A Study of Competitive Marketing Strategies in Red Ocean Telecom Sector

Institute of Business Management and
Research – International Business School

(IBMR-IBS)
Survey No. 4, Adjacent to BMW Show Room
Hosur Main Road, Near Electronic City
Bangalore – 560 100. India.
LC Code: 02894
Project Report
entitled
“A STUDY OF COMPETITIVE MARKETING STRATEGIES IN
RED OCEAN TELECOM SECTOR ”
By
Md.Ahmad Ali
SMU Regn. No: 520850733
Submitted in partial fulfillment of the requirements
for
Master of Business Administration (MBA)
of Sikkim Manipal University, INDIA
and
Post-Graduate Program in Management (PGPM)
Of IBMR-International Business School, Bangalore, India
Sikkim-Manipal University of Health, Medical and

Technological Sciences, Syndicate House
Manipal - 576 104,
Karnataka, India
ACKNOWLEDGEMENT
Institute of Business Management and Research –
International Business School (IBMR-IBS),Bangalore
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This research project.I would also like to acknowledge the constant help
and encouragement of my project guide Prof. Chandrashekaran Menon,
who has given his valuable suggestions and expert guidance and support.
I would also like to thank all those who have directly or indirectly helped
us in the preparation of this report.

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Bonafide Certificate:
BONAFIDE CERTIFICATE
Certified that this project report titled
“A STUDY OF COMPETITIVE MARKETING STRATEGIES IN RED
OCEAN TELECOM SECTOR ”
is the bonafide work of
“Md.Ahmad Ali”
who carried out the project work under my supervision.
SIGNATURE SIGNATURE
HEAD OF THE DEPARTMENT EXTERNAL IN CHARGE
Marketing
IBMR-IBS
Survey No. 4, Adjacent to BMW Show Room
Hosur Main Road, Near Electronic City
Bangalore – 560 100. India.

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ACKNOWLEDGEMENT
This research project.I would also like to acknowledge the constant help
and encouragement of my project guide Prof. Chandrashekaran Menon,
who has given his valuable suggestions and expert guidance and support.
I would also like to thank all those who have directly or indirectly helped
us in the preparation of this report.
(Student Signature)
MD.AHMAD ALI
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EXECUTIVE SUMMARY
This report examines the emergence of innovation and value creation for enhancing
customers' experience, as a result of increasing competition in the Indian telecom
industry during the late 1990s and early 2000s. The report provides a detailed account of
the evolution of the Indian telecom industry.
It traces various developments in the industry before, during and after the liberalization
of the Indian telecom sector. It also provides information about the increasing popularity
of cellular services which led to the emergence of several private telecom operators like
Bharti Tele Ventures, Hutchison Telecom, Idea Cellular Ltd, Reliance Telecom Ltd, etc.
Due to the huge market potential even public sector undertakings like BSNL and MTNL
have also begun offering cellular services apart from basic wire line services.
The fast track growth of the Indian telecom industry has made it a key contributor to
India’s progress. India adopted a phased approach for reforming the telecom sector right
from the beginning. Privatization was gradually introduced, first in value-added services,
followed by cellular and basic services. An independent regulatory body, Telecom
Regulatory Authority of India (TRAI), was established to deal with competition in a
balanced manner. This gradual and thoughtful reform process in India has favoured
industry growth. Today, there are more than 225 million telecom subscribers in India.
Every month, 6-7 million new subscribers are added. Upcoming services such as 3G and
WiMax will help to further augment the growth rate.
Furthermore, the Indian economy is slated to sustain its 7-9 per cent growth rate in the
near future. This is supported by the political stability that the country is experiencing
currently. India’s demographic outlook makes it one of the largest markets in the world.
A conducive business environment is also created by a favourable regulatory regime.
There exists enormous business potential for telecom companies on account of the
country’s low tele-density, which is close to 19 per cent presently. The Indian telecom
industry is growing at the fastest pace in the world and India is projected to be the second
largest telecom market globally by 2010.

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TABLE OF CONTENTS
CHAPTER PAGE NO.
1. Introduction 1
2. Global Overview 9
3. Indian Overview 17
4. Industry Structure 21
5. Government Policy Analysis 25
6. Economic Factors and Its Implications 36
7. Analytical Framework 41

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8. Company Analysis 51
9. Trend and forecast 64
10. Bibliography 73
Chapter 1
INTRODUCTION
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1.1 HISTORY OF TELECOMMUNICATION INDUSTRY
The history of telecommunication industry started with the first public demonstration of
Morse’s electric telegraph, Baltimore to Washington in 1844. In 1876 Alexander Graham
Bell filed his patent application and the first telephone patent was issued to him on 7 th of
March.
In 1913, telegraph was popular way of communication. AT&T commits to dispose its
telegraph stocks and agreed to provide long distance connection to independence
telephone system.
In 1956, the final judgment limited the Bell System to Common Carrier Communications
and Government projects but preserving the long-standing relationships between the
manufacturing, researches and operating arms of the Bell System. In this judgment
AT&T retained bell laboratories and Western Electric Company. This final judgment
brought to a close the justice departments seven –year-old antitrust suit against AT&T
and Western Electric which sought separation of the Bell Systems Manufacturing from its
operating and research functions. AT&T was still controlling the telecommunication
industry.
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In 1982 , AT&T was requested to divestiture its stock ownership in Western Electric;
termination of exclusive relationship between AT&T and Western Electric; divestiture by
Western Electric of its fifty percent interest in Bell Telephone Laboratories, AT&T ‘s
telecommunication research and development facility, is a jointly owned subsidiary in
which AT&T and Western Electric each own 50% of the stock; separation of telephone
manufacturing from provision of telephone service and the compulsory licensing of
patents owned by AT&T on a non-discriminatory basis.
It was telecommunication act of 1996 that true competition was allowed. The act of 1996
opened the market to all competitors. AT&T being the first telecommunication company
paved the road for the telecommunication industry as well as set the policy and standards
for others to follow.
Chapter 2

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GLOBAL
OVERVIEW
2.1 INTRODUCTION
World telecom industry is an uprising industry, proceeding towards a goal of achieving

two third of the world's telecom connections. Over the past few years information and
communications technology has changed in a dramatic manner and as a result of that
world telecom industry is going to be a booming industry. Substantial economic growth
and mounting population enable the rapid growth of this industry.

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The world telecommunications market is expected to rise at an 11 percent compound
annual growth rate at the end of year 2010. The leading telecom companies like AT&T,
Vodafone, Verizon, SBC Communications, Bell South, Qwest Communications are
trying to take the advantage of this growth. These companies are working on
telecommunication fields like broadband technologies, EDGE(Enhanced Data rates for
Global Evolution) technologies, LAN-WAN inter networking, optical networking, voice
over Internet protocol, wireless data service etc.
Economical aspect of telecommunication industry: World telecom industry is taking a

crucial part of world economy. The total revenue earned from this industry is 3 percent of
the gross world products and is aiming at attaining more revenues. One statistical report
reveals that approximately 16.9% of the world population has access to the Internet.
Present market scenario of world telecom industry: Over the last couple of years, world
telecommunication industry has been consolidating by allowing private organizations the
opportunities to run their businesses with this industry. The Government monopolies are
now being privatized and consequently competition is developing. Among all, the
domestic and small business markets are the hardest.
2.2 GLOBAL SCENARIO
Until the 1980s the world telecommunications systems had a simply administrative
structure. The United States telephone service was supplied by a regulated monopoly,
American Telephone and Telegraph (AT&T). Telegraph service was provided mainly by
the Western Union Corporation. In almost all other countries both services were the
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monopolies of government agencies known as PTTs (for Post, Telephone, and
Telegraph). In the United States beginning in 1983, AT&T agreed in a court settlement to
divest itself of the local operating companies that provided basic telephonic service. They
remained regulated local monopolies, grouped together into eight regional companies.
AT&T now offers long distance service in competition with half a dozen major and many
minor competitors while retaining ownership of a subsidiary that produces telephonic
equipment, computers and other electronic devices. During the same period Great
Britain’s national telephone company was sold to private investors as was Japan’s NTT
telephone monopoly. For telegraphy and data transmission, Western Union was joined by
other major companies, while many multinational firms formed their own
telecommunications services that link offices scattered throughout the world. New
technology also brought continuing changes in the providers of telecommunication.
Private companies such as Comsat in the United States were organized to provide
satellite communication links within the country.
Around the world we are witnessing remarkable changes to the telecoms environment.
After years of debate, structural separation is now taking place in many parts of the world
including Hong Kong, New Zealand, Singapore and some European markets. Structural
separation – or at least full-blown operational separation – is required to advance the
entire industry and to create new business opportunities and innovations which will
benefit our society, our economy and ultimately our industry.
The focus is also shifting away from broadband to what it can actually achieve. Next
Generation Telecommunications better describes this new environment and is essential
for the emerging digital economy. Important services that depend on NGT include tele-
health, e-education, e-business, digital media, e-government and environmental
applications such as smart utility meters.
In order to meet this burgeoning consumer demand for NGT applications, we are seeing
increasing investment in All-IP Next Generation Networks and fibre networks. A proper
inventory of national infrastructure assets is required if we want to establish an efficient
and economically viable national broadband structure for these services. In the
developing markets, next generations telecoms will take the form of wireless NGNs (ie,
LTE/WiMAX).
These are some of the elements of the broader ICT revolution that is unfolding before our
very eyes. We are right in the midst of the transition from old communications structures
(mainly one-way streets) to new structures that are fully-interactive and video-based.

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One of the drivers behind the industry changes are the declining revenues experienced by
the telcos in their traditional markets. Over the past 10 years or so, fixed-line operators
have been affected by deregulation, a severe industry downturn, declining prices and
major inroads by mobile services. In addition, people are drifting to other forms of
communication, such as email, online chat, and mobile text messaging instead of the
traditional phone.
This has also led to an increased need for bandwidth, which in turn has revived the
submarine cable sector. In recent times there have been many cable build-out
announcements around the world, and some major systems are again being constructed.
Over 25 systems are expected to be built over the next two to three years and network
upgrades are also on the agenda for some existing systems.
It is clear that the mobile industry is also undergoing profound changes. The saturated
developed markets are forcing the industry to find new revenue streams and we are now
seeing other organizations such as media companies, content providers, Internet media
companies and private equity companies becoming involved in this market.
For the time being however, voice will remain the killer application for mobile with some
data services included as support services and niche market services. 4G (ie,
WiMAX/LTE) is the real solution for mobile data and by 2015 it is expected that the
majority of mobile revenues will come from data.
With the Internet economy, digital media and other telecommunications activities
becoming further established, the need for modern and efficient infrastructure is
becoming more critical.
2.3 GLOBAL PLAYERS
2.3.1 AT&T
AT&T Inc. is the largest provider of both local and long distance telephone services,
wireless service, and DSL Internet access in the United States. Formerly SBC

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Communications, Inc., the company shed its name and took on the iconic AT&T moniker
and the T stock-trading symbol (for "telephone") after its acquisition of American
Telephone & Telegraph Company (later known as AT&T Corporation).
AT&T Inc. was founded in 1983 as Southwestern Bell Corporation, headquartered in St.
Louis, Missouri. It was one of the seven original Regional Bell Operating Companies, or
"Baby Bells." The company — a holding company for Southwestern Bell Telephone
Company — was created as a result of U.S. antitrust action against American Telephone
& Telegraph Company in 1983. It took full control of Southwestern Bell Telephone on
January 1, 1984.
2.3.2 MCI Worldcom
MCI, Inc. is an American telecommunications company that is headquartered in

Ashburn, Virginia. The corporation was the result of the merger of WorldCom (formerly
known as LDDS followed by LDDS WorldCom) and MCI Communications, and used
the name MCI WorldCom followed by WorldCom before taking its final name on
April 14, 2003 as part of the corporation's emergence from bankruptcy. The company
formerly traded on NASDAQ under the symbols "WCOM" (pre-bankruptcy) and
"MCIP" (post-bankruptcy). The corporation was purchased by Verizon Communications
with the deal closing on July 7, 2006, and is now identified as that company's Verizon
Business division with the local residential divisions slowly integrated into local Verizon
subsidiaries.
MCI's history, combined with the histories of companies it has acquired, echoes most of
the trends that have swept American telecommunications in the past half-century: It was
instrumental in pushing legal and regulatory changes that led to the breakup of the AT&T
monopoly that dominated American telephony; its purchase by WorldCom and
subsequent bankruptcy in the face of accounting scandals was symptomatic of the
Internet excesses of the late 1990s. It accepted a proposed purchase by Verizon for
US$7.6 billion.
2.3.3 NEXTEL

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Sprint Nextel Corporation is one of the largest telecommunications companies in the US.
With 53.8 million subscribers, Sprint Nextel operates the third largest wireless
telecommunications network in the United States (based on total wireless customers),
behind AT&T and Verizon Wireless. Sprint is a global Tier 1 Internet carrier, and, as
such, makes up a portion of the Internet backbone. In the United States, the company also
operates the second largest wireless broadband network and is the third largest long
distance provider.
The company was created in 2005 by the $35 billion purchase of NEXTEL
Communications by Sprint Corporation. In 2006, the company spun off its local landline
telephone business, naming it Embarq and also completed the $6.5 billion acquisition of
Nextel Partners, one of its largest affiliates, which primarily provides Nextel wireless
services to more rural markets.
Sprint Nextel has its executive headquarters in Reston, Virginia and maintains an
operational and engineering headquarters in Overland Park, Kansas (where the largest
number of Sprint Nextel employees are based). Both internally and externally, "Sprint" is
an acceptable short name for the company; however, all iDEN "walkie-talkie" phones
currently being shipped are still branded with the Nextel logo and graphics.
2.3.4 Deutsche Telecom
Deutsche Telekom (DTAG) is a telecommunications company headquartered in Bonn,

Germany. It is the largest telecommunications company in Germany and in the European
Union.
Deutsche Telekom was formed in 1996 as the former state-owned monopoly Deutsche
Bundespost was privatized. As of June 2008, the German Government still holds a 15%
stake in company stock directly, and another 17% through the government bank.
2.3.5 France telecom
France Télécom is the main telecommunication company in France and one of the
largest in the world. It currently employs about 191,000 people (half outside of France)
and has nearly 159 million customers worldwide (2007). For the twelve months ending
September 2004 it had revenue of US$60.11 billion. The current CEO is Didier Lombard.

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In August 2005, FT acquired a 77% ownership in the Spanish mobile phone company
Amena, rebranding it Orange España. France Telecom-Orange is the number three
mobile operator and the number one provider of broadband internet services in Europe
and, under the brand Orange Business Services, is one of the world leaders in providing
telecommunication services to multinational companies
2.4 GLOBAL TRENDS
The industry is dominated by three major communication tools. These are:

 Fixed-lines
 Mobile
 The Internet
The State of the market though has been changing. This has been mainly characterized by
increasing competition, mainly due to the numerous players in the telecom industry. The
boom in the telecom industry can be mainly attributed to increasing private sector
participants. There also has been an increased independent regulation by these
companies.
2.4.1 Fixed Line and Cellular Line Subscribers
Fixed-line market penetration remains comparatively low in most developing countries,

at an average of 13 per cent by end of 2007 even though the developing world accounted
for 58 per cent of the world’s 1.3 billion fixed phones lines in 2007. In fact, this segment
of the market showed a decline in developed countries and just a slight increase in some
developing countries. Overall, it is fair to say that fixed-line penetration worldwide
stagnated in 2007. Mobile penetration, however, continued to show high growth rates –
enough to reach an estimated 61 per cent of the world’s population (some 4 billion
subscribers) by the end of 2008. Moreover, by the beginning of the year, more than 70
per cent of the world’s mobile subscribers were in developing countries. Five years
earlier, in 2002, those subscribers had been less than 50 per cent of the world total. Africa
remains the region with the highest growth rate (32 per cent between 2006 and 2007).
The graph below shows the growing trends of the fixed and cellular subscribers. This
shows the transition from fixed telephone subscribers to mobile subscribers

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Figure: 2.1
Growth in fixed lines, mobile cellular subscribers, estimated Internet users and subscribers to
mobile broadband networks, in billions, 1995-2007
Source: ITU World Telecommunications

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Chapter 3
INDIAN
OVERVIEW
3.1 INTRODUCTION
Today the Indian telecommunications network with over 375 Million subscribers is
second largest network in the world after China. India is also the fastest growing telecom
market in the world with an addition of 9- 10 million monthly subscribers. The tele-

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density of the Country has increased from 18% in 2006 to 33% in December 2008,
showing a stupendous annual growth of about 50%, one of the highest in any sector of
the Indian Economy. The Department of Telecommunications has been able to provide
state of the art world-class infrastructure at globally competitive tariffs and reduce the
digital divide by extending connectivity to the unconnected areas. India has emerged as a
major base for the telecom industry worldwide. Thus Indian telecom sector has come a
long way in achieving its dream of providing affordable and effective communication
facilities to Indian citizens. As a result common man today has access to this most needed
facility. The reform measures coupled with the proactive policies of the Department of
Telecommunications have resulted in an unprecedented growth of the telecom sector.
The thrust areas presently are:
1. 1.Building a modern and efficient infrastructure ensuring greater competitive

environment
2. With equal opportunities and level playing field for all stakeholders.
3. Strengthening research and development for manufacturing, value added services.
4. Efficient and transparent spectrum management
5. To accelerate broadband penetration
6. Universal service to all uncovered areas including rural areas.
7. Enabling Indian telecom companies to become global players.
Recent things to watch in Indian telecom sector are:

1. 3G and BWA auctions
2. MVNO
3. Mobile Number Portability
4. New Policy for Value Added Services
5. Market dynamics once the recently licensed new telecom operators start rolling
out
6. Services.
7. Increased thrust on telecom equipment manufacturing and exports.
8. Reduction in Mobile Termination Charges as the cost per line has substantially
reduced
9. Due to technological advancement and increase in traffic.
India's telecom sector has shown massive upsurge in the recent years in all respects of
industrial growth. From the status of state monopoly with very limited growth, it has
grown in to the level of an industry. Telephone, whether fixed landline or mobile, is an
essential necessity for the people of India. This changing phase was possible with the

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economic development that followed the process of structuring the economy in the
capitalistic pattern. Removal of restrictions on foreign capital investment and industrial
de-licensing resulted in fast growth of this sector. At present the country's telecom
industry has achieved a growth rate of 14 per cent. Till 2000, though cellular phone
companies were present, fixed landlines were popular in most parts of the country, with
government of India setting up the Telecom Regulatory Authority of India, and measures
to allow new players country, the featured products in the segment came in to
prominence. Today the industry offers services such as fixed landlines, WLL, GSM
mobiles, CDMA and IP services to customers. Increasing competition among players
allowed the prices drastically down by making the mobile facility accessible to the urban
middle class population, and to a great extend in the rural areas. Even for small
shopkeepers and factory workers a phone connection is not an unreachable luxury. Major
players in the sector are BSNL, MTNL, Bharti Teleservices, Hutchison Essar, BPL, Tata,
Idea, etc. With the growth of telecom services, telecom equipment and accessories
manufacturing has also grown in a big way.
Indian Telecom sector, like any other industrial sector in the country, has gone through
many phases of growth and diversification. Starting from telegraphic and telephonic
systems in the 19th century, the field of telephonic communication has now expanded to
make use of advanced technologies like GSM, CDMA, and WLL to the great 3G
Technology in mobile phones. Day by day, both the Public Players and the Private
Players are putting in their resources and efforts to improve the telecommunication
technology so as to give the maximum to their customers.
3.2 TELECOM SUBSCRIBER BASE IN INDIA
Indian telecommunication Industry is one of the fastest growing telecom market in the
world. The mobile sector has grown from around 10 million subscribers in 2002 to
reach 150 million by early 2007 registering an average growth of over 90%. The two
major reasons that have fuelled this growth are low tariffs coupled with falling handset
prices.
Surprisingly, CDMA market has increased it market share upto 30% thanks to Reliance
Communication. However, across the globe, CDMA has been loosing out numbers to
popular GSM technology, contrary to the scenario in India.
The other reason that has tremendously helped the telecom Industry is the regulatory
changes and reforms that have been pushed for last 10 years by successive Indian
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governments. According to Telecom Regulatory Authority of India (TRAI) the rate of
market expansion would increase with further regulatory and structural reforms.
Even though the fixed line market share has been dropping consistently, the overall
(fixed and mobile) subscribers have risen to more than 200 million by first quarter
of 2007. The telecom reforms have allowed the foreign telecommunication companies to
enter Indian market which has still got huge potential. International telecom companies
like Vodafone have made entry into Indian market in a big way.
Currently the Indian Telecommunication market is valued at around $100 billion (Rupees
400,000 crore). Two telecom players dominate this market - Bharti Airtel with 27%
market share and Reliance Communication with 20% along with other players like BSNL
(Bharat Sanchar Nigam Limited) and AT&T. One segment of the market that has been
puzzling is broadband Internet. Despite the manner in which the country’s Internet
market has been booming, India’s move into high-speed broadband Internet access has
been distinctly slow. And, while there appears to be considerable enthusiasm amongst the
population for the Internet itself, this has not been reflected in broadband subscription
numbers. In 2006 India witnessed a good surge in broadband users with the total
subscriber base in the country expanding by almost 200% to just over 2 million by
years end. Despite this surge, broadband penetration in India still remains around
only 0.2%; broadband services still account for only 25% of the total Internet subscriber
base, still in itself comparatively low. So, if 70% of total population is rural, the scope for
growth in this Industry is unprecedented
The Ministry of Communications and Information Technology (MCIT) is has very

aggressive plans to increase the pace of growth, targeting 250 million telephone
subscribers by end-2007 and 500 million by 2010. Most of the expansion in subscribers is
set to occur in rural India. India’s rural telephone density has been languishing at around
1.9%. The subscriber addition rate has been strong in the last 12 months but the
regulatory developments will increase competition and thus curtail the long-term growth
rates of individual companies. The savings through the setting of tower companies will
partly go towards the higher capex and opex costs from more stringent spectrum
allocation norms for the incumbents.

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Chapter 4
INDUSTRY
STRUCTUR
E

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4.1 INTRODUCTION
The telecom industry is one of the prime contributors to India's GDP. The once
monopolistic market is today, highly competitive. This has necessitated the growth of
India telecom infrastructure.
From the time of the British Rule, the Telecom Industry was under the strict supervision
of the government. The trend continued even after independence until the late 1990s
when the following initiatives were taken up by the government:
* The telecom sector was opened up for private investment as a part of liberalization-
privatization-globalization policies
* On 1st October, 2000 the Government corporatized its operations wing under the
name of Bharat Sanchar Nigam Limited (BSNL)
* The criteria for private companies for entering the telecom sector were relaxed
What followed was a rapid development of the market for mobile phones and allied
innovations, hence bringing about a new era in the telecom sector in India.
4.2 INDIA TELECOM INFRASTRUCTURE
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. 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.

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4.2.1 India telecom infrastructure – present status
The government of India believes that for rapid economic development backed by social
welfare, the telecom infrastructure in India needs to be uplifted. This necessitates the
formulation of a comprehensive telecom policy that visualizes the future of the Indian
telecom market. By the beginning of 2007, the telecom network in India consisted of 48
million fixed-line connections. Nowadays, a vast majority of the population has access to
telephone services. The highly competitive environment has ensured low pricing of goods
and services that caters to the weaker sections of the society. Moreover, the enhancement
of India telecom infrastructure has also widened the scope of the telecom sector to other
allied ventures like mobile services, Internet, cable TV services, E-Commerce, and other
forms of Information Technology (IT).
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. This rapid growth is possible due to various proactive and positive
decisions of the Government and contribution of both by the public and the private
sectors. The rapid strides in the telecom sector have been facilitated by liberal policies of
the Government that provides easy market access for telecom equipment and a fair
regulatory framework for offering telecom services to the Indian consumers at affordable
prices
In terms of long distance calls, India telecom infrastructure has made remarkable
progress. Latest technologies, like use of fibre-optic cables has enhanced call-clarity and
reduced call-costs to a large extent. The present telecom and mobile-phone service
providers in India, apart from BSNL include Hutchison Essar, Reliance Communications,
Bharti Airtel, Idea, Tata Indicom, and a few others.
4.2.2 India telecom infrastructure – present status
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%.

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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 have since been issued. Also to improve the
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).
 Provision of mobile coverage of 90% geographical area by 201

 One phone per two rural households by 2010 (about 80 million rural
connections).

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Chapter 5
GOVERNMENT
POLICY
ANALYSIS

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5.1 INTRODUCTION
As the sector is open for both private and public players there are huge number of players
in the market which requires a proper picturing of rules and regulation to play a fair
game. India has been very strong in case of rules and regulation; it has created body like
DOT, TRAI, DTS who takes care of the rules and regulation. Apart from them it keeps
issuing policy and act which checks the events happening in the industry. The
government has been issuing policy like Broadband Policy 2004, new telecom
policy1999, National Telecom Policy 1994. There are more agencies like ITU, TDSA,
TCIL, ICSIL, and MCOCA, which helped it regulating their work. With increasing
number of players in market the government and its agencies have to function more
carefully.
5.2 GOVERNMENT REGULATION

5.1.1 Department of Telecommunications
Until October 2000, the Department of Telecommunication (DOT) was the authority in
granting licences and service provision. It also operated domestic basic telephone
services throughout India. The policy making functions and the service providing
function were segregated into two different entities during 2000.The two service
providing department of telecom sector were corporatized-the department of telecom
service and the department of telecom operation . The state owned corporation BSNL
took over all service providing functions of these two departments.
5.1.2 National telecom policy, 1994

The new economic policy adopted by the Government aims at improving India's
competitiveness in the global market and rapid growth of exports. Another element of the
new economic policy is attracting foreign direct investment and stimulating domestic
investment. Telecommunication services of world class quality are necessary for the
success of this policy. It is, therefore, necessary to give the highest priority to the
development of telecom services in the country.
Objective

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a. The focus of the Telecom Policy shall be telecommunication for all and
telecommunication within the reach of all. This means ensuring the availability of
telephone on demand as early as possible.

b. Another objective will be to achieve universal service covering all villages as early
as possible.

c. The quality of telecom services should be of world standard. Removal of consumer
complaints, dispute resolution and public interface will receive special attention.
The objective will also be to provide widest permissible range of services to meet
the customer's demand at reasonable prices.

d. Taking into account India's size and development, it is necessary to ensure that
India emerges as a major manufacturing base and major exporter of telecom
equipment.
5.1.3 The Telecom Regulatory Authority Of India Act, 1997
Powers & functions of the TRAI
a. Recommend the need and timing for introduction of new service provider;
b. Recommend the terms and conditions of license to a service provider;
c. Ensure technical compatibility and effective inter-connection between different

service providers;
d. Regulate arrangement amongst service providers of sharing their revenue derived

from providing telecommunication services;
e. Ensure compliance of terms and conditions of license;
f. Recommend revocation of license for non-compliance of terms and conditions of

license;
g. Lay down and ensure the time period for providing local and long distance circuits

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of telecommunication between different service providers;
h. Facilitate competition and promote efficiency in the operation of

telecommunication services so as to facilitate growth in such services;
i. Protect the interest of the consumers of telecommunication service;
j. Monitor the quality of service and conduct the periodical survey of such provided
by the service providers;
k. Inspect the equipment used in the network and recommend the type of equipment to
be used by the service providers;
l. Maintain register of interconnect agreements and of all such other matters as may
be provided in the regulations;
m. Keep register maintained under clause (l) open for inspection to any member of
public on payment of such fee and compliance of such other requirements as may
be provided in the regulations;
n. Settle disputes between service providers;
o. Render advice to the Central Government in the matters relating to the development
of telecommunication technology and any other matter relatable to
telecommunication industry in general;
p. Levy fees and other charges at such rates and in respect of such services as may be
determined by regulations;
q. Ensure effective compliance of universal service obligations;
Perform such other functions including such administrative and financial functions as may
be entrusted to it by the Central Government or as may be necessary to carry out the
provisions of this Act.
5.1.4 New telecom policy, 1999

Objectives and targets of the new telecom policy, 1999
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1. 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
telecom policy.
2. 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
3. Encourage development of telecommunication facilities in remote, hilly and tribal

areas of the country.
4. Create a modern and efficient telecommunications infrastructure taking into

account the convergence of IT, media, telecom and consumer electronics and
thereby propel India into becoming an IT superpower
5. Convert PCO's, wherever justified, into Public Teleinfo centers having

multimedia capability like ISDN services, remote database access, government
and community information systems etc.
6. 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
7. Strengthen research and development efforts in the country and provide an

impetus to build world-class manufacturing capabilities
8. Achieve efficiency and transparency in spectrum management
9. Protect defense and security interests of the country
10. Enable Indian Telecom Companies to become truly global players
5.1.5 Broadband Policy, 2004

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Preamble
Recognizing the potential of ubiquitous Broadband service in growth of GDP and

enhancement in quality of life through societal applications including tele-education, tele-
medicine, e-governance, entertainment as well as employment generation by way of high
speed access to information and web-based communication, Government have finalized a
policy to accelerate the growth of Broadband services.
Demand for Broadband is primarily conditioned and driven by Internet and PC

penetration. It is recognized that the current level of Internet and Broadband access in the
country is low as compared to many Asian countries. Penetration of Broadband, Internet
and Personal Computer (PC) in the country was 0.02%, 0.4% and 0.8% respectively at
the end of December, 2003. Currently, high speed Internet access is available at various
speeds from 64 kilobits per second (kbps) onwards and presently an always-on high
speed Internet access at 128 kbps is considered as ‘Broadband'. There are no uniform
standards for Broadband connectivity and various countries follow various standards.
5.1.6 Administration and Control on Telecom Industry
The Telecom Commission, set up in April 1989, has the administrative and financial
powers of the Government of India to deal with various aspects of telecommunications.
The Commission and the Department of Telecommunications (DOT) are responsible,

inter alia, for policy formulation, licensing, wireless spectrum management,
administrative monitoring and control of the Public Sector Undertakings
(PSUs) engaged in telecommunication services, research and development,
standardization/validation of equipment. In addition to the Telecom Commission,
other Government organizations engaged in the telecom sector (as a part of
DOT) are the Centre for Development of Telematics (CDOT), the Telecom
Engineering Centre (TEC) and the Wireless Planning and Coordination (WPC) wing.
CDOT was established in 1984 with the objective of developing a new generation of
digital switching items. It has developed a wide range of switching and transmission
products both for rural and urban applications. TEC is devoted to product validation and
standardization for user agencies. It also provides technical and engineering support to
the Telecom Commission and the field units. The Wireless Planning and Coordination
wing deals with the policies of Spectrum management, licensing, frequency
assignments, international coordination for spectrum management and administration of
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the Indian Wireless Telegraphy Act, 1933. In order to administer the use of radio
frequencies, the licenses/renewals for use of wireless equipment and the frequencies are
authorized by WPC. The licenses are granted for specific periods on payment of
prescribed license fees and royalty in advance and are renewed after expiry of the validity
periods.
5.1.7 Telecom Reforms
As a part of the continuing process of telecom reforms and in pursuance of the New
Telecom Policy 1999 (NTP-99), the Department of Telecom Services (DTS) and the
Department of Telecom Operations (DTO) were carved out from DOT in October 1999
for providing telecommunication services in the country. DTS and DTO were finally
corporatized into a wholly owned Government Company namely, the Bharat Sanchar
Nigam Limited (BSNL) (incorporated on 15 September 2000) and their business was
transferred to this Company with effect from 1 October 2000. The creation of BSNL was
expected to provide a level playing field in all areas of telecom services, between
Government operators and private operators.
5.1.8 Regulatory Control
The entry of private service providers in 1992 brought with it the inevitable need for
independent regulation. The Telecom Regulatory Authority of India (TRAI) was thus
established with effect from 20 February 1997 by an Act of Parliament, called the
Telecom Regulatory Authority of India Act, 1997, to regulate telecom services, including
fixation/revision of tariffs for telecom services, which were earlier vested in the Central
Government. The TRAI Act was amended by an ordinance, effective from 24 January
2000, establishing a Telecommunications Dispute Settlement and Appellate Tribunal
(TDSAT) to take over the adjudicatory and disputes functions from TRAI. TDSAT was
set up to adjudicate any dispute between a licensor and a licensee, between two or more
service providers, between a service provider and a group of consumers, and to hear and
dispose of appeals against any direction, decision or order of TRAI.
5.1.9 Other Government Organizations in the Telecom Sector
Besides MTNL and BSNL, other public sector undertakings in the telecom sector are ITI
Limited (ITI), Telecommunications Consultants India Limited (TCIL), Intelligent
Communication Systems India Limited (ICSIL) and Millennium Telecom Limited
(MTL). ITI Limited was formed in 1948 for manufacturing a wide range of
equipment, which included electronic switching equipment, transmission equipment
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and telephone instruments of various types. TCIL was established in 1978 for providing
know-how in all fields of telecommunications at the global level. The core competence of
TCIL is in communications network projects, software support, switching and
transmission systems, cellular services, rural telecommunications and optical fiber based
backbone network. ICSIL was established in April 1987 for manufacturing computer
based communication systems and equipment. It also provides engineering, technical and
management consultancy services for computers and communication systems in India
and abroad. MTNL was established in February 2000 as a wholly owned subsidiary
of MTNL for providing internet services in the country. It is pursuing the establishment
of broadband internet access for the corporate segment and Voice over Internet Protocol
(VOIP) telephony services throughout India with the use of relevant technologies like
Very Small Aperture Terminals (VSATs).
5.1.10 Regulatory and policy issue of telecom industry
Indian telecom sector is witnessing an unprecedented growth of its time. The same is
expected to increase in future as well. This is necessitating action on the fronts of
infrastructure development and suitable legislative and regulatory reforms in the field of
Information and Communication Technology (ICT) at large. Convergence laws in India
are in the process of formulation and so are policy related matters. Though the
Communication Convergence Bill, 2001 has been formulated, it seems not to have been
notified yet. The Bill is intended to promote, facilitate and develop in an orderly manner
the carriage and content of communications (including broadcasting, telecommunications
and multimedia), for the establishment of an autonomous Commission to regulate
carriage of all forms of communications, for establishment of an Appellate Tribunal and
to provide for matters connected therewith or incidental thereto, to facilitate development
of a national infrastructure for an information based society, and to enable access thereto,
to provide a choice of services to the people with a view to promoting plurality of news,
views and information, to establish a regulatory framework for carriage and content of
communications in the scenario of convergence of telecommunications, broadcasting,
data-communication, multimedia and other related technologies and services, to provide
for the powers, procedures and functions of a single regulatory and licensing authority
and of the Appellate Tribunal, etc.
5.1.11 Norms for M&A Between Telecommunication Companies
The government has revised norms and regulations for merging & acquisition (M&A)
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between telecommunication companies within a same circle. Declaring the guidelines
and regulations, the Department of Telecommunication (DoT) said that prior approval for
merger of telecommunication companies is necessary. It is emphasize that the total
market share after merging should not exceed to more than 40% in terms of both
subscriber base and revenue. Prior it was held at 67 per cent. It has been made clear that
no merger would be allowed unless and until there are minimum four service providers
left after such merging process.
The government's revised norms and regulations concerning to merger has tightened the
merging and acquisitions between telecommunication companies in the circle. From now
consolidation between telecommunication companies within same circle would have
means facing difficulty and high cost also. Idea has recently acquired license only for 9
circles. Therefore, it is not possible for an existing licensee to get the Idea in these nine
circles. Similarly other licensees if they want to sell, needs to search for some other suitor
which should be outside the purview of group of licensed operators in their circles. This
new step from the government side has opened up a new gateway for new players, which
would have till now facing lots of troubles in absence of any license.
The new government regulations are more stringent and left less room for air to pass.
Less flexibility is allowed while designing all four phases - for any merging pre consent
of government is required to take, the market share of merging entity beyond which any
merging will not be allowed, has been brought down from 67% to 40%, before
contemplating any merging process it is imperative that the license must go from through
3 years of operation and last the merged entity is required to pay extra amount for every
spectrum.
The new norms issued are somewhere deviated from the TRAI's regulations. The TRAI
had ruled out merging and acquisition procedure unless and until rollout
recommendations were not full filled. But in the revised guidelines issued by government
for merging process, nothing has been mention in respect of rollout obligations. It is kept
silent for it. Now a clause has been inserted which have made license operation of three
years obligatory. In new guidelines issued by the government 'acquisition' word has been
dropped. The removal in the recent issued guidelines will somewhere create ambiguity to
the extent that it will not be clear as whether these norms are specifically for merger or
acquisition.
The regulations are looking as a pill of relief for new entrants. As now they can bring
strategic investors, which means they can sell maximum 74% stake to all those new
global companies or domestic entities which are keen to make entry into the India's
fastest growing telecommunication sector. Earlier existing telecommunication players
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purchased new entrants for reducing spectrum crunch. But now all new entrants who
have received license in recent years can be merged or purchased by others only after
January 2011.
The new issued guideline also makes it clear that ‘merger of licenses shall be restricted to
the same service area’. It means if an operator has its services only in eastern regions it
can't undergone into merging process with another telecommunication company who is
offering services only in Himachal Pradesh and Punjab. Further it clears that no buoyant
or merging process can be taken place among top 3 service providers. It makes clear that
as long as these new norms are into operation, Vodafone can never be able to purchase
Bharti or Reliance and vice versa, nor can ever the Idea Cellular purchase Vodafone.
However, such big companies- Reliance, Bharti, Vodafone, and Idea Cellular can
purchase small players like Spice.
The DoT also explicitly mentioned out that the spectrum transfer charges are needed to
be pay in case of any merging between existing telecommunication companies. The
amount which will be paid is decided by government. However, if number of service
providers falls below 4 in circle during process then no merging will take place.
The government's motto behind issuing new principles and guidelines is to ensure that
one of the fastest growing telecommunication sectors in near future will continually to
have more than 8 operators in circles. This step in turns bolsters competition and helps in
earning more bucks. It will also lead to optimum utilization of resources.
5.2. IMPORTANT REGULATIONS AND THEIR IMPACT ON THE

INDIAN TELECOM INDUSTRY
5.2.1 Unified Access Service License Regime (UASL)
Unified licensing marked the end of the license regime in the Indian telecom industry. It
helped in aligning convergent technologies and services. The establishment of the
Unified Access Licensing Regime (2003) eliminated the need for different licenses for
different services. Players are now allowed to offer both mobile and fixed-line services
under a single license after paying an additional entry fee. This does not take into account
national and international long-distance services and Internet access services.
5.2.2 Access Deficit Charges (ADC)

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ADC makes it mandatory for a service provider at the caller’s end to share a percent of
the revenue earned with the service provider at the receiver’s end in long-distance
telephony. This subsidises the infrastructure costs of the service provider enabling access
at receiver’s end, especially because rental for fixed-line services is low. Revision in the
ADC regime is expected to be followed by further tariff reduction in telecom services.
Figure: 5.1 Year wise cellular tariff and no. of subscribers
5.2.3 Access Deficit Charges (ADC)
ADC makes it mandatory for a service provider at the caller’s end to share a percent of
the revenue earned with the service provider at the receiver’s end in long-distance
telephony. This subsidises the infrastructure costs of the service provider enabling access
at receiver’s end, especially because rental for fixed-line services is low. Revision in the
ADC regime is expected to be followed by further tariff reduction in telecom services.
5.3 CONCLUSION
We saw various agencies and acts passed by Indian government to regulate the industry.
The government has to be rigid and cautious as the global players enter into the market.
The increasing number of services provided by telecom sectors call for additional
attention. The government has been doing excellent job in maintaining a harmony
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between public and private players but still has a long way to go. The step taken by
government towards the 3G allocation shows how effectively it can operate.
Chapter 6
ECONOMIC
FACTORS AND
ITS
Page 37
IMPLICATION
S
6.1 INTRODUCTION
This chapter gives us an overview about the various measures taken by the government of
India to bring in more FDI in to telecommunication sector. The government wants to

bring in advanced technology and more capital in the telecommunication sector and
hence has increased the FDI cap to 74%. The telecommunication sector has provided
employment opportunities to various skilled and unskilled workers directly or indirectly.
The telecommunication sector has contributed to the growth of GDP and also to the
growth of Capital markets. There are stocks like which form the BSE -30 share index.
These factors provide an economic overview of the economy and have an impact on the
growth of the sector and the country as a whole.
6.2 INVESTMENTS
One of the most significant contributors to India’s booming economy is the development
of the services sector and the focus of Foreign Direct Investment in the
Telecommunication sector. Over the past two decades, the service sector has expanded
rapidly and has come to play an increasingly important role in national economies and in
Page 38
the international economy. The structure of Foreign Direct Investment (FDI) worldwide
has also shifted towards services. In the early 1970s, service sector accounted for only
one quarter of the world FDI stock. In 1990 this shares was less than one half and by
2003, it has risen to about 67 per cent. Now service sectors like telecommunication, IT
enabled services, electricity insurance, air transport are becoming prominent.
Since the introduction of `Manmohanomics’ during PV Narasimha Rao’s government in

1991, Foreign Direct Investment (FDI) has been looked upon as a tool to transform under
developed countries into advanced nations. Since then every government has encouraged
the expansion of foreign direct investment.
The liberalization measures post-1990 has changed with foreign investments radically,
now portfolio as well as Foreign Direct Investment are not only allowed but also actively
encouraged. Initially Foreign Direct investment was introduced only in a few sectors but
since then it has been introduced in a variety of sectors including the sector of
Telecommunications. There are multi-faceted advantages of encouraging foreign direct
investment in telecom sector. Apart from ensuring telecom services at subsidized prices,
it can satisfy the dire need of infrastructural reforms in rural areas. The inflows will allow
multiple benefits such as technology transfer, market access, improvement in voice and
data quality and organizational skills. It increases the flow of foreign currency and helps
in maintaining harmonious relationship with the country from which the investment is
made. Moreover, India offers an unprecedented opportunity for telecom service
operators, infrastructure vendors, manufacturers and associated services companies.
When the Indian government opened up cellular telephony to private industry, several
foreign investors were ready to enter India’s telecom sector. However beating other
manufacturing and services sectors, Indian telecom had attracted major inflow of FDI
since August 1991. According to the numbers published by Investindiatelecom (an online
agency which tracks developments in the Indian telecom sector), Indian telecom has
grossed actual FDI worth Rs 9576.40 crores during the period starting from late 1991 to
early 2003. Of the total FDI inflow in Indian telecom sector, the major share has gone
towards investment in holding companies followed by cellular network and
manufacturing and consultancy.
While Hutchison Whampoa has a 49 per cent stake in Hutchison telecom, Vodafone has
21 per cent in RPG cellular and Verizon has ten percent stake in Reliance telecom. Other
foreign companies with similar stake in Indian companies include AT&T Wireless,
Cellnet and First Pacific.

Page 39
Recently, there has been a hike in the Foreign Direct Investment in the telecom sector and
it has been increased from 49% to 74 %. This move seems to be positive for the sector, as
it requires investments of Rs 700 –900 million over the next 5 years. FDI inflow by 2004
was 9950.94 cores in telecom. Countries like Europe, Korea, and Japan telecom are likely
to enter India, as India is seen as fastest growing telecom market in world. The increase
in the FDI limit is expected to usher in a 20 per cent jump in foreign investments in the
telecom sector within the next two years from the current Rs10, 000 crores.
There are restrictions related to remote access, transfer of network information outside
India and international transit routing of Indian traffic. It has been decided to enhance the
FDI in telecom services in areas like basic telecom, cellular unified access services, Nat
/intranet, long distance Vast, public mobile, radio service & gmdcs. DOT will have the
authority to restrict the license company from operating in any of the sensitive areas of
the country. Foreign portfolio investments will be allowed in existing news channels
within an existing 26 per cent cap on foreign investment holdings for that sector. This
comes in time when there is a boom in the Indian stock markets as well and in the
consumers section. This would clearly go on to attract several players in the telecom
sector globally to look forward to investing in India. The highlights of the new policy are
that Foreign Direct Investment up to 74% is permitted in the telecom sector. Internet
service (with gateways); infrastructure providers (category-II); radio paging service etc.
have been made subject to licensing and security requirements. FDI up to 100%
permitted in respect of the following telecom services: Internet Service Providers not
providing gateways, Electronic mail, Voice mail, Infrastructure providers providing dark
fibre. FDI up to 100% is allowed subject to the stipulation that all such companies would
confirm to divest 26% of their equity in favour of the Indian public within five years, if
these companies are listed in other parts of the world. The above services would be
subject to licensing and security requirements, wherever required. This increase in the
FDI limit would see a sea change of investment flowing into India, and have a
magnanimous effect on the telecom sector by way of economic reforms and also would
affect the economy as a whole, and would have a chain effect on various other sectors.
Due to the increase in the foreign direct investment in the telecommunication market in
India companies like Bharti Tele-Ventures and Hutchison Essar will be able to modulate
the foreign stakes in their companies that have already acquired a range between 67-69
percent of their assets. With respect to the unnerving growth in the telecom industry in
India which accounted for nearly 30 percent every year, the Union Cabinet decided for
the hike in foreign direct investment as it will benefit the country by facilitating the
capital inflows in the industry. As of now acquires the largest share in the Indian telecom

Page 40
market has been acquired by the mobile segment as it has been estimated to witness a
double rise in the past 2 years.
The 74 shares occupied by the Indian telecommunication industry would involve all the
foreign direct investments that have mainly come from the non-residential Indians,
foreign currency convertible bonds, foreign institutional investors, convertible preference
shares, and depository receipts on a direct and indirect basis. The step taken for the
increase in the FDI in Indian telecom industry will boost up the country's economic
condition. Post 1991 one of the major contributors in the accretion of India's economy is
Foreign Direct Investment and thereby it has been highly needed by each sector in Indian
telecommunications industry. As of now the telecom sector requires 1, 60,000 crores for
development purposes among which 30,000 is coming from the local markets.
FDI in services responds well to openness especially when it comes to the

telecommunications sector. This is quite evident looking at the recent boom in the Indian
Telecommunication sector. Further liberalization of services involves potential
advantages for Indian economy. Benefits can arise from increased competition, lower
prices, and better quality of services. FDI in services like Telecommunications provide
key inputs to other productive activities that lead to further investment and
competitiveness of an economy. Efforts should be made towards attracting efficiency
seeking FDI through a right policy that expands operation, improve local skills, establish
linkages and upgrade technology
However, precautions should be taken to avoid the risk of foreign investors out-
competing domestic investors especially in case of infrastructure services like
Telecommunications. Services where domestic investors are not able to cater to the
growing demand, or where domestic service-providers do not have the ability or capacity
to provide the required quality of services, are where the least barriers exist.
To circumvent such spirals it is important for the region to have appropriate domestic
regulations in place, which will assure better quality of services at affordable prices.
Clear domestic regulations increase transparency in the system and encourage foreign
direct investment. To sustain the momentum of growth in services trade in the region,
conscious efforts should be made to improve the competitive advantage of the region as a
whole. Inclusion of trade in services in SAFTA may help attract FDI in services and lead
to greater intra-regional trade. Access to more efficient services could lead to higher
growth in productivity in other sectors, which, in turn, could improve the overall
competitive strength of the region.

Page 41
Thus it can be concluded that the recent upward swing in the Telecommunications sector
in India is due to the introduction of FDI in this sector by the Indian Government since
1991 but at the same time we must also be careful and not get carried away by this
development and should have proper regulations in place to actually utilize this situation
to our advantage.
Chapter 7

Page 42
ANALYTICAL
FRAMEWOR
K
7.1 INTRODUCTION
In the third section we have analyzed in detail the entire telecom industry sector. There
only we have laid the background for analysing the analytical framework for the telecom
industry. Here we will carry out the Porter’s five forces analysis and SWOT analysis for
the telecom industry. We will also carry out the ratio analysis of the telecom industry as a
whole to find the financial performance of the industry and compare it with that of
different companies.
7.2 PORTER’S FIVE FORCES
There is continuing interest in the study of the forces that impact on an organisation or an
industry, particularly those that can be harnessed to provide competitive advantage. The
ideas and models which emerged during the period from 1979 to the mid-1980s (Porter,
1998) were based on the idea that competitive advantage came from the ability to earn a

Page 43
return on investment that was better than the average for the industry sector (Thurlby,
1998).
As Porter's 5 Forces analysis deals with factors outside an industry that influence the
nature of competition within it, the forces inside the industry (microenvironment) that
influence the way in which firms compete, and so the industry’s likely profitability is
conducted in Porter’s five forces model. A business has to understand the dynamics of its
industries and markets in order to compete effectively in the marketplace. Porter (1980)
defined the forces which drive competition, contending that the competitive environment
is created by the interaction of five different forces acting on a business. In addition to
rivalry among existing firms and the threat of new entrants into the market, there are also
the forces of supplier power, the power of the buyers, and the threat of substitute products
or services. Porter suggested that the intensity of competition is determined by the
relative strengths of these forces.
The nature of competition in an industry is strongly affected by suggested five forces.

The stronger the power of buyers and suppliers, and the stronger the threats of entry and
substitution, the more intense competition is likely to be within the industry. However,
these five factors are not the only ones that determine how firms in an industry will
compete – the structure of the industry itself may play an important role. Indeed, the
whole five-forces framework is based on an economic theory know as the “Structure-
Conduct-Performance” (SCP) model: the structure of an industry determines
organizations’ competitive behaviour (conduct), which in turn determines their
profitability (performance). In concentrated industries, according to this model,
organizations would be expected to compete less fiercely, and make higher profits, than
in fragmented ones.

Page 44
Main Aspects of Porter’s Five Forces Analysis
The original competitive forces model, as proposed by Porter, identified five forces
which would impact on an organization’s behaviour in a competitive market. These
include the following:
 The rivalry between existing sellers in the market
 The power exerted by the customers in the market
 The impact of the suppliers on the sellers
 The potential threat of new sellers entering the market
 The threat of substitute products becoming available in the market
Understanding the nature of each of these forces gives organizations the necessary
insights to enable them to formulate the appropriate strategies to be successful in their
market (Thurlby, 1998). We will examine these concepts as described by Porter’s 5 force
model and as applied to Indian telecom industry simultaneously.
7.2.1 Force 1: The Degree of Rivalry

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The intensity of rivalry, which is the most obvious of the five forces in an industry, helps
determine the extent to which the value created by an industry will be dissipated through
head-to-head competition. The most valuable contribution of Porter's “five forces”
framework in this issue may be its suggestion that rivalry, while important, is only one of
several forces that determine industry attractiveness.
 This force is located at the centre of the diagram
 Is most likely to be high in those industries where there is a threat of substitute

products; and existing power of suppliers and buyers in the market
Now let us understand the implication of degree of revelry in Indian telecom sector. The
dimensions of this parameter are determined by:
High Exit Barriers: In any industry, if the exit barrier is high it increases the difficulty
of any organization to leave the industry sector. So it makes any difficult to any willing to
leave company to leave the industry. The telecom industry suffers from high exit barriers,
mainly due to its specialized equipment. Networks and billing systems cannot really be
used for much else, and their swift obsolescence makes liquidation pretty difficult.
High Fixed Cost: The industry also suffers from high fixed cost which makes the entry
barrier also very high for the industry. It comes as no surprise that in the capital-intensive
telecom industry the biggest barrier to entry is access to finance. To cover high fixed
costs, serious contenders typically require a lot of cash. When capital markets are
generous, the threat of competitive entrants escalates. When financing opportunities are
less readily available, the pace of entry slows. Meanwhile, ownership of a telecom license
can represent a huge barrier to entry.
 6-7 players in each region
 3 out of 4 BIG-Four present in each region
Very less time to gain advantage by an innovation: Every company in this industrial
sector in investing a huge amount in research and development and marketing strategy.
That is why we see any offer launched by any company is counter attacked by other
companies very soon. This makes the industry rivalry most prominent.
Eg. Caller tunes, life time card
Price wars: The price war is really very fierce in this industry. Price war in telecom
industry has commoditized the market that branding has taken a backseat.
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7.2.2 Force 2: The Threat of New Entrants
Both potential and existing competitors influence average industry profitability. The
threat of new entrants is usually based on the market entry barriers. They can take diverse
forms and are used to prevent an influx of firms into an industry whenever profits,
adjusted for the cost of capital, rise above zero. In contrast, entry barriers exist whenever
it is difficult or not economically feasible for an outsider to replicate the incumbents’
position. The most common forms of entry barriers, except intrinsic physical or legal
obstacles, are as follows:
 Economies of scale: In telecom industry the economies of scale exists from

the supplier side. That is why companies try to increase their subscriber base
at drastic rate.
 Distribution channels: Distribution channels are also providing a major

determining factor. These channels are not loyal to any company and
competitors can easily access them and make out work for them.
 Customer Switching Costs: Customer switching cost is very low, as cost of

new connection is really low. And new connection offers more benefits to the
customers.
7.2.3 Force 3: The Threat of Substitutes
The threat that substitute products pose to an industry's profitability depends on the
relative price-to-performance ratios of the different types of products or services to which
customers can turn to satisfy the same basic need. The threat of substitution is also
affected by switching costs – that is, the costs in areas such as retraining, retooling and
redesigning that are incurred when a customer switches to a different type of product or
service. It also involves:
 Product-for-product substitution (email for mail, fax); is based on the
substitution of need;
 Generic substitution (Video suppliers compete with travel companies);
 Substitution that relates to something that people can do without (cigarettes,

alcohol).
Now let us discuss this concept for telecom industry. The potential major substitutes for
telecom industry are as follows:
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 VOIP (Skype, Messenger etc.)
 Online Chat
 Email
 Satellite phones
All of these technologies have a huge potential, though none of the above a major threat
in current scenario. So the telecom industry has to keep a close look on these substitutes.
7.2.4 Force 4: Buyer Power
Buyer power is one of forces that influence the appropriation of the value created by an
industry. The most important determinants of buyer power are the size and the
concentration of customers. Other factors are the extent to which the buyers are informed
and the concentration or differentiation of the competitors. Kippenberger (1998) states
that it is often useful to distinguish potential buyer power from the buyer's willingness or
incentive to use that power, willingness that derives mainly from the “risk of failure”
associated with a product's use.
 This force is relatively high where there a few, large players in the market, as it is
the case with retailers a grocery stores;
 Present where there is a large number of undifferentiated, small suppliers, such as

small farming businesses supplying large grocery companies;
 Low cost of switching between suppliers, such as from one fleet supplier of trucks
to another.
In the context of Indian telecom industry we can say that the following points influence
the buyer power:
 Lack of differentiation among the service provider

 Cut throat competition
 Customer is price sensitive
 Low switching costs
 Number portability to have negative impact

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7.2.5 Force 5: Supplier Power
Supplier power is a mirror image of the buyer power. As a result, the analysis of supplier
power typically focuses first on the relative size and concentration of suppliers relative to
industry participants and second on the degree of differentiation in the inputs supplied.
The ability to charge customers different prices in line with differences in the value
created for each of those buyers usually indicates that the market is characterized by high
supplier power and at the same time by low buyer power.
In the drawback of Indian telecom industry the following should be kept in mind:
 Large number of suppliers: The industry basically has a large number of suppliers,
which helps them to choose from a lot of options. So they try to select the best
option to deliver the value to the customers and to have a competitive advantage
from their competitor.
 Shared tower infrastructure: Technology has helped them to share the tower
infrastructure. This basically helps them to reduce the initial investment a lot.
 Limited pool of skilled managers and engineers especially those well versed in the
latest.
 Medium cost of switching since changing their hardware would lead to additional
cost in modifying the architecture.
 Overall influence on the industry – medium.
7.3 SWOT ANALYSIS
A scan of the internal and external

environment is an important part of the
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strategic planning process. Environmental factors internal to the firm usually can be
classified as strengths (S) or weaknesses (W), and those external to the firm can be
classified as opportunities (O) or threats (T). Such an analysis of the strategic
environment is referred to as a SWOT analysis.
The SWOT analysis provides information that is helpful in matching the firm's resources
and capabilities to the competitive environment in which it operates. As such, it is
instrumental in strategy formulation and selection. The following diagram shows how a
SWOT analysis fits into an environmental scan:
SWOT Analysis Framework
Environmental Scan
/ \
Internal Analysis External Analysis
/ \ / \
Strengths Weaknesses Opportunities Threats
7.3.1 |
SWOT Matrix Strengths
Here we will analyze the strengths of the telecom industry as a whole. The most
important factors are:
 Technology is advanced and easy to implement: For telecom industry the

technology is really advanced and more and more investment is done on
technology to get world class infrastructure and knowhow to put in this field.
Recently the telecom sector is going to add 3G spectrum as its latest up-
gradation.
 Management Team has prior experience: The management team controlling

Indian telecom sector in really efficient. Thank goes to the IITs which produce
world class engineers. So Indian telecom sector has abundance of
technological knowhow.
7.3.2 Weakness

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The weaknesses of the Indian telecom sector are as follows.
 High Cost of Infrastructure: The infrastructure cost of telecom industry is very

high.
 Low customer retention power: The customer retention power for telecom
industry is really low and the customer changes their service provider
company very soon.
7.3.3 Opportunity
 Population: The population of India is really an opportunity of telecom service

providers, as the number of population without telecom service is also very high.
The industry has to target India’s huge population to grow.
 Changing Population psychograph: Population psychograph is also changing.

Previously telecom service was thought as an emergency service, now it has
become an essential part of life in our country.
 Increased Penetration Level: All the organizations of the industry are trying to
increase their penetration level, in other word to increase the tele-density of the
country. The urban Indian population gives a real growth prospect to the industry.
 FDI: The foreign direct investment in telecom has been hiked up from 49% to
74%. This move is positive for the sector, as it requires investments of Rs 700 –
900 million over the next 5 years. FDI inflow by 2004 was 9950.94 cores in
telecom. Countries like Europe, Korea, and Japan telecom are likely to enter
India, as India is seen as fastest growing telecom market in world.
7.3.4 Threats
The treats to the industry are the following:
 Government Policies – Government may provide licenses to many foreign

operators, which may already have pose a threat for the existing players in the
industry.
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 New Technology can change the market dynamics: A lot of new technologies are
coming. Then even have the potential of changing the entire industry dynamics or
even create substitute of the telecom services existing.
Some of the examples are follows:
 VOIP (Skype, Messenger etc.)

 Online Chat
 Email
 Satellite phones
To summarize the SWAT analysis we can draw the following framework for telecom
industry:

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Chapter 8
COMPANY
ANALYSIS
8.1 INTRODUCTION
A brief overview about each company has been mentioned in this chapter. This chapter
also deals with the analysis of the companies on various financial ratios. The financial
ratios of these companies are compared with the industry standard ratios. There is
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comparison with the companies on various parameters like Enterprise value, Market
capitalization, EPS, Sales and other income. This comparison gives us an overview in
terms of position of companies in each parameter. These ratios give us an insight to the
financial stability of the firm.
Figure: 9.1 Market Share of Telecom Companies as on 31st Jan’09
Tata Teleservices (Maharashtra) Ltd.

9%
Aircel + Dishnet
5%
Bharti Airtel Ltd

Idea Cellular + Spice 24%
11%
HFCL
MTNL 0%
1%
BSNL
13%
Reliance Communications Ltd.
18%
BPL Mumbai
1% Shyam Telecom
Vodafone Essar Ltd. 0%
17%
8.2 TOP FIVE COMPANIES
The Top five companies, on the basis of ‘Market Share’ as on 31st January, 2009 are:
1. Bharti Airtel Ltd.

2. Reliance Communications Ltd.
3. Vodafone Essar Ltd.
4. BSNL
5. Idea Cellular + Spice
BHARTI AIRTEL LTD.
Telecom giant Bharti Airtel is the flagship company of Bharti Enterprises. The Bharti
Group has a diverse business portfolio and has created global brands in the
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telecommunication sector. Airtel comes from Bharti Airtel Limited, India’s largest
integrated and the first private telecom services provider with a footprint in all the 23
telecom circles. Bharti Airtel since its inception has been at the forefront of technology
and has steered the course of the telecom sector in the country with its world class
products and services. The businesses at Bharti Airtel have been structured into three
individual strategic business units (SBU’s) - Mobile Services, Airtel Telemedia Services
& Enterprise Services. The mobile business provides mobile & fixed wireless services
using GSM technology across 23 telecom circles while the Airtel Telemedia Services
business offers broadband & telephone services in 95 cities and has recently launched
India's best Direct-to-Home (DTH) service, Airtel digital TV. The Enterprise services
provide end-to-end telecom solutions to corporate customers and national & international
long distance services to carriers. All these services are provided under the Airtel brand.
The company served an aggregate of 88,270,194 customers as of December 31, 2008; of

whom 85,650,733 subscribed to GSM services and 2,619,461 use the Telemedia Services
either for voice and/or broadband access delivered through DSL. Bharti Airtel is the
largest wireless service provider in the country, based on the number of subscribers as of
December 31, 2008. They also offer an integrated suite of telecom solutions to their
enterprise customers, in addition to providing long distance connectivity both nationally
and internationally. They have recently forayed into media by launching their DTH and
IPTV Services. All these services are rendered under a unified brand "Airtel".

The company also deploys, owns and manages passive infrastructure pertaining to
telecom operations under its subsidiary Bharti Infratel Limited. Bharti Infratel owns 42%
of Indus Towers Limited. Bharti Infratel and Indus Towers are the two top providers of
passive infrastructure services in India.

Company shares are listed on The Stock Exchange, Mumbai (BSE) and The National
Stock Exchange of India Limited (NSE).
RELIANCE COMMUNICATIONS LTD.

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Reliance Communications is the flagship company of the Anil Dhirubhai Ambani Group
(ADAG) of companies. Listed on the National Stock Exchange and the Bombay Stock
Exchange, it is India’s leading integrated telecommunication company with over 71
million customers.
Their business encompasses a complete range of telecom services covering mobile and
fixed line telephony. It includes broadband, national and international long distance
services and data services along with an exhaustive range of value-added services and
applications. Our constant endeavour is to achieve customer delight by enhancing the
productivity of the enterprises and individuals we serve.
Reliance Mobile (formerly Reliance India Mobile), launched on 28 December 2002,

coinciding with the joyous occasion of the late Dhirubhai Ambani’s 70th birthday, was
among the initial initiatives of Reliance Communications. It marked the auspicious
beginning of Dhirubhai’s dream of ushering in a digital revolution in India. Today, the
company can proudly claim that they were instrumental in harnessing the true power of
information and communication, by bestowing it in the hands of the common man at
affordable rates.
They endeavour to further extend their efforts beyond the traditional value chain by
developing and deploying complete telecom solutions for the entire spectrum of society.
It was established in the year 2004 as Reliance Infrastructure Developers Private Limited,
Reliance Communications started laying 60,000 route kilometers of a pan-India fibre
optic backbone with high capacity, integrated (wireless and wireline), convergent (voice,
data and video) digital network and to offer services spanning the entire infocomm value
chain. It is capable of delivering a range of services spanning the entire infocomm
(information and communication) value chain, including infrastructure and services for
enterprises as well as individuals, applications, and consulting.
VODAFONE ESSAR LTD.

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Vodafone Essar in India is a subsidiary of Vodafone Group Plc and commenced
operations in 1994 when its predecessor Hutchison Telecom acquired the cellular license
for Mumbai. Vodafone Essar now has operations in 22 circles with over 65.92 million
customers**. The company is a joint venture of Essar Communication Holdings Ltd and
the UK-based Vodafone Group. Vodafone has partnered with the Essar Group as their
principal joint venture partner for the Indian market. They are in the business of cellular
telephony. Over the years, Vodafone Essar, under the Hutch brand, has been named the
‘Most Respected Telecom Company’, the ‘Best Mobile Service in the country’ and the
‘Most Creative and Most Effective Advertiser of the Year’.
Vodafone is the world’s leading international mobile communications company. It

currently has equity interests in 27 countries across 5 continents and 40 partner networks
with over 289 million proportionate customers worldwide. Vodafone has partnered with
the Essar Group as its principal joint venture partner for the Indian market.
Essar Global Limited (EGL) is a diversified business group spanning the manufacturing
and services sectors of Steel, Energy, Power, Communications, Shipping & Logistics,
and Projects. The group has operations and investments in India, Canada, USA, Africa,
the Middle East, the Caribbean and South East Asia and employs 30,000 people
worldwide.
Vodafone Essar Ltd provides services like 2G, which are based on 1800 Mhz and
900Mhz GSM digital technology. They offers voice and data services. In addition, they
offers postpaid connections activation, prepaid SIM cards and recharge coupons sale,
service activation/deactivation, postpaid tariff plan change, customer query resolution,
prepaid/postpaid SIM card replacement and upgradation, mobile number change, and
information on and subscription of value added services through stores.
**Figures from Cellular Operators Association of India, February 28, 2009

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BHARAT SANCHAR NIGAM LTD.
Bharat Sanchar Nigam Ltd. formed in October, 2000, is World's 7th largest
Telecommunications Company providing comprehensive range of telecom services in
India: 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.
It has about 47.3 million line basic telephone capacity, 4 million WLL capacity, 20.1
Million GSM Capacity, more than 37382 fixed exchanges, 18000 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 Rural-Urban 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.
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 17.8 million cellular customers, garnering
24 percent of all mobile users as its subscribers. That means that almost every fourth
mobile user in the country has a BSNL connection. In basic services, BSNL is miles
ahead of its rivals, with 35.1 million Basic Phone subscribers i.e. 85 per cent share of
the subscriber base and 92 percent share in revenue terms.
BSNL has more than 2.5 million WLL subscribers and 2.5 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 0.6 million DataOne broadband
customers.

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IDEA CELLULAR LTD. + SPICE
DEA Cellular is a publicly listed company, having listed on the Bombay Stock Exchange
(BSE and the National Stock Exchange (NSE) in March 2007. Idea Cellular Ltd.
is India's leading GSM mobile services operator. It has licenses to operate in 11 circles.
The company has a customer base of over 17 million. It is the first cellular company to
launch music messaging with Cellular Jockey, Background Tones, Group Talk, a voice
portal with Say IDEA and a complete suite of mobile email Services.
A brand known for many firsts, Idea was the first to launch GPRS and EDGE in the
country. Idea has received international recognition for its path-breaking innovations
when it won the GSM Association Award for "Best Billing and Customer Care Solution"
for 2 consecutive years.
IDEA Cellular is part of the Aditya Birla Group, India's first truly multinational
corporation. The group operates in 25 countries, and is anchored by over 1,25,000
employees belonging to 25 nationalities.
The combined holding of the Aditya Birla Group companies in Idea stands at 98.3 per
cent. Mr. Kumar Mangalam Birla has been named the Chairman of the company.
The Indian telecommunications market for mobile services is divided into 22 "Service
Areas" classified into "Metro", Category "A", Category "B" and Category "C" service
areas by the Government of India. These classifications are based principally on a Service
Area's revenue generating potential
Customer Service and Innovation are the drivers of this Cellular Brand. A brand known
for their many firsts, IDEA is the only operator to launch General Packet Radio Service
(GPRS) and EDGE in the country. IDEA has seen phenomenal growth since its
inception, the company's footprint idea is to first achieve critical mass, then drill deep
instead of spreading thin, however, does not increasing geographic footprint only, it also
drills deep and successfully attempts to provide excellent network coverage in all its
circles of operations.

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8.3 BOTTOM FIVE COMPANIES
The Bottom five companies, on the basis of ‘Market Share’ as on 31st January, 2009 are:
1. Aircel Cellular Ltd. + Dishnet

2. Mahanagar Telephone Nigam Ltd. (MTNL)
3. BPL Mobile Communications Ltd.
4. HFCL Infotel Ltd.
5. Shyam Telecom Ltd.
AIRCEL + DISHNET
The Aircel Group is a joint venture between Maxis Communications Berhad of Malaysia
and Apollo Hospital Enterprise Ltd of India, with Maxis Communications holding a
majority stake of 74%.
Aircel commenced operations in 1999 and became the leading mobile operator in Tamil
Nadu within 18 months. In December 2003, it launched commercially in Chennai and
quickly established itself as a market leader – a position it has held since.
Aircel began its outward expansion in 2005 and met with unprecedented success in the
Eastern frontier circles. It emerged a market leader in Assam and in the North Eastern
provinces within 18 months of operations. Till today, the company gained a foothold in
14 circles including Chennai, Tamil Nadu, Assam, North East, Orissa, Bihar, Jammu &
Kashmir, Himachal Pradesh, West Bengal, Kolkata, Kerala, Andhra Pradesh, Karnataka
and Delhi.
The Company has currently gained a momentum in the space of telecom in India post the
allocation of additional spectrum by the Department of Telecom, Govt. of India for 13
new circles across India. These include Delhi (Metro), Mumbai (Metro), Andhra Pradesh,
Gujarat, Haryana, Karnataka, Kerala, Madhya Pradesh, Maharashtra & Goa, Rajasthan,
Punjab, UP (West) and UP (East).
Aircel has won many awards and recognitions. Voice and Data gave Aircel the highest
rating for overall customer satisfaction and network quality in 2006. Aircel emerged as
the top mid-size utility company in Business world’s ‘List of Best Mid-Size Companies’
in 2007. Additionally, Tele.net recognized Aircel as the best regional operator in 2008.

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With over 16 million customers in the country, Aircel, the fastest growing telecom
company in India, has revved up plans to become a full-fledged national operator by end
of 2009.
MTNL
Mahanagar Telephone Nigam Limited (MTNL) was set up in 1st April of the year 1986
by the Government of India to upgrade the quality of telecom services, expand the
telecom network, introduce new services and to raise revenue for telecom development
needs of India's key metros, Delhi (the political capital) and Mumbai (the business capital
of India). The company has also been in the forefront of technology induction by
converting 100% of its telephone exchange network into the state-of-the-art digital mode.
MTNL as a company, over last nineteen years, grew rapidly by modernizing the network,
incorporating the State-of-the-art technologies and a customer friendly approach. The
Company providing various types of telecommunication services including Telephone,
telex, wireless, data communication, telematic and other like forms of communication
(Internet).

First digital exchange world technology brought to India by the company during the year
1986. Phone Plus services was offered by the company in the year 1988, it gives
multiplied benefits to telephone users. During the year 1992, the company introduced
Voice Mail Service. MTNL had introduced the Integrated Services Digital Network
(ISDN) services in the period of 1996. Apart from this IVRS (Interactive Voice Response
System) like local assistance changed number information, and fault booking system
ensuring round the clock service, a CD-ROM version of the telephone directory and an
on-line directory enquiry through PC was introduced during the year 1997. To facilitate
the clientele, MTNL launched the country's first toll-free service in Delhi in the period of
1998. During the year 1999, MTNL brought in the most widely using service called
Internet (Network of Networks), the extreme level of information exchange.
During the year 2001, the company launched GSM Cellular Mobile service under the
brand name Dolphin and in the same year MTNL also launched Wireless in Local Loop
(WLL) Mobile services under the brand name Garuda.

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The Company established Wi-Fi & digital certification services in the identical year.
MTNL bagged the award for excellence in cost reduction in the year 2004. State of the
art training centre of the company 'CETTM' was commissioned in the year of 2004. The
Company introduced the broadband services under the brand name of 'TRI BAND'
during the year 2005. MTNL-STPI IT Services Ltd is a 50:50 Joint Venture between
Software Technology Parks of India (STPI) and the company. The Company has
restructured Millennium Telecom Ltd (MTL) as a Joint Venture company of MTNL and
BSNL with 51% and 49% equity participation respectively.

To remain market leader in providing world class Telecom and IT related services at
affordable prices, the company partaking its all efforts in the same business area and
MTNL wants to become a global player, also find a place in the Fortune 500' companies.
BPL MOBILE COMMUNICATIONS LTD.
BPL Mobile Communications Limited popularly known as BPL Mobile is an India-based

telecommunication service providing company. BPL Mobile Communications Limited is
an offshoot of the legendary business conglomerate ESSAR group. BPL Mobile
Communications Limited was established in the year 1995 and it is presently operating in
only in the city of Mumbai. BPL Mobile Communications Limited has revolutionized the
Indian mobile telecommunication industry. Within a short span of time the subscriber
base of BPL Mobile Communications Limited has reached the 1 million mark. This
gigantic mobile telecommunication company of India has grown in leaps and bounds and
it offers seamless service to its customers spread across Mumbai. Further, BPL Mobile
has gained tremendous popularity due to its competitive pricing of tariffs. BPL Mobile
offers high-class mobile service to its wide pool of Mumbai subscribers.
Further, it ranks very high on parameters like, customer satisfaction, billing performance,
voice quality etc and was thus ranked first in the category of Global System for Mobile
Communications (GSM) and Code Division Multiple Access (CDMA) of mobile service
providers, operating in Mumbai. Superior coverage and optimum sound clarity are the
strengths of BPL Mobile. BPL Mobile Communications Limited provides its customers
with world class mobile services, through the use of state-of-the-art technology and
network and this includes use of unique network design, the Qualnet, Camel Phase 2
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Intelligent Network (IN) platform and GPRS facilitating ultra modern services like
Multimedia Messaging Services (MMS), mobile browsing and Java based mobile phone
games. Mr. S. Subramaniam, CEO of the company, heads this leading telecommunication
company of India.
The products and services offered by BPL Mobile Communications Limited are as
follows -
 Prepaid Connections
 Postpaid Connections
 Prepaid Recharge Coupons
 Bill Payments
 Value Added Services (VAS)
 Service Inquiries
 SIM Replacements
 Handset Sales
HFCL INFOTEL LTD.
Incorporated on 2 Aug.'46, The Investment Trust of India (ITI) is managed by chairman

and managing director B K Kothari. During 2002-03 the name of the Company changed
to HFCL Infotel Ltd, as part of Company's diversification and restructuring programme,
HFCL Infotel Ltd ('transferor Company') a telecommunication Company operating in the
Punjab Circle merged with the Company through a Scheme of Amalgamation and
decided to hive off the business of Hire Purchase, Finance, Leasing and Securities
Trading by way of an outright sale with effect from 1st September 2002 to its wholly
owned subsidiary 'Rajam Finance & Investments Company (India) Ltd' now renamed as
'The Investment Trust of India Ltd'

Other group companies are Kothari Sugars and Chemicals and Madras Safe Deposit. In
Sep.'94, it came out with a rights issue of 21.79 lac shares (premium: Rs 30) aggregating
Rs 8.72 cr, to augment long-term working capital. The company is mainly engaged in
hire purchase, lease financing and investments. Its clients include individuals, firms as
well as corporate bodies.
ITI's business activities include sugar, petrochemicals, industrial alcohol, etc. It has two
subsidiaries -- ITI Pioneer AMC and ITI Capital Markets. ITI Pioneer AMC has
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promoted Kothari Pioneer Mutual Fund. ITI has invested 55% of its capital in ITI Pioneer
AMC and the remaining 45% has been subscribed to by Pioneering Management
Corporation, US. During 1995-96, ITI Pioneer AMC Limited ceased to be a subsidiary of
the company. During 1997-98, The Company’s holding in ITI Capital Market Ltd was
sold to Kothari Pioneer AMC Ltd.

During 2003-04, The Company launched its Prepaid Mobile product and a complete
range of innovative value Added Services and Data products were launched in May 2004,
by the introduction of DSL-high speed Internet product. The company became the first
service provider to have launched DSL services in the state of Punjab and Chandigarh.
During 2004-05, The Company expanded its services to 125 cities/towns with 2.47 lacs
subscribers in Punjab.

The company is planning a venture into Video and Cable TV Services and making triple
play services by an expansion into the neighbouring states of Punjab. A wholly owned
subsidiary, Connect Broadband Services Limited was formed on July 2004, for the above
purpose.

The Company's services namely, Fixed Line Telephoney, Mobile Telephoney,
Broadband Internet Access and Data Networking Access are offered under the brand
name 'CONNECT'.
SHYAM TELECOM LTD.
Incorporated in 1992, Shyam Telecom Limited, a leading manufacturer of Telecom

Equipment in India is the flagship company of the Shyam Group of India. The expanding
horizon of the telecom sector in India has given Shyam new vistas and avenues for
growth and expansion.

To concentrate mainly on its core activities i.e. investment in Telecom activities, the
company restructured its business and a result it has de-merged its manufacturing
business to a wholly owned subsidiary viz. Shyam Telecom Manufacturing Ltd (formerly
known as Shyam Telecom Infrastructure Projects Ltd). Subsequently the company will be
an investor in Shyam Telecom Manufacturing Limited (developer of wireless product for
GSM & CDMA) and Shyam Telelink Ltd (basic telephony services in Rajasthan).

Shyam Telecom also took a strategic decision by de-subsidiarise Shyam International Ltd
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by which Shyam ACeS also got de-subsidiarised. It has also acquired the entire capital of
Shyam Telecom Manufacturing Ltd & Shyam Tel Singapore Pvt. Ltd.

Shyam's R&D which is fully recognized by the Department of Science and Technology
has been able to design new products. Shyam's R&D wing is well-equipped with the
latest and sophisticated testing instruments, CAD/CAM for design and assembly work
besides having highly qualified engineers.

The company currently manufactures Wireless in Local Loop, Fiber in local loop, Digital
Loop Carriers (DLC), Digital Radios, Spread Spectrum Radios, Digital Subscriber Line
(DSL) for Internet Access, Remote Energy Meeting Systems (REMS) & Supervisory
control & data accusation systems (SCADA). The company has an international presence
in 27 countries spread over America, Europe, Africa, Indian sub-continent and Asia-
Pacific.

The company has extended its basic telephony service to Jaipur and Jodhpur. The
company's service covered all the three technologies in basic telephony - wireline,
CDMA and CorDect.
Chapter 9

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TRENDS
AND
FORECAST
9.1 INTRODUCTION
The recent development in information technology and science has made a great
difference in telecom industry by increasing its efficiency and opening doors to major
developments of sector. CDMA, GSM, 2G&3G SPECTRUM, WIMAX etc are some of
the technology which have discussed. Both development and problem walks hand in
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hand, with increasing development the industry is facing huge challenges and problems.
The industry will have to work more efficiently in order to overcome the problems. The
industry in total has got a great future and has a lot of untapped potential market.
9.2 TECHNOLOGIES
Technology is very much related to the way we conduct business. Today everything that
we talk about in business, like, the way we conduct business, the way we do things, the
way we deliver to the customers, etc. is using some form of technology. Therefore, role
of technology cannot be defined because it is a mindset and it happens over a period of
time.
The various technologies used by the Telecom Service Providers are as follows:
9.2.1 GSM (Global System for Mobile Communication)

GSM, first introduced in 1991, is the leading digital cellular system. It uses narrowband
TDMA (Time Division Multiple Access). Eight simultaneous calls can occupy the same
radio frequency. GSM simplifies data transmission to allow laptop and palmtop
computers to be connected to GSM phones. It provides integrated voice mail, high-speed
data, fax, paging and Short Message Services (SMS) capabilities, as well as secure
communications. It offers the best voice quality of any current digital wireless standard.
Originally a European standard for digital mobile telephony, GSM has become the
world's most widely used mobile system and is now being used in more than 100
countries. GSM networks operate on the 900MHz, 1800MHz and 1900MHz wavebands
all over the world.
9.2.2 GPRS (General packet radio service)

GPRS is a packet oriented mobile data service available to users of the 2G cellular
communication systems global system for mobile communications (GSM), as well as in
the 3G systems. In the 2G systems, GPRS provides data rates of 56-114 kbit/s.
GPRS data transfer is typically charged per megabyte of traffic transferred, while data
communication via traditional circuit switching is billed per minute of connection time,
independent of whether the user actually is using the capacity or is in an idle state. GPRS
is a best-effort packet switched service, as opposed to circuit switching, where a certain
quality of service (QoS) is guaranteed during the connection for non-mobile users.
2G cellular systems combined with GPRS are often described as 2.5G, that is, a
technology between the second (2G) and third (3G) generations of mobile telephony. It
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provides moderate speed data transfer, by using unused time division multiple access
(TDMA) channels in, for example, the GSM system. Originally there was some thought
to extend GPRS to cover other standards, but instead those networks are being converted
to use the GSM standard, so that GSM is the only kind of network where GPRS is in use.
GPRS is integrated into GSM Release 97 and newer releases. It was originally
standardized by European Telecommunications Standards Institute (ETSI), but now by
the 3rd Generation Partnership Project (3GPP).
9.2.3 EDGE (Enhanced Data rates for GSM Evolution)
EDGE, Enhanced GPRS (EGPRS), or IMT Single Carrier (IMT-SC) is a backward-

compatible digital mobile phone technology that allows improved data transmission rates,
as an extension on top of standard GSM. EDGE is considered a 3G radio technology and
is part of ITU's 3G definition,[1]. EDGE was deployed on GSM networks beginning in
2003— initially by Cingular (now AT&T) in the United States.
EDGE is implemented as a bolt-on enhancement for 2G and 2.5G GSM and GPRS
networks, making it easier for existing GSM carriers to upgrade to it. EDGE is a superset
to GPRS and can function on any network with GPRS deployed on it, provided the
carrier implements the necessary upgrade.
EDGE requires no hardware or software changes to be made in GSM core networks.

EDGE compatible transceiver units must be installed and the base station subsystem
needs to be upgraded to support EDGE. If the operator already has this in place, which is
often the case today, the network can be upgraded to EDGE by activating an optional
software feature. Today EDGE is supported by all major chip vendors for both GSM and
WCDMA/HSPA.
9.2.4 CDMA (Code division multiple access)
CDMA is a channel access method utilized by various radio communication

technologies. It should not be confused with the mobile phone standards called cdmaOne
and CDMA2000 (which are often referred to as simply "CDMA"), which use CDMA as
an underlying channel access method.
One of the basic concepts in data communication is the idea of allowing several
transmitters to send information simultaneously over a single communication channel.
This allows several users to share a bandwidth of frequencies. This concept is called

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multiplexing. CDMA employs spread-spectrum technology and a special coding scheme
(where each transmitter is assigned a code) to allow multiple users to be multiplexed over
the same physical channel. By contrast, time division multiple access (TDMA) divides
access by time, while frequency-division multiple access (FDMA) divides it by
frequency. CDMA is a form of "spread-spectrum" signaling, since the modulated coded
signal has a much higher data bandwidth than the data being communicated.
9.2.5 HSDPA (High-Speed Downlink Packet Access)
HSDPA is a 3G (third generation) mobile telephony communications protocol in the

High-Speed Packet Access (HSPA) family, which allows networks based on Universal
Mobile Telecommunications System (UMTS) to have higher data transfer speeds and
capacity. Current HSDPA deployments support down-link speeds of 1.8, 3.6, 7.2 and
14.4 Mbit/s. Further speed increases are available with HSPA+, which provides speeds of
up to 42 Mbit/s downlink
The High-Speed Downlink Shared Channel (HS-DSCH) lacks two basic features of other
W-CDMA channels—variable spreading factor and fast power control. Instead, it
delivers the improved downlink performance using adaptive modulation and coding
(AMC), fast packet scheduling at the base station, and fast retransmissions from the base
station, known as hybrid automatic repeat-request (HARQ).
9.2.6 WLL (Wireless Local Loop)
Wireless local loop (WLL), is a term for the use of a wireless communications link as the
"last mile / first mile" connection for delivering plain old telephone service (POTS)
and/or broadband Internet to telecommunications customers. Various types of WLL
systems and technologies exist.
WLL (Wireless in Local Loop) is a communication system that connects subscribers to

the public Switched Telephone Network (PSTN) using radio frequency signals as a
substitute for conventional wires for all or part of the connection between the subscriber
and the telephone exchange. It is useful for those subscribers who are located in pockets
where immediate telephone connections cannot be provided due to lack of underground
cable network but radio coverage is available.
Other terms for this type of access include Broadband Wireless Access (BWA), Radio In
The Loop (RITL), Fixed-Radio Access (FRA) and Fixed Wireless Access (FWA).

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9.2.7 WiMax
WiMax (Worldwide Interoperability for Microwave Access) is a technology designed to

give people high speed access to the net over relatively long distances. A typical WiMax
system could theoretically give users in an area three to 10 kilometers wide a 40 Mbps
connection to the net.
This technology already deployed in some urban centres like Chennai (Madras) and
Mumbai (Bombay) would overcome the need to lay expensive cables or fibre optics to
villages.
At the moment there is a wired backbone throughout India but many villages are 30 to
40km away from the nearest connection. Wimax services can overcome that. One or two
WiMax base stations are enough to connect three or four villages.
The government telecoms operator BSNL is also in the process of rolling out some
WiMax services. But it is still expensive and at the moment is aimed squarely at large
businesses that need a quick-fix solution to broadband access.
9.2.8 3G TECHNOLOGIES
3G or Third Generation technology is a convergence of various Second Generation

telecommunication systems. The technology is intended for SMARTPHONES -
multimedia cell phones. Video broadcasting and other e-commerce services such as,
stock transactions and e-learning will now be made possible much faster. It offers 3 Mbps
speed for downloading, which is very high as compared to that of the 2G technology. The
3G technology provides for internet surfing, downloading, e-mail attachment
downloading, audio-video conferencing, fax services and many other broadband
applications.
3G Technology was implemented in Japan for the first time in the world. Today the
technology is serving 25 countries over more than 60 networks having its existence in
Asia, Europe and USA. Video conferencing has been a major factor in the success of the
technology.
3G Technology in Indian Telecom Industry

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From the time of telegraphs Indian telecom sector has witnessed an immense growth and
has diversified into various segments like, Fixed Line Telephony, mobile telephony,
GSM, CDMA, WLL etc. The telecom industry is growing at a fast pace introducing
newer technologies. Even the network operators and handset providers are also coming
up with newer value added services and advanced technology cell phones with
multimedia applications. Now it's time to welcome the much-awaited 3G Technology.
Bharat Sanchar Nigam Limited is all set to launch the technology by December 2007.
Not only the network providers but also the handset providers in India are waiting eagerly
for the launch of 3G to earn very high revenues from the value added services provided
by the technology.
The technology is initially being launched on CDMA platform. The technology is being
tested over various platforms and cellular networks.
9.2.9 4G TECHNOLOGY
4G (also known as Beyond 3G), an abbreviation for Fourth-Generation, is a term used to

describe the next complete evolution in wireless communications. A 4G system will be
able to provide a comprehensive IP solution where voice, data and streamed multimedia
can be given to users on an "Anytime, Anywhere" basis, and at higher data rates than
previous generations.
As the second generation was a total replacement of the first generation networks and
handsets, and the third generation was a total replacement of second generation networks
and handsets, so too the fourth generation cannot be an incremental evolution of current
3G technologies, but rather the total replacement of the current 3G networks and
handsets. The international telecommunications regulatory and standardization bodies are
working for commercial deployment of 4G networks roughly in the 2012-2015 time
scale. At that point it is predicted that even with current evolutions of third generation 3G
networks, these will tend to be congested.
There is no formal definition for what 4G is; however, there are certain objectives that are
projected for 4G. These objectives include: that 4G will be a fully IP-based integrated
system. 4G will be capable of providing between 100 Mbit/s and 1 Gbit/s speeds both
indoors and outdoors, with premium quality and high security.
Many companies have taken self-serving definitions and distortions about 4G to suggest
they have 4G already in existence today, such as several early trials and launches of
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WiMAX. Other companies have made prototype systems calling those 4G. While it is
possible that some currently demonstrated technologies may become part of 4G, until the
4G standard or standards have been defined, it is impossible for any company currently to
provide with any certainty wireless solutions that could be called 4G cellular networks
that would conform to the eventual international standards for 4G. These confusing
statements around "existing" 4G have served to confuse investors and analysts about the
wireless industry.
9.2.10 HOW IS 3G DIFFERENT FROM 2G AND 4G
While 2G stands for second-generation wireless telephone technology, 1G networks used

are analog, 2G networks are digital and 3G (third-generation) technology is used to
enhance mobile phone standards.
3G helps to simultaneously transfer both voice data (a telephone call) and non-voice data
(such as downloading information, exchanging e-mail, and instant messaging. The
highlight of 3G is video telephony. 4G technology stands to be the future standard of
wireless devices.
Currently, Japanese company NTT DoCoMo and Samsung are testing 4G

communication. 3G services will enable video broadcast and data-intensive services such
as stock transactions, e-learning and telemedicine through wireless communications.
All telecom operators are waiting to launch 3G in India to cash in on revenues by

providing high-end services to customers, which are voice data and video enabled. India
lags behind many Asian countries in introducing 3G services.
9.3 FUTURE PROJECTIONS
The Indian telecommunications industry is one of the fastest growing in the world and
India is projected to become the second largest telecom market globally by 2010.
India added 113.26 million new customers in 2008, the largest globally. In fact, in April
2008, India had already overtaken the US as the second largest wireless market. To put
this growth into perspective, the country’s cellular base witnessed close to 50 per cent
growth in 2008, with an average 9.5 million customers added every month. According to
the Telecom Regulatory Authority of India (TRAI), the total number of telephone
connections (mobile as well as fixed) had touched 385 million as of December 2008,
taking the telecom penetration to over 33 per cent. This means that one out of every three
Page 72
Indians has a telephone connection, and telecom companies expect this pace of growth to
continue in 2009 as well. "We are extremely bullish that the growth will continue in
2009. This year, the number of additions will be in excess of 130 million," according to
T.V. Ramachandran , Director General, Cellular Operators Association of India (COAI),
an industry body that represents all Global System for Mobile communications (GSM)
players in India.
According to CRISIL Research estimates, eight infrastructure sectors, which include the
telecom sector, are expected to draw more than US$ 345.28 billion investment in India by
2012.
With the rural India growth story unfolding, the telecom sector is likely to see
tremendous growth in India's rural and semi-urban areas in the years to come. By 2012,
India is likely to have 200 million rural telecom connections at a penetration rate of 25
per cent. And according to a report jointly released by Confederation of Indian Industry
(CII) and Ernst & Young, by 2012, rural users will account for over 60 per cent of the
total telecom subscriber base.
According to Business Monitor International, India is currently adding 8-10 million

mobile subscribers every month. It is estimated that by mid 2012, around half the
country's population will own a mobile phone. This would translate into 612 million
mobile subscribers, accounting for a tele-density of around 51 per cent by 2012.
It is projected that the industry will generate revenues worth US$ 43 billion in 2009-10.
9.3.1 Growth in Segments
According to a Frost & Sullivan industry analyst, by 2012, fixed line revenues are
expected to touch US$ 12.2 billion while mobile revenues will reach US$ 39.8 billion in
India. Fixed line capex is projected to be US$ 3.2 billion, and mobile capex is likely to
touch US$ 9.4 billion.
Further, according to a report by Gartner Inc., India is likely to remain the world's second
largest wireless market after China in terms of mobile connections. According to recent
data released by the COAI, Indian telecom operators added a total of 10.66 million
wireless subscribers in December 2008. Further, the total wireless subscriber base stood
at 346.89 million at the end of December 2008.

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The overall cellular services revenue in India is projected to grow at a CAGR of 18 per
cent from 2008-2012 to exceed US$ 37 billion. Cellular market penetration will rise to
60.7 per cent from 19.8 per cent in 2007.
The Indian telecommunications industry is on a growth trajectory with the GSM

operators adding a record 9.3 million new subscribers in January 2009, taking the total
user base to 267.5 million, according to the data released by COAI. However, this figure
does not include the number of subscribers added by Reliance Telecom.
In WiMax, India is slated to become the largest WiMAX market in the Asia-Pacific by
2013. A recent study sees India's WiMAX subscriber base hitting 14 million by 2013 and
growing annually at nearly 130 per cent. And investments in WiMAX ventures are slated
to top US$ 500 million in India, according to a report by US-based research and
consulting firm, Strategy Analytics.
9.3.2 Manufacturing
India's telecom equipment manufacturing sector is set to become one of the largest
globally by 2010.
Mobile phone production is estimated to grow at a CAGR of 28.3 per cent from 2006 to
2011, totaling 107 million handsets by 2010. Revenues are estimated to grow at a CAGR
of 26.6 per cent from 2006 to 2011, touching US$ 13.6 billion.
9.3.3 Rural Telephony
Rural India had 76.65 million fixed and Wireless in Local Loop (WLL) connections and
551,064 Village Public Telephones (VPT) as on September 2008. Therefore, 92 per cent
of the villages in India have been covered by the VPTs. The target of 80 million rural
connections by 2010 is likely to be met during 2008 itself. Universal Service Obligation
(USO) subsidy support scheme is also being used for sharing wireless infrastructure in
rural areas with around 18,000 towers by 2010.
BIBLIOGRAPHY

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Information has been sourced from namely, books, newspapers, journals, industry
portals, government agencies, industry news and developments and through access to
database.
 http://www.capitaline.com/
 http://www.wikipedia.org/
 http://www.oecd.org/
 http://www.legalserviceindia.com/
 http://www.dot.gov.in/
 http://www.economictimes.indiatimes.com/
 http://www.ibef.org/
 http://www.domain-b.com/
 http://www.trai.gov.in/
 http://www.perry4law.wordpress.com/
 http://www.indianembassy.org/
 http://www.financialexpress.com
 http://www.pib.nic.in/
 http://www.emeraldinsight.com/
 http://www.search.epnet.com/
 Frost & Sullivan (2007), “Telecom – Catalyzing India’s New Economy”

 Banka Sanjoy (2006), “Mergers and Acquisitions in Indian Telecom Industry-A
Study”
 Jain Rekha (2001), “A review of The Indian Telecom Sector”
 Fortis Investments (2006),”Global Telecom Sector”
 Sharma Seema and Lokesh Singla (2009), “Telecom equipment Industry:
Challenges and Prospects”
 Bhattacharya Manas (2000), “Telecom Sector in India: Vision 2020”
QUESTIONNAIRE FOR THE CUSTOMERS

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Personal information:-
Name :--_____________________ Contact no.___________________
Occupation___________________
Monthly income:-______________
1. Do you have any mobile connection
 Yes
 No
2. How many mobile connections do you have
 One
 two
 three
 more than three
3. Which mobile connection currently using

 Airtel
 Idea
 BSNL
 Vodafone
 Reliance
 Tata indicom
4. Since from you are using Airtel?

 One month
 1-3 months
 3-6 months
 More than 6 months
5. Rating of your mobile services over the parameters:
1 Best 2 Good 3 Average 4 Poor 5 Worst

Call charges
Roaming
facility
Schemes
Customer
care
Coverage

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Quality of
service
Problem of
call drop or
connectivity
6. How much monthly expense on your mobile?

 <150
 150-300
 30-500
 >500
7. In future if you wish to buy Airtel connection?
 Yes
 No
8. If you are permitted to retain the current mobile number that you have, would you change
your current service provider:
 Yes
 No
9. If so, which brand would you select:
 Airtel
 Vodafone
 BSNL
 Idea
 Reliance
10. Rank the following factors according to your perception for a particular factor (1 for most
preferred and 4 for least preferred)
Remark Airtel Vodafone Bsnl Mtnl

Network
Call Cost
Customer Care
11. Tick the following;-(for the market leader Airtel)
S.No Factors responsible Yes No

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1. First mover advantage in the market
2. Concentrate on elite, up market professionals and

entrepreneurs
3. Market leader benefit
4. Brand loyalty of the consumers
5. Proactive and innovative services
6. Highly Focused On Telecom
7. Various offers are available on the necessary goods for

which you were planning for purchase…..
8. Attractive and innovative promotional advertisements
9. Advertisements by Saif Ali Khan &
10. A.R.Rehman‟s ringtone composition
11. Indian brand
12. Huge network coverage
13. Newly introduced special 5 plan
14. Voice clearance
15. Status symbol
12. Any special comment or suggestion for Telecom Companies?

___________________________________________________________________________
___________________________________________________________________________

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