased affordability for customers
 Faster roll out of services in rural and remote areas
 Significant reduction in initial set up costs
 Increased environmental aesthetics
 Lower operating costs for service providers
• Enterprise Telecom Services includes key services, such as voice over

Internet protocol (VoIP), dedicated telecom communication systems; IT
infrastructure enabled unified communication services, etc. Telecom service
providers are increasingly targeting enterprises by providing dedicated services
and are expected to witness major developments in near future.
• Virtual Private Network is a private data network that provides
connectivity within closed user groups via public telecommunication
infrastructure. Competition is likely to heat up in the VPN segment as DOT has
relaxed the norms for private players.
• 3G The Indian government plans to auction the spectrum for 3G services by

inviting bids from domestic as well as foreign players, and creating a
competitive environment that offers better services to consumers. Therefore,
the 3G spectrum is among the major investment opportunities and growth
drivers of the telecom industry.
 The immense potential for 3G is reflected by the 30–40 percent annual

growth in Value- Added Services.
 Cell phone manufacturers are striving to develop USD 100 priced 3G

handsets for the
Indian market.
India expects to replicate its 2G growth in 3G services.
• WiMAX has been one of the most significant developments in wireless

communication in the recent past. Since this mode of communication provides
network access in inaccessible locations at a speed of more than 4 Mbps, it is
expected to be a major factor in driving telecom services in India, especially
wireless services. Thus, it will lead to the increased use of telecom services,
Internet, value-added services and enterprise services. WiMAX is expected to
accelerate economic growth and assist in providing better education, healthcare
and entertainment services.
 It is estimated that India will have 13 million WiMAX subscribers by 2012.
 Aircel is the pioneer in WiMAX technology in India.
 The state-owned player, BSNL, aims to connect 74,000 villages through

WiMAX.
 Bharti, Reliance and VSNL have acquired licenses in the 3.3GHz

range to utilise the opportunities offered by this domain.
• Value Added Services: The VAS industry was worth USD 632 million in
2006–07. The industry is estimated to grow by 60 percent in 2007–08 and
become an USD 1,011 million opportunity.
The VAS industry is currently focussing on the entertainment sector, such as the
Indian film industry and cricket; however, there is scope for growth in other
avenues as utility-based services, such as location information and mobile
transactions.
• Rural Telephony: As the government targets to increase rural teledensity from
the current 2 percent to 25 percent by 2012, rural telephony will require major
investments. This segment will boost the demand for telecom services,
equipment, Internet services and other value-added services; thereby, offering
great market opportunities for telecom players.
1.6 Industry Revenue (2002-2010)
According to a Frost & Sullivan industry analyst, by 2012, fixed line revenues are
expected to touch US$
12.2 billion While mobile revenues will reach US$ 39.8 billion in India. India has
become the second country in the world to have more than 100 million CDMA-
based (code division multiple access) mobile phone subscribers after the US,
which has 157 million CDMA users. The Indian telecommunications industry is on
a growth trajectory with the GSM operators adding nearly 9 million new
subscribers in April 2009, taking the total user base to 297 million, a growth of
3.11 per cent over the additions made the previous month. The figures, however,
do not include the GSM subscriber additions made by
Reliance
Telecom.
Yea Revenue(US$
r
2002- billions)9
03
2003- 10
04
2004- 11
05
2005- 15
06
2006- 20
07
2008- 32
2009- 09 43
10(forecasted)
Revenue (US$
billion)
Revenue (US$
billion)
43
32
20
15
9 10 11
1.7 Subscriber Growth
India added 130 million new customers in 2008-09, the largest globally. The
country’s cellular base witnessed close to 50 per cent growth in 2008, with an
average 9.5 million customers added every month.
By April 2009, the total number of telephone connections reached 441.47 million.
With this growth, the overall tele-density reached 37.94 at the end of April 2009.
According to Business Monitor International, India is currently adding 8-10 million
mobile subscribers every month. It is estimated that by mid 2012, around half the
country's population will own a mobile phone. This would translate into 612 million
mobile subscribers, accounting for a tele-density of around 51 per cent by 2012.
Source:
www.trai.gov.in
1.8 Major Players
Bharti-Airtel leads the wireless market with 24% market share. The company
recently achieved the magic figure of 100 million subscribers. However, Bharti-
Airtel expects a bloodbath in the Indian telecom market in the near future, and is
looking to spread its risks by entering new geographies (Bharti-MTN deal is
discussed in Industry Update Section). With 12-13 players present in the market
there would be a severe pressure on margins. Be it an Aircel or Etisalat, the new
operators would not remain fringe players in the Indian market, but would try and
rock the applecart of existing operators. The growth in Indian market could start
tapering off very soon. According to an industry expert the subscriber base will not
expand beyond 800 million in coming years from current number 400 million. Also,
ARPUs in India have steadily falling ($5-$6). There have been talks about 3G and
IPTV pushing growth, but it all seems far-fetched. The third generation of mobile
services (3G) will be used by telcos to gain more spectrum. Besides, the services
will be used only in urban areas.
1.8.1 Wireless Service Providers (Market share)
As on June 30th 2009

Bharti
Airtel
18%
2 Vodaf
4
% one
8%
Essar
1% BSNL
1
%
3% I
1 D
8 E
%
A
A
i
r
c
e
l
Reliance GSM
MTNL
5%
11% Loop Mobile
1
1 Tata Teleservices
%
S
o
u
rc
e:
w
w
w
.c
o
ai
.c
o
m
1.8.2 Handset Manufacturers (Market share)
India's telecom equipment manufacturing sector is set to become

one of the largest globally by 2010. Mobile phone production is
estimated to grow at a CAGR of 28.3%, totaling 107 million
handsets by
2010. Nokia Leads the market with whopping 60% share. Korean
giant Samsung currently at number
Three is looking forward increase its market share to 20% through
aggressive marketing.
H
a
n
d
s
e
t
M
a
r
k
e
t
5% N
ok
15%
ia
6%
6 So
7
% 0 ny
%
8% Sa
m
su
ng
M
ot
or
ol
a
L
G
Others
1.9 Major Investments
The booming domestic telecom market has been attracting huge amounts of
investment which is likely to accelerate with the entry of new players and launch of
new services. Buoyed by the rapid surge in the subscriber base, huge investments
are being made into this industry.
• The Russian government is likely to pick up equity amounting to US$ 670

million-US$ 700 million in Sistema Shyam TeleServices Ltd (SSTL), a joint
venture between Russia-based telecom major Sistema and Shyam Group in
India, by the end of this financial year. SSTL is also planning to invest US$
5.5 billion over the next 5 years in India.
• Norway-based telecom operator Telenor has bought a 60 per cent stake in
Unitech Wireless for
US$ 1.23 billion.
• Japanese telecom major NTT DoCoMo acquired a 27.31 per cent
equity capital of Tata
Teleservices for about US$ 2.6 billion in November 2008.
• Bahrain's Batelco has signed a deal to buy 49 per cent in Chennai-based S-
Tel, a GSM service provider, for US$ 225 million.
• BSNL, India's leading telecom company in revenue terms, will put in about
US$ 1.16 billion in its
WiMax project.
• Vodafone Essar will invest US$ 6 billion over the next three years in a bid to
increase its mobile subscriber base from 40 million at present to over 100
million.
• Telecom operator Aircel, which launched GSM mobile services in Bangalore
in February 2009, plans to invest US$ 220.58 million over the next year to set
up base stations across the state.
Some deals are discussed in detail in industry consolidation section.
1.10 Rural Telephony
Rural India had 76.65 million fixed and Wireless in Local Loop (WLL) connections
and 551,064 Village Public Telephones (VPT) as on September 2008. Therefore, 92
per cent of the villages in India have been covered by the VPTs. Universal Service
Obligation (USO) subsidy support scheme is also being used for sharing wireless
infrastructure in rural areas with around 18,000 towers by 2010.
1.11 Exploring the rural telecom opportunity

It is believed that of the next 250 million people expected to go mobile; at least
100 million will come from rural areas. Though the rural mobile penetration is
highest in Punjab (20.69 per cent), followed by Himachal Pradesh (17.09 per
cent), Kerala (10.63 per cent) and Haryana (10.20 per cent), most
companies are now sweating it out by hard selling their products and services in
the rural areas of the region. As a result, the geographical coverage of mobile
telephony in India has gone up from 13 percent, a couple of years ago, to 39
percent now.
1.12 Policy Initiatives
The government has taken many proactive initiatives to facilitate the rapid growth
of the Indian telecom industry.
• 100% foreign direct investment (FDI) is permitted through the automatic

route in telecom equipment manufacturing
• FDI ceiling in telecom services has been raised to 74%
• Introduction of a unified access licensing regime for telecom services on a pan-
India basis
• Plan to introduce mobile number portability in a phased manner
• The government is implementing a program of connecting 66,822 uncovered
villages under the Bharat Nirman programme. The government will invest
US$ 2 billion to set up 112,000 community service centres in rural India
to provide broadband connectivity in 2008-09.
• The Department of Telecommunications (DOT) has stated that foreign
telecom companies can
Bid for 3G spectrum without partnering with Indian companies. Only after
winning a bid, would they need to apply for unified access service licence
(UASL) and partner with an Indian company in accordance with the FDI
regulations.
1.13 India’s subscriber base comparison with the world (as on 2008)
2 Telecom Regulatory Authority of India (TRAI)
2.1 Mission
To ensure that the interests of consumers are protected and at the same time to
nurture conditions for growth of telecommunications, broadcasting and cable
services in a manner and at a pace which will
Enable India to play a leading role in the emerging global information society.
2.2 Role of
TRAI One of the main objectives of TRAI is
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. The functions of TRAI can be divided
as : Recommendatory function and Mandatory Function.
2.3
Recommendatory
Functions
• Need and timing for introduction of new service provider
• Terms and conditions of licence to a service provider
• Revocation of license for non-compliance of terms and

conditions of license
• Measures to facilitate competition and promote efficiency in

the operation to facilitate growth in industry
• Technological improvement in services by service providers
• Inspection of type of equipment used by service provider

• Measures for Technological development
• Efficient Management of available spectrum
2.4
Mandatory
Functions
• Ensure compliance of terms and conditions of license
• Fix the terms and conditions of their inter connectivity between

service providers
• Ensure Technical compatibility and effective inter-

connection between different service providers
• Regulate arrangements for sharing of revenues amongst service providers
• Lay-down the standards of QoS to be provided by service provider, ensure

this by periodical survey
• Lay-down and ensure time period for providing local and long-
distance circuits of telecommunication between different service providers
• Maintain inter-connect agreement register
• Ensure compliance of USO (universal service obligation)
2.5 Other functions

• Levy fees and other charges as determined by regulations
• Perform administrative functions as entrusted to it by Central government or

as per TRAI act
• Notify in Official Gazette the service rates and message rates within and
outside India
Snapshot of TRAI
functions
3 Scenario of Indian Telecom Sector
The telecom services have been recognized the world-over as an important tool for
socio-economic
development for a nation. It is one of the prime support services needed for rapid
growth and modernization of various sectors of the economy. Indian
telecommunication sector has undergone a major process of transformation through
significant policy reforms, particularly beginning with the announcement of NTP 1994
and was subsequently re-emphasized and carried forward under NTP 1999. Driven by
various policy initiatives, the Indian telecom sector witnessed a complete
transformation in the last decade. It has achieved a phenomenal growth during the last
few years and is poised to take a big leap in the future also.
The Indian Telecommunications network with
430 million connections (as on March 2009) is the 3rd largest in the world. The sector is
growing at a speed of 46-50% during the recent years. This rapid growth is possible
due to various proactive and positive decisions of the Government and contribution of
both by the public and the private sectors to the Indian consumers at affordable
prices. Presently, all the telecom services have rapid strides in the telecom sector have
been facilitated by liberal policies of the Government that provides easy market access
for telecom equipment and a fair regulatory framework for offering telecom services
been opened for private participation. The Government has taken following main
initiatives for the growth of the Telecom Sector:
3.1 Liberalization
The process of liberalization in the country began in the right earnest with the
announcement of the New Economic Policy in July 1991. Telecom equipment
manufacturing was de-licensed in 1991 and value added services were declared open
to the private sector in 1992, following which radio paging, cellular mobile and other
value added services were opened gradually to the private sector. This has resulted in
large number of manufacturing units been set up in the country. As a result most of
the equipment used in telecom area is being manufactured within the country. 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.
3.2 National Telecom Policy 1994
In 1994, the Government announced the National Telecom Policy which defined certain
important objectives, including availability of telephone on demand, provision of world
class services at reasonable prices, improving India’s competitiveness in global market
and promoting exports, attractive FDI and stimulating domestic investment, ensuring
India’s emergence as major manufacturing / export base of telecom equipment and
universal availability of basic telecom services to all villages. It also announced a series
of specific targets to be achieved by 1997.
3.3 Telecom Regulatory Authority of India (TRAI)
The entry of private service providers brought with it the inevitable need for
independent regulation. The Telecom Regulatory Authority of India (TRAI) was, thus,
established with effect from 20th February 1997 by an Act of Parliament, called the
Telecom Regulatory Authority of India Act, 1997, to regulate telecom services,
including fixation/revision of tariffs for telecom services which were earlier vested in
the Central Government.
The TRAI Act was amended by an ordinance, effective from 24 January
2000, establishing a Telecommunications Dispute Settlement and Appellate Tribunal
(TDSAT) to take over the adjudicatory and disputes functions from TRAI. TDSAT was set
up to adjudicate any dispute between a licensor and a licensee, between two or more
service providers, between a service provider and a group of consumers, and to hear
and dispose of appeals against any direction, decision or order of TRAI.
3.4 New Telecom Policy 1999
The most important milestone and instrument of telecom reforms in India is the New
Telecom Policy 1999 (NTP 99). The New Telecom Policy, 1999 (NTP-99) was approved
on 26th March 1999, to become effective from 1st April 1999. 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. It clearly recognized the need for
strengthening the regulatory regime as well as restructuring the departmental telecom
services to that of a public sector corporation so as to separate the licensing and policy
functions of the Government from that of being an operator. It also recognized the
need for resolving the prevailing problems faced by the operators so as to restore their
confidence and improve the investment climate.
Key features of the NTP 99 include:

· Strengthening of Regulator.
· National long distance services opened to private operators.
· International Long Distance Services opened to private sectors.
· Private telecom operators licensed on a revenue sharing basis, plus a one-time
entry fee.
Resolution of problems of existing operators envisaged.
· Direct interconnectivity and sharing of network with other telecom operators
within the
Service area was permitted.
· Department of Telecommunication Services (DTS) corporatized in 2000.
· Spectrum Management made transparent and more efficient.
3.5 Performance of telecom equipment manufacturing sector
As a result of Government policy, progress has been achieved in the manufacturing of

telecom equipment in the country. There is a significant telecom equipment-
manufacturing base in the country and there has been steady growth of the
manufacturing sector during the past few years. The figures for production and export
of telecom equipment are shown in table given below:
(Rs in
Crores)
Year Production Export
2002-03 14400 402
2003-04 14000 250
2004-05 16090 400
2005-06 17833 1500
2006-07 23656 1898
2007-08 41270 8131
Rising demand for a wide range of telecom equipment, particularly in the area of
mobile telecommunication, has provided excellent opportunities to domestic and
foreign investors in the manufacturing sector. The last two years saw many renowned
telecom companies setting up their manufacturing base in India. Ericsson set up GSM
Radio Base Station Manufacturing facility in Jaipur. Elcoteq set up handset
manufacturing facilities in Bangalore. Nokia and Nokia Siemens Networks have set up
their manufacturing plant in Chennai. LG Electronics set up plant of manufacturing
GSM mobile phones near Pune. Ericsson launched their R&D Centre in Chennai.
Flextronics set up an SEZ in Chennai. Other major companies like Foxconn, Aspcom &
Solectron etc have decided to set up their manufacturing bases in India.
The Government has already set up Telecom
Equipment and Services Export Promotion Council and Telecom Testing and Security
Certification Centre (TETC). A large number of companies like Alcatel, Cisco have also
shown interest in setting up their R&D centers in India. With above initiatives India is
expected to be a manufacturing hub for the telecom equipment.
3.6 Opportunities
India offers an unprecedented opportunity for telecom service operators, infrastructure
vendors, manufacturers and associated services companies. A host of factors are
contributing to enlarged opportunities for growth and investment in telecom sector:
· An expanding Indian economy with increased focus on the services sector

· Population mix moving favorably towards a younger age profile
· Urbanization with increasing incomes
Investors can look to capture the gains of the Indian telecom boom and diversify their
operations outside developed economies that are marked by saturated telecom
markets and lower GDP growth rates.
Inflow of FDI into India’s telecom sector during April 2000 to March 2009 was about Rs
275,444 million. Also, more than 8 per cent of the approved FDI in the country is
related to the telecom sector.
The telecom sector has shown robust growth during the past few years. It has also
undergone a substantial change in terms of mobile versus fixed phones and public
versus private participation.
The number of telephones has
increased from 54.63 million as on 31.03.2003 to 429.72 million as on 31.03.2009.
Wireless subscribers increased from 13.3 million as on 31.03.2003 to 391.76 million as
on 31.03.2009. Whereas, the fixed line subscribers decreased from 41.33 million in
31.03.2003 to 37.96 million in 31.03.2009. The broadband subscribers grew from a
meager 0.18 million to 6.22 million during the last 5 years.
4 India’s Competitive Advantage
An analysis of the Indian telecom industry under the Porter’s Diamond Model
reveals that India offers a competitive advantage for firms operating in the country.
India is the fastest growing free

market democracy in the world. It
has a mature and dynamic private
sector, which accounts for 75 per
cent of India’s GDP, and a market with
enormous potential due to its large
size and diversity. It is also expected
to achieve the highest growth rate
among the BRIC countries (Brazil,
Russia, India and China). India offers
significant business
opportunities to the
services, as well as the
manufacturing sectors. This is
because India offers benefits such
as cost advantage in product
development and back-office
processing and the large-scale
availability of skilled
English-speaking
professionals. The middle class
population is also a significant
market for any business
entity. AT Kearney ranked India as the second-most attractive democracy in its
FDI confidence index. The success of MNCs is a proof that India is an attractive
investment destination. India’s huge domestic market and buoyant economic
growth have always attracted foreign investors.
Some of the key advantages of investing in India are

outlined below.
4.1 Stable Economic Outlook
A decade of reforms has opened the country to greater competition and spurred
industries to become more efficient. India is currently the fourth-largest economy
on PPP basis and is well positioned on a continuously increasing growth curve.
India’s emergence as a leading destination for foreign investment is a result of
positive indicators such as a stable 6 per cent annual growth, rising foreign
th
exchange reserves of over US$ 266.18 billion(July 24 2009) and Foreign Direct
Investment (FDI) of US$ 15 billion. Goldman Sachs had earlier predicted that India
will become the third-largest economy in the world. However, it has now revised
its previous estimates and claims that by 2050, India will even surpass the US and
become the second-largest economy after China. The country’s economic growth
has become more attractive due to the rising share of the services sector in the
GDP.
4.2 Large Market Potential
Around 30-40 million people in India join the middle class every year. The country’s
upper middle class spends 6 percent of its earnings on telecom services. India is
one of the largest consumer markets in the world. Due to rapid economic growth
and rise in disposable income, the spending power of consumers is increasing
rapidly. It has been forecasted that 15 years down the line, Indians will be
approximately four times richer than they are today. As per this forecast, Indians
will purchase five times more cars and consume three times more crude oil than
they do today.
According to the 2001 census, about 54 per cent of the country’s total population
was below 25 years of age. By 2013, another 200 million people will be joining the
league, representing an exponential growth in the ‘consuming class’. India will
become a large consumer of world resources - be it natural or man- made, thereby
offering numerous opportunities to marketers around the globe. Approximately 33
per cent of India’s population will be residing in urban areas by 2026, as against 28
per cent in 2001.
4.3 Large Talent Pool

The working age population is expected to rise by 83 per cent by 2026. India has
over 380 universities and about 1,500 research institutes, which churn out
approximately 200,000 engineers, 300,000 post graduates, 2,100,000 other
graduates and around 9,000 PhDs. This large base of skilled manpower offers
unparalleled advantages to the companies operating in India. As a result, many
multinational companies have either established operation hubs in India to
leverage this sizeable talent pool, or they have outsourced their work to a third
party in India. The numerous BPOs and KPOs flourishing in India are a direct
consequence of companies choosing the latter option.
4.4 Low Labour Cost
CII estimates that manufactured product outsourcing accounted for US$ 10 billion
in 2007. The value will escalate to US$ 50 billion by 2015. India has one of the
lowest labour costs among the developing countries, which is the foremost factor
for attracting multinational giants in every sector. The Ministry of Commerce,
Government of India, has estimated that off shoring operations to India can
provide a cost benefit of up to 40 to 60 per cent, as compared to developed
countries. The country has also emerged as a major R&D hub with more than
hundred Fortune 500 companies based in India. An apt example is Nokia, which
has set up its manufacturing operations in India considering the long term
sustainable demand for mobile telephony. The company believes that this
initiative will help the company in reducing time to market and respond better
to customer requirements. It has pumped in US$ 150 million into its Chennai
facility.
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India.
• Porter’s Diamond Model – Indian

Telecom Industry
5 The Road Ahead
The target for the 11th Plan period (2007-12) is 600 million phone connections
with an investment of US$ 73 billion. Apart from the basic telephone service, there
is an enormous potential for various value- added services. In fact, the real potential
for telecom service growth is still lying untapped.
According to the CII Ernst & Young report titled 'India 2012: Telecom growth
continues', revenue from
India's telecom services industry is projected to reach US$ 54 billion in 2012, as
against US$ 31 billion in
200
8.
India is the world’s largest untapped

mobile market
5.1 Gradual Progression in Telecom Sector

The progression chart below depicts the major regulations and events driving the
extra ordinary growth of Telecom sector from year 1999 to 2008. In order to
capitalize this opportunity of meeting the consumer needs in highly
competitive market the operators have reduced the tariffs to attract
consumers with low purchasing power primarily in semi urban and rural India. In fact
lucrative offers like being paid for incoming calls have transformed the
scenario completely. Through these changing regulations and events, the Industry
players are aiming to achieve the following
• Acquiring new subscribers by expanding in Semi Urban and Rural India

• Selling more services to existing subscribers
The recent TRAI recommendation permitting PC-to-phone calls where ISPs can
offer cheaper STD calls and even free local calls. This would result in further
reduction of voice tariffs. This would lead to increased focus on MVAS by mobile
operators.
5.2 Acquiring New Subscribers through expansion in Rural India
Acquiring customers have always been a great challenge for companies. Given
the current level of saturation in Metros and Urban Market and cut throat
competition among operators , increasing subscriber base in urban market
would be all the more challenging. Therefore a lot of operators with adequate
support from Government are eyeing the rural market for future growth. Big
operators like Airtel have claimed that soon mobile connections and recharge
vouchers etc will be available at all such places from where people buy match
boxes. This certainly explains the future penetration of these services in remotest
of villages.
5.3 Selling More to Existing Subscribers

This is relatively easier as compared to acquiring new customers. Also since now
the new subscriptions will largely happen at the bottom of the pyramid therefore
the new subscriptions will further lower the average revenue per user. In such a
scenario mobile VAS sector is a potential long-term revenue stream as it will be
easier to sell more to the existing customers.
5.4 Government Initiatives

Government also has supported the growth of this sector by coming out with a
number of initiatives for the low end subscribers of rural India, and Universal
Service Obligation (USO) fund was one such initiatives. The USO fund was an
initiative taken up by the government to increase rural teledensity. In recent
developments, BSNL and two private operators will erect 427 towers in remote
areas offering over four lakh mobile connections. All the towers are expected to
be erected and commissioned by December 2008. Under the second phase, DoT
aims at erecting 11,000 towers throughout the country to offer over 11 million
mobile connections ADC was levied by Telecom Regulatory Authority of India
(TRAI) in 2003 to provide support for BSNL's rural telephone obligation. Telecom
Regulatory Authority of India (TRAI) has recently given orders for the withdrawal
of the ADC (Access Deficit Charge) and the subsequent passing of the benefit to
the consumers by the telecom operators.
5.5 The reasons for the increasing importance of MVAS can be classified as:
Decrease in ARPU despite increase in MOU: Though the subscriber base is
growing at a rapid pace and has positively impacted industry revenues, operator
margins also have shrunk owing to competition and lower “Average Revenue per
User” (ARPU) as the major growth is coming from bottom of the pyramid. As ARPU
declines and voice gets commoditized, the challenge is to develop alternative
revenue streams and retain customers by creating a basis for differentiation in
high-churn markets.
Need for differentiation: There is a greater need among the telecom
operators to differentiate themselves from each other.
• Number of Licensees: With increasing number of licensees (98 UASL, and
37 cellular licenses) in the telecom space the average numbers of
operators in many circles have increased to 5-6 operators offering more
choices to the consumer. Thus the competition among the operators has
increased tremendously. Therefore it is very important for them to
differentiate themselves from the others. Now that voice has got
commoditized these operators are using MVAS for their
• differentiation and marketing these services heavily for creating
awareness among the consumers.
• Decreasing Call Rates: In order to attract consumers with relatively low
purchasing powers
primarily from Semi Urban and Rural India the operators have drastically
reduced the call rates making it affordable to even the lower segment of
society. The tariff in India is one of the lowest at Rs.1 per minute as compared
to the tariff in developed nations like USA and UK where the call rates are
Rs.13 and Rs7-8 respectively.
• 3G bidders who are non operators: The arrival of new technologies will
give rise to greater competition as many non operators are also bidding for
the 3G licenses. Department of Telecom
• has planned to allow five 3G operators in each circle depending on
the availability of spectrum.Therefore there would be a greater need to
differentiate one self in order to attract new customers and retain the
existing ones.
• Saturation in Metro and Urban Market: The metro/urban areas offer
high level of penetration and have significant mobile subscribers. In such a
highly saturated market with the entry of MVNO’s the competition will get
fierce. Therefore capitalizing on value added services will give operators
opportunity to increase ARPU by providing premium services.
Increasing need and demand from consumers: In addition to the above supply
side reasons the ‘pull effect’ from consumers asking for more than just basic
telephony is also a key driver for MVAS services. Today most of the consumers are
seeking more from their communication device apart from just mobility and
desire to stay connected. As we have seen, Telecommunication has moved beyond
providing just basic voice calls. The mobile phone has evolved from a mere
communication device to an access mode with an ability to tap a plethora of
information and services available in the ecosystem. This is the reason why it is
now being referred to as the ‘fourth screen’, after Cinema halls, Television and PC.
5.6 Defining VAS

But the fundamental question that remains is how VAS is defined. A clear MVAS
definition is not only required to clear the air among the MVAS providers but it will
also have an impact on the dynamics of the Value chain. A detailed definition of
VAS might have an impact on the licensing issues surrounding VAS. Let’s look at
different VAS definitions floating in the market.
5.6.1 Basic definition of a VAS

Value Added Service (VAS) in telecommunication industry refers to non-core
services, the core or basic services being standard voice calls and fax
transmission including bearer services. The value added services are
characterized as under:-
• Not a form of core or basic service but adds value in total service offering.
• Stands alone in terms of profitability and also stimulates incremental
demand for core or basic services
• Can sometimes be provided as stand alone.
• Do not cannibalize core or basic service.
• Can be add-on to core or basic service and as such can be sold at premium
price.
• May provide operational synergy with core or basic services.
A value added service may demonstrate one or more of these characteristics and
not necessarily all of them. In some cases, the value added service becomes so
closely integrated with the basic offering that neither the user nor the provider
acknowledge or realize the difference. A classic example is of P2P SMS. Some of the
operators do not consider P2P SMS as part of their VAS revenue.
5.6.2 Definition as per TRAI

In the Unified Access Service License (UASL), VAS is
defined as follows-
“Value Added Services are enhanced services which add value to the basic
teleservices and bearer
servic
es
for which separate licence are
issued”
The Government of India issues licenses for the following Value
Added Services:-
• Public mobile trunking service
• Voice mail service
• Closed users group domestic 64 kbps data network via INSAT satellites system
• Videotex service
• GMPCS
• Internet
• Audiotex
• Unified messaging service
5.7 Mobile VAS in rural market

The next wave of Telecom growth will come from the bottom of the pyramid.
For majority of the population in the rural segment, the mobile phone is the first
communication device. Rural should not always be interpreted as poor and
therefore some categories of MVAS might apply directly to them.
But whether the statement can be extended to MVAS depends on some key
factors. One is to clearly
identify the need of the rural segment, second is to communicate the services to
them i.e. generate awareness and thirdly, to provide an easy and cheap access
mode to the rural consumers. All these 3 are quite big challenges and therefore
needs to be addressed adequately for MVAS to take off in Rural India. Apart from
the identification of rural consumer needs and development of relevant
content, communication of these services to the rural population would be a bigger
challenge. One way to do this is to communicate through regional SMS for which a
separate SMS gateway needs to be installed. Literacy level of the geographical
area will be another limitation. Therefore the better communication option is Voice
in regional languages. The challenge with regional voice is not only investment but
also blockage of the already scarce spectrum.
Marketing the content in rural market is going to be all the more challenging. This
would require right packaging and pricing of MVAS. Providing cheap access mode
to end consumer would be another key booster to rural MVAS. Current voice
MVAS charges are expensive from a rural consumer perspective
therefore that also would need to be addressed for e.g. the ‘sachet model’ could
prove to be successful
here.
MVAS is going to address two main needs of rural consumers- connectivity and
entertainment mode. Connectivity will provide Information VAS on Agriculture
necessary for the farmer’s livelihood e.g. mandi rates, weather, etc. Health,
finance, job opportunities etc are potential areas. Mobile also has the potential
to evolve as a key entertainment mode considering lack of other entertainment
options in rural areas. The industry has witnessed some type of content being
downloaded more in small towns of UP and Bihar rather than in metros like
Delhi and Mumbai. Therefore by leveraging on these two aspects MVAS can be a
success in rural area.
5.8 Access devices for MVAS
5.8.1 GPRS Handsets

Currently the penetration of GPRS enabled handsets are close to 26% in India as
against 99% in South Korea and 76% in Japan. Of the total mobile subscribers in
India 65 million possess GPRS-enabled handsets. Of all those who posses GPRS
enabled handsets only 20-25% of them have got the GPRS activated and only
about 15% use it. Even in case of developed nations like South Korea and Japan
not more than 50% of the subscribers owning GPRS enabled handsets use it.
This clearly indicates that the consumer today engage more in text based services
than the web based applications. Therefore for MVAS to grow to its full potential
the handset manufacturers will have to look at ways to manufacture GPRS
enabled phones which are affordable and user friendly. Moreover they would also
need to increase its awareness and educate the consumers on how to use GPRS.
5.8.2 3G Handsets
The market for 3G in the country is expected to be huge with over 65 million
wireless subscribers, who use their handsets to access data services on the Web.
These subscribers are currently using mobile handsets which are internet-enabled
and are potential broadband subscribers with the deployment of advanced
wireless technologies such as 3G. According to Indian Cellular Association (ICA)
about 5% of mobile users already have handsets that can work on 3G
spectrum. In addition, out of all those possessing the 3G enabled handsets
the number of people who would use 3G services would be determined by the
quality of content available. Unlike most other countries, we are looking at 3G
services not only as premium services but also as an extension of 2G. Since our
broadband penetration is abysmal, 3G would provide a much required boost to it.
Given that mobile phones are much cheaper as compared to PCs, the demand
for broadband on mobile is expected to be much greater. More importantly,
3G will solve problems more in rural India. Therefore the shift towards 3G would
depend on affordability of handsets along with the quality of content available.
6 Key trends in telecom industry
6.1 Mobile Number portability (MNP)
One of the most frequent definitions that prevail in the telecom circles for
number portability is: "Number portability is a circuit-switch telecommunications
network feature that enables end users to retain their telephone numbers when
changing service providers, service types, and or locations."
Why mobile number portability (MNP)? When fully implemented nationwide by

both wireline and wireless providers, portability will remove one of the most
significant deterrents to changing service, providing unprecedented convenience
for consumers and encouraging unrestrained competition in the
telecommunications industry. In short, this is the best method to increase the
efficiency of the service provider by increasing the competition, thereby ensuring
better services in all respects.
From the subscribers’ perspective, this is a deceptively simple and very welcome
change, because they can change wireless service providers without worrying
about notifying friends, family and business contacts that their wireless number is
changing. In addition, being able to ‘port’ a number from one provider to another
eliminates the hassle and expenses of changing business cards, stationery,
invoices and other materials for businesses.
From the wireless carrier’s perspective the change is anything, but simple.
Virtually all of wireless carriers’ systems are affected. Especially any system that
relies on mobile identity numbers (MINs) or mobile directory numbers (MDNs) will
be affected. Examples of critical systems and processes that would be affected
are: billing, customer service, order activation, call delivery, roamer registration
and support, short messages service center, directory assistance, caller ID,
calling name presentation, switches, maintenance and CSC systems, home
location registers (HLRs), and visiting location registers (VLRs).
6.1.1 The Inhibitors
Huge Costs: One of the most common barriers in MNP implementation, within
any country, has been the implementation cost. Service Providers have been
constantly bargaining for time, based on the cost factor, from their respective
governments. Referring to the recent example of the US, where each of the large
carriers would need to spend $50–60 million to institute the service and an
equivalent sum to maintain it. The FCC on this plea gave wireless carriers in the
US another year, i.e., till November 2003, for resolving implementation issues. The
experience of developed countries exhibits that local number portability for fixed
wireline was introduced within two to three years of introduction of competition to
incumbent state telcos. The cost estimate for the implementation of WNP in
developed nations like the US can be very helpful for the other countries, who wish
to think on the lines of number portability. To add on increased marketing costs
are to be realized as the carriers look to lock up their current base before number
portability is implemented, and then aggressively pursue the customers of other
carriers thereafter.
Customer Retention/Increased Competition: Every subscriber in a race to
retain its customer would like to offer its customers best services so as to save
them from porting. It’s like a blessing in disguise for the customers, as they would
get better service irrespective of the carrier, albeit with the same number.
Infrastructure Upgrade: To support WNP, a company has to upgrade both its

hardware and software capabilities, which will amount to some cost. Softwares
need to be upgraded to provide proper routing of calls. The carriers need to
upgrade their networks to handle portability requests. The provider, which has its
portability compatible would be expected to attract maximum customers and will
emerge the winner.
Cost Recovery and Bill Reconciliation/Query Processing: When a customer

plans to shift, the old service provider (OSP) has to perform a query to identify if
there are any billing amounts pending, which they need to recover before the
subscriber moves to the new service provider (NSP).
6.1.2 MNP Implemen tation globally

Globally, Singapore was the first country to implement MNP in 1997, followed by
Hong Kong in 1999 and Australia in 2001. Off late, many countries have adopted
the MNP model to prevent market doldrums and putting pressure on service
providers to furnish more services at a competitive price level. However, it has not
been able to produce any significant results in these markets.
While it has worked in markets like Hong Kong and Australia, it failed to bear fruit
in the UK, France, Germany, Pakistan, Ireland, Malta, among others. MNP worked in
Hong Kong due to the speedy porting process and the availability of already
implemented solution (for fixed-line services). In Australia, the regulator effectively
promoted number portability and was able to maintain the maximum porting time
of just under three hours.
Furthermore, in Finland, where initially the implementation was viewed as a

success due to dearth of minimal contract periods and high migration incentives,
operators failed to sustain the momentum.
The failure in most markets where MNP was implemented is attributed to factors
like half-hearted implementation, issues related to contract, lack of consumer
awareness, overboard of paperwork, technical difficulties and poor customer
service.
The neighboring country Pakistan, the first country in Southeast Asia to introduce
MNP in March 2007, experienced less than 1% portability. One of the reasons for
such poor response is the pitiable customer service and time consuming process
during porting the number. Pakistan has over 90 million cellular subscribers with
approximately 95% of them pre-paid.
According to experts, disaster recovery and business continuity are also critical
elements for MNP providers and hence, it is essential to have a backup center
connected over secured redundant leased lines. This center should also be located
on a different seismic area.
There is no doubt that if implemented successfully, MNP can be a big boon

for Indian cellular subscribers. However, considering the overall market dynamics
and past experiences, the approach of the government and gaps in implemetation
planning, its success can be strictly questioned in the long run.
The regulators therefore need to build their fundamentals. To make MNP utilitarian
for consumers, the government needs to have a clear roadmap, strategic policies
and should define strict guidelines and timelines for the service providers.
6.2 Wimax v/s 3G
The WiMAX vs. 3G cellular showdown is poised to become one of the next great
market battles in the telecom industry. Fortunes will be made and lost in this
battle, and the user experience of the Internet will be irreversibly changed in the
process. 3G scores for voice; Wimax may lead to increased broadband penetration.
With the Department of Telecommunications gearing up for simultaneous release
of 3G and WiMax spectrum, analysts expect the two emerging wireless
technologies to battle it out for supremacy.
WiMax or Worldwide Interoperability for Microwave Access is a telecom

technology that enables wireless transmission of data. The technology is
available as IEEE 802.16D (fixed) and IEEE 802.16E (mobile). It offers downloads
of up to 70 Mbps as compared to the 15 Mbps that 3G provides. Mobile WiMax
offers download speeds of around 20 Mbps. In India, companies like Tata
Communications Internet Services, Intel, Bharat Sanchar Nigam Ltd, Bharti Airtel
and Reliance Communications are the proponents of WiMax. Most of the companies
have had beta-runs of the technology. According to a top official with a service
provider, telecom service providers are in various stages of WiMax
implementation. Some companies have commercially launched fixed WiMax
services in certain cities.
While opponents of WiMax say currently it cannot be used for mobile

applications, the first mobile WiMax network was introduced in Italy this July.
Another reason for the industry pinning its hopes on WiMax is its ability to increase
the broadband penetration. WiMax makes huge sense for companies as it enables
them to provide cheaper mobile internet and broadband services, in turn,
increasing the internet penetration. However, this will adversely impact services
like GPRS and e-mail on mobile as
users might move over to WiMax-enabled devices for data, even though they might
stick with 3G or 2G
spectrum for
voice.
The Telecom Regulatory Authority of India has set a target of 20 million broadband
connections by 2010 from the current 4.3 million. The industry expects WiMax to
bridge the gap. According to a consultant of Ernst & Young service providers
would mainly use the technology for gaining traction with the customers, as
providing the last mile over the conventional digital subscriber lines would be
time-
consuming and
costly.
3G WiMax Result
To be auctioned DoT has Advantage WiMax
recommended
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Spectrum Allocation Simultaneous Simultaneous Neutral
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download
speeds
(Mobile)
Operators will have to use 3G spectrum to revive voice services that

are being choked by a dearth of 2G spectrum, Patel added. The
WiMax customer premise equipment (CPE) is priced at Rs 5,000-
10,000, while the CPEs for 3G would be cost Rs 10,000 and above.
The industry will know the winner in the next six months, when the
spectrum allocation is complete.
6.3 Mobile Virtual Network

Operator (MVNO)
Mobile Virtual Network Operator (MVNO) is a GSM phenomenon

where an operator or company which does not own a licensed
spectrum and generally with out own networking infrastructure.
Instead MVNOs resell wireless services under their brand name,
using regular telecom operator's network with which they have a
business arrangements. Usually they they buy minutes of use
from the licensed telecom operator and then resell minutes of
usage to their customers of MVNO. Currently MVNOs are emerging
in fast pace in European markets and beginning in USA also.
Slowly MVNO phenomenon catching up in Asia and other parts of
the world also.
An example for MVNO is Virgin Mobile. Virgin Mobile plc is a mobile

phone service provider operating in the UK, Australia and Canada,
and the US. The company was the world's first Mobile Virtual
Network
Operator launched in the UK in 1999. It does not maintain its own network, and
instead has contracts to use the existing network(s) of other providers. In the UK,
Virgin Mobile uses the T-Mobile network. In the US, the Sprint network is the
carrier. In Australia, Virgin Mobile operates on the Optus network. In Canada, it
uses the Bell Mobility network. These networks use different technology (GSM in
the UK and Australia and CDMA in the US and Canada).
Usually MVNO's do not have their own infrastructure; some providers are actually
deploying their own Mobile Switching Centers (MSC) and even Service Control
Points (SCP) in some cases. Some MVNO's deploy their own mobile Intelligent
Network (IN) infrastructure in order to facilitate the means to offer value-added
services. In this way, MNVO's can treat incumbent infrastructure such as radio
equipment as a commodity, while the MVNO offers its own advanced and
differentiated services based on exploitation of their own IN infrastructure. The
goal of offering value-added services is to differentiate versus the incumbent
mobile operator, allowing for customer acquisition and preventing the MVNO from
needing to compete on the basis of price alone.
MVNO's have full control over the SIM card, branding, marketing, billing, and
customer care operations. While sometimes offering operational support systems
(OSS) and business support systems (BSS) to support the MVNO, the incumbent
mobile operators most keep their own OSS/BSS processes and procedures
separate and distinct from those of the MVNO.
In the future a cell phone user may be able to subscribe to a network operator plus
multiple MVNOs for specific data services over the same phone. One MVNO could
provide sports news, another weather and traffic and still another could provide
instant messaging capabilities. In this way, each MVNO and the network operator
could focus on their own niche markets and form customized detailed services
that would expand their customer reach and brand.
Regul ation ofMVNO’s
So far MVNOs have not been regulated in any country. The ITU has received
several requests to study the issue, specifically to provide input on whether
government intervention is necessary to allow MVNOs to offer services and
applications at a lower price to consumers. This would help to ensure a more
efficient use of the spectrum but some incumbent providers argue that the
market is already competitive and intervention is not necessary.
6.4 IPTV
IPTV (Internet Protocol Television) delivers television programming to
households via a broadband connection using Internet protocols. It requires a
subscription and IPTV set-top box, and offers key advantages over existing TV
cable and satellite technologies. IPTV is typically bundled with other services like
Video on Demand (VOD), voice over IP (VOIP) or digital phone, and Web access,
collectively referred to as Triple Play.
Because IPTV arrives over telephone lines, telephone companies are in a prime
position to offer IPTV
services initially, but it is expected that other carriers will offer the technology
in the future. IPTV
promises more efficient streaming than present technologies, and therefore
theoretically reduced prices to operators and subscribers alike. However, it also
adds many advantages that may play into market pricing.
One of the advantages of IPTV is the ability for digital video recorders
(DVRs) to record multiple broadcasts at once. According to Alcatel, one leading
provider, it will also be easier to find favorite programs by using "custom view
guides." IPTV even allows for picture-in-picture viewing without the need for
multiple tuners. You can watch one show, while using picture-in-picture to channel
surf!
IPTV viewers will have full control over functionality such as rewind, fast-forward,
pause, and so on. Using a cell phone or PDA, a subscriber might even utilize
remote programming for IPTV. For example, if a dinner function runs longer than
expected, you don't have to miss your favorite program. Just call home and
remotely set the IPTV box to record it.
However, the real advantage of IPTV is that it uses Internet protocols to

provide two-way communication for interactive television. One application might
be in game shows in which the studio audience is asked to participate by helping a
contestant choose between answers. IPTV opens the door to real-time participation
from people watching at home. Another application would be the ability to turn on
multiple angles of an event, such as a touchdown, and watch it from dual angles
simultaneously using picture-in-picture viewing.
One can also receive Web service notifications while watching IPTV for things such
as incoming email and instant messages. If you IPTV is packaged with digital
phone, Caller ID might pop up on screen as your telephone rings.
IPTV is already growing in the international market, with providers in many

countries including Japan, Hong Kong, Italy, France, Spain, Ireland, and the United
Kingdom. In the United States SBC reportedly purchased a software delivery
system for IPTV services from Microsoft in 2004 for $400 million dollars. Alcatel is
working with Microsoft to develop a "global solution" for IPTV services, and Verizon
has also made a deal with Microsoft for IPTV software.
6.5 Telecom penetration in rural India faces challenges
Even as the rural market is growing attractive for India's telecom industry, the
operators face several challenges in rural penetration like illiteracy and low revenue
per user, according to a report.
"Despite the inherent attractiveness of the rural market for telecom operators, several
challenges in going rural stare the operators in their face," said the report jointly
prepared by the Federation of Indian Chambers of Commerce and Industry (FICCI) and
global consultancy KPMG.
6.6 TRAI fixes MNP charges at Rs 19
India is all set to usher in the mobile number portability services, offering a facility to
the customers to change their service provider while retaining the same number. It is
likely to be put in place by January 2010 as the telecom regulator has directed
operators to make adequate technical arrangements for the same.
The Telecom Regulatory Authority of India (TRAI) has decided to fix Rs. 19 as MNP
request processing charges; the customers are required to pay the intended operator
from December 31, 2009.
6.7 Telecom Tariff War in India Reaches New Heights
The ongoing tariff war in the highly competitive Indian telecom market has been taking
new shape with every passing day. Operators have been announcing new promotional
schemes including reduction in tariffs for voice call, slashing roaming charges and
many more such lucrative offers. Recently floated idea of per second call rates has
further aggravated competition among telecom players with every operator seemingly
imitating others for retaining their market share.
6.8 IT, Telecom to scale new heights in 2010
Research firm IDC, in its latest outlook for 2010, has claimed
further growth of telecom and Information Technology industry
next year given to some transformational changes on the anvil in
these segments.
There would be a surge in desktop and mobile devices with the introduction of smart
phones, cloud-based computing and telephony. The firm said in its influential
Predictions 2010 study that market has been on recovery path and there is a wide
spread anticipation of modest growth in IT and telecommunications spending in 2010
7 Industry Updates
7.1 Consolidation in Industry.

Telecom players are looking to tap into global funds to finance their aggressive
growth plans. This will result in partnerships joint ventures and equity sellout to
foreign players. New license holders will continue to look to sell their stake at a
premium. New policies will seek to curb this license arbitrage. Smaller players with
operations in only a few circles will find in difficult to compete with the nationwide
players. The industry may see consolidation with these smaller operators being
acquired by the larger ones. “Unbundling of the corporation” will continue as
companies will seek f or economies of scale and lower startup cost by
infrastructure sharing. 3G and WiMax license will spur M&A and partnership
activity.
7.1.1 Idea Cell ular’s Acquisition of Spice Telecom

There were three transactions as part of this acquisition; acquisition of shares of
Spice, a non-compete fee and a capital infusion of about Rs 7300 crores received
from TM International Bhd (TMI). With respect to shares, Idea acquired 40.8%
stake of Spice Communications at Rs 77.30 a share for Rs 2,716 crore. There was a
share swap in which Spice shareholders got 49 Idea shares for every 100 Spice
shares held. An additional Rs 544 crore was paid to the promoters of Spice group as
'non-compete fee'.
The deal was strategically important for Idea Cellular as it was looking forward to
transfer itself into a pan-India telecom service provider. The spectrum auctioned
by GoI is a scarce resource nowadays and cost a premium. Also there’s restriction
by TRAI with respect to number of operators per telecom circle. So it makes sense
to acquire a small telecom operator. Small players like Spice Telecom operating at
only a few circles(Karnataka and Punjab) will find difficult to compete with the
nationwide players in the long run. So it was a win-win deal for both companies.
7.1.2 Vodafone’s entry into India
Vodafone paid a discounted price of $10.9 billion in cash for

acquiring the 52% stake held by Hutchison Telecom
International (HTIL) in Indian mobile firm Hutch-Essar. HTIL
declared a special dividend of 6.75 HK dollars per share
following the completion of the formalities. The final price was
a reduction of
$180 million from the originally agreed price of
$11.08 billion.
Vodafone is the largest mobile telecommunications network company in the world.

The deal gave them access to one of the fastest growing mobile markets in the
world.
7.1.3 Telenor-Unitech Deal
Norwegian Telecom major Telenor is in the process of acquiring

controlling stake of
67.25% in Unitech wireless via equity infusion. The enterprise
valuation of Unitech Wirelsss is about Rs 10,900 crore. As per the
deal, Telenor will infuse cash in four stages and at each phase, by
increasing its stake in Unitech Wireless. In the first phase, they
got 33.5% ownership in Unitech Wireless. In the second phase
they completed the acquisition for a 49 per cent stake in Unitech
Wireless by paying Rs
1,130 crore for a further 15.5 per cent stake in the company. The
acquisition is expected to be completed by end of this quarter.
7.1.4 TTSL – DoCoMo Deal.

Japanese carrier NTT DoCoMo acquired 26 per cent stake in Tata
Teleservices (TTSL). The Tata DoCoMo-branded GSM service has already started
in Southern India and gradually will be expanded nationwide. DoCoMo’s
international expansion plans have not always proven successful, with the firm
historically preferring to take small stakes in firms and then
try to influence their strategy. It has been less
prepared to take majority stakes and impose
its will, as other leading carriers have chosen
to do.
The difficulties faced by the firm in

spreading its domestically successful i-
mode service internationally
typify the obstacles it has faced overseas. With Tata, DoCoMo had said
“participating proactively in TTSL’s management by providing human resources
and technical assistance to help realise improved network quality and the possible
introduction of leading-edge, value-added services.”
7.1.5 Bharti-MTN deal (in talks) .

Recently Bharti Airtel has re-started its audacious merger bid with MTN that could
create a $61-billion transnational telecom goliath with combined revenues of $20
billion and over 200 million subscribers across Africa, Asia and Middle East, will be
among the world's 10 biggest telecom companies. The deal could be win-win for
both parties. Bharti is under pressure in its home country due to severe
competition and looking forward to spread its risk across geographies. Meanwhile,
the African telecom operator is also encountering some of the problems that its
counterpart in India is confronting. MTN may have higher ARPUs (in the range of
$12-20), but they are also falling fast.
7.1.5.1 Strategic benefits to both players

Synergies would be sought from a number of areas, including procurement,
operational best practice, R&D and international network sharing. The two
companies will not overlap in each other’s business operations: Bharti Airtel will
be the primary vehicle for Bharti and MTN to pursue further expansion in Africa
and the Middle East.
With both Bharti and MTN operating in high-growth
geographies, it would be imperative for them to
incrementally expand into untapped areas. Collaborating
with each other would seem the logical way ahead. The
most important, and visible fallout of the deal, if it
materializes, will be the advantage of economies of scale
for the new entity.
In recent times, companies are more amenable to

mergers and acquisitions. Of late, companies are finding
it tough to obtain easy funds for expansion, which calls for
more collaboration if corporate intend to expand. Bharti
would not be involved only in MTN’s day-to-day activities,
but it would also have a say while making bigger strategic
decisions, such as those pertaining to investments in
other geographies or sourcing of equipment.
The high subscriber base and financial muscle will give Bharti-MTN the desired
edge while dealing with vendors. Once the merger happens, the economies of
scale of the complete outfit (Bharti-MTN) would be taken into account. For
instance, even if the company places an order worth just $1 million, the vendor
would not hesitate to lap it up, as there could be orders worth a billion dollars in
other projects. This would offset whatever concerns there may be with respect to
the small population size in countries where MTN operates.
7.1.5.2 Takeaways for Bharti

• The biggest takeaway for Bharti is in the form of access to new geographies
with high growth potential. Without a partner, Bharti would have to embark
on a Greenfield project, which would be time-consuming and capital
intensive.
• Besides, without local knowledge (with respect to the market and
government regulations), Bharti could be on a sticky wicket. The Indian telco
does not have the expertise in running multi- country operations.
• MTN has operations in 21 countries across Africa and the Middle East and is
one of the largest emerging market mobile operators globally. While Africa
has one-third of the world’s population, its telephonic density is just 30 per
cent. This offers plenty of room for expansion. The fact that 95 percent of
Africa is prepaid, which ensures all cash operations, fits perfectly into Bharti’s
plans.
• The options for Bharti were to go either the Greenfield way or with an
experienced partner.
MTN’s strong foothold in some growing markets such as South Africa,
Botswana, Iran and Nigeria ensures that when the growth in India starts to
slow down, Bharti would be ready to take off in other geographies. Besides,
there is a lot of potential in Africa as three-fourths of the continent is still
untapped.
• Africa is quite like rural India and from that perspective; Bharti could learn
how to roll out
infrastructure in rural
India.
• In addition, MTN is strong in the value-added services (VAS) and mobile
commerce space. So, as and when mobile commerce picks up in India (after
RBI’s approval), Bharti would be able to tap this market through MTN’s
expertise.
• MTN has a vast experience in running multi-country operations and
overcoming regulatory hurdles. By working with MTN, life for Bharti will get a
lot of easier.
7.1.5.3 Major Challenges for the merg er

• One of the major challenges would be the integration of the company on the
ground. It is tough for intercontinental companies to merge seamlessly
because of cultural divide.
• Alcatel-Lucent for instance is still trying to adjust to cultural divide. Although
Nokia-Siemens has
bridged this divide faster, it was because both the companies were European.
• The Black Empowerment Act could pose a challenge, as it is meant to
safeguard the rights of the black population. As per this Act, blacks are
ensured a minimum shareholding management seats and voting rights.
• The country’s strong trade union, Congress of South African Trade Unions
(COSATU), which has
influence over President Jacob Zuma, had almost wrecked the Vodafone-
Vodacom deal.
7.2 FDI Investments in the Telecom Sector in India:
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$ 7,513.22 million. This makes telecommunication the
third-largest sector to attract FDI in India in the post liberalization era.
The investment was majorly in handset manufacturing and telecom
service provider.
FDI in Telecommunication Sector (US$ million)
2008-09 2345.38
2007-08 1275.65
2006-07 521
2005-06 680
2004-05 129
2003-04 116
With stable macroeconomic impetus and numerous other advantages, India
has the potential to become the electronics manufacturing hub of the world.
Excited by the record-breaking industry growth, investors have outlaid US$ 1.5
billion in the past two and a half years in the Indian telecom sector. India will
receive an additional US$ 2 billion investment in the next one year. With the world
now recognising India’s manufacturing potential, the Indian telecom handset
manufacturing market is likely touch US$ 7 billion by 2010.
An example is Nokia. The company has already produced 25 million handsets in

its Chennai facility. It will pump in an additional US$ 150 million to this set up. The
company exports around 20 per cent of its volume to South-east Asia, the Middle
East and Africa. Local manufacturing allows companies to avoid 4 per cent
countervailing duties on imported handsets, thereby further reducing the cost.
7.3 Outsourcing by Telecom Service Providers in India
Managed service is another segment that is attracting telecom companies. On

account of the rapidly growing subscriber base, service providers find it difficult to
manage their infrastructure and network. In such cases, they completely or
partially outsource their infrastructure or network management operations.
7.3.1 Hutchitson Essar (now Vodafone) and Nokia Deal:

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

complexity
• Opportunity to strengthen core

competency
• Reduction in financial
outlay
• Touching base with new processes and

technologies
7.3.2 Bharti Airtel’s IT Outsourcing to IBM:

Another dimension of managed service is telecom, communication and network
management solutions for enterprises. Bharti Televentures and IBM, together
offer telecom and IT solutions in India. The solutions and services portfolio
comprises of the remote monitoring of servers, security operations and network
operations, providing data centre services (including server hosting, server
management and storage management), IT help desk services and end-to-end
connectivity and fulfilling all telecom and communication requirements.This
information technology outsourcing deal with infotech major IBM is estimated to be
in the range of $700-750 million for a ten-year period.
The deal involved outsourcing of BTVL's hardware, software and IT service
requirements to IBM. The agreement specifies that payments made to IBM India
will be linked to the percentage of revenue generation by BTVL and pre-defined
service level agreements. The percentage-linked revenue payment is modelled to
decrease with BTVL's increase in revenue.The deal includes all customer-
facing IT applications like billing, customer relationship management and data
warehousing. In addition, Internet, e-mail and online collaborations are included in
it. On the infrastructure front, IBM will consolidate BTVL's data centre, IT helpdesk
and enhance its disaster recovery centre capabilities, he said.
7.3.3 Bharti’s Outsourcing to Alcatel-Lucent:

Telecom major Bharti Airtel has a $500-million deal to Alcatel-Lucent for
outsourcing the management and servicing of its broadband and fixed line
network for five years.The deal involves the creation of a joint venture with
Alcatel-Lucent holding 76 per cent of the equity, and Bharti having the remainder
24 percent. The joint venture will help accelerate performance as Bharti migrates
to the next generation networks for the broadband and telephone customers.
7.3.4 Bharti Outsourcing Deal with Nokia & Ericsson

Bharti Airtel awarded a $400m contract to Nokia for expanding its managed GSM
networks in eight
circles. This also marks Bharti’s third major deal with Nokia in the last two years.
Bharti would have
100% ownership of the networks supplied by Nokia, with the actual payment being
linked to utilisation of capacity and fulfillment of agreed quality of service
parameters.
This comes close on the heels of Bharti’s recent signing of a $1bn three-year
service contract with
Ericsson towards design, planning, supply, installation, commissioning and
upgrading of its network in
15 telecom
circles.
This emphasises Bharti’s policy towards outsourcing all operational activities,

including customer services to global majors. This has enabled Bharti to focus on
its core areas: product innovation, value added services, marketing, branding and
pricing. It has enabled Bharti to concentrate on customers, finances and
regulation. As per the three-year contract, Nokia will provide managed services and
expand Airtel’s GSM/GPRS/EDGE networks in eight circles of Mumbai,
Maharashtra & Goa, Gujarat, Bihar, Orissa, Kolkata, West Bengal and Madhya
Pradesh.
The network monitoring operations will be carried out from Nokia’s state-of-the-
art Global Network Services Center in Chennai. The deal also envisages Nokia to
deploy its WAP solution across Bharti’s national network to enhance its mobile
packet core network capabilities. This will make usage of data services easy,
thereby increasing the consumption of content on the Bharti network.
7.4 Entry of MTS & Videocon in the Indian Market
&
Having started in the Moscow license zone in 1994, МТS in 1997 received licenses for
further areas, and began expansion, later entering other countries of the CIS. On
October 31 2008, Vodafone announced a partnership deal with MTS, whereby
Vodafone services will be available to MTS subscribers; some form of co-branding will
follow, and both companies have noted the potential for more efficient purchasing. In
2008, Sistema formed 74:26 joint venture with India’s Shyam Group to form Sistema
Shyam Teleservices (SSTL), and acquired PAN-India license to provide CDMA services
in the country. In March 2009, SSTL launched the MTS brand in state of Tamil Nadu,
followed by neighboring state Kerala and W.Bengal in April and May respectively. At
present MTS India present in 8 circles out of 22 telecom circles of India. AUSPI reports
show MTS gets a huge response in India due to its excellent competitive & cheaper
tariff.
Consumer durables major
Videocon Group, which has bagged national telecom licence through its subsidiary
Datacom Ltd, would roll out the GSM services from Chennai on August 15 this year.
Unveiling the plans, Videocon Chairman Venugopal Dhoot said that GSM services would
be first launched in, to be followed by other metros, Kerala and North India. Datacom
had obtained licences for providing GSM services in 22 circles across the country.
Dhoot said telecommunications would be a focus area for Videocon Group in the
coming years and the group would invest around Rs 6,000 crore in this business. The
group was also in talks with some companies based in the Middle-East to rope in a
foreign partner for the telecom business.
8 Future Technology Trends
In this section we have listed down the future technologies which are in roadmap
and are speculated to make an impact on current business model of telcos.
8.1 IP Multimedia Subsystems (IMS)
IP Multimedia Subsystem (IMS) is a generic architecture for offering multimedia

and voice over IP services, defined by 3rd Generation Partnership Project (3GPP).
IMS is access independant as it supports multiple access types including GSM,
WCDMA, CDMA2000, WLAN, Wire line broadband and other packet data
applications. IMS will make Internet technologies, such as web browsing, e-mail,
instant messaging and video conferencing available to everyone from any location.
It is also intended to allow operators to introduce new services, such as web
browsing, WAP and MMS, at the top level of their packet-switched networks.
IP Multimedia Subsystem is standardized reference architecture. IMS consists of

session control, connection control and an applications services framework along
with subscriber and services data. It enables new converged voice and data
services, while allowing for the interoperability of these converged services
between internet and cellular subscribers. IMS uses open standard IP protocols,
defined by the IETF. So users will be able to execute all their services when roaming
as well as from their home networks. So, a multimedia session between two IMS
users, between an IMS user and a user on the Internet, and between two users on
the Internet is established using exactly the same protocol. Moreover, the
interfaces for service developers are also based on IP protocols.
Some of the possible applications where IMS can

be used are:
• Presence services
• Full Duplex Video Telephony
• Instant messaging
• Unified messaging
• Multimedia advertising
• Multiparty gaming
• Video streaming
• Web/Audio/Video Conferencing
• Push-to services, such as push-to-talk, push-to-view, push-to-video

Effectively, IMS provides a unified architecture that supports a wide range of IP-
based services over both packet- and circuit-switched networks, employing a
range of different wireless and fixed access
technologies. A user could, for example, pay for and download a video clip to a
chosen mobile or fixed device and subsequently use some of this material to
create a multimedia message for delivery to friends on many different networks.
A single IMS presence-and-availability engine could track a user's presence and
availability across mobile, fixed, and broadband networks, or a user could
maintain a single integrated contact list for all types of communications.
A key point of IMS is that it is intended as an open-systems architecture:

Services are created and delivered by a wide range of highly distributed systems
(real-time and non-real-time, possibly owned by different parties) cooperating with
each other. It is a different approach to the more traditional telco architecture of
a set of specific network elements implemented as a single telco-
controlled infrastructure.
8.2 High Speed Downlink Packet Access (HSDPA)

High Speed Downlink Packet Access (HSDPA) is a packet based technology for W-
CDMA downlink with data transmission rates of 4 to 5 times that of current
generation 3G networks (UMTS) and 15 times faster than GPRS. The latest release
boosts downlink speeds from the current end-user rate of 384 kbps (up to 2 Mbps
according to standards) to a maximum value according to standards of 14.4 Mbps.
Real life end-user speeds will be in the range of 2 to 3 Mbps.
HSDPA provides a smooth evolutionary path for Universal Mobile

Telecommunications System (UMTS) networks to higher data rates and higher
capacities, in the same way as Enhanced Data rates for GSM Evolution (EDGE)
does in the Global System for Mobile communication (GSM) world. The introduction
of shared channels for different users will guarantee that channel resources are
used efficiently in the packet domain, and will be less expensive for users than
dedicated channels.
8.3 4G or Fourth Generation Networks

4G or Fourth Generation is future technology for mobile and wireless
comunications. It will be the successor for the 3Rd Generation (3G) network
technology. Currently 3G networks are under deployement. Approximatly 4G
deployments are expected to be seen around 2010 to 2015.
The basic voice was the driver for second-generation mobile and has been a
considerable success. Currently, video and TV services are driving forward third
generation (3G) deployment. And in the future, low cost, high speed data will
drive forward the fourth generation (4G) as short-range communication
emerges. Service and application ubiquity, with a high degree of personalization
and synchronization between various user appliances, will be another driver. At the
same time, it is probable that the radio access network will evolve from a
centralized architecture to a distributed one.
The evolution from 3G to 4G will be driven by services that offer better quality
(e.g. multimedia, video and sound) thanks to greater bandwidth, more
sophistication in the association of a large quantity of information, and improved
personalization. Convergence with other network (enterprise, fixed) services will
come about through the high session data rate. It will require an always-on
connection and a revenue model based on a fixed monthly fee. The impact on
network capacity is expected to be
Significant. Machine-to-machine transmission will involve two basic equipment
types: sensors (which measure parameters) and tags (which are generally
read/write equipment).
It is expected that users will require high data rates, similar to those on fixed
networks, for data and streaming applications. Mobile terminal usage (laptops,
Personal digital assistants, handhelds) is expected to grow rapidly as they
become more user friendly. Fluid high quality video and network reactivity are
important user requirements. Key infrastructure design requirements include:
fast response, high session rate, high capacity, low user charges, rapid return on
investment for operators, investment that is in line with the growth in
demand, and simple autonomous terminals. The infrastructure will be much
more distributed than in current deployments, facilitating the introduction of a new
source of local traffic: machine-to-machine.
9 Targets Set By Government

· 500 Million Connections by the year 2010
· Provision of mobile coverage of 90% geographical area by 2010
9.2 Rural Telephony
· 2 One phone per two rural households by 2010 (about 80 million rural
connections).
. 200 million rural subscribers by 2012
· Reduce urban-rural digital divide from present 25:1 to 5:1 by 2010
9.3 Broadband
. 20 million Broadband connections by 2010
· Broadband with minimum speed of 1 mbps
· Broadband coverage for all secondary & higher secondary schools and public
health care centres by the
End of year 2010
· Broadband coverage for all Grampanchayats by the year 2010
. Broadband on demand in every village by 2012
9.4 Infrastructure Sharing
· USO subsidy support scheme for shared wireless infrastructure in rural areas with
about 19,000 towers
By 2010
· Increase sharing in urban areas to 70% by 2010
9.5 Introduction of Spread of IPTV and Mobile TV

· IPTV in 600 towns by 2010
9.6 Manufacturing
· Making India a hub for telecom manufacturing by facilitating more and more
telecom specific SEZs.
· Quadrupling production in 2010.
· Achieving exports of 10 billion during 11th Five year plan.
9.7 International Bandwidth
· Facilitating availability of adequate international bandwidth at competitive

prices to drive ITES sector at faster growth.
9.8 Research & Development

· Pre-eminence of India as a technology solution provider.
· Comprehensive security infrastructure for telecom network.
· Tested infrastructure for enabling interoperability in Next Generation Network.
· Doubling the telecom equipment R&D by 2010 from present level of 15%.
10 Indian Telecommunications at a glance (As on 31st March 2009)
Rank in world in network size 3rd
Tele–density (per hundred populations) 36.98
Telephone connection (In Millions)
Fixed 37.96
Mobile 391.76
Total 429.72
Village Public Telephones Covered (Out of 66,822 57,167

uncovered villages)
Foreign Direct Investment (in millions) (from 275,441

January 2000 till January 2009)
Licenses issued
Basic 2
CMTS 39
UAS 240
Infrastructure Provider I 177
ISP (Internet) 349
ISP with Telephony (Broadband) 125
National Long distance 26
International Long Distance 24

11 Conclusion
The Indian Telecom Service provider industry is gearing for a revolution. The
customer is driving this revolution and will see more unique and sophisticated
offerings coming his way. The 3G which will pave the way for 3.5G, 3.75G and the
next big thing-4G and the VAS services will keep the customer asking for more.
Doors have being opened for the new entrants to enter the market and lots of FDI
coming in which will create a stiffer competition among the players. The rural areas
which have remained untapped will see an insurgence of services. Also the easing
of the regulations by TRAI, the ease of spectrum licensing, the FDI influx will make
the telecom space in India a must watch in the coming years.
12 References
[1] IBEF report 2007-08: Telecommunication - MARKET &

OPPORTUNITIES.
[2] Cellular Statistics – Cellular Operator Association of India
[3] IAMAI & technology Group@IMRB: MOBILE VALUE ADDED SERVICES IN
INDIA- A Report.
[4] Telenor Entering India: Investment Update
[5] Voice and Data (May 2009): Mobile Number Portability - Poaching
with Portability. [6] Business India: Telecom Takeover, Bharti-MTN
deal
[7] Moneycontrol.com: Idea Spice deal
[8] Business Standard: Vodafone Hutch deal
[9] Into Mobile: India’s 3G License Plans Updated.
[10] The Economic Times
[11] www.trai.gov.in
Appendix A
SNAPSH
OT
(Data As on 31st
March 2009) Telecom Subscribers
(Wireless +Wireline)
Total Subscribers 429.72 Million
% Growth During Quarter 11.68%
Urban Subscribers 309.43 Million
(72%) Rural Subscribers 120.29 Millions
(28%) Overall Teledensity 36.98 %
Urban Teledensity 88.66
% Rural Teledensity 14.8
% Wireline Subscribers
Total Wireline Subscribers 37.96 Million
% Growth During Quarter 0.15%
27.38 Million
Urban (72.13%)
Wireline 10.58 Millions
Subscriber (27.87%)
Rural
Wireline
Subscribers
Village Public Telephones (VPT)
5.61 Million Public Call Office

(PCO)
6.20 Million Wireless

Subscribers
Total Wireless Subscribers
391.76 Million
% Growth During Quarter
12.93%
Urban Wireless Subscribers
282.05 Million(72%) Rural Wireless

Subscribers
109.71 Million (28%)
297.26 Million
GSM r
Subs s
cribe
CDMA Subscribers (75.88%)
Internet & 94.50 Million
Broadband (24.12%)
Subscribers
Total Internet Subscribers (including

Broadband) 13.54 Million
% Growth During Quarter
5.30% Broadband Subscribers
6.22 Million
Wireless Data Subscriber 117.82 Million
Sou
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United world school of business [mumbai]

Certified that this project report “……INDIAN TELECOM

Is the bonafide work of “…………..

DR. PRIYA M KENKARE

United World School of Business (Mumbai)

International Business: Term II

1.13 India’s Subscriber base comparison with world

3.5 Performance of Telecom Equipment Manufacturing Sector

International Business: Term II

3.7 Network Expansion

4 India’s Competitive Advantage

4.4 Low Labour Cost

5 The Road Ahead

6 Key trends in telecom industry

6.5 Telecom penetration in rural India faces challenges

International Business: Term II

6.8 IT telecom to scale new heights in 2010

7.1.1 Idea Cellular’s Acquisition of Spice Telecom

7.3.3 Bharti’s Outsourcing to Alcatel-Lucent

7.4 Entry of MTS & Videocon in the Indian market

8 Future Technology Trends

9.1 Network Expansion

International Business: Term II

International Business: Term II

The rapid growth in Indian telecom industry has been contributing to

In this report we have tried to capture most of the areas of Telecom

International Business: Term II

1851 • Introduction of Telegraph services

2000+ • CAGR of around 85% since 1999

1.2 Quick Facts

International Business: Term II

1.4 Industry Sectors

Network Telecom Service

From holistic point of view telecom industry can be divided to four

• Managed services is another segment that is attracting telecom companies.

• To reduce their network deployment costs, many service providers are

 Improved service quality

 Increased affordability for customers

 Faster roll out of services in rural and remote areas

 Significant reduction in initial set up costs

 Increased environmental aesthetics

 Lower operating costs for service providers

• Enterprise Telecom Services includes key services, such as voice over

• 3G The Indian government plans to auction the spectrum for 3G services by

 The immense potential for 3G is reflected by the 30–40 percent annual

 Cell phone manufacturers are striving to develop USD 100 priced 3G

India expects to replicate its 2G growth in 3G services.

• WiMAX has been one of the most significant developments in wireless

 It is estimated that India will have 13 million WiMAX subscribers by 2012.

 Aircel is the pioneer in WiMAX technology in India.

 The state-owned player, BSNL, aims to connect 74,000 villages through

 Bharti, Reliance and VSNL have acquired licenses in the 3.3GHz

1.8 Major Players

As on June 30th 2009

India's telecom equipment manufacturing sector is set to become

• The Russian government is likely to pick up equity amounting to US$ 670

Some deals are discussed in detail in industry consolidation section.

1.10 Rural Telephony

1.11 Exploring the rural telecom opportunity

• 100% foreign direct investment (FDI) is permitted through the automatic

• Terms and conditions of licence to a service provider

• Revocation of license for non-compliance of terms and

• Measures to facilitate competition and promote efficiency in