Project On Managerial economics


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Telecommunication is the assisted transmission over a distance for the purpose of communication. In earlier times, this may have involved the use of smoke signals, drums, semaphore, flags or heliograph. In modern times, telecommunication typically involves the use of electronic devices such as the telephone, television, radio or computer. Early Inventors in the field of Telecommunication include Alexander Graham Bell, Guglielmo Marconi and John Logie Baird. Telecommunication is an important part of the world economy .

Key Events


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Telecommunication sector in India liberalized to bridge the gap through government spending & to provide additional resources for the nation’s telecom target. Private sector allowed participating The telecom industry gets an annual foreign investment Rs 20.6 million



License for providing cellular mobile services granted by the government of India for the Metropolitan cites of Delhi, Mumbai, Kolkata & Chennai. Cellular mobile service to be duopoly (i.e. not more than two cellular mobile operators could be licensed in each telecom circle), under a fixed license fee regime for 10 years.


19 more telecom circles get mobile licenses


Kolkata became the first metro to have a cellular network


Telecom Regulatory Authority of India is set up


Annual foreign investment in telecom stands at Rs 17,756.4 million.


FDI inflow into telecom sector falls by almost 90% to Rs. 2126.7 million


Tariff rebalancing exercise gets initiated
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National Telecom Policy is announced.


FDI inflow drops further down to Rs 918 million coming

2000 (January) 2001(January)

Amendment of TRAI Act.

Global Telecom Scenario
The global telecom scenario presents the overview of number of telephone connections all over the world. Telecom sector has been growing at the tremendous rate . The major area contributing to this growth is telephone connections. The data here represents the number of telephone connections all over the world and highest number of connections are from Asia.

AFRICA : 220.743 837.195 1744.815 1090.504 35.997



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Overview of Telecom Industry in India
Telecommunication Sector have grown phenomenally in the past 3 years as has been surveyed by Indian Ministry of Communications and Information Technology in New Delhi very recently. The telecom sector is one of the leading contributors to India's flourishing economy. According to the report presented by taking into account the statement of Indian Ministry of Communications and Information Technology, the telecom opportunities in India has been growing by 20 to 40 percent every year since past 3 years. The telecom services in India have been recognized as a world-class tool for the socioeconomic development in India. India is known to rank fourth in the telecom industry in Asia after China, Japan, and South Korea and the telecom network in India is known to stand in the eighth position across the globe and second among the emerging economies. The tele-density has grown leaps and bounds in the past few years from 2.3 percent in 1999 to 4.8 percent in 2002. The world average percentage for the telecom industry as against the Indian average is 7.5 times while the Asian average against the same was 4.5 times. The current market range of the telecommunication industry in India has been estimated to USD 8 billion and this is expected to undergo an accretion by the end of 2012. The growth witnessed by the telecom market in India has increased the number of opportunities for the industry and this has been fueled by the growing mobile sector, which has attained the consumer level of 10 million by the end of December 2002 that was almost 100 percent in the year. This outstanding growth in the mobile sector explains the advent of digital cellular technology and reduced tariffs as a consequence of competitive pressures. The growth in the cellular subscribers has surpassed the benchmark of subscriber base. The telecom market has increased dramatically with the advent of Wireless in Local Loop Technology.

Telecommunication Sector Opportunities in India assures a transparent, safe, and secured ambiance for the telecom market. Around 300 million population of highly consumable middle-class status that is advantageous for the industry surrounds the telecom sector in India. This is because, in some of the Indian that possess land line telephones can be substituted by mobile phones that is very unlike the developed countries. Therefore, it adds up to the growth in mobile sector in Indian telecom industry. Few more Telecommunication Sector Opportunities in India include introduction of Internet telephony services, privatization of VSNL, and introduction of a number of international long distance services sector. The opportunities in the Indian telecom sector is increasing at a massive pace with the introduction of newer and innovative schemes in various sectors and at present the telecom sector in India is claimed to be one of the major contributors in India's flourishing economy.

Graph showing lowest tariff in INDIA


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In 2005-2006, the telecom industry witnessed a growth of 21% with a total revenue of Rs. 86,720 crores, and the total investment rising to Rs. 2,00,660 crores. It is projected that the telecom industry will be enjoying over 150% growth in the next 4-6 years. The growth also requires a huge investment by the players in the sector. Bharti Airtel is planning to invest about $8 billion by the year 2010. Liberalization policy and some socio-economic factors are mainly responsible for the immense growth in the sales volumes. The lifestyle of the people has changed. They need to be connected to the other people all the time. With the lowering down of the tariffs the affordability of the mobile phones has increased. The finance sector has also come up with loans for handsets on 0% interest. Mobile services providers are also expanding their coverage area by installing more and more antennas and other equipments. The telecom sector in the country has already adopted the latest technological advancements to cater to the demands of the growing market. Telecom Expo India, Convergence India, VAS India and IPTV India being organized year to year are all efforts in this direction. Budget 2007 has brought disappointment to the telecom sector. Mobile service providers have been asked to cut down their roaming rentals as well as their long distance and international call tariffs. This has led to discontent on the part of the service providers. However, Telecom Regulatory Authority of India (TRAI) is of the opinion that this will lead to increased use of roaming, which will ultimately lead to more revenue generation. Moreover, with cheaper handsets and lesser tariffs, it is expected that by the year 2010 there will be over 500 million subscribers in the Indian telecom market. Also, the telecom industry this year will be focusing more on rural areas to connect them with the urban areas so that the farmers and the small-scale industries can have faster access to information related to weather and market conditions


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70 60 50 40 30 20 10 0 1999
6.94 2.32 0.52 8.36 2.86 0.68 10.37 3.58 0.93 12.2 4.29 1.21 14.32 5.11 1.49 7.02 1.57 8.95 1.73 20.74 12.74 1.86 5.88 7.9 26.88 18.31 39.45















According to Gartner, a global information technology research and advisory firm, the revenue from India’s telecom Sector will cross $30 billion by 2013. The total mobile services revenue is projected to grow at a compound annual growth rate (CAGR) of 12.5 percent during 2009-2013 to exceed $30 billion. At the same time the telecom subscriber base is expected to cross 770 million connections by 2013, growing at a CAGR of 14.3 percent from 452 million in 2009. The factors supporting this increase are: • • • • increased focus of operators on rural areas increased adoption of value Added Services availability of cheaper handsets entry of consumer durable and electronic companies into the mobile handset segment

The number of prepaid subscribers is expected to cross 740 million ( about 96 percent) by 2013. At the same time the postpaid subscriber base will exceed 29 million subscribers by 2013, growing 2.5 percent from 2008. Gartner also predicted that the churn rate (the rate at which a subscriber switches from one operator to another) will cross 59 percent in 2013 from 53 percent currently.


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Compared Teledensity between urban and rural areas

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The graph shows the comparative study between the mobile and fixed line subscription.

W ireline

250 200
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tions (in s)


Fixed vs. Mobile

Fixed line Telephony
Fixed Line Telephony can be further categorized as fixed wireline telephony and fixed wireless telephony (known as WLL (F)). Fixed Line Telephony provides services such as local calls and long distance calls- national and international. The
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Government of India is now taking actions to convert all national long distance calls to local calls. In this regard, Public Players have already started their 1Rs. call service. In India at present, fixed line telephone numbers are of 8 digits, (initially 5 and 7 digits). The sector is in the process of converting all fixed line numbers to 10 digits. Both Public Players and Private Players are competing hard to capture more and more market share. MTNL and BSNL are the leading public sector players, whereas Reliance Infocomm, Tata Teleservices and Touchtel are the leading private sector players.

Market shares of public and Private Players


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During financial year 2005-06, Fixed Line Telephony segment in Indian telecom sector witnessed a growth of 8.64%. The total subscriber base of fixed lines including WLL(F) touched the figure of 50.2 million and was showing an upward trend. Subscriber trend of Fixed Line Telephony in Indian market

Private Players
Private Players are providing services to the whole of India. The companies are
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serving both urban and rural areas. Tata Teleservices, HFCL, Shyam, Reliance, Touchtel are the leading Private Players in fixed line segment. With more than 80% share with Public Players, Private Players are now striving hard to capture more and more customers. Since 1997, the year they entered Fixed Line Telephony, they have been increasing their market share every year.

Market shares of Private Players (18%) in Fixed Line Telephony


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Public Players
The two Public Players, Mahanagar Telephone Nigam Limited (MTNL) and Bharat Sanchar Nigam Limited (BSNL), are providing services to the whole of India. The companies are serving both urban and rural areas. MTNL is providing services to two metropolitan cities, Delhi and Mumbai, whereas BSNL provides services to the rest of India.

Market shares of Public Players in Indian Fixed Line Telephony


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Since, Private Players entered Indian Fixed Line Telephony, market shares of Public Players started declining. This can be easily seen by the trend of number of subscribers (increasing or decreasing) of Public Players. MTNL has showed a declining trend in the last three years. BSNL is adding new customers but with a declining growthh rate.


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Subscriber trend of MTNL in Fixed Line Telephony

Subscriber trend of BSNL in Fixed Line Telephony


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* Figures are based on TRAI reports and individual company's reports


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Mobile Telephony
Mobile telephony was introduced in Indian markets in mid- 1990s. In the last few years, the sector has witnessed tremendous growth. The subscriber base is adding more and more customers every year. Mobile telephony recorded more than 52.2 million users in FY 2004-05, exceeding fixed line telephone subscriber base. Also, mobile segment has welcomed more and more players every year. Liberalized policies have ensured lower tariffs and reduced roaming rentals. This will lead to increased usage of mobile phones. Mobile telephony can be further categorized into WLL, CDMA and GSM. The much-awaited 3G mobile technology is going to enter soon in Indian telecom sector. Mobile telephony provides services such as messaging- text and multimedia- mobile commerce through GPRS enabled mobile Internet, with local calls and long distance calls- national and international. Not only service providers but also equipment manufacturers are contributing towards the growth of the sector. Mobile telephony started up with bulky handsets and has
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now reached to smart phones with cameras, radio facility and lots of other multimedia applications. Also, PDAs have entered Indian markets with operating systems that make it a pocket PC. Both Public Players and Private Players are competing hard to capture more and more market share. Leaders in Fixed Line Telephonyhave now started providing mobile services, such as MTNL's Garuda and Dolphin. Private Players capture most of the market share in Indian mobile segment.

Market shares of public and private players


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During financial year 2005-06, mobile telephony segment in Indian telecom sector witnessed a growth of 72%. The total subscriber base of mobile phones touched a figure of 90.14 million in 2006.

Subscriber trend of mobile telephony in Indian market


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Private Players'
Private Players are providing services to the whole of India. Tata Teleservices, Reliance Communications, Bharti Airtel, Idea cellular, Hutch, etc are the leading Private Players in cellular services. They are providing cellular services through CDMA, GSM and WLL networks. With more than 70% share in market, Private Players are introducing more and more discount schemes and tariff plans and call rentals to capture more and more customer base. Even the handset manufacturers are coming up with advanced multimedia applications to attract customers.


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Market shares of Private Players (78%) in mobile telephony

Subscriber base of Private Players in mobile telephony


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Public Players

The two Public Players, Mahanagar Telephone Nigam Limited (MTNL) and Bharat Sanchar Nigam Limited (BSNL), are providing mobile services in India. MTNL's
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Garuda, Trump and Dolphin and BSNL's Cellone and Excel are running successfully on CDMA, WLL and GSM technologies.

Market shares of Public Players in Indian mobile telephony

Since, Private Players entered Indian Fixed Line Telephony, market shares of Public Players started declining. This can be easily seen by the trend of number of subscribers (increasing or decreasing) of Public Players. MTNL has showed a
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declining trend in the last three years. BSNL is adding new customers but with a declining growth rate.


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Subscriber trend of MTNL in mobile telephony

Subscriber trend of BSNL in mobile telephony


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* Figures are based on TRAI reports and individual company's reports

The responsiveness of one variable to changes in another is known as elasticity. The elasticity can be of 3 types: 1. Price elasticity 2. Income elasticity 3. Cross elasticity 1. Price elasticity • Price Elasticity of Demand – The responsiveness of demand to changes in Threat from New Entrants
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Where % change in demand is greater than % change in price – elastic – Where % change in demand is less than % change in price - inelastic The telecom industry is highly elastic that is whenever there is a small shift in the price of the product the quantity demanded varies drastically. With the fall in the price demand increases, and with the increase in the price, demand decreases.


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Key 5 Major players Of Telecom sector


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Corporate Overview:

Vodafone Group Plc is one of the worlds leading mobile telecommunications company, offering an extensive range of services, including voice and data communications.
Corporate History

The Vodafone network was launched on January 1, 1985, which was the first cellular network to be launched in the UK. In 2005, Vodafone launched of PC-to-mobile instant messaging.
Key Facts

Sales (FY05) US$62.9 billion, Assets (FY05) US$252.8 billion.

SWOT Analysis
1. Strengths ➢ Dominance in Cellular Market. ➢ Wide Geographical Presence.
2 Weaknesses

➢ Declining Market Share in Japanese Market. ➢ Limited Exposure to Emerging Markets. ➢ Dispute over Corporate Tax Bill in Europe. 3 Opportunities
➢ Expanding Geographic Presence. ➢ Growth through 3G. 4 Threats
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➢ Emergence of Low-Cost Brands. ➢ Market Saturation in Europe. ➢ Increased Competition in Core Markets. Competitive Positioning On the basis of parameters such as:➢ Number of customers ➢ Total revenue ➢ Voice revenue


➢ Company Profile (as on 31.12.2007)
➢ Corporatized on 1st October 2000


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➢ Connects length and breadth of INDIA except Delhi & Mumbai ➢ 37516 Digital Exchanges with 29051 exchanges in rural areas on reliable media.



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Pan-India reach Experienced telecom service provider Total telecom service provider Huge Resources (financial & technical pool) Huge customer base Most trusted telecom brand Transparency in billing Easy deployment of new services Copper in last mile can be used for easy broadband deployment ➢ Huge Optical Fibre network and associated bandwidth ➢ ➢ ➢ ➢ ➢ ➢ ➢ ➢ ➢

➢ ➢ ➢ ➢ ➢ ➢ ➢ ➢ ➢ ➢ ➢

➢ ➢

Non-optimization of network capabilities Poor marketing strategy Bureaucratic organizational set up Inflexibility in mindset (DOT period legacies) Limited number of value added services Poor franchisee network Legacy of poor service image Huge and aged manpower Procedural delays Lack of strategic alliances Problems associated with incumbency like outdated technologies, unproductive rural assets, social obligations, political interference, Poor IT penetration within organization Poor knowledge Management

OPPORTUNITIES ➢ Tremendous market growing at 20 lac customers per month ➢ Untapped broadband services ➢ Untouched international market ➢ Can capitalize on public sector image to grab government’s ICT initiatives ➢ ITEB service markets ➢ Diversification of business to turn-key projects ➢ Leveraging the brand image to source funds ➢ Almost un-invaded VSAT market ➢ Fuller utilization of slack resources ➢ Can make a kill through deep penetration and low cost advantage ➢ Broaden market expected from

THREATS ➢ Competition from private operators ➢ Keeping pace with fast technological changes ➢ Market maturity in basic telephone segment ➢ Manpower churning ➢ Multinational eyeing Indian telecom market ➢ Private operators demand for sharing last mile ➢ Decreasing per line revenues due to competitive pricing ➢ Private operators demand to do away with ADC can seriously effect revenues ➢ Populist policies of government like “OneIndia” rates
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convergence of broadcasting, telecom and entertainment industry

Having analysed the external environment and assessed the internal strengths and weaknesses of BSNL, the key issues can be summarized as follows: BSNL – The key issue
➢ ➢ To provide high speed Internet connectivity (upto 8 Mbps) To provide dial VPN service to MPLS VPN customers. Access Server (BRAS).

➢ To provide Virtual Private Network (VPN) service to the broadband customers ➢ To provide multicast video services, video-on-demand, etc. through the Broadband Remote ➢ To provide a means to bill for the aforesaid services by either time-based or volume-based
billing. It shall provide the customer with the option to select the services through web server ➢ To provide both pre-paid and post paid broadband services.

Bharti Airtel


ections n)

Airtel comes to you 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
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80 70 60

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.

Strengths: ➢ Bharti Airtel has more than 65 million customers (July 2008). It is the largest cellular provider in India, and also supplies broadband and telephone services – as well as many other telecommunications services to both domestic and corporate customers.
➢ Other stakeholders in Bharti Airtel include Sony-Ericsson, Nokia - and Sing Tel,

with whom they hold a strategic alliance. This means that the business has access to knowledge and technology from other parts of the telecommunications world ➢ .The company has covered the entire Indian nation with its network. This has underpinned its large and rising customer base. Weaknesses:
➢ An often cited original weakness is that when the business was started by Sunil

Bharti Mittal over 15 years ago, the business has little knowledge and experienceof how a cellular telephone system actually worked. So the start-up business had to outsource to industry experts in the field.
➢ Until recently Airtel did not own its own towers, which was a particular strength of

some of its competitors such as Hutchison Essar. Towers are important if your company wishes to provide wide coverage nationally .
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➢ The fact that the Airtel has not pulled off a deal with South Africa's MTN could signal

the lack of any real emerging market investment opportunity for the business once the Indian market has become mature. Opportunities: ➢ The company possesses a customized version of the Google search engine which will enhance broadband services to customers. The tie-up with Google can only enhance the Airtel brand, and also provides advertising opportunities in Indian for Google. . ➢ Global telecommunications and new technology brands see Airtel as a key strategic player in the Indian market. The new iPhone will be launched in India via an Airtel distributorship. Another strategic partnership is held with BlackBerry Wireless Solutions. ➢ Despite being forced to outsource much of its technical operations in the early days, this allowed Airtel to work from its own blank sheet of paper, and to question industry approaches and practices,for example replacing the Revenue-Per-Customer model with a Revenue-Per-Minute model which is better suited toIndia, as the company moved into small and remote villages and towns. ➢ The company is investing in its operation in 120,000 to 160,000 small villages every year. It sees that less well-off consumers may only be able to afford a few tens of Rupees per call, and also so that the business benefits are scalable - using its 'Matchbox' strategy.
➢ Bharti Airtel is embarking on another joint venture with Vodafone Essar and Idea

Cellular to create a new independent tower company called Indus Towers. This new business will control more than 60% of India's network towers. IPTV is another potential new service that could underpin the company's long-term strategy. Threats ➢ Airtel and Vodafone seem to be having an on/off relationship. Vodafone which owned a 5.6% stake in the Airtel business sold it back to Airtel, and instead invested in its rival Hutchison Essar. Knowledge and technology previously available to Airtel now moves into the hands of one of its competitors.
➢ The quickly changing pace of the global telecommunications industry could tempt

Airtel to go along the acquisition trail which may make it vulnerable if the world goes into recession. Perhaps this was an impact upon the decision not to proceed with talks about the potential purchase of South Africa's MTN in May 2008.This opened the door for talks between Reliance Communication's Anil Ambani and MTN, allowing a competing
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Inidan industrialist to invest in the new emerging African telecommunications market. ➢ Bharti Airtel could also be the target for the takeover vision of other global telecommunications players that wish to move into the Indian market.

Reliance Communications (formerly Reliance Infocomm), along with Reliance Telecom and Flag Telecom, is part of Reliance Communications Ventures (RCoVL). It is an Indian telecommunications company. According to National Stock Exchange data, Anil Dhirubhai Ambani controls 66.77 per cent of the company, which accounts for more than 1.36 billion shares.[3] It is the flagship company of the Reliance-Anil Dhirubhai Ambani Group, comprising of power (Reliance Energy), financial services (Reliance Capital) and telecom initiatives of the Reliance ADAG. It uses CDMA2000 1x technology for its existing CDMA mobile services, and GSM900/GSM-1800 technology for its existing/newly launched GSM services.


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RelCom is also into Wireline Business throughout India and has the largest optical fiber communication (OFC) backbone architecture [roughly 110,000 km] in the country. Reliance Communications has interests in Direct To Home (DTH) TV also, known as "Big TV". It plans to launch its DTH business by July 2008. Once launched, RelCom will have presence across all B2C communications channel in one of the fastest growing markets in the world.

SWOT Analysis
Strengths ➢ Mobile Communications Arm of a Large, Well-Funded, Well-Connected and Ambitious Indian Conglomerate ➢ Economies of Scale From Large Subscriber Base ➢ Expertise in a Business Model That Allows It to Maintain High Profitability From Lower-Yielding Subscribers Weaknesses ➢ Cost Structure Disadvantage With Subscribers Spread Across Two Different Mobile Networks ➢ Low ARPU Compared With Competitors ➢ Weakness in Rural Markets ➢ Brand Positioning ➢ Limited Availability of Value-Added Services Opportunities ➢ Aggressive Move Into the Rural Market ➢ Use Upcoming Mobile Number Portability as "Launching Pad" to Grab Market Share of Higher ARPU Users — and Ramp Up Focus on Data Revenue ➢ Overseas Investments ➢ Lease Spare Capacity on Its CDMA Network to Mobile Virtual Network Operators Threats ➢ Quicker Than Expected Slowing of Growth in the Indian Marketplace
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➢ Mobile Number Portability Risks Accelerating Churn of Subscribers From CDMA to GSM ➢ New Competitors

Background Idea Cellular is one of the leading mobile operators in India. It was originally incorporated as Birla Communications Limited, with the license to operate in Maharashtra and Gujarat. The name was changed to Birla Tata AT&T Limited, consequent to stake acquisition by AT&T Corporation and Tata Group. In 2002, the company's name was changed to Idea Cellular Limited. Due to stake sale by AT&T Corporation and Tata Group, Aditya Birla Group is now the sole promoter of Idea Cellular.

SWOT Analysis
Strength ○ Attractive existing footprint. ○ Original licensee in seven of the Established Circles, providing incumbency advantages; ○ Market leader in two of, and established positions in the remainder of, the Established Circle ○ Strong distribution channels; ○ High quality network structure; ○ A national brand; ○ Part of the Aditya Birla Group ○ Attractive growth Weaknesses
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High Debt-Equity Ratio: The Company's Debt-Equity ratio is high as compared to its peers. Moreover, the Company needs the approval of the lenders under its financing arrangements before undertaking certain significant corporate actions ○ Concentration: The Company revenues are derived solely from providing mobile services and it is dependent on four of the Established Circles for a significant proportion of its revenues. ○ The Company had accumulated losses amounting to Rs. 19.23 billion and Rs. 17.23 billion for financial years 2005 and 2006 respectively. The Company may not be in a position to pay dividends until it clears its accumulated losses

Oppor tunities ○ The Indian telecommunication industry is expected to continue to enjoy growth due to its low-teledensity and increasing affordability of mobile telephone and services. ○ The contribution of service sector to the GDP has improved significantly from 29% in 1950 to 54% in 2005. This is primarily due to growth of informationtechnology and information technology enables services. This will further stimulate the demand for mobile telecommunication services. ○ The regulatory environment is improving and there is greater clarity in existing rules and procedures. This would enable operators in improving network quality. Also raising of funds will become easier due to greater predictability of operational environment. T hreats ○ There is intense competition in the Indian telecommunication industry. Idea Cellular faces significant competition from private companies that have a pan-India footprint such as Bharti Airtel, Tata Teleservices and Reliance Communication Ventures. Also it faces competition from government owned companies such as BSNL and MTNL. ○ Alternative technology is evolving very rapidly in the telecommunications industry. For instance, "Wi-Fi" and Wi-Max" which allows for voice data transfer have been tested and handsets with such technology may soon be available in the Indian market. Moreover, satellite communication voice data transport medium like "Skype" may become a serious competitor in the long distance voice data transfer business.


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