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University Centre Address: 1 By-Neeraj Kumar Singh (Roll No - 520751161)
University Centre Address: 1 By-Neeraj Kumar Singh (Roll No - 520751161)
its growth with a case study of B.S.N.L., a telecom service provider of India
Sikkim-Manipal university of Health, Medical and technological sciences, Distance education wing, Syndicate house, Manipal-576104.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Project Synopsis
Title
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider in India.
Objectives
The objective of the project can be summarized as follows1) The first objective is to access the Indian telecom sector, its current status & structure, its appellate authority, its telecom policies, service offerings, investment opportunities & incentives, research & development works, growth potential, government vision and mission etc. 2) The second objective is to find out the socio-economic impact of telecommunication investment in developing countries like India, the effect of information and communication technologies, the digital divide in developing and developed nations. 3) The third objective is to find out different financing strategies and financial ways to finance a telecom projects in India, and to access the different financial risks associated with. 4) The fourth objective is to establish the relation between the telecom investment and its effect on the growth in global perspective. 5) The fifth objective is to take the case of B.S.N.L. ( A govt. of India enterprise), a telecom service provider, to access its current business structure, service offerings, current growth in terms of revenue and profits, service expansions, its asset structure, social commitment. 6) The sixth objective is to find out the telecom trends in global perspective, high growth drivers, business patterns, cost efficient operation, and how to expand in low ARPU Rural markets. 7) The seventh objective is to see the picture of public-private partnership contribution in telecom growth in India, their investment pattern and their differential contribution to the telecom growth. 8) The eighth objective is to look into the telecom investment opportunities and potential in Indian telecom sector and the public private investment avenues and nodal agencies. 9) At last, to bring out the conclusion for financing needs of telecom sectors, their socio-economic effects, find out the viable technological options to grow in rural telephony, proving the purpose of peoples growth, analyzing the global telecom growth and public private contributions, observing the chunk of investment required to revolutionize the growth, in developing nations like India.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Methodology
To fulfill the objective of the project, different research methodologies have been used to come on the conclusions. Mainly descriptive study has been made to keep the research simple and narrative and some time quantitative and mainly qualitative approaches have been made to the subject. Mainly secondary data which have been collected from different websites, magazine, research papers, interactions and books, have been used for analysis purpose. Different case studies have been taken in to consideration to bring out some facts. Company financials available in public domains have been compared and telecommunication papers available on websites of ministry of finance, D.O.T., and TRAI have been looked up. Some surveys of telecom vendors in India, have also been taken into consideration to pull out the conclusions on the subject.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Acknowledgement
I am very much thankful to the people who have helped me in preparation of this project, directly or indirectly. I would like to give special thanks to Mr. Srikanta Ghosh, faculty at Sikkim Manipal University study centre, Durgapur, who has given me the opportunities to do this project. I am very much grateful to Mr. D. Rana, D.E. (Admin), B.S.N.L., Durgapur, Mr. N. Chakraborty, S.D.E. / Panagarh & B.B., B.S.N.L., Durgapur for their endeavor support for completing this project. I am thankful to my friends giving their remarkable contribution and special thanks to Mr. Srikanta Ghosh, who not only explained the topics very well but has thrown the light on the practical aspect of the project too.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Table of Content
1. Executive Summary of the Project 7 2. Bharat Sanchar Nigam Limited (Company Profile) .9 2.1 Introduction 9 2.2 Vision, Mission & Objectives ...11 2.3 Organization Chart of BSNL .12 2.4 Staff 13 2.5 Finance 14 3. Indian Telecom Sector at a Glance 15 3.1 Status of Telecom Sector 15 3.2 Target Set by the Government ...29 3.3 Indian Telecommunications at a glance 31 3.4 Bharat Nirman 32 4. Institutional History of the Telecom Sector in India .34 4.1 Progress of Reforms ...36 4.2 Pre-reform Period and Telecommunication in India ..38 4.3 Liberalization and Reforms in Telecom Sector since early 1990s ...39 5. Why Telecom Investment and Expansion?? ...............................................................................47 5.1 Traditional methods of financing telecommunication in developing countries .......47 5.2 Investing in telecommunication projects a multiplication effect? ...............................49 5.3 What is Information and Communications Technology? ...............................................50 5.4 The Digital Divide ..51 6. What is creative or innovative financing? ....................................................................................59 6.1 What is financial engineering? .........................................................................................59 6.2 Financing Strategies..61 6.3 Financing ways 65 6.4 Financial risks ..73 6.5 Leverage effects on ways to finance telecommunication 78 6.6 How financial development may promote growth .79 6.7 The importance of telecommunication for economic growth .80 7. B.S.N.L. as a Telecom Service Provider 85 7.1 BSNL as an integrated telecom service provider ...85 7.2 Growth Plan 92 7.3 Projects Recently Implemented / Under Development ..94 7.4 Social Commitment 95 7.5 Summary of financial statement .96 8. Telecom Trends and High Growth Drivers 98 8.1 General Outlook of communication services 98 9. Cost efficient operations and rural telecom infrastructure convergence 105 9.1 Optimised network operations 106 9.2 Price to optimize network utilization...108 9.3 Shared access is a bridge to personal connectivity..108 5 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
9.4 India's WiMAX subscribers to top 13 million by 2013 111 10. The Role of Public & Private Players in Indian Telecom Sector113 10.1 Airtel as a private telecom service provider115 10.2 Performance parameters of BSNL 119 11. Telecom Investment opportunities and Potential In India .129 11.1 Opportunities ...129 11.2 Potential ..130 11.3 Investment Facilitation Agencies ...131 12. Methodology .133 12.1 The road to answering our purpose..133 12.2 Data collection methods...134 12.3 Source critique.134 13. Analysis .134 13.1 The benefits of wireless .135 13.2 Delivering service to customers .136 13.3 Technology choices 137 13.4 Enter WiMAX 138 13.5 Looking to the future ..138 13.6 Streamlining Telcos process efficiency 139 13.7 Growing pains 139 13.8 Next-generation technologies .140 13.9 Public-Private Investment ..141 13.10 World telecoms and IT outlook ..143 14. Findings, Conclusions, and Recommendations .146 15. References .148 15.1 Internet.148 15.2 Articles.150 15.3 Literature..152 16. Explanation Of Words ..153 17. Appendix 170 17.1 Basic Information of Indian economy and social structure ..170 17.2 Financial Statement of BSNL 171 17.3 Financial Performance of Airtel 177 17.4 World Telecom and Telecom Industry ..178 17.5 Tele-density Picture in India ..179 17.6 Economic and social indicators of India 180 17.7 Sector Distribution of Investment Commitments to Infrastructure Projects .188 17.8 Auditor General of India Report on Outstanding Billed Amount in Telecom ...189
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Unit-1
India has taken positive steps towards liberalizing the telecommunications market and introducing private investment and competition in basic telecommunications services. Foreign equity in value-added services is limited to 51 percent. For basic services, the limit is 49 percent as it has been difficult to raise the amounts of money needed to finance the new networks, creative financing arrangements have been allowed in some cases that extend the limit to 74 percent. The Indian Telecommunications network with 353 million connections (as on September 2008) is the third largest in the world. The sector is growing at a speed of 46-50% during the recent years. NTP-99 laid down a clear roadmap for future reforms, contemplating the opening up of all the segments of the telecom sector for private sector participation. The Government is committed to expanding rural connectivity through a slew of measures so that rural users can access information of value and transact business. This will include connecting block headquarters with fiber optic network, using wireless technology to achieve last mile connectivity and operating information kiosks through a partnership of citizens, panchayats, civil society organizations, the private sector and Government. Telecommunication plays a central role in helping developing countries participate in the global economy. Telecommunication is pervasive in all aspects of our lives, from the stereo in your living room to the mobile phone you carry with you. These technological innovations we have in our lives are often taken for granted and it is unfeasible for us to imagine how we can function without them. By encouraging the establishment of telecommunication industries within their countries, not only is their GNP boosted from the production of higher value-added goods, but also, the economy can progress to that which is predominantly characterized by secondary or tertiary industries Usually financial engineering are used to reduce the financial risk, a second thing is to restructure cash flows for better financial management. Because financial engineering are used to finance projects it can be used to finance telecom projects around the world, and especially in India. This kind of infrastructure project is according to Merna & Njiru (2002) important in developing countries because they are in need for that. Infrastructure projects in developing countries bring several improvements of the country, they lead to: Human welfare and economic development. Reduction of poverty. The environment will be improved. A well spread out telecommunication network provides a great impetus to the economic growth in a country. Considering the significance of its contribution and also the need to integrate with the global economy, several policy initiatives have been taken by the government. (Ministry of Finance, Govt. of India, 2004-11-26)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
To understand the telecom sector growth, it is needed to analyze the giant companies working in telecom sector. The health of these companies tells the story of operating environment of Indian telecom industry. Bharat Sanchar Nigam Limited, a government of India enterprise, formed on 1 st October-2000, from its parent body Department of Telecom ( DOT ) working under ministry of telecommunication, India, is playing a major role in Indias telecom arena. When B.S.N.L. formed, the growth of telecom in India was very much dismal, great challenges were before the government to fire the telecommunication growth, pacing the structural growth of India. So, corporatization of DOT done. New entity, B.S.N.L, got more independence, made professional approach in its growth keeping the mission of governments social view, and maintaining its financial health. It has been expanded into different kind of telecom fields and being competitive with others private players in the sector. Because it is wholly owned by government, it can be said to be the government purpose vehicle, to regulate the Indian telecom industry, fulfilling the purpose of socio-economic development of India. The exploded growth in Indian telecom industry after telecom reforms has shown at the one side a tremendous telecom infrastructure growth both by B.S.N.L. and other private players, but at the other side, fierce competition between these operators, has shrank the margins of operation. At the one side where Indian people have got improved and diverse services at better prices, the financial health of these companies have been affected. Here, we have taken the case of B.S.N.L, and analyzed its business operations, its financial needs, growth areas, non-profitable operations, in the perspective of Indian telecom sector as a whole. The growth figure of Airtel has been seen and analyzed the contribution of private players in telecom growth in India. Now different technologies and market efficient technologies are available. Their social impact has been viewed and trend in telecom evolution has been considered to make the viable investment. The telecommunication markets are evolving all over the world very rapidly and day by day a new technology is coming to rock the bourses but at some cost. The time span of these technologies are very less, and before implementing the options available, the company should analyze its commercial aspect, and should try implementing the project of lesser break-even time. In this competitive era, you cant get the chance to be left out in implementing the new technology, in spite of how much it cost to your exchequer. New technology in telecom brings the new dimension of businesses, and new reform in social arena, so it is indispensable for the countrys growth. All development, expansion, growth need financing. How these financing can be arranged. Different kinds of innovative ways of financing are available and which will be suited best, it should be analyzed case by case basis, so that financing needs may be fulfilled and growth can be intact.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Unit-2
2.1 Introduction
Bharat Sanchar Nigam Ltd. formed in October, 2000, is World's 7th largest telecommunications company providing comprehensive range of telecom services in India like Wireline, CDMA mobile, GSM Mobile, Internet, Broadband, Carrier service, MPLS-VPN, VSAT, VoIP services, IN Services etc. Within a span of five years it has become one of the largest public sector unit in India.
BSNL has installed quality telecom network in the country and now focusing on improving it, expanding the network, introducing new telecom services with ICT applications in villages and wining customer's confidence. Today, it has about 46.188 million basic line telephone capacity, 7.96 million WLL capacity, 45.288 million GSM Capacity, 4.854million internet capacity, 5.807 million broadband capacity, more than 37382 fixed exchanges, 60000 BTS, 287 Satellite Stations, 480196 Rkm of OFC Cable, 63730 Rkm of Microwave Network connecting 602 Districts, 7330 cities/towns and 5.5 Lakhs villages.
BSNL is the only service provider, making focused efforts and planned initiatives to bridge the RuralUrban Digital Divide ICT sector. In fact there is no telecom operator in the country to beat its reach with its wide network giving services in every nook & corner of country and operates across India except Delhi & Mumbai. Whether it is inaccessible areas of Siachen glacier and North-eastern region of the country. BSNL serves its customers with its wide bouquet of telecom services.
BSNL is numero uno operator of India in all services in its license area. The company offers vide ranging & most transparent tariff schemes designed to suite every customer. BSNL cellular service, CellOne, has more than 46.732 million cellular customers as on March-2009, garnering 16.19 percent of all mobile users as its subscribers. In basic services, BSNL is miles ahead of its rivals, with 29.346 million Basic Phone subscribers i.e. 85 per cent share of the subscriber base and 92 percent share in revenue terms.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
BSNL has more than 5.436 million WLL subscribers and 3.693 million Internet Customers who access Internet through various modes viz. Dial-up, Leased Line, DIAS, Account Less Internet(CLI). BSNL has been adjudged as the NUMBER ONE ISP in the country.
BSNL has set up a world class multi-gigabit, multi-protocol convergent IP infrastructure that provides convergent services like voice, data and video through the same Backbone and Broadband Access Network. At present there are 3.557 million DataOne broadband customers and 5.807 million equipped capacity at the end of March-2009. The company has vast experience in Planning, Installation, network integration and Maintenance of Switching & Transmission Networks and also has a world class ISO 9000 certified Telecom Training Institute.
Scaling new heights of success, the present turnover of BSNL is more than Rs.351,820 million (US $ 8 billion) with net profit to the tune of Rs.99,390 million (US $ 2.26 billion) for financial year 200607. The infrastructure asset on telephone alone is worth about Rs.630,000 million (US $ 14.37 billion).
BSNL plans to expand its customer base from present 47 millions lines to 125 million lines by December 2007 and infrastructure investment plan to the tune of Rs.733 crores (US$ 16.67 million) in the next three years. The turnover, nationwide coverage, reach, comprehensive range of telecom services and the desire to excel has made BSNL the No. 1 Telecom Company of India.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
2.2
2.2.1 VISION
To become the largest telecom Service Provider in Asia.
2.2.2 MISSION
i. ii. To provide world class State-of-art technology telecom services to its customers on demand at competitive prices. To Provide world class telecom infrastructure in its area of operation and to contribute to the growth of the country's economy.
2.2.3 OBJECTIVES
To be the Lead Telecom Services Provider. To provide quality and reliable fixed telecom service to our customer and there by increase customer's confidence. To provide mobile telephone service of high quality and become no. 1 GSM operator in its area of operation. To provide point of interconnection to other service provider as per their requirement promptly. To facilitate R & D activity in the country. Contribute towards: i. National Plan Target of 500 million subscriber base for India by 2010. ii. Broadband customers base of 20 million in India by 2010 as per Broadband Policy 2004. iii. Providing telephone connection in villages as per government policy. iv. Implementation of Triple play as a regular commercial proposition.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
2.3
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
2.4
Staff
Distribution of Group-wise staff strength of DoT and BSNL (numbers) as on 31st March 2007 is indicated below:
2.5
Finance
13 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Bharat Sanchar Nigam Limited, the largest Public Sector Undertaking of the Nation, is certainly on a financial ground that's sound. The Company has a net worth of Rs. 88,128 crores (US$ 22.02 billion), authorised equity capital of Rs. 10,000 crores (US $ 2.50 billion), Paid up Equity Share Capital of Rs. 5,000 crores (US $ 1.25 billion) and Revenues is Rs. 38053 crores (US $ 9.51 billion) in 2007-08. (Note: 1 US $ = 40.02 INR as on 31-03-2008)
Unit-3
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
The telecom services have been recognized the world-over as an important tool for socio-economic development for a nation. It is one of the prime support services needed for rapid growth and modernization of various sectors of the economy. Indian telecommunication sector has undergone a major process of transformation through significant policy reforms, particularly beginning with the announcement of NTP 1994 and was subsequently re-emphasized and carried forward under NTP 1999. Driven by various policy initiatives, the Indian telecom sector witnessed a complete transformation in the last decade. It has achieved a phenomenal growth during the last few years and is poised to take a big leap in the future also.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
which promotes a level playing field and facilitates fair competition. In pursuance of above objective TRAI has issued from time to time a large number of regulations, orders and directives to deal with issues coming before it and provided the required direction to the evolution of Indian telecom market from a Government owned monopoly to a multi operator multi service open competitive market. The directions, orders and regulations issued cover a wide range of subjects including tariff, interconnection and quality of service as well as governance of the Authority. The TRAI Act was amended by an ordinance, effective from 24 January 2000, establishing a Telecommunications Dispute Settlement and Appellate Tribunal (TDSAT) to take over the adjudicatory and disputes functions from TRAI. TDSAT was set up to adjudicate any dispute between a licensor and a licensee, between two or more service providers, between a service provider and a group of consumers, and to hear and dispose of appeals against any direction, decision or order of TRAI.
Key features of the NTP 99 include: Strengthening of Regulator. 16 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
National long distance services opened to private operators. International Long Distance Services opened to private sectors. Private telecom operators licensed on a revenue sharing basis, plus a one-time entry fee. Resolution of problems of existing operators envisaged.
Direct interconnectivity and sharing of network with other telecom operators within the service area was permitted.
Department of Telecommunication Services (DTS) corporatised in 2001. Spectrum Management made transparent and more efficient.
All the commitments made under NTP 99 have been fulfilled, each one of them, in letter and spirit, some even ahead of schedule, and the reform process is now complete with all the sectors in telecommunications opened for private competition.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Total foreign equity (including equity of NRIs and international funding agencies) must not exceed 74%. Promoters must have a combined net worth of Rs.25 million.
Private operators will have to enter into an arrangement with fixed-service providers within a circle for traffic between long-distance and short-distance charging centers.
Seven years time frame set for rollout of network, spread over four phases. Any shortfall in network coverage would result in encashment and forfeiture of bank guarantee of that phase.
Private operators to pay one-time entry fee of Rs.25 million plus a Financial Bank Guarantee (FBG) of Rs.200 million. The revenue sharing agreement would be to the extent of 6%.
Private operators allowed to set up landing facilities that access submarine cables and use excess bandwidth available.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
obligations for installing at least one Gateway Switch having appropriate interconnections with at least one National Long Distance service licensee. There is no bar in setting up of Point of Presence (PoP) or Gateway switches in remaining location of Level I Taxs. Preferably, these PoPs should conform to Open Network Architecture (ONA) i.e. should be based on internationally accepted standards to ensure seamless working with other Carriers Network.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Unified access license regime was introduced in November2003. Unified Access Services operators are free to provide, within their area of operation, services, which cover collection, carriage, transmission and delivery of voice and/or non-voice messages over Licensees network by deploying circuit, and/or packet switched equipment. Further, the Licensee can also provide Voice Mail, Audiotex services, Video Conferencing, Videotex, E-Mail, Closed User Group (CUG) as Value Added Services over its network to the subscribers falling within its service area on non-discriminatory basis. The country is divided into 23 Service Areas consisting of 19 Telecom Circle and 4 Metro Service Areas for providing Unified Access Services (UAS). The licence for Unified Access Services is issued on nonexclusive basis, for a period of 20 years, extendable by 10 years at one time within the territorial jurisdiction of a licensed Service Area. The licence Fee is 10%, 8% & 6% of Adjusted Gross Revenue (AGR) for Metro and Category `A, Category `B and Category `C Service Areas, respectively. Revenue and the fee/royalty for the use of spectrum and possession of wireless telegraphy equipment are payable separately. The frequencies are assigned by WPC wing of the Department of Telecommunications from the frequency bands earmarked in the applicable National Frequency Allocation Plan and in coordination with various users subject to availability of scarce spectrum. At present 3 to 6 service providers (2-5 Private and 1 Public Sector Undertaking) are there in most of the service areas.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
In January 2003, TRAI notified the Interconnection Usage Charges (IUC) Regulation, 2003 and issued the same in October 2003, which covered arrangements amongst service providers for payment of IUC, covering Basic Services, including Wireless-in-Local Loop (Mobile), Cellular Mobile Services, National Long Distance (NLD) and International Long Distance (ILD) services. This regulation provided for charges payable by one operator to another for origination, transit and termination of calls in a multioperator environment. It came into force with effect from 1 February 2004. The main features of the new IUC regime were lower Access Deficit Charges (ADC), uniform termination charges of Rs 0.30 per minute irrespective of the terminating network, reduction of ADC on NLD and ILD calls, all of which resulted in lower tariff environment on voice telephony.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
technologies, national security and bring in competitive environment so as to reduce regulatory interventions. By this new policy, the Government intends to make available transponder capacity for VSAT services at competitive rates after taking into consideration the security requirements. The service providers permitted to enter into franchisee agreement with cable TV network operators. However, the Licensee shall be responsible for compliance of the terms and conditions of the licence. Further in the case of DTH services, the service providers permitted to provide Receive-Only-Internet Service. The role of other facilitators such as electricity authorities, Departments of ITs of various State Governments, Departments of Local Self Governments, Panchayats, Departments of Health and Family Welfare, Departments of Education is very important to carry the advantage of broadband services to the users particularly in rural areas. The Year 2007 was declared the year of broadband. Target has been set for 20 million broadband connections by 2010 and providing Broadband connectivity to all secondary and higher secondary schools, public health institutions and panchayats by 2008. In rural areas, connectivity of 512 KBPS with ADSL 2 plus technology (on wire) will be provided from about 20,000 existing exchanges in rural areas having optical fibre connectivity. Community Service Centres, secondary schools, banks, health centres, Panchayats, police stations etc. can be provided with this connectivity in the vicinity of above-mentioned 20,000 exchanges in rural areas. DOT will be subsidizing the infrastructure cost of Broadband network through support from USO Fund to ensure that Broadband services are available to users at affordable tariffs.
3.1.10
Tariff Changes
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
The Indian Telecom Sector has witnessed major changes in the tariff structure. The Telecommunication Tariff Order (TTO) 1999, issued by regulator (TRAI), had begun the process of tariff balancing with a view to bring them closer to the costs. This supplemented by Calling Party Pay (CPP), reduction in ADC and the increased competition, has resulted in a dramatic fall in the tariffs.
The peak National Long Distance tariff for above 1000 Kms. in 2000 has come down from US$
0.67 per minute to US$ 0.02 per minute in 2006. The International Long Distance tariff from US$ 1.36 per minute in 2000 to US$ 0.16 per minute in
2004 for USA, Canada & UK. The mobile tariff for local calls has reduced from US$0.36 per minute in 1999 to US$ 0.009 - US$
0.04 per minute in 2006. The Average Revenue Per User of mobile is between US$ 5.06 - US$ 7.82 per month
3.1.11
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
In Basic, Cellular Mobile, Paging and Value Added Service, and Global Mobile Personal Communications by Satellite, Composite FDI permitted is 74% (49% under automatic route) subject to grant of license from Department of Telecommunications and adherence by the companies (who are investing and the companies in which investment is being made) to the license conditions for foreign equity cap and lock in period for transfer and addition of equity and other license provision. (Press Note 3(2007)) Foreign direct investment upto 74% permitted, subject to licensing and security requirements for the following: Radio Paging Service
FDI upto 100% permitted in respect of the following telecom services: Infrastructure Providers providing dark fibre (IP Category I); Electronic Mail; and Voice Mail
The above would be subject to the following conditions: FDI upto 100% is allowed subject to the conditions that such companies would divest 26% of their
equity in favor of Indian public in 5 years, if these companies were listed in other parts of the world. The above services would be subject to licensing and security requirements, wherever required. Proposals for FDI beyond 49% shall be considered by FIPB on case-to-case basis.
3.1.12
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
An attractive trade and investment policy and lucrative incentives for foreign collaborations have made India one of the worlds most attractive markets for the telecom equipment suppliers and service providers. No industrial license required for setting up manufacturing units for telecom equipment. Automatic approval of 100 percent foreign equity, technology fee up to US $ 2 million, royalty up to 5 percent for domestic sales and 8 percent for exports in telecom manufacturing projects. Foreign equity of 74%(49 % under automatic route) permitted for telecom services - basic, cellular mobile, paging, value added services - and global mobile personal communications by satellite. Telecom services projects extended a number of incentives: Amortization of license fee Tax holiday Enhanced limit of external commercial borrowings Rebate on subscription to shares/debentures. Scope for tax exemption on financing through venture capital Concessional import duties for import of equipment by telecom service projects (including cellular,
basic, internet etc.) Full repatriability of dividend income and capital invested in the telecom sector.
3.1.13
Network Expansion
25 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
The telecom sector has shown robust growth during the past few years. It has also undergone a substantial change in terms of mobile versus fixed phones and public versus private participation. The following table shows the growth trend of telecom sector from last five years: The number of telephones has increased from 54.63 million as on 31.03.2003 to 353.66 million as on 30.09.2008. Wireless subscribers increased from 13.3 million as on 31.03.2003 to 315.31million as on 30.09.2008. Whereas, the fixed line subscribers decreased from 41.33 million in 31.03.2003 to 38.35 million in 30.09.2008. The broadband subscribers grew from a meager 0.18 million to 4.91 million during the last 4 years.
3.1.14
Trend in Tele-density
Tele-density in the country increased from 5.11% in 2003 to 30.64 % in September 2008 i.e. an incremental growth of 34.15 % during last 5 years (about 7% per annum). In the rural area teledensity increased from 1.49% in Mar 2003 to approx. 11.5% in September 2008 and in the urban areas it is increased from 14.32% in Mar 2003 to 75.76% in september 2008.This indicates a rising trend of Indian telecom subscribers. 3.1.15
Rural Telephony
Apart from the 76.65 million fixed and WLL connections (as on Sep. 2008) provided in the rural areas, 551064 VPTs have been provided. Thus, 92% of the villages in India have been covered by the VPTs. More than 2 lakh PCOs are also providing community access in the rural areas. Further, Mobile Gramin Sanchar Sewak Scheme (GSS) a mobile Public Call Office (PCO) service is provided at the doorstep of villagers. At present, 2772 GSSs are covering 12043 villages. Also, to provide Internet service, Sanchar Dhabas (Internet Kiosks) have been provided in more than 3500 Block Headquarters out of the total 6337 Blocks in the country. The target of 80 million rural connection by 2010 will be met during year 2008 itself. USO subsidy support scheme is also being utilized for sharing wireless infrastructure in rural areas with about 18,000 towers by 2010.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
3.1.16
Opportunities
India offers an unprecedented opportunity for telecom service operators, infrastructure vendors, manufacturers and associated services companies. A host of factors are contributing to enlarged opportunities for growth and investment in telecom sector: An expanding Indian economy with increased focus on the services sector Population mix moving favorably towards a younger age profile Urbanization with increasing incomes
Investors can look to capture the gains of the Indian telecom boom and diversify their operations outside developed economies that are marked by saturated telecom markets and lower GDP growth rates. Inflow of FDI into Indias telecom sector during Jan 1991 to August 2008 was about Rs 233,344 million. Also, more than 6 per cent of the approved FDI in the country is related to the telecom sector.
3.1.17
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
India has proven its dominance as a technology solution provider. Efforts are being continuously made to develop affordable technology for masses, as also comprehensive security infrastructure for telecom network. Research is on for the preparation of tested infrastructure for enabling interoperability in Next Generation Network. It is expected that the telecom equipment R & D shall be doubled by 2010 from present level of 15%. Modern technologies inductions are being promoted. Pilot projects on the existing and emerging technologies have been undertaken including WiMax, 3G etc. Emphasis is being given to technologies having potential to improve rural connectivity. 3G and Broadband Wireless Access(BWA) policies has since been issued. Also to beef up R&D infrastructure in the telecom sector and bridge the digital divide, cellular operators, top academic institutes and the Government of India together set up the Telecom Centres of Excellence (COEs). The main objectives of the COEs are as follows:
Achieve Telecom Vision 2010 that stipulates a definite growth model and take it beyond. Secure Information Infrastructure that is vital for countrys security. Capacity Building through Knowledge for a sustained growth. Support Planned Predictive Growth for stability. Reduce Rural Urban Digital Divide to reach out to masses. Utilize available talent pool and create environment for innovation. Management of National Information Infrastructure (NII) during Disaster Cater the requirement of South East Asia as Regional Telecom Leader
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
3.2.3 Broadband
Broadband with minimum speed of 1 mbps. Broadband coverage for all secondary & higher secondary schools and public health care centres by the end of year 2008. Broadband coverage for all Gram panchayats by the year 2010 29 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
3.2.6 Manufacturing
Making India a hub for telecom manufacturing by facilitating more and more telecom specific SEZs. Quadrupling production in 2010. Achieving exports of 6 times from present level of 0.5 billion in 2010.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Facilitating availability of adequate international bandwidth at competitive prices to drive ITES sector at faster growth.
3.3
Rank in world in network size Teledensity (per hundred populations) Telephone connection (In million) Fixed Mobile Total
Village Public Telephones 5.6 lakh Foreign Direct Investment (in million) (from 182042 January 2000 till August 2008) Licenses issued Basic CMTS UAS Infrastructure Provider I ISP (Internet) million 2 60 224 177 382
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
ISP with Telephony (Broadband) National Long distance International Long Distance
125 24 19
3.4
Bharat Nirman
A time-bound plan for rural infrastructure by the Government of India in partnership with State Governments and Panchayat Raj Institutions 2005-2009. Bharat Nirman will be a time-bound business plan for action in rural infrastructure for the next four years. Under Bharat Nirman, action is proposed in the areas of irrigation, road, rural housing, rural water supply, rural electrification and rural telecommunication connectivity. We have set specific targets to be achieved under each of these goals so that there is accountability in the progress of this initiative. - Dr. Manmohan Singh Prime Minister Goal: Every village to be connected by telephone: remaining 66,822 villages to be covered by November 2007 The Department of Telecom in the Ministry of Communications and Information Technology has the responsibility of providing telephone connectivity to the 66,822 villages that remain to be covered.
3.4.1 Funds
The resources for implementation of universal services obligation are raised through a Universal Service Levy which has presently been fixed at 5% of the adjusted gross revenue of all telecom service providers except the pure value added service providers like internet, voice mail, e-mail service providers. The rules also make a provision for the Central Government to give grants and loans to the Fund. The balance to the credit of the Fund does not lapse at the end of the financial year. USO Fund assigns the task of providing VPTs on the basis of bids through open tender and in this case the work has been assigned to Bharat Sanchar Nigam Ltd. Out of the 66,822 villages identified, connectivity in 14,183 32 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
remote and far-flung villages will be provided through digital satellite phone terminals. From the USOF, assistance is provided for both capital expenditure as well as operational expenditure. It is estimated that a total sum of Rs.451 crore would be required to provide VPTs in these 66,822 villages and the entire sum will be met out of USOF and no separate allocation from Government would be required.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Unit-4
The telegraph act of 1885 governed the telecommunications sector. Under this act, the government was in-charge of policymaking and provision of services . Major changes in telecommunications in India began in the 1980s. Under the Seventh Plan (1985-90), 3.6 percent of total outlay was set aside for communications and since 1991, more than 5.5 percent is spent on it (Figure 1). The initial phase of telecom reforms began in 1984 with the creation of Center for Department of Telematics (C-DOT) for developing indigenous technologies and private manufacturing of customer premise equipment. Soon after, the Mahanagar Telephone Nigam Limited (MTNL) and Videsh Sanchar Nigam Limited (VSNL) were set up in 1986. The Telecom Commission was established in 1989. When telecom reforms were initiated in 1994, there were three incumbents in the fixed service sector, namely DoT (Department of Telecom), MTNL and VSNL. Of these, DoT operated in all parts of the country except Delhi and Mumbai. MTNL operated in Delhi and Mumbai and VSNL provided international telephony. Given its all-India presence and policy-making powers, the DoT enjoyed a monopoly in the telecom sector prior to the major telecom reforms. However, subsequent to the second phase of reforms in 1999, which included restructuring the DoT to ensure a level playing field among private operators and the incumbent, the service-providing sector of DoT was split up and called Department of Telecom Services (DTS). DTS was later corporatized and renamed Bharat Sanchar Nigam Limited (BSNL). This meant separation of the incumbent service provider from the policy-maker. Broadly, DoT is now responsible for policy-making, licensing and promotion of private investments in both telecom equipment and manufacture and provision of telecom services. BSNL, a corporate body, is responsible for the provision of services. A crucial aspect of the institutional reform of the Indian telecom sector was setting up of an independent regulatory body in 1997 the Telecom Regulatory Authority of India (TRAI), to assure investors that 34 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
the sector would be regulated in a balanced and fair manner. TRAI has been vested with powers to ensure its independence from the government. The government has retained the licensing function with itself. The main issue with respect to licensing has not been whether it should be with the regulator but that the terms and conditions of licensing should involve consultations with TRAI to ensure transparency in the bidding process Some of the main functions of TRAI include fixing tariffs for telecom services, dispute-settlement between service providers, protecting consumers through monitoring of service quality and ensuring compliance to license conditions, setting service targets and pricing policy for all operators and service providers.
Further changes in the regulatory system took place with the TRAI Act of 2000 that aimed at restoring functional clarity and improving regulatory quality. TRAI can frame regulations and can levy fees and charges for telecom services as deemed necessary. The regulatory body also has a separate fund (called the TRAI General Fund) to facilitate its functioning. To fairly adjudicate any dispute between licensor and licensee, between service provider, between service provider and a group of consumers, a separate disputes settlement body was set up called Telecom Disputes Settlement and Appellate Tribunal (TDSAT). Telecommunications is the transmission of data and information between computers using a communications link such as a standard telephone line. Typically, a basic telecommunications system would consist of a computer or terminal on each end, communication equipment for sending and receiving data, and a communication channel connecting the two users. Appropriate communications software is also necessary to manage the transmission of data between computers. Some applications that rely on this communications technology include the following: Electronic mail (e-mail) is a message transmitted from one person to another through computerized channels. Both the sender and receiver must have access to on-line services if they are not connected to the same network. E-mail is now one of the most frequently used types of telecommunication. Facsimile (fax) equipment transmits a digitized exact image of a document over telephone lines. At the receiving end, the fax machine converts the digitized data back into its original form. Voice mail is similar to an answering machine in that it permits a caller to leave a voice message in a voice mailbox. Messages are digitized so the caller's message can be stored on a disk. Videoconferencing involves the use of computers, television cameras, and communications software and equipment. This equipment makes it possible to conduct electronic meetings while the participants are at different locations.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
The Internet is a continuously evolving global network of computer networks that facilitates access to information on thousands of topics. The Internet is utilized by millions of people daily. Actually, telecommunications is not a new concept. It began in the mid-1800s with the telegraph, whereby sounds were translated manually into words; then the telephone, developed in 1876, transmitted voices; and then the teletypewriter, developed in the early 1900s, was able to transmit the written word. Since the 1960s, telecommunications development has been rapid and wide reaching. The development of dial modem technology accelerated the rate during the 1980s. Facsimile transmission also enjoyed rapid growth during this time. The 1990s have seen the greatest advancement in telecommunications. It is predicted that computing performance will double every eighteen months. In addition, it has been estimated that the power of the computer has doubled thirty-two times since World War II (With row, 1997). The rate of advancement in computer technology shows no signs of slowing. To illustrate the computer's rapid growth, Ronald Brown, former U.S. secretary of commerce, reported that only fifty thousand computers existed in the world in 1975, whereas, by 1995, it was estimated that more than fifty thousand computers were sold every ten hours (U.S. Department of Commerce, 1995). Deregulation and new technology have created increased competition and widened the range of network services available throughout the world. This increase in telecommunication capabilities allows businesses to benefit from the information revolution in numerous ways, such as streamlining their inventories, increasing productivity, and identifying new markets. In the following sections, the technology of modern telecommunications will be discussed.
4.1
4.1.1
Progress of reforms
Private Participation in Telecom
For the provision of basic services, the entire country was divided into 21 telecom circles, excluding Delhi and Mumbai (Singh et. al. 1999). With telecom markets opened to competition, DoT and MTNL were joined by private operators but not in all parts of the country. By mid-2001, all six of the private operators in the basic segment had started operating (Table 1).
After a recent licensing exercise in 2002, there exists competition in most service areas. However, the market is still dominated by the incumbent. In December 2002, the private sector provided approximately 10 million telephones in fixed, WLL (Wireless Local Loop) and cellular lines compared to 0.88 million cellular lines in March 1998 (DoT Annual Report, 2002). 72 per cent of the total private investment in telecom has been in cellular mobile services followed by 22 per cent in basic services. After the recent changes, the stage is now set for greater competition in most service areas for cellular 36 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
mobile Over time, the rise in coverage of cellular mobile will imply increased competition even for the basic service market because of competition among basic and cellular mobile services. 4.1.2 Teledensity and Village Public Phones (VPTs)
India's rapid population increase coupled with its progress in telecom provision has landed India's telephone network in the sixth position in the world and second in Asia (ITU). The much publicized statistic about telecom development in India is that in the last five years, the lines added for basic services is 1.5 times those added in the last five decades! The annual growth rate for basic services has been 22 percent and over 100 percent for internet and cellular services. As Dossani (2002) argues, the comparison of teledensity of India with other regions of the world should be made keeping in mind the affordability issues. Assuming households have a per capita income of $350 and are willing to spend 7 percent of that total income on communications, then only about 1.6 percent of households will be able to afford $30 (for a $1000 investment per line). Teledensity has risen to 4.9 phones per 100 persons in India compared to the average 7.3 mainlines per 100 people around the world. Figure 2 shows the growth rate of fixed and cellular mobile subscription between 1998 and 2002. Although, the coverage is still much higher in urban areas - 13.7 in urban areas compared to1.4 in rural areas, the government has made efforts to connect villages through village public telephones (VPT) and Direct Exchange Lines (DEL). This coverage increased from 4.6 lakhs in March 2002 to 5.10 lakhs in December 2002 for VPT and from 90.1 lakhs in March to 106.6 lakhs in December 2002 for DELs. BSNL has been mainly responsible for providing VPTs; more than 84 percent of the villages were connected by 503610 VPTs with private sector also providing 7123 VPTs . The overall telecom growth rate is likely to be high for some years, given the increase in demand as income levels rise and as the share of services in overall GDP increases. The growth rate will be even higher due to the price decrease resulting from a reduction in cost of providing telecom services. A noteworthy feature of the growth rate is the rapid rate at which the subscriber base for cellular mobile has increased in the last few years of the 1990s, which is not surprising in view of the relatively lower subscriber base for cellular mobile. 4.1.3 Foreign Participation
India has opened its telecom sector to foreign investors up to 100 percent holding in manufacturing of telecom equipment, internet services, and infrastructure providers (e-mail and voice mail), 74 percent in radio-paging services, internet (international gateways) and 49 percent in national long distance, basic telephone, cellular mobile, and other value added services (FICCI, 2003). Since 1991, foreign direct investment (FDI) in the telecom sector is second only to power and oil - 858 FDI proposals were received during 1991-2002 totaling Rs. 56,279 crores (Figure 4) (DoT Annual Report, 2002). Foreign investors have been active participants in telecom reforms even though there was some frustration due to initial dithering by the government. Until now, most of the FDI has come in the cellular mobile sector partly due to the fact that there have been more cellular mobile operators than fixed service operators. For instance, during the period 1991-2001, about 44 percent of the FDI was in cellular mobile and about 37 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
8 percent in basic service segment. This total FDI includes the categories of manufacturing and consultancy and holding companies 4.1.4 Tariff-setting
An essential ingredient of the transition from a protected market to competition is the alignment of tariffs to cost-recovery prices. In basic telecom for example, pricing of the kind that prevailed in India prior to the reforms, led to a high degree of cross-subsidization and introduced inefficient decisionmaking by both consumers and service-providers. Traditionally, DoT tariffs cross-subsidized the costs of access (as reflected by rentals) with domestic and international long distance usage charges (Singh et. al. 1999). Therefore, re-balancing of tariffs - reducing tariffs that are above costs and increasing those below costs - was an essential pre-condition to promoting competition among different service providers and efficiency in general.
TRAI issued its first directive regarding tariff-setting following NTP 99 aimed at re-balancing tariffs and to usher in an era of competitive service provision. Subsequently, it conducted periodic reviews and made changes in the tariff levels, if necessary. Table 4 shows the current level of telephone charges in India effective from January, 2003. Re-balancing led to a reduction in cross-subsidization in the fixed service sector. Cost based pricing, a major departure from the pre-reform scenario, also provides a basis for making subsidies more transparent and better targeted to specific social objectives, e.g. achieving the USO. 4.1.5 Service Quality
One of the main reasons for encouraging private participation in the provision of infrastructure rests on its ability to provide superior quality of service. In India, as in many developing countries, low teledensity resulted in great emphasis being laid on rapid expansion often at the cost of quality of service. One of the benefits expected from the private sector's entry into telecom is an improvement in the quality of service to international standards. Armed with financial and technical resources, and greater incentive to make profits, private operators are expected to provide consumers value for their money. Telephone faults per 100 main lines came down to 10.32 and 19.14 in Mumbai and Delhi respectively in 2002-03 compared to 11.72 and 26.6 in 1997-98. Quality of service was identified as an important reform agenda and TRAI has devised QOS (Quality of Service) norms that are applicable across the board to all operators (Singh et. al. 1999).
4.2
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Before 1990's Telecommunication services in India were complete government Monopoly - the Department of Telecommunication (DoT). Government also retained the rights for manufacturing of Telecommunication equipments. MTNL and VSNL were created in the year 1986.Early 1990's saw initial attempts to attract private investment. Telecommunication equipment manufacturing was deli censed in the year 1991. A notable revolution has occurred in the telecom sector. In the pre reforms era, this was entirely in the hands of the central government and due to lack of competition, the call charges were quite high. Further, due to lack of funds with the government, the government could never meet the demand for telephones. In fact, a person seeking a telephone connection had to wait for years before he could get a telephone connection. The service rendered by the government monopoly was also very poor. Wrong billing, telephones lying dead for many days continuously due to slackness on the part of the telecom staff to attend to complaints, cross connections due to faulty / ill maintained telephone lines, obsolete instruments and machinery in the telephone department were the order of the day in the pre reforms era.
Today, there are many players in the telecom sector. The ultimate beneficiary has been the consumer. Prices of services in this sector have fallen drastically. Telephone connections are today affordable to everyone and are also easily available. Gone are the days, when one had to wait for years to get a telephone connection. The number of telephone connections which was only 2.15 million (fixed lines) in 1981 increased to 5.07 million(fixed lines) in 1991. Today (as in 2003), there are 54.62 million telephone connections of which 41.33 million are fixed line telephone connections, 12.69 million are cellular mobiles and the remaining 0.60 million are WLL telephones1. Wireless in Local Loop (WLL) telephones and cellular mobile telephones were unknown in India a few years ago. Cell phones charges have come down so much that today one can see even a common man going around with a cell phone in his hand. The private companies are giving various incentives to attract customers, a situation which is entirely opposite to the conditions prevailing in the pre reforms era when one had to wait for years to get a telephone connection. The first step toward deregulation and beginning of liberalization and private sector participation was the announcement of National Telecom Policy 1994.NTP 1994 , for the first time, allowed private/foreign players to enter the 'basic' and the 'new cellular mobile section. FDI up to 49% of total equity was also allowed in these sectors. The policy allowed one private service provider to compete in basic services with the incumbent DoT in each DoT internal circle. It allowed duopoly in cellular mobile services in each circle. As part of the implementation of the NTP 94, licenses were issued against license fees through a bidding process. This policy initiated the setting up of an independent regulatorthe Telecom Regulatory Authority of India (TRAI), which was established in 1997. The main objective of TRAI is to provide an effective regulatory framework to ensure fair competition while, at the same time, protect the interest of the consumers. 39 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
4.3
4.3.1
1. On 24th July 1991, Government announced the New Economic Policy. 2. Telecom Manufacturing Equipment license was delicensed in 1991. 3. Automatic foreign collaboration was permitted with 51 per cent equity by the collaborator.
4.3.2
1992-93:
Value added services were opened for private and foreign players on franchise or license basis. These included cellular mobile phones, radio paging, electronic mail, voice mail, audiotex services, videotex services, data services using VSAT's, and video conferencing. 4.3.3 1994-95:
1. The Government announced a National Telecom Policy 1994 in September 1994. It opened basic telecom services to private participation including foreign investments. 2. Foreign equity participation up to 49 per cent was allowed in basic telecom services, radio paging and cellular mobile. For value added services the foreign equity cap was fixed at 51 per cent. 3. Eight cellular licensees for four metros were finalized. 4.3.4 1996-97:
1. TRAI was set up as an autonomous body to separate the regulatory functions from policy formulations and operational functions. 2. Coverage of the term "infrastructure" expanded to include telecom to enable the sector to avail of fiscal incentives such as tax holiday and concessional duties. 40 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
3. An agreement between Department of Telecommunication (DoT) and financial institutions to facilitate funding of cellular and basic telecom projects. 4. External Commercial Borrowing (ECB) limits on telecom projects made flexible with an increased share from 35 per cent to 50 per cent of total project cost. 5. Internet Policy was finalized. 4.3.5 1998-99:
FDI up to 49 per cent of total equity, subject to license, permitted in companies providing Global Mobile Personal Communication (GMPC) by satellite services. 4.3.6 1999-00:
1. National Telecom Policy 1999 was announced which allowed multiple fixed Services operators and opened long distance services to private operators. 2. TRAI reconstituted: clear distinction was made between the recommendatory and regulatory functions of the Authority. 3. DOT/MTNL was permitted to start cellular mobile telephone service. 4. To separate service providing functions from policy and licensing functions, Department of Telecom Services was set up. 5. A package for migration from fixed license fee to revenue sharing offered to existing cellular and basic service providers. 6. First phase of re-balancing of tariff structure started. STD and ISD charges were reduced by 23 per cent on an average. 7. Voice and data segment was opened to full competition and foreign ownership increased to 100 per cent from 49 per cent previously. 41 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
4.3.7
2000-01:
1. TRAI Act was amended. The Amendment clarified and strengthened the recommendatory power of TRAI, especially with respect to the need and timing of introduction of new services provider, and in terms of licenses to a services provider. 2. Department of Telecom Services and Department of Telecom operations corporatized by creating Bharat Sanchar Nigam Limited. 3. Domestic long distance services opened up without any restriction on the number of operators. 4. Second phase of tariff rationalization started with further reductions in the long distance STD rates by an average of 13 per cent for different distance slabs and ISD rates by 17 per cent. 5. Internet Service Providers were given approval for setting up of International Gateways for Internet using satellite as a medium in March 2000. 6. In August 2000, private players were allowed to set up international gateways via the submarine cable route. 7. The termination of monopoly of VSNL in International Long Distance services was antedated to March 31, 2002 from March 31, 2004.
4.3.8
2001-02:
1. Communication Convergence Bill, 2001 was introduced in August 2001. 2. Competition was introduced in all services segments. TRAI recommended opening up of market to full competition and introduction of new services in the telecom sector. The licensing terms and conditions for Cellular Mobile were simplified to encourage entry for operators in areas without effective competition. 3. Usage of Voice over Internet Protocol permitted for international telephony service. 42 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
4. The five-year tax holiday and 30 per cent deduction for the next five years available to the telecommunication sector till 31st March 2000 was reintroduced for the units commencing their operations on or before 31st March 2003. These concessions were also extended to internet services providers and broadband networks. 5. Thirteen ISP's were given clearance for commissioning of international gateways for Internet using satellite medium for 29 gateways. 6. License conditions for Global Mobile Personal Communications by Satellite finalized in November 2001. 7. National Long Distance Service was opened up for unrestricted entry with the announcement of guidelines for licensing NLD operators. Four companies were issued Letter of Intent (LOI) for National Long Distance Service of which three licenses have been signed. 8. The basic services were also opened up for competition. 33 Basic Service licenses (31 private and one each to MTNL and BSNL) were issued up to 31stDecember 2001. 9. Four cellular operators, one each in four metros and thirteen were permitted with 17 fresh licenses issued to private companies in September/October 2001. The cell phone providers were given freedom to provide, within their area of operation, all types of mobile services equipment, including circuit and/or package switches that meet the relevant International Telecommunication Union (ITU)/ Telecom Engineering Centre (TEC) standards. 10. Wireless in Local Loop (WLL) was introduced for providing telephone connection in urban, semiurban and rural areas. 11. Disinvestment of PSU's in the telecom sector was also undertaken during the year. In February 2002, the disinvestment of VSNL was completed by bringing down the government equity to 26 per cent and the management of the company was transferred to Tata Group, a strategic partner. During the year, HTL was also disinvested. 12. Government allowed CDMA technology to enter the Indian market.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
13. Reliance, MTNL and Tata were issued licenses to provide the CDMA based services in the country. 14. TRAI recommended deregulating regulatory intervention in cellular tariffs, which meant that operators need no longer have prior approval of the regulator for implementing tariff plans except under certain conditions.
4.3.9
2002-03
1. International long distance business opened for unrestricted entry. 2. Telephony on internet permitted in April 2002. 3. TRAI finalized the System of Accounting Separation (SAS) providing detailed accounting and financial system to be maintained by telecom service providers. 4.3.10 2003-04 1. Unified Access Service Licenses regime for basic and cellular services was introduced in October 2003. This regime enabled services providers to offer fixed and mobile services under one license. Consequently 27 licenses out of 31 licenses converted to Unified Access Service Licenses. 2. Interconnection Usage Charge regime was introduced with the view of providing termination charge for cellular services and enable introduction of Calling Party Pays regime in voice telephony segment. 3. The Telecommunication Interconnection Usage Charges Regulation 2003 was introduced on 29th October 2003 which covered arrangements among service providers for payment of Interconnection Usage Charges for Telecommunication Services and covered Basic Service that includes WLL (M) services, Cellular Mobile Services, and Long Distance Services (STD/ISD) throughout the territory of India 4. The Universal Service Obligation fund was introduced as a mechanism for transparent cross subsidization of universal access in telecom sector. The fund was to be collected through a 5 per cent levy on the adjusted gross revenue of all telecom operators.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
4.3.11 2004-05 1. Budget 2004-05 proposed to lift the ceiling from the existing 49 per cent to 74 per cent as an incentive to the cellular operators to fall in line with the new unified licensing norm. 2. 'Last Mile' linkages permitted in April 2004 within the local area for ISP's for establishing their own last mile to their customers. 3. Indoor use of low power equipments in 2.4 GHz band de-licensed from August 2004. 4. Broadband Policy announced on 14th October 2004. In this policy, broadband had been defined as an "always-on" data connection supporting interactive services including internet access with minimum download speed of 256 kbps per subscriber. 5. The Telecommunications (Broadcasting and Cable Services) Interconnection Regulation 2004 was introduced on 10th December 2004. 6. BSNL and MTNL launched broadband services on 14th January 2005. 7. TRAI announced the reduction of Access Deficit Charge (ADC) by 41 per cent on ISD calls and by 61 per cent on STD calls which were applicable from 1st February 2005.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
1. Budget 2005-2006 cleared a hike in FDI ceiling to 74 per cent from the earlier limit of 49 per cent. 100 per cent FDI was permitted in the area of telecom equipment manufacturing and provision of IT enabled services. 2. Annual license fee for National Long Distance (NLD) as well as International Long Distance (ILD) licenses reduced to 6 per cent of Adjusted Gross Revenue (AGR) with effect from 1st January 2006.
3. BSNL and MTNL launched the 'One-India Plan' with effect from 1st March 2006 which enable the customers of BSNL and MTNL to call from one end of India to other at the cost of Rs. 1 per minute, any time of the day to phone. 4. TRAI fixed Ceiling Tariff for International Bandwidth, Ceiling Tariff for higher capacities reduced by about 70 per cent and for lower capacity by 35 per cent. 5. Regulation on Quality of Service of Basic and Cellular Mobile Telephone Services 2005 introduced on 1st July 2005. 6. BSNL announced 33 per cent reduction in call charges for all the countries for international calls. 7. Quality of Service (Code of Practice for Metering and Billing Accuracy) Regulation 2006 introduced on 21st March 2006.
4.3.13 11th plan (2007-20012) FDI in Telecom sector has increased in recent years with value of 81.62 billion with share of 10% in total inflow during January 2000 to June 2005. This is mainly in telecom services and not in telecom manufacturing sector. Therefore, it is essential to enhance the prospect for inflow of increased funds. The NTP 1999 sought to promote exports of telecom equipments and services. But till date export of telecom equipment remains minimal. Most of the state-of-the-art telecom equipments including mobile phones are imported from abroad. There is thus immense potential for indigenous manufacturing in India. Certain measures like financial packages, formation of a telecom export promotion council, 46 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
creation of integrated facilities for telecom equipment through SEZ and encouraging overseas vendors to set up facilities in India, are required for making India a hub for telecom equipment manufacturing and attract FDI. The telecom sector has shown robust growth during the past few years. It has also undergone a substantial change in terms of mobile versus fixed phones and public versus private participation.
Unit-5
Globalization is a central driving force behind the rapid social, political and economic changes that are reshaping modern society and world order (Dunning & Hamdan, 1997). One of the key elements of globalization is telecommunication. Telecommunication plays a central role in helping developing countries participate in the global economy. Telecommunication is pervasive in all aspects of our lives, from the stereo in your living room to the mobile phone you carry with you. These technological innovations we have in our lives are often taken for granted and it is unfeasible for us to imagine how we can function without them. In certain parts of the world these thing are unheard of and the people who live there have not experienced the numerous benefits of modern telecommunications. Telecommunication maybe isnt the highest priority for developing countries. The main reason for this is that telecommunication competes with food, housing, sanitation, health, transport and education. But it is important to focus on telecommunication investments, because it improves the other mentioned problems. (John Williamson, The Rural Telecom Dilemma)
5.1
Funds for the development of infrastructure projects are traditionally obtained from general taxation or borrowed from multi-lateral and bilateral agencies (Merna & Njiru, 1998). The level of funding provided from national budget financing will depend on the priorities of the national government and its total tax resources. Due to low levels of public finance derived from general taxation, most developing countries rely on borrowing from multi-lateral and bilateral agencies to finance infrastructure developments. This has made most of the developing countries heavy with debt and is spending a large portion of their small finances in meeting debt payments, thus making developing countries borrowing to service debts and not financing infrastructure development projects. The level of finance available for borrowing the traditional sources has reduced in the recent past (Merna & Njiru, 1998). When 47 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
introducing telecommunication into a country, financing it from state funding is probably the easiest method to use (ITU, 2002). Traditional methods of public financing and management of infrastructure projects have failed to keep pace with the rising demand for infrastructure services in most developing countries. The private sector has participated in infrastructure projects that are financed and managed by the public sector as consultants and contractors during the implementation phase of infrastructure development projects. The main reasons to fund telecommunications infrastructure are the positive externalities that occur from the services used (World Bank, 1998).
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
infrastructure such as telecommunication are key factors in the ability to participate and compete in international trade, even in traditional commodities
5.2
One benefit from what the innovations bring to developing nations is the improvement of the overall economy (Dunning & Hamdan, 1997). By encouraging the establishment of telecommunication industries within their countries, not only is their GNP boosted from the production of higher valueadded goods, but also, the economy can progress to that which is predominantly characterized by secondary or tertiary industries (Dunning & Hamdan, 1997). Should these industries flourish and even expand, investments by large foreign corporations dealing in the modern communication technologies may be expected as their confidence in the country's improving economy increase.
Employment
Reforms may generate layoffs and reductions in wages, at least during the transition period. The negative impact of layoffs on poverty can be mitigated through
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Public Expenditures
Revenues from reforms (for example, privatisation) and the phasing out of subsidies generate fiscal space for other public programs that may be better targeted and more pro-poor.
severance packages and other policies. The poor may be hurt by the reduction of public subsidies for infrastructure services (there may be cuts in the subsidies for both connections and consumption).
5.3
Information and Communications Technology (ICT) is an umbrella term that includes any communication device or application, encompassing: radio, television, cellular phones, computer and so on, as well as the various services and applications associated with them, such as videoconferencing and distance learning. ICTs are often spoken of in a particular context, such as ICTs in education, health care, or libraries (ITU, 2003). The Organization for Economic Co-operation and Developments (OECD) definition makes a distinction between the manufacturing and service dimensions of the ICT. In 1998 OECD member countries agreed to define the ICT sector as a combination of manufacturing and services industries that capture, transmit and display data and information electronically. The important factor in this broad definition is that, as it breaks the traditional dichotomy between manufacturing and services, activities producing and distributing ICT products can be found everywhere in the economy (OECD, 2002). The definition OECD made, paves way for understanding the multi-dimensionality of the ICT and its applicability in helping reduce poverty across various sectors (OECD, 2002). The manufacturing sector of ICT hardware and software contributes to the economic growth and creates employment in countries like China, Malaysia and Mexico. India, on the other hand, has been a beneficiary of global software outsourcing, achieving spectacular growth in this sector. India exports software to 95 countries around the world and serves as a major outsourcing hub. The main market for the Indian software has been the USA, and to a lesser degree, Europe. 185 of the Fortune 500 companies outsourced their software requirements in India alone. ICT industry generated 7.7 billion USD in 1999 and creating over 180,000 jobs in India in 1998 (UNDP, 2001). 50 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Since these sectors rarely create direct employment for the very poor. There is no denying of the fact that ICT has been recognized as an important tool for socioeconomic development. Socio-economic development was earlier limited to providing services from top-down approaches to the communities who are less privileged, poor and disadvantaged (Mahmud, 2002).
5.4
According to ITU (2002) the digital divide is a result of socio-economic disparities, and thus it is little different from other income, health and education divides, linked to poverty. The digital divide, is therefore often just a symptom of a much more profound and longstanding economic and social division within and between societies, and which existed prior to the ICT revolution. Lack of information is one of the major causes for this situation (Jaggi, 2003). Relevant and concerned information, which they want to know, is missing. Hence, the gap between information rich and information poor community is also increasing. The new millennium has ushered in a world of greater inter-connectivity, accelerating the flow of free data and information, and shrinking time and national boundaries.
The information and technology gap and related inequities between industrialized and developing nations are widening: a new type of poverty -information poverty - looms. Most developing countries, especially the least developed countries are not sharing in the communications revolution. (United Nations, 2000)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
In the past, ICT was generally considered as a luxury and was not considered as a viable option for development policy where other needs, such as building roads, hospitals and providing drinkable water, etc. were considered more urgent (Pedrelli et al, 2001). However, the digital divide has today become one of the most prominent considerations in the development divide, and the early judgment is no longer sustainable, especially when considering the following points: ICT provides exceptional opportunities to effectively fight against poverty in the developing countries: for example, ICT can support the poor in business development, foster empowerment of the poor, facilitate access to education and health, help improve the environment and prevent natural disasters. Thanks to the huge amount of information easily accessible and hardly controllable by governmental institutions, it strengthens democracy. United Nations (UN) considers ICT a priority for the development of poor countries, and many developing countries agree on the importance of the role that ICT can play in their development. International initiatives are proliferating. The G8 Dot Force, the UN ICT Task Force and several other initiatives are aimed at effectively promoting access to ICT in the developing countries. Exclusion from ICT increases the divide between the developed and developing countries.
Unit-6
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
When you are planning for a way to finance a project it is important to do a deep research of the different specific factors that a country has, and then choose a financial way based on those circumstances.
6.1
financial engineering are divided in a public and a private sector. The public sector has four mechanisms for participation and they are direct, indirect, equity and risk. The private sector has three mechanisms for participation and they are debt, mezzanine and equity.
Financial Engineering
Public
Private
Direct
Indirect
Equity
Risk
Debt
Mezzanine
Equity
According to Gerald (1998) the word finance was introduced in 1960s. The term financial engineering is even younger and was introduced during the 1980s. A factor that made it easier to start use financial engineering was the introduction of computers and communication technology or also known as ICTs. This has lowered the costs and time spending in these operations.
Finnerty (1988) defines financial engineering as the development and creative application of financial technology to solve financial problems and exploit financial opportunities.
Financial engineering is the use of financial instruments to restructure an existing financial profile into one having more desirable properties. Lawrence Galitz (1995) 60 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Financial engineering is about employing theoretical finance and computer modelling skills to make pricing, hedging, trading and portfolio management decisions. When you are using derivative securities and other methods, financial engineering aims to precisely control the financial risk that an entity takes on. Methods can be employed to take on unlimited risks under certain events, or completely eliminate other risks by utilizing combinations of derivative and other securities (Galitz, 1995). Financial engineering are usually used in these areas: Investment banking. Corporate Strategic planning. Risk management. Primary and derivative securities valuation. Swaps and derivatives trading or dealing. Financial information systems management. Portfolio management. Securities trading.
Usually financial engineering are used to reduce the financial risk, a second thing is to restructure cash flows for better financial management (Galitz, 1995). Because financial engineering are used to finance projects it can be used to finance telecom projects around the world, and especially in developing countries. This kind of infrastructure project is according to Merna & Njiru (2002) important in these countries because they are in need for that. Infrastructure projects in developing countries bring several improvements of the country, they lead to: Human welfare and economic development. Reduction of poverty. The environment will be improved.
6.2
Financing Strategies
In this section we will present the different strategies involved when financing telecommunication projects. 61 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
payments provides a fixed rate of return on equity and amortising of debts. While using the BLT system the government can shift the financial risk to the private sector.
6.2.6 Privatization
According to Ferreira & Khatami (1996) the public ownership during 1970s and 1980s in developing countries lead to economic instability and structural inefficiencies. When privatization was introduced in late 1980s the economy has improved in these countries. For instance in Latvia the government sold 60 63 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
% of the telecommunication to private companies, which lead to many bidders that wanted to invest in the countrys telecommunication, for example Telia, Telekom Finland, France Telecom, Tele Danmark, OTE (Greece) and Deutsche Telekom. (Ferreira & Khatami, 1996) According to Merna & Njiru (2002) privatization is the most innovative way of financing infrastructure projects. The definition of privatization is according to Gayle & Goodrich (1990): The process of reducing the roles of government while increasing those of the private sector activities or asset ownership. Merna & Njiru (2002) also say that privatization should be preceded by liberalization because it will help open up the market to international competition. The privatization shall then be followed by a deregulation and the main purpose of this is that the privatized enterprises should face market forces. The main benefits that a privatization results in are the following: Increased quantity of production. Improved quality of the output. Reduced unit cost of production. In longer terms, expanded opportunities for growth and employment. Generation of new technologies. Increased foreign investments.
6.2.7 Acronyms
Merna & Njiru (2002) describes a number of different acronyms that involves in different ways to finance infrastructure projects, these are:
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
BOD BOL BOOST BOOT BRT BCC DBOM DBFM DBFO FBOOT ROL ROT
Build-operate-deliver Build-operate-lease. Build-own-operate-subsidies-transfer. Build-own-operate-transfer. Build-rent-transfer. Business-cooperation-contracts. Design-build-operate-maintain. Design-build-finance-maintain Design-build-finance-operate Finance-build-own-operate-transfer. Refurbish-operate-lease. Rehabilitate-operate-transfer.
6.3
Financing ways
Here we will present the most common innovative ways to finance telecommunication projects.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
6.3.1 Leasing
According to Sigurd Hansson (1998) there are three different kinds of leasing: 1. Operational leasing The company that lends out the material are responsible for reparations and maintains. If new material or products are launched the company upgrade the system to these new models. 2. Financial leasing In this case a leasing company will be involved. The country that wants to set up a telecommunication network in their country give monthly payments to the leasing company. The leasing company then gives a payment to the supplier which sends the material for the telecommunication network to the country. 3. The third way is when a sale of a service happens in the same time period when lending out a good. How leasing works today:
Customer
Supplier
Leasing Company
Deeper explanations of the leasing process that are showed in this figure are: 1. The customer decides which supplier they want to buy from; they decide price, delivery and installation conditions. They also decide that the leasing company will be the buyer. 2. The leasing contract is established between the customer and the leasing company. 66 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
3. The leasing company then buys the equipment and it will be delivered to the customer. 4. The leasing company pays for the equipment to the supplier. 5. When the customer has got the equipment, they will start to pay the leasing company, usually every month. 6. When the renting time has expired, the customer can continue to rent the equipment, but at this time to a significant lower price. The big advantage to lease instead of buying is that the customer does not need to have financial resources except for the monthly payments. This will lead to that the country can establish a telecommunication network in a short time period and then pay the leasing company on a monthly basis.
6.3.3 Gifts
Gifts to developing countries could come in different forms. It could be a sum of money from example a foreign telecom operator that wants to invest in new markets. A better method for the telecom operator 67 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
would be to give telecom equipment to the developing country, which would lead to a lock-in effect. The most common way gifts are given are from help organizations like U.S. Agency for International Development (USAID) or SIDA, that makes a donations by either give out money for a certain project, give guarantees or subsides.
6.3.4 Guarantees
When an investor sends money that is aimed for a specific developing country, there could be a risk that the country uses the money for other projects. To reduce this risk the investor could, according to Stromberg (2003), give the country some instructions where the money will be spent, in other words set up guarantees for the investment. These guarantees provides credit enhancement to financing infrastructure projects which according to Stromberg (2003) leads to economic growth and reducing poverty. An effect that the guarantees has, is when they are set it could be easier to get money from other investors, because they see that it is decided where the money will be invested and they do not risk to send money to developing countries that will use the money for other projects than has been determined (Stromberg, 2003).
6.3.6 Aid
A definition by Merna & Njiru (2002) of aid is a direct gift of money from a government or the World Bank. The gift of money could be in different forms for example loans, grants and funds to development banks. The aid is aimed for developing countries to raise their community and social welfare. The donor could be involved in the project and decide what shall be done. Aid is usually aimed for two different sectors. 68 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Projects aid This form of aid is often very structured from the donor. Programme aid This form of aid finance imports in return for sectoral policy reforms. It can be described in two different forms. Bilateral aid The definition of bilateral aid is money sent from one government to another government. This aid is aimed to finance a specific project in the country that gets the money. Some examples of bilateral aid agencies around the world are UKs Department for International Development (DfID), the Overseas Economic Cooperation Fund (OECF) of Japan and finally Kreditanstalt Fur Wiederaufbau (KFW) in Germany. Multi-lateral aid This aid is primarily aimed for infrastructure projects. These projects are financed by multilateral development banks (MDBs). Some examples of these banks are the World Bank Group, the Asian Development Bank (ADB), the African Development Bank (AfDB) and the InterAmerican Development Bank. These banks drawing funds from several countries and their loans are usually more favorable than commercial banks.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
This project was built in the mid 1970s. It involved a cross-border network of radio links. The Regional African Satellite Communication System (RASCOM) This project was established in 1993. The task of the RASCOM project was to harness the satellite communication for the 40 African countries that was involved. The SPACECOM Project This project was launched in 1994 by ITU. This project focused on bringing space technology to rural development, especially in Kenya, Uganda and Tanzania.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
6.3.11 Pre-Paid
The pre-paid system was introduced in Germany in the 1920s, but it is a fairly recent concept in the United States. A definition (Investorwords, 2004-12-02) of pre-paid would be that you pay for access to a certain product or service in advance. These payments are often done on a monthly basis. A connection to the telecommunication industry would be that when the telecommunication network is built, the country has to pay on a monthly basis to access the network.
6.3.12 Options
According to Neftci (2004), options are an instrument of volatility. There are several kinds of options, the two basic ones are call and put options, which Hull (2003) defines as follow. Call option A call option gives the holder the right but not the obligation to buy the underlying asset at a certain date for a certain price. Put option A put option gives the holder the right but not the obligation to sell the underlying asset at a certain date for a certain price. Neftci (2004) describes that there are several more options but they usually are divided in two categories, which are plain vanilla and exotic options. The options in the plain vanilla category are treated with the Black-Scholes model, which is a model for pricing European options. This model was 71 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
developed 1973 by Fisher Black, Myron Scholes and Robert Merton. The main difference between an American option and a European option according to Hull (2003) is that the American option could be exercised at any time during its lifetime and the European option only can be exercised at the end of its lifetime. Options can be used in big projects like a telecommunication investment. The advantage that this method has is that it provides insurance for the investor. The main reason for this according to Hull (2003) is that the investor has the right but not the obligation to take an action, if there would be big price movements the investor can take an action on the basis of that.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
6.4
Financial risks
When it comes to financial risks that could be involved in telecommunication projects Merna & Njiru (2002) claims that risks are usually known before because there are always two parties involved that has opposite viewpoints. The authors define financial risks as: 73 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
The impact on the financial performance of any entity exposed to risk. There are several kinds of financial risks that Merna & Njiru (2002) describes, and here follows a presentation of them. Currency risk This kind of risk is usually seen in cross border flow of funds. When a country that wants to invest in telecommunication has to deal with foreign currencies, it normally results in some form of currency risk. A problem that can arise in developing countries is that they have exotic currencies, which means that they have a currency that not are traded on any existing exchange market, which may result in a more difficult process. The currency risk could also be a problem for foreign investors and other organizations that give money support to developing countries, which could result in big losses when the money are exchanged to a local currency. Interest rate risk Interest rate risk is a risk that affects both the borrowing and investing sides directly. This risk is usually classified in a short and a long time perspective. In the short time perspective the investment and its risk mainly depend on the money market. In the long time perspective the rate could be paid for example every 6 month until the loan matures. Equity risk The equity is usually connected with the share capital, if the shares rise or fall it will affect the equity. The risk of equity is connected with warrants and convertible bonds. If a company let investors buy warrants and bonds on the shares of a company there would be a risk involved, because the company could both win and lose on the deal, because they do not know if the share price will rise or fall in the future.
Commercial risk Commercial risks are related to the completion, operation or input and output of the project and it could affect the financial performance. A connection to the different related factors are that the first which is completion, is a risk if the project is not finished when it was supposed to, which will result in more expenditure. The second, which is operation, could be a risk if, for example a telecommunication does not work properly or are involved in some legal issues which also result in more expenditures. The third 74 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
and final, is input and outputs. The risk in this case is that a project often are dependent of suppliers, if the supplier for some reason cannot deliver the required material, the whole project could be affected. Liquidity risk Liquidity risk has a connection to commercial risk. If the project does not reach its goals it could result in a liquidity risk. This risk is usually a result of that a seller is forced to sell under the market price which will result in lower incomes and volatile liquidity. Counterparty risk or credit risk Counterparty risk which is also called credit risk is seen in any financial transaction that involves two parties. An example could be a developing country that has signed a contract with a financial institution of borrowing money; this will be enclosed with a risk because it is not for sure that the financial institution could accomplish the deal at the right time. It could also be in diverse, when the loan is going to be paid back and the lender cannot accomplish the payments, because of some problems. Political risk This kind of risk follows by a publicity guaranteed loan or a loan directly to a foreign government. The definition of political risk is: The exposure to a loss in cross-border lending caused by events that are, at least to some extent, under the control of the government of the borrowing country. (Nagy, 1979) In other words, a political risk is the risk that the investor could lose the money because of the countries political structure. Some examples of political risks are tax laws, expropriation of assets, the government repudiation to sign a contract, inconvertibility of foreign currency. Other factors that may affect the political risk in a country could be war, terrorism or civil disturbance.
Regulatory risk Montgomery Research (2004-12-02) defines regulatory risk as the external regulatory actions and development that can impact the financial and operational performance of a company; this could include revenue requirement, cost structure and operational processes.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
It is important that companies understand how the regulatory market model works and then try to lessen the effects of the regulatory risk. Montgomery Research (2004-12- 02) gives the following statement that companies should follow. 1. Assign probabilities for every potential outcome for each regulatory scenario. 2. Quantify the financial impact for each regulatory scenario to the company. 3. Finally, calculate the expected results and variance for each regulatory risk scenario. Inflation Inflation is defined (Investorwords, 2004-12-02) as a sustained rise in the general levels of prices, which in other words means that the money loosens its value and the price for different projects could reach unlimited values. One factor that can contribute to inflation is that the money supply in a specific country increases. There are a lot of different methods of measuring inflation and here follow a description of some of them. o Consumer price index This method compares the prices of products at different time periods. The products that are chosen, are products that are bought by the typically consumer. o Producer price index This method compares the price incomes for different products to a producer at different time periods. The main difference between this method and the consumer price index is that the taxes that the consumer pays could vary from the taxes that the producer has to pay. o Wholesale price index Here the change of price is measured at the wholesaler. o Commodity price index The price change of a selection of commodities is measured.
o GDP deflator This is measured by the total amount of money spend on GDP. This method is the broadest measure of price levels. (Investorwords, 2004-12-02)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
A small amount of inflation in a country usually has a positive effect on the economy, but when the inflation increases it could have dramatically effects on the economy. A British economist called A.W. Phillips found a relationship between inflation and unemployment. When the inflation is high, the unemployment is low and vice versa, the Phillips curve is shown in the following figure.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Technological risk This is a risk that could be seen in all technological projects, for example in a telecommunication network. The risks contain temporarily shut downs of the network for some reasons, it can also be because of an upgrading of the network. Operating risk These risks are involved in commercial risk and it covers these scenarios. 1. The risk that the project cannot run at the predicted efficiency. 2. The risk that the project gets too expensive to run. 3. The project could be delayed, for example the suppliers could not deliver the needed material. 4. Natural disasters may arise that disturb the projects, for example fire and flooding. High transaction costs This is a part of operating risk, which contain the risk that the cost of using a network gets too high. Transaction cost also covers the risk that the business deals are too
6.5
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
The ability to control large amounts of a financial asset with a comparatively small amount of capital. (The Handbook of World Stocks, Derivative & Commodity Exchanges, 2004-10-29) Usually the road to a successful leverage project is that a person/country that wants to invest in a project spends a minor sum of their budget and loan the rest of the money. This will generate that they have money left for other investments (The Handbook of World Stocks, Derivative & Commodity Exchanges, 2004-10-29). A leverage effect can be seen in three different projects: 1. Start-up grants/gifts. 2. Financial snow-ball effect. 3. Creating new investments. (LOCREGIS, 2004-10-29) A connection to this segment could be a developing country with a limited amount of money that wants to invest in telecommunication, therefore creating new investments. To be capable of manage this, is to take some percentage of their money and then loan the rest to build up the telecommunication network. Then they will have the remaining money left to upgrade the network or spend in other projects. According to the International Labor Organization (2004-10-29) there is another view of leverage effects which are seen when the projects are implemented. This involves factors that arise because of the new project. Some examples could be that new projects generate new jobs and new business can arise that has this project as a requirement for their own business, a good example is telecommunication. According to the World Bank (2004-12-02), new jobs in developing countries will generate poverty reduction. The new jobs will also generate economic growth which also helps reducing poverty.
6.6
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
6.7
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
A well spread out telecommunication network provides a great impetus to the economic growth in a country. Considering the significance of its contribution and also the need to integrate with the global economy, several policy initiatives have been taken by the government. (Ministry of Finance, Govt. of India, 2004-11-26) The Indian economy is on the path of recovery. The gradual opening up of the economy ensured steady growth even at a time when other countries were in the grip of massive slowdown. Indias move toward globalisation by progressive reforms, especially in the telecom sector which has been driven by transparent policies and better market conditions to attract foreign investments, is responsible for the economic growth in India (Proctor & Olivier, 2002). Guislain & Qiang (2003) argues that the telecommunication sector includes both the production and distribution of equipment and the delivery of services (see Figure 12). It is one of the key drivers of economic growth and plays a vital role in the competitiveness of modern economies. Furthermore, it is often among the first infrastructure sectors to allow private and foreign provision, and therefore, a trend setter for other sectors to open up and follow the path of reform.
A study by Contessi (2003) shows informal evidence, that there is positive correlation between GDP per capita of a country and its endowment of connections. 81 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
An econometric study by Jacobsen (2003) analysed the relationship between telecommunication development and economic growth. The study showed that there seems to be larger growth effects from telecommunication development in developing countries than in developed countries, a result that contradicts earlier findings. The result stems from a larger indirect impact of telecommunications in other sectors.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
The above figures show the correlations Jacobsen (2003) made. They show that in the period between 1990 and 1999, GDP is strongly correlated with main telephone lines. The relationship between GDP and personal computers and between GDP and telecommunications investment is also large, while cellular telephones seem to have somewhat lesser correspondence with GDP.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Unit-7
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
BSNL has installed Quality Telecom Network in the country and now focusing on improving it, expanding the network, introducing new telecom services with ICT applications in villages and wining customer's confidence. BSNL is numero uno operator of India in all services in its license area. The company offers vide ranging & most transparent tariff schemes designed to suite every customer.
7.1
BSNL being the oldest telecom player, if we take the legacy of DoT before its formation, is a diverse telecom service provider. It is niche in all verticals of telecom fields and is serving the nation by being with the nation. All the services provided by the company can be broadly classified as: Wire Line Services CDMA WLL Limited Mobility Services GSM & CDMA Based Full Mobility Services National Long Distance Services International Long Distance Services Leased Lines, D.S.P.T., & I.S.P. Services. IN Services viz. Prepaid calling card etc.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
To fulfill the telecom service need of the nation, BSNL offers different kinds of products suiting the different kind of people with different kind of need. These various product offered by BSNL can be summarized as follows: 1. BSNL Landline: 1.1 1.2 1.3 1.4 Fixed Line Pre-paid (FLPP) BSNL PCO Phone plus services ISDN
2. BSNL Mobile: 2.1 2.2 2.3 2.4 Prepaid and Postpaid Unified Messaging WAP/ GPRS/ MMS 3G services
4. BSNL Internet: 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11 4.12 4.13 PSTN dial up access ISDN dial up access Leased line access Direct Internet Access (DIAS) Account free Internet dial up access based on CLI BROADBAND connection Wi-Fi SANCHARNET CARD Wi-Max WAP & GPRS Co-location service Web-hosting SMS & Bulk SMS
5. BSNL Managed Network Services 87 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
6. MPLS BASED VPN SERVICE 7. Leased Line : 7.1 7.2 Managed Leased Line Service(MLLN) Access link Services
8. Intelligent Network Services (IN) 9. Audio Conferencing 10. Video Conferencing 11. BSNL Web Conferencing 12. Fleet Management Solution 13. Inet 14. EPABX 15. Data Communication 15.1 15.2 15.3 HVNET RABMN INMARSAT
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
WiMAX: Tender Invited for 1000 BTS at Rural Block HQs covering 25000 village communities centers. IPTV: Launched in Three Cities viz. Bangalore, Pune & Kolkata. Agreement signed with Franchisees for another 50 Cities VOIP: EOI under consideration 3G Services: Have been launched in Feb-2009 in select cities and now pan India roll-out is on the card. New Generation N/W: Is being deployed to meet future technology compatibility. DTH Services: Plannings to launch this service is on the card.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
As per the records found from the company sources, the companys presence in different categories of services are as follows: Basic Telephone (Bfone) Total Number of connections WLL (Tarang) Total Number of connections Village Public Telephones Total Number of Telephones
Public Telephones (Local, STD and Highway) Total Number of Public Telephones as on 30.09.08 STD Stations Number of STD Stations
19,31,182
as on 30.09.08
33,206
Transmission Systems as on 30.09.08 Transmission Systems Digital (Route kms) Coaxial Microwave UHF Optical Fiber
Satellite Based Services (as on 30.09.08) MCPC-VSATs IDR Systems (2 Mb/ 8 Mb)
82 99/38
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Total number of connections District Headquarters covered Total number of villages covered Total number of Town/cities covered National Highway covered (Km) State Highway covered (Km) Railway route covered (Km)
46,684,049 618(All covered) 2,90,975 19,971 55,896(out of 60,519) 74,930(out of 1,240,77) 42,454(outof 54,731
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Telex/Telegraph Offices Departmental Telegraph Offices Telecom Centers Combined Offices Bureau-Fax Centers
7.2
Growth Plan
BSNL's future plan include a fast expansion programme of increasing the present 34 million lines to twice that number by 2005 and some 120 million lines by 2010. The shift in demand from voice to data domination, and from wireline to wireless, has revolutionized the very nature of the network. BSNL has already set in place several measures that should enable it to evolve into a fully integrated multi-operator by 2005 and its incumbent status, size, infrastructure and human resource should certainly, give it a distinct advantage. Consolidation of the network and maintaining high quality of service comparable to International standards is the key aim of the Growth Plan. Objective of the plan are: The telephone connection shall be provided on demand and it shall be sustained. The Network shall be made fully digital. All the technologically obsolete analog exchanges will be replaced with digital exchanges. To provide digital transmission links up to all SDCAs. Digital connectivity shall be made available to all the exchanges by 2007. 92 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Extensive use of Optical fiber System in the local, Junction and long distance network so as to make available sufficient bandwidth for the spread of Internet and Information technology. ISDN services shall be extended to all the district headquarters, subject to demand. To provide Intelligent Network Services, progressively all over the country (major cities have already been covered). To set up Internet Nodes progressively up to District headquarters level. Upgrading existing STD/ISD PCOs to full fledged Public Tele-Info Centers (PTIC) for supporting Multi media capability and Internet Access. Replacement of life expired, analogue coaxial and radio systems. Introduction of Wireless technology (Supporting Internet Access) and optical fiber technology in subscriber loop. Introduction of latest telecom services like National directory enquiry, computerization etc. Cellular Mobile Service 'Cell One' of BSNL was launched on 19th October 2002 . The scheme will cover 4 million customers in two phases. Phase-I will cover about 1.5 million customers covering about 1000 cities during 2002-03, which will be expanded to 4 million in phase-II.
BSNL has decided to lease out its passive infrastructure that includes towers mainly, to other telecom companies in semi- urban areas in the country. BSNL has more towers in tier-II and -III cities, So it has decided to lease out those towers with unutilized capacity to the operators." The agreement would be on bilateral basis. Aimed at generating more revenue and fully utilizing the huge tower base, BSNL plans to cash in on its pan-India presence. It operates all over India, except Delhi and Mumbai. The PSU plans to lease out its Ground Based Towers in circles such as Andaman and Nicobar, Andhra Pradesh Assam, Bihar, Gujarat, Chhatisgarh, Haryana, Himachal Pradesh, Jammu & Kashmir, Jharkhand, Karnataka, Kerala, Maharashtra, Madhya Pradesh, North East, Orissa, Punjab, Rajasthan, Uttar Pradesh (East and West), Uttranchal and West Bengal. BSNL has over 60,000 towers and the most of them are in semiurban areas where private operators have small footprint. According to the industry analysts, erecting one cell site costs about Rs 30 lakh, which takes the most of the cost and time for any operator.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
State-owned BSNL has floated a tender for 93 million lines. BSNL executives say the total value of the contract could be about Rs 40,000 crore. Off these, about 21 million lines are reserved for third generation (3G) services. The tender details have been sent to global network majors, including Ericsson, Nokia Siemens, Motorola, Nortel, Alcatel Lucent, Huawei and ZTE. The bids of all companies will be opened on July 16-2008. The BSNL contract is split into three parts of 25 million each for the North, South and West Zones and 18 million for the East Zone. The tender conditions also stipulate that one company cannot be awarded more than two zones; this implies that the maximum order than equipment major can bag is for 50 million lines. In a bid to infuse additional competition, BSNL has divided the tender into four components, 2G lines, 3G lines, infrastructure and operating and business support systems (OSS & BSS). This implies, companies can bid individually for any of the four components, or a single company can also bid for all the components. About 30% of the contract size, which is equivalent to 31 million lines, could be reserved for state-owned ITI. The reservation for ITI is likely to be outside this tender, if this be the case, the actual size of the orders could be 124 million lines
7.3
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
With the convergence of technologies, catalyzed by the global IT revolution the world is witnessing change as never before in recorded history. In the realm of telecommunication, the change and the pace of it are more pronounced - from basic telephony to voice, video and data services, and from bandwidth on demand to virtual private networks, IT is making the entire plethora of BSNL's telecom services expand. And, being rapidly implemented as the backbone for running customer-friendly services. FRS (Fault Repair System), DQ (Directory Enquiry), IVRS (Interactive Voice Response System) and accounting and billing systems are already operational at BSNL. DOTSOFT , an integrated commercial & FRS package being inducted countrywide, to provide single window convenience. Telephone Directory on CD ROM and on the internet. Infrastructure, technology and expertise for full service support to e-commerce enterprises.
7.4
Social Commitment
BSNL is committed to provide quality Telecom Services at affordable price to the citizens of the remotest part of the Country. BSNL is making all effort to ensure that the main objectives of the new Telecom Policy 1999 (salient points indicated below) are achieved. Access to telecommunications is of utmost importance for achievement of the country's social and economic goals. Availability of affordable and effective communications for the citizens is at the core of the vision and goal of the new Telecom policy 1999. Strive to provide a balance between the provision of universal service to all uncovered areas, including the rural areas, and the provision of high-level services capable of meeting the needs of the country's economy. Encourage development of telecommunication facilities in remote, hilly and tribal areas of the country; Transform in a time bound manner, the telecommunications sector to a greater competitive environment in both urban and rural areas providing equal opportunities and level playing field for all players.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
7.5
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
The BSNL board has cleared the companys proposed $10-billion listing. If BSNL does manage to raise Rs40,000 crore by selling a 10% stake, the telco would be valued at Rs4,00,000 crore (around $100 billion). This will catapult BSNL into the league of top telcos in the world in terms of market cap. Incidentally, the market valuation of Bharti Airtel is just around $37 billion. Industry analysts had estimated the BSNL to be valued at over Rs4,00,000 crore. The plan was to divest 10 per cent through the IPO. The valuation of India's largest telecom company was estimated by analysts to stand at over Rs4,00,000 crore, larger than the combined market capitalization of Bharti Airtel Rs1,16, 342 crore and Reliance Communications (RCom) at Rs1,19,125 respectively the second- and third largest telecom companies. According to analysts, the $37-45 billion valuation is a fair one. BSNL has about 81 million subscribers, 10 million more than the countrys largest private operator, Bharti Airtel, which is valued just over $38 billion. However, a top BSNL official said that this was only the book value of the company and did not include its asset value. "If we include the asset value, BSNL's valuation is much higher. In financial 97 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
yerar 2008-09, the company would invest about Rs15,000 crore to expand its mobile and broadband networks. The company has also committed to invest about Rs60,000 crore by 2010 to expand its telecom infrastructure and operations
Unit-8
8.1
Communication services between people will continue to evolve as per their growing needs Richer communication stimulates all three drivers for growth:- new subscribers, services & traffic In 2009 global data revenues will reach $189 billion of which 50% will be richer communication services Price pressure on voice services accelerates need for new revenues 98 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
As voice becomes a commodity, service providers need new killer apps to boost ARPU and generate revenue across all customer segments. To deliver this, wireless operators need a well-balanced bundle of high-quality and attractive valueadded services, one of the keys to success in today's highly competitive telecommunications market.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
t han
India is seeing phenomenal growth in wireless market and touching the 37% tele-density at the end of March-2009 on the basis of unprecedented growth in wireless customers. Now the wireless market is on the growth trajectories of the business cycle in India, and there is significant portion of the population is still not having the access to the service, the great growth is ahead in this sector.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
2/3 of
the
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
To say that India offers potential is a complete under-statement. Approximately 70% of Indian households have no access whatsoever to fixed lines. Enter wireless, enter broadband, enter WiMAX, to mention just a few to tap the untapped potential which is extra-ordinarily high.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
The WiMAX network will enable BSNL to offer enterprise customers high- bandwidth data communications services such as MPLS, VPN, leased line, and Internet access, as well as VoIP, telemedicine, e-education, e-governance, and e-commerce in remote areas Internet access is still the big broadband driver in India, with wireless broadband becoming the clear option owing to economics and ease of deployment
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Different access technologies are available for implementation but all needs project feasibility on revenue and profit terms. As India GDP will grow faster, per capita income will be increased and purchasing power of the Indian customer will be increased, and feasibility of high end premium product like fiber, VDSL2, LTE, HSPA, WCDMA, MBMS will be successfully launched which will change the pattern of Indian economy significantly. These technologies have tremendous potential to bring revolutionary effects. Now the companies are focusing on low cost services to access the customers in rural India, and implemented the access technologies like ADSL, ADSL2+, Fixed WiMAX, EDGE, GSM, CDMA2000, EVDO to access the broad rural market of India.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Reaching and profitably serving low-income users is a big challenge for the mobile industry in emerging markets. Service providers must focus on tight marketing-operational alignment, optimized network costs, flexible pricing and strong distribution networks. Consulting firm Ovum's latest report outlines three aspects that operators must consider in serving low ARPU users. A close connection between marketing and network operations is crucial to profitability in emerging markets, while different markets require different approaches and considerations. "A number of emerging market operators face significant operational challenges at least partly due to a disconnect between marketing and network operations. For example, several African operators are being warned by regulators to tone down their marketing, as the pace at which they are building network capacity cannot meet with the heavy flow of new customers," says Angel Dobardziev, Ovum's Emerging Markets Practice Leader.
In the more sparse rural areas, such disconnect is more likely to produce the opposite challenge, which is an under-utilised network as a result of poor choice of coverage or inept marketing: "Successful operators bring marketing and network operations close together in targeting rural areas. With 70% of India's population in rural areas, for instance, a profitable rollout strategy there should focus on covering the most attractive rural communities first. Only then can a service provider focus on driving up profitability through locally-focused promotions, public access phones and PCs to demonstrate the value of the services and aggregate demand," says Angel Dobardziev.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
9.1
Service providers must pay particular focus on four key areas when it comes to optimizing their networks for low Average Revenue Per Users (ARPU). They are: network design and rollout; base station equipment and site costs; backhaul and transmission; operational/business support systems (OSS and BSS).
When designing network coverage for low ARPU areas, operators must take the opposite approach to what is happening in mature markets, where switching at the edge of the network is shifting towards the core, partly because backhaul is becoming cheap and plentiful.
In low ARPU markets, the first principle is to have as few cell sites as possible. Each additional site generates incremental costs for equipment, site, security, transmission and power. More importantly, service providers must adopt distributed network architectures, with base station clustering and local call switching.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Does Best of Breed OSS adequately address the challenges of OSS in emerging markets? The Yankee Group commented in Unified OSS architecture is the critical underpinning for automating the telecom service delivery factory, a commissioned work conducted by Yankee Group Research on behalf of Clarity International, that: "With carriers focusing more on reducing opex and capex, a unified OSS solution provides a compelling value proposition that ensures long-term viability. Unified OSS removes some of the bottlenecks associated with best-of-breed OSS solutions.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
9.2
Transparency and simplicity in pricing are essential for low ARPU users. Angel Dobardziev explains: "operators must price their services to ensure optimum network utilization and profitability, in the same way that budget airlines generate their profits by ensuring higher aircraft utilization."
The research suggests service providers should consider dealer commissions another key lever in optimizing subscriber acquisition and retention costs in order to ensure low ARPU customers remain profitable. "Some emerging market operators in Asia and Africa have managed to reduce their dealer commissions to US$1, and even to agree that commissions would not be paid if the subscriber left the network within a certain period. This is an approach that operators need to consider for the next wave of low ARPU users, particularly those based in remote rural areas," says Dobardziev.
9.3
An effective local distribution network is one of the most critical components of a service provider's marketing efforts for low ARPU users. Carefully optimized selection, incentives and promotional support for the network of agents and airtime resellers are an essential element of an operator's marketing strategy. Typically, these users earn small sums of money frequently (often daily), and as a result top up their phones by small amounts more frequently.
To these users, getting the phone initially is less a challenge than topping it up regularly, locally and in small enough amounts that they can afford. If there isn't an agent nearby to serve rural users locally, operators will be missing out on significant revenues. Meanwhile, service providers need to weave shared-access voice and data services into their marketing strategies, such as BSNLs Village Public Telephone, Bharti Airtel's Public Call Offices and BSNLs Rural broadband package to Common Service Centre.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Flexibility in design keeps the scope of improvement and expansion. The operator should innovate in their retail outlet to comprise the existing capability to serve the current services and if needed could adopt the future changes in service offerings, that reduces the cost and expedite the sales process of future services.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
A comprehensive service delivery platform of B.S.N.L. to streamline and adopt the rapid changes in telecom operations.
Unified OSS focuses on simplification through pre-integration, consolidation of operational data and centralised workflow spanning end-to-end operational processes; from SLA management to field-force logistics. Frost and Sullivan in Market Insight featuring OBCE Trends agree that: "This pre-integrated approach streamlines the rollout of an OSS deployment and yields greater out-of-the-box functionality. It avoids costly one-off, technology dependent solutions."
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Today, there is a strong need to accept the challenges of rural communication coverage in emerging markets and win those challenges by concrete efforts of intelligent solutions, lying in wireless technologies.
wireless networks can be deployed rapidly. A GSM network, for example, can be deployed and offering services within a matter of weeks, compared to the time needed to deploy a wireline network. And wireless is extremely cost effective. With the highly competitive nature of the global wireless market, particularly in GSM, infrastructure costs are very low. Handset and terminal costs are also low - and are likely to fall further. The Ultra Low Cost Handset initiative driven by the GSM Association is targeting the sub-US$20 handset, opening up the market to low-income users.
Personal computer penetration levels in India have to be around 15 million throughout the country. WiMAX is the key to mass communication. There is huge potential for broadband wireless Internet and Voice-over-Internet Protocol (VoIP) services in India because there are still more than 600,000 villages with no basic communication means. It has to be said that one major obstacle looms in the way of widespread WiMAX rollout.
Licence holders need to have at least 20 MHz of spectrum to support wide-scale deployments and to build profitable businesses, but most currently have 12 MHz or less. Urgent and radical measures are required. Government agencies are now in discussion with telecoms companies. If the national Department of Defence releases some of its spectrum to civilian operators, there could be more spectrum available.
9.4
Deployment of 3G and WiMAX streams will generate a reasonable user base over the next five-year period. While the global economy is lying dormant, demand for telecommunications services in India continues to fuel significant growth in the sector. According to research firms Maravedis and Tonse that in 2008, approximately 10,000 BWA/WiMAX base station sectors were deployed in total. Currently there are about 300,000 BWA/WiMAX subscribers already using these services. 112 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
In the next six years India has the potential to become one of the top broadband wireless markets on the planet. The resulting ecosystem and opportunities will make India a dream destination for vendors and investors. Tonse Telecom CEO, Sridhar Pai. For the severely under-served Indian broadband market, demand for wireless broadband connectivity continues across all sectors: retail, SOHO, SMEs and large enterprises alike. India is expected to see the world's lowest end-to-end cost for WiMAX services, with costs driven down faster than in any other market. Computer penetration is still very low and the Indian telecom sector operates in a volume-driven market and innovative business models such as public-private partnerships will emerge, together with low cost devices and a vibrant ecosystem.
B.S.N.L. was initially a wire line operator and later came into wireless market. Wire-line business is a capital intensive field with long break-even time. Its operational margins are being hit by higher cost of its operation. With the implementation of 4G, WiMax technology and by going wireless it can improve on margin front and expand its business rapidly. Prior presence in rural market, can give it an edge to launch its operations rapidly, using these new technology, and being a niche player in all front.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Unit-10 The Role of Public & Private Players in Indian Telecom Secotor
NTP-99 laid down a clear roadmap for future reforms, contemplating the opening up of all the segments of the telecom sector for private sector participation. It clearly recognized the need for strengthening the regulatory regime as well as restructuring the departmental telecom services to that of a public sector corporation so as to separate the licensing and policy functions of the Government from that of being an operator. In this process, B.S.N.L. formed from DoT being a public sector telecom operator. After this a number of private players have been emerged and invested heavily in the Indian telecom sector. We can name few major operators as Airtel, Vodafone, Reliance, Idea, Tata Teleservice. Both public and private players have contributed significantly in the Indian telecom growth. Here we take the case of largest public sector telecom operator, B.S.N.L. and lagest private sector telecom operator, Airtel, for the comparison of their performance in telecom sector.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
From the above graph we can see that private players are playing a significant role in the churning out the customer base in Indian wireless market. Airtel has largest subscriber among all players and B.S.N.L. is at the forth place in customer market share. Airtel has added 31.94m customer in 2008-09 in comparison to B.S.N.Ls 12.3m, around 2.5 times more. Airtel being a private player is outpacing the public sector enterprises, and thus fulfilling the objectives of NTP-99. B.S.N.L. Customer Market Share percentage is shrinking year by year, due to private players aggressive growth.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
The fierce competition between the operators in India is dragging the ARPU to the lower side which is affecting the bottom level of companies financial. To subsidize the effect, the operators have to churn out the customers rapidly. Airtel has maintained his financial growth despite lowering ARPU with increased volume of customers. Airtel is beating all the expectation and has been evolved as a strong player in Indian telecom arena. It is showing the example for the others to follow.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
10.2
10.2.1
1. Billed /Del/Month (Basic services)(upto March 2008) 2. Billed /Cell/Month (Cellular) (upto March 2008) 10.2.2 1. Fixed 2. GSM 3. WLL MARKET SHARE : : :
B.S.N.L. lowering ARPU is affecting the financials of the company and year on year its margins of profit is shrinking and very dismal growth in revenue front. All these are due to slow growth in customer addition, and poor operational efficiency.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
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Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Outstanding Amount
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Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
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Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
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Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Circle CHENNAI KERALA TAMIL-NADU KARNATAKA PUNJAB A.P. GUJARAT UTTRANCHAL RAJASTHAN H.P. MAHARASHTRA WEST BENGAL CALCUTTA J. & K. U.P.(WEST) HARYANA ORISSA M.P. A&N CHHATTISGARH U.P.(EAST) ASSAM JHARKHAND N.E.-I BIHAR N.E.-II Total
6th Month 98.79 98.74 96.62 96.45 96.39 95.84 95.13 94.66 94.04 93.42 93.30 92.75 92.61 91.49 91.47 90.90 90.43 89.77 89.28 87.92 84.31 84.17 81.77 72.21 64.71 60.42 93.62
Circle N.E.-II CHENNAI KERALA GUJARAT PUNJAB TAMIL-NADU KARNATAKA A.P. MAHARASHTRA U.P.(WEST) CALCUTTA UTTRANCHAL HARYANA RAJASTHAN H.P. ORISSA J. & K. M.P. A&N WEST BENGAL CHHATTISGARH U.P.(EAST) N.E.-I ASSAM BIHAR JHARKHAND Total
3rd Month 154.08 97.42 96.97 96.26 94.92 94.58 94.57 93.82 93.48 93.28 92.57 91.33 89.67 88.45 88.03 87.89 85.10 84.89 84.71 83.50 81.96 76.73 70.67 69.06 68.07 63.55 91.36
Circle CHENNAI GUJARAT KERALA TAMIL-NADU PUNJAB KARNATAKA CALCUTTA MAHARASHTRA A.P. RAJASTHAN H.P. UTTRANCHAL HARYANA U.P.(WEST) ORISSA A&N M.P. CHHATTISGARH WEST BENGAL U.P.(EAST) ASSAM J. & K. N.E.-I JHARKHAND N.E.-II BIHAR Total
2nd Month 96.57 95.37 94.88 92.39 91.52 91.43 91.35 91.19 91.08 90.88 90.46 88.85 86.03 85.75 83.58 81.77 81.71 81.27 77.71 73.75 73.36 73.35 59.02 56.59 40.76 27.79 88.69
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
6th Month Target -> 99% CIRCLE Chennai Kerala Tamilnadu C.E. (%) 98.79 98.74 96.62
Target 2nd Month C.E. (%) 97.42 96.97 96.26 CIRCLE Chennai Gujarat Kerala Target-> 90% C.E. (%) 96.57 95.37 94.88
As per Auditor General of India report, the total arrears of revenue is over Rs4030.51 Crore at the end of June-2007 in respect of telephone and telegraph services which will have adverse impact on the financial health of commercial undertaking like B.S.N.L..
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Indian Telecom market is a big cake and both public and private can share it. Both have to come forwarded to fulfill the aspiration of Indias telecom services need and a great impact of this will lead India to the new sunny horizon of prosperity. Its financing need is too big that government cant alone do the magic. Magic lies in public-private partnership, and this is evolving the better picture of India.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Unit-11
11.1 Opportunities
India is the fifth largest Telecom services market in the world; US$23 billion revenues in FY 2007. Industry grew by about 22% in FY 2007 over FY 2006, 290 million subscribers - 39 million fixed lines and 251 million wireless - (February 2008). The telecom subscriber base has grown at about 40% p.a. over the last 4 years. Wireless segment subscriber base grew at 62% p.a. . The Indian telecom market has both public and private sector companies participating. Public sector has over 27% subscriber market share, down from over 90% in 2000 & Private companies have added subscribers at a CAGR of 80% since 2000. Mobile operators have deployed both CDMA (62 million users) and GSM (189 million users) wireless networks (February 2008). Value added service features constitute about 10% of revenue (2% in 2001). In India 74% to 100% FDI is permitted for various telecom services. FIPB approval is required for foreign investment exceeding 49% in all telecom services. 100% FDI is permitted in telecom equipment manufacturing India has a telecom policy that aims to encourage private and foreign investment. Highlights are An independent regulator the Telecom Regulatory Authority of India (TRAI). Revenue-share model for licenses issued by the Government for telecom services in India. Unified access licenses are available for providing telecom services on a pan-India basis in both, GSM & CDMA technologies. Government has simplified NLD and ILD license norms and lowered entry barriers. New entrants given 3 years to set up infrastructure. Entry fee and net worth requirements have been reduced. Policy on Mobile Number Portability (MNP) & 3G to be announced shortly. Policy on Active Infrastructure Sharing to be announced shortly. Universal Access Service License (UASL) recently issued to 5 new players. 130 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
India is expected to be among the fastest growing telecom markets in the world, projected growth of 27% p.a. to reach 500 million subscribers by March 2010. Over 8 million new users are added every month mostly in wireless
11.2 Potential
Favourable demographics and socio-economic factors leading to high growth:
o
Growth of disposable income combined with changes in lifestyle Increasing affordability - low tariffs, easy payment plans and low-cost handset Increased coverage and availability of mobile services
Investment opportunity of over US$76 billion across many areas: Network infrastructure to increase service coverage Roll-out of additional network for 2G, 3G, WIMAX etc. Applications/software for voice, data and broadcasting services Devices like the mobile handset, set top box, modem, gaming console, and consumer premise equipments etc. Nokia, Siemens, Alcatel, Lucent, Elcoteq, LG, Ericsson are all investing in India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
11.3.2 Foreign Investment Implementation Authority (FIIA) The Government of India has set up FIIA in the Ministry of Industry and Commerce to facilitate quick translation of FDI approval and implementation. The organisation also provides a proactive one-stop, after-care service to foreign investors by helping them obtain the necessary approvals, sort out operational problems and meet various government agencies to find solutions to problems and maximize opportunities through the partnership approach. FIIA, in accordance with its mandate, assumes the following role: U nderstands and addresses concerns of investors U nderstands and addresses concerns of approving authorities Initiates multi-agency consultation Refers matters not resolved at the FIA level to higher levels on a quarterly basis, including cases of project slippage on account of implementation bottlenecks
11.3.3 Investment Comision (IC) The three-member Investment Commission, set up in the Ministry of Finance in December 2004 by the Government of India, has Mr. Ratan Tata as Chairman and Mr. Deepak Parekh and Dr. Ashok Ganguly as members. The Investment Commission advises the Government of India on changes in policy and procedures that will enhance investment in India, recommends projects and investment proposals that should be fast tracked/mentored and promotes India as an investment destination. 132 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
11.3.4 Secretariat for Industrial Assistance (SIA) The SIA, functioning with the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, acts as a gateway to industrial investment in India. It provides a single-window clearance for entrepreneurial assistance and facilitates the processing of investors applications requiring government approval.
11.3.5 India Brand Equity Foundation (IBEF) IBEF collects, collates and disseminates comprehensive information on India. The website, www.ibef.org has been developed as a single-window resource for in-depth information and insight on India. IBEF also produces a wide range of well-researched publications focused on Indias economic and business advantages.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Unit-12
Methodology
This chapter will cover the methods we have used in this project. We will describe chosen methods, how the work has been carried out to answer our purpose, data collection methods. Additionally, methodology problems that have come up during the process will be presented. Motivations and justifications for all adopted methods will also be given.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
12.2.2 Secondary data Problems can however occur, as it can be difficult to find relevant material. It can also be difficult to value the quality and usefulness of the found material. Example of secondary data are information that are documented in books, articles, tape recordings and information that are available in other electronic forms, like internet. . The secondary data in this project are government of India telecom growth figures, investment estimate, social and economic indicators, estimates of consulting firms, World bank reports, companies financials, Telecom statistics of different research analysts.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Unit-13
Analysis
Access to modern communications is a basic requirement for economic growth and social harmony. As an example, so important are communications deemed that the Indian Government, in drawing up a list of the ten key goals for national growth, put communications on a par with water and energy in terms of importance. That access to communications is an essential precursor for economic activity and growth is not in dispute. In studies carried out by the International Telecommunications Union (ITU) it was found that just the simple provision of a public pay telephone box in a remote village which previously had no communications with the outside world stimulated economic activity, increased employment and created new wealth. Unfortunately, some twenty five years after the Maitland Report for the United Nations identified the importance of ensuring universal access to communications, the problem has remained largely unresolved. In many regions of the world, such as Africa, India, China and South America, there are still large numbers of people who do not have this access: indeed there are probably hundreds of millions of people who have not even seen or used a telephone. This gap between the telecommunications haves who have easy access to services such as the Internet and the telecommunications have nots who do not, has been dubbed the digital divide and until comparatively recently no viable solutions to bridging this divide presented themselves.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Most importantly, wireless networks can be deployed rapidly. A GSM network, for example, can be deployed and offering services within a matter of weeks, compared to the time needed to deploy a wireline network. And wireless is extremely cost effective. With the highly competitive nature of the global wireless market, particularly in GSM, infrastructure costs are very low. Handset and terminal costs are also low - and are likely to fall further. The Ultra Low Cost Handset initiative driven by the GSM Association is targeting the sub-US$20 handset, opening up the market to low-income users. Wireless has proved its case beyond doubt. In the 25 years since the first cellular phone call was made, the global cellular market has grown to almost three billion, representing around half of the worlds population. And growth continues apace. Developments in wireless technology have produced an evolution from analogue cellular, to digital cellular with the advent of GSM, and now the wireless world is moving towards IP (Internet Protocol).
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Operators in mature markets are already responding to this shift in demand and are offering an increasing range of services and applications which the end user can adapt and modify to his or her requirements. The demand for personalisation will soon be a factor which operators in lesser developed markets will have to address. The big question for all operators is which wireless technology from the ever-growing range on offer is most appropriate for the delivery of advanced services and applications.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
markets have often invested heavily in infrastructure and strive for high utilization through customer growth to balance costs. One emerging market operator estimates that the right choice of OSS saved around US$200 million in life-time integration costs and delivered sophisticated OSS functionality two years earlier, when compared to Best of Breed OSS. Within seven months of starting up, they were the countrys largest mobile operator. Subscribers in emerging markets are technology-literate and competition is relentless, throughout this intense growth period. Once again taking this February's OSS Observer as the source, competition is a major reason why India has some of the lowest mobile rates in the world, at two cents per minute. The need to defend market share and capture new subscribers drives innovation in service offerings. In addition to coping with demands of growth, the OSS for emerging markets must reduce time-tomarket for new products. Demands for 12-15 new products and features per year for mobile service providers in emerging markets are not unheard of and are being supported by Unified OSS today.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
India has attracted most of the investment commitments to infrastructure projects with private participation in the region. This is not surprising, as India is by far the regions largest economy. But it has also made the broadest and most sustained efforts to attract investment. Thanks to the success of its reforms in transport and telecommunications, India attracted more investment commitments to infrastructure projects with private participation in 2006 than any other developing country. Indeed, commitments in India were nearly twice those in its nearest rival, Brazil, and well ahead of those in China.
Estimates from a World Bank study suggest that annual GDP growth of 7.5 percent would lead to annual investment needs of about 5 percent of GDP to meet the increased demand for infrastructure services along with another 2 percent of GDP for capital replacement. India is in the global arena for increased foreign investment - both through the Equity markets - termed Foreign Institutional Investment (FII) and Foreign Direct Investment (FDI). While its size and growth potential make India attractive as a market, the most compelling reason for investors to be in India is that it provides a high return on investment. India is a free-market democracy with a legal and regulatory framework that rewards free enterprise, entrepreneurship and risk taking. Over 300 million Indians (63 million households) are expected to have a household income of over US$6,000 by 2015 (over US$30,000 in PPP* terms). India is experiencing a rapid growth in consumer spending. The economic reforms since the early nineties have unleashed a new entrepreneurial spirit creating a vibrant economy supported by rising per capita income. Fast-growing disposable incomes, increased availability and use of consumer finance and credit cards complement the keenness of the average Indian to adapt to and assimilate global trends. This has led to the creation of a rapidly growing
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
consumer base and one of the worlds largest markets for manufactured goods and services. Growth in key sectors like infrastructure, services and manufacturing continues at about 10-12% p.a.
Global IT spending will continue to outpace global economic growth over the five years to 2011 as companies continue to upgrade their corporate networks worldwide. Primary drivers will include the increased demand from small and medium-sized enterprises, particularly in Asia; continued network equipment and service upgrades across the business sector; and steady demand from both the corporate sector and consumers for innovative, converged electronic devices with Internet access. Sales growth of the PC will slow over the forecast period. From strong double-digit figures of the past few years, global PC shipments will grow by just 4.3% per annum between 2007 and 2011, according to IDC, the US IT consultancy. This growth will be driven by emerging markets and Western Europe where penetration levels are lower. Purchasing and owning a mobile phone will continue to be a worldwide obsession, but the rate of growth will moderate from nearly 10% this year to 5% in 2010, according to Pyramid Research, a US telecom consultancy. Average revenue per subscriber will decline in the period, as operators compete more aggressively for customers on price. Worldwide demand for broadband internet connections will grow in double-digits the next five years for the worlds sixty largest economies to 585m subscribers by 2011. Revenues from broadband services will leap from US$137bn this year to US$207bn in 2011, accounting for nearly 40% of total fixed line revenue worldwide, according to Pyramid.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Price competition will remain keen in the years ahead. The sectors ability to keep costs low through global sourcing as well as ruthless attention to supply-chain efficiencies and economies of scale should, however, stem severe profit erosion for the most efficient players. On the demand side, the increased popularity of on-demand, online services as opposed to traditional software with its endless upgrades will offer continued opportunities for innovative start-ups. Web 2.0 initiatives, which create a platform for collaborative, online work environments, will gain traction in a wider circle of industries. The IT and telecom sectors drive to innovate will continue to be backed by its strong commitment to research and development (R&D). As a result, companies will continue to launch tempting new products for both the business and consumer market. Some will be tied to global issues, such as the environment. Rising concerns about the impact of air travel, for example, will convince more managers to trade in their carry-on luggage for the latest video conferencing systems. The vast majority will be web-linked products and services, ranging from internet radios to Internet Protocol TV (IPTV) and mobile phones equipped for banking, TV and social networking. Sales of these goods will dampen the growth in demand for the traditional PC, as traditional PC-based tasks move to smaller, net-enabled devices. At the same time, there will be increased reliance on network availability and dependability. The mobile phone and its uses will be transformed by the higher capabilities of the latest handsets which are now rolling out around the world. Third generation (3G) phones, which have high-speed internet connections, already outnumber conventional handsets in Japan and are growing quickly in other developed economies. By early 2007, the Japanese were more likely to be using their phone than their PC to connect to the internet. According to Pyramid Research, sales of 3G phones or phones with high-speed net connections will account for 35% of all the worlds mobile phone subscriptions by 2011, from about 11% in 2006. The growth in revenues from data downloads (video, music included) for mobiles, according to Pyramid, will be more than three times that of mobile voice revenue over the forecast period, and is expected to hit US$224bn in 2011. This growth will be driven by more than the purchase of the latest music video. According to Celent, a US-based consulting firm, 35% of online banking households will be using mobile banking in 2010, up from 1% now. Forecasts for mobile TV are varied, but telecom service providers are taking the plunge nonetheless. In the first quarter of 2007, Sprint Nextel, the third largest US mobile service provider, signed a deal with ABC to offer full episodes of major prime-time shows streamed directly to subscribers mobile phones. Customers opting for a US$20/month data plan will be able to watch the four most recent episodes of their favourite shows for free. Deals like these underline the rapidly changing environment for telecom service operators. Fixed-line telecoms revenue, according to Pyramid, will remain flat over the next five years, with income from broadband and other internet services making up for the rapidly declining sales of fixed line voice service. This will drop from US$339bn this year to US$273bn in 2011 as more customers move to mobile phone use only even inside their house or internet telephony.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
By contrast, global mobile phone service revenues, according to Pyramid, will jump from US$734bn to US$875bn in the same period, with mobile phone revenues outstripping fixed-line voice revenues by more than 320% in 2011. In addition to the sheer convenience of the mobile phone for customers in wealthy nations, the handset has taken on a surprisingly strong role in the developing world. That is because the fixed-line infrastructure in many poorer countries remains woefully undeveloped due to inefficiency, under-investment, high levels of government regulation or all three. Given the relative ease of setting up a mobile phone network, developing countries will continue to show the fastest growth rates of mobile phone subscriptions globally. Africa, for example, recorded a 46% increase in mobile customers in 2006, according to Wireless, a telecoms consultancy, and growth is expected to remain in double digits for the next two years. The Economist Intelligence Unit forecasts that India will see the number of mobile subscriptions rise by an annual average of 27.5% over the next five years to reach 390m by 2011. Even so, our forecasts show that Indias penetration will still be just 33% by the end of the forecast period, well below that of other major emerging markets such as China (46%) Brazil (69%) and Russia (111%). The research shows clear digital divide between rich and poor will remain for the next five years at least. Even with the strong growth rates forecast, the penetration of mobile phones in the Middle East and Africa will reach only 54% by the end of the forecast period, and 39% for Asia, excluding Japan. However, the main risks to this forecast are on the upside. The number of subscribers could rise faster as economic growth accelerates, competition continues to drive down prices and new service packages are offered. In South Africa, this scenario is already playing out three players MTN, Vodacom and Cell C battled so hard for customers that mobile penetration hit 75% in 2006. The leading economies of the developed world Japan, Europe and North America will account for the lions share of IT spending globally over the next five years, but there will be some reduction in their domination of the sector. According to the EIU forecasts, these two regions and Japan will account for 83% of IT spending in 2007 but this will slip to 79% in 2011. The buoyant economies of India and China will be the major reason for this erosion. Asia, excluding Japan, will handsomely outpace the developed world in IT spending over the next five years. We forecast that growth in purchases of IT equipment, software and services in Asia, excluding Japan, will run at about 8-9%, well above the rate of worldwide growth for the forecast period. China and India alone will account for more than 55% of the IT spending in the region.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Unit-14
Access to modern communications is a basic requirement for economic growth and social harmony. The reason that so many people remain unconnected to any kind of communications network is simple. The cost and effort required to deploy traditional copper or fibre cable networks to remote rural areas would be astronomical and would take many decades. The lack of existing infrastructure, particularly electrical power, makes such a task almost impossible. Wireless is extremely cost effective. With the highly competitive nature of the global wireless market, particularly in GSM, infrastructure costs are very low. Despite the ubiquity of GSM and other cellular technologies, there remain many millions of people who do not have access to communications. Wireless offers a solution to this problem, and over the next few years access to communications will become the norm rather than the exception. Those communications will initially be basic voice but, driven by demand from customers, operators will rapidly evolve their service offerings to deliver a true, personalised, communications experience to customers worldwide. Operators need to evaluate their technical options as the best solution will nearly always be a mix of different technologies which together deliver flexible solutions which meet users needs. Unified OSS can deploy faster and with lower risk than Best of Breed OSS solutions, avoiding integration and data synchronization costs. It helps operators in emerging markets achieve RoI on their infrastructure investments sooner and, through simplicity and flexibility, allows operators to engage their subscribers with innovative products over evolving networks. Its single data-model exploits relationships between network, service, customer, SLA and field-engineer in managing the customer experience. Unified OSS is proven to help operators in emerging markets enjoy business benefits of sophisticated OSS solutions.
The most innovative way a country or company can finance telecommunication is to find the right combination of financing ways and strategies, to have the knowledge of which ways to choose from is a key in finding the optimal combination for a country or company. The main advantage by using a combination of strategies and financing ways, instead of onesingle way, is that the risks will be reduced, which is an innovative way of financing telecommunication. This will attract more investors, because they will get better security on their investments, this is very important. A crucial factor for the country is to lower all possible risks, like political risk, currency risk and inflation which will reduce the risks for the investors even more. 147 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
It is also important that the developing countries try to finance locally, which will, for example reduce the currency risk, and also involve the private sector. By involving the private sector together with the public sector, the risks reduce and make the telecommunication projects safer to invest in. Research shows that increased FDI leads to increased economic growth. FDI does not only contribute to capital accumulation, but it also seems to act as a vehicle for technology transfers and hence to foster growth by increasing total factor productivity.
Traditional ways to finance telecommunication might not be the most efficient way to reduce poverty because of the risk that traditional ways stand for. Instead, by using innovative ways the risks will be reduced which leads to poverty reduction. In India, public-private partnership has been proved boon for the telecom industry, and government should focus on this with creating the conducing environment of investment. The companies should focus on the future technology like NGN, WiMax, GSM, CDMA etc. rather than wire line, providing voice services, enhancing value added services, concentrating to volume growth despite lowering ARPU, expanding rapidly and keeping the project costs low with increased operating efficiency using unified OSS.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Unit-15
15.1 Internet
References
BSNL Corporate site: http://bsnl.co.in National Portal of India: http://india.gov.in The Parliament of India: http://www.parliamentofindia.nic.in Ministry of Communications and Information Technology: http://www.moc.gov.in Department of Telecommunication: http://www.dot.gov.in Private Investment Promotion in Indian Telecom: http://www.dot.gov.in/osp/osp.htm Telecom Regulatory Authority of India: http://www.trai.gov.in Telecom Engineering Center: http://www.tec.gov.in Wireless Planning & Coordination Wing : http://www.wpc.dot.gov.in Telecommunications Consultants of India Limited : http://www.tcil-india.com Directory of Indian Ministries and Departments : http://www.nic.in Ministry of Information Technology : http://www.mit.gov.in Ministry of Finance : http://www.finmin.nic.in Secretariat of Industrial Assistance : http://www.indmin.nic.in Department of Commerce : http://www.commin.nic.in Ministry of External Affairs : http://www.meadev.nic.in Reserve Bank of India : http://www.rbi.org.in Securities and Exchange Board of India : http://www.sebi.gov.in Confederation of Indian Industry : http://www.ciionline.org Associated Chambers of Commerce : http://www.assocham.org Federation of Indian Chambers of Commerce and Industry : http://www.bisnetindia.com Asia-Pacific Telecommunity (APT) : http://www.aptsec.org Ameritrade Education Centre: http://www.ameritrade.com Asia-Pacific Economic Cooperation: http://www1.apecsec.org.sg Asia Trade Hub: http://www.asiatradehub.com Bashir, Abdel-Hameed M. (1999), "Foreign Direct Investment and Economic Growth In Some MENA Countries": http://www.sba.luc.edu/orgs/meea/volume1/bashir.html Bond, Patrik (1997), Privatisation, participation and protest in the restructuring of municipal services: http://www.thewaterpage.com/ppp_debate1.htm Bond, Patrik (1998), Development aspects of municipal infrastructure delivery: http://www.local.gov.za/DCD/policydocs/whitepaper/cl2pat.htm Burr, Chandler (2000), "Grameen Village Phone, Its Current Status and Future Prospects": http://www.ilo.org/public/english/employment/ent/papers/grameen.htm Economist: http://www.economist.com Ericsson: http://www.ericsson.com European Commission: http://europa.eu.int. Eurotunnel: http://www.eurotunnel.com 149 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
International Association of Financial Engineers: http://www.iafe.org International Finance Corporation: http://www.ifc.org International Labour Organisation: http://www.ilo.org International Telecommunication Union: http://www.itu.org Investorwords: http://www.investorwords.com Kuritzkes, Andy: http://fic.wharton.upenn.edu/fic/0402.pdf Methods and Data - Quantlets: http://www.quantlet.com LOCREGIS: http://www.locregis.net Millenium Development Goals, http://www.developmentgoals.org Ministry of Communication - Science and Technology: http://www.mcst.gov.mv Ministry of Finance, Govt. of India: http://indiabudget.nic.in/es2001-02/chapt2002/chap94.pdf Montgomery Research: http://www.utilitiesproject.com OECD: http://www.oecd.org OECD(2002),"Measuring the Information economy": http://www.oecd.org/dataoecd/16/14/1835738.pdf Pacific Telecommunications Council: http://web.ptc.org Telecomweb: http://www.telecomweb.com The Handbook of World Stocks, Derivative & Commodity Exchanges: http://www.exchange-handbook.co.uk. The World Bank Institute: http://www.worldbank.org/wbi The World Bank Group: http://www.worldbank.org UNDP (2001), "Creating a Development Dynamic. Final Report of the Digital Opportunity Initiative": http://www.opt-init.org/framework/pages/es.html UN, http://www.un.org World Bank: http://www.worldbank.org World Bank (2000a), "Internet Economic Toolkit for African Policy Makers": http://www.infodev.org/projects/internet/010toolkit/afpt1.pdf
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
15.2 Articles
TRAI (March 20, 2006), Recommendations on Issues relating to Broadcasting and Distribution of TV channels. Economic Survey, Annual Reports of the Department of Telecommunications, Ministry of Communications and Technology and the Telecom Regulatory Authority of India (TRAI)various issues. Business Standard: August 22, 2007 Panagariya, Arvind (2004). "India in the 1980s and 1990s: A Triumph of Reforms". "That old Gandhi magic", The Economist, November 27, 1997. Ahluwalia, MS. 2001, "State level performance under economic reforms in India" Working Paper No. 96, Center for Research on Economic Development and Policy Reform, Stanford University Department of Telecommunications, Annual Report 2002-2003, Ministry of Communication and Information Technology, New Delhi Department of Telecommunications "Indian Telecommunication Statistics: Policy Framework, Status and Trends", Economic Research Unit (Statistics Wing), Ministry of Communications, New Delhi.
Bell, Clive & Rich, Robert (1994), "Rural poverty and agricultural performance in post-independence India", Oxford Bulletin of Economics and Statistics. Berthelemy, Jean-Claude & Varoudakis, Aristomene (1996), "Economic Growth, Convergence Clubs and the Role of Financial Development", Oxford Economic Papers. Bosworth, Barry P. & Collins, Susan M. (1999), "Capital Flows to DevelopingEconomies: Implications for Saving and Investment", Brookings Institution. Carkovic, Maria & Levine, Ross (2002), "Does Foreign Direct Investment Accelerate Economic Growth?", University of Minnesota. Gerald, Joe (1998), Defining Financial Engineering, Financial Engineering News. Ernst, M. & Ngoc-Nga Pham, N. (1994), Financing infrastructure in developing economies: Benefits", East Asian Executive Reports. 151 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Isaksson, Anders & Levin, Jrgen (1999), "Financial Development, Economic Growth and Poverty Eradication", Swedish International Development Cooperation Agency (SIDA). Jacobsen, Karen F. (2003), "Telecommunications Development and Economic Growth in Developing Countries", Chr. Michelsen Institute. Levine, Ross (1997), "Financial Development and Economic Growth: Views and Agenda", The Journal of Finance. Pedrelli, Maurizio et al (2001), "Developing countries and the ICT revolution", European Parliament Directorate General for Research. Sridhar, Kala S. & Sridhar, Varadharajan (2004), "Telecommunications Infrastructure and Economic Growth: Evidence from Developing Countries", National Institute of Public Finance and Policy: India.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
15.4 Literature
Ferreira, David & Khatami, Kamran (1996). Financing Private Infrastructure in Developing Countries, Washington DC: World Bank. Kayani, Rogati & Dymond, Andrew (1997), Options for Rural Telecommunications Development, Washington DC: World Bank. Merna, Tony & Njiru, Cyrus (2002), Financing Infrastructure Projects, Bodmin: Thomas Telford Limited. Neftci, Salih N (2004), Principles of Financial Engineering, London: Elsevier Inc. Qiang, Christine Z.-W. (2003), Contribution of Information and Communication Technologies to Growth, Herndon: World Bank. United Nations Development Programme (2000), Human Development Report, New York: Oxford University Press. Dossani, R. (Ed.) 2002, Telecommunications reform in India. Quorom Books.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Unit-16
Explanation Of Words
In this chapter we will try and explain words that we have used during this project.
3G
3G is the third generation of telecommunication hardware standards and general technology for mobile networking, superseding 2.5G. It is based on the International Telecommunication Union (ITU) family of standards under the IMT-2000.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Bharat Nirman
Bharat Nirman will be a time-bound business plan for action in rural infrastructure for the next four years. Under Bharat Nirman, action is proposed in the areas of irrigation, road, rural housing, rural water supply, rural electrification and rural telecommunication connectivity.
CAGR
Compounded Annual Growth Rate: is the average annual growth rate calculated over a period (either forecast or historical)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
CII
The Confederation of Indian Industry: Founded in 1895, CII is an Indian business association, with a direct membership of over 5,300 companies from the private as well as public sectors, including SMEs and MNCs and indirect membership of over 80,000 companies from around 300 national and regional sectoral associations.
CMIE
The Centre for Monitoring Indian Economy: is an independent economic organization which specializes in monitoring and researching the Indian economy
Creative financing
Is where the seller provides the financing for the purchase of a property. It is the use of one of several methods that enable a seller to dispose the good quickly without requiring the buyer to qualify for and obtain financing at a lending institution. A part of creative financing is microfinance.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Dark Fiber
In fiber optic communications, dark fiber or unlit fiber (or fibre) refers to unused fibers, available for use.
Emerging markets
It is a financial market of a developing country, usually a small market with short operating history.
Factory outlet
Also called an outlet shop, is a shop supposedly selling goods direct from the factory at a discount.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
FICCI
Federation of Indian Chambers of Commerce and Industry: Set up in 1927, it is a business association with over 1,500 corporate members
Financial engineering
Is a process by which quantitative methods are used to design financial transactions and the financial structure of an organization in order to maximize the organizations effectiveness. FIPB (FOREIGN INVESTMENT PROMOTION BOARD ) Has been set up by the government of India in order to increase the flow of foreign direct investments into the country. By doing this, Foreign Investment Promotion Board (FIPB) has been able to give a major boost to the Indian economy.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
ICT
Information and Communications Technology - or technologies (ICT) is an umbrella term that includes all technologies for the manipulation and communication of information.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
IN Services
The Intelligent Network, typically stated as its acronym IN, is a network architecture intended both for fixed as well as mobile telecom networks. It allows operators to differentiate themselves by providing value-added services in addition to the standard telecom services such as PSTN, ISDN and GSM services on mobile phones. In IN, the intelligence is provided by network nodes owned by telecom operators, as opposed to solutions based on intelligence in the telephone equipment, or in Internet servers provided by any part. IN is based on the Signaling System #7 (SS7) protocol between telephone network switching centers and other network nodes owned by network operators.
Internet Broadband
Broadband Internet access, often shortened to just broadband, is high data rate Internet accesstypically contrasted with dial-up access over a 56k modem. Although various minimum bandwidths have been used in definitions of broadband, ranging up from 64 kbit/s up to 1.0 Mbit/s, the 2006 OECD report is typical by defining broadband as having download data transfer rates equal to or faster than 256 kbit/s, while the United States FCC, as of 2008, defines broadband as anything above 768 kbit/s. The trend is to raise the threshold of the broadband definition as the marketplace rolls out faster services. Data rates are defined in terms of maximum download because several common consumer broadband technologies such as ADSL are "asymmetric"supporting much slower maximum upload data rate than download.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
IPTV
An IPTV (Internet Protocol Television) service (or technology) is the new convergence service ( or technology) of the telecommunications and broadcasting through QoS controlled Broadband Convergence IP Network including wire and wireless for the managed, controlled and secured delivery of a considerable number of multimedia contents such as Video, Audio, data and applications processed by platform to a customer via Television, PDA, Cellular, and Mobile TV terminal with STB module or similar device.
ISUP
Means Integrated Service Digital Network (ISDN) User Part
ITES
Given the proximity of BPO to the information technology industry, it is also categorized as an information technology enabled service or ITES. Business process outsourcing (BPO) is a form of outsourcing that involves the contracting of the operations and responsibilities of a specific business functions (or processes) to a third-party service provider.
ITU
The International Telecommunication Union is the second-oldest international organization still in existence (the oldest being the Rhine Commission), established to standardize and regulate international radio and telecommunications. It was founded as the International Telegraph Union in Paris on 17 May 1865. Its main tasks include standardization, allocation of the radio spectrum, and organizing interconnection arrangements between different countries to allow international phone calls in which regard it performs for telecommunications a similar function to what the UPU performs for postal services. It is one of the specialized agencies of the United Nations, and has its headquarters in Geneva, Switzerland, next to the main United Nations campus. 161 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Local component
Is a factor that you can find locally in an area. For example, in a certain city you can find more capital, people that has a higher education, more labor and so on. It is what you can find as local condition and make it to your advantage.
Leased Circuits
Means telecommunication facilities leased to subscribers or service providers to provide for technology transparent transmission capacity between network termination points which the user can control as part of the leased circuit provision.
Microfinance
Is the provision of a broad range of financial services such as deposits, loans, payment services, money transfers, and insurance to poor and low-income households and their micro enterprises.
MPLS-VPN
MPLS VPN is a family of methods for harnessing the power of Multiprotocol Label Switching (MPLS) to create Virtual Private Networks (VPNs). MPLS is well suited to the task as it provides traffic isolation and differentiation without substantial overhead.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
NTP 1999
The New Telecom Policy, 1999 (NTP-99) was approved on 26th March, 1999, to become effective from 1st April, 1999. NTP-99 laid down a clear roadmap for future reforms, contemplating the opening up of all the segments of the telecom sector for private sector participation.
OECD
The Organisation for Economic Co-operation and Development (OECD) (in French: Organisation de coopration et de dveloppement conomiques, OCDE) is an international organisation of 30 countries that accept the principles of representative democracy and free-market economy. Most OECD members are high-income economies with a high HDI and are regarded as developed countries. It originated in 1948 as the Organisation for European Economic Co-operation (OEEC), led by Robert Marjolin of France, to help administer the Marshall Plan for the reconstruction of Europe after World War II. Later, its membership was extended to non-European states. In 1961, it was reformed into the Organisation for Economic Co-operation and Development by the Convention on the Organisation for Economic Co-operation and Development.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
PCO
A Public call office (PCO) is a telephone facility located in a public place in India.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Pro-poor growth
Compares changes in the incomes of poor people with respect to changes in the incomes of the nonpoor. Growth is "pro-poor" if the incomes of poor people grow faster than those of the population as a whole, i.e. inequality declines.
PPP
Public-private partnership (PPP) describes a government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies. These schemes are sometimes referred to as PPP or P3.
PSTN
Means the Public Switched Telephone Network.
QOS
Means Quality of Service.
R&D
The phrase research and development (also R and D or, more often, R&D), according to the Organization for Economic Co-operation and Development, refers to "creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of man, culture and society, and the use of this stock of knowledge to devise new applications.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
SEZ
A Special Economic Zone (SEZ) is a geographical region that has economic laws that are more liberal than a country's typical economic laws.
Tele-density
Is main lines per 100 inhabitants.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
UN
The United Nations (UN) is an international organization whose stated aims are to facilitate cooperation in international law, international security, economic development, social progress, human rights, and achieving world peace. The UN was founded in 1945 after World War II to replace the League of Nations, to stop wars between countries, and to provide a platform for dialogue. There are currently 192 member states, including nearly every recognized independent state in the world. From its headquarters on international territory in New York City, the UN and its specialized agencies decide on substantive and administrative issues in regular meetings held throughout the year.
UNDP
The United Nations Development Programme (UNDP) is the United Nations' global development network. The UNDP is an executive board within the United Nations General Assembly. The UNDP Administrator is the third highest ranking member of the United Nations after the United Nations Secretary-General and Deputy Secretary-General. Headquartered in New York City, the UNDP is funded entirely by voluntary contributions from member nations. The organization has country offices in 166 countries, where it works with local governments to meet development challenges and develop local capacity. Additionally, the UNDP works internationally to help countries achieve the Millennium Development Goals (MDGs).
USAID
The United States Agency for International Development (USAID) is the United States federal government organization responsible for most non-military foreign aid. An independent federal agency, it receives overall foreign policy guidance from the United States Secretary of State and seeks to "extend a helping hand to those people overseas struggling to make a better life, recover from a disaster or striving to live in a free and democratic country. USAID advances U.S. foreign policy objectives by supporting economic growth, agriculture and trade; health; democracy, conflict prevention, and humanitarian assistance. It provides assistance in SubSaharan Africa; Asia and the Near East, Latin America and the Caribbean, Europe, and Eurasia. USAID 168 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
is organized around three main pillars: Economic Growth, Agriculture, and Trade; Global Health; Democracy, Conflict, and Humanitarian Assistance.
VAS(Value-Added Services)
Means such services as may be available over a Telecommunications System in addition to Voice Telephony or Data Services, and specifically those services listed as "Value-Added Services" in the Regulations or Orders.
VoIP
Voice over Internet Protocol (VoIP) is a general term for a family of transmission technologies for delivery of voice communications over IP networks such as the Internet or other packet-switched networks. Other terms frequently encountered and synonymous with VoIP are IP telephony, Internet telephony, voice over broadband (VoBB), broadband telephony, and broadband phone.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Wire-line
In the United States, the pair of wires from the central switch office to a subscriber's home is called a subscriber loop. It is typically powered by -48V direct current (DC) and backed up by a large bank of batteries (connected in series) in the central office, resulting in continuation of service during most commercial power outages. The services provided on this pair of wire are called wire-line services.
WiMax
WiMAX, meaning Worldwide Interoperability for Microwave Access, is a telecommunications technology that provides wireless transmission of data using a variety of transmission modes, from point-to-multipoint links to portable and fully mobile internet access. The technology provides up to 3 Mbit/s broadband speeds without the need for cables. The technology is based on the IEEE 802.16 standard (also called Broadband Wireless Access). The name "WiMAX" was created by the WiMAX Forum, which was formed in June 2001 to promote conformity and interoperability of the standard. The forum describes WiMAX as "a standards-based technology enabling the delivery of last mile wireless broadband access as an alternative to cable and DSL".
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Unit-17 Appendix 17.1 Basic Information of Indian economy and social structure
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
17.4
Telephone main lines (m) per 100 people Mobile subscribers (m) per 100 people Internet users (m) per 100 people Broadband subscriber lines per 100 people Personal computers (per 1000 people)
931.4 19.5
1,028.6 1,073.0 1,114.1 1,150.1 1,174.5 1,186.7 1,200.4 1,217.0 21.1 21.8 22.5 23.0 23.2 23.3 23.3 23.5
1,071.2 1,289.0 1,587.6 1,954.1 2,247.3 2,482.6 2,668.0 2,824.8 2,970.1 3,113.9 22.5 543.1 11.4 68.5 1.4 126.2 26.8 648.5 13.5 107.8 2.2 144.4 32.6 762.8 15.7 159.9 3.3 159.5 39.8 841.1 17.1 217.1 4.4 175.1 45.3 926.2 18.7 284.3 5.7 198.3 49.6 52.8 55.4 57.8 60.0
1,030.6 1,143.1 1,258.2 1,376.8 1,503.0 20.6 351.3 7.0 212.1 22.6 415.0 8.2 225.7 24.7 475.3 9.3 239.5 26.8 532.6 10.4 252.9 29.0 585.9 11.3 265.7
(a) 60 countries covered by the Economist Intelligence Units industry service. Source: Economist Intelligence Unit.
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Demography
Unit Population Urban population Birth rate Death rate Infant mortality rate Life expectancy Labor force (Million) (% to total) (Per 1,000) (Per 1,000) (Per 1,000 live births) (Years) (Million) Value 1,065 28 25 8 68 65.4 427
National Income
Unit Gross Domestic Product (GDP) Share in GDP Agriculture Industry Manufacturing Services (%) (%) (%) (%) 24 25 17 51 (US$ Bn) Value 652
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Net National Product Per capita NNP Per capita PPP Gross Domestic Savings Gross Domestic Capital formation
(% to GDP)
26
Agriculture
Unit Production Foodgrains Rice Wheat Sugar* Tea Tobacco Oilseed Cotton Fruits Vegetables (Mn tonnes) (Mn tonnes) (Mn tonnes) (Mn tonnes) (Mn tonnes) (Mn tonnes) (Mn tonnes) (Mn tonnes) (Mn tonnes) (Mn tonnes) 206.4 88 73 13 0.8 1 25 17 48 90 Value
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
(per 1,000 people) 10 (per 1,000 people) 83 (per 1,000 people) 41 (per 1,000 people) 55 (per 1,000 people) 7 (per 1,000 people) 16 (per Mn people) (% to GDP) 120 0.85
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
External debt
Unit Total Debt outstanding ($ Bn) Value 113.6
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
(%)
18.3
Poverty
Unit Population below poverty line Note: Data generally relate to the latest available period, 2004-05 Source: Statistical Outline of India 2004-05, Economic Survey of India 04-05, CMIE, TSMG. (%) Value 26.1
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
17.8
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Declaration
195 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
I here by declare that the project report entitled Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India . submitted in partial fulfillment of the requirements for the degree of Masters of business Administration to Sikkim-Manipal University, India, is my original work and not submitted for the award of any other degree, diploma, fellowship, or any other similar title or prizes.
Place: Date:
Examiners Certification
196 By- Neeraj Kumar Singh (Roll No- 520751161)
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
The project report of Mr Neeraj Kumar Singh, titled Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India. is approved and is acceptable in quality and form.
External Examiners
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
This is to certify that the project entitled Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India. submitted in partial fulfillment of the requirements for the degree of Masters of Business Administration of Sikkim-Manipal University of Health, Medical and technological sciences by Mr. Neeraj Kumar Singh, has been worked under my supervision and guidance and that no part of this report has been submitted for the award of any other degree, diploma, fellowship or other similar titles or prizes and that the work has not been published in any journal or Magazine.
Reg.No.:520751161
Certified
Descriptive qualitative approach towards the financing needs of Indian telecom sector and different innovative ways to finance its growth with a case study of B.S.N.L., a telecom service provider of India
Project Examination Marks Statement for MBA IV Semester (Revised) University: Sikkim Manipal University Status: Date of Examination: Roll. Name Internal Evaluator No. 520751161 Neeraj Kumar Singh
Synopsis Methodology Analysis + Findings 25 marks IE3 Project Report 25 marks IE4 VIVA Total internal evaluators marks 100 marks IE= IE1+ IE2 + IE3 + IE4 + IE5
05 marks IE1
10 marks IE2
35 marks IE5
05 marks EE1
10 marks EE2
35 marks EE5
We here by certify that the project examination has been conducted on the date as indicated above and the information given above has been verified and found correct. 1) Internal Examination Signature with Date Name: Srikanta Ghosh Centre In Charge stamp with signature 199 By- Neeraj Kumar Singh (Roll No- 520751161) 2) External Examiner Signature with Date Name: