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TELECOM INDUSTRY

INTRODUCTION

The Indian telecom industry has evolved as one of the fastest-growing sectors inthe country. Currently, India’s telephone network is one of the largestcommunications network in the world.India's tele-density has improved from under 4% in March 2001 to over 26% by theend of March 2008. Cellular telephony has emerged as the fastest growing segmentin the Indian telecom industry. The mobile subscriber base (GSM and CDMAcombined) has grown from under 2 m at the end of FY00 to touch 300m at the endof March 2008 (compounded annual growth of nearly 85% during this eight yearperiod), of which 261.07m were mobile subscribers and 39.42m were fixed/landlinesubscribers. This is expected to reach 402.4m by the end of 2008.India is the third-largest country in the world in terms of telecom subscriber base,with 205.86 million subscribers as on March 2007, up from the earlier eleventhposition in 2001; at the end of December 2006 total world telecom subscriber basewas around 3,921.0 million. The largest subscriber base is in China (828.84 million),followed by the US at 405.03 million.Service sector is one of the most significant sectors of the Indian economy,contributing nearly 55% to the GDP in 2007–08. The sector contributes more than2.83 per cent of the country’s GDP. Total revenue of the telecom sector during FY07was estimated at Rs 1053.19 billion, up by 21.4 per cent over the previous year. InFY07, the revenue share of private sector companies was 57 per cent as comparedwith 48 per cent in FY06, while public sector companies’ revenue share declinedfrom 52 per cent in FY06 to 43 per cent in FY07. The revenue generated from the Telecom Sector is represented in the chart below.Chart. 1:

Indian Telecom Service Sector Revenue

Source:

TRAI

TELECOM SEGMENT

The Telecom sector can be broadly classified in four categories.

•

Fixed Line Telephony

•

Mobile Telephony

•

Internet

•

Telecom EquipmentsHowever in the present report the market segment considered is limited to onlyfixed line and mobile telephony only.

FIXED LINE TELEPHONY

The current market size of this segment is about Rs. 30164 crore with a total of 43million lines. This market is dominated by the state operators, BSNL and MTNL, who togetheraccounts for around 92 per cent of the total subscriber base. Private sector servicesare presently available in selective urban areas (in about 18 circles), andcollectively account for remaining 8 per cent of the subscriptions. However, privateservices focus on the business/corporate sector, and offer reliable, high-endservices, such as leased lines, ISDN, closed user group and videoconferencing, andas a result average revenue per user (ARPU) is higher for private players.

MOBILE TELEPHONY

In the mobile segment there are 25 private companies providing cellular service in19 telecom circles and 4 metro cities, covering 1500 towns across the country.Presently there are 5 private service operators in each area and an state operator.Almost 80% of the cellular subscriber base belongs to the pre-paid segment. DOT(Department Of Telecommunication) has allowed companies to buy rivals within thesame operating circle provided their combined market share did not exceed 67%.Previously, they were allowed to buy companies outside their circle.Chart. 2:

Number of wire line and wireless subscribers over the years

SUPPLY - DEMAND ANALYSIS:

The wireless sector has grown exponentially in the last couple of years ascompared to the wireline sector. As a matter of fact in the last 2 years the numberof wire line consumers have decreased by about 13%.

Cheaper call rates, mobility, good connectivity and other value added services suchas SMS, E-mail service, Live updates are some of the reasons that have spurred thegrowth of the mobile sector. The wireless sector can again be grouped into GSM (Global System for MobileCommunication) service providers and CDMA (Code Division Multiple Access)service providers. The two basically denote the difference in technology inproviding wireless service. The major GSM service providers in India are:Bharti Airtel, Vodafone, BSNL, Reliance, Aircel, Idea, Spice, MTNL and BPL.While in the CDMA sector major players are:Reliance Infocom, Tata Teleservices, BSNL, MTNL, HFCL and Shyam Telelink. The relative market share of various players in the two segment are:Chart.3:

Market Share of CDMA Operators

Chart. 4:

MarketShare of Wire line Operators

Chart.5:

Market Share of GSM OperatorsNow accessing and analysing the demand side for the telecom sector wesee the following salient points: