RISK MANAGEMENT IN TELECOM

SECTOR

AKHIL MAURYA
SANKALP DHEER
HARI SHANKAR NANDA
NAMAN KULSHRESTHA
 India Telecom Industry
• The Indian telecommunications industry is one of the
fastest growing in the world.
• According to the Telecom Regulatory Authority of
India (TRAI), the number of telephone subscriber base
in the country reached 653.92 million as on May 31,
2010, an increase of 2.49 per cent from 638.05 million
in April 2010.
• The overall tele-density (telephones per 100 people)
has touched 55.38.
• The wireless subscriber base has increased to 617.53
million at the end of May 2010 from 601.22 million in
April 2010, registering a growth of 2.71 per cent.
 RISK FACTORS Affecting Industry
• Regulation and compliance :  The regulatory authority in India has
delayed the 3G auction and sets up new guidelines every now and
then. It has also given 3G license for BSNL without giving it to other
providers. Airtel and Vodafone which has launched iPhone 3G
phone were left in the dark with 3G phones without any 3G service.

• Entry of 4-5 players  : Licenses were granted to 6 new players.

Unitech, Sistema, etc.. Sistema has started its operations under the
name of MTS by providing 1 million minutes free. New players and
offers like these would seriously dent the expansion plans of
established players. All the players should think out of the box and
come up with IDEAS. Next thing would be consolidation in the
industry which is already happening in the telecom tower business.
• Capital for expansion : This is the biggest criteria for smaller
players. While there are no smaller players, as the new
players are backed up by some heavy-weights, expansion is
still tough. This is where sharing infrastructure comes into
picture. Indus Towers is one such example. BSNL has recently
announced about leasing its towers. Initiatives like these will
help both the older and newer players to penetrate into new
markets.
• Attracting and managing talent and intellectual capital : This
is a tough one. With fierce competition comes the talent
poaching. Companies should have some talent retention
measures in place. Airtel has 
restructured its business into 9 verticals to retain talent.
 Not every company can do the same but, that is one option.
• Management of strategic partnerships : Providing free SMS’s or
call rates at 40 paise per minute are no longer the differentiators. It
is the value Added services which matter. There were bunch of
partnerships which happened in the last 2 months. Ask Laila-Airtel
partnership for local search, AmarChitraKatha - Vodafone, IDEA and
Bharat Matrimony have tied up for VAS. BSNL has recently tied up
with Hungama portal for music and game downloads. Strategic
partnerships like these should be nurtured and maintained.

• Inappropriate processes and systems to support exponential

business growth experienced over past 4-5 years : This is where
investing in IT and the right tools is crucial. These are the
operations that should be outsourcing so that the telecom
companies can focus on their core areas. Indian telecom companies
should outsource aggressively and focus on expanding their
network and services.
• Forecasting returns from technology and
infrastructure investments
• Privacy and security risks
• Contain and reduce costs
• Manage consolidation and mergers &
acquisition : This would tie back to point #2 of
entry of new players and a possible
consolidation in the telecom business and the
tower business.
• Corporate social responsibility and sustainability : With
the Satyam scam jolting India Inc, this would be high on the
radar for the companies.
• Lack of protection for digital intellectual property : This
could be next for Indian telecom. Too soon but might take
2-3 years for this to become a risk
• Concentration of equipment manufacturers : Sourcing
from a single supplier or a bunch of supplier could lead to
great dependency. Satyam scam has just shown the world
how dependent one can become on the outsourcing
services. Same case will be applicable to the telecom
companies. For example, Reliance sources most of its
equipment from ZTE - a Chinese company. This is a
potential risk.
• Indian telecom sector is all set for the second
revolution. With the major cities already
saturated and having a tele-density in excess
of 80%, it is the tier 2 and rural areas which
will provide the next big leap. 32% is the
overall tele-density of India. A wide gap and
even bigger opportunity for the telecom
providers. Only if they can manage these risks.