Enabling the next wave of telecom growth in India

Industry inputs for National Telecom Policy 2011

2

Enabling the next wave of telecom growth in India

Foreword
The Federation of Indian Chambers of Commerce and Industry (FICCI) and Ernst & Young have collaborated on this deep review of the telecoms sector in India. The National Telecom Policy 1999 (NTP 1999) has served the sector in India for well over a decade, in which time we have witnessed significant changes in the socioeconomic environment, technological advancements and business dynamics. The telecom industry in India is ready to take the next leap forward with new developments such as launch of third generation (3G) services by private operators, 3G and broadband wireless access (BWA) auctions, launch of mobile number portability (MNP), and the emergence of mobile commerce (m-commerce). In the future, rural and semi-rural markets are expected to drive growth, especially in the wireless segment. The Ministry of Communications & Information Technology has released the 100-day agenda for the Indian telecom sector, and announced formulation of a new and comprehensive National Telecom Policy 2011 (NTP’11). Therefore, the time is ripe for a comprehensive review to build a forward looking and transparent policy that will be the backbone to achieve the ”India telecom vision 2020.” This report focuses on specific areas where the Government of India (GoI) needs to intervene and move the policy to the next generation of reforms. It aims to capture developments witnessed in the telecom sector in the last decade and analyze historical performance to estimate growth over the next ten years. It includes inputs from stakeholders in the telecom industry, encompassing operators, telecom equipment manufacturers, infrastructure providers, industry associations and industry practitioners. We would like to extend our gratitude to the industry leaders who participated in the report and helped us to present the industry’s perspective.

Amit Mitra Secretary General FICCI, India

Virat Bhatia Chairman FICCI Committee on Communications and Digital Economy

Prashant Singhal Telecom Industry Leader Ernst & Young, India

Enabling the next wave of telecom growth in India

iii

iv Enabling the next wave of telecom growth in India . which had played a key role in shaping the sector.” the provision of leading class services at reasonable prices. With plenty of strong potential value remaining.Executive summary The liberalization of the domestic economy and increasing integration with the global economy has positioned India as the second fastest expanding economy of the world. Indian telecom is an economic miracle in the making. India has faced challenges in liberalizing its telecom industry from a monopoly to a decentralized competitive model. The announcement of the National Telecom Policy (NTP) in 1994 marked the first steps toward the new model. Presently. Liberalization initiatives. centralized economic model for four decades. recognizing the need to overhaul its policy framework. issued the NTP 1999. After embracing a closed. Connecting such a vibrant economy of more than a billion people together and with the rest of the globe is an extraordinary achievement in terms of a nation’s socioeconomic development. Government. especially in the 1990s. It aimed at making available “telephone on demand. resulted in an improved business climate and in an increase in investment across the country. the sector requires much attention and a robust policy framework to address the challenges that exist in the present scenario as well as help to capture the opportunities that the sector holds for the country. India has reached the goals set in NTP 1999 far ahead of time. boosting the industrial growth over the past decade. there are more than 700 million subscribers in India. India shifted to a market-oriented model. In 1999. promoting India’s emergence as a major manufacturing and export base of telecom equipment and universal availability of basic telecom services to all villages. and the overall teledensity has reached more than 60%. with the market evolving into the world’s second largest in terms of subscribers.

broadband. The major recommendations for the policy framework for the Indian telecom industry are as follows: Focus areas Licensing Recommendations Need to have a single universal license for all telecom services There should be a uniform fee structure across all telecom circles Pure internet service providers should continue to be allowed without payment of any license fees Provide a clear license renewal regime that includes legislation.The present challenges include the spectrum and licensing framework. The opportunities around which the policy initiatives need to be designed include financial inclusion. m-commerce and convergence. mergers and acquisitions scenario. taxation and aspects of foreign direct investment (FDI). renewal procedures. reasons for refusal to renew and appeals to regulatory decisions Enabling the next wave of telecom growth in India v . Universal Service Obligation Fund (USOF) structure. infrastructure segment. equipment manufacturing.

Focus areas Spectrum Recommendations Need to re-farm available spectrum Spectrum up to contracted limit should be ensured as initial spectrum to the existing players Spectrum usage charge should be identified upfront at the time of spectrum allocation USOF The USOF should be utilized for the following in rural and remote areas: • Provision of public telecom and information services  • Provision of household telephones • Creation of infrastructure for provision of mobile services • Provision of broadband connectivity to villages in a phased manner • Creation of general infrastructure for development of telecommunication facilities • Induction of new technological developments in the telecom sector Subsidies should be distributed through transparent marketoriented allocation strategy Broadband Backhaul connectivity and optic fiber communication (OFC) should be provided to all telecom towers. base station controllers (BSCs) and base transceiver stations (BTS) from nearest block headquarters Make available more spectrum for wireless broadband Make broadband connectivity mandatory for all buildings to get completion certificate on the lines of water and power connectivity Create content and applications in regional languages to promote rural broadband Mergers and acquisition Merger should not result in less than six operators in a circle  The share of a merged entity should not be greater than 30% in terms of sub-base or adjusted gross revenue (AGR) vi Enabling the next wave of telecom growth in India .

Enabling the next wave of telecom growth in India vii . However. convergence. which imposes double taxation on ILD and NLD license holders FDI Given the importance of foreign investment.e. m-commerce. the policy should consider raising the upper limit on foreign investment to encourage more foreign players to invest in the capex-intensive telecom sector Policies should also cover areas like financial inclusion. a uniform system of taxation and subsidies and other incentives designed to create an environment that encourages the build-out of the national telecom infrastructure and the increased participation of all stakeholders There is a need for a national right of way (ROW) policy for the rollout of backhaul network Telecom infrastructure Enterprise data Upgrading encryption levels in international long distance (ILD) and national long distance (NLD) licenses to allow strong encryption of up to 256 bits to protect confidential information in accordance with international best practices Telecom Regulatory Authority of India (TRAI) and Department of Telecommunications (DOT) should eliminate the cumulative assessment of licensing fees on the purchase of inputs. ease in state-wise compliances Equipment manufacturing There is a need to set up hardware manufacturing cluster parks (HMCP) across the country and upgrade localized infrastructure to support large volume contract manufacturing R&D should be the key focus Need to lay down a National Telecom Critical Infrastructure Policy on the lines of NTP 1999 elaborating uniform procedures for land acquisition.. there is no unique. perfect model accepted globally which can be implemented in India and leading practices across the globe should be adopted for transforming the Indian telecom sector into the greatest possible success story. security concerns and consumer affordability. with all services and goods being taxed at a standard rate Special consideration needs to be given on certain areas in the backdrop of the peculiarities of the telecom sector such as “place of supply rules” i. the state where GST will be paid for different kind of telecom services.Focus areas Taxation Recommendations The upcoming goods and service tax (GST) regime should aim to simplify the tax structure for the industry.

It identifies and evaluates the critical success factors that are applicable across all telecom segments such as spectrum. ILD. analysis and insights provided by Ernst & Young. These interviews provided a firsthand perspective on the opportunities and challenges faced by various stakeholders in the sector. equipment manufacturing. infrastructure.Methodology In 2010. FDI. broadband. value-added services (VAS). It examines the NTP 1999. which is used by the Government of India (GoI) as a decisionmaking guide for the Indian telecom sector. The research program studies in detail all the key segments of the telecom landscape — wireless. licensing framework. As a part of the research program. infrastructure and convergence. NLD. The study gives a detailed perspective on the telecom sector in India. These findings have been combined with secondary research. This report reflects the key conclusions of that wider study. Ernst & Young conducted comprehensive interviews with senior executives in the Indian telecom sector. security. outlining the phenomenal growth witnessed by the sector and recommendations for the existing policy framework that will enable the next level of growth. consumer affordability and the role of the regulator. Ernst & Young conducted a research study on the Indian telecom sector in collaboration with one of the leading business organizations in India — FICCI. USOF. viii . wireline.

List of participants Virat Bhatia President. Mathews Director General Cellular Operators Association of India Rajat Mukarji Chief Corporate Affairs Officer Idea Cellular Ltd. VSM Chairman and Managing Director Tulip Telecom Ltd. Col. Ltd. Ltd. Ltd. TV Ramachandran Resident Director Vodafone Essar Rajan S. Ltd. Mahendra Nahata Managing Director Himachal Futuristic Communication Shamik Das Chief Executive Officer S Tel Pvt. Corporate Affairs & Business Development. Anil Sardana Managing Director Tata Teleservices Ltd. Ltd. SC Khanna Secretary General Association of Unified Telecom Service Providers of India Himanshu Kapania Deputy Managing Director Idea Cellular CS Rao Head of Corporate Affairs and Regulatory Division Reliance Communications Naresh Ajwani Chief Regulatory & Corporate Affairs Viom Networks Ltd.Syed Safawi President Reliance Communications Ltd. India Ericsson India Vsevolod Rozanov President and Chief Executive Officer Sistema Shyam TeleServices Ltd. Ashok Sharma National Head — Regulatory Aircel Ltd. Brijendra K Syngal Senior Principal Dua Consulting Pvt. Lt. South Asia AT&T Communication Services India Pvt. ix . Rajiv Mehrotra Chief Executive Officer Vihaan Networks Ltd. Sanjay Kapoor Chief Executive Officer Bharti Airtel (India & South Asia) Mahesh Uppal Director Com First (India) Pvt. Parag Kar Senior Director — Government Affairs Qualcomm India Pvt. HS Bedi. External Affairs. P Balaji Head of Communications. B S Shantharaju Chief Executive Officer Indus Towers Ltd.

governments and academia. Cellular Operators Association of India (COAI): established in 1995. FICCI is one of the largest and oldest apex business organizations in India. and its stand on policy issues is sought after by think tanks. . regulators. COAI has emerged as the official voice for the Indian GSM industry and interacts directly with ministries. AUSPI is the representative industry body of unified access service licensees providing CDMA and GSM mobile services. who share a common interest in the development of cellular mobile telephony. Association of Unified Telecom Service Providers of India (AUSPI): constituted in 1997. Over the years. The organizations’ publications are widely read for their in-depth research and policy prescriptions. coverage and teledensity in India. it has joint business councils with 79 countries across the world. AUSPI is a registered society that works as a non-profit organization with the aim of delivering improved access. non-governmental society dedicated to the advancement of modern communication through the establishment of a world-class cellular infrastructure. economic and political change. financial institutions and technical bodies.Industry associations Federation of Indian Chambers of Commerce and Industry (FICCI): established in 1927. policy-makers. COAI is a registered. FICCI is active in 39 sectors of the economy. It plays a leading role in policy debates that are at the forefront of Indian social. fixed–line services and VAS across the country. It provides a forum for discussion and exchange of the ideas between these bodies and service providers. Home to 400 professionals. nonprofit.

tele-trading. Telecom Equipment Manufacturers Association (TEMA): established in 1990. medical transcription. trade missions. communicating on behalf of the industry and helping to create a favorable business environment for the industry. . billing services and network operating centers. The association was formed by several leading non-integrated long-distance carriers that provide service to the enterprise market segment. ACTO is an industry body that focuses on policies that enhance enterprise telecommunications in India. Internet Service Providers Association of India (ISPAI): founded in 1998. creating platforms for its members. It plays an active role in the dissemination and exchange of information among the GoI. foreign agencies.Association of Competitive Telecom Operators (ACTO): established in 2008. ISPAI acts as a collective voice of the ISP community. conducting research. Internet & Mobile Association of India (IAMAI): founded in January 2004. evaluating and recommending industry standards and practices. TEMA is an industry association for telecom equipment manufacturers as well as component and cable manufacturers. information technology (IT). IAMAI is an industry body representing the interests of online and mobile VAS industry. knowledge process outsourcing. tele-education. which includes IT-enabled services. financial services. Other Service Providers Association of India (OSPAI): established in 2008. business process outsourcing and multinational company segments. It has helped in shaping telecom policies for ISPs and internet entrepreneurs to grow their services in a supportive and enabling environment. tele-medicine. with the mission of promoting internet for the benefit of all. Indian missions abroad and leading national and international trade associations. functioning as an association of companies operating in areas such as domestic and international call centers. OSPAI is the representative industry body. It acts as an interface with government bodies for the growth of all services covered under the registration of other service providers. business process outsourcing. The association’s activities include promoting the digital economy. embassies.

2.Contents 1.3.7. Overview 1. Achievements and setbacks of NTP 1999 3.5. Outlook 9 10 12 14 15 16 17 19 21 22 27 28 3. Wireless 2.8. Key enablers under existing scenario 4. Value-added services 2. National long distance and international long distance 2.2 Licensing Spectrum 45 46 47 48 48 50 1 Enabling the next wave of telecom growth in India .11.3. Connected India: telecom vision 2020 4.10. Telecom equipment manufacturing in India 2.3.1. Key achievements of NTP 1999 3. Internet and broadband subscribers 2. Connected Indian: telecom mission 2020 4.1.2.4. Infrastructure 2. Key challenges of NTP 1999 31 34 41 4 Key enablers 4.1 4. Indian telecom sector 1.1.2. Evolution of the telecom sector in India 2.2.6. History of the Indian telecom industry 2.3.9. Regulatory framework 2.1. Wireline 2. Overview of the Indian telecom industry 2. Importance of telecom 3 3 5 2.

3.7 m-commerce M2M communication Mobile money M-health M-education Financial inclusion MNREGA and UID 5.4.3 4.7 4. Global practices Conclusion Glossary 75 87 89 Enabling the next wave of telecom growth in India 2 .4.3. Key enablers for potential opportunities 4.4.3 4.3.5 4.4.3.10 Equipment manufacturing 4.13 Convergence 4.3.9 Universal Service Obligation Fund (USOF) Broadband Mergers and acquisition Taxation Foreign direct investment (FDI) Consumer affordability and rural penetration Human resource 53 55 57 58 60 61 63 64 66 69 70 71 72 72 73 73 73 74 74 74 4.3.4.4.6 4.3.8 4.3.1 4.3.12 Enterprise data 4.4.11 Telecom infrastructure 4.14 Security 4.3.3.4 4.4.2 4.4.3.6 4.4 4.5 4.

India is now closely integrated with the global economy and is considered one of the pillars of global economic growth.” Export-Import Bank of India website. accessed 10 October 2010. DBS Group Research. November 2008. “India’s Macroeconomic Indicators.” The Financial Express. The easy access to mobile services is the outcome of positive regulatory changes. Overview Over the past two decades. India has grown rapidly from a “command and control” economy to a market-based economy.5% and 14. the mobile phone has been transformed from being a luxury that few could own into one of the essentials of an average Indian’s existence. compared with 3. the telecom sector has been the major contributor to India’s growth. accessed 19 October 2010. page 8.com/ind-eco. http://www.1.6%. with the further opening of the economy and the creation of regulatory institutions to march toward fully competitive markets. India’s GDP has been rising by more than 7%1 annually in the past decade. while the industrial sector and agriculture sector contributed 28. India’s service sector was estimated to account for 56. intense competition among multiple operators. low-priced handsets. respectively.5%2 annually from 1950 to 1980. Within the services sector. to GDP. accounting for nearly 3.com/news/redefining-the-hindu-rate-ofgrowth/104268/0. As a result of liberalization. Ernst & Young report.financialexpress. In less than a decade.9%3 of GDP.eximbankindia. 13 October 2010. http://www.6%4 of total GDP in FY10.1 Indian telecom sector 1. 26 August 2010.12 April 2004. India 2012: telecom growth continues. The process of liberalization started in the mid-1980s and gathered momentum in the 1990s. 1 2 3 4 India: Rising growth potential. In FY10 (financial year ended 31 March 2010).pdf. low tariffs and significant investments in telecom infrastructure and networks. “Redefining The Hindu Rate Of Growth. 3 Enabling the next wave of telecom growth in India . The Indian economy maintained a growth rate of more than 5% even during the global recession.

e-Charge Economies of scale Low acquisition cost (no handset subsidy) Source: “How can carriers make 40% EBIDTA margin at 2 cents/min tariff?.” http://www. network Infrastructure sharing Paradigm shift from average revenue per user (ARPU) to revenue per min Focus on prepaid Low cost distribution.telecomcircle.Indian telecom model Outsourcing non-core activities like IT.com/2009/02/carriers-ebidta/. accessed 25 October 2010. Enabling the next wave of telecom growth in India 4 .

“High-teledensity states grew faster. a 1% increase in mobile subscribers is estimated to increase per capita GDP by about US$200. 5 Enabling the next wave of telecom growth in India . page 17.2.livemint. 5 6 Unfinished Business: Mobilizing new efforts to achieve the 2015 millennium development goals.http://www. registering a consistent overall growth rate of more than 35% over the past decade in terms of subscribers. a government organization. There is a substantial relationship between increase in teledensity and the economic development of a region. Importance of telecom Telecommunication is pivotal to a country’s socioeconomic growth. September 2010.” LiveMint.” through which fishermen are provided free mobile handsets.1 Economic growth Indian telecom has emerged as one of the greatest economic success stories. 1. It has helped to reduce the time spent by agents and owners waiting for boats. In other words. Mobile telephony had a profound impact on the fishing community in the southern state of Kerala. has partnered with a leading telecom equipment and service provider to provide “Fisher friend.com/2009/01/19224316/ Highteledensity-states-grew-f. According to a study by the Indian Council for Research on International Economic Relations (ICRIER). By virtue of being a carrier and disseminator of information. security. creates efficient information flows.6% points. 19 January 2009. The well-distributed network of telecommunication services results in widening markets. business communication. along with free access to information service. World Bank. a 10%5 increase in teledensity is known to boost GDP growth by 0. Samar Srivastava. Bihar could have witnessed 4% faster growth if it had enjoyed the same teledensity as Punjab. for instance. Narrowing access gaps and removing barriers to information dissemination are prerequisites for promoting equitable and sustainable development as well as political and social cohesion. says study. It is one of the main architects of the accelerated growth and progress of different segments of the economy. Increasing connectivity is highly instrumental in improving governance. The MS Swaminathan Research Foundation (MSSRF).2. accessed 10 October 2010. reduced business risk and made those involved with fishing feel much safer at sea. response to emergencies and in the overall strengthening of the sociocultural ethos of the country. mobile telephony has made the rural and underdeveloped markets much more efficient. The advantages of the advent of telecommunications are manifold and explicitly verifiable from the phenomenal success of the sector. According to a World Bank study.2% faster.html. States with 10%6 higher teledensity have grown 1. and have helped those who catch the fish communicate with merchants and transporters in an efficient and effective manner.1. states with a higher teledensity have grown faster than those with lower teledensity. lowers transaction costs and is an effective substitute for infeasible physical transport. Mobiles have helped to co–ordinate demand and supply. The usage of mobile phones has enabled fishermen to respond quickly to market demand and prevent wastage. shared on a rotating basis.

Enabling the next wave of telecom growth in India 6 .1. call center operations.3 Social development Connectivity fosters social development. RuralShores: bringing jobs to rural India Over the years.2. This represents an innovative approach in providing quality health care whenever and wherever needed. Further. page 13. Indian villages account for 70%7 of the country’s total population. The provision of telecom services in rural areas and the obscure hinterland has made previously abandoned areas highly accessible. generating awareness. and establishing the mobile testing of diseases. improving access to and connectivity with health centers. It helps combat epidemics such as HIV/AIDS and malaria by supplying information on treatment and control. 1. The telecom sector has led to the growth of a range of communication technology-enabled activities and services. Nielsen. As a result. human resource services. RuralShores is an initiative that aims to reverse the trend. low employee attrition and the potential for scalability. It aims to introduce rural youth to BPO and to provide employment in their village. 56% of the country’s income. August 2010. • • • Helping to stem urban migration by generating greater income and employment potential in rural areas Facilitating emergency response and access to health care and allied services Facilitating m–commerce and e-commerce through trade along the agriculture supply chain. the quality of life in rural area improves. it ensures complete information protection. revenue accounting. 64% of consumption expenditure and 33% of national savings. providing the following advantages: • • • 7 Challenges Before An Integrated India: Bridging The Urban . creating an atmosphere of economic diversification. telecom is also a major creator of jobs. In return.2.4 Rural development According to FICCI and Nielsen study. guaranteed service levels. customer support centers. Communication facilities in rural areas are critical for the development of rural India. software development. However. corporations benefit through cost-effectiveness due to the lower costs associated with a rural ecosystem. systems engineering and systems design and integration are popular examples. Telecommunication helps provide access to health care and allied services.2. including improved education. resulting in the organized aggregation of supply and demand Providing enhancement of microfinancing. the spread of telecom and information services to rural areas is enabling the setup of rural business process outsourcing (BPO). technology transfer and entrepreneurship Facilitating national and regional integration. health and increased citizen participation in civil society. Moreover. With more untapped territories being connected through telecom. The current synergy between health reform initiatives and advantages in technologies has resulted in the proliferation of e-medicine projects. Participation in the initiative is an act of corporate social responsibility. employment and a strong socio-cultural ethos Open rural areas to foreign investment. a committed workforce and business continuity. the hitherto dormant economic potential is being increasingly tapped. leading to the inclusion of rural India in the global economic milieu and reducing the rural-urban divide. thus reducing the pressure of urban migration 1. Operations such as data entry. the lack of employment opportunities in rural India has forced people belonging to villages to move to the cities.Rural Divide. processing of insurance claims.2 Job creation Besides being one of the largest revenue generators.

making it easily accessible and increasing transparency. hospital information and libraries.nic.6 Strengthening investments Attractive trade and investment policies have transformed the Indian telecom sector into one of the most investorfriendly markets.8 accounting for more than 8% of approved FDI. quality and the cost-effectiveness of public services has been made possible by the telecom revolution. The four main types of e-governance services provided are as follows: • Government to government (G2G): these services take place at two levels — the local or domestic level and the international level. memos.2. as well as basic citizen services such as license renewals.9 billion). It is facilitating women’s participation in the political and economic processes of the country. One prime success story of communication technology promoting women’s education is India’s “Distance education for women’s development and empowerment” jointly run by the Department of Women and Child Development • • 8 “Fact Sheet on Foreign Direct Investment (FDI) from August 1991 to March 2010. 1. rules and regulations.2.1. and creating new economic opportunities for women through digital empowerment. Simplifying the application and approval procedures process for SME requests would encourage business development. Since the advent of IT and communication technology. including the “Millennium Development Goals. It is an irreplaceable component for achieving most developmental goals. G2G services are transactions between the central/national and local governments.in/. among others. conduct of public examination and customs clearance. as well as citizen assistance for basic services such as education. Achieving gender equality and empowering women is crucial because of its cross-cutting influence. Indian ministries and government departments are working to computerize their operations to make them simpler and increasingly accessible for Indian citizens.” Mobile telephones and the internet can advance gender equality by: • • Empowering women and surmounting gender inequality: this is being achieved by promoting the awareness among women about their social and political status. renewing licenses. ordering of birth/death/marriage certificates and filing of income taxes. such as the provision of human resource training and development that could improve the day-to-day functions of the bureaucracy and dealings with citizens. and between the departments and their agencies and bureaus. obtaining permits and the payment of taxes. downloading application forms. 1.” Department of Industrial Policy & Promotion. Significant progress has been made in the computerization of railway bookings. allocation of the Permanent Account Number (PAN) to income tax payers.5 E-governance E-governance that helps exploit the power of information and communication technology to transform accessibility. registering businesses. high illiteracy and negative social norms. Government to business (G2B): this entails services between government and the business community. G2G services are transactions between governments. accessed 10 October 2010. Delivering literacy and education to women wherever they live or work: this opens up new avenues and allows for flexible learning times. Government to employee (G2E): this includes G2C services as well as specialized services that cover only government employees. the inflow of FDI into India’s telecom sector was approximately INR407. including the dissemination of policies. Most relevant information about these entities is now available on their websites. On a global footing.1 billion (US$8. processing of passport application. health care. The services offered through G2B transactions also assist in business development. Between FY00 and FY10.2. 7 Enabling the next wave of telecom growth in India . http://dipp. specifically the development of small and medium enterprises (SMEs). and can be used as an instrument of international relations and diplomacy.7 Gender equality The advent of communications technology has helped overcome institutional and social barriers of mobility. Business services offered include obtaining current business information. • Government to citizen (G2C): this comprises information dissemination to the public.

According to Cybermedia India Online Limited.9 1.2.. 14 April 2010. 1. which aim to provide inclusive growth. the introduction of electronic muster rolls.ciol.com/News/News/News-Reports/Nokia-to-rollout-mobile-banking-in-India/134910/0/. focus on global telecom standardization activities and the promotion of entrepreneurship.8 m–commerce This is the next revolution that is expected to emerge through the use of mobile phones. there is a significant focus on technology with the potential to improve rural connectivity. the development of manufacturing capability.9 Facilitating research and development The growth in high-speed communication and advances in internet technology are making India a major R&D hub. making sure the worker is paid for the day. Mobile banking enables customers of banks and other financial institutions to access their account information.2. paying bills for utilities such as power and gas. This program provides a multimedia training package to make women’s self-help groups sustainable by developing their decision-making ability and resource management skills in 150 low-literacy districts. the introduction of GPS-enabled biometric systems at the grass-roots level continues to remain a challenge. the value of mobile payment transactions in India is expected to reach approximately US$1. organizations such as Telecom Centers of Excellence (TCOE). The integration of such programs with mobile telephony is expected to benefit such programs of national importance. the generation of intellectual property right (IPR). leading class services and a global presence. the elimination of ghost workers. This is one of the most befitting instances of the telecom and internet revolution. The challenges surrounding these programs include job cards for those demanding work. Once a worker has logged in. Mobile phones provide consumers an opportunity to transact anytime and anywhere. m-commerce finds its applications across various end markets such as banking and financial institutions. this data could be transmitted to MNREGA. 1. Furthermore.3 billion by 2013. the TCOEs have focused on the technological and management challenges that Indian operators face in reaching all sections of society while offering affordable solutions. (R&D). Efforts are constantly being made to devise more affordable technology for the masses. For instance. NTP 1999. These organizations have helped to create synergy among academia. trade stocks and purchase financial products such as insurance. the telecom industry and the Government for the creation of new services and applications. formulated by the GoI. For instance. thus overcoming cultural and language barriers. wage payments and the authorization of wages electronically. transfer funds. accessed 12 October 2010.” CyberMedia India Online Ltd. strengthening health networks. an integrated system for taking biometric attendance through handheld devices and transmitting it through mobile phones for authentication is expected to solve the challenge of attendance. monitoring health trends and provisioning primary health care. as these become a tool for commerce. taking relevant education that is well aligned to the needs of the communities to their doorstep. In pursuance of the NTP 1999’s objective toward R&D. Enabling the next wave of telecom growth in India 8 . • Helping lower child mortality and improve maternal health: this is done by providing information on nutrition. booking tickets for transportation services such as trains and taxis and online shopping. places great emphasis on research and development 9 “Nokia to rollout mobile banking in India.2. http://www. In India. the Center of Excellence in Wireless Technology (CEWIT) and the Broadband Wireless Consortium of India (BWCI) have been established.10 Provide impetus to initiatives such as MNREGA and Aadhaar The GoI has undertaken programs such as the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) and AadhaaR — Unique Identification Authority of India (UIDAI).and the Indira Gandhi National Open University.

2 9 Evolution of the telecom sector in India Enabling the next wave of telecom growth in India .

in 1986. and Mahanagar Telephone Nigam Limited (MTNL) were formed. and the NTP was announced in 1994. VSNL and MTNL aimed at providing services to international and metropolitan areas. Further. The liberalization of the sector resulted in the need for a regulator. growth in the initial years was very slow due to high mobile handset prices as well as the high tariff structure of service providers. However.1. two wholly government-owned companies — Videsh Sanchar Nigam Limited (VSNL). In January 2000. telephone services were introduced. Following independence. NTP 1999 enabled the telecom sector to reach an average subscriber growth rate of more than 35%. the Telecommunications Dispute Settlement and Appellate Tribunal (TDSAT) was established to take over the adjudicatory and disputes functions from TRAI. universal licensing regime. with exchanges being opened in Kolkata. respectively.2. In 1881. Mumbai. Chennai. Telephone and Telegraph (PTT). Interconnect Usage Charges (IUC). and guidelines for intra-circle M&A 2005–11 2000–05 1990–2000 1980–90 1947–80 Enabling the next wave of telecom growth in India 10 . which is now known as Tata Communications. the sector underwent its first wave of change. and the TRAI was established in 1997. and calling party pays (CPP) • 2004: Broadband policy. History of the Indian telecom industry The Indian telecom sector has evolved from the bygone days of “telephone on demand” to the advent of 3G telephony. Telecom equipment manufacturing was also de–licensed in 1991. all foreign telecommunication companies in India were nationalized to constitute the Posts. Brief history of the Indian telecom sector • 2006: DoT announces criteria for additional spectrum • 2007: Cap on number of players in a circle removed • 2008: New licenses granted by DoT • 2010: 3G and BWA spectrum auction • 2011: MNP launched Pan-India • 1947: Nationalization of all foreign telecommunication companies to constitute the posts and telegraph • 1950: Telephone exchanges taken over from the princely states • 1981: Contracts with a French company to merge with the state-owned ITI. and were under government control. The introduction of the New Industrial Policy 1991 initiated the liberalization process in India. primarily due to initiatives taken by the regulator and service providers. Karachi and Ahmedabad. to set up 5 million lines per year • 1985: Establishment of DoT • 1986: Establishment of VSNL and MTNL • 1991: Telecom equipment manufacturing completely deregulated • 1992: VAS opened to private sector participation • 1994: NTP 1994 • 1997: Establishment of TRAI • 1999: NTP 1999 • 2000: Establishment of TDSAT • 2003: Unified Access Service License (UASL). DoT was established in 1985 to provide domestic and long-distance services in India. The formulation of NTP 1994 was followed by the launch of mobile telephony in India in 1995. Its history begins with the laying down of the first experimental electric telegraph line in Kolkata. In the early 1980s. The introduction of NTP 1999 heralded pro-consumer policies.

The bidding process continued for a period of 16 days. which permitted an access service provider to offer both fixed and/or mobile services under the same license. e–commerce.In 2002. The GoI also introduced the Broadband Policy 2004. the DoT approved the sharing of infrastructure among mobile operators. the DoT issued guidelines for the intra-circle merger of cellular mobile telephone service (CMTS)/UAS licenses. which recognized the ubiquitous potential of broadband services and their contribution toward the GDP growth and improved quality of life through e–governance. Allocation of spectrum and grant of wireless license was subject to availability and. The GoI subsequently issued licenses in November 2003. Thus. the Universal Service Support Policy came into effect. the amount payable by BSNL and MTNL for 3G services pushed the total auction revenue to INR677. Further. In May 2003. mobile services had outpaced fixed-line services with nearly 45 million mobile subscribers. The seven winners were required to pay INR509. December 2006. providing statutory status to the USOF in December 2003. During the same year. The licenses were to be issued on continuous basis without any restriction on the number of entrants in a circle and applications were to be processed within 30 days of submission. The GoI offered two 20MHz blocks in the 2.2 billion for the B circles. through which all local incoming calls were made free. the GoI introduced the Unified Access Service (UAS) licensing regime. March 2007 and January 2008. In July 2010. INR1. The auction aimed at allotting three to four 3G licenses for each of the 22 regional circles. the Government concluded the auction of BWA services across India. entertainment.7 billion to the GoI. BSNL. In November 2005. in case UASL was not allocated spectrum due to non-availability. the GoI raised in excess of INR1 trillion from the auction of 3G and BWA services. In March 2008.6 billion).2 billion (US$14. The GoI commenced the auction for 2x5MHz in the 2100MHz band for 3G services in April 2010.4 billion (US$8. In February 2008. Additionally. and INR300 million for the rural C circles. The fund was introduced to provide access to telegraph services to people in rural and remote areas at affordable prices. among others. which witnessed fierce bidding for spectrum. 11 Enabling the next wave of telecom growth in India .3GHz range in each of the country’s 22 circles. using any technology. The reserve price for 3G services was categorized on the basis of circles — INR3. Operators were allowed to share infrastructure in their tower installations. FDI limit in the telecom sector was increased from 49% to 74%. Following the auction of 3G mobile services. raising INR385. as these constitute an essential and possibly the most expensive component in the entire telecom service delivery infrastructure.2 billion for the more populated A and Metro circles. education and medicine. new UASL guidelines were issued. telecom towers were accorded “Infrastructure Status” by the Reserve Bank of India (RBI). The Broadband Policy 2004 specified targets in terms of subscribers. which covered the levy paid by mobile operators to the state–run operator. the calling party pays (CPP) regime was introduced. In 2004. ADC was the fee paid by private mobile operators to the state-owned BSNL.2 billion) in auction revenues. reaching the final stage in May 2010. in February 2004. which mainly used the proceeds of ADC to develop rural telephony services. January 2004. the licensee was required to endeavor to rollout services using wireline technology. The bidding process continued for 34 days. the TRAI abolished the access deficit charge (ADC).

the Indian Wireless Telegraphy Act. telegraph and other means of communication The laws governing the telecom sector include the Indian Telegraph Act. 1885. 1997 DoT • The DoT is a part of the MICT. wireless spectrum management.2. data. and the Department of Posts The MICT formulates policies with respect to telecom.2. Department of Telecommunications (DoT). The key feature of India’s regulatory regime is transparency in industry information. The key departments of the ministry include the Department of Telecommunications. facsimile and telematic services and other like forms of communications International cooperation Promotion of standardization and R&D Promotion of private investment Telecom Commission • • • The Telecom Commission was set up in 1989 by the GoI to deal with various aspects of telecommunications The commission consist of four full-time members that are ex-officio Secretary to the GoI in the DoT. administrative monitoring of public sector undertakings (PSUs). and the Telecom Regulatory Authority of India Act. telephones. MICT • • • The MICT is part of the Indian Government. the Telecom Regulatory Authority of India (TRAI) and the Telecom Dispute Settlement & Appellate Tribunal (TDSAT). the Department of Information Technology. Regulatory framework A number of positive regulatory changes have driven growth in the sector. licensing. the Telecom Commission. an open approach and encouragement of consultation with stakeholders. The key stakeholders as a part of the regulatory environment in the telecom ecosystem include the Ministry of Communications & Information Technology (MICT). Its key responsibilities include: • • • • Policy. wireless. R&D and standardization and validation of equipment. licensing and coordination matters relating to telegraphs. and four part-time members that are secretaries to the GoI of the concerned departments The Telecom Commission is responsible for policy formulation. post. 1933. among other matters Enabling the next wave of telecom growth in India 12 .

TRAI • TRAI was established as an independent statutory regulatory authority under the TRAI Act in 1997. such as administrative and financial functions. the GoI established the Telecom Dispute Settlement & Appellate Tribunal (TDSAT). that may be entrusted to TRAI by the central government. and to hear and dispose of appeals against any decision or order of TRAI The appellate tribunal consists of a chairperson and two other members 13 Enabling the next wave of telecom growth in India . as an authority separate from the TRAI to handle disputes in the telecom sector The functions of TDSAT are to adjudicate any dispute between a licensor and licensee. between two or more service providers. and between a service provider and a group of consumers. or as may be necessary to carry out the provisions of the TRAI act TDSAT • • • In April 2000. and the terms and conditions of license to a service provider Ensuring technical compatibility and effective inter-connection between different service providers Regulating revenue-sharing arrangements among service providers Ensuring compliance with the terms and conditions of license Setting and enforcing the time frames for providing local and long-distance telecommunication circuits Recommending revocation of licenses for non-compliance of their terms and conditions Facilitating competition and promoting efficiency in the operation of telecommunication services Protecting the interests of the consumers Monitoring the quality of service and conducting periodical surveys Inspecting the equipment used in the network and recommending the type of equipment to be used by service providers Settling disputes between service providers Advising the central government in matters related to the development of telecommunication technology and the telecom industry Levying fees and other charges Ensuring compliance with universal service obligations Performing other functions. The key powers and functions of the authority include: • • • • • • • • • • • • • • • Recommending the need for a new service provider.

accessed 12 October 2010. accessed 10 October 2010.3.3 million Teledensity (%) 50% Rural 32.3 million subscribers.9% 140. 13 “Position paper on the Telecom sector in India.3% 45.7% Source: TRAI 10 “TRAI Press Release No.livemint.3 40% 30% 20% 10% 18. http://pppinindia. infrastructure sharing and the introduction of positive and enabling regulatory reforms.1%. The telecom revolution in the country has impacted both the urban and rural population.5 FY00 61.9%. hypercompetition in the sector. As of September 2010.6 FY03 7.2% 205. com/2010/05/30230743/Telcos-to-recoup-3G-bid-money.9 FY07 3. December 2009.6% 36. The total subscriber base (including wireline and wireless) reached 723. http://www.asp.9% 28. page 4. http://www. affordable handsets. 63 /2010.7 FY08 FY09 FY10 Sep-10 0% Total subscribers Source: TRAI Teledensity According to TRAI.pdf.0% 98. 30 May 2010.3% FY01 4.html.0% 26. Such phenomenal growth can be attributed primarily to the country’s large population.gov. urban subscribers account for more than 65% of the overall subscriber base. leading toward a huge urban–rural digital divide.1% to reach 621.trai. In the past decade. “Telcos to recoup 3G bid money in 5-6 years: Analysys Mason.3 621.”TRAI website. 12 Ernst & Young analysis.3 million10 in September 2010.” LiveMint.5 429. Overview of the Indian telecom industry India is the world’s second-largest telecom market. high economic growth. reduced tariffs.4 FY05 300.3% Urban 67.7% 37. The wireless segment has been registering monthly mobile additions of about 15 to 2011 million subscribers.3 FY06 70% 60% 723. Lower costs and the additional benefit of mobility that is associated with wireless subscribers have led to the stagnation of the wireline subscriber base. Urban and rural subscriber base.0 FY02 5.” Department of Economic Affairs – Ministry of Finance.13 in comparison with US$200–US$350 per subscriber for wireline.2% 12.5 FY04 9.com/ pdf/ppp_position_paper_telecom_122k9. The capital cost to provide mobile service varies in the range of US$50–US$90 per subscriber.2. 11 Shauvik Ghosh. accessed 10 December 2010. wireless subscribers constitute the majority of the total subscriber base.0% 76. the total subscriber base grew from FY00 through FY10 at a compound annual growth rate (CAGR) of 36. However. Subscriber base and teledensity (wireless and wireline) 800 Total subscribers (million) 700 600 500 400 300 200 100 0 2.in/Default. the total teledensity has risen above 50%. accounting for 95.0% 52.1% 54.12 whereas wireline subscribers account for 4. with the mobile segment leading this growth. Enabling the next wave of telecom growth in India 14 . September 2010 100%= 723.

5%14 to reach 584.” Zinnov Research and Consulting. The road ahead for the Indian telecom sector is expected to be more eventful.7% 687.8% 391.zinnov. the growth in the number of subscribers was very low. Mobile services were commercially launched in India in 1995. 16 “Penetration of Mobile Telephony in India & Value added services in Indian Mobile Telephony market. Wireless India has emerged as one of the world’s fastest-growing telecom markets. the gap between GSM and CDMA has widened as the GSM subscriber base has grown more rapidly.1% of the total wireless subscriber base. The wireless subscriber base in India grew from FY00 through FY10 at a compound annual growth rate (CAGR) of 77.7 4. India’s mobile market is the second largest in terms of subscribers in the world after China.gov.9 0.2. July 2010.1 261. CDMA.6% 1. with average monthly subscriber additions in the range of 0. October 2006.pdf.5 13.1% Source: TRAI 14 Ernst & Young analysis. accessed 10 October 2010.8 33. accessed 15 October 2010.0 33. page 2. VAS.0% 98.8% 52. and this growth is primarily attributed to the growth in wireless services.6% 9.com/presentation/Mobile_VAS. http://www. In the initial years of mobile telephony.05–0.0% 70% 60% 50% Teledensity (%) 40% 30% 20% 10% 0% FY10.” TRAI website. FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 Sep-10 Wireless subscribers Teledensity Source: TRAI Wireless subscribers: GSM vs. 15 “TRAI: The Indian Telecom Services Performance Indicators (January .6% 58.2 14.4. mobile number portability (MNP) and the growth of manufacturing.asp. The advent of NTP 1999 paved the way for aggressive growth in the wireless subscriber base.7 million CDMA 15.1 22. Over an extended period.8 165. http://www.2% 3.1 million16 subscribers.3 million15 subscribers in Wireless subscribers in India 800 700 Wireless subscribers (millions) 600 500 400 300 200 100 0 1.March 2010). 84.7 584.4% 3.3 49.9% GSM GSM subscribers constitute about 84.2% 6.trai. September 2010 100% = 687.6 0.in/Default. primarily due to the advent of new services such as 3G. 15 Enabling the next wave of telecom growth in India .

there is a significant opportunity for future growth. improved mobile coverage. In the future.1% Source: TRAI. accessed 10 October 2010. Although fixed-line operators are trying to offer VAS such as high-speed internet access.5 million19 public call offices (PCOs) and 0. Apart from these two players.gov.in/Default. Wireline The Indian wireline market grew at a CAGR of 3. http://www. http://www.in/Default. cheaper handsets.5 40. in FY10.1%.4 38. the wireline subscriber base was 37 million. the wireline subscriber base has declined due to lower mobile tariffs.0 37.6% 40.” TRAI website. The wireline market is dominated by the governmentcontrolled incumbent players. it accounted for 5.gov.9%. accounting for 73. wireline service continues to face stiff competition from wireless services.9% 94.7% -2.3% 0. additional private players have also ventured into the fixed-line market.” TRAI website.9% 32. 19 “TRAI: The Indian Telecom Services Performance Indicators (July . there were 3.4% of the subscribers.4% 5. the major wireline operators in India also operate mobile networks.9% 3.1 41. In FY10.March 2010).1% of the subscribers in FY10.2. DoT In FY00.9% -3.7 17. video on demand and videoconferencing. Enabling the next wave of telecom growth in India 16 .trai. 18 “TRAI: The Indian Telecom Services Performance Indicators (January .0 25% 20% 35.asp.18 with a teledensity of 3. Although wireline infrastructure in India is not as extensive as wireless infrastructure. July 2010.3% 41. Furthermore. the wireline market accounted for 93.6 Growth rate (%) 15% 10% 5% 0% -5% -10% Wire line subscribers Source: TRAI Growth rate Change in the composition of subscribers 100% 80% 60% 40% 20% 0% 6.3% -1.7% 38.8 39. Over the years.6 million village public telephones (VPTs) in India. As of September 2010.7 18.3%17 during the period between FY00 and FY10.asp.6% FY00 Wireless FY10 Wireline 93. In the recent past. Wireline subscribers 50 45 Wire line subscribers (million) 40 35 30 25 20 15 10 5 0 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 Sep-10 -3. 17 Ernst & Young analysis. driven by the immense potential for data growth.5. besides other new technologies.September 2010).4 41.trai.3 7.1% 22. accessed 15 January 2011. the emergence of new technologies such as fiber to the home is expected to drive the growth of the wireline market in India. the urban market has dominated the wireline subscriber base.3% -3. January 2010.0% 26. where they see higher revenue growth and continue to invest extensively. the advantage of mobility among wireless networks and inadequate infrastructure of the wireline network.

2 million and 8. whereas traditional internet connections have a speed of less than 256 kbps.3 6.9 16.2 FY05 9. 21 Bringing Mass Broadband to India: Roles for Government and Industry.1 8. The opportunities hold a much larger promise for India’s large low-income population and a growing economy. Booz & Company. June 2010. it has made significant inroads in the urban market.3 3.6 5 0 0. access to personal computers and electricity.5% to reach 16. accessed 25 October 2010. governance. According to Booz & Company. such as opportunities for education. cable television networks. satellite media. governance. September 2010. the number of internet and Internet and broadband subscribers (million) 20 15 10 5. Broadband infrastructure plays a vital role in a country’s achievement across domains such as social progress and economic development. The minimum threshold speed for a broadband connection is 256 kilobits per second (kbps) or more.9 1. Broadband brings a number of benefits. Also. The DoT formulated the Broadband Policy 2004.3 17. digital subscriber lines (DSL) on copper loop. employment and the delivery of services. a 10%22 increase in broadband penetration leads to a 1. This falls short of a Broadband Policy’s goals of 40 million internet subscribers and 20 million broadband subscribers by the end of 2010. entrepreneurship and services.2.8 million. org/2010/10/09/international-insights-%E2%80%93-september/. http://intug. 22 “Broadband Commission Presents Report to United Nations.3% increase in GDP. Although the internet is a function of various factors such as literacy. Internet and broadband The internet has revolutionized the lifestyle of many Indians by creating a new means of communication.” International Telecommunications Users Group website. terrestrial wireless and future technologies.5 10.9 11. Further. FY06 FY07 Internet subscribers FY08 FY09 Broadband subscribers FY10 Sep 10 Source: TRAI 20 Ernst &Young analysis.5% increase in labor productivity in a country. knowledge sharing.3 13. it is estimated that a 10%21 increase in broadband penetration translates to a 1. From FY05 through FY10.6. 17 Enabling the next wave of telecom growth in India . which envisions the creation of a framework through various access technologies such as optical fiber.4 2.9%20 and 117. the evolution of technology and increase in bandwidth has given rise to internet connections at speeds faster than traditional dial–up connections.8 6. respectively in FY10.2 broadband subscribers has increased at a CAGR of 23.

As of September 2010. The key factors responsible for the widespread adoption of broadband include affordability and availability.6% Source: TRAI Source: TRAI Digital subscriber line (DSL) is the preferred technology among service providers for both internet access and broadband services.0% 10. and 86.8% 4.6% 4.6% 0. DSL constituted 50.5% DSL Dial-up Wireless Cable modem Ethernet Others 50. despite a structured framework that included ambitious goals to be met in 2010.9% of the market share in broadband access. September 2010 3. . The share of wireless technology continues to be negligible and remains to be fully exploited.5% of the market share in internet access. Currently.Market share by subscribers of technologies in internet access.3% 0. September 2010 1. Broadband penetration continues to be very low in India. broadband users are concentrated in urban areas.5% 6. primarily in business districts or high–end residential areas of the larger cities.0% Market share by subscribers of technologies in broadband. especially in the case of broadband services.5% 31.5% DSL Cable modem Ethernet Wireless Others 86.

7.262 FY10 1.251 39 5. the financial services sector and the government. network integration.027 FY11E 1. managed services and network security services are provided by global operators in partnership with Indian IT companies. National long distance and international long distance The Indian enterprise data connectivity market is growing at 10% annually and annual revenue is expected to near the US$10 billion mark in the next five years. network storage and enterprise voice solutions.169 23 Industry estimates. The other services relevant to this segment are international private leased circuits.800 45 6. network management. With telecom and IT converging. and national and international data connectivity. internet connectivity.556 FY09 930 480 70 110 65 210 250 130 30 56 1. The growing demand for connectivity is coming primarily from the IT and IT-enabled services sectors (ITeS). multiprotocol label switching (MPLS) based IP-VPN services.200 510 130 150 80 350 600 180 52 72 2.600 20 3. Enterprise segment revenues23 Activity Private line VPN Ethernet Managed business VoIP Managed IP telephony Hosting services Application services Security Continuity and recovery Managed storage Outsource task Contact center Total (US$ million) FY08 829 423 40 92 51 161 170 110 20 40 1. Most large global players have set up operations in India to cater to the connectivity needs of their customers.2.064 495 92 125 75 260 370 150 45 61 2. Voice over Internet Protocol (VoIP) is considered a key enterprise application for lowering operating costs.900 31 4. 19 Enabling the next wave of telecom growth in India . A majority of global operators in this space are also offering VAS such as network security. It has spurred the demand for IP-based virtual private network (IP-VPN) services in India.

27 DoT Annual Report 2009–10.7% to reach total revenues of INR164 billion.Department of Telecommunications.asp. with its revenues reaching INR176 billion26 in FY10. As of December 2009. the GoI had issued 29 NLD24 service licenses.1 1.3% 176. the market slowed in FY10. http://voicendata.0% 35% 30% 25% 20% 15% 10% 10% 0% FY07 FY08 FY09 Market size (INR billion) FY10 Growth (%) Source: Voice and Data 24 DoT Annual Report 2009–10. FY10. 26 “India among the Top Few Fastest Growing Telecom Markets. ILD has witnessed steady growth. Enabling the next wave of telecom growth in India 20 . Market size of ILD 200 Market size (INR billion) 150 100 50 0 115.3 97. with the sale of the strategic stake in VSNL to the Tata Group.Department of Telecommunications. primarily due to a decline in ARPU across all operators. the GoI had issued 24 ILD27 service licenses. http://voicendata.0% 40% 30% 20% 10% 0% 71.com/content/vnd100_2010vol-II/110070519. FY10.asp.2% 150.6% in FY 2009-10. accessed 18 October 2010.0% 115. In FY10.ciol.3 0.” Voice & Data. the Indian market for NLD grew by 13.3% 35.9 FY07 Market size (INR billion) Source: Voice and Data Growth (%) In 2002. 25 “India’s NLD market has grown by 13. without any restriction on the number of operators.7% FY08 FY09 FY10 Growth (%) Growth (%) Market size (INR billion) 48.3% 25. Market size of NLD 180 160 140 120 100 80 60 40 20 0 60% 50% 164. with the annual license fee being reduced to 6% of the AGR.0 144.NTP 1999 opened up the NLD service for private operators. As of December 2009.25 However. accessed 18 October 2010.ciol.0 30.3 13.” Voice & Data. India’s ILD services were opened up for private players.com/content/vnd100_2010vol-II/110070520.0 17.

9 15. wireless and landline infrastructure equipment.4% 3. The majority of telecom segments are highly dependent on imports. with the remainder coming from global companies manufacturing in India.8.1% Sweden US Singapore Hong Kong Others According to industry estimates.html. Telecom equipment manufacturing The telecom equipment industry comprises products such as cell phones.9 billion FY07 Note: Includes both indigenous and offshore production Source: DoT.” LiveMint. 2009 100%=US$8. India is a strong market for global telecom equipment vendors.0 412. 28 “Telecom equipment manufacturing in India needs help urgently.5% 6. companies in the manufacturing segment are yet to feature in the global telecom landscape.5 0 FY04 FY05 FY06 Production 236. DSL and cable modems and networking devices.livemint. Manufacturers in India face challenges such as high logistics costs.6 19. the demand for telecom equipment is expected to be worth US$70–100 billion28 in 2015.1%.3% 3.7 2006 2007 3.9% 4. 02 September 2010.2. including routers and switches.org/telecomequipment-manufacturing-in-india-needs-help-urgently-21-july-2010-t.0 120 100 80 60 40 20 FY08 FY09 Exports 0 Value of telecom equipment imports to India 10 Imports (US$ billion) 8 6 4 2 0 1. according to a leading telecom equipment manufacturer.0 140 Exports (INR billion) 110. chipsets.ciol. “Indian telecom firms may get DoT boost.0 160.com/2010/04/01215017/Indian-telecomfirms-may-get-D.3 2005 1.climatechallengeindia.29 respectively.7 81. From 2005-09. accessed 02 August 2010. “Policy recommendations to increase domestic telecom growth and exports of telecom equipment and service.” CyberMedia India Online. the manufacturing and exports of telecom equipment grew at a CAGR of 33. 21 July 2010.9 Source: International Trade Centre Share of imports by country of origin. inadequate tax benefits and competition from low-cost Chinese equipment. 29 Ernst & Young analysis.3 200 140. the market for wireless infrastructure equipment is estimated to be US$8–10 billion. with the exception of telecom towers and cables.4% 3. http://www.7 1. only 40% of the requirement for equipment is met through local sourcing.30 and equipment worth INR190 billion was imported in 2009. http://www.com/News/News/News-Reports/ Time-to-go-local-in-telecom-equipment-purchase/140758/0/.2 2008 2009 8.” India Climate Portal. GOI.4% China South Korea 59. accessed 12 October 2010. Despite the growth of a localized manufacturing environment in India.” “Telecom Equipment & Services Export Promotion Council (TEPC). 30 “Time to go local in telecom equipment purchase. Furthermore. accessed 10 October 2020. an unreliable power supply.0 100 4. Source: International Trade Centre Although a few Indian mobile operators have a significant presence globally. Telecom equipment manufacturing and exports Production (INR billion) 600 500 400 300 178.0 2.3 518.9% and 112. http://www. 21 Enabling the next wave of telecom growth in India . Ministry of Communications and IT.” 19.

4 to 2. The National Telecom Critical Infrastructure Policy is expected to address these concerns as well as the issues affecting telecom providers on the state level. Competition will give further impetus to the development of infrastructure. as the safety and aesthetic issues related to the setup of towers are addressed. GBTs can accommodate up to six tenants.2 Towers and in-building solutions Telecom towers are broadly classified as ground-based and rooftop towers. diesel generator set  and security cabin. and the demand for more services will translate into the development of more telecom infrastructure. topography. The rollout of services by operators takes place only on the back of robust telecom infrastructure. including ROW related issues. with each BSC being connected to a base transceiver station (BTS). CDMA. whether it is GSM. Infrastructure development plays a crucial role in the development of the wireless sector. air conditioner.” Lok Sabha. Telecom infrastructure industry in India. It connects the electronic infrastructure at the tower site with the BSC and MSC. feeders. duct space and tower through simple registration without paying any license fee. so as to facilitate the handing over of signals from one BTS to another like a chain. the number of operators providing their services from a particular site influences the extent of civil infrastructure installed at the site.33 depending upon subscriber usage. GBTs involve a capital expenditure in the range of INR2. depending on the height of the tower. December 2008. Infrastructure Provider-I (IP-I) can provide assets such as dark fiber. Civil infrastructure includes components such as tower site. a mobile network in a circle consists of mobile switching centers (MSCs). ICRA Rating Feature. steel tower. and safety and aesthetic concerns. page 9. The development of the telecom infrastructure depends on four key factors: rollout. The components of mobile networks include the electronic infrastructure.9. the civil infrastructure and backhaul. http://loksabha. Crisil Research. availability. Enabling the next wave of telecom growth in India 22 . Finally. on behalf of the licensee. competition. “Growth of Telecom Sector. battery backup. March 2009. while electronic infrastructure forms the remaining 40%. it does not play any role in carrying wireless signals. Civil infrastructure includes the complementary elements of a cellular network that ensure that the electronic components are operational. node B.9. cables.1 Mobile network Typically. The BTSs are installed in a contiguous manner. radio access network. Telecom towers and allied infrastructure. However. page 6. radio antennas. Infrastructure The Indian telecom success story is built around the wireless segment. accessed 28 October 2010. power regulation equipment. civil infrastructure forms about 60% of the cost of setting up a network.2. frequency band of operation and spectrum 31 32 33 34 35 2. each of which is connected to base station controllers (BSCs). the rollout of infrastructure will become easier. growing at a CAGR of more than 75%31 in the past decade in terms of the number of subscribers. fire extinguisher. core network and other transmission equipment. price. As of March 2010. March 2009. Falling prices of telecom services will help to increase their affordability. ICRA Rating Feature.nic. Ground-based towers (GBT) are 200 to 40035 feet high and are mostly used in rural and semi-urban areas because of the easy availability of real estate. Backhaul consists of the intermediate links between the core of the network and the various sub-networks. 3G or BWA.in/.45532 telecom towers in the country. ROW. Rooftop towers (RTTs) are placed on the roofs of high-rise buildings.9. The radius of each BTS varies from 500 meters to as much as 8-10 km. page 5.34 Electronic infrastructure consists of the electronics needed to run a wireless network such as a BTS or cell site. However. there were 425. Typically. It is not influenced by the type of the communication technology being used. The policy should clearly define the role of the Central Government and the states to help catalyze telecom sector growth. Ernst & Young analysis. It can also create active infrastructure.8 million. 2. Telecom infrastructure industry in India. The high level of growth in the Indian wireless telecommunications market will continue to drive huge investment in infrastructure as well as a speedy rollout of networks into new areas. hurdles to the erection of cellular towers and value added tax (VAT) levies on broadband services delivered through fiber media. The wireless sector has charted an impressive growth trajectory. shelter room.

121 41.271 3. operators used their tower infrastructure for competitive advantage.” Lok Sabha. Typically.207 34.in/. State-wise number of towers States Rajasthan Gujarat.102 38. where there is paucity of real-estate space.102 26.071 1. asp.275 23. As a result.387 5.trai.090 52.611 18. and emergency services.” Reserve Bank of India.3 Telecom infrastructure in India Initially. Coverage is required to meet the needs of both the general public.5-2 million. Sikkim. accessed 20 September 2010.371 8.9. RTTs can accommodate two to three tenants. 37 “Master Circular . The tax benefit encourages the participation of private sector through investment.aspx. Mizoram and Tripura Kerala and Lakshadweep Total Public sector 2. over the past few years.854 3. 36 “TRAI: Consultaion paper on issues related to telecommunication infrastructure policy.nic.614 35.766 21. these involve a capital expenditure of INR1. Manipur. 23 Enabling the next wave of telecom growth in India . telecom towers were accorded Infrastructure Status37 by the RBI.752 1. there are an estimated 425.322 26. Daman and Diu Maharashtra and Goa Karnataka Madhya Pradesh and Chhattisgarh West Bengal.634 4.36 In July 2010.794 369 1.323 38.392 22.512 488 3.494 24. The GoI provides certain benefits specifically to infrastructure companies.608 2. Orissa.rbi. However.455 Source: “Growth of Telecom Sector. shopping malls. accessed 28 October 2010.are shorter than GBTs and are common in urban and highly populated areas. which need reliable communications for efficient incident management and personal safety. In-building solutions are designed to improve the reception of radio frequency signals indoors to meet the increasing demand for high-quality mobile services.418 Towers 25.gov.037 Private sector 23.337 720 2. Today.Exposure norms. there are three types of tower companies — pure-play tower companies. Extending Infrastructure Status to telecom towers and the resultant income tax benefits should certainly encourage tower companies to expeditiously set up more towers in underserved areas.350 28.678 425.708 8.008 4. This constitutes an essential and possibly the most expensive component in the entire telecom service delivery infrastructure.428 4.577 2. Haryana and Chandigarh Uttar Pradesh and Uttarakhand Andhra Pradesh Punjab and Himachal Pradesh Jammu and Kashmir Tamil Nadu and Pondicherry Bihar and Jharkhand Nagaland. Over the past couple of years.321 20.899 6. which expects its mobile phones to work at all times. http://loksabha.460. 2. Currently.55.154 1. tenancy level for the industry stands at 1.396 18.995 25.org.920 23.177 41.630 31.in/scripts/BS_ViewMasterCirculardetails.098 57.184 391. http://www. In recent years.in/Default.644 17. mass transit systems.392 45. accessed 01 February 2011. http://www. operators with towers and operator-owned tower companies. implying a subscriber-per-tower ratio of 1. Meghalaya. the growth of mobile communications has made the provision of radio coverage within airports.242 17.028 2. stadiums and office buildings an essential requirement.455 telecom towers in India. the leading operators have opted to share their infrastructure.” TRAI website January 2011. telecom operators have hived off their telecom towers into separate entities. Andaman and Nicobar Assam and Arunachal Pradesh Delhi.494 34.

while the tower company earns revenues. Capital expenditure (capex) and operating expenditure (opex) savings: the setting up of a countrywide cellular network requires substantial capex. This translates to consumption of more than 2 billion liters of diesel per year for cell sites.4 Energy requirements Currently. telecom towers consume an average of about 5-6 kilo watt of energy coupled with an average of 8 hours of diesel generator running time due to power outages. superior network quality is a sustainable differentiating factor that helps to reduce customer churn and command premium prices.38 Estimated cost savings resulting from infrastructure sharing39 Component Capex (including interest) Opex saving as a result of infrastructure provisioning fee savings Opex saving as a result of shared energy costs Total opex savings Total savings (capex and opex) 71.5 liters.5x in the course of this decade. where mobile teledensity is barely in the double digits. such as land and energy.4 Savings (INR billion) 476. significant investments will be required.2 81.5 Future growth potential. Due to higher costs of land development. A significant part of the network rollout is likely to come in the untapped rural areas. In its more complex forms.6 Goals of infrastructure sharing The key beneficiary of infrastructure sharing is the subscriber.9. Against this background. massive amounts of funds can be saved. On average. energy.0 2. power shortages.9. further increasing capex requirements. and newer operators can build an assetlight model. service providers have strong incentives to share infrastructure. Spectrum constraints and network quality: for operators in urban areas. 10. it will allow a better use of spectrum. 2. insurance costs. 39 Industry estimates.6 billion resulting from savings in infrastructure provisioning fee (IPF). additional security. unclear land ownership and expensive backhaul connectivity costs in the rural areas. It is estimated that tenancy levels will rise to between 2–2.9. the industry has pumped in INR1 trillion and another INR400–500 billion is expected to be invested in the next two years. Such an arrangement works well for both partners. capital and interest costs.2. The dependence on diesel could be reduced if the Government utilized that subsidy to support a move toward renewable energy options such as solar. translating to 6 million liters of diesel per day. It is estimated that infrastructure sharing in its current form has helped achieve savings of INR557. the concept of infrastructure sharing assumes special importance. Enabling the next wave of telecom growth in India 24 . and has a pre-tax margin of 7%–8%. Since many rural areas are far-flung. Average diesel consumption per site per hour is about 2. state electricity boards. and infrastructure sharing will act as an important tool to achieve faster rollouts and save operating and capital expenditure in these areas. which is subsidized by GoI.6 557. Rollouts in rural and semi-urban areas: as wireless service providers penetrate rural and semi-urban areas. Tower sharing could help operators maintain quality network coverage throughout the city. land owners and so on before the tower and electronic infrastructure can be completed. a higher proportion of ground-based towers. 27 million units of electricity are consumed per day. With sharing. as the tenant paying a higher rent to the tower company accelerates the time-to-market process. Infrastructure sharing serves the following goals: Optimal use of scarce resources: infrastructure sharing in its simpler forms will lead to better use of scarce national resources.6 Reduction in execution risks: erecting towers carries with it significant execution risks and requires as many as 40 clearances from separate authorities such as the Standing Advisory Committee on Radio Frequency Allocation (SACFA). 38 Industry estimates. Overall. more groundbased towers will be needed. investments required and emerging trends The industry faces low profitability. fuel cells or wind power by treating these toward renewal effort as a part of the overall effort to reduce greenhouse gases and the country’s carbon footprint.

These provide incentives for companies to participate in infrastructure sharing. Electronic infrastructure sharing: this refers to the sharing of electronic elements such as antennas. mast and site. RAN sharing: this is the simplest type of electronic infrastructure sharing. Thus. radio access network (RAN). infrastructure sharing reduces operating costs and provides additional capacity in congested areas where space for sites and towers is limited. The radio network controller (RNC) and core network are not shared in this model. Node B sharing: in the Node B sharing model. Commercial considerations appear to be driving the increasing trend to adopt a variety of infrastructure models. This is by far the most common form of infrastructure sharing in India now. masts. buildings. including radio equipment.7 Models of infrastructure sharing As India’s mobile networks have expanded over the past few years. It helps to expand coverage into previously unserved geographic areas. What started off as arrangements between two telecom operators has evolved into the creation of tower companies. infrastructure sharing typically receives the backing of many conservation groups because less network buildup means fewer negative environmental impacts.” GSMA. as operators can dramatically reduce site acquisition times and load their electronics and electronic network elements onto the civil infrastructure of incumbent operators in a civil sharing model. so that each service provider can maintain control of its equipment and spectrum use. Service providers can agree to provide mobile services to each other’s subscribers to ensure converage wherever their own network signal is not available or weak.9. Government initiatives on infrastructure sharing: regulators favor faster deployment and investment optimization in the telecom sector. For operators who have been awarded 3G licenses and will be launching 3G operations. The tower business can become a profit center by itself. 25 Enabling the next wave of telecom growth in India . It also provides an additional source of revenue but may be limited by differing strategic objectives. it provides an opportunity to reduce capital and operational expenditure by sharing infrastructure from the start of the build-out. It involves all the access network elements to the point of connection with the core network. rather than just leading to cost savings. product innovation and improved customer service. 2. shelters. Local restrictions and environmental benefits: as local authorities become more concerned about the environmental and aesthetic effects of the number and location of antennas in an area. The level of sharing among wireless service providers varies depending on the complexity of the arrangements and the interdependence of the wireless service providers. This can increase the coverage area and improve the quality of service. Operators have realized that the industry needs significant capital expenditure. node B and transmission equipment. page 12. The separation of the core network also allows each service provider to offer differentiated services to its subscribers. Expeditious time-to-market for new players: sharing significantly speeds up the time-to-market. Less negative environmental impact: although environmentalists show limited support for telecom network deployment. cables. Infrastructure sharing limits duplication and gears investment toward underserved areas.Revenue stream for incumbents: sharing enables incumbents to earn revenues from a new source. feeders. operators either establish a joint venture company to operate the shared network or establish an agreement on the use of each other’s networks. apart from improving capex and opex efficiencies. towers. one physical unit is shared by two distinct nodes B. An extended version of RAN can be in the form of intra-circle roaming. zoning regulations may start to play an important role in driving service providers to share civil infrastructure. freeing up significant resources and management time to focus on their core business. Infrastructure sharing can take the following forms40: Civil infrastructure sharing: this refers to the sharing of physical sites. coverage is no longer a source of competitive advantage. 40 “Mobile infrastructure sharing. thus contributing to the growth of the industry as a whole. There are many government initiatives that support infrastructure sharing. which can be reduced by sharing their networks. Usually. power supply and battery backup.

especially with the advent of smartphones and 3G. The benefits of DAS are twofold — the technology allows carriers to fill in coverage gaps and dead spots in their macro network and. Mobile virtual network operators (MVNOs): these typically do not have their own network and have no rights to spectrum. They typically rely on operator network sharing to get access to subscribers and offer services. stadiums and shopping malls as well as for outdoor purposes. including electronic components such as optic and feeder fiber cables. DAS has emerged as a powerful tool for wireless carriers to bolster their coverage and boost their capacity. radio links. A common RF or optical fiber medium can be utilized. This can be implemented to various levels depending on which platforms operators wish to share. four of whom have formed two consortiums of two operators each. National roaming accelerates competition by allowing new players to launch their services within a shorter time frame. backhaul.Core network: the most complex form of network sharing involves both radio and core network elements. but required each operator to maintain 30% of its network separately. Exits from such sharing arrangements can easily be provided if warranted due to an increase of traffic or other reasons. Essentially. Enabling the next wave of telecom growth in India 26 . usually a base station. it helps add much-needed capacity to operators’ networks. Each consortium has built out a joint network. reducing cost and maintenance efforts. antenna and transmission equipment. network elements. there are five operators. Radio and core sharing: all electronic components in the access and core network as well as civil infrastructure are shared. who have yet to complete their network deployment to provide national service coverage through sharing incumbents’ networks in specific areas. DAS technology can be used to boost signal coverage in large buildings. DAS is a collection of small antennas spread over a specific geographic area and connected by fiber to a central location or power source. National roaming: mandatory national roaming is a form of infrastructure sharing that allows new operators. The regulator permitted this level of sharing. permitting one or more partner service providers to access some or all of the mobile network. Backhaul sharing: common backhaul sharing will be very useful in rural environments where traffic from BTS to BSC is very low. Distributed antennae sharing (DAS): over the past few years. to provide wireless service within a geographic area or structure. In Sweden. by breaking down the macro cell site into smaller pieces.

The key participants in the mobile VAS market include content owners. Entertainment mobile VAS constitutes 57% of the overall revenues followed by information mobile VAS (39%) and m-commerce (4%). The growth of m–commerce. accessed 10 October 2010. 27 Enabling the next wave of telecom growth in India . with India being one of the leading mobile markets for the young. IAMAI. mobile payments and money transfer. followed by technology enablers (10%–20%) and content aggregators (10%–15%).trai.gov. IAMAI. games and services such as m–commerce and m–radio. out of the total amount paid by end users (excluding P2P SMS).5 45. IAMAI. Moreover. which provides services such as mobile banking. July 2010 41 42 43 44 Mobile VAS in India: 2010. Content owners end up getting approximately 5%–10% of the overall revenues. media companies.2. Value-added services (VAS) According to the Internet and Mobile Association of India (IAMAI). growing at a CAGR of more than 50% during 2006–10. “TRAI Press Release No. 63 /2010. followed by music. July 2010. In terms of revenue distribution among various market participants. content aggregators or developers.0 billion41 in 2010. July 2010 Source: Mobile VAS in India: 2010. approximately 60%–80%43 is captured by mobile operators.0 Revenue distribution of VAS services (%) 100 15 15 60 10 2006 2007 2008 2009 2010F Operator revenue Technology enabler Content aggregator Content owner Total Source: Mobile VAS in India: 2010. is also expected to drive the market for mobile VAS.0 145.6 75. the mobile VAS in India was estimated to be worth INR145. IAMAI. IAMAI. Market size of VAS 160 Market size (INR billion) 140 120 Growth (%) 100 80 60 40 20 0 28. monotones.1 93. which has exceeded the 700 million44 mark. handset manufacturers and content converters. technology enablers.42 The key mobile VAS include person-to-person (P2P) SMS. as well as aggressive marketing efforts by telecom operators to spread awareness about their services such as updates and alerts. Mobile VAS in India: 2010. The mobile VAS revenues in the country are driven by the P2P SMS service. The demand for mobile VAS is driven by the increase in the mobile subscriber base. The demand for mobile VAS is mostly driven by the youth. http://www. July 2010. Mobile VAS in India: 2010.” TRAI website. person-to-application (P2A) SMS. short-code providers. application-to-person (A2P) SMS. the decline in ARPU has compelled mobile operators to focus on mobile VAS to generate additional revenues. The rollout of 3G services is expected to drive the mobile VAS market in the future. creating opportunities for both telecom operators and companies engaged in VAS. The rollout of 3G services in the near future is expected to provide consumers with new and improved services such as highspeed data transfer. July 2010.asp. polytones and truetones as well as caller ring-back tones (CRBT).10.in/Default.

1 1. Outlook 2. Further.2% 109. with a significant number of multiple and inactive Subscriber Identity Module (SIM) owners. DoT.0% 101. The presence of as many as 14 mobile operators in certain parts of the country and rising financial pressures are expected to drive consolidation in the sector.9% 97. the country’s wireless teledensity is expected reach 97.1 Wireless At the end of December 2010.11.2% and 110% in 2015 and 2020.600 1.9% 95. Ovum.2 923.gov.0 72. during the period 2010–15. 46 Ernst & Young analysis. the number of wireless subscribers in India is expected to increase at a CAGR of 10. 3G subscribers are expected to reach 142 million by 2015.8 60% 40% 20% 0% 1.134.0 6. Wireless subscribers in India Wireless subscribers (million) 1.7% 25% 20% 15% 303. According to Ovum. http://www. Although the telecom sector is witnessing strong customer additions every month.7% 752.400 1.9% 10. 3G subscribers forecast 350 300 250 200 150 100 50 0 3. 3G subscribers are expected to be more than 300 million by 2020. respectively.2 3G subscribers 3G subscribers as a percentage of wirless subscribers (%) 3G subscribers (million) 3G is the next generation mobile technology which is capable of delivering broadband content.1 2009 2010 2011F 2012F 2013F 2014F 2015F 2020F Wireless subscribers Source: TRAI.200 1.4 10% 142.217.7% 63.ovumkc. accessed 16 October 2010. the ARPU continues to shrink.8% 35.1% 92. Ernst & Young analysis Teledensity 2.1 million47 subscribers in 2015. there were 752.asp. accounting for 20% of the total wireless subscriber base.0 118.0 5% 0% 20. 3G services will drive the expansion of wireless services in future.000 800 600 400 200 0 77.0% 11.9% 120% 100% Enabling the next wave of telecom growth in India 28 .” TRAI website. Further. July 2010.1%.2 million45 mobile subscribers.2.com/.2% 44.185. http://www.3 1. Ernst & Young analysis 45 “TRAI: The Indian Telecom Services Performance Indicators (January .5 1.March 2010).8 80% 1. Ovum website. accounting for 12% of the total wireless subscriber base.049. 47 Ovum: Mobile regional and country forecast pack: 2010–15.9% 8.46 to reach 1.11. Teledensity (%) 87. accessed 10 October 2010.in/Default.217.trai. location based services and remote access/ VPN applications.1 525.516.0 2011F 2012F 2013F 2014F 2015F 2020F 3G subscribers 3G subscribers as a % of wireless subscribers Source: Ovum. Future subscriber growth is likely to hinge upon rural and low-income users. including a host of rich multimedia services such as video calling. video on demand.11. leading to falling profit margins of mobile operators.

11. According to Ovum. Ovum.49 to reach 29. accessed 10 October 2010. Wireline subscribers in India Wire line subscribers (million) 40 35 30 25 20 15 10 5 0 2009 2010 2011F 2012F 2013F 2014F 2015F 2020F Source: TRAI. Ernst & Young analysis 48 “TRAI: The Indian Telecom Services Performance Indicators (January .5 48 100 150 Source: “TRAI: Consultation Paper on National Broadband Plan. accessed 16 October 2010.3 million broadband subscribers in India.1 35.in/Default.ovumkc. Broadband subscribers forecastc Year 2010 2012 2014 2020 Number of households 236 241 250 275 % of households to be covered for broadband 5% 20% 40% 55% Number of broadband connections (million) 11.asp. http://www. during the period 2010–15. http://www. 29 Enabling the next wave of telecom growth in India . DoT.asp. the wireline subscribers are forecasted to reach 26.1 34.1 30.5 29. Ovum website.2. The growth of broadband is expected to increase with uptake of 3G and BWA services.” TRAI website.1 26.11.3 million in 2020. 49 Ernst & Young analysis. The growth in the mobile market is seen as the cause of the decline.in/Default. the number of wireline subscribers in India is expected to decrease at a CAGR of nearly 4%.trai.4 Broadband As of September 2010.gov. July 2010. a trend that is expected to continue.5 32.gov.1 million50 by 2015. 50 Ovum: Fixed voice connections forecast pack: 2008–15. June 2010. there were 10. accessed 10 October 2010. Further. Ernst & Young analysis 37.1 million48 wireline subscribers at the end of December 2010.3 Wireline There were 35. The wireline market is in decline.” TRAI website.com/.3 2. page 16. http://www. the broadband connections are estimated to reach 150 million by 2020.trai.9 33. Considering increasing broadband demand.March 2010).

97 billion by 2015. and the adoption of VAS. Revenue and capex forecast Revenue and capex (US$ billion) 70 60 50 40 30 20 10 0 32. Ovum website. to reach US$51.0 10. Ernst & Young analysis 51 Ernst & Young analysis. 2009-2014. including BWA penetration.9 15. Enabling the next wave of telecom growth in India 30 .0 57.0%.0 34.7 11. the increase in mobile penetration in both urban and rural areas.8 45. the contribution of non-voice services towards the industry revenues is expected to reach 38% by 2020. Other services such as ILD.com/.2.9 2009 2010F 2011F Revenues 2012F 2013F 2014F Capex 2015F 2020F Source: Ovum.5 7.5 Revenue and capex Over the years. accessed 16 October 2010.1 48. According to Ovum. Ernst & Young analysis Over the years.8 51.0452 billion and US$14.ovumkc. the Indian telecom sector has witnessed an increase in revenues and contribution toward GDP. respectively by 2020. industry revenues and capital expenditure are expected to increase at CAGR of 8. 52 Ovum: Forecast of service provider revenue and capex. with the introduction of 3G and BWA services. Revenue break-up: voice and non-voice 10% 17% 22% 27% 32% 38% 90% 83% 78% 73% 68% 62% 2011F 2012F 2013F Voice 2014F 2015F Non-voice 2020F Source: Pyramid Research.2 15.1%51and 7. during the period 2009–15.1 13. lower tariffs. respectively.9 billion. http://www.4 14. The future revenue growth and increase in capex is expected to be driven by the rollout of 3G services and the increase in broadband penetration across the country. Further.3 38.0 13.2 billion and US$ 13.8 43. industry revenues and capex are expected to increase to US$57.11. NLD and VAS are also expected to drive revenue growth. The growth in revenues is driven by cheaper mobile handsets.

3 31 Achievements and setbacks of NTP 1999 Enabling the next wave of telecom growth in India .

and provide reliable transmission media in all rural areas Achieve telecom coverage of all villages in the country and provide reliable media to all exchanges by 2002 Provide internet access to all district headquarters by 2000 Provide high-speed data and multimedia capability.4% to 4% by 2010. for all cities with a population greater than 200. and protection of the country’s security interests. using technologies including international services digital network (ISDN).000 by 2002 • • • • Enabling the next wave of telecom growth in India 32 . global standards in the quality of service. FDI and domestic investment. The key objectives of the policy include telecommunication for all and within the reach of all.The NTP 1999 aims at making India competitive in the global telecom market through growth in exports. making it more affordable by fixing a suitable tariff structure and making rural communication mandatory for all fixed service providers Increase rural teledensity from 0. the emergence of India as a major manufacturing base and a major exporter of telecom equipment. achieving universal service across all villages. The policy includes specific targets: • • Make available telephone on demand by 2002 and sustain it thereafter so as to achieve a teledensity of 7% by 2005 and 15% by 2010 Encourage the development of telecom in rural areas.

and the adoption of per-second billing by various operators • Robust growth in revenues — industry revenues recorded at US$35 billion • Increased FDI in the telecom sector — accounts for more than 8% of cumulative FDI inflows in the past decade • The promotion of manufacturing of telecom equipment in India and the growth of telecom exports • Growth of the telecom industry has led to the development of new business ecosystems. providers.0%) • Contribution of telecom to overall GDP of almost 3%. R&D and customer care.3 million) and in teledensity (61. among others • Among the lowest tariffs in the world.. e. technology. especially reliability. resulting in huge operating expenditure • Effective utilization of USOF to increase rural penetration • Increasing broadband penetration and rural connectivity • Overcoming security concerns over the use of mobile handsets and telecom equipment • Limited availability of talent.5% in 2000 • Creation of jobs across sales and marketing. mobile value-added services (MVAS) encompass mobile operators. especially telecom specialists • Fixed mobile convergence (FMC) 33 Enabling the next wave of telecom growth in India . aggregators and technology enablers Sector still faces challenges for growth: • Spectrum re-farming and effective management of spectrum in a transparent manner • Creation of an effective licensing framework where amendments are carried out in consultation with service providers • “Critical” Infrastructure Status along with uniform policy and single window clearance • Energy requirements.NTP 1999 has been a catalyst for the telecom sector: • Growth in the subscriber base (723. up from 1.g. content creators.

3% poses a critical challenge due to low population density. the overall teledensity as of September 2010 stood at 61. It has helped reduce the cost and time of transactions and has visibly compensated for the poor infrastructure. Currently.0% 24.0% 119. http://www.7% FY00 10. geographical spread.2% 5.6% 1. “The Digital Provide: Information (Technology).1.trai. January 2010.1 Teledensity Reforms in the telecom sector have been encouraged by the active participation of the public and private sector. accessed 10 December 2010. the introduction of mobile telephony in Kerala increased the fishing community’s profits by 8%. low per capita income and the cost of maintaining phones in rural areas. http://www.4% 65.8% FY05 12.3% 28.” TRAI website. 2007.7% 137. page 76. There is a significant opportunity for service providers to increase penetration in rural areas and generate revenues.asp.1% 1. Enabling the next wave of telecom growth in India 34 . the disparity between urban and rural areas in terms of mobile penetration has increased significantly.3% 4.” Indian Institute of Kanpur website. Following independence. Market Performance and Welfare in the South Indian Fisheries Sector. According to a study by Robert Jensen.” The Quarterly Journal of Economics.3.in/Default.asp.. with rural teledensity being far ahead of the NTP 1999 target.2% FY08 14.56 decreased fish prices by 4% and consumption of fish increased by 6%.” TRAI website.9% 0. about 70% of the population in India lives in rural areas.in/3inetwork/html/reports/IIR2007/04-Rural Telecom. 54 “TRAI Press Release No.9% FY01 14. and mobile penetration stands at a meager 28. which was set at 4% by 2010.4% in rural India.in/Default.02%53. the teledensity level in the country was 0.7% 37.3%55 and 28. NTP 1999 has been instrumental in the growth of telecom in both urban and rural areas.2% 9. Key achievements of NTP 1999 3.9%.9% 4.2% 1. 56 Jensen.6% FY04 38.2% 9. R.trai. 55 “TRAI: The Indian Telecom Services Performance Indicators (July – September 2010). 63 /2010. respectively. FY09 FY10 Sept 10 Urban teledensity Source: TRAI Rural teledensity Total teledensity 53 “Rural Telecom and IT.0%. The overall teledensity target of 15% by 2010 was achieved in FY07.9% 52. a Harvard University economist.gov. Furthermore.8% 5. Although India has witnessed a steep rise in teledensity over the past few years.9% 47.iitk.3% 0.4% 61.ac.gov.0% 26.1.pdf.54 Urban teledensity and rural teledensity at the end of September 2010 were 137.8% FY07 89. The improvement in rural teledensity Urban and rural teledensity 140% 120% 100% Teledensity (%) 80% 60% 40% 20% 0% 8. and its targets have been achieved well in advance.0% FY06 18.1% 1. there is an uneven distribution of teledensity among Indian states resulting in slow economic development of the states and their surrounding regions.2% FY02 FY03 20.4%. the level had increased to only 1.2% 2.3% 26. The impact of mobile telephony on rural areas has been profound. http://www. As a result.4% 2.3% 3. by 1998.5% 12. accessed 15 January 2011.

Dun & Bradstreet website.0% FY06 432.3 43. Dun & Bradstreet 3. Mix of private and PSU operators. media. technology.3% FY07 PSU operators Private operators Subscribers per employee ratio in India FY05 PSU operators Private operators 132 1. as well as indirect employment.5% 205.5 26.5% 65.110 The development of telephony in India has played an important role in altering the structure of the economy. Employees of private and PSU operators 100%= 436.9% 47.7 20. FY10 The Indian telecom industry employs more than 430.Total teledensity by state in India.5% 429. December 2009.089 FY06 158 1.1. The expansion of the Indian BPO industry is a classic example of indirect employment.2 Teledensity and employment Over the past decade.2% Low teledensity: 0%–50% Medium teledensity: 50%–100% High teledensity: 100% and above Source: TRAI FY05 FY06 FY07 FY08 PSU operators FY09 Private operators Source: TRAI.7% 300.400 11. R&D and customer care. The ratio of the number of subscribers per employee is very high in the case of private operators in India. with the majority of these employees being a part of the public sector undertakings (PSU).891 9. 35 Enabling the next wave of telecom growth in India .771 14.8% 52. R&D and financial services.0% 89. technology. which augurs well for sectors such as IT/ITES. by subscriber base 100%= million 98.3% FY05 429.5% 79. which has resulted in an increase in employment opportunities in the telecom sector.and information-based economy.1% 56. It has paved the way for a knowledge.7% 85. 57 Overview of Telecom Industry.00057 direct employees.7% 90.4 140.9 34. The sector has created direct employment across various business areas such as sales and marketing. education. private telecom players have considerably expanded their operations.3% 73.678 FY07 193 2.

3.1.3 Size of the telecom sector and contribution to GDP
The revenues of the Indian telecom sector have increased by almost fivefold from US$7 billion in FY00 to US$35 billion58 in FY09. The growth in revenues has been driven by favorable factors such as the availability of cheaper mobile handsets, lower tariffs, the increase in mobile penetration in both urban and rural areas and the adoption of VAS. In addition, infrastructure sharing has enabled operators to improve margins by bringing down costs significantly. India’s telecom sector is a voice-centric market characterized by high MoU and ARPU. A sharp decline in call charges and the cost of services has enabled the rise of mobile subscribers and revenues. Indian telecom sector gross revenues
40 35 Revenue (US$ billion) 30 25 20 15 10 5
FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10

The contribution of the telecom sector to India’s GDP is estimated to increase from 1.5% in 2006 to 2.8%59 in 2010. The Indian economy is expected to sustain an 8% or a higher growth rate in the future. As the country aims to achieve higher teledensity, the contribution of the telecom sector in GDP is expected to increase. According to an ICRIER study, a 10%60 increase in mobile penetration results in a 1.2% increase in GDP.
Contribution of telecom to GDP
3.0% 2.5% 2.0% 1.5% 1.0% 0.5% FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 1.5% 1.7% 1.6% 1.6% 2.2% 2.2% 2.3% 2.3% 2.6% 2.8% 2.4%

31 25 17 20

Source: TRAI; Ernst & Young estimates

15 7 8 8 9

0

Source: TRAI; Ernst & Young analysis

The contribution of the telecom sector also has a multiplier effect on growth, due to associated individuals and businesses. Further, the GoI’s aim to reach rural teledensity of 40%61 by 2014 from the current levels and achieve broadband coverage of all 250,000 village panchayats under the Bharat Nirman Program is expected to enhance the contribution of the telecom sector to India’s GDP.

58 Transfer Pricing Report — Telecom (general), Ernst & Young, 2010. 59 Ernst & Young analysis. 60 “High-teledensity states grew faster, says study,” LiveMint, http://www.livemint.com/2009/01/19224316/Highteledensity-states-grew-f.html, accessed 10 October 2010. 61 “Bharat Nirman: A business plan for rural infrastructure,” Bharat Nirman website, http://www.bharatnirman.gov.in/page2.html, accessed 20 October 2010.

Enabling the next wave of telecom growth in India

FY10

35

33

0.0%

36

3.1.4 FDI in the Indian telecom sector
In the past decade, India has witnessed a considerable rise in FDI. During the last decade, FDI in India increased at a CAGR of 28.0%62 to reach US$37.2 billion63 in FY10. The telecom sector is among the leading sectors attracting FDI, accounting for 8.1% of the cumulative FDI equity inflows from FY00 to FY10. Over the past few years, a number of foreign ownership and equity regulation reforms have been introduced in the telecom sector. These reforms have led to an increase in FDI inflow in the sector.

From FY08 through FY10, FDI equity inflows in the telecom sector increased at a CAGR of 42.3%65 to reach US$2.6 billion. Higher levels of FDI in the telecom sector have intensified competition and strengthened market penetration. They have also opened up opportunities for telecom manufacturing and related business areas in the sector.

3.1.5 Restructuring mobile tariffs
The decline in tariffs has enabled the industry to reach a phenomenal size in terms of subscribers, while at the same time diluting the ARPU. In the early days, mobile tariffs were targeted toward both the calling and receiving party, with the regime popularly known as “receiving party pays.” In January 2003, TRAI announced the implementation of the “calling party pays” regime, with incoming calls being free of charge for the receiving party.

FDI limits in telecom64
• 100% FDI is permissible in the case of infrastructure providers that offer dark fiber, ROW, duct space, tower, email, and voice mail: • FDI of up to 49% can be done on the Automatic Route (without prior government approval); beyond that, prior approval is required • 74% FDI is permissible in the case of basic, cellular, unified access services, NLD/ILD, V-Sat, public mobile radio trunked services (PMRTS), global mobile personal communications services (GMPCS) and other VAS • FDI of up to 49% can be done on the Automatic Route (without prior government approval); beyond that, prior approval is required • 74% FDI is permissible in the case of ISPs with gateways, ISPs not providing gateways, radio paging and end-to-end bandwidth • FDI of up to 49% can be done on the Automatic Route (without prior government approval); beyond that, prior approval is required

Cumulative FDI equity inflow in India, FY00-10

21.4%

Services sector Computer hardware and software Telecommunications
9.0%

FDI equity inflow in the telecom sector (US$ billion)

Housing and real estate Construction activities

38.3% 8.1% 7.6% 7.3% 4.1% 4.2%

Power Automobile Others FY08 1.3

2.6

2.6

FY09

FY10

Source: Department of Industrial Policy & Promotion (DIPP), Ministry of Commerce and Industry 62 Ernst & Young analysis. 63 “Fact Sheet on Foreign Direct Investment from August 1999 to July 2010,” Department of Industrial Policy & Promotion, http://dipp.nic.in/, accessed 10 October 2010. 64 Department of Industrial Policy & Promotion: Consolidated FDI policy effective from April 2010, Department of Industrial Policy & Promotion, April 2010, page 58. 65 Ernst & Young analysis.

37

Enabling the next wave of telecom growth in India

The effective price per minute for an outgoing mobile call has declined from approximately INR16.4066 in 1995 to almost INR0.30 today. Since the formulation of NTP 1999, the industry has experienced a decline of about 95% in mobile tariffs. The entry of new service providers has resulted in a tariff war, as the market entrants have used pricing to grab market share. Per-second billing has emerged as an industry norm, thereby creating a win-win situation for subscribers. The intense competition in the telecom sector has led to declining ARPU among mobile operators. From FY06 through FY10, the ARPU of GSM and CDMA operators decreased by 64.2% and 70.3%, respectively. The average annual decrease for GSM and CDMA operators was 22.1% and 25.8%, respectively. ARPU levels are estimated to continue declining over the next few years, though the rate of decline is expected to be slow. Following the introduction of the NTP 1999, the MoU among telecom service providers have also witnessed an increase. Although India has recorded one of the highest MoU globally in the past few years, the sector has also experienced a decline in MoU, especially in the case of CDMA operators. In addition, the rate per minute (RPM) has declined due to the increase in competition in the sector.

GSM operators: ARPU and MoU
600 500 ARPU (INR) 400 300 200 100 0 FY06 FY07 FY08 FY09 395 366 298 264 205 131 FY10 164 Sep10 471 493 484 410 423 600 500 400 300 200 100 0 MoU (minutes)
MoU (minutes)

ARPU
Source: TRAI

MOU

CDMA operators: ARPU and MoU
600 500 ARPU (INR) 400 300 200 100 0 FY06 FY07 FY08 MOU FY09 256 202 550 471 364 159 99 352 600 500 400 308 78 300 200 76 100 0

307

3.1.6 Handset prices
The Indian mobile handset market is estimated to be worth INR500 billion.68 The market has witnessed the entry of a number of mobile manufacturers, raising the total number of manufacturers to about 30 from approximately 5 in 2008. The Indian mobile handset market is dominated by established global brands. The market is characterized by the presence of both high–end and low–end mobile phones, with a wide gap between handset prices. The market is also inundated with unbranded and cheap imported mobile phones, which are primarily Chinese in origin. The growing mobile subscriber base in India has led to the entry into the market of a number of “homegrown” mobile handset manufacturers.

FY10

Sep10

ARPU
Source: TRAI

GSM and CDMA operators: RPM
1.0 0.9 0.8 0.7 INR 0.6 0.5 0.4 0.3 0.2 0.1 0.0 FY06 FY07 FY08 GSM
Source: TRAI

0.9

0.6 0.5 0.5 0.4 0.4 0.3 0.2 FY09 FY10 Sep10 0.4 0.3 0.4 0.3

CDMA

66 “One Minute at a Time,” Outlook India, http://business.outlookindia.com/printarticle.aspx?266748, accessed 21 October 2010. 67 Ernst & Young analysis. 68 “Small handset makers making big strides,” Business Standard, 15 April 2010, http://www.business-standard.com/india/news/small-handset-makersmaking-big-strides/391912/, accessed 5 October 2010.

Enabling the next wave of telecom growth in India

38

” Department of Industrial Policy & Promotion. India has witnessed prominent diversification in the industry composition of overseas activities of Indian firms.6 billion69 in FY09.8 billion in FY01.1. Indian mobile handset market 120 100 Volume (million units) 4. Globally. In line with the change in the pattern of investments.5% to reach a projected US$18.in/. India’s FDI outflows (debit) have grown at a CAGR of 47. 39 Enabling the next wave of telecom growth in India . and foreign affiliations were formed through joint ventures. page 13. Over the period.nic.4 7 5.6 71. Global Positioning System (GPS). 3G and an improved user interface. the structure of ownership has also shifted toward majority and full ownership.8 101. the ASP of feature phones is expected to be US$50. August 2009.5 108 6. usually with a minority ownership. access to niche technologies. and the majority of this capital value has been used to acquire companies. monotone ringtones to MP3 ringtones.6 6 5 4 3 2 1 0 Value (US$ billion) 3. a wider customer base and growth momentum. FDI by firms belonging to developing countries has gained momentum and has become an integral part of globalization.2 95. However. Indian companies have reached overseas destinations to tap new markets and have acquired technologies. and the ASP of smartphones is expected to drop below US$200. The market has witnessed investment in the form of greenfield projects. Over the next few years. from US$0. M&A provide benefits such as expansion of global footprint. new product mix. the price of feature phones is declining at a faster rate than smartphones. According to the National Council of Applied Economic Research (NCAER). The share of manufacturing in the investment activity has Source: Voice & Data 69 “NCAER: FDI in India and its growth linkages.4 FY06 FY07 FY08 FY09 FY10 3. http://dipp.0 5. email. enhanced memory. Over the past decade. the average selling price (ASP) of both feature phones and smartphones has been on the decline. greenfield investments were a popular mode of overseas investment among Indian firms. accessed 10 October 2010. Macquarie Capital In the past decade. adding numerous features ranging from monochrome screens to touch screens.7 80 60 40 20 0 33.7 Global outreach of Indian telecom companies In the early 1990s. Video Graphics Array (VGA) to 8-to-12-megapixel cameras.Average selling price (ASP) of mobile handsets 200 Average selling price (US$) 180 160 140 120 100 80 60 40 20 0 1Q08 Nokia 2Q08 3Q08 Motorola 4Q08 Samsung 1Q09 2Q09 Sony Ericsson 2Q09E 4Q09E Others 1Q10E 2Q10E Source: Company data. mobile handsets have evolved rapidly.

0 300.700. Key overseas M&A by Indian firms Year 2010 2010 2003 2005 2010 2000 Target company Zain Africa BV Warid Telecom. leading to the emergence of telecom giants from India.0 30. Bangladesh FLAG Telecom Group Ltd Teleglobe International Holdings Ltd. whereas the share of services has increased.0 Source: Thomson ONE Banker Enabling the next wave of telecom growth in India 40 . Telecom Seychelles Astratel Nusantara PT Acquirer company Bharti Airtel Ltd Bharti Airtel Ltd Reliance Gateway Net Pvt Ltd TCL Bharti Airtel Ltd CDC Capital Partners Deal value (US$ million) 10.declined considerably.8 177.0 62. The Indian telecom sector has actively been a part of the global M&A activity.0 194.

2 Growth of broadband As of September 2010. the Indian telecom industry is expected to reach 1 billion73 wireless subscribers by March 2014. the Broadband Policy 2004 had anticipated 40 million71 internet subscribers and 20 million broadband subscribers by 2010.3. page 18.trai. http://www.asp.2.dot. broadband penetration is accepted as a measure of a country’s ability to compete as an economic power. Despite being the second-largest market in terms of the subscriber base. Currently. and the number of wireline subscribers has fallen from 41.gov. page 339.5 million in FY06 to 37 million in FY10.9 million70 internet subscribers and 10. the telecom sector continues to face various issues that act as impediments to its growth. India has an internet penetration of 7%. wireline and wireless complement each other. India lags behind in terms of availability of spectrum for commercial use. 3. Russia and China. page 7. May 2010. accessed 10 October 2010. 31% in Russia and 28% in China. 72 The Internet’s New Billion. in the absence of a long-term plan to meet future requirements. However.in/Default. the advent of new technologies is expected to create conflicts for spectrum. May 2010. According to TRAI.” TRAI website. accessed 15 January 2011. The sluggish growth in broadband services is attributable to the absence of low-cost devices.gov.htm. 41 Enabling the next wave of telecom growth in India . according to TRAI. accessed 10 October 2010. 3. inadequate content and applications in regional languages.asp.74 Spectrum bands such as the 900MHz band are of great value to mobile operators due to the longer ranges these can support. Globally. http://www.trai.” TRAI website. with a CAGR of 77. Although wireline infrastructure in India has been in place for an extended period. The decline has been due to lower mobile tariffs. http://www.” TRAI website. September 2010.5% during the period FY00–10.72 in comparison with 33% in Brazil.1 Growth of wireline The wireline segment has added just 10 million users since the introduction of the NTP 1999. there were 17. According to Boston Consulting Group.2. 3. along with the benefit of VAS such as internet for the urban and rural population and the abolition of the digital divide.asp. 71 “Broadband Policy 2004. therefore requiring lesser BTSs density and lower capital and operating expenditure. cheaper handsets.2.” DoT website. In line with the growth of subscribers.2. January 2010.September 2010). Despite India’s status as an IT superpower. 74 “TRAI: Spectrum Management and Licensing Framework. broadband penetration levels in India are far below other emerging countries such as Brazil. the affordability and availability of broadband services and inadequate infrastructure. the bandwidth required by 2014 may be as high as 800MHz. Key challenges of NTP 1999 NTP 1999 envisaged the affordability and availability of telecommunication services for the common populace. 70 “TRAI: The Indian Telecom Services Performance Indicators (July .gov.3 million broadband subscribers in India. the growth of wireline phones is not in sync with the rise in the number of wireless subscribers.in/Default.in/ntp/broadbandpolicy2004. the need for spectrum to service these subscribers has also increased. http://www. The Broadband Policy 2004 has failed to keep pace with advances in technology and failed to boost the telecom sector. Boston Consulting Group.trai. 73 “TRAI: Spectrum Management and Licensing Framework. The availability of spectrum for commercial services in India is below the required levels. accessed 10 October 2010.gov. Furthermore. improved mobile coverage. The stagnancy in the growth of wireline networks has an impact on the overall growth of the telecom sector and other services such as internet and broadband services. the advantage of mobility among wireless networks and the inadequate infrastructure of the wireline network.3 Spectrum challenges The Indian telecom industry has witnessed phenomenal growth in the number of subscribers. However.in/Default.

the e–auction of 3G mobile services was concluded after 183 rounds of bidding across all service areas. to the government operator on a pro bono basis In 2001.1GHz band with reserve prices for different categories of LSAs In May 2010. and TRAI continued to maintain that there was a shortage of 2G spectrum A new SBN policy was defined. the fourth operator license was issued using a three-stage auction procedure. subscriber based norms (SBN) was introduced. All operators were expected to pay higher spectrum usage charges. one or two new firms also paid the stipulated entry fee and obtained a license to operate GSM services in certain LSAs 3G services were treated as a separate service from 2G. Start-up spectrum of 2x4. and opted for the auction of a start–up spectrum of 2x5MHz in the 2. the bandwidth for broadband services (WiMAX) was auctioned by the GoI.4 billion from the broadband wireless auction Source: “A peep into RF spectrum allocation process in India.1GHz UMTS band The DoT proposed new 2G spectrum usage charges for all operators. GoI announced UASL that allowed basic service license holders to provide full mobility-based services with a stipulated entry fee based on the bid price paid by the fourth operator in 2001 The fixed fee-based license allowed any number of mobile licenses to be provided and implicitly de-linked spectrum allocation from licensing.pdf accessed 02 August 2010 Enabling the next wave of telecom growth in India 42 .” Integrated Defense Staff http://ids. irrespective of the quantity they held. It laid down a roadmap for the allotment of 2x12. they were given start-up spectrum only as and when available Following the entry of two or three CDMA-based mobile operators in each LSA. the GoI announced the policy for 3G mobile services. in addition to 25MHz in the 2.4MHz of start-up spectrum in the 900MHz band. licensees were required to pay a percentage of annual revenue as spectrum charges In 2002. It auctioned two 20MHz blocks in the 2.4MHz of start–up spectrum for GSM-based services Two operators were selected for each License Service Area (LSA).7 billion to the GoI within 10 days of the closing of the auction.4MHz in 1.in/tnl_jces_Sep_2009/Spectrum%20allocation%20 procedure. it totalled to INR677.2 billion Following the completion of the 3G auctions. Although firms were awarded licenses after paying the required entry fee. The GoI allocated spectrum to new telecom players in service areas across India The defense services agreed to vacate 2x20MHz in the 1. and incumbents were kept out of fresh allocations.3GHz range in each of the country’s 22 service areas.800MHz band. All of the 71 blocks up for auction across the 22 service areas were sold: • Third stage: 2006–08 Criterion for allocation of spectrum • • • • Fourth stage: 2008–10 Policy on 3G and 3G auctions • • • • All the winners of the auction were required to pay INR509. This differed from the earlier strategy of increasing spectrum charges only for those operators who held more than 6. the third operator license was awarded.2MHz per circle in case of GSM players and above 5MHz for CDMA In August 2008.800MHz was given to the winning bidder: • • In addition to the entry fees.5MHz of spectrum per operator in each LSA Second stage: 2003–06 Unified Access Service (UAS) licenses • • In November 2003.nic. Including the amount paid by state-owned BSNL and MTNL. along with 2x4. Subsequently. the GoI auctioned 2x4. The GoI raised INR385. in 2001.Spectrum and license allocation timeline in India First stage: 1995–2003 Auctioning scarce spectrum • • • In 1995. in line with TRAI’s recommendations.

despite being a “key infrastructure. incur huge costs and delays because several state agencies are involved in granting approval for setting up towers. especially away from cities and towns.4 Licensing challenges NTP 1999 permitted Cellular Mobile Service Providers (CMSPs) to provide all types of mobile services. permitting an access service provider to offer either fixed or mobile services or both. There are huge gaps in low-income or sparsely populated areas. May 2010. page 59.3.2.gov.asp. using any type of network equipment that met the International Telecommunication Union (ITU) or Telecommunication Engineering Center (TEC) standards. The policy made the cellular license technology neutral. where telecom companies see poor returns on the expensive investment required in setting up the infrastructure.75 Globally.trai. Inadequate utilization of towers: towers are not fully utilized as no law ensures that no new tower is built in an area where an existing tower is under utilized.” is far from ubiquitous. 3. Since the introduction of the UAS licensing regime. However. However. which are highlighted below: Role played by multiple state agencies: there is no uniform approval process across the states. the allocation of spectrum is separate from the grant of license to provide service.” TRAI website. Several demand prohibitive fees. there is a limited number of telecom equipment manufacturers and providers tend to be highly dependent on imported equipment during the setup of mobile networks. 43 Enabling the next wave of telecom growth in India . including voice and non-voice messages. 75 “TRAI: Spectrum Management and Licensing Framework. the total number of licenses in a circle ranges from 12 to 14. Currently. therefore. page 59. some treat infrastructure business in the same way they treat petty commercial undertakings. and some look at infrastructure companies as a means to finance deficits. accessed 10 October 2010. 3. others require dealing with multiple agencies. Prior to this.5 Equipment manufacturing The Indian telecom sector has witnessed rapid growth. the GoI introduced the UAS licensing regime. in their service area of operations.6 Infrastructure Telecommunications infrastructure. Completing the important task of connecting the remaining areas therefore requires an all-round effort by improving the economics of rolling out networks and addressing any other stakeholders’ concerns that act as a barrier. Telecom infrastructure service providers face several challenges. http://www. single window clearance. preferential treatment for sharing and incentives in a timely manner. Civic issues: there is a need to address civic issues such as zoning regulation. telecom manufacturing in India has not been able to keep pace. Moreover. licenses are bundled with the allotment of a certain amount of spectrum. in India. and the biggest barrier to setting up telecom towers and other infrastructure is the wide variation in the approval process adopted by local bodies. licensees were required to use GSM technology. data services and PCOs. and also allowed licensees to migrate from a fixed license regime to a revenue-sharing arrangement starting in August 1999.2. the country lags behind in terms of telecom R&D and continues to be reliant on imports.in/Default.2. In November 2003. Tower companies.

service providers are forced to use diesel generator sets at tower sites most of the time.” and thus. citing concerns over alleged health hazards relating to BTS.000 per tower and the New Delhi Municipal Council (NDMC) charges INR200. Enabling the next wave of telecom growth in India 44 . the power is either unavailable or erratic. there is a need to accelerate the pace of setting up the tower infrastructure in these areas. Diesel fuel is subsidized. IS:802 and IS:875. the Municipal Corporation of Delhi (MCD) charges INR100. The above IS codes are primarily meant for electric/power transmission line tower design. They do not reflect the fact that USOF subsidies are perhaps most urgently required to defray the cost of infrastructure creation in rural areas. This adds avoidable uncertainity in an already tough business. namely IS:800.000 tonnes of CO2 and 24.5 million tonnes. while others charge “commercial” rates. Grievance redressal: there is no clear grievance escalation/ redressal mechanism that infrastructure companies can seek when a conflict arises. Without it. there is no clarity on the rates to be paid by infrastructure companies. which is not only more expensive but also polluting. 76 Industry estimates. and there are other options as well. Although the USOF was created with the sole aim of promoting rural telephony. Energy consumption: cell sites account for most of the energy consumed by mobile networks.000 tonnes of carbon equivalent. Utilization of USOF and incentives: since the next level of growth is expected to come from rural areas.Taxation on towers: multiple levies and high taxes are imposed for setting up mobile towers. the fund rules are too cumbersome and lack focus. Secondly. Power consumption: one of the major problems faced is the lack of reliable grid power. Currently all the telecom operators are following IS codes. The cumulative carbon footprint of telecom towers due to diesel consumption in a year is more than 5. Misplaced apprehensions on health hazards of electromagnetic radiation from mobile antennas: many state governments and municipalities have barred towers in residential areas. For instance. the highest tariff is applied to the telecom site. The site clearance basically requires examination from the point of safety for flight navigation and interference with existing wireless systems. and it is estimated that India as a country consumes more than 2 billion liters of diesel per year for cell sites. In large parts of India. and the load criteria for telecom towers and transmission line towers are different. This increases the dependence on diesel. Delays and cumbersome processes for the SACFA clearances: the SACFA gives siting clearance of all wireless installations in the country. as these are dependent on diesel generators to keep running. Some agencies charge them “industry” rates. for the design of towers. the power connection to telecom towers is treated as one to a “commercial establishment. Safety: the construction of telecom towers is still a self-regulated activity throughout India. Further.000 per tower as a one-off registration fee in Delhi. Environmental issues: diesel consumed by towers results in about 17.76 The thrust in increasing rural telephony will further aggravate the diesel dependence by telecom towers.

and the formulation of a competitively neutral policy that is not discriminatory toward any of the stakeholders 45 Enabling the next wave of telecom growth in India . India’s telecom industry is at a crossroad.4 • • • • Key enablers As we enter the second decade of the 21st century. providing interested parties with concrete opportunities to navigate the growth of the telecom sector The creation of an efficient mechanism to implement regulatory decisions. the time is ripe for a comprehensive review to build a forward-looking. efficient. A principle. independent and competitively neutral policy that will accelerate the pace of growth in telecom services and manufacturing. strong and transparent policy framework that will be the backbone to achieving the India Telecom Vision 2020. transparent. The NTP 1999 has served the sector well for more than a decade. This is the appropriate time to look again at the NTP 1999 and customize it to meet current and future needs. India needs a principle and objective-based. technological advancements and business dynamics of telecommunications. It needs to identify and address barriers to growth The functioning of the regulator in an unbiased manner.and objective-based policy that provides a clear roadmap of the telecom sector and is reviewed regularly to keep abreast with rapid technological developments in the sector A transparent approach to policy formulation. which witnessed significant changes in the socioeconomic environment. Therefore.

Connected India: telecom vision 2020 The policy initiatives should focus on achieving the vision for connected Indian Telecom 2020: India should have a convergence services enabled network with voice.1. data. with inclusive participation from rural India to ensure telecom coverage for all. broadband and internet services delivery to subscribers with high quality of experience. It should be supported by different metrics of quality of services at affordable tariffs meeting the needs of different segments of society. Enabling the next wave of telecom growth in India 46 . media. video.4.

2. achieve total broadband connections of 150 million To earn revenues of around US$60 billion • • • A two-pronged strategy is needed to achieve connected India Telecom Mission 2020. M&As. This will. 47 Enabling the next wave of telecom growth in India . Connected India: telecom mission 2020 Connected India: telecom mission 2020 should aim to achieve the following objectives: • To recognize and treat telecom infrastructure as critical infrastructure to accelerate the pace of growth of the sector and increase its contribution to the Indian economy To connect the unconnected at affordable prices to ensure 100% telecom coverage of the country. include the unique identification number (UID) scheme.4. equipment manufacturing and infrastructure development. the existing challenges faced by various stakeholders need to be addressed. broadband penetration. financial inclusion and m-commerce. achieve rural penetration of 100% and reach overall wireless penetration of 110% To strengthen broadband penetration to reduce the digital divide. Second. First. This involves key enablers such as licensing framework. among other things. the policy should be able to meet future opportunities. spectrum. USOF.

are currently imposed on the industry. the number of incumbent telecom service providers varies from four to six. subject to its availability and efficient usage. a licensee is entitled to obtain a certain amount of spectrum. However.3. In November 2003. excluding the USOF. should be fixed. The policy must preserve competition and ensure that no service is given a price arbitrage over others. the GoI introduced the UAS licensing regime. mobile or both services under the same license. Parameters Spectrum and license Recommendations Need to have a single universal license for all telecom services. VAT. Multiple levies. Fee There should be a uniform license fee across all telecom circles.3. A uniform revenue share license fee of 1%. using any technology. including service tax and license fees (such as universal service obligation fees and spectrum charges). entry tax and levies on towers. which aggregate to 30% of the revenues earned by telecom companies.4. under the UAS regime. Enabling the next wave of telecom growth in India 48 . Globally. Key enablers under existing scenario 4. Moreover. stamp duty. with the allocation of spectrum separate from the allocation of a license. states levy additional taxes such as octroi. in India. Pure internet service providers should continue to be free of any license fees.1. The GoI has issued many new UAS licenses since the introduction of the UAS regime. for global practices. DoT should consider lowering the contribution from 5% of AGR to 1% of AGR.1 Licensing77 The telecom sector has evolved from a monopolistic regime in the early 1990s to 12–14 licensees in a circle now. which let the provider offer fixed. Since there is a significant cash reserve lying unutilized in the USOF. 77 See 5.

reasons for refusal to renew and appeals to regulatory decisions • Provide details along with the license. amendments to license agreements are carried out unilaterally. if the burden is not kept at a manageable level Amendments Currently. if the legislative framework is not comprehensive • Create a balance between certainties in the renewal process • Regulatory discretion to clear parameters of license renewal with appropriate checks and balances Procedures for license renewal: • Initiate renewal process well in advance of expiry • Perform periodic forward review of market and needs • Disclose and publish reasons for non-renewal of licenses • Adopt a public consultation process • Guarantee a right to appeal In the event of non-renewal: • Provide minimum notice period • Delay vacancy of spectrum to give enough time for operators to adapt strategies • Ensure exit strategies for operators and continuity of service to consumers Change in license conditions and obligations: • Renewal process is a good occasion to review license conditions • Ineffective mandatory service obligations create an anti-competitive impact. renewal procedures.License renewal Ensure regulatory certainty and ease investor concerns: • Provide a clear license renewal regime that includes legislation. 49 Enabling the next wave of telecom growth in India . Service providers should be consulted before provisions in license agreements are amended.

A mechanism to ensure transparent and non-discriminatory spectrum management is needed. being a scarce natural resource. plays a critical role in the provision of mobile telecom services.300-2. Spectrum available for telecom operators in different frequency bands80 Frequency band (in MHz) 450-470 698-806 806-824 824-844 869-889 890-915 935-960 1.3.2 Spectrum78 Spectrum.500-2. accessed 10 October 2010. May 2010.400 3.” TRAI website.980 2. a minimum of 287MHz and a maximum of 454MHz is currently available.6-21.8 35-75 35-75 0-20 (after coordination) 0-60 60 40 40 100 (ISPs) 287.880-1.in/Default.asp.” TRAI website. accessed 10 October 2010.880 1.161MHz79 of identified spectrum by TRAI.690 3.785 1.6-21.6 78 See 5.920-1.in/Default.2-453. In line with estimated demand of approximately 500-800MHz spectrum across various bands out of a total 1. data and other application services. May 2010. page 22.010-2.300-3. 80 “TRAI: Spectrum Management and Licensing Framework.400 2. It is estimated that the total requirement of spectrum in the next five years would be of the order of 500-800MHz including 275MHz for voice services alone.gov.8 18.900 1.025 2. the National Frequency Allocation Plan (NFAP) is the basis for spectrum utilization and development and the manufacturing of wireless equipment. http://www.gov. In India.400-3.trai.trai.785-1. for global practices.asp.910 1.600 Total Spectrum available in the band (in MHz) 20 108 18 20 20 25 25 75 20 75 20 10 60 15 60 100 190 100 200 1.161 Spectrum available for telecom sector 20 20 18. The next five years are going to see the spread of telecom services enabling subscribers to benefit from voice.4.170 2.110-2.805-1.900-1. page 22. 79 “TRAI: Spectrum Management and Licensing Framework.710-1.2. Enabling the next wave of telecom growth in India 50 . http://www. An increasing availability of smart-phones with significant processing capacity and a wide array of applications are resulting in higher requirements of spectrum.805 1.

January 2010.5 150.63 0.7 18.75 13.2 78.1 24 17.27 0. accessed 14 January 2011.4 75.26 0.pdf.3 49.4 69.8 41. February 2009.75 15 12.4 60.6 77.09 0. http://www.2 28. MHz (2008) 170 200 265 140 120 120 358 353 294 Wireless subscribers.25 10 13.2 62.6 37.” TRAI website.2 63. 2008 (million) 46.57 0.in/Default.48 0. May 2010.7 43.5 13.1 0.75 0.22 0.2 6.4 72.6 66.trai. page 22.15 83.15 84.15 78.15 79.55 70.4 No.5 64.trai. Circle-wise spectrum allocated in India81 Circle Allocated spectrum (MHz) GSM Delhi Mumbai Kolkata Maharashtra Gujarat Andhra Pradesh Karnataka Tamil Nadu Kerala Punjab Haryana Uttar Pradesh — West Uttar Pradesh — East Rajasthan Madhya Pradesh West Bengal Himachal Pradesh Bihar Orissa Assam North East Jammu & Kashmir 53.2 59.25 67.25 10 10 10 Total 68.7 0.3 37.1 62. gov.4 55 53.3 19.37 0.2 49.14 0.8 59. accessed 15 January 2011.5 0.accessed 10 October 2010.48 0.2 53.6 14.4 69. Ernst & Young analysis.” TRAI website.4 67 61.6 150.9 52.75 15 12.2 76.5 31.78 0.8 75.3gamericas.35 0.2 63.2 50.52 0.gov.1 44.75 11.4 63.4 69.49 0.in/Default.75 13.8 61.4 CDMA 15 15 13.8 63 53 57.75 12.63 0.asp.3 31 6.7 0.3 Subscriber/MHz (million/MHz) 0.4 270.5 76.5 11.26 0.6 10. http://www.95 76.5 15 15 12.2 4.” 3g Americas website.4 74.ICT Statistics 2008.31 0. 51 Enabling the next wave of telecom growth in India .org/documents/MWC%202009%20Digital%20Dividend%20Pavilion-3G%20Americas%20 Erasmo%20Rojas.3 74.7 38.Latin America Wireless Roadmap.16 0.22 0.6 80.2 37.36 0.53 0.49 0. http://www. of operators GSM 12 11 10 12 11 12 12 11 11 12 12 11 11 12 11 10 11 12 11 10 10 10 CDMA 4 4 4 4 4 4 4 4 4 5 4 4 4 4 4 4 4 4 4 4 4 4 Total 16 15 14 16 15 16 16 15 15 17 16 15 15 16 15 14 15 16 15 14 14 14 33.6 0. Ernst & Young analysis.9 83.65 65 63.asp.6 72. “TRAI: The Indian Telecom Services Performance Indicators (July-September 2010).5 13.08 Subscriber (million) Subscriber/MHz (million) 81 “TRAI: Spectrum Management and Licensing Framework.6 87.11 0.55 0.92 Argentina Brazil Canada Chile Colombia Mexico Spain UK US Source: “Digital Dividend Pavilion .Country-wise spectrum availability Country Total licensed spectrum for mobile services. ITU .4 60.

Spectrum should be provided to the highest bidder. Service providers should be allowed to enter into arrangements for transfer/sharing of spectrum among themselves so as to effectively utilize it and attain maximum spectral efficiency in the sector. Allocation of spectrum beyond the contacted limit should be based on market mechanisms.communicationstoday. National frequency allocation plan should be reviewed every two years.2MHz for GSM operators and 5MHz for CDMA operators. “Presentation to the DoT committee on spectrum allocation criteria.pdf. Allocation of spectrum should be based on auctions. timely allocation. The contacted limit of spectrum will be 6. http://www.5 65 72.7 100. Re-farming Spectrum allocation Spectrum allocation should be based on technology neutrality. Need to review the present usage of spectrum available with government agencies so as to identify the possible areas where spectrum can be re-farmed. service flexibility.2 75-96 Source: “Digital Dividend Pavilion .6 138. Regular spectrum audits should be carried to oversee the efficient utilization of spectrum. accessed 14 January 2011. Parameters Availability Recommendations Align spectrum bands with globally harmonized bands to achieve interference-free coexistence and economies of scale. Spectrum allocation to new players Spectrum usage charges Spectrum sharing and trading Enabling the next wave of telecom growth in India 52 .4 92. based on a transparent auction mechanism to determine the price. http://www. This roadmap should be made available publicly to ensure transparency. The criteria for levying spectrum usage charges should be identified upfront at the time of allocation of spectrum. and to draw up a suitable schedule.in/images/1-pdotfinal.” Communications Today.Operator spectrum holdings Country/Region/Operator India Denmark EU average France Germany Italy Spain Sweden UK US Spectrum holding per operator.co. Need to lay down a clear roadmap for spectrum management which should state the requirement and availability of spectrum for each circle as well as for the whole country. It should be based on market price and not administered pricing.  Spectrum allocation to existing players 2G spectrum up to the contracted limit should be ensured as initial spectrum. MHz 28-37 118.org/documents/MWC%202009%20Digital%20Dividend%20Pavilion-3G%20Americas%20 Erasmo%20Rojas.pdf.” 3g Americas website. timely spectrum reconciliation and enhanced transparency. accessed 14 January 2011. February 2009.6 92 82. Need to bring in additional spectrum for commercial telecom services. Identify and vacate new spectrum bands for future use.Latin America Wireless Roadmap.3gamericas.

3 Universal Service Obligation Fund (USOF)82 NTP 1999 envisaged access to basic telecom services for all.011 broadband connections out of the proposed 888.4. for global practices.1 39.694 have been provided as of December 2009. whereas urban teledensity is about 137. via Dow Jones Factive. 40.0 12. (INR billion) 40 30 20 10 0 34.121 MARR-based VPTs installed before April 2002.3.4%. As of 31 December 2009.302 uncovered villages.9 16. with a universal service levy of 5% being levied on the adjusted gross revenue (AGR) earned by all telecom operators except on VAS such as internet service.832 wireline broadband connections have been provided as of 31 December 2009.3%. voice mail and email. rural teledensity is at 28. the Universal Service Support Policy came into effect. especially those in rural and remote areas.0 N/A FY05 Funds collected FY06 Funds disbursed FY07 FY08 FY09 Dec-09 Source: DoT 82 See 5. 83 “Minister Sachin wants to ‘Pilot’ IT revolution in northeast.705 rural community phones (RCPs).7 18.1 15. Multi access radio relay (MARR)-based VPT: out of 185.5 55.2 17. at affordable prices. about 6. As of 31 December 2009. © 2010 HT Media Limited. However. BSNL has provided VPTs to 61.186 out of 62.950 towers have been set up under this scheme.83 at the end of FY10.2 VPT and RCP: around 570.3.436 infrastructure sites spread over 500 districts in 27 states.000 VPTs are currently eligible for financial support for operation and maintenance.” Indo-Asian News Service. The USOF is estimated to hold around INR180 billion. In 2002. resulting in a huge digital divide. The USOF has enabled telecom development in rural areas through the following key developments: Disbursement of the USO levy to the operators 60 50 54.500 have been replaced as of 31 December 2009. The USOF covers rural and remote areas with public access telephones and individual rural household telephones in net high cost rural and remote areas. The USOF has a long way to go to provide impetus to rural telephony and bridge the gap between the funds collected and disbursed in an effective manner. Tower infrastructure: provide infrastructure support to set up and manage 7. about 184.4 32. 7 March 2010. 53 Enabling the next wave of telecom growth in India . Out of the target of 40. Rural broadband: 95.6 13.

Enabling the next wave of telecom growth in India 54 . so DoT should lower the contribution from 5% to 1% of AGR. The USOF should aim to achieve the following: • 100% rural teledensity by 2015 • 25-30 million broadband subscribers in rural areas over the next five years • Data coverage to all villages through cable modem termination system (CMTS) data technology by 2015 • Broadband connectivity for 250.Parameters Objectives Recommendations The USOF framework needs to be reviewed regularly to effectively utilize the funds to achieve universal service. There is a significant cash reserve lying unutilized in the USOF.000 gram panchayats by 2012 • At least 20 active public information kiosks with at least 256 kbps speed in every district headquarters by 2015 Potential usages The USOF should be utilized for the following: • Provision of public telecom and information services • Provision of household telephones in rural and remote areas as may be determined by GoI from time to time • Creation of infrastructure for provision of mobile services in rural and remote areas • Provision of broadband connectivity to villages in a phased manner • Creation of general infrastructure in rural and remote areas for development of telecommunication facilities • Induction of new technological developments in the telecom sector in rural and remote areas Method of allocation Fund collection Subsidies should be distributed through transparent market-oriented allocation methodology.

gov. 2004. connectivity.asp. page 3. This calls for a critical review of the Broadband Policy 2004 and the creation of appropriate infrastructure to support broadband growth. The net broadband addition per month is just 0.2 million. against the target of 20 million by 2010 set in the Broadband Policy of 2004. with a broadband penetration of just 0. lack of vernacular content. economic.4. and 118 out of 154 countries in terms of ICT access.gov. India lags behind in terms of ITU’s ICT Development Index (IDI).in/Default. June 2010. http://www. The growth of broadband is restricted by several factors such as its perceived utility. To kick-start the broadband penetration in rural and far-flung areas. connecting 40% of the households in the country.3. The need to provide broadband services in rural areas should be met with the help of easy financing and the means to share capital expenditures. use.asp. 84 See 5. there should be balanced competition to ensure the quality and affordability of services. Today.” TRAI website. India has set a target of 100 million broadband connections by 2014. as well as its BRIC counterparts. The last mile access issue can be addressed through the deployment of wireless technology. behavioral and government initiatives. Broadband should be redefined and clauses such as ‘’always on’’ and minimum speed should be removed from National Broadband Policy. cost and competition — are essential for improving broadband penetration. deployment of wireless access should be given preference and fiber media should be utilized from the already available fiber capacity across nation. application. accessed 10 October 2010. http://www. cost of device and affordability. 86 “TRAI: Consultation Paper on National Broadband Plan. accessed 10 October 2010. socioeconomic growth is dependent on the spread of broadband services across the country. respectively. social.85 There were just 8. and skills.74%. Further.” TRAI website. 85 “TRAI: Consultation Paper on National Broadband Plan.86 with a ranking of 129.4. June 2010.4 Broadband84 India trails all developing Asian countries.1 to 0.trai. 55 Enabling the next wave of telecom growth in India . for global practices.8 million broadband connections at the end of FY10. Broadband services should be encouraged using wireless media because the laying of fibers block by block at district headquarters would be costly and time-consuming. page 28. The drivers for broadband services are broadly classified as technological.in/Default. The 3C’s — customer. 106.trai. in order to encourage broadband.

The GoI should consider a differential tax to encourage the private sector to set up common access points. driving licenses. The support for local access and content delivery to towns should extend beyond the 150 commercially viable towns. Regional content Content and applications in regional languages should be created to promote rural broadband. Wireless broadband More spectrum should be made available. Since growth will be through wireless broadband. The Government should foster competition to improve the pace of penetration. Computer usage by government employees should be encouraged. Online fee payments should be encouraged for land records. payment of electric and water bills. In addition. all national and state highway projects should include the laying of an optic fiber backbone. the government and private sector should collectively work toward developing low-cost mobile applications. More than two service providers with a rollout obligation should be funded. PC penetration Workshops by local entrepreneurs should be promoted under the common services centers (CSC) scheme. Fiscal incentives Tariffs need to come down. Broadband connectivity should be made mandatory for all buildings requiring a completion certificate. operate and transfer route. BSCs and BTS from the nearest block headquarters. The development of the customer premises equipment (CPE) model should be supported for the interoperability of broadband.Parameters Infrastructure Recommendations Optic fiber communication (OFC). and charges for broadband services should be rationalized across all states. Discounts should be provided for online payments. This can happen only if there are incentives to build infrastructure and provide broadband services. which is a part of the National e-Governance Plan (NeGP). The tax status for expenditure on connectivity/usage should be similar to policies on other public welfare services such as education and medical allowance. Investments should be made in key content development and services such as e-health and e-education. Enabling the next wave of telecom growth in India 56 . Backhaul connectivity and OFC should be provided to all telecom towers. There is a case for private-public partnership (PPP) in broadband along the lines of highway construction in India through the build. building and cooperative society bylaws can be effectively modified to make it mandatory for such entities to invite broadband service providers to broadband-enable buildings by at least 10 Mbps per household. remote and inaccessible areas. Similarly. high-capacity microwave and satellite connectivity should be extended to rural. Right of way (ROW) ROW procedures should be uniform. vehicle registration. on the lines of water and power connectivity.

CMTS license with UASL. unified access services license (UASL) with UASL.5. Market share of merged entity Lock-in period 87 See 5. Merger of licenses shall be restricted to the same circle. The share of a merged entity should not be greater than 30% in terms of sub-base or AGR.4. for global practices. Merger of license(s) shall be permitted in the following category of licenses: cellular mobile telephone service (CMTS) license with CMTS license. The stipulation regarding the minimum period of three years from the effective date of license for merger or acquisition should be done away with. and UASL with UASL. Parameters Number of operators Service area and license stipulations Recommendations Mergers should not result in less than six operators in the circle. Merged licenses in all the categories above shall be in UASL category only. intra-circle M&A is allowed subject to the following conditions: • • • The total number of operators in a circle should not fall below four Market share and revenues of the merged entity should be less than 40% in each circle A three-year lock-in for owner’s equity in the new operators that have been given licenses recently (no lock-in if fresh equity) Maximum spectrum of the merged entity will be capped at 15MHz for Metros and A circle and 12.3.4MHz for B circle and C circle No one entity can hold equity stake of 10% or more in more than one licensee company in the same circle • • The Government should continue to follow the policy to permit mergers but at the same time retain enough competition in the market so as to protect the consumer interest. The TRAI recommendations dated 11 May 2010 should be followed to maintain the balance between the interests of consumers and service providers. 57 Enabling the next wave of telecom growth in India .5 Mergers and acquisitions87 At present.

the operators pay up to 30%88 of their total revenues toward different levies. VAT. the revenue share license fee (including the USOF) is prescribed as follows: • • • • 6% to 10% of AGR for access services. the significance of the telecom sector to the Indian economy has grown immensely.indiatimes. which is 23%–25% higher than their counterparts in other Asian countries. The Indian telecom sector is subject to numerous taxes and levies.gov. the bouquet of services has changed. The issue whether the sale of RCVs should attract service tax or VAT has been a subject of constant debate and discussion. This position has been adopted by industry players. there are certain key challenges faced by the sector which are outlined below: Recharge coupon vouchers (RCVs): the Indian telecom sector is also characterized by a large prepaid subscriber base. Central value-added tax (CENVAT) position on tower materials and shelters: telecom operators are availing CENVAT credit on goods such as angles. Enabling the next wave of telecom growth in India 58 .89 96.1% of the CDMA subscribers were prepaid subscribers. tower material and shelters has been an industry issue on which even the service tax authorities in different jurisdictions have taken a different stand and have sought to deny credit on these goods treating such goods as not qualifying as “capital goods” under the CENVAT Credit Rules 2004.cms. with the matter going up to the Supreme Court.4. as the RCVs are witnessing liberalization in the flexibility of their usage.com/news/news-by-industry/telecom/telecom-firms-wantlower-tax-burden/articleshow/2753840. Denial of credit on such goods would lead to an increase in the financial burden on telecom operators. which are used for building transmission towers. http://economictimes. as well as tax.asp. accessed 15 January 2011. Currently. which account for 80%–85% of the operator revenues. The issue was first taken up in the case of a leading telecom player by the state of Karnataka. custom duty and other taxes. The levy of VAT on the sale of RCVs to subscribers would result in double taxation. 89 “TRAI: The Indian Telecom Services Performance Indicators (July – September 2010).4% of the GSM subscribers and 94.3. the sector contributes significantly to GDP.) and accordingly they can be treated as capital goods in the hands of an operating company given that towers and shelters are essential for the provision of telecommunication services.e. depending on the category of circle 6% of AGR for NLD/ILD services 6% of AGR for internet service providers for revenues accruing from internet telephony service Despite the significant contribution of the Indian telecom sector to the growth of the GDP and the tax revenue of the Indian economy. 5% levy for USOF.” TRAI website. RCV is one of the most popular ways to pay for telecommunication services. channels and beams. According to TRAI. such as to procure merchandise. The levy of VAT on the activity of providing broadband connectivity services would lead to double taxation of such services. these goods could be treated as “component/ spare/accessories” of “capital goods” (i. while the dominant purpose for selling these RCVs is provision of telecom services to subscribers. This includes the uniform license fee. or other services. BTS etc.” The Economic Times. The classification of tower. http://www. accessed 10 January 2011. thereby leading to greater financial burden on the telecom sector. • • Sale of light energy: broadband services also continue to face taxation-related concerns.trai.in/Default. Various states across India have issued show cause notices. As of September 2010. thereby leading to greater financial burden on the telecom sector. Over the years. Currently.6 Taxation Over the years. It is important to note that currently the industry players are paying service tax on such broadband services.. However. Towers and shelters fall under Chapter 73 and 94 respectively of the Central Excise Tariff Act 1985. January 2010. It is important to note that currently industry players are paying service tax on RCVs. or passed orders demanding VAT/sales tax on the activity of providing broadband connectivity by use of optical fiber cables treating it to be sale of “artificially created light energy” under the respective state VAT legislation. 88 “Telecom firms want lower tax burden. The Supreme Court without going into the merits of the case has ordered a relook at the matter by the state VAT authorities.

It is important to note that as per the current proposal. ease in statewise compliances. The upcoming GST regime should.• Levy of entertainment tax on VAS products: there is a proposal in certain states to levy entertainment tax on VAS products as such products to entertain the caller. The upcoming GST regime should aim to simplify the tax structure for the industry. GST should not translate into an ambitious target to generate higher service tax revenues from the telecom sector. in view of the exponential growth witnessed by the telecom sector. 59 Enabling the next wave of telecom growth in India . entertainment tax is not proposed to be subsumed in goods and services tax (GST). In case entertainment tax is levied on VAS products.e. aim to rationalize the tax structure in the Indian telecom industry. the state where GST will be paid for different kind of telecom services. Further. special consideration has to be given on certain areas in the backdrop of the peculiarities of the telecom sector such as “place of supply rules90” i. the non-subsumation of entertainment tax in GST could impose a significant financial impact on the telecom industry. Upcoming GST regime: according to industry experts. along with the creation of a roadmap for a single unified levy.. thus. with all services and goods being taxed at a standard rate. The sector should be provided tax benefits and incentives in recognition of being a key contributor to the socioeconomic development and GDP of the country. • 90 Place of supply rules define the place (state) which has the right to tax a service transaction.

In Latin America. FDI in developing countries enables the development of a local telecommunication infrastructure and universal access. the telecommunications market reform has continued. The telecom sector has a substantial impact on a nation’s economic development. It results in substantial progress in meeting such countries’ basic telecommunication requirements.3. globalization has led to a rapid increase in FDI. Enabling the next wave of telecom growth in India 60 . several countries that first privatized their domestic operators in the early 2000s are now preparing for a second round of market openings. telecommunication industries are often state-operated and monopolized in many countries. and enhances market competition. the balance between economic gains from foreign investment and national telecommunications sovereignty presents a challenging task.7 Foreign direct investment (FDI) In the past decade. FDI in telecom brings advanced technological skills and large amounts of funds. Given the importance of foreign investment.4. Taiwan and Thailand opening their markets to foreign investment. The WTO aims to promote foreign and domestic investment. Hence. However. The telecom sector has been among the sectors that have witnessed substantial growth in FDI. Together. the WTO and the ITU encourage the development of a global telecommunication infrastructure and the formation of an integrated global telecommunication market. including the development of new forms of electronic commerce. with countries such as the Philippines. Globally. As a result. Foreign private investment has entered the developing markets through joint ventures with local telecommunication operators or the sale of equity stakes in state-owned telecommunication entities to private foreign investors. prosper together. In the Asia–Pacific region. and the ITU allocates global spectrum to particular services and manages scarce communications resources among countries for the benefit of trade liberalization and to prevent discrimination between domestic and foreign suppliers. and due to its influence on national security. major FDI in the telecom sector is facilitated by two international organizations — the World Trade Organization (WTO) and the International Telecommunication Union (ITU). many countries control FDI in telecom according to their economic and developmental needs. The Indian telecom sector needs to foster a suitable environment where investment and entrepreneurship. social stability and national security. the policy should consider raising the upper limit on foreign investment to encourage more foreign players to invest in the capexintensive telecom sector. thereby enhancing economic growth in developing countries.

the increase in subscriber base and teledensity has enabled telecom companies to achieve economies of scale and.4.04 Pakistan 0. at the same time. giving India some of the lowest tariffs in the world. It also removed the distinction between fixed-line and cellular tariffs.16 0.01 India Phillipines Source: DoT. 61 Enabling the next wave of telecom growth in India .19 0.03 China 0.17 0.1 0.1 0. The DoT has been successful in providing world-class telecom infrastructure at globally competitive tariffs and has reduced the digital divide by extending connectivity to unconnected areas.8 Consumer affordability and rural penetration The Indian telecom market has some of the lowest tariffs in the world. This was followed up by incumbent operators introducing cheaper tariffs.2 0.2 0.3 0.05 Thailand 0.11 0. Mobile tariffs per minute in US$ 0.23 0.3. provide leading class services.0 Belgium UK France Brazil 0. India Telecom 2010 brochure In February 2006.” It was considered affordable. The plan enabled customers to make calls to any phone from one end of the country to the other for INR1 any time during the day. customer friendly and innovative for both local and long distance calls.09 Malaysia 0. with a large majority of people using low-cost mobile handsets. a leading operator launched the “One India Plan. Furthermore.

Enabling the next wave of telecom growth in India 62 . For the service provider. In order to drive penetration in rural and remote areas. home offices and other organized/ unorganized groups in rural and remote areas to serve the needs of the population in a holistic way. the entity buying connections in wholesale will be the customer. Similarly. which are available in very small increments. increased usage and highly utilized networks also help lower tariffs. lower tax burden. operator strategies such as innovative business models. easy market entry. small office.Drivers of affordable mobile communication • • • • • Transparent regulation Easy market entry Lower tax burden Low risk License reforms to permit mobile resale Innovative business model Reduction in capex and opex Increased usage Highly utilized networks Policy and regulatory approach Affordable mobile communications Operator strategies • • • • Affordable mobile communication is driven by policy and a regulatory approach and operator strategies. reduction in capital expenditure and operational expenditure. operators in Bangladesh have designed products and services such as micro prepaid topups. Resale of mobile services will allow an entity to resell mobile services after buying connections in wholesale from the underlying service provider. This arrangement will allow SMEs. Factors such as transparent regulation. Pakistan has taken initiatives on the policy and regulatory front by removing import duties on mobile handsets and reducing SIM card activation charges to make mobile communication more affordable. it is important that alternative models such as mobile resale be introduced. On the other hand. The entity will sell the connections to their end customer and contract and bill them in their own capacity for the services provided. The entity will not replicate the efforts of service provider. There is a need to create a regulatory framework that enables greater sharing. and also allow consumers to transfer airtime between each other and use it as currency. The services will be provided only by the underlying access provider who will continue to address the related compliance requirements. and low risk enable the creation of policy and a regulatory approach that helps to drive down tariffs.

and AUSPI submitted a report that suggested ways to form seven TCOEs across India in a PPP mode. the Center of Excellence in Wireless Technology (CEWIT) and the Broadband Wireless Consortium of India (BWCI) have been established. which is characterized by a dynamic young population base– more than half of which is under 25 years old. In terms of size and diversity. Government of India — Annual Report 2009–10. 91 Unleashing India’s Innovation.9 10. Number of higher education institutions and student enrollment 30. However. India lags behind China and the US in terms of student enrollment. Each TCOE is sponsored by a telecom operating company and is hosted by a premier technical or management institute. India has the largest number of higher education institutions. Such organizations promote R&D and help in creating a talented workforce. As of December 2009.213 20. a committee comprised of the DoT. COAI.000 6. For instance. October 2007. 2010 In keeping with the NTP 1999’s R&D objective. 53 state private universities.213 5 0 Student enrollment in higher education (million) Number of students by field of study in India 1% 2% 3% 7% 45% 3% Arts Science Commerce/ Management Engineering/ Technology Medicine Law Agriculture 21% Others 18% Source: Making the Indian higher education system future ready. The main funding for a TCOE comes from the sponsoring telecom operators. 40 central universities.92 there were 504 universities and university-level institutions.000 12. 63 Enabling the next wave of telecom growth in India . only 17%91 of those in their mid–20s or older have completed their secondary education. Ernst & Young. organizations such as the Telecom Centers of Excellence (TCOE). followed by the US and China. including 243 state universities.706 17.8 25.4 30 25 20 15 10 21. in May 2007.000 Number of higher education institutions 21. World Bank website. India possesses a developed higher education system that offers training in many fields. Ernst & Young.3.4. 130 deemed universities and 33 institutions of national importance. page xv. 2010 0 India US China Source: Making the Indian higher education system future ready. FY10. 92 Ministry of Human Resource Development. Ministry of Human Resource Development.9 Human resource India has the benefit of a huge population. However. while the GoI provides basic and research infrastructure.

According to DoT estimates.Telecom Equipment and Services Export Promotion Council (TEPC). for global practices. resulting in the significant growth of exports to developing nations. and policy initiatives should be focused on encouraging localized manufacturing. 28 February 2010. Increased competitiveness in the global market: a technologically advanced manufacturing ecosystem in India prospectively offers an international platform to telecom manufacturers. In order to reduce transaction costs. In addition. the provision of a single window clearance for all state-level approvals would be a vital fiscal measure. accessed 20 October 2010. 93 See 5. localized players can expect to compete globally with established manufacturers and make their own mark in foreign markets in the long run.net/indian-telecom-a-tale-of-stupendousgrowth/. Export promotion The Government could create a sizable export promotion fund for the Telecom Equipment and Services Export Promotion Council (TESEPC). supported by the banking system. Parameters Manufacturing hub Recommendations There is a need to set up hardware manufacturing cluster parks (HMCP) across the country and to upgrade localized infrastructure to support large volume contract manufacturing.6. 96 Policy Recommendations to Increase Domestic Telecom Growth and Exports of Telecom Equipment & Services .com/2010/04/01215017/Indian-telecom-firms-may-get-D.” The Viewspaper. growth in the segment holds the potential to triple the country’s current employment base by FY14. 01 April 2010. accessed 02 August 2010. further strengthening the case for a robust telecom manufacturing industry. page 4.3. the share of locally manufactured equipment has declined to 30% in FY09 from 74% in FY04. http://theviewspaper. There is a need to align product certification with international standards and to facilitate global accreditation for the testing facility. India needs to position itself as a telecom manufacturing hub in the long term. The case for a growing telecom electronics and equipment manufacturing industry is as follows: • Significant export potential: according to the Telecom Equipment and Services Export Promotion Council (TEPC). royalty payments of up to 5% on domestic sales and 8% on exports should be exempted from income tax.10 Equipment manufacturing93 The production of telecom equipment in India has increased at a CAGR of 29% from FY04 to FY09. Thus. customs clearance for imports and exports should be done on a self-declaration basis. • • Employment generation: given the right impetus. The tax on the payment of royalty should be as low as possible. reaching a value of INR518 billion94 in FY09 during the last five years. Fiscal incentives Domestic telecom equipment manufacturers may be allowed to have access to external commercial borrowing for capital expenditure and working capital requirements. the segment holds an export potential of INR450-500 billion96 by FY14.4. 95 “Indian telecom firms may get DoT boost. However. Other significant incentives would encompass the removal of withheld tax on the fee for transfer of technology and software import. 94 “Indian Telecom: A Tale of Stupendous Growth.livemint. The value of telecom equipment exports was INR81 billion in FY09 during the last five years. http://www. html. Enabling the next wave of telecom growth in India 64 . the requirement for telecom equipment in India is expected to be about INR5 trillion95 by 2015. In addition. The policy should provide encouragement to localized manufacturers for products designed and manufactured in India as well as products that are manufactured but not designed in the country. There should be provision for round-the-clock customs clearance. financial institutions should lend money for the capital expenditure and working capital requirements of the telecom equipment manufacturers at the rates they use when lending to telecom service providers or infrastructure providers.” LiveMint. In order to encourage technology transfer. It is necessary to ensure the free movement of the equipment/raw materials.

Indian trade missions in these regions should proactively seek opportunities in the telecom electronics and equipment domain and facilitate business interactions. Leading class R&D centers in the PPP mode should be promoted. Set up an autonomous body. Africa. A fund for R&D and product development for the segment should be created. The active participation of the private sector in multiple projects is expected to lead to R&D benefits that will flow to both the public and the private sector. A detailed program should be created to attract investment in the manufacturing of accessories such as batteries and chargers for mobile handsets. Latin America. R&D should be the key focus. Russia and Eastern Europe.Bilateral trade programs Telecom exports from India may be included in bilateral trade agreements with emerging markets in regions such as South Asia. to assist and provide guidance to those who want to set up a manufacturing facility. Service hubs Telecom equipment manufacturers should be encouraged to create service hubs to develop a global network and strengthen their presence across India. 65 Enabling the next wave of telecom growth in India . Taxation Financial support Investments for accessories R&D The current taxation structure for mobile handsets must be maintained for long-term growth. similar to the Telecom Finance Corporation.

single window clearance and preferential treatment for sharing and incentives need to be addressed in a timely manner.11 Telecom infrastructure97 Infrastructure growth is critical to the rollout of services. The march of technology-IP/converged platforms is leading to integrated technology-neutral host platforms. the tower business is characterized by high initial capital investments. which avoids duplication of capex. If an existing tower is not operating at 100% capacity. but are matters liable to be governed by the GoI or regulatory authority constituted by it in accordance with the NTP. Telecom/broadband connectivity should be considered a necessity such as water and power in every housing facility. Technological approaches that can potentially reduce the direct and indirect costs of creating telecom infrastructure should be encouraged. which are directly connected with the growth of tower infrastructure. The rollout subsidy could be fixed at a flat amount based on the approved tower design for a period of five years. creating a uniform taxation regime. in-building solutions and DAS make it possible to conserve spectrum and reduce the visual impact of towers. For India to achieve 85% teledensity.3. If legislative amendments are needed. 97 See 5. The profitability is dependent on the ability to increase tenancy on the tower. stable and predictable cash flow. a new tower could be awarded through a bidding process. But the lack of guidelines or standard procedures results in enormous delays and huge cost implications. there is a need to lay down a National Telecom Critical Infrastructure Policy on the lines of NTP 1999 elaborating uniform procedures for land acquisition. Parameters State subject Recommendations There is an urgent need for simplification and harmonization of complex rules and processes so that unreasonable barriers do not impede the rollout of infrastructure. the scale and spread of the tower portfolio and the ability to raise capital. Moreover. There is a need for national ROW policy for rollout of backhaul network. Full utilization of towers— optimum sharing There should be laws governing the rollout of towers. Every tower should be fully utilized. The biggest barrier to setting up telecom towers and other infrastructure is the wide variation in the approval process adopted by local bodies. GoI should announce a National Telecom Critical Infrastructure Policy (NTCIP). the rents charged. then no new tower should be allowed in that zone. there is no uniform approval process across states for setting up telecom infrastructure. Once the existing tower is at capacity. low working capital requirements and high incremental profitability. it needs 95% coverage. A 70-meter tower could service an area of 2-3 square kilometers. This mandate should be included in bylaws of the local and state governments. Civic issues Civic issues such as zoning regulation. Such practice is being followed in developed countries such as the US. and there could be distance guidelines for the same. These are not matters of local self-government or municipal departments. and extending subsidies and other packages to create a conducive environment to boost national telecom infrastructure building and thereby ensure the increased participation of all the stakeholders. for global practices. Also. At present. Tower infrastructure needs to come under the Indian Telegraph Act.” Tower infrastructure should be erected in accordance with the NTP and licenses granted by the GoI under the Indian Telegraph Act. The telecom infrastructure service provider needs to apply to the local municipality or panchayats for permission to build a tower. they should be adopted in a timely manner. Enabling the next wave of telecom growth in India 66 . and GoI should declare mobile and tower infrastructure as “Critical Infrastructure Services. There is also a need for an empowered committee or similar structure to engage with roads and power ministries.4. Given the challenges that the industry faces.7.

Power tariffs and consumption Telecom services should be treated as a public utility service. There should be a method to cash in carbon credits. There is little justification for imposing costs such as lincense fees on these players. The fee levied on tower companies should not be viewed as a source of income to fund the development of a municipality. Tower specification and standardization requirements should be clearly spelled out. a cess should not be levied on them. Operators should reduce their existing diesel generator run times by deploying the latest fastcharging batteries and improving their partial-state-of-charge capabilities. which should be approved by a competent authority. Energy consumption Indian mobile operators and equipment vendors need to develop energy-efficient networks by designing and deploying low-energy BTSs that are powered by renewable energy. The energy used by tower companies should fall under a uniform classification in all states. Since tower operators do not  directly serve the end consumer. The SACFA Committee should be revamped as part of a faster and simpler site clearance process. Time-related incentives ought to be provided to tower infrastructure providers to speed up deployment. SACFA clearances Telecom service providers coordinate with a variety of departments for site clearances which is a time-consuming process. fiscal incentives and subsidies. The USOF contribution toward the setup of telecom infrastructure and its role for rural rollouts should be specified. USOF subsidies are required to defray the cost of infrastructure creation in rural areas. Grid power supply should be made available.Taxation on towers Rationalize the tax structure across states in the form of tax cuts. Each tower should have a structural certificate.000 employees) and BTS manufacturers. fuel cells or wind power. which account for 60% of infrastructure companies’ outgo. There could be 6-10 standard designs for a tower. there is no cess on handset manufacturers. Standardized design across operators and geography would further help optimize sharing and potentially reduce cost. The state electricity boards should be advised to place a priority on applications for utility connections from telecom infrastructure service providers. because they do not interface directly with end users. call centers (with about 40. Utilization of USOF and incentives Grievance redressal Safety concerns A broader framework should be created to handle and settle grievances involving infrastructure companies in the event of a conflict. and treating these efforts as part of the overall effort to reduce greenhouse gases and the country’s carbon footprint. Currently. The Central Government should not impose a cess on tower operators. Infrastructure companies are akin to players such as equipment vendors and network management companies. The immediate cost of infrastructure creation can be brought down significantly by reducing  government duties and taxes. The dependence on diesel could be reduced if the Government utilizes the current diesel subsidy to support a move toward renewable energy options such as solar. and the industrial rate structure should be made applicable to towers across all states. which will make towers safer. 67 Enabling the next wave of telecom growth in India .” The development of specific IS code of telecom towers will help the industry to follow optimized design parameters. which would be approved by a “design approving authority.

increase the energy efficiency of new network equipment and optimize network technology to increase energy efficiency. 118. the British Medical Association. Misplaced apprehensions on health hazards of electromagnetic radiation from mobile antennae-BTS International institutions like the World Health Organization. Recent surveys have shown that the radio frequency exposure from base stations ranges from 0.000 renewable energy base stations could reduce annual carbon emissions by up to 6. the International Commission on Non Ionizing Radiation Protection (ICNIRP) and the GSM Association have opined that there is no conclusive evidence of any health hazards due to radiation from mobile towers. Further. This is because the frequencies used in FM radio (around 100MHz) and in TV broadcasting (around 300 to 400MHz) are lower than those employed in mobile telephony (900MHz and 1. due to their lower frequency. depending on a variety of factors such as the proximity to the antenna and the surrounding environment.3 million tonnes. Even for limited camouflaging. Local authorities and consumer groups should be made more aware of this. The feasibility of using biofuels is also being studied. Environmental issues If these BTSs can be run on renewable energy resources. there should be a joint endeavor between civic agencies and other related departments. In fact. Operators should be encouraged to use green technologies. Alternative sources of energy need to be developed and deployed wherever found feasible.800MHz) and because a person’s height makes the body an efficient receiving antenna. Furthermore. the body absorbs up to five times more of the signal from FM radio and television than from base stations. Operators are also experimenting with the use of non-conventional sources of energy wherever feasible for meeting energy requirements.Aesthetic concerns There could also be special consideration made for camouflaging towers in and around certain specific urban areas having heritage or other architectural significance. annual carbon emissions could be reduced. at similar radio frequency exposure levels. there is a need to fix the feed strength to control radiation emissions. radio and television broadcast stations have been in operation for the past 50 or more years without any adverse health consequence being established. Service providers are using green shelters or deploying outdoor BTS wherever found feasible to reduce power consumption. Enabling the next wave of telecom growth in India 68 . These measures have the potential to reduce the carbon footprint significantly. and not for all generic urban areas. While the operators are making their best efforts to educate the general public. a positive public stand by the regulator would be extremely helpful. There should be incentives for tower companies to optimize fuel and power costs.002% to 2% of the levels of international exposure guidelines.

telecom licenses are voice-centric. should be clarified. Need to eliminate the cumulative assessment of licensing fees on the purchase of inputs. a wholesale pricing regime should be introduced. specifically LIRC. Access charges under new RIOs for accessing new cables should represent only the actual incremental network costs of providing the access services. non-discriminatory and cost-based. India does not rank in the top 10 data revenue earning countries. However. data revenue. 69 Enabling the next wave of telecom growth in India . Regulatory restrictions related to interconnection of data and public switched voice networks interfere with the realization of these services’ full potential. In line with international practice.12 Enterprise data The share of data service in India’s total telecom revenue is about 11% as compared with many other countries where it ranges from 20% to 40%. and are largely premised on the provision of mass market consumer voice services. Lawful interception The proper treatment of data services under the ILD and NLD licenses. International private leased circuit (IPLC) regime Indian BPOs are addressing contact center requirements globally to collect voice calls outside of India and transporting them over an IPLC or MPLS link provided by the authorized service providers.4. The Indian enterprise sector requires the ability to provide sophisticated IP-based and other data communications services to meet needs of enterprise and multinational customers. most regulations are voice-centric and do not cover issues related to enterprise service providers. Therefore. current ILD and NLD licenses were drafted before the development of current GTS services and technologies. and service revenue98 by country Rank 1 2 3 4 5 6 7 8 9 10 By subscribers China India US Russia Brazil Indonesia Japan Germany Pakistan Italy By data revenue US Japan China UK Italy Germany France Korea Spain Australia By service revenue US China Japan France Italy UK Germany India Spain Brazil Focus area Encryption Recommendations Encryption levels in ILD and NLD licenses should be upgraded to allow strong encryption of up to 256 bits to protect confidential information in accordance with international best practices.3. which imposes double taxation on ILD and NLD license holders. Therefore. with attention given to MPLS and IP-VPN services. including lawful interception  and monitoring conditions. BPO customers need variable per minute usage-based pricing model both for inbound and outbound calls. In the interest of national security. The security/lawful monitoring and interception requirements applicable to enterprise data services should be specified. which do not connect to a public network. Taxation 98 Enterprise Sector. the customer should undertake to make its encryption key available to the licensed entity on demand. Costing should be in place for RIO charges to ensure proper cost-oriented charges. Ranking of subscribers. Interconnection regime and cable landing station (CLS) access Access charges under existing Reference Interconnect Offers (RIOs) should be fair. November 2010. It should be retail minus and avoid vertical price squeeze by the incumbent. To promote competition in the IPLC segment. Association of Competitive Telecom Operators. these licenses do not allow the use of adequate encryption in accordance with current commercial standards to protect confidential information. They also do not address the contracting and billing arrangements required by enterprise and multinational customers and do not clearly set forth licensee obligations regarding data services required by customers. Despite the large number of players entering the enterprise data segment.

or access devices such as the telephone. Convergence creates opportunities such as the combination of either equipment or businesses to provide multiple telecommunications. a telco provides video. Triple play is also used to define the end result of convergence.4.3. the convergence of voice and data has created a trend for tariff plans based on the volume of data transferred with common billing for interchangeable use of voice calls and data services. telecom and telephone. Market-related convergence arises due to consumer expectations of one-stop service availability and bundling of services.13 Convergence99 The ITU defines convergence as the integration of customer end terminal equipment. it is expected that these lines will become an alternate medium for providing information services. with a service provider offering a bundle of services. data and telephone through separate channels. As a result. It is essential to create a regulatory framework that addresses the issues arising from both technological and business convergence. In the near future. At the same time. Today. broadcasting and internet-based services by a single operator. commercial power lines have been used to provide telecommunication and internet services. Technological convergence has made way for business convergence. whereas another telco provides triple play through a single channel. taking convergence to a new level.8. 99 See 5. Convergence has led to increased competition in the marketplace. Convergence has evolved due to the processes of digitalization and computerization. Hence. Enabling the next wave of telecom growth in India 70 . it poses challenges that need to be addressed from a regulatory perspective. impacting both the telecommunications and broadcasting sector as a whole. for global practices. television and personal computer. most of the telecom operators provide broadband services in addition to voice communication services. In the US and Hong Kong. which refers to the combination of three services — internet.

71 Enabling the next wave of telecom growth in India . the DoT blocked calls to mobile devices without a 15-digit International Mobile Equipment Identity (IMEI) number. along software and facilities at the time of procurement and with a trained workforce. Firstly. other issues remain that continue to raise concerns over security. highly vulnerable. terabytes and exabytes of data need to be set up. The key players that have been impacted by the security concerns include one of the world’s leading mobile handset manufacturers. Although the GoI has initiated these steps to enhance security and curb terrorism with the help of mobile telephony. This move is expected to have impacted approximately 25 million users. with Chinese mobile phones being the major category. issuing guidelines related to the import of network equipment from foreign telecommunications vendors. telecom equipment manufacturers and telecom operators. internet service providers and one of the world’s leading internet search engines. leaving the telecom system source code and design along with Indian security agencies.4. The IMIE number helps intelligence agencies track mobile phone users and curb anti–national activities. the Ministry of Home Affairs.3. the guidelines put the onus for compliance on the voice and data traffic. which is a unique number allotted to every mobile phone for the identification purposes. Indian intelligence agencies. manufacturers. with penalties for non-compliance. Know Your Customer (KYC) verification process for a mobile connection faces issues The guidelines mandate the sharing and monitoring of such as forged documents. Secondly. India has witnessed a series of terrorist attacks. the GoI has taken steps regarding telecom infrastructure equipment. modern data mining and network mobile operator. The guidelines outlined by the that is active in a network should be liable to being disabled GoI impact the commercial viability of telecom equipment via government-approved encryption. with terrorism being primarily attributable to religious communities and radical movements. In 2009.14 Security In the recent past. The management infrastructure that is able to monitor DoT has also mandated thorough inspection of hardware. virtual private networks (VPNs). The key stakeholders associated with security concerns surrounding telecom equipment include the DoT. as the requested information is considered sensitive and proprietary. Thirdly. with the rapid growth in Further. any suspicious equipment periodic review thereafter. As a result.

Going forward. Enabling the next wave of telecom growth in India 72 .9. The rollout of 3G services m-commerce Mobile banking • Inter–account fund transfer • Account inquiry • Stock trading • Bill payment Mobile payments • Information services. 4. booking tickets for transportation services such as trains and taxis and online shopping.4. for global practices. purchase of goods and services) Mobile transfer • Prepaid card top-up • Person-to-person transfers • International remittances 100 See 5. the UID scheme and financial inclusion. mobile banking and multimedia messaging service (MMS).. paying bills for utilities such as power and gas.e. driven by the uptake of services such as mobile web browsing. in India is expected to boost market growth. Key enablers for potential opportunities Telecom will find its immense use in schemes and initiatives aimed at socioeconomic development in the years to come such as m-commerce. cinema) • Shopping (i. the rollout of 3G services and increasing usage of WAP.1 m-commerce100 The next revolution that is expected through the use of mobile phones is the emergence of m-commerce. including current affairs.. web-enabled phones and smartphones by mobile subscribers is expected to play an important role in the growth of m-commerce. It is forecasted to overtake e-commerce in terms of the number of transactions.4. especially in the case of banking and internet-based purchases. The m-commerce service umbrella in India has been limited primarily to payment and transfer systems. m–commerce finds its applications across various end markets such as banking and financial institutions. with each broad category providing an array of services. train. Mobile phones provide the consumer an opportunity to transact anytime and anywhere.4. tourism and search engines • Ticketing (e.g. with synergy existing between e–commerce and m–commerce.

4. This will cause a reduction in the cost of transactions. education. adoption of other services such as ticketing. coupons and advertising would pick up.4. transportation and other emerging industries are expected to be at the forefront in adopting M2M communication. to extend affordable health care to all in the country. finance. over a period of time. There are a number of government schemes and other initiatives from medical service providers offering tele-medicine services. December 2010. health care.2 M2M communication According to Ericsson. researchers and patients. Mobile payment technology will transform the nature of physical interaction between consumers.3 Mobile money Mobile communication and secure mobile transaction opportunities will bring a transformation in the manner in which money is managed. with machine– to–machine (M2M) communication being the key driver behind this exponential increase in connected devices. delivery of health care information to practitioners. merchants and banks. the world is expected to witness 50 billion101 connected devices in 2020. 4. with mobile money becoming a truly rich and integrated application for consumer convenience.4. monetary settlements. Ericsson. 4. real-time monitoring of patient vital signs and direct provision of care via mobile tele-medicine. to look at account information and transfer small amounts of money between various accounts. service quality and security. 73 Enabling the next wave of telecom growth in India . mobilized and generated in future. disruptive business models and reduced legal and professional fees. page 2. M2M is characterized by small amounts of data between the device and network. thereafter. bill payment related to utility and others will become a major application.4. owing to increased volume. The initial application will focus on mobile banking. It offers a huge potential for health care delivery in India. redundancy and coverage. where the ability to conduct transactions from anywhere and at any time inherently lends itself to real-time 101 The World of 50 billion connections. and will enable networks to support automated machine communications. Utilities. It will significantly impact the banking industry.4 M-health M-health applications include the use of mobile devices in collecting community and clinical health data. The key advantages provided by M2M include cost and spectrum efficiency. government.

MNREGA aims at enhancing the livelihood security of people in rural areas by guaranteeing 100 days of wageemployment in a financial year to a rural household whose adult members volunteer to do unskilled manual work.4. The integration of such programs with mobile telephony will benefit the nation. about 80% of households do not have bank accounts. subsidies and other government programs while also strengthening national security.4. students and peers through collaboration in a distributed environment. In India. It aims to bridge the supplydemand gap of high-quality teachers in the country. The UID program is critical to improving the delivery of social services. an integrated system for taking biometric attendance through hand-held devices and transmitting it through mobile phones for authentication is expected to solve the challenge of attendance. Once workers have logged in. 4. and help them earn their daily wages. It enables a virtual community to facilitate the learning activities of teachers. MNREGA achieves twin objectives of rural development and employment.4.6 Financial inclusion Financial inclusion is central to the overall task of inclusive growth. 4.4. Enabling the next wave of telecom growth in India 74 . For instance. this data could be transmitted to MNREGA.7 MNREGA and UID MNREGA and UID strive for providing inclusive growth.5 M-education M-education offers innovative use of mobile and wireless technologies for education. Financial inclusion aims to bring the unbanked and under-banked population into the organized financial services framework and assist in growth of the electronic payments market in India. The ability of the Indian telecom sector to reach the masses owing to its scale and built-in affordability will help to achieve financial inclusion.

Global practices 75 Enabling the next wave of telecom growth in India .5.

allotting licenses to operators who best meet stated pre-set criteria). • Successful bidders were expected to pay a minimum royalty fixed by the Government for the first five years of the license. which is to the advantage of operators and consumers. • The number of 3G operators was fixed at three per region. Japan • In 1998. Sweden • In May 2000. Licensing Hong Kong In February 2001. the successful bidders were required to pay royalties according to the royalty percentage determined at the time of auction. • The three-license limit was driven by a shortage of spectrum. as operators do not pay expensive fees to the state for the issue of licenses. In March 2000. Enabling the next wave of telecom growth in India 76 . with a guaranteed minimum payment. network rollout. the Japanese Ministry of Posts and Telecommunications (MPT) published the draft for the introduction of 3G services and solicited public comment. • The selection of applicants was based on the “beauty contest” criteria (i. The royalty auction included the following: • Bidders were asked to bid for a level of annual royalty of the percentage of turnover from their 3G services network operations. Further..1. the Swedish law states that licenses are allocated based on specific criteria. The Government decided to issue four licenses for up to 31 December 2015. the MPT established the technical regulations and publicized the licensing policies. Sweden issued an invitation to provide network capacity for UMTS mobile telecommunications services. the Government decided to issue four licenses through auctions. Following the pre–qualification exercise.5. with the regulator having a total of 60MHz of spectrum for 3G services. • The Government focused on rapid rollout and nationwide coverage. with the number of applicants matching the number of licenses. the policy for comparative selection was not invoked. The Government selected a royalty-based proposal that required the bidder to pay a certain percentage of its annual 3G revenue turnover determined by the auction.e. quality of service and financial capability. the Hong Kong Government released its 3G licensing framework. with the same royalty percentage applying to all licensees. From the sixth year on. with new as well as incumbent opeartors — but not fixed regional operators — being eligible. The pre–qualification criteria included investment. • Successful bidders were required to provide a five-year rolling guarantee of the minimum royalty payment for the entire license period. • Since the 3G license allocation in Japan was straightforward.

Spectrum Re-farming of spectrum • The US Government created the Spectrum Relocation Fund (SRF) in December 2004.int/osg/spu/ni/3G/casestudies/GSM-FINAL.pdf. 77 Enabling the next wave of telecom growth in India . Public consultation procedures and the right to appeal also increase the prospects for a successful renewal process.0 10. transparent and participatory renewal process. 5.ntia.0 35.508.08 116. 103 “1710–1755MHz spectrum band relocation.itu.482.0 51.2. The 1. This is done through the principle of renewal expectancy.390. which were authorized to be auctioned for commercial purposes.080.0 3.0 Nominal 4.” National Telecommunications and Information Administration website. and through promoting regulatory certainty through a fair. gov/reports/2008/SpectrumRelocation2008.4 44. The 102 “3G Mobile Licensing Policy.doc.Allocation of 3G mobile licenses102 Country Austria Australia Canada Finland France Germany Italy South Korea Netherlands New Zealand Norway Portugal Spain Sweden Switzerland UK Number of licenses 6 6 5 4 4 6 5 3 5 4 4 4 4 4 4 5 Mobile incumbents 4 4 4 3 3 4 4 2 5 2 2 3 3 3 2 4 Method Auction Auction Auction Beauty contest + nominal fee Beauty contest + nominal fee Auction Auction Beauty contest + fee Auction Auction Beauty contest + fee Beauty contest + fee Beauty contest + fee Beauty contest Auction Auction Date November 2000 March 2001 January 2001 March 1999 July 2001 July 2000 October 2000 End 2000 July 2000 January 2001 November 2000 December 2000 March 2000 December 2000 December 2000 April 2000 Sum paid (US$ million) 610. and ensure sufficient lead times and transitional arrangements in the event of non-renewal or changes in licensing conditions.755MHz band paired with the 2. accessed 22 October 2010.755MHz band used by federal agencies was reallocated to AWS under the provisions of Commercial Spectrum Enhancement Act (CSEA).0 45.710–1.7 1. accessed 12 October 2010.0 2.870.155MHz band. which provides a funding mechanism through which federal agencies can recover the costs associated with relocating their radio communications systems from certain spectrum bands.pdf. Policy-makers and regulators should focus on creating interest among providers and providing incentives for long-term investment.520.110– 2. page 1. page 50.8 360. including the use of the SRF to facilitate relocation of federal communications systems. http://www. In September 2006.0 Note: The “beauty contest” approach purports to allocate licenses to operators who best meet stated pre-set criteria.710–1. It is essential to provide details about license renewal or reissue.0 351.” ITU website.070.0 each 44.103 the Federal Communications Commission (FCC) concluded the auction of Advanced Wireless Services (AWS) in the 1.0 120. http://www.

the Brazilian telecommunications regulator. in consultation with the Office of Communications (Ofcom). New Zealand was the first country to introduce open market trading of spectrum. sharing or reallocation opportunities for spectrum. The secondary trading of spectrum provided benefits such as economic efficiency. emergency and public safety services (E&PSS) and science services.. civil maritime. Innovation and Skills website. i. transferee retains the license and legal responsibilities. Further.4–3. In 2006. promotion of innovation and flexibility. Enabling the next wave of telecom growth in India 78 . Spectrum could be shared on a short-term or long-term basis under the condition that the use is vacated immediately when the need arises. and facilitates the provision of innovative new wireless services in the commercial market.gov. agreed to re-allocate spectrum in the 2. While it is important to ensure that access to spectrum 104 “A Strategy for Management of major Public Sector Public Holdings. spectrum is needed only in certain geographical areas. In 2010.6GHz band had previously been allocated to multichannel multipoint distribution service (MMDS) operators to support pay-per-view TV services. In 1989. the UK Department of Trade  and Industry’s spectrum strategy committee. the Ministry of Communications and the Ministry of Defense have agreed to make 2x75MHz spectrum available for WiMAX in the 3. in 2004.AWS auction raised US$13.e. The FCC distinguished between de jure rights. but transfers management control of the spectrum.6GHz band. page 28. • Geographical sharing: in certain situations. simplifying them in mid-2004. The critical success factors for spectrum trading include a large number of buyers and sellers.e. the Australian Communications and Media  Authority (ACMA) reviewed government spectrum holdings.. giving them the option to deploy LTE immediately.pdf. ANATEL. the FCC proposed the concept of developing smart devices that adjust to the spectrum they use and take advantage of underused spectrum. The MoD has management rights to 35%104 of the spectrum bands listed in the UK Frequency Allocation Table (UKFAT). as a part of spectrum re–farming. The 2. • In March 2007. is guaranteed the moment it is needed. bis. an inefficient primary mechanism of spectrum allocation that makes it necessary to move to a market-based method of secondary allocation. Such spectrum could be made available for other applications inland. uk/files/file38572. and it has begun a program to identify which spectrum can be released and time frame for releasing it. i. It also provides the terms and flexibility to enter into leasing arrangements for a limited time if the bodies do not wish to dispose of the spectrum permanently. accessed 12 October 2010. and innovation in the supply and demand for radio-based technologies. In 2003. In Italy. The re–allocation benefits the country’s mobile operators. and spectrum regulation. Spectrum assigned to the maritime sector may need to be used for maritime radio services only near the coastline. One of the key recommendations of the Independent Review of Government Spectrum Holdings (IRGSH) was a regular review of all defense band allocations.” UK Department for Business. inland waterways and rivers. civil aeronautical. the FCC formulated rules for spectrum trading. http://www. the possibility exists to use the spectrum for other applications the primary user does not need. assignment of the license to another party. • • • • • Sharing of spectrum • Time sharing: defense needs to use part of the spectrum only in crisis situations during exercises. The committee formulated the strategic plan for the Ministry of Defense (MoD). and de facto control.6GHz band to support the nationwide deployment of nextgeneration mobile broadband services.7 billion in net winning bids. formulated policies and a strategic plan for the future allocation of spectrum to meet the needs of users in both the public and the private sector. Spectrum trading • Spectrum trading gives public and private sector entities the opportunity to decide which spectrum to release or share.

5% (plus federal contributions) 1% 1% 1% Considering USOF for rural wireless broadband services With the rising importance of broadband. accessed 20 October 2010.5. On the other hand. with the aim of increasing overall teledensity. after liberalization of the telecom sector. The key reasons include: • • • • • • • • Considering whether broadband is an essential service of significant “social importance” Estimating the degree of expected market penetration of broadband service Assessing the nature and extent to which broadband will not be made available by the market and the associated reasons Identifying and specifying the objectives and desired outcomes Assessing the extent to which market demand and delivery will meet the specified objectives Considering the social and economic disadvantages incurred by those without access to broadband if there is no government intervention Estimating the costs of intervention to widen broadband deployment through the use of the USO mechanism Estimating the costs of intervention through the use of the USO mechanism compared with the use of other approaches 105 Organization for Economic Co-operation and Development: Working Party on Telecommunication and Information Services Policies.000 rural areas over a five-year period to meet the policy goal of ensuring some telephone access in all villages with at least 500 residents. a competitive tender mechanism was used. In Greece. Universal service levies by country105 Country Malaysia India Colombia US Russia Canada Peru Uganda Nigeria Contribution by operators 6% 5% of license fee 5% Less than 4% (plus state levies) 2% 1. Most European countries. have not considered the creation of a universal fund. ANATEL has imposed a coverage obligation rather than a funding mechanism. governments should consider whether they should create a USOF for broadband services. In most countries. As a result. USO services were provided by incumbent operators. Communication service providers are obliged to contribute to this fund in many countries. The contribution rate ranges from 0. BT is the designated USO provider. http:// www. the telecom regulator. The Brazilian legal framework uses a variety of tools to achieve universal service.org/dataoecd/59/48/36503873. a separate universal service fund has been set up.3.oecd. However. page 19. countries with large geographic areas and consequently much higher costs to serve rural areas have funds that aim to cater for the rural population. with a relatively small geographical area and high population density. Universal Service Obligation Fund In many countries. Brazil has developed a mechanism that achieves universal objectives through obligations imposed on its licensees. In Mexico. the incumbent operator was required as part of its privatization to install payphones in 20. In the UK.pdf. 79 Enabling the next wave of telecom growth in India .1% in France to 6% in Malaysia. or proposing to expand into high-costs areas. subsidies are granted according to formulas for compensating operators already serving high-cost rural areas within their operating territory.

operators invited to submit proposals for universal service provider and to be compensated from the fund through a competitive process. Enabling the next wave of telecom growth in India 80 . Method of allocating funds The Government determines the level of subsidy paid to the USO provider. 0.16% of all operators’ revenues. 5% levy on the revenue of telecommunication operators. 0. 1% levy on all sector participants. Subsidies distributed through competitive bidding. Both fixed and mobile operators pay a fixed percentage of eligible telecom revenue. Major operators contribute 1% of revenue.. April 2006. Universal service fund supports ICT projects consistent with the Government’s development objectives. Subsidies mainly awarded to tele–center projects and areas of greatest need. with the lowest bidder being the winner. Subsidies distributed through competitive bidding. Subsidies distributed through competitive bidding. The USO provider makes an offer to provide services at specified cost. with the lowest bidder being the winner. Subsidies distributed through competitive bidding. The telecommunication carriers are eligible to receive universal service funds. Method of allocating funds Government to determine based on its goal to increase wireless and wireline teledensity. with the lowest bidder being the winner.Methods of utilizing USOF across various countries106 Developed countries Country Australia Canada Source of revenue Levy on licensed operators depending on market share of eligible revenue. France Italy Operators contribute a percentage of revenue i. Universal service fund compensates costs estimated on the basis of long run marginal costs. 5% of national and long distance operators’ revenues. with the lowest bidder being the winner. Subsidies distributed through competitive bidding. including telecom operators. Source of revenue 1% of all operators’ gross revenues. Starting in 2002. page 19. Japan Developing countries Country Argentina Brazil Telecommunications carriers contribute to the USOF. couriers and ISPs. Government budget.e. plus funds from license fees. 1% of service providers’ gross operational revenues earned from telecom services. and the regulator decides what part to accept. and additionally 15% for joint and common costs. 2% levy on the revenues of the incumbent operators. with the lowest bidder being the winner. Chile Colombia Malaysia Nepal India Peru South Africa Uganda 106 Organization for Economic Co-operation and Development: Working Party on Telecommunication and Information Services Policies. Compensation for costs incurred by USO provider. ISPs and mobile operators. Subsidies distributed through competitive bidding. Fixed and mobile network operators contribute 6% of their weighted revenue from designated services to the fund. with the lowest bidder being the winner. 1% of all operators’ gross revenues. the postal service.1%.

encourage competitive ecosystems. 23% of 107 World Broadband Statistics: Short report. Of all participants. as against only 8% by systems. Other top trends next 12 months.7% 0. the growth rate is much higher in the developed world. Furthermore. form PPPs. Point Topic Ltd. increased risks: 3.4 million fixed broadband subscribers.pdf.4. 23%.3% 7. a large digital divide exists between the developed and the developing 2.com/Assets/PDF/Article/WA-323857001. The trend of actions that organizations have taken to control the leakage of Enabling the next wave of telecom growth in India 5.5 million fixed broadband subscribers. it declined to just 2%. regulatory environment. The firm combination of national objectives toward broadband services with leading practices is expected to enable developing nations to achieve benefits of broadband growth.5% 26.7% 10% 20% 30% 40% Monthly broadband charges on a purchasing power parity basis (US$) 60 50 40 30 20 10 0 56 35 UAE Germany 34 Saudi Arabia 32 China 29 Japan 23 UK 22 Canada 20 US 18 Hong Kong 16 India 7 Israel Source: “Measuring the Information Society. The number of organizations currently evaluating the use of virtualization techniques is growing: 81 4. Emerging markets such as India need to adopt leading practices that facilitate rapid and cost-effective deployment of broadband technologies. as they provide businesses and consumers with fast and continuous access to internet–based services.. page 2. Intel 37.8 million107 broadband subscriptions across the world. whereas African countries were able to add 2. Broadband penetration by country 2009 Netherlands Korea UK Finland US Australia China India 0% Source: OECD. Broadband services have economic benefits both in developed and developing nations. and release spectrum for the sustainable deployment of broadband services. invest in infrastructure and latest technology. Eastern Europe added 19. Broadband Broadband networks are an essential infrastructure for the global economy.intel.” ITU.1% 33. identity and access management computing. that emerged were increases in the global respondents stated that 108 “Intel: Realizing the benefits of broadband. TRAI.” Intel website. The broadband ness controls will be implesecurity has increased: penetration rate ingrowth in theeconomies is nearly to mitigate new or The survey revealed developed mented organization’s annual investment in information security. However. However. if China is excluded from the developing world. which covers the overall . http://www.7% 26. accessed 12 auditing capability and stronger they have embraced cloud October 2010. Investment in information world in terms of broadband penetration.5% 29. content and applications. Increased security aware1. The essential leading practices that enable countries to increase broadband penetration include: adoption of regulations that embraces innovation and competition. For instance.4% 23. during 2005–08. However. infrastructure. 61% (46% globally) agreed that their organization will spend more this year in information security than it did last year. 2010. The Information Security Management System (ISMS).108 in comparison with 4% in developing economies. Booz & Company analysis There are more than 497. page 4. Indian organizations. The survey revealed that more A total of 34 % of respondents than 60% of the respondents are revealed that they are either implementing security awareness evaluating or planning to evaluate controls to mitigate new or virtualization techniques in the increased risks. Although the world is witnessing a rise in broadband penetration. urban–rural divide and other factors that impact broadband penetration are very different in developing nations.5.

education and other information and communications technology (ICT) services Priorities Incentives and initiatives • Offer a 30%-50% discount on telecom service charges to low-income and disabled users  • Provide low-interest loans for communications infrastructure development in less-advantaged regions. e–commerce. formulated the action plans. digital television or any other device • Bridge the digital divide arising due to access cost related to internet services • Establish the UK as a world leader in digital excellence with public services that are responsive. focusing on adoption among the more disadvantaged • Provide support to BBC and commercial market for experimentation in broadband content using commissions and partnerships Enabling the next wave of telecom growth in India 82 . and launched the Korean Agency for Digital Opportunity and Promotion (KADO) • Encourage infrastructure investment by incumbents and market entrants  • Support construction of new high-capacity digital broadband backbone. technology demonstration projects. mobile phone. personalized and efficient • Use ICT to reduce social exclusion Priorities • Transform learning with ICT • Set up a digital challenge for local authorities to achieve both excellence and equity in ICT • Make the UK a safe place to use the internet • Promote the creation of innovative broadband content • Create a strategy for the transformation of delivery of key public services • Have Ofcom (the independent regulator and competition authority for the UK telecom industry) set out regulatory strategy • Improve access to technology for the digitally excluded and ease technology use for the disabled Incentives and initiatives • Ensure that ICT is embedded in education to improve the quality of the learning experience for all. as well as funding for information society–related R&D • Plan to implement number portability for both wireline and wireless services • Create fund for promotion of digital literacy • Develop content for disabled people and elderly people • Create and support ICT United Kingdom Policy element Objectives Action • Create a “digitally rich” UK. with each citizen having access to a personal computer.South Korea Policy element Objectives Action • The South Korean Government created an action plan for the emergence of a knowledge-based  society. The Korean Digital Divide Act created the five–year master plan to close the digital divide. where all have the confidence to access the new and innovative services delivered by computer. subsidies for purchase of personal computers by low-income citizens • Promote digital literacy • Support e–governance. re-engage those who have been disaffected and equip children with skills increasingly essential in the workplace • Have Ofcom research the prospects for home broadband adoption. through funding • Financial support for R&D.

the FCC used a cap of 70MHz in deciding mergers. the merger of the UK operations of two mobile operators was cleared by the European Commission. have abstained from the implementation of a spectrum cap. It placed a limit of 45MHz on the commercial mobile radio spectrum (CMRS) that a single entity could acquire in any geographical area across the US. which would help overcome the challenges posed by globalization. However. the key to the telecom sector is radio spectrum management. especially in emerging markets. After the elimination of the spectrum cap. A spectrum cap refers to the amount of spectrum any operator or group of operators can hold in a geographic area. with different views on each regulatory issue. other countries. a spectrum cap has been implemented in Canada. However. a spectrum cap was in place from 1994 to 2003. such as Australia. Mexico and Guatemala. After the auction in 700MHz band. Similarly. Ofcom. The spectrum under 1GHz is the obvious choice for mobile broadband as the airwaves have higher propensity which is needed for high data rate services. there is a lack of regulatory consistency at the international level. The US and the UK have gradually eased their respective spectrum caps. In any country. In March 2010. the telecom regulator. In the UK.5. allowing other competitors to rollout services. Mergers and acquisitions The telecom sector has evolved at different rates around the world. The emergence of new technologies and applications worldwide has forced mobile operators to expand their global footprint through mergers and acquisitions. Ofcom has proposed a cap on the amount of spectrum held by any operator in the spectrum range under 1GHz. the parties offered to surrender 15MHz of spectrum. In the US. has proposed a cap on the award of spectrum to a mobile operator. and it was abolished in 2003. the cap was raised to 55MHz. The combined amount of spectrum held by the two parties — at 1. the spectrum cap in the US stands at 95MHz.5. As a result. 83 Enabling the next wave of telecom growth in India . In 2001.800MHz — was larger than that of their competitors.

consulting firms. which more than doubled between 1985 and 2005. telegraph and telephone (PTT) operator developed the Nordic mobile telephony standard in collaboration with Sweden-. liberalization and innovation drive the telecom equipment industry109 Background • Prior to the 1990s. Finland removed the restriction on foreign ownership in Finnish firms and restrictions on capital inflows. In 1991. and in 1991.000 firms in 2000. • Specialization in telecom: Finland’s ICT sector has developed specialization in the manufacturing and export of telecom equipment. which encourages cooperation among a wide range of manufacturers and suppliers. The country witnessed more than fivefold growth in FDI from 1990 to 2000. Trade Liberalisation and Innovation Capacity in the Finnish Telecom Equipment Industry.000 people in over 4.6. An increase in FDI has resulted in technology transfer and cooperation that has helped to fuel the telecom sector. the country’s ICT sector has benefitted from investment in R&D. including mobile application developers. From 1987 to 1997.5. the country redirected its trade to the West. with electronics and electrotechnics accounting for about 25% of the country’s exports. secondary and tertiary education is free of charge. primarily driven by a robust educational system in which basic. and Denmark based PTTs. It employed more than 80. academic and research institutions. Equipment manufacturing Finland: Market openness. The country has invested in a number of technical universities. which has facilitated the emergence of Finland in the telecom sector by providing a large pool of engineers. Finland lowered the entry barriers through the introduction of reforms. content owners and content providers for mobile applications. in the late 1990s. Further. Enabling the next wave of telecom growth in India 84 . “Market Openness. • First-mover advantage: in the 1970s. equipment manufacturers. includes a wide range of stakeholders. mobile network operators. and joined the European Union in 1993. public certification and standardization authorities and financial service providers. with telecom equipment manufacturing accounting for 90% of the ICT manufacturing in 2003. the Finnish economy was dominated by forest-related industries. • Development of clusters: the development of the Finnish telecom industry is also attributed to the emergence of an ICT cluster. the first GSM network was launched in Finland. Finland deregulated the telecom sector by the adoption of the Telecommunications Act and a new Radio Act. the economy shifted to ICT and consumer electronics. However. • Deregulation and increased competition: in the late 1980s and early 1990s. networks were opened to free competition. Finland’s state-owned post. After the collapse of the Soviet Union in 1991. with Nordic countries benefitting from the first-mover advantage in the mobile telecom industry worldwide. component manufacturers and electronics contract manufacturers. Norway-. These changes were primarily driven by higher education and the emergence of knowledge-based industries. which is also known as Finland’s Wireless Valley.” OECD Publishing. The mobile telecom cluster. 29 July 2008. Strategic initiatives 109 Caroline Lesser. • Skilled workforce: Finland has a strong skilled workforce. particularly in the ICT sector. • Foreign direct investment: in 1993.

• Tariff barriers: during the 1980s and early 1990s. Chinese manufacturers have evolved from producing cheap and low-quality imitations to products that use high-end advanced technology. These operators are encouraged to share both civil and electronic infrastructure. some of its tariff rates were above 50%. Each consortium has built a joint network. R&D led to the emergence of Chinese manufacturers that spend a significant portion of their revenues on R&D. An administrative group has been established to own and operate existing RAN and fund future network rollout plans as agreed with operators. leading global telecom manufacturers launched their R&D centers in China. 85 Enabling the next wave of telecom growth in India . This helped the country to produce products rapidly. government support to domestic telecom enterprises and the presence of a well–qualified technical workforce. raw materials such as parts and components and other intermediate imported goods do not have any duty imposed. The implementation of the export processing regime facilitated the reduction of tariff rates. worldwide. The operators challenged the Commission’s decision. This enabled the country’s domestic and foreign-owned firms to compete. • Over the years. This has led to greater opportunities for operators to engage in infrastructure sharing. In the EU. These centers have helped global players to understand the local market and helped in the overall development of the telecom sector.China: Emergence of a global manufacturer and innovator110 Background • China’s telecom sector has witnessed rapid growth in the last two decades. The regulator permitted this level of sharing. China implemented policies that favored the inflow of FDI. Strategic initiatives Since 1978. operators have commercially negotiated for 3G site and RAN sharing. and the country joined the WTO in 2001. • Foreign direct investment: in 1979. the tariffs reached less than 15%. In the 1980s. • The emergence of a strong telecom sector in China has also been driven by a burgeoning domestic market with the highest number of mobile subscribers in the world. along with technological expertise. In 2001. “China’s Emergence as a Manufacturing Juggernaut: Is It Overstated?” Federal Reserve Bank of Philadelphia. • • • 110 Behzad Kianian and Kei-Mu Yi. the country reduced its tariff barriers drastically. the US granted China the most favored nation status in 1980. particularly in rural areas that may be costly to serve otherwise.7. The awarding of 3G licenses led to an increase in applications to share infrastructure and in particular for new 3G operators to be permitted to use national roaming to provide full geographic coverage. despite the presence of multinationals. The European Court of First Instance ruled in favor of the operators and stated that the EU had overplayed the competition concerns. although national roaming was permitted for new entrants. Under the policy. there are five operators. individual national regulatory authorities are required to notify the EU Commission of decisions regarding infrastructure sharing. it was often time limited. The key reforms undertaken by the country include development of a trade policy. In Sweden. Other European NRAs followed the Commission’s approach and as such active infrastructure sharing was limited. • Research and development: during the late 1990s. 2009. four of whom have formed two separate consortiums of two operators each. Furthermore. as long as they are used to produce export goods. the EU took a negative view of the benefits versus costs of infrastructure sharing and saw it as having a potential negative impact on competition. with the emergence of Chinese firms that have successfully competed in the global marketplace. China established an export processing policy. In Australia. National roaming was permitted in rural areas for a longer period than for urban areas. 5. • Export processing: in the late 1970s and 1980s. As a result. Additionally. Telecom infrastructure • • Brazil is split into 11 licensing areas with 4 operators in each licensing area. Infrastructure sharing has been well accepted globally. reduction in tariff barriers and development of an enabling environment to attract FDI. China has implemented numerous reforms that have boosted the country’s  manufacturing and trade. Initially.

publish tariffs and reference offers.7% during the same period. but operators must retain logical control over their networks and spectrum. television. Enabling the next wave of telecom growth in India 86 . Ovum website. Mobile networks in North America witnessed growth in data services that were also driven by the introduction of smartphones. m-commerce Globally. This has made it possible for telephone companies to receive a statewide franchise to provide video services that compete with cable. satellite and cable and content. • • In Norway.8. Latin American countries such as Uruguay.com/. All transmission routes (i. Paraguay. the rollout of 3G has provided the required impetus to drive widespread adoption of m-commerce services.but required each operator to maintain 30% of its network separately. a number of commercially negotiated and regulated agreements exist between the two main operators and the MVNOs. accessed 16 October 2010. It is the regulator of the telecommunications and the broadcasting sectors. the Independent Communications Authority  of South Africa was established. In July 2000. the state of Texas passed a bill deregulating the telecom markets. Venezuela. Countries such as Sudan. Independent Television Commission. subject to an individual consideration. http://www. After smartphones were released. In India. provided such networks can offer sufficient capacity and that the arrangement is without substantial disadvantage to subscribers. Brazil. m-commerce is very popular in countries where most of the population is unbanked. Radio Authority and Radio Communications Authority were combined to form Ofcom. In Canada in 2002. voice revenues are expected to decline at a CAGR (2008–15) of 1. P-P radio lines) may be shared. with responsibilities across television. It is also the regulator of the UK communications industries. In Canada. as well as to regulate telecom common carriers and service providers. optic fiber. Radio network controllers (RNC) may be shared physically. For core networks.1% to reach US$19. All operators may share sites and masts. wire. In July 2005. The Ministry of Transport and Communications may. Recently.e. but data revenues are expected to increase at a CAGR of 16. The main operator is obliged to provide national roaming and MVNO access. Ghana. allow fulfillment of the coverage requirements through roaming in networks based on other technologies than Universal Mobile Telecommunications System (UMTS). Convergence • In the US. cables. Office of Telecommunications. the Australian Broadcasting Authority and the Australian Communications Authority merged to form the Australian Communications and Media Authority. the Philippines and South Africa have been the largest adopters of this service. implement accounting separation and is subject to price and accounting controls for national roaming. Telecom operators that provide IPTV services on their broadband networks have demanded amendments to the regulations to allow them to provide national franchise and rollout of services. However.ovumkc. There are commercial agreements between the main operators. The cable industry has opposed this demand. the regulatory functions of the Broadcasting Standards Commission.5 billion111 in 2015. • • • 5. cable TV services require approvals at the municipal level. the Canadian Radio-television and Telecommunications Commission (CRTC) is an independent public authority to regulate and supervise all aspects of the Canadian broadcasting system. Argentina. and took over the functions of two previous regulators – the South African Telecommunications Regulatory Authority and the Independent Broadcasting Authority. 111 Ovum: Mobile regional and country forecast pack: 2010–15. 5.9.. the mobile switching center (MSC) may not be shared. networks’ packet data grew nine times larger than voice services. radio. and Mexico have also implemented m-commerce successfully. the Federal Communications Commission (FCC) is an independent agency that regulates interstate and international communications by radio. as the cable industry underwent the time-consuming and expensive process to secure city-by-city franchises over the last three decades. telecommunications and wireless communications services.

Multiple reforms in the Indian telecom sector have coalesced to produce a remarkable decade of continued success. progressive policies will become increasingly important to guide unparalleled growth and transformation in the sector. Looking ahead. 87 Enabling the next wave of telecom growth in India .

household telephones and broadband connectivity in rural and remote areas. • • • The key recommendations for advancing the sector to the next level of growth focus on financial inclusion. spectrum. and encourage a healthy level of consultation with stakeholders. The report is an attempt to help understand the viewpoints of various stakeholders and to arrive at reasonable and practical recommendations to help overcome the challenges that the sector faces and harness its opportunities. and inducting new technological developments in rural and remote areas. Future policy should encourage identifying and vacating spectrum bands for future use. Enabling the next wave of telecom growth in India 88 . HMCP should be set up across the country. This approach has helped the sector grow by leaps and bounds. • The USOF should be utilized for the provision of public telecom. M&A. The share of a merged entity should not be greater than 30% in terms of subscriber base or AGR. service flexibility. Content and applications in regional languages should be created to promote rural broadband. Spectrum allocation should be based on technology neutrality. high-capacity microwave and satellite connectivity — must be extended to rural. It should be used for creating infrastructure for the provision of mobile services and development of telecommunication facilities. with which the regulatory authorities make industry information public and accessible. a uniform taxation regime. • • • A single license should cover all telecom services. equipment manufacturing and infrastructure sharing. R&D initiatives should be encouraged. broadband. Broadband infrastructure — OFC. The key recommendations for improving the existing scenario focus on licensing framework. There should be uniform fee structure across all telecom circles. Spectrum sharing and trading should be allowed. information services. The distribution of funds should be through transparent market-oriented allocation methodology.Conclusion The telecom sector in India has witnessed a series of fundamental structural and institutional reforms over the past decade. The best feature of India’s regulatory regime has been its open and transparent approach. Operators must be allowed to merge intra-circle while being allowed to combine spectrum. DoT should also consider lowering the contribution to 1% of AGR toward the fund. and fiscal incentives should be provided to promote local manufacturing. convergence. A National Telecom Critical Infrastructure Policy on the lines of NTP 1999 should establish uniform procedures for land acquisition. remote and inaccessible areas. security concerns and consumer affordability. m-commerce. timely allotment. USOF. and subsidies and other packages for creating an environment conducive to boosting the construction of national telecom infrastructure and ensuring the increased participation of all the stakeholders. timely spectrum reconciliation and enhanced transparency.

Glossary AWS A2P ACMA ACTO ADC AGR ARPU AUSPI BSCs BTS BWA BWCI CAGR CDB CEWIT CLS CMRS CMSPs CMTS CMTS COAI CPE CPP CRBT CRTC CSC CSEA CVD DAS DoT DSL Advanced Wireless Services Application-to-person Australian Communications and Media Authority Association of Competitive Telecom Operators Access deficit charge Adjusted Gross Revenue Average Revenue Per User Association of Unified Telecom Service Providers of India Base Station Controllers Base Transceiver Stations Broadband Wireless Access Broadband Wireless Consortium of India Compound annual growth rate Cut-out Distance Band Center of Excellence in Wireless Technology Cable Landing Station Commercial Mobile Radio Spectrum Cellular Mobile Service Providers Cellular Mobile Telephone Service Cable Modem Termination System Cellular Operators Association of India Customer Premises Equipment Calling party pays Caller Ring Back Tones Canadian Radio-television and Telecommunications Commission Common Services Centers Commercial Spectrum Enhancement Act Countervailing Duty Distributed Antennae Sharing Department of Telecommunications Digital Subscriber Lines 89 Enabling the next wave of telecom growth in India .

E&PSS FCC FDI FICCI FY G2B G2C G2E G2G GBT GMPCS GoI GST HMCP IAMAI IBA ICASA ICNIRP ICRIER ICT IDI ILD IMEI IPF IP-I IPLC IP-VPN ISPAI IT ITeS ITU Emergency & Public Safety Services Federal Communications Commission Foreign direct investment Federation of Indian Chambers of Commerce and Industry Financial Year Government-to-business Government-to-citizen Government-to-employee Government-to-government Ground-Based Towers Global Mobile Personal Communications Services Government of India Goods and Services Tax Hardware Manufacturing Cluster Parks Internet & Mobile Association of India Independent Broadcasting Authority IBA Independent Communications Authority of South Africa International Commission on Non Ionizing Radiation Protection Indian Council for Research on International Economic Relations Information and Communications Technology ICT Development Index International long distance International Mobile Equipment Identity Infrastructure Provisioning Fee Infrastructure Provider-I International Private Leased Circuit IP-based Virtual Private Network Internet Service Providers Association of India Information Technology IT-enabled Services Sectors International Telecommunication Union 90 .

KADO kbps KYC MARR MCD MMDS MMS MNP MNREGA MoD MoU MPLS MSCs MTNL NCAER NDMC NeGP NFAP NLD NRAs NTCIP NTP OFC P2A P2P PAN PCOs PMRTS POPs PPP PSU PTT RCP RCV RIOs Korean Agency for Digital Opportunity and Promotion kilobit per second Know Your Customer Multi Access Radio Relay Municipal Corporation of Delhi Multichannel Multipoint Distribution Service Multimedia Messaging Service Mobile number portability Mahatama Gandhi National Rural Employment Guarantee Act Ministry of Defense Minutes of usage Multiprotocol Label Switching Mobile Switching Centers Mahanagar Telephone Nigam Limited National Council of Applied Economic Research New Delhi Municipal Council National e-Governance Plan National Frequency Allocation Plan National long distance National Regulatory Authorities National Telecom Critical Infrastructure Policy National Telecom Policy Optic fiber communication Person-to-application Person-to-person Permanent Account Number Public Call Offices Public Mobile Radio Trunked Services Point of Presence Private-public Partnership Public Sector Undertakings Posts. Telephone and Telegraph Rural Community Phones Recharge Coupon Voucher Reference Interconnect Offer 91 Enabling the next wave of telecom growth in India .

RKM RNC ROW RPM RTT SACFA SATRA SIM SRF TCOE TDSAT TEC TEMA TESEPC TRAI UAS UID UIDAI UKFAT UMTS USOF VAS VoIP VPNs VPTs VSNL WMO WPC WTO Route Kilometer Radio Network Controllers Right of way Rate per minute Roof-top tower Standing Advisory Committee on Radio Frequency Allocation South African Telecommunications Regulatory Authority Subscriber Identity Module Spectrum Relocation Fund Telecom Centers of Excellence Telecommunications Dispute Settlement and Appellate Tribunal Telecommunication Engineering Center Telecom Equipment Manufacturers Association Telecom Equipment and Services Export Promotion Council Telecom Regulatory Authority of India Unified Access Service Unique identification number Unique Identification Authority of India UK Frequency Allocation Table Universal Mobile Telecommunications System Universal Service Obligation Fund Value-added services Voice over Internet Protocol Virtual Private Network Village Public Telephones Videsh Sanchar Nigam Limited Wireless Monitoring Organization Wireless Planning & Coordination Wing World Trade Organization 92 .

Notes

93

Enabling the next wave of telecom growth in India

Enabling the next wave of telecom growth in India

94

Notes

95

Enabling the next wave of telecom growth in India

Enabling the next wave of telecom growth in India 96 .

FICCI maintains the lead as the proactive business solutions provider through research. set up in 1927. is the largest and oldest apex organization of Indian business. interactions at the highest political level and global networking. 97 Enabling the next wave of telecom growth in India .500 corporates and over 500 chambers of commerce. seminars and meets for promoting business. With a nationwide membership of over 1.About Federation of Indian Chambers of Commerce and Industry (FICCI) FICCI. conferences. FICCI espouses Indian businesses and speaks directly and indirectly for over 250.000 business units. FICCI organizes a large number of exhibitions.

outsourcing. transaction and advisory needs. Our clients benefit from our insights on key trends and emerging issues.Ernst & Young’s Global Telecommunications Center Telecommunications operators are facing the challenges of growth. They know that they have much to gain from our clear understanding of the opportunities. Beijing and San Antonio.com/telecommunications Enabling the next wave of telecom growth in India 98 . What gives us this understanding is our Global Telecommunications Center. tax. operational efficiency. Operators choose Ernst & Young because they value our industry-based approach to addressing their assurance. Operating from Paris. complexities and commercial realities of the telecommunications industry — wherever in the world they’re operating. infrastructure sharing. Delhi.ey. future growth markets or mergers and acquisitions. Cologne. Johannesburg. revenue assurance. These may relate to the economic downturn. convergence. the Center brings together people and ideas from across the world. We help our clients react to trends in a way that improves the financial performance of their business. technological change and regulatory pressures in increasingly difficult economic conditions. regulations. Learn more about our approaches and services by visiting our website: www. next-generation services. Riyadh. business transformation. to help our clients address the challenges of today — and tomorrow.

com Prashant Singhal Global Telecommunications Center — Delhi prashant.ey.com Holger Forst Global Telecommunications Center — Cologne holger.ey.de.ey.stoltz@ey.com Adrian Baschnonga Global Telecommunications Senior Analyst abaschnonga@uk.com Mike Stoltz Global Telecommunications Center — San Antonio michael.com Wasim Khan Global Telecommunications Center — Riyadh wasim.khan@sa.la.ey.com 99 Enabling the next wave of telecom growth in India .bachelerie@fr.Contacts Vincent de La Bachelerie Global Telecommunications Center Global Telecommunications Leader vincent.chaya@fr.com Jonathan Dharmapalan Global Deputy Telecommunications Leader jonathan.singhal@in.dharmapalan@ey.thiemele@ci.ey.forst@de.com Serge Thiemele Global Telecommunications Center — Johannesburg serge.lo@cn.ey.ey.com Steve Lo Global Telecommunications Center — Beijing steve.ey.com Marc Chaya Global Telecommunications Markets Leader marc.

Enabling the next wave of telecom growth in India 100 .

Ernst & Young Assurance | Tax | Transactions | Advisory About Ernst & Young Ernst & Young is a global leader in assurance. Worldwide. seminars and meets for promoting business. each of which is a separate legal entity. this document has been printed on paper with a high recycled content.000 people are united by our shared values and an unwavering commitment to quality.000 business units. On any specific matter. our clients and our wider communities achieve their potential. set up in 1927. is the largest and oldest apex organization of Indian business. We make a difference by helping our people. EYG no.ey. This publication contains information in summary form and is therefore intended for general guidance only. Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited.500 corporates and over 500 chambers of commerce. FICCI maintains the lead as the proactive business solutions provider through research. interactions at the highest political level and global networking. Ernst & Young Global Limited. FICCI organizes a large number of exhibitions. transaction and advisory services. does not provide services to clients. reference should be made to the appropriate advisor. The opinions of third parties set out in this publication are not necessarily the opinions of the global Ernst & Young organization or its member firms. With a nationwide membership of over 1. conferences.com © 2011 EYGM Limited. All Rights Reserved. tax. . It is not intended to be a substitute for detailed research or the exercise of professional judgment. About Federation of Indian Chambers of Commerce and Industry (FICCI) FICCI. Neither EYGM Limited nor any other member of the global Ernst & Young organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. EH0091 In line with Ernst & Young’s commitment to minimize its impact on the environment. a UK company limited by guarantee. our 141. For more information about our organization. please visit www. FICCI espouses Indian businesses and speaks directly and indirectly for over 250.