2.1 INTRODUCTION The basic concept of cell phones began in 1947, when researchers looked at mobile car phones and realized that by using small cells (range of service area) with frequency reuse, they could increase the traffic capacity of mobile phones substantially. However, at that time, the technology to do so was not available. Anything to do with broadcasting and sending a radio or television message over the airwaves comes under the control of Federal Communications Commission (FCC) Regulation of the United States. A cell phone is a type of twoway radio. In 1947, AT&T (American Telephone & Telegraph) proposed that the FCC allocates a large number of radio-spectrum frequencies so that widespread mobile telephone service would become feasible and AT&T would have an incentive to research the new technology. The FCC decided to limit the number of frequencies available in 1947, the limits made only twenty-three phone conversations possible simultaneously in the same service area. AT&T and Bell Laboratories proposed a cell phone system to the FCC of many small, low-powered, broadcast towers, each covering a 'cell' a few miles in radius and collectively covering a larger area. Each tower would use only a few of the total frequencies allocated to the system. As the phones travel across the area, calls would be passed from tower to tower. (Rastogi 2003)

in a separate venture. In 1981. cell phone subscribers exceeded one million and the airways were crowded. cell phone radio-telephone system test in the Washington/Baltimore area.2 HISTORY OF CELL PHONE Martin Cooper. AT&T and Bell Laboratories had constructed a prototype cellular system. By 1987. the first commercial cell phone system began its operation in Tokyo. However. the slow-moving FCC finally authorized commercial cellular service for USA. China led the cell phone . Despite the incredible demand. a former general manager for the systems division at Motorola. In 1979.2. By 1982. Motorola was the first to incorporate the technology into a portable device that was designed for use outside an automobile. A year later. Consumer demand quickly outstripped the 1982 system standards. Bell Laboratories introduced the idea of cell phone communications in 1947 with the police car technology. is considered the inventor of the first modern portable handset. it took 37 years for cell phone services to become commercially available in the United States. By 1977.3 CELL PHONE SUBSCRIBERS’ 15 TOP RANKING COUNTRIES The worldwide number of cell phone subscribers surpassed 2 billions in 2005—up from 11 millions in 1990 and 750 million in 2000. (COAI 2005) 2. the first American commercial analog cell phone service or AMPS (Advanced Mobile Phone Service) was made available in Chicago by Ameritech. A year later. public trials of the new system were started in Chicago with over 2000 trial customers.S. Motorola and American Radio Telephone started a second U.

414 2.5 2.9 2.2 billions by the end of the year 2010.subscribers list with nearly 400 millions as at the end of 2005—nearly twice as many as in the USA. Sep‘ 26 2005 Cell phone subscribers (in millions) 398 202 115 95 86 79 73 59 58 47 46 40 39 38 38 1.9 1.8 3.9 5. Worldwide cell phone subscribers are estimated to reach 3.1 Top 15 Countries with the Number of Cell Phone Subscribers Year 2005 China USA Russia Japan Brazil India Germany Italy UK France Mexico Turkey Spain South Korea Indonesia Top 15 countries Worldwide Total Source: Business Wire.9 1.1 3. Russia has seen tremendous growth in the last few years and is projected to be running in third place by the year-end 2005.3 9. Rapid expansion of cell phones in India will see a future climb in the rankings to a possible number two in 2010.8 68.6 4.5 100 . Table 2.8 2.6 4.2 1.065 Share (Per cent) 19.3 2.8 1.

096 190.499 Per cent 31. Gartner is the world‘s leading information technology research and advisory company.2 4.479 12.2 0.4 WORLD WIDE MARKET SHARE OF MOBILE PHONES World wide market share of various mobile companies has been analysed by Gartner. The results of the analysis are presented in the table below.2 3.895 38.8 6.354 10.823 35.495 10.643 2005 Per cent 29.374 11.6 6.997 1.9 17.7 20 100 Increase per cent (2004-05) 2.1 6.981 9.3 2.368 24.6 15.7 0.018 24. The European countries will continue to lead cell phone subscribers‘ per capita along with a few Asian countries such as Hong Kong and Taiwan.56.626 18. 2.The rankings will change considerably by 2010 and will mainly consist of the large populous countries and they will surpass the smaller European countries that were early mobile phone adopters.7 12.8 12.5 6.4 -0.4 -2. Table 2.0 .843 8.2 WORLD WIDE MARKET SHARE OF CELL PHONES BETWEEN 2004 AND 2005 Year Company Nokia Motorola Samsung LG Sony Ericson Seimens Others Total Source: Gartner 2004 ( in thousands) 46.9 23.794 34.1 100 ( in thousands) 60.1 6.

8 per cent.6 per cent world wide during the year 2004 and Motorola 15.e. Kolkata and Chennai. and Motorola‘s share increased to 17. it is inferred that Nokia had the highest market share of 29. Private sector was allowed participation. This shows the improvement in cell phone .7 per cent.9 per cent world wide.From the table. The companies expect a greater increase in the near future in their market share. 2. 1994 – License for providing cell phone services was granted by the government of India for the metropolitan cities of Delhi. During 2005.5 HISTORY OF CELL PHONES IN INDIA A report of Cellular Operators Authority of India regarding the entry of cell phones into India is listed below. introduction over the years. Nokia expanded its market share to 31.(August) Kolkata became the first metro with a cell phone network. 1995 – 19 more telecom circles got mobile licences 1995 . 20. 1993 – The telecom industry got an annual foreign investment Rs.6 millions. 1992 – Telecommunication sector in India was liberalized to bridge the gap through government spending and to provide additional resources for the nation‘s telecom target. Mumbai. Cell phone service became duopoly (i. Not more than two cell phone operators could be licensed in each telecom circle) under a fixed license fee regime for 10 years.

7 millions.6 COMPARISON OF CELL PHONE AND FIXED TELEPHONE SUBSCRIBER BASE IN INDIA India‘s subscriber base for telephone services continued to maintain its general growth.756.National Telecom Policy was announced. There was an increase in the growth rate of both mobile as well as fixed telephone subscribers. 17. During April 2005. 1999 – Tariff rebalancing exercise got initiated.FDI inflow into telecom sector fell by almost 90 per cent to Rs. 1999 (March) .TRAI was set up. 1999. 2000 (Jan) . 918 millions.65 millions. 2000 (June) .FDI inflow dropped further down to Rs. Source: Cellular Operators Authority of India (COAI) 2.44 millions mobile subscribers were added raising the total number of mobile subscribers to around 53.Amendment of TRAI Act. . 2126. 1998 – Annual foreign investment in telecom stood at Rs. 1.4 millions.1997.

2005.08 per cent at the end of March. 2.Table 2.91 98. At the end of April 2005. Tele density of the country had reached 9.18 34.21 45.50 100.98 77.65 46.60 42.94 millions at the end of December 2005 to 149.3 Comparison of Subscriber additions during April 2004 – 2005 Subscribers in Millions 2004 Category March 2005 Additions during the month 1.44 0.40 1.5 million subscribers at the end of December 2006 according to TRAI in Delhi.77 March April April Additions during the month 1.15 The table shows the comparison of the subscriber additions to mobile and fixed phones during the month of April for the years 2004-2005.97 42.03 Mobile Fixed Total Subscribers Source: TRAI 33.26 per cent as compared to 9.12 53. Based on current trends.7 GROWTH OF MOBILE SUBSCRIBERS The number of wireless subscribers grew to 97 per cent from 75.58 76.59 2. The Indian government is targeting 500 million telephones both fixed and wireless by 2010. most of the . total fixed lines crossed 46 millions and mobiles reached around 54 millions making a total of telephone subscribers in the country to cross 100 millions.95 52.37 0.

(Newswire 2005) India became third largest mobile population in the world by 2007 as middle classes ‗went mobile‘. . The Indian government is keen on promoting local manufacturing in India as it finds that the business process outsourcing and software outsourcing boom in the country has not brought benefits to semi skilled workers. A recent relaxation of government rules allows foreign companies to hold up to 74 per cent stake in mobile services operations. A large government owned service provider.6 million forecast mobile owners in 2007.demands for new connections are likely to come for mobile services. The large growth in mobile subscribers in India has attracted foreign companies to invest in mobile services in the country. Sony Ericson and Motorola have set up manufacturing facilities in India. The table describes this phenomenon. BSNL. With 124. has started insisting that its suppliers manufacture a part of their products locally. Multinational wireless equipment makers like Nokia. Data from Wireless World Forum‘s ‗Indian Mobile Market 2006‘ Statistical Hand Book reveals that mobile ownership had crossed 100 million in 2007 as ‗the largest middle class in the world‘ took up ownership. India ranked third in the world behind only China and USA The number of cell phone subscribers has been growing from year to year and it is making explosive growth.

the cell phone has shown a marvelous growth and during the year 2008 the subscribers‘ growth was about 22.Table 2. .232 subscribers in the year 1997.94.36.87. The circle-wise mobile subscribers‘ statistics in India is furnished in Table 2.54.321 12.449 35.93.232 10.36. 2.758 Source: Cellular Operators Authority of India (COAI) Starting with just 7.095 64.99.70603 11.31.18. The reason for this increase is due to the high level of cell phone usage among customers and also its importance has been made known to all.25.26.637 2.940 6.5. 94.8 MOBILE SUBSCRIBER STATISTICS IN INDIA CIRCLE-WISE Telecom circles have been divided by the Telecommunications Department based on the subscribers available in each circle.166 Cell Phone Subscribers in India Year 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Number of Subscribers 7.405 4.77.758.07.814 1.18.578

(E) U.Table 2. (W) West Bengal Andaman & Nicobar Assam Bihar Himachal Pradesh Jammu & Kashmir North East Orissa Calcutta Chennai Delhi Mumbai All India Source: Kathuria (2004) Mobile subscriber base 2584966 2308123 2896007 2044819 675061 1595985 1053848 2433335 864895 1109981 1218547 333122 712 89234 631809 170626 42285 30631 347577 1235074 1440513 4236138 3637687 33700599 .5 Circle-wise Subscribers in India during 2004 Circle-wise Subscribers Circle Gujarat Karnataka Maharashtra Tamil Nadu Haryana Kerala Madhya Pradesh Punjab Rajasthan U.P.P.

15 million 5.25.6 million 5.1 million 10.7 million 11.8 million 2. followed by Mumbai with 10.000 7.6 per cent.6 per cent. BSNL. June 2005 .1 per cent of total mobile phone subscribers in India.6 million 1.4 million 4 million Service Provider Aircel Bharti Televentures BPL Mobile BSNL HFCL Infotel Hutchison Essar Idea Cellular MTNL Reliance Infocomm Spice Telecom Tata Teleservices Number of Circles 2 23 4 21 1(Punjab) 13 8 2 21 2 20 Source: Business Today. Table 2. Bharti Airtel.9 NUMBER OF CIRCLES AND SUBSCRIBERS OF VARIOUS SERVICE PROVIDERS DURING THE YEAR 2005 Various service providers such as Aircel. Hutch and others in India and the number of circles available for them along with the number of subscribers on land line and mobile are presented below.8 per cent and Maharashtra with 8. Tamil Nadu constitutes 6. 2.4 million 2 million 43.6 Number of Circles and Subscribers of Various Service Providers During the Year 2005 Number of subscribers (Fixed and Mobile) 1.Delhi circle has the highest number of subscribers nearing 12.

followed by 11.7 Growth of Cell Phone Subscribers in Tamil Nadu Operators Vodafone Essar Aircel BSNL Bharti Airtel 2001 1397631 1541921 Nil Nil 2002 1685843 2190665 310038 59193 2003 2044523 3605695 3099552 1098948 2004 3908279 10286233 5979016 3267270 2005 5158159 16162232 11447947 5610398 2006 7440040 23986849 19983331 14383439 2007 19663254 42652655 25014874 30944341 March 2008 9102720 14608396 7091948 11483001 Source: COAI The table describes that the growth of service providers has been increasing from 2001 to 2008. and Airtel use GSM technology whereas Tata Indicom and Reliance use CDMA technology. Table 2. BSNL. The following table explains the subscribers to GSM technology using various service providers. the mobile subscribers‘ growth has increased drastically over the years.10 GROWTH OF MOBILE SUBSCRIBERS IN TAMIL NADU In Tamil Nadu.8 million subscribers at the national level during the year 2005.7 millions for Aircel. There are various players in the market using GSM. GSM technology has easy accessibility. . 2. Aircel. CDMA technology. As far as Tamil Nadu is concerned. Aircel holds the highest number of subscribers closely followed by Airtel and Vodafone. it is seen that BSNL has 43.From the table.4 millions for Airtel and 1. Vodafone Essar.

By doing this. but to achieve resurgence in its core mobile operations is not that easy and turns out to be tough. When Reliance launched its ‗Independence Day Special‘ plan for its prepaid subscribers at Ps. as this precedes its move to trigger the second round of the tariff war. Announcing price cuts to shake up the mobile market was easy for BSNL. BSNL not only set its prepaid tariffs 10 per cent lower than Reliance. but also opened another front.5 per cent. who thought that the tariffs suit to counter the effect of BSNL‘s price cuts. by slashing its postpaid tariffs. To . it will have to work on many fronts.6 per cent compared to BSNL‘s 21. it wanted to retain its stature as the most competitive mobile service operator. when it added an average of only 1. BSNL‘s plain price cuts in pre and postpaid segments may not be sufficient to keep its mobile addition momentum intact. Bharti has maintained its lead in GSM market share over BSNL at 25. Both Bharti and Hutch continue to pose a challenge to BSNL. The recent acquisition of Aircel has given Hutch a higher market share of 23. 0.5 lakh subscribers per month compared to three lakh subscribers added by Bharti.11 TARIFF WARS The healthy growth in mobile subscriber additions by BSNL is noteworthy. BSNL appears to have lost the ground between December 2003 and May 2004. If BSNL is to sustain its pace in mobile additions and enhance its market share.8 per cent.2. It was a rude shock to the other GSM operators.99 per minute. it may not have bargained for BSNL‘s stunning response.

The tough battle may also shift towards premium value-added services such as multimedia messaging service or stock market quotes and transactions. Maharashtra. BPL mobile has introduced a one-second billing pulse for its pre and post paid customers. The shortage of mobile lines has been BSNL‘s bugbear. MTNLs The ability of BSNL to sustain the . The ability of BSNL to pick and choose its premium customers and offer them special packages in future will perhaps augment its tariff advantage. Bharti has offered separate packs for STD and local calls based on the subscriber calling pattern. Andhra Pradesh and Karnataka. As Bharti had an operating margin of 35 per cent in its integrated telecom operations. it may yield to Reliance. For instance. private GSM operators have introduced innovation in their tariff plans. Reliance has introduced ―Joy 499‖ for post-paid customers with charges of 40 paise per minute on intra-circle calls within its network.defend their subscriber base. may revert to the latter. Unless BSNL sticks to its plan of rolling out 15 million lines in phases over the next 18 months. Unless BSNL offers a portfolio of such feature-rich services and use these as selling points. the strategic focus. Bharti or Hutch. competition will be put to a litmus test. Even Reliance and Hutch are unlikely to back out in the battle for market share. (Thiagarajan 2004) A merger of BSNL with Mahanagar Telephone Nigam Limited (MTNL) would also provide an edge for cell phone customers. which has shifted to minutes of usage from Average Revenue per User (ARPU). First. it may fall behind in the decisive race for market share. at least in the metros and lucrative states such as Gujarat. it has comfortable squeeze in expenses and plays the tariff game over a longer period. As the telecom market matures over the year 2008 or so.

. The latest tariff war may usher in the final round of consolidation in the mobile sector sooner than expected. The larger players will be able to leverage on economies of scale as the mobile subscriber base increases. On a stand-alone basis. Bharti and Hutch are likely to turn the heat on the consolidation front. It may not be surprising if the cell phone companies advance their IPO (Initial Public Offering) plans to finance acquisitions and broaden their foot prints. it was never able to compete with the private players. Reliance.subscriber additions in Mumbai and Delhi are insignificant. and raise finance for incremental capital expenditure at finer rates. Secondly. This has continued for several months now.

Sign up to vote on this title
UsefulNot useful