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A study report on Indian telecom Industry: “Price-War and its

impact on industry”

Grand Project Report

A study report on Indian Telecom Industry:


“Price-War and its impact on industry”

Prepared By
Bhuvar Rajsee R.
Roll No. SF – 1, MBA SEM – 4
Guided by
Prof. Vishal Javiya
Academic Year
2008-10

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Submitted to
Smt. R D Gardi Department of Business Management,
Saurashtra University, Rajkot

DECLARATION

I, undersigned Mr. Bhuvar Rajsee R. Student of Smt. R. D. Gardi


Department of Business Management, Saurashtra University, Rajkot hear
by declare that the project work presented in this report my own
work and has been created by me under the supervision of Prof.
Vishal Javiya

This has not been previously submitted to any other university for
any examination.

Date: - 12-4-2010
Place: - Rajkot

Signature

(Bhuvar Rajsee R.)

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

PREFACE

“Preface makes man perfect not money”

MBA is a course where getting theoretical knowledge only won’t serve the
purpose. The effective application of the theoretical aspects in the
practical situations should be given more importance. So as a part of
academic activity the MBA students are required to undergo research
report after the end of 4th Semester. During the research study i get the
opportunity to apply the concepts they have learned in first three
semesters.

So, as a student of MBA, I have taken a golden opportunity to research on


Indian telecom industry and I really enjoyed my research study and learn
many new insights which probably I never have learned from the
classroom.

Here, I tried my level best to represent all the information and I have
expressed my deliberated efforts to make my report clean & specific.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

ACKNOWLEDGEMENT

The successful completion of a research study requires guidance & help


from a number of people. I was fortunate to have all the support from my
Professors. I therefore take this opportunity to express my profound sense
of gratitude to the all those who extended their whole hearted help and
support to me in completing this grant research project.

I am sincerely thankful to Dr. Pratapsinh Chauhan (Head of Department-


RDGDBM, Saurashtra University-Rajkot) for allowing me to undertake the
report and making available all facilities for the successful completion of
the report besides guiding me to pursue the study on proper line.
I also express my deep sense of gratitude towards Mr. Vishal Javiya.
(Guide, Faculty at RDGDDBM)

No Acknowledge would suffice for the support my family members, my


colleagues, some bloggers, customer care executive & other friends who
work on industry.

Lastly, I extend my thanks to all those whose name have not been
mentioned way in successfully carrying out the project report.

Date: - 12-4-2010
Place: - Rajkot.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Contents

SR. Particulars Page


NO no.

1 Executive summary 6

2 Introduction 10

⇒ Objective 11

⇒ Research methodologies 12

⇒ Indian Telecom Industry at a glance 13

⇒ Where we stand in world? 16

⇒ Development of mobile phone 18

⇒ History of cellular services in India 24

⇒ Impact of LPG on cellular service industry 27

⇒ Regulatory Authority 31

⇒ Various Telecom policies 34

C Major players of the Industry 38

⇒ Cellular Service providers’ Overview 39

⇒ All-over Market share 41

⇒ List of cellular operator with subscriber base 42

1. Airtel 42

2. Reliance communications 46

3. Vodafone Essar 49

4. BSNL 53

5. Idea cellular 57

6. Tata Teleservices limited 60

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Executive summary

We undertook this project to understand the Cellular Industry as a whole.


Also to get better insight of how External Environment as well as the
Competitive Environment can affect it. in the price-war situation which
types problem faced by Indian telecom industry. At present Telecom
Sector is in boom, every day there are new changes happening in the
industry. This project has taught us that how difficult it is for a company
to survive in the market with the continuous changes in terrif, whether
these changes are in Technology, or in the pricing structure or in the legal
policies or in the terms of customer preferences. We also came to know,
that the telecom market is having very high Entry as well as Exit barriers,
due to the increased number of players and strong rivalry among existing
players.

The government of India recognizes that the provision of a world-class


telecommunications infrastructure and information is the key to rapid

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

economic and social development of the country. It is critical not only for
the development of the Information Technology industry, but also has
widespread ramifications on the entire economy of the country. It is also
anticipated that going forward, a major part of the GDP of the country
would be contributed by this sector.

The process of deregulation began in India in 1980s with the restructuring


of Telecom department to stimulate growth and introduce new
technologies. When cellular mobile services were first introduced, it was
duopoly, under a fixed license fee regime and for a license period of 10
years. The initial response was encouraging because of the perceived
attractiveness of the Indian market in the terms of teledensity, the high
latent demand and the increasing middle class. The Telecom Regulatory
Authority of India (TRAI) was formed in 1997 with a view to provide an
impactive regulatory framework and adequate safeguards to ensure fair
competition and protection of consumer interests. The Government is
committed to a strong and independent regulator with comprehensive
powers and clear authority to impactively perform its functions. Telecom
proved to be a powerful attraction of foreign investment. The cumulative
FDI inflow into Telecom since 1993 has exceeded Rs. 43,000 Million.
Within telecom, Cellular Industry has attracted most of the foreign
investment since 1993, accounting for almost 50 % of the FDI inflow in to
telecom – representing amongst the biggest investment in any one sector
in India.

The concept of Cellular service had been established to target only to


Business class people. But after the revolutions happened in this industry,
the technology enhanced and the competition has made the tariffs
cheaper and now it has become the status symbol, and because of that
now not only the business classes people keep it but also service class
people, school & college going students keep the cellular phone with
them. It has given the new uses to this service people keep in touch with
their relatives and friends. The living standard has also changed. The
advertising is also in full fledge; this has lead the cellular service so
popular.

The cellular operators are facing the biggest threat ever by the CDMA
(Code Division Multiple Access), i.e. Rcom and Tata Tele services. Due to
cheaper rates, better technology & latest innovations the cellular
operators are coming with the new schemes and decreased tariffs to
retain the customers so they do not switch. Introduction of Satellite
phones by Iridium Inc. may also affect the cellular market. Even though

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

the technological changes have kept sweeping across the country’s


telecom landscape with the introduction of GSM (Global System for mobile
Communication) and CDMA (Code Division Multiple Access) services, the
regulation is still in a flux. The issues involved are the existence of
different tariffs rates between the two services as well as the types of
services two warring groups can provide. And, with the entry of Reliance
group the competition just has been increased.

At present, we are using the 2.5-generation of mobile system. The 3 rd


generation of mobile communication systems will soon by implement.
Following on the heels of analog technology, the third generation will be
digital mobile multimedia offering broadband mobile communication with
voice, video, and graphics, audio and other information.

Indian cellular industry is in full of its color with boom seen in


Indian economy. With the entry of major players, major up fold has
been seen in cellular industry since last 8-10 years. Government
continuous intervention in this industry is major factor that has affected
positively & negatively for different technological players.

Today’s price-war situation in competitive environment in cellular industry


has inspired us to study this industry form strategic point of view. We had
undertaken this project for our learning as well as to fulfill academic
guideline of Saurashtra University. Objective of our study is “The core
objective of the project is to understand the price-war situation and its
impact on Cellular industry of India. To achieve objective of our study we
had given importance to secondary data collection and its analysis &
conclusion.

In our research secondary data collected from various magazines,


newspapers, internet, library, reports of different companies etc.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Introduction

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Objective

Main-objective

To study the present scenario of cellular (GSM +CDMA) service industry of


India and understand the price-war and its impact on industry.

To understand the marketing mix of VAS as a “next wave for revenue


growth”

Sub-objective;

⇒ To review Indian scenario of cellular service industry.

⇒ To review major Indian players of cellular service.

⇒ To review of new players in cellular services industry.

⇒ To know the subscribers growth rate of different players.

⇒ To understand price-war.

⇒ To find out reason behind price-war.

⇒ To understand the ARPU (Average Revenue per User).

⇒ To find out price-war impact on ARPU.

⇒ To find out price-war impact on stock market performances.

⇒ To find out price-war impact on financial performances.

⇒ To understand V.A.S. (value added services).

⇒ To understand V.A.S. roll in price-war situation.

⇒ To compare V.A.S. revenue v/s calling revenue.

⇒ To find out V.A.S. market size

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

⇒ To understand V.A.S. revenue distribution.

⇒ To find out opportunities and threats for cellular service industry.

Research methodologies

Research is an art of scientific investigation, which helps to search for


knowledge. Research methodology considers following items:

Types of data:

There are main two types of data.

⇒ Primary Data: -data are those, which are collected for the first
time and thus happen to be original in character.

⇒ Secondary Data: - Secondary data, on the other hand are those,


which have already been collected by someone in the past. For this
research study secondary data is used.

Data Source:

Secondary data are collected from the magazines, different reports,


publishes, newspapers, Internet, etc.

We have taken secondary data which are related to prepare project. For
comparison also we taken secondary data and from that we have
prepared interpretation. Other analysis we have made from collected data
only. This way, we have prepared project by using secondary data.

Indian Telecom Industry at a glance

Where we stand today…

⇒ 525.15 Million Mobile Subscriber.

⇒ In year 2015 India beat china with 'billion plus' Subscriber .

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

⇒ Monthly growth rate of 3.78% .

⇒ Avg.15 million (19.20 million in Jan.) New Subscriber added every


month.

⇒ Tele-density stands at 44.73%.

⇒ 13 major players………8 old…….5 new………other 3 waiting for


lunched.

⇒ Lowest call charge in the world……….1/2(half) paisa per second.

⇒ 1 rupee, 1 sms to 1 paisa, 1 sms.

⇒ New SIM-card in 10 Rupees with free 50 Rupees talk time + 30 sms.

⇒ ARPU reduce 173.66 to155.60 (-10.40%) in last quarter.

Above figure told everything about Indian cellular industry!

The Indian telecommunication industry, with about 525 million mobile


phone connections (Dec 2009)[update] , is the third largest
telecommunication network in the world and the second largest in terms
of number of wireless connections. The Indian telecom industry is one of
the fastest growing in the world and is projected that India will have
'billion plus' mobile users by 2015. Projection by several leading global
consultancies is that India’s telecom network will overtake China’s in the
next 10 years. For the past decade or so, telecommunication activities
have gained momentum in India. Efforts have been made from both
governmental and non-governmental platforms to enhance the
infrastructure. The idea is to help modern telecommunication
technologies to serve all segments of India’s culturally diverse society,
and to transform it into a country of technologically aware people.

The telecom services have been recognized the world-over as an


important tool for socio-economic development of a nation.
Telecommunication is one of the prime support services needed for rapid
growth and modernization of various sectors of the economy. It has
become especially important in recent years because of enormous growth
of information technology and its significant potential for the impact on the
rest of the economy.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Telecommunications is one of the few sectors in India, which has


witnessed the most fundamental structural and institutional reforms
since1991. Considering the great potential for the growth of telephone
demand with the accelerated growth of economic activities, the
Government of India announced the National Telecom Policy in 1994 and
the New Telecom Policy in 1999. The National Telecom Policy provides for
private sector participation to supplement the efforts of Dot in basic
telephone services. The opening up of the basic services provided a big
opportunity for private & foreign investors. More policy initiatives included
Addendum to NTP-1999.

The entire sector is now open to unrestricted competition in all. The opening
of the sector has not only led to rapid growth but also helped a great deal
towards maximization of consumer benefits. The tariffs have been falling
continuously across the board as a result of healthy and unrestricted
competition and India today has one of the lowest tariffs in the world.
Besides, as a result of the various measures and initiatives taken by the
Government, India is now fast emerging as one of the leading telecom
nations.

The reforms process in the telecom sector is still on, aiming to remove the
balance hurdles and limitations. With a strong population of over 1.16 Billion,
India has become one of the most dynamic and promising. Telecom markets
of the world. In recent times, the country has emerged as one of the fastest
growing telecom markets in the world. It has third largest telecom
network and the second largest wireless network in the world.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Growth of Mobile subscriber base from 1999 to Jan-2010 (In


millions)

Note: 2015 figure is projected by some agency.

Dec.2009 India have the 525.15 million subscribers, it is 22x times higher
than 1999.
During this period call charges reduce 56 x times, in compare to 1999 Rs
16.80 per minute.

Where we stand in world?

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

List of countries by number of mobile lines in use


Country-wise mobile subscribers

Ran Country or Number of mobile Populatio % of


k region phones n population
1 China 747,380,000 1,335,330, 55.97
000
2 India 525,147,922 1,174,040 44.73
,000
3 United States 276,610,580 308,505,00 89.0
0
4 Russia 207,900,000 141,915,97 143.2
9
5 Brazil 173,960,000 191,480,63 90.84
0
6 Indonesia 140,200,000 231,369,50 60.53
0
7 Japan 107,490,000 127,530,00 84.11
0
8 Germany 107,000,000 81,882,342 130.15
9 Pakistan 97,579,940 168,500,50 59.60
0
10 Italy 88,580,000 60,090,400 147.41
11 Mexico 79,400,000 109,610,00 72.44
0
12 United 75,750,000 61,612,300 122.95
Kingdom
13 Vietnam 70,000,000 87,375,000 80.11
14 Philippines 67,900,000 92,226,600 73.62
15 Turkey 66,000,000 71,517,100 92.29
16 Nigeria 64,000,000 154,729,00 41.36
0
17 France 58,730,000 65,073,842 90.25
18 Ukraine 55,170,908 46,143,700 119.56
19 Thailand 51,377,000 65,000,000 79.0
20 Spain 50,890,000 45,828,172 111.05
21 Bangladesh 50,400,000 162,221,00 31.11
0
22 South Korea 47,000,000 48,333,000 97.24
23 Argentina 40,402,000 40,482,000 99.8
24 South Africa 42,300,000 47,850,700 82.9
25 Iran 39,400,000 71,208,000 54.2

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Development of mobile phone

This history of mobile phones chronicles the development of radio


telephone technology from two-way radios in vehicles to handheld cellular
communicating devices.

In the beginning, two-way radios (known as mobile rigs) were used in


vehicles such as taxicabs, police cruisers, ambulances, and the like, but
were not mobile phones because they were not normally connected to the
telephone network. Users could not dial phone numbers from their
vehicles. A large community of mobile radio users, known as the
mobileers, popularized the technology that would eventually give way to
the mobile phone. Originally, mobile two-way radios were permanently
installed in vehicles, but later versions such as the so-called transportable
or "bag phones" were equipped with a cigarette lighter plug so that they
could also be carried, and thus could be used as either mobile or as
portable two-way radios. During the early 1940s, Motorola developed a
backpacked two-way radio, the Walkie-Talkie and later developed a large
hand-held two-way radio for the US military. This battery powered
"Handy-Talkie" (HT) was about the size of a man's forearm.

In 1910 Lars Magnus Ericsson installed a telephone in his car, although


this was not a radio telephone. While travelling across the country, he
would stop at a place where telephone lines were accessible and using a
pair of long electric wires he could connect to the =9781840464191 In
Europe, radio telephony was first used on the first-class passenger trains
between Berlin and Hamburg in 1926. At the same time, radio telephony
was introduced on passenger airplanes for air traffic security. Later radio
telephony was introduced on a large scale in German tanks during the
Second World War. After the war German police in the British zone of
occupation first used disused tank telephony equipment to run the first
radio patrol cars. In all of these cases the service was confined to
specialists that were trained to use the equipment. In the early 1950s
ships on the Rhine were among the first to use radio telephony with an
untrained end customer as a user.

In 1946 soviet engineers G. Shapiro and I. Zaharchenko successfully


tested their version of a radio mobile phone mounted inside a car. The
device could connect to local telephone network with a range of up to 20
kilometers.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Pioneers of the cell phone:

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Dr. Martin Cooper of Motorola, made


the first US analogue mobile phone call
on a larger prototype model in 1973.
In December 1947, Douglas H. Ring and W. Rae Young, Bell Labs
engineers, proposed hexagonal cells for mobile phones in vehicles.[1]
Philip T. Porter, also of Bell Labs, proposed that the cell towers be at the

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

corners of the hexagons rather than the centers and have directional
antennas that would transmit/receive in three directions (see picture at
right) into three adjacent hexagon cells. The technology did not exist then
and the frequencies had not yet been allocated. Cellular technology was
undeveloped until the 1960s, when Richard H. Frenkiel and Joel S. Engel
of Bell Labs developed the electronics.

Recognizable mobile phones with direct dialing have existed at least since
the 1950s. In the 1954 movie Sabrina, the businessman Linus Larrabee
(played by Humphrey Bogart) makes a call from the phone in the back of
his limousine.

The first person to have a mobile phone in the United Kingdom was
reputedly Prince Philip, who had a system fitted into the trunk of his Aston
Martin in 1957. The Prince could make phone calls to the Queen while
driving, which was thought to be quite amazing at the time. The Duke of
Gloucester heard about the mobile phone and tried to obtain one, but the
Post Office denied his request. They were prepared to indulge the
husband of Her Majesty, but nobody else, as the system used an entire
dedicated radio frequency.

The first fully automatic mobile phone system, called MTA (Mobile
Telephone system A), was developed by Ericsson and commercially
released in Sweden in 1956. This was the first system that did not require
any kind of manual control in base stations, but had the disadvantage of a
phone weight of 40 kg (90 lb.). MTB, an upgraded version with transistors,
weighing 9 kg (20 lb.), was introduced in 1965 and used DTMF signaling.
It had 150 customers in the beginning and 600 when it shut down in
1983.

In 1957 young Soviet radio engineer Leonid Kupriyanovich from Moscow


created the portable mobile phone, named after himself as LK-1 or
"radiophone". This true mobile phone consisted of a relatively small-sized
handset equipped with an antenna and rotary dial, and communicated
with a base station. Kupriyanovich's "radiophone" had 3 kilogram of total
weight, could operate up to 20 or 30 kilometers, and had 20 or 30 hours
of battery lifespan. LK-1 and its layout was depicted in popular Soviet
magazines as Nauka i zhizn, 8, 1957, p. 49, Yuniytechnik, 7, 1957, p. 43–
44. Engineer Kupriyanovich patented his mobile phone in the same year
1957 (author's certificate (USSR Patent) # 115494, 1.11.1957). The base
station of LK-1 (called ATR, or Automated Telephone Radio station) could
connect to local telephone network and serve several customers.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

In 1958, Kupriyanovich resized his "radiophone" to "pocket" version. The


weight of improved "light" handset was about 500 grams.

In 1958 the USSR also began to deploy the "Altay" national civil mobile
phone service especially for motorists. The newly-developed mobile
telephone system was based on Soviet MRT-1327 standard. The main
developers of the Altay system were the Voronezh Science Research
Institute of Communications (VNIIS) and the State Specialized Project
Institute (GSPI). In 1963 this service started in Moscow, and in 1970 the
Altay service already was deployed in 30 cities of the USSR. The last
upgraded versions of the Altay system are still in use in some places of
Russia as a trunking system.

In 1959 a private telephone company located in Brewster, Kansas, USA,


the S&T Telephone Company, (still in Business today) with the use of
Motorola Radio Telephone equipment and a private tower facility, offered
to the public mobile telephone services in that local area of NW Kansas.
This system was a direct dial up service through their local switchboard,
and was installed in many private vehicles including grain combines,
trucks, and automobiles. For some as yet unknown reason, the system
after being placed online and operated for a very brief time period was
shut down. The management of the company was immediately changed,
and the fully operable system and related equipment was immediately
dismantled in early 1960, not to be seen again.

In 1966, Bulgaria presented the pocket mobile automatic phone RAT- 0.5
combined with a base station RATZ-10 (RATC-10) on Interorgtechnika-66
international exhibition. One base station, connected to one telephone
wire line, could serve up to six customers.

In 1967, each mobile phone had to stay within the cell area serviced by
one base station throughout the phone call. This did not provide
continuity of automatic telephone service to mobile phones moving
through several cell areas. In 1970 Amos E. Joel, Jr., another Bell Labs
engineer invented an automatic "call handoff" system to allow mobile
phones to move through several cell areas during a single conversation
without loss of conversation.

In December 1971, AT&T submitted a proposal for cellular service to the


Federal Communications Commission (FCC). After years of hearings, the
FCC approved the proposal in 1982 for Advanced Mobile Phone System

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

(AMPS) and allocated frequencies in the 824–894 MHz band.[6] Analog


AMPS was superseded by Digital AMPS in 1990.

One of the first successful public commercial mobile phone networks was
the ARP network in Finland, launched in 1971. Posthumously, ARP is
sometimes viewed as a zero generation (0G) cellular network, being
slightly above previous proprietary and limited coverage networks.

First generation:

On April 3, 1973, Motorola employee Dr. Martin Cooper placed a call to Dr.
Joel S. Engel, head of research at AT&T's Bell Labs, while walking the
streets of New York City talking on the first Motorola DynaTAC prototype
in front of reporters. Motorola has a long history of making automotive
radios, especially two-way radios for taxicabs and police cruisers.

Second generation:

In the 1990s, 'second generation' (2G) mobile phone systems such as


GSM, IS-136 ("TDMA"), iDEN and IS-95 ("CDMA") began to be introduced.
In 1991 the first GSM network (Radiolinja) opened in Finland. 2G phone
systems were characterized by digital circuit switched transmission and
the introduction of advanced and fast phone-to-network signaling. In
general the frequencies used by 2G systems in Europe were higher than
those in America, though with some overlap. For example, the 900 MHz
frequency range was used for both 1G and 2G systems in Europe, so the
1G systems were rapidly closed down to make space for the 2G systems.
In America the IS-54 standard was deployed in the same band as AMPS
and displaced some of the existing analog channels.

Coinciding with the introduction of 2G systems was a trend away from the
larger "brickle" phones toward tiny 100–200g hand-held devices, which
soon became the norm. This change was possible through technological
improvements such as more advanced batteries and more energy-
efficient electronics, but also was largely related to the higher density of
cellular sites caused by increasing usage levels. This decreased the
demand for high transmission powers to reach distant towers for
customers to be satisfied.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

The second generation introduced a new variant to communication, as


SMS text messaging became possible, initially on GSM networks and
eventually on all digital networks. The first machine-generated SMS
message was sent in the UK in 1991. The first person-to-person SMS text
message was sent in Finland in 1993. Soon SMS became the
communication method of preference for the youth. Today in many
advanced markets the general public prefers sending text messages to
placing voice calls.

2G also introduced the ability to access media content on mobile phones,


when Radiolinja (now Elisa) in Finland introduced the downloadable ring
tone as paid content. Finland was also the first country where advertising
appeared on the mobile phone when a free daily news headline service on
SMS text messaging was launched in 2000, sponsored by advertising.

Third generation:

Not long after the introduction of 2G networks, projects began to develop


third generation (3G) systems. Inevitably there were many different
standards with different contenders pushing their own technologies. Quite
differently from 2G systems, however, the meaning of 3G has been
standardized in the IMT-2000 standardization processing. This process did
not standardize on a technology, but rather on a set of requirements (2
Mbit/s maximum data rate indoors, 384 Kbit/s outdoors, for example). At
that point, the vision of a single unified worldwide standard broke down
and several different standards have been introduced.

The first pre-commercial trial network with 3G was launched by NTT


DoCoMo in Japan in the Tokyo region in May 2001. NTT DoCoMo launched
the first commercial 3G network on October 1, 2001, using the WCDMA
technology. In 2002 the first 3G networks on the rival CDMA2000 1xEV-
DO technology were launched by SK Telecom and KTF in South Korea, and
Monet in the USA. Monet has since gone bankrupt. By the end of 2002,
the second WCDMA network was launched in Japan by Vodafone KK (now
Softbank).pooEuropean launches of 3G were in Italy and the UK by the
Three/Hutchison group, on WCDMA. 2003 saw a further 8 commercial
launches of 3G, six more on WCDMA and two more on the EV-DO
standard.

During the development of 3G systems, 2.5G systems such as CDMA2000


1x and GPRS were developed as extensions to existing 2G networks.

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R D Gardi Department Of Business Management, Saurashtra University, Rajkot
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These provide some of the features of 3G without fulfilling the promised


high data rates or full range of multimedia services. CDMA2000-1X
delivers theoretical maximum data speeds of up to 307 Kbit/s. Just
beyond these is the EDGE system which in theory covers the
requirements for 3G system, but is so narrowly above these that any
practical system would be sure to fall short.

By the end of 2009 there were 325+ Million subscribers on 3G networks


worldwide, which reflected 9% of the total worldwide subscriber base.
About two thirds of these are on the WCDMA standard and one third on
the EV-DO standard. The 3G telecoms services generated over 120 Billion
dollars of revenues during 2009 and at many markets the majority of new
phones activated were 3G phones. In Japan and South Korea the market
no longer supplies phones of the second generation. Earlier in the decade
there were doubts about whether 3G might happen, and also whether 3G
might become a commercial success. By the end of 2009 it had become
clear that 3G was a reality and was clearly on the path to become a
profitable venture.

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R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
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History of cellular services in India

The popular meaning of telecom always involves electrical signals and


nowadays people exclude postal or any other raw telecommunication
methods from its meaning. Therefore, the history of Indian telecom can
be started with the introduction of telegraph. As the cellular service is the
part of telecom.

Introduction of Telegraph:

The postal and telecom sectors had a slow and uneasy start in India. In
1850, the first experimental electric telegraph Line was started between
Kolkata and Diamond.

In 1851, it was opened for the British East India Company. The Posts and
Telegraphs department occupied a small corner of the Public Works
Department at that time. Construction of 4,000 miles (6,400 km) of
telegraph lines connecting Kolkata (Calcutta) and Peshawar in the north
via Agra, Mumbai (Bombay) through Sindwa Ghats, and Chennai in the
south, as well as Ootacamund and Bangalore was started in November
1853. Dr. William O'Shaughnessy, who pioneered telegraph and
telephone in India, belonged to the Public Works Department. He tried his
level best for the development of telecom throughout this period. A
separate department was opened in 1854 when telegraph facilities were
opened to the public.

Introduction of the Telephone:

In 1880, two telephone companies namely The Oriental Telephone


Company Ltd. and The Anglo-Indian Telephone Company Ltd. approached
the Government of India to establish telephone exchanges in India. The
permission was refused on the grounds that the establishment of
telephones was a Government monopoly and that the Government itself
would undertake the work. By 1881, the Government changed its earlier
decision and a license was granted to the Oriental Telephone Company

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R D Gardi Department Of Business Management, Saurashtra University, Rajkot
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Limited of England for opening telephone exchanges at Kolkata, Mumbai,


Chennai (Madras) and Ahmadabad. January 28, 1882, is a Red Letter Day
in the history of telephone in India. On this day Major E. Baring, Member
of the Governor General of India's Council declared open the Telephone
Exchange in Kolkata, Chennai and Mumbai. The exchange at Kolkata
named "Central Exchange" was opened at third floor of the building at 7,
Council House Street. The Central Telephone Exchange had 93
subscribers. Bombay also witnessed the opening of Telephone Exchange
in 1882.

Further developments:

⇒ 1902 - First wireless telegraph station established between Saugor


Islands and Sand heads.
⇒ 1907 - First Central Battery of telephones introduced in Kanpur.
⇒ 1913-1914 - First Automatic Exchange installed in Shimla.
⇒ 1927(July 23,) - Radio-telegraph system between the UK and India.
⇒ 1933 - Radiotelephone system inaugurated between the UK and
India.
⇒ 1953 - 12 channel carrier system introduced.
⇒ 1960 - First subscriber trunk dialing route commissioned between
Kanpur and Lucknow.
⇒ 1975 - First PCM system commissioned between Mumbai City and
Andheri telephone exchanges.
⇒ 1976 - First digital microwave junction introduced.
⇒ 1979 - First optical fiber system for local junction commissioned at
Pune.
⇒ 1980 - First satellite earth station for domestic communications
established at Secunderabad, Andhra Pradesh.
⇒ 1983 - First Analog signal Stored Program Control exchange for
trunk lines commissioned at Mumbai.
⇒ 1984 - C-DOT established for indigenous development and
production of digital exchanges.
⇒ 1985 - First mobile telephone service started on non-commercial
basis in Delhi.
⇒ 1986 - Conversion of DOT into two wholly government-owned
companies: theVidesh Sanchar Nigam Limited (VSNL) for

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R D Gardi Department Of Business Management, Saurashtra University, Rajkot
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international telecommunicationsand Mahanagar Telephone Nigam


Limited (MTNL) for service inMetropolitan areas.
⇒ 1994- Startinga cellular service in India.
⇒ 1997 - Telecom Regulatory Authority of India created.
⇒ 1999 - Cellular Services are launched in India. New National
Telecom Policy isadopted.
⇒ 2000 - Dot becomes a corporation, BSNL

While all the major cities and towns in the country were linked with
telephones during the British period, the total number of telephones in
1948 was only around 80,000. Even after independence, growth was
extremely slow. The number of telephones grew leisurely to 980,000 in
1971, 2.15 million in 1981 and 5.07 million in 1991.

In 1975, the Department of Telecom (DoT) was separated from P&T. DoT
was responsible for telecom services in entire country until 1985 when
Mahanagar Telephone Nigam Limited (MTNL) was carved out of DoT to
run the telecom services of Delhi and Mumbai. In 1990s the telecom
sector was opened up by the Government for private investment as a part
of Liberalization-Privatization-Globalization policy. Therefore, it became
necessary to separate the Government's policy wing from its operations
wing. The Government of India corporatized the operations wing of DoT
on October 01, 2000 and named it as Bharat Sanchar Nigam Limited
(BSNL). Many private operators, such as Reliance India Mobile, Tata
Telecom, Vodafone, BPL, Bharti, Idea etc., successfully entered the high
potential Indian telecom market.
Development of cellular industry:

The telecom services have been recognized the world-over as an


important tool for socio-economic development for a nation.
Telecommunication is one of the prime support services needed for rapid
growth and modernization of various sectors of the economy. It has
become especially important in recent years because of enormous growth
of information technology and its significant potential for the impact on
the rest of the economy. In the past decade or so the distinction between
communications & IT has been diminishing with emerging common
infrastructures blurring the differentiation between content & carrier
methods. At the same time, as has been the case in most of the
developed world, the combination of enhanced computing power and
improved telecommunications- equated by some to the introduction of

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R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
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steam power in the 18th century and electricity in the 19th, has spurred a
major improvement in the productive capacities of the economies.

India is perceived to have a special comparative advantage in information


technology and in IT enabled services. The extent of advantage depends
critically on high quality telecommunication infrastructure. Telecom
infrastructure is treated as a crucial factor to realize the socio-economic
objectives in India.

Impact of LPG on cellular service industry

Introduction:

Globalization, liberalization and privatization are the three most spoken


words in today’s world. These initiatives paved way for all-round reforms,

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R D Gardi Department Of Business Management, Saurashtra University, Rajkot
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Especially in developing economies, like India. These countries realized


that development of impactive and efficient means of communications
and information technology is important to push them onto the path of
development. The growth of the telecom sector in India during post-
liberalization has been phenomenal. This research aims to throw light on
the factors that contributed to growth in the segment and presents an
insight on the present status of the industry.

Liberalization:

No meaningful liberalization of the telecom sector is possible unless there


is an impactive and strong regulatory authority. In view of the raging
controversy between the TRAI and the DOT over the powers and
jurisdictions of each other, the Union Government intends suitable
amendments in the TRAI Act to create investors' confidence and a level-
playing field between public and private operators. Taking into account
the convergence of telecom, computers, television and electronics, a
group of experts is being constituted to recommend a new legislation in
place of the India Telegraph Act 1885 as it has lost its relevance.

In the early 1990s was the impact of economic reforms promulgated by


the Government of India to align its economy with the world economy.
Further the economic renaissance of India catalyzed the need for the
opening of Indian cellular industry. Since independence the number of
basic telecommunication services network has expanded from about 84
thousand connections to around 385.95 lakh connections as on March 31
2002. The basic service network represents the majority of the telephone
subscription, which accounts for around 86% of the total
telecommunication network in India. Post 1990s, the Government of India
did away with its old monopoly-market concept and shifted to open-
market policy regime.

In the course of liberalization, licenses were granted for providing cellular


mobile service in the metro cities of Delhi, Mumbai, Kolkata, and Chennai.
To avoid overlaps, the NTP stated that not more than two cellular
providers could operate in a given telecom circle. Service providers were
now free to provide all types of mobile services including voice and non-
voice messages and data services in their service area of operation.

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R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
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Bharti, a part of Bharti Enterprises, was the first to launch its cellular
service on July 7, 1995. Bharti's cellular services were launched under the
brand name ‘AirTel'and was categorized as pre-paid services and post-
paid services. The postpaid service was launched under the brand name
“Airtel” whereas its prepaid services were launched under the brand
name “Magic”...

Established in 1976, Bharti Enterprises was India's leading Telecom and


Healthcare conglomerate. It had profits of $320 million and revenues of $
1,790.776 million for the financial year 2004. Pre-paid services are the
mobile service where the user needs to purchase a “prepaid” card that
offers talk-time and other services depending on the talk- time value of
the card.

Post-paid services refer to mobile services that are billed on a monthly


basis. The user needs to pay the bills at the end of the month's usage of
the service.

Privatization:

For decades, we have wanted the government to stop baking bread,


running hotels, operating airlines, offering phone services, providing
insurance or running any business that requires high standards of
customer service. Also, we wanted government to stop being both, a
service provider and a regulator, or a player and a referee. And in the last
five years, the government is actually making a serious attempt to get out
of several businesses through its privatization programmed. It has also
set up several independent regulators to ensure a fair competition
between service providers and to deal with the impact of changing
technology on the way businesses are run.

Privatizations and competition alone have led to big improvements in


service quality in many areas. Unfortunately, the regulatory systems
seem to operate on the belief that competition alone is enough to protect
consumer interests. Take for instance the Telecom Regulatory Authority
of India (TRAI). It follows the open house route to policy making, but does
not entertain the mounting number of individual complaints. However, it
is now planning to set up a telecom ombudsman to interface with
customers. Meanwhile, subscribers across the spectrum of telephone
services continue to report a variety of complaints.

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R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
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ArunSaxena, president of the International Consumer Rights Protection


Council (ICRPC), forwarded Pole’s complaint to the company. Other civic
activists point out that the problem is not restricted to Reliance. Kisan
Mehta of the Save Bombay Committee points to several problems with
the Tata Indicom service. Almost all mobile companies are extremely
difficult to reach through their help lines, tardy in their billing and seldom
respond to complaints or queries sent to their email addresses. None of
them allow access to senior executives if a consumer wants to take an
unresolved complaint to a higher level.

Calls to mobile phones are the most annoying form of telemarketing


because they are not only a brazen invasion of privacy but often make
the victim pay long distance charges. Some of our leading banks and
finance companies have no qualms about letting telemarketers harass
their customers. My experience with a leading Indian bank and a foreign
bank reveals that we cannot get off the list until we make multiple
complaints to the top management of these institutions. We can say that
most mobile phone companies are indeed protective of their subscribers
and do not parts with telephone lists, so most call centers create lists by
dialing random numbers and hoping to strike lucky. The problem is that
they simply refuse to strike out numbers even when the person
emphatically asks them never to call.

The solution is obvious: Introducing a ‘do-not-call-registry’ and making the


invasion of consumer privacy punishable with a hefty fine. Even the US
has experimented with such a registry only recently and less than a week
ago a federal appeals court has upheld the government’s right to help
people block unwanted telemarketing calls. In India, filing a complaint
against companies, which harass consumers through telemarketing,
would again require a long battle with a consumer court. The alternative
would be consumer action in the form of circulating the names of such
companies on Internet groups and encouraging the boycott the products
of companies that invade our privacy.

Civil courts are crowded and consumer courts are slowed down by
inadequate infrastructure and often a poor understanding of consumer
issues. The solution lies in expanding the role of independent regulators
and asking them to create grievance redressed courts or ombudsmen to
hear consumer complaints and grant swift justice. But unless the judicial
system makes it much too expensive for companies to ignore their
customers, the benefits of privatization will invariably taper off within a
couple years after any sector is opened up to competition.

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R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
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Policy Initiatives:

India is one of the most deregulated telecom markets in the world. Private
participation is permitted in all segments of the services – international
long distance, domestic long distance, basic, cellular, internet, radio-
paging, and a number of value-added services. Private participation in
international voice services has been a significant step undertaken by the
government. Private players have been allowed to provide international
long distance services since April 2002; two years ahead of schedule. The
government has announced the New Telecom Policy (NTP) 1999 to further
de-regulate the sector with respect to services like basic, international
long distance (ILD), national long distance (NLD) and Wireless in Local
Loop (WLL) among others.

The government has liberalized the sector with the following


objectives:

Ensure availability of telephones on demand

Benchmark telecom services with global standards

India Positioning as a major manufacturing base and exporter of telecom


equipment.

Introduce all value added services available internationally

Achieve higher telecom penetration

The government has relaxed significantly the foreign investment norms in


the sector. Presently 49 per cent equity participation is permitted in
telecom services and 74 per cent in Internet services under the automatic
route. Maximum foreign equity participation for Internet Service Providers
(ISPs) is 100 per cent. Private investors, both domestic and foreign, have
already invested over US $ 2,449 million in different segments of the
industry. 100 per cent FDI is allowed for manufacturing telecom
equipment.

To impactively regulate the sector, facilitate growth and development,


promote transparency and ensure fair competition, the government has
set up the Telecom Regulatory Authority of India (TRAI) as an

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independent regulatory body and the Telecom Dispute Settlement


Appellate Tribunal as a dispute settlement body.

Globalization:

With the advent of globalization and deregulation, the dynamics of the


Telecom industry is undergoing a sea change. This is also affected by the
convergence of voice, data, and video. In order to stay ahead of
competition, telecom service providers need to operate with low delivery
costs, offer efficient services to retain existing customers, and come up
with new schemes to attract new customers. Several telecom operators
offer a variety of telecom services.

In 1995, the Indian cellular industry looked very promising. With ever
increasing globalization and expanding business activities, cell phones
became a necessity for business on the move. The younger generation
also began to flaunt the cell phone as a status symbol. Soon cell phones
were being used not only as a tool for communication but also as a source
of entertainment.

As per the FDI policy for the Telecom Sector, investment up to 49% is
permitted in Basic, Cellular and other value added services, which is hiked
to 74%; up to 74% is permitted in Internet, infrastructure and radio
paging services and up to 100% is permitted in manufacturing, Internet
service, voice and electronic mail, based on certain conditions for
fulfillment as a part of licensing and security requirements, laid down by
the Department of Telecommunications, Government of India. Several
announcements were made relating to policy change covering change of
ADC from per minute charges to revenue share, and mobile number
portability. FDI ceiling increment has led to an increase in FDI in mobile
services whereas ADC has resulted in reduction of mobile tariffs in the
country. On the policy front, per minute ADC on domestic calls was
changed to revenue share regime. And the percentage charged is 1.5% of
AGR (adjusted gross revenue).

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R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
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Regulatory Authority

Department of Telecom:

The Department of Telecom has been formulating developmental policies


for the accelerated growth of the telecommunication services. The
Department is also responsible for grant of licenses for various telecom
services like Unified Access Service Internet and VSAT service. The
Department is also responsible for frequency management in the field of
radio communication in close coordination with the international bodies. It
also enforces wireless regulatory measures by monitoring wireless
transmission of all users in India.

Telecom Commission:

The Telecom Commission was set up by the Government of India vide


Notification dated April 11, 1989 with administrative and financial powers
of the Government of India to deal with various aspects of
Telecommunications. The Commission consists of a Chairman, four full
time members, who are ex-office Secretary to the Government of India in
the Department of Telecommunications and four part time members who
are the Secretaries to the Government of India of the concerned
Departments. The Telecom Commission and the Department of
Telecommunications are responsible for policy formulation, licensing,
wireless spectrum management, administrative monitoring of PSUs,
research and development and standardization/validation of equipment
etc. The multi-pronged strategies followed by the Telecom Commission
have not only transformed the very structure of this sector but have
motivated all the partners to contribute in accelerating the growth of the
sector.

COAI (Cellular Operators Association of India):

COAI (Cellular Operators Association of India) was set up in 1995 as a


registered non- governmental, and non-profit society. The Cellular
Operators Association of India was established with the aim that it would
be dedicated to the advancement of modern communication.

COAI encourages the advancement of communication through Services of

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R D Gardi Department Of Business Management, Saurashtra University, Rajkot
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Mobile Cellular Telephone. The vision of COAI (Cellular Operators


Association of India) is to set up and sustain cellular infrastructure that is
of world class standard and also to encourage mobile communication
services that is affordable in the country.
Cellular Operators Association of India is the official voice for the cellular
industry in India and interacts on its behalf with the licensor, the telecom
industry associations, the management spectrum agency, and the policy
makers. The chairman of COAI (Cellular Operators Association of India) is
Mr. Sanjeev Aga and the vice- chairman is Mr. Naresh Gupta. COAI
(Cellular Operators Association of India) has many committees under it
such as the Executive Council Committee, Business Development
Committee, Finance and Commercial committee, Regulatory Council
Committee, and Technology Committee.

COAI (Cellular Operators Association of India) objectives includes to


upgrade and maintain services such as security, speech transmission,
coverage, and access in order to help in the expansion of the cellular
services in the country and to make continuous efforts to satisfy the
customers. Further the various objectives of COAI are to address the
problems of the cellular operators that relate to financial, operational,
licensing, or regulatory by interacting with the Ministry of Finance,
Department of telecommunications, Financial Institutions, Ministry of
Communications & IT, Ministry of Commerce, and Telecom Regulatory
Authority of India. Also the objectives of Cellular Operators Association of
India are to make efforts to achieve the country's objectives of better
rural access and increased tele- density and also to spread information
and dispense awareness among consumers and operators on issues
relating to the various kinds of services provided by the service operators
to their customers.

The various cellular companies that are members of COAI (Cellular


Operators Association of India) are:

➢ Loop mobile
➢ Reliance Telecom Ltd
➢ Idea Cellular Ltd
➢ Aircel Ltd
➢ Vodafone Group
➢ Bharti Airtel Ltd

TRAI as a regulatory authority:

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Government of India had set-up telecom regulatory authority of India


(TRAI) as a regulatory authority for telecom sector. GoI has given a power
to TRAI for development of telecom sector. TRAI act as an immediate
between industries and government. TRAI was formed in Jan 1997 with a
view to provide an impactive regulatory framework and adequate
safeguard to ensure fair competition and protection of consumer interest.
The government is committed to strong and independent regulator with
comprehensive powers and player authority to impactively perform its
functions. TRAI, 1993 deals with the powers and functions of the
authority. One of the important function to be discharge by the authority
is to laid down the standard of quality of service to be provided by the
service provide and for that the prescribed quality of service is
maintained by the service provides and for that purpose one of the means
adopted would be to conduct periodical survey of the such service
provided by the service provider. In pursuance of this objective the
authority notify a regulation on quality of service of basic and cellular
mobile service in July, 2000. The purpose of the regulation is to create
suitable conditions for customer satisfaction by meeting down the quality
of service that the service providers are required to provide and customer
as a right to accept. Satisfaction by making known the quality of service
that the service providers are required to provide and the consumer has
the right to accept. The regulation also provides for measuring customer
perception regarding telecom services through surveys. The authority
through independent agency may conduct such service. The regulation
further provides for meeting the results of the surveys public so as to
improve the quality of the service by generating healthy competition
among the service providers.

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Various Telecom policies

Government policy:

Policy Initiatives by Govt. of India in the Telecommunication Sector have


been one of the largest causes for the success of the telecom market in
India. The national parties before the administrative unit have lifted
private telecom units based on license-fee.

The government of India has adopted a new economic policy for the
telecommunication market in India. This policy has been impactive from
1994 and the Govt. of India with the aim to accelerate India's growth in
export production and international market formulated it. The national

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telecom policy as has been designed by the government of India also


ensures foreign direct investment and exhilarating domestic investiture.
This national economic policy of telecom department demands superior
quality telecommunication services and therefore the development of
telecom services are to be given the utmost importance to attain the
peak of success. The national telecom policy covers the following
objectives:

A number of policy changes have been made in the recent past which, if
implemented, is bound to have a significant impact on the telecom
scenario. The most significant among the changes is the announcement
of a New Telecom Policy (NTP) 1999. The Policy envisages development of
telecom facilities in remote, rural and tribal areas of the country and their
availability to the masses at affordable costs.

The NPT 1999, which has come into impact from April 1, 1999, aims at
making telephones available on demand by the year 2002 and to achieve
teledensity of seven per hundred persons by the year 2005. In case of
rural areas, the current teledensity is proposed to be raised from 0.4 to 4
by the year 2010. The policy document of NPT outlines rapid growth in
the telecom sector in India with a projected teledensity of 15 by the year
2010.

National Telecom policy 1994:

The Government of India (Government) recognizes that provision of world


class telecommunications infrastructure and information is the key to
rapid economic and social development of the country. It is critical not
only for the development of the Information Technology industry, but also
has widespread ramifications on the entire economy of the country. It is
also anticipated that going forward, a major part of the GDP of the
country would be contributed by this sector. Accordingly, it is of vital
importance to the country that there be a comprehensive and forward
looking telecommunications policy which creates an enabling framework
for development of this industry.

Objectives and achievements:

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In 1994, the Government announced the National Telecom Policy which


defined certain important objectives, including availability of telephone on
demand, provision of world class services at reasonable prices, ensuring
India's emergence as major manufacturing / export base of telecom
equipment and universal availability of basic telecom services to all
villages. It also announced a series of specific targets to be achieved by
1997. As against the NTP 1994 target of provision of 1 PCO per 500 urban
population and coverage of all 6 lac villages, DoT has achieved an urban
PCO penetration of 1 PCO per 522 and has been able to provide telephone
coverage to only 3.1 lac villages. As regards provision of total telephone
lines in the country, DoT has provided 8.73 million telephone lines against
the eighth plan target of 7.5 million lines.

Need for a new telecom policy:

In addition to some of the objectives of NTP 1994 not being fulfilled, there
have also been far reaching developments in the recent past in the
telecom, IT, consumer electronics and media industries world-wide.
Convergence of both markets and technologies is a reality that is forcing
realignment of the industry. At one level, telephone and broadcasting
industries are entering each other's markets, while at another level
technology is blurring the difference between different conduit systems
such as wire line and wireless. As in the case of most countries, separate
licenses have been issued in our country for basic, cellular, ISP, satellite
and cable TV operators each with separate industry structure, terms of
entry and varying requirement to create infrastructure. However, this
convergence now allows operators to use their facilities to deliver some
services reserved for other operators, necessitating a relook into the
existing policy framework. The new telecom policy framework is also
required to facilitate India's vision of becoming an IT superpower and
develop a world class telecom infrastructure in the country.

TRAI Act 1997:

This Act may be called the Telecom Regulatory Authority of India Act,
1997.

Introduction:

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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.

Changing telecom scenario:

India has registered an impressive growth in the telecom sector. Over the
years the country has developed a vast telecom network comprising over
25000 telephone exchanges and 21.5 million working connections. There
is a large network of optical fibre cables, digital microwave and satellite
communication systems. A very strong industrial base has been built in
the telecom sector with a large number of national and multi-national
telecom companies.

The NPT 1999, which has come into impact from April 1, 1999, aims at
making telephones available on demand by the year 2002 and to achieve
teledensity of seven per hundred persons by the year 2005. In case of
rural areas, the current teledensity is proposed to be raised from 0.4 to 4
by the year 2010. The policy document of NPT outlines rapid growth in
the telecom sector in India with a projected teledensity of 15 by the year
2010.

This will require a massive investment of over 23 billion dollars in the next
five years and 65 billion over the next 10 years in the telecom sector.

Accelerator:

Telecommunication is by itself an accelerator of economic growth. As per


the calculations made by experts even one percent increase in
teledensity results in a three percent increase in the gross national
product (GNP).

The NPT 1999 has been hailed the world over as a progressive and
forward-looking policy in tune with the high technological changes of the
21st century. It addresses the various problems affecting the telecom
sector. The new policy comes as a breath of fresh air for the beleaguered

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

telecom industry. It is expected to encourage investments in the telecom


sector and holds the promise of boosting the entry of world class
infrastructure in the country.

Bail-out package:

The Government later came out with what came to be known as a bail-out
package allowing licensees of all telecom services including basic,
cellular, paging and other value-added services to migrate to the
revenue-sharing system under the NPT 1999. According to the
Government, this was necessitated because a large number of licensees
under the 1994 Telecom Policy were finding it difficult to pay the license
fee and wanted to switch over to the revenue-sharing regime under the
new policy.

The Government clarified that it did not want to discriminate between the
existing telecom operators and the new licensees. Moreover, future
collections under the old license fee regime were uncertain as many
cellular operating companies were likely to turn sick.

Under the bail-out package, the private telecom operators were required
to pay up 30 per cent of arrears of license fee including interest last by
August 31 as provided in the license agreement for migrating to the New
Telecom Policy. Requisite bank guarantees for the remaining amount of
arrears, including interest, were to be furnished for the period till the
arrears were cleared by January 31 next year. Relief was provided to the
licensees by extending the period of their licenses from the present 10
years to 20 years from the date of existing license agreement.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Major players of the


Industry

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Cellular Service providers Overview

India is the developing country and so all the industry in India are
developing day by day, but cellular service industry in India is in emerging
stage. So, there are much chances of development in this industry and
chances of new players to enter into this industry. In India, more than
45% people have mobiles and the others do not have mobiles. The
mobiles are useless without SIM card and the companies who provide the
SIM card are known as cellular service companies. In India, public
companies as well as private companies are in this business. The
companies who provide cellular services are as follows.

List of cellular operator

Ran Operator Technolo Frequency Subscrib Ownership


kk gyy ers
(in
millions)
(As of
January
2010[update
]
)
1 Airtel GSM GSM 900/1800 118.8640 Bharti
31 Enterprises
(64.76%)
SingTel
(30.84%)
Vodafone
(4.4%)
2 Reliance CDMAOn CDMA2000 1x 93.79561 Reliance -
Communicat e 3 Anil
ion GSM, Dhirubhai
Ambani
Group
3 Vodafone GSM GSM 900/1800 91.40195 Vodafone
Essar 9 (67%)
Essar Group
(33%)

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

4 BSNL GSM, GSM 900, 62.86121 State-owned


CDMAOn CDMA2000 1x 4
e,

5 Idea Cellular GSM GSM 1800 57.61187 Aditya Birla


2 Group
Axiata
Group
Berhad
(15%)
6 Tata CDMA, CDMA2000 1x 57.32944 [Tata
Teleservices GSM, 9 Indicom--
(Tata Tata Group]
Indicom)
(Tata [Tata
DoCoMo) DoCoMo--
(Virgin Tata Group,
mobile) (74%) &NTT
DoCoMo,
(26%)]

[Virgin
Mobile
(50%)
Tata Tele.
(50%)]
7 Aircel GSM GSM 900/1800 31.02399 Maxis
7 Communicat
ions (74%)
Apollo
Hospital
(26%)
8 MTNL GSM, GSM 900, 4.875913 State-owned
CDMA CDMA2000 1x

9 MTS India CDMA CDMA2000 1x 3.042741 Sistema


(73.71%)
Shyam
Group
(23.79%)

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

10 Loop Mobile GSM GSM 2.649730 Essar Group


900(Mumbai)/
1800

11 Uninor GSM - 1.208130 Telenor


(67.25%)
Unitech
Group
(32.75%)
12 HFCL Infotel CDMA - 3.41862 HFCL Group

13 S Tel GSM - 1.41411 Siva Group


(51%)
Batelco
(49%)

All-over Market share (as of January 2010):

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Bharti Airtel

Introduction:

Bharti Airtel formerly known as Bharti Tele-Ventures LTD (BTVL) is the


largest cellular service provider in India, with more than 110 million

Type Public
Founded July 07, 1995
Founder(s) Sunil Bharti Mittal
Headquarters New Delhi, India
Key people Sunil Mittal
(Chairman) & (MD)
Sanjay Kapoor
(CEO)
Industry Telecommunications
Products Wireless
Telephone
Internet
Satellite television
Revenue ▲ US$ 7.254 billion (2009)
Operating income ▲ US$ 2.043 billion (2009)
Net income ▲ US$ 1.662 billion (2009)
Total assets ▲ US$ 11.853 billion (2009)
Owner(s) BhartiEnterprises (64.76%)
SingTel (30.5%)
Vodafone (4.4%)
Website www.bharti.com
www.airtel.in
subscribers as of 2009[update]. With this, Bharti is now the world’s third-
largest, single-country mobile operator and sixth-largest integrated
telecom operator. It also offers fixed line services and broadband
services. It offers its TELECOM services under the Airtel brand and is
headed by Sunil Bharti Mittal. The company also provides telephone
services and broadband Internet access (DSL) in top 95 cities in India. It
also acts as a carrier for national and international long distance

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

communication services. The company has a submarine cable landing


station at Chennai, which connects the submarine cable connecting
Chennai and Singapore
.
The businesses at Bharti Airtel have always 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 a Direct-to-
Home (DTH) service, Airtel Digital TV. Shahrukh Khan is the brand
ambassador of the mobile company and Kareena Kapoor and Saif Ali Khan
are the brand ambassadors of the DTH Company. The company provides
end-to-end data and enterprise services to the corporate customers
through its nationwide fiber optic backbone, last mile connectivity in
fixed-line and mobile circles, VSATs, ISP and international bandwidth
access through the gateways and landing station.

Globally, Bharti Airtel is the 3rd largest in-country mobile operator by


subscriber base, behind China Mobile and China Unicom. In India, the
company has a 24.6% share of the wireless services market, followed by
17.7% for Reliance Communications and 17.4% for Vodafone Essar. In
January 2010, company announced that ManojKohli, Joint Managing
Director and current Chief Executive Officer of Indian and South Asian
operations, will become the Chief Executive Officer of the International
Business Group from 1st April 2010. He will be overseeing Bharti's
overseas business. Current Dy. CEO, Sanjay Kapoor, will replace
ManojKohli and will be the CEO with impactive from 1st April, 2010.

Brand “Airtel” in sub-continent:

Airtel is a brand of telecommunication services in India, Bangladesh and


in Sri Lanka owned and operated by Bharti Airtel. It is the largest cellular
service provider in India in terms of number of subscribers. Services are
offered under the brand name Airtel: Mobile Services (using GSM
Technology), Broadband & Telephone Services (Fixed line, Internet
Connectivity (DSL) and Leased Line), Long Distance Services and
Enterprise Services (Telecommunications consulting for corporate). It has
presence in all 23 circles of the country and covers 71% of the current
population (as of Financial Year 2007). Airtel has also launched 16Mbps
broadband plans in India, making it the first ISP to do so.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Airtel in Sri Lanka:

In December 2008, Bharti Airtel rolled out third generation services in Sri
Lanka in association with Singapore Telecommunications. SingTel is a
major player in the 3G space in Asia. It operates third generation
networks in several markets across Asia.

Airtel's operation in Sri Lanka, known as Airtel Lanka, commenced


operations on the 12th of January 2009.

Airtel in Bangladesh:

In January 2010, it was announced that the Bangladesh


Telecommunications Regulatory Commission (BTRC) of The People's
Republic of Bangladesh had given Bharti Airtel the go ahead to acquire a
70% stake in the Bangladesh business of Abu Dhabi based Warid
Telecom. The latter had till date invested a total of $600 million, with
plans to bring their Bangladesh investments to the $1 billion mark. Airtel's
70% stake in the company is said to be at a cost of an initial $300 million.
Warid will be later named Airtel and the price of the sim will go higher and
call rates will be lower....!

Touchtel:

Until September 18, 2004, Bharti provided fixed-line telephony and


broadband services under the Touchtel brand. Bharti now provides all
telecom services including fixed-line services under a common brand
"Airtel".

BlackBerry:

On 19 October 2004 Airtel announced the launch of a BlackBerry Wireless


Solution in India. The launch is a result of a tie-up between Bharti Tele-
Ventures Limited and Research in Motion (RIM).

I Phone 3G:

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

The Apple iPhone 3G was rolled out in India on 22 August 2008 via Airtel&
Vodafone.

Merger talks:

In May 2008, it emerged that Bharti Airtel was exploring the possibility of
buying the MTN Group, a South Africa-based telecommunications
company with coverage in 21 countries in Africa and the Middle East. The
Financial Times reported that Bharti was considering offering US$45
billion for a 100% stake in MTN, which would be the largest overseas
acquisition ever by an Indian firm. However, both sides emphasize the
tentative nature of the talks, while The Economist magazine
noted, "If anything, Bharti would be marrying up," as MTN has more
subscribers, higher revenues and broader geographic coverage. However,
the talks fell apart as MTN group tried to reverse the negotiations by
making Bharti almost a subsidiary of the new company.

In May 2009, Bharti Airtel again confirmed that it is in Talks with MTN and
companies have now agreed discuss the potential transaction exclusively
by July 31, 2009. Bharti Airtel said in a statement “Bharti Airtel Ltd is
pleased to announce that it has renewed its effort for a significant
partnership with MTN Group".

Talks eventually ended without agreement, some sources stating that due
to the South African government opposition.

Now in South Africa:


In March 2010 Airtel acquired Zain mobile.

Promotional Sponsorship:

Bharti Airtel signed a five-year deal with ESPN Star Sports to become the
title sponsor of the Champions League Twenty20 cricket tournament. The
tournament itself is named "Airtel Champions League Twenty20."
On the 9th of May, 2009 Airtel signed a major deal with Manchester
United Football Club. As a result of the deal, Airtel gets the rights to
broadcast the matches played by the team to its customers.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Subscriber base:
The Airtel subscriber base according to TRAI - Telecom Regulatory
Authority of India as of February 2009 was:

Airtel’s Subscriber

Metro/cir Dec'09 Jan-10 Monthl %Mark % Growth over


cle y et previous
Additio Share month
ns

Delhi 4472773 4573196 100423


Mumbai 2736098 2762132 26034
Kolkata 2298467 2401078 102611
Chennai 2051435 2088404 36969
A.P. 8320748 8593204 272456
Karnataka 9223183 9601066 377883
Type Public (BSE: RCOM)
T.N. 5617492 5795731 178239
Founded 2004
Maharasht 5400924 5544737 143813
Headquarters Navi Mumbai, Maharashtra, India
ra
Key people Anil Ambani
Gujarat 3811098 3931331 120233
(Chairman) & (MD)
Punjab 3653315 3713574 60259
Industry Telecommunications
UP (W) 2105439 2198209 92770
Products Wireless
Haryana 1199001 1238027 39026
Telephone
M.P. 4214828 4330838 116010
Internet
Kerala 2053643 2114180 60537
Television
H.P. 921798 937867 16069
Revenue US$ 4.26 billion (2008)
Rajasthan 6193807 6409936 216129
Net income US$ 1.35 billion (2008)
UP (E) 5391829 5552153 160324
Total assets US$ 19.31 billion (2008)
WB
Employees 3136788 3321104 33,000
184316
J &
Website K 1442521 1517626 www
75105
rcom.co.in
Orissa 2624480 2711377 86897
Bihar 6656835 6851526 194691
Assam 1306812 1352549 45737
NE 817419 842913 25494
Total 856507 8838275 32.99% 3.19%
33 8
Additions 2730140 2732025

Reliance communications

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Introduction:

Reliance Communications, formerly known as Reliance Infocomm, along


with Reliance Telecom and Flag Telecom, is part of Reliance
Communications Ventures (RCoVL). It is the second largest mobile
operator in India, based on number of subscribers. 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. 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 GSM-900/GSM-
1800 technology for its existing/newly launched GSM services.

RelCom is also into Wire line Business throughout India and has the
largest optical fiber communication (OFC) backbone architecture [roughly
110,000 km] in the country.
Reliance Communications has launched its Direct To Home (DTH) TV also,
known as "Big TV". RelCom have presence across all B2C communications
channel in one of the fastest growing markets in the world.

Bid for Hutch:

In 2007, Reliance Communications had bid for 67% of Hutch but lost to
Vodafone.

Acquisitions:

In July 2007, the company announced it is buying US-based managed


Ethernet and application delivery services company Yipes Enterprise
Services for a cash amount of Rs. 1200 crore rupees (equivalent of USD
300 million). The deal was announced of the overseas acquisition, the
Reliance group has amalgamated the United States-based Flag Telecom
for $ 211 million [roughly Rs 950 crore (Rs 9.50 billion)].

Recent news:

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

On the 19th December 2008, one of the flag telecom cables in the
Mediterranean sea was damaged. Flag Telecom is now part of Reliance
Globalcom.
On the 30th December 2008, Reliance became the first telecom company
in India to operate in both CDMA as well as GSM technologies.

Reliance GSM:

On the 30th December 2008, Reliance Communications became the first


telecom operator in the history of Indian telecommunications to
simultaneously launch its GSM services in 17 circles, namely Andhra
Pradesh, Chennai, Delhi, Gujarat, Haryana, Jammu & Kashmir,
Karnataka, Kerala, Maharashtra, Mumbai, Punjab, Rajasthan, Tamil Nadu,
Uttar Pradesh(East & West) thereby establishing itself as a pan-India
operator.

It already operates GSM services in 8 circles namely Assam, Bihar &


Jharkhand, Himachal Pradesh, Kolkata, Pradesh Chhattisgarh, North
Eastern states, Orissa, West Bengal But operates under the brand
Reliance Smart GSM. Reliance Smart is owned by their sister concern
Reliance Telecom. They got these licenses when they took over USHA
PHONE.

Subscriber base:
The Reliance subscriber base according to TRAI - Telecom Regulatory
Authority of India as of January 2010 was:

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Reliance’s Subscriber(GSM)

Metro/circle Dec'09 Jan-10 Monthly %Mark %


Additio et Growt
ns Share h over
previo
us
month

Kolkata 1368432 1368432 0

M.P. 3856360 3856360 0

W.B. 2331990 2331990 0

H.P. 807290 807290 0

Bihar 3548515 3548515 0

Orissa 1756929 1756929 0

Assam 1595535 1595535 0

N.E. 492639 492639 0

Total 15757690 15757690 - 4.00% 0.00%

Additions 601289 -

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Vodafone Essar

Introduction of Vodafone:

Vodafone Essar, formally known as Hutchison Essar is a cellular operator

Type Limited
Founded 1994 as Hutchison Essar
Headquarters Mumbai, Maharashtra, India
Industry Mobile telecommunications
Products Mobile networks,
Telecom services, Etc.
Owner(s) Vodafone Group (67%)
Essar Group (33%)
Employees 10,000 – March 31, 2009
Website www.vodafone.in
in India that covers 23 telecom circles in India based in Mumbai. Vodafone
Essar is owned by Vodafone 67% and Essar Group 33%. It is the second
largest mobile phone operator in terms of revenue behind Bharti Airtel,
and third largest in terms of customers. As of June 31, 2009 (2009 -06-31)
[update]
Vodafone India has 18.8% customer market share and 20.7%
revenue market share.

On February 11, 2007, Vodafone agreed to acquire the controlling interest


of 67% held by Li KaShing Holdings in Hutch-Essar for US$11.1 billion,
piping Reliance Communications, Hinduja Group, and Essar Group, which
is the owner of the remaining 33%. The whole company was valued at
USD 18.8 billion. The transaction closed on May 8, 2007. Despite the
official name being Vodafone Essar, its products are simply branded
Vodafone. It offers both prepaid and postpaid GSM cellular phone
coverage throughout India with good presence in the metros.

Vodafone Essar provides 2.75G services based on 900 MHz and 1800 MHz
digital GSM technology, offering voice and data services in 23 of the

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

country's 23 license areas. It is among the top three GSM mobile


operators of India.

Vodafone as brands:

In December 2006, Hutch Essar re-launched the "Hutch" brand


nationwide, consolidating its services under a single identity. The
Company entered into an agreement with NTT DoCoMo to launch I-mode
mobile Internet service in India during 2007.

The company used to be named Hutchison Essar, reflecting the name of


its previous owner, Hutchison. However, the brand was marketed as
Hutch. After getting the necessary government approvals with regards to
the acquisition of a majority by the Vodafone Group, the company was
rebranded as Vodafone Essar. The marketing brand was officially changed
to Vodafone on 20 September 2007. On September 20, 2007 Hutch
became Vodafone in one of the biggest brand transition exercises in
recent times.

Vodafone Essar is spending somewhere in the region of Rs. 250 crores on


this high-profile transition being unveiled today. Along with the transition,
cheap cell phones have been launched in the Indian market under the
Vodafone brand. The company also plans to launch co-branded handsets
sourced from global vendors as well.

A popular daily quoted a Vodafone Essar director as saying that "the


objective is to leverage Vodafone Group's global scale in bringing millions
of low-cost handsets from across-the-world into India."

Incidentally, China's ZTE, which is looking to set-up a manufacturing unit


in the country, is expected to provide several Vodafone handsets in India.
Earlier this year, Vodafone penned a global low-cost handset procurement
deal with ZTE.

Growth of Hutchison Essar (1992-2005)

In 1992 Hutchison Whampoa and its Indian business partner established a


company that in 1994 was awarded a license to provide mobile
telecommunications services in Mumbai (formerly Bombay) and launched

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

commercial service as Hutchison Max in November 1995. Analjit Singh of


Max still holds 12% in company.

In Delhi, UP (E), Rajasthan and Haryana, ESSAR was the major partner.
But later Hutch took the majority Stake.

By the time of Hutchison Telecom's Initial Public Offering in 2004,


Hutchison Whampoa had acquired interests in six mobile
telecommunications operators providing service in 13 of India's 23 license
areas and following the completion of the acquisition of BPL that number
increased to 16. In 2006, it announced the acquisition of a company
(EssarSpacetel — A subsidiary of Essar Group) that held license
applications for the seven remaining license areas.

In a country growing as fast as India, a strategic and well managed


business plan is critical to success. Initially, the company grew its
business in the largest wireless markets in India — in cities like Mumbai,
Delhi and Kolkata. In these densely populated urban areas it was able to
establish a robust network, well-known brand and large distribution
network -all vital to long-term success in India. Then it also targeted
business users and high-end post-paid customers which helped Hutchison
Essar to consistently generate a higher Average Revenue per User
("ARPU") than its competitors. By adopting this focused growth plan, it
was able to establish leading positions in India's largest markets providing
the resources to expand its footprint nationwide.

In February 2007, Hutchison Telecom announced that it had entered into


a binding agreement with a subsidiary of Vodafone Group Plc to sell its
67% direct and indirect equity and loan interests in Hutchison Essar
Limited for a total cash consideration (before costs, expenses and
interests) of approximately US$11.1 billion or HK$87 billion.

⇒ 1992: Hutchison Whampoa and Max Group established Hutchison Max


⇒ 2000: Acquisition of Delhi operations Entered Calcutta and Gujarat
markets through ESSAR acquisition
⇒ 2001: Won auction for licenses to operate GSM services in Karnataka,
Andhra Pradesh and Chennai
⇒ A 'You and I' print advertisement of Hutch featuring Cheeka (dog)
⇒ 2003: Acquired AirCelDigilink (ADIL — ESSAR Subsidiary) which
operated in Rajastan, Uttar Pradesh East and Haryana telecom circles
and renamed it under Hutch brand

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R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

⇒ 2004: Launched in three additional telecom circles of India namely


'Punjab', 'Uttar Pradesh West' and 'West Bengal'
⇒ 2005: Acquired BPL (Except Mumbai)- 3 Circles, another mobile service
provider in India
⇒ 2008: Vodafone acquired the Licence in remaining 7 circles and has
started its pending operations in Madhya Pradesh/Chhattisgarh
with its headquarters at Malviya Nagar, Bhopal as well as in Orissa,
Assam, North East and Bihar
⇒ 2008: Vodafone launched the Apple iPhone 3G to be used on its 17
circle 2.75G network.
⇒ Hutch was often praised for its award winning advertisements which all
follow a clean, minimalist look. A recurrent theme is that its message
Hello stands out visibly though it uses only white letters on red
background. Another recent successful ad campaign in 2003 featured
a pug named Cheeka following a boy around in unlikely places, with
the tagline, wherever you go, our network follows. The simple yet
powerful advertisement campaigns won it many admirers.
⇒ 2009: Vodafone launched Recharge Online
⇒ 2009: Vodafone Essar - 1st Indian Telecom operator to receive the
Payment Card Industry Security Standard (PCI DSS) certification for its
Mumbai operations and launches unlimited SMS offer in Mumbai.
⇒ Launched an entirely accepted advertising Campaign “Zoo Zoo”
during IPL.
⇒ Introduce a new slogan “power to you”
⇒ 2010: Vodafone emerged as the most admired marketer in India.

Subscriber base:
The Vodafone subscriber base according to TRAI - Telecom Regulatory
Authority of India as of January 2010 was:

Vodafone’s Subscriber

Metro/cir Dec'09 Jan-10 Monthly %Mark %


cle Addition et Growt
s Share h over

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

previo
us
month

Mumbai 4931149 4986437 55288


Delhi 4730533 4818472 87939
Kolkata 3372057 3418307 46250
Chennai 1744951 1764103 19152
Gujarat 9759813 1002802 268209
2
A.P. 5308228 5464272 156044
Karnataka 4678686 4840810 162124
Punjab 2838036 2923706 85670
Haryana 2647870 2747370 99500
U.P.(E) 8847424 9157975 310551
Rajasthan 6978674 7146313 167639
UP (W) 5819801 6054407 234606
WB 6531567 6681702 150135
Maharash 6478362 6683781 205419
tra
T.N. 6704337 6830799 126462
Kerala 3964795 4045074 80279
Orissa 826548 893340 66792
Assam 616994 676722 59728
North 388120 417406 29286
East
MP 1329163 1478444 149281
Bihar 2598473 2768804 170331
HP 149176 159765 10589
J&K 157202 157333 131
Total 91401959 941433 23.87% 3.00%
64
Additions 2794352 2741405

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

BSNL

Introduction:

Bharat Sanchar Nigam Limited (known as BSNL, India Communications

Type State-owned
Founded 19th century, incorporated 2000
Headquarters Bharat Sanchar Bhawan, Harish
Chandra Mathur Lane, Janpath, New
Delhi
Key people KuldeepGoyal
(Chairman) & (MD)
Industry Telecommunications
Products Wireless
Telephone
Internet
Television
Revenue ▼ US$ 7.03 billion (2009)
Owner(s) The Government of India
Employees 357,000 – March 31, 2009
Website Bsnl.co.in
Corporation Limited) is a state-ownedtelecommunication company in
India. BSNL is the sixth largest cellular service provider, with over 57.22
million customers as of December 2009 and the largest land line
telephone provider in India. Its headquarters are at Bharat Sanchar
Bhawan, Harish Chandra Mathur Lane, Janpath, and New Delhi. It has the
status of Mini Ratna, a status assigned to reputed public sector
companies in India.

BSNL is India's oldest and largest Communication Service Provider


(CSP).Currently has a customer base of 90 million as of June 2008. It has
footprints throughout India except for the metropolitan cities of Mumbai
and New Delhi which are managed by MTNL. As on March 31, 2008 BSNL

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

commanded a customer base of 31.55 million Wire line, 4.58 million


CDMA-WLL and 54.21 million GSM Mobile subscribers. BSNL's earnings for
the Financial Year ending March 31, 2009 stood at INR 397.15b (US$7.03
billion) with net profit of INR 78.06b (US$ 1.90 billion). BSNL has an
estimated market value of $ 100 Billion. The company is planning an IPO
within 6 months to offload 10% to public in the Rs 300-400 range valuing
the company at over $100 billion.

Services:

BSNL provides almost every telecom service in India. Following are the
main telecom services provided by BSNL:

Universal Telecom Services: Fixed wire line services & Wireless in Local
loop (WLL) using CDMA Technology called bfone and Tarang respectively.
As of December 31, 2007, BSNL has 81% market share of fixed lines.

Cellular Mobile Telephone Services: BSNL is major provider of Cellular


Mobile Telephone services using GSM platform under the brand name
BSNL Mobile. As of Sep 30, 2009 BSNL has 12.45% share of mobile
telephony in the country.

Internet: BSNL provides internet services through dial-up connection


(Sancharnet) as Prepaid, (Net One) as Postpaid and ADSL broadband
(BSNL Broadband). BSNL has around 50% market share in broadband in
India. BSNL has planned aggressive rollout in broadband for current
financial year.

Intelligent Network (IN): BSNL provides IN services like televoting, toll free
calling, premium calling etc.

3G: BSNL offers the '3G' or the'3rd Generation' services which includes
facilities like video calling etc.

IPTV: BSNL also offers the 'Internet Protocol Television' facility which
enables us to watch television through internet.

FTTH: Fiber to The Home facility that offers a higher bandwidth for data
transfer. This idea was proposed on post-December 2009.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Present and future:

BSNL (then known as Department of Telecom) had been a near monopoly


during the socialist period of the Indian economy. During this period,
BSNL was the only telecom service provider in the country (MTNL was
present only in Mumbai and New Delhi). During this period BSNL operated
as a typical state-run organization, inefficient, slow, bureaucratic, and
heavily unionized. As a result subscribers had to wait for as long as five
years to get a telephone connection. The corporation tasted competition
for the first time after the liberalization of Indian economy in 1991. Faced
with stiff competition from the private telecom service providers, BSNL
has subsequently tried to increase efficiencies itself. DoT veterans,
however, put the onus for the sorry state of affairs on the Government
policies, where in all state-owned service providers were required to
function as mediums for achieving egalitarian growth across all segments
of the society. The corporation (then DoT), however, failed miserably to
achieve this and India languished among the most poorly connected
countries in the world. BSNL was born in 2000 after the corporatization of
DoT. The efficiency of the company has since improved. However, the
performance level is nowhere near the private players. The corporation
remains heavily unionized and is comparatively slow in decision making
and implementation. Though it offers services at lowest tariffs, the private
players continue to notch up better numbers in all areas, years after year.
BSNL has been providing connections in both urban and rural areas. Pre-
activated Mobile connections are available at many places across India.
BSNL has also unveiled cost-impactive broadband internet access plans
(DataOne) targeted at homes and small businesses. At present BSNL
enjoy's around 60% of market share of ISP services.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Subscriber base:
The BSNL subscriber base according to TRAI - Telecom Regulatory
Authority of India as of January 2010 was:

BSNL’s Subscriber

Metro/circle Dec'09 Jan-10 Monthly %Mark %


Additio et Growt
ns Share h
over
previ
ous
mont
h

Kolkata 1709842 1755860 46018


Chennai 1172491 1189158 16667
Bihar 3541695 4165628 623933
TN 3883003 4020802 137799
Maharashtra 4074350 4213199 138849
Gujarat 2691970 2777067 85097
AP 3989713 4078007 88294
Karnataka 3075023 3143061 68038
Kerala 3293938 3438993 145055
Punjab 3354951 3411009 56058
Haryana 2232351 2282820 50469
UP (W) 2889815 2977858 88043
UP (E) 7033749 7180690 146941
Rajasthan 3428297 3662113 233816
MP 2835041 2979746 144705
WB and A & N 2100271 2160727 60456
HP 1126070 1156410 30340
Orissa 1997388 2083541 86153
J&K 970542 898433 -72109
North East 818719 858559 39840

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Assam 1004263 1020949 16686


Total 57223482 59454630 15.08% 3.90%
Additions 2036513 2231148

Type Public

Founded 1995
Headquarters Santacruz East, Mumbai, India[1]
Key people Kumar Mangalam Birla
(Chairman)
Sanjeev Aga
(MD)
RajatMukharjee
(VP Corporate Affairs)
Industry Telecommunications
Products Mobile
Owner(s) Aditya Birla Group (49.05%)
Axiata Group Berhad (15%)
Providence Equity (10.6%)
Website IdeaCellular.com
Idea cellular

Introduction:

Idea Cellular is a wireless telephony company operating in all the 22


telecom circles in India based in Mumbai. It is the 3rd largest GSM
company in India, behind Airtel and Vodafone and ahead of state run
player BSNL.

In 2000, Tata Cellular was a company providing mobile services in AP.


When Birla-AT&T brought Maharashtra and Gujarat to the table, the

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

merger of these two entities was a reality. Thus Birla-Tata-AT&T,


popularly known as Batata, was born. In 2001, the Batata triumvirate
agreed to merge its operations with the Rajeev Chandrasekhar promoted
BPL Communications. The merger could have brought in regions like
Mumbai, Maharashtra, Kerala and Tamil Nadu, which seemed to be a
perfect accompaniment to what it already had. This was critical with the
bid for the fourth operator license round the corner. However, the
engagement with BPL was broken. Then Idea set sights on RPG’s
operations in Madhya Pradesh which was successfully acquired, helping
Batata have a million subscribers, and the license to be the fourth
operator in Delhi was clinched. In 2004, Idea (the company had by then
been rechristened) bought over the Escorts group’s Escotel gaining
Haryana, Uttar Pradesh (West) and Kerala — and licenses for three more
— UP (East), Rajasthan and Himachal Pradesh. By the end of that year,
four million Indians were on the company’s network. In 2005, AT&T sold
its investment in Idea, and the year after Tata’s also bid good bye to
pursue an independent telecom business. And Idea was left only with one
promoter, the AV Birla group when the company’s stock listed on the
bourses in March 2007, its subscriber base was 13 million with presence
in 11 circles. In less than three years, the subscriber numbers have more
than quadrupled. The public issue was oversubscribed 50 times and
raised Rs 2,450 crore. In June 2008, Idea Cellular bought out BK Modi’s
stake in Spice Communications for Rs 2,700 crore adding Punjab and
Karnataka circles. Modi’s joint venture partner, Telekom Malaysia,
invested Rs 7,000 crore for a 14.99% stake in Idea. Just around then,
Idea’s subsidiary, Aditya Birla Telecom sold a 20% stake to US-based
Providence Equity Partners for over Rs 2,000 crore.

The company has its retail outlets under the "Idea n' U" banner. The
company has also been the first to offer flexible tariff plans for prepaid
customers. It also offers GPRS services in urban areas.

Idea Cellular won the GSM Association Award for "Best Billing and
Customer Care Solution" for 2 consecutive years.

Holding:

Initially the Birla’s, the Tata’s and AT&T Wireless each held one-third
equity in the company. But following AT&T Wireless' merger with Cingular
Wireless in 2004, Cingular decided to sell its 32.9% stake in Idea. This
stake was bought by both the Tata’s and Birla’s at 16.45% each.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Tata's foray into the cellular market with its own subsidiary, Tata Indicom,
a CDMA-based mobile provider, cropped differences between the Tata’s
and the Birla’s. This dual holding by the Tata’s also became a major
reason for the delay in Idea being granted a license to operate in Mumbai.
This was because as per Department of Telecommunications (DOT)
license norms, one promoter could not have more than 10% stake in two
companies operating in the same circle and Tata Indicom was already
operating in Mumbai when Idea filed for its license.

The Birla’s thus approached the DOT and sought its intervention and the
Tata’s replied by saying that they would exit Idea but only for a good
price. On April 10, 2006, the Aditya Birla Group announced its acquisition
of the 48.18% stake held by the Tata’s at Rs. 40.51 a share amounting to
Rs. 44.06 billion. While 15% of the 48.14% stake was acquired by Aditya
Birla Nuvo, a company in-charge of the Birla’s' new business initiatives,
the remaining stake was acquired by Birla TMT holdings Private Ltd., an
AV Birla family owned company. Currently, Aditya Birla Group holds
49.1% of the total shares of the company. Malaysia based Axiata controls
a 14.99% stake in the company.

Subscriber base:
The Idea subscriber base according to TRAI - Telecom Regulatory
Authority of India as of January 2010 was:

Idea’s Subscriber

Metro/circle Dec'09 Jan-10 Monthly %Mark %


Addition et Growt
s Share h over
previo
us
mont
h

Maharashtra 8924182 9001337 77155


Gujarat 4902071 5252379 350308

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

A.P. 6020680 6001231 -19449


M.P. 6603298 6918727 315429
Delhi 2451843 2478120 26277
Kerala 5071417 5082126 10709
Haryana 1915261 1979687 64426
U.P.(W) 5306026 5434597 128571
UP E 3307374 3539998 232624
Rajasthan 2141326 2179942 38616
HP 230578 246510 15932
Mumbai 1261670 1332274 70604
Kolkata 201294 362802 161508
W.B. 311307 502631 191324
J&K 11684 26523 14839
Assam 42757 56574 13817
N.E. 3144 7136 3992
Bihar 2497061 2851186 354125
Orissa 460739 480561 19822
Tamilnadu 600535 671266 70731
Karnataka 2321359 2400611 79252
Punjab 3026266 3081186 54920
Total 57611872 59887404 15.19% 3.95%
Additions 1706694 2275532

Tata Teleservices limited

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Introduction:

Tata Teleservices Limited (TTSL) is a part of the Tata Group of companies


based in Navi Mumbai, an Indian conglomerate. It operates under the
brand name Tata Indicom in various telecom circles of India. In Nov 2008,
Japanese telecom giant NTT Docomo picked up a 26 per cent equity stake

Type Private
Founded 2000
Headquarters Navi Mumbai, India
Key people Mr. Ratan N. Tata
(Chairman)
Anil Kumar Sardana
(MD)
Industry Telecommunications
Products Wireless
Telephone
Internet
Television
Employees 350,000
Parent Tata Group
Divisions Tata Indicom (CDMA)
Tata DoCoMo (GSM)
Virgin Mobile (CDMA)
Website Tatateleservices.com
in Tata Teleservices for about Rs 13,070 crores ($2.7 billion) or an
enterprise value of Rs 50,269 crores ($10.38 billion). In Feb 2008, TTSL
announced that it would provide CDMA mobile services targeted towards
the youth, in association with the Virgin Group on a Franchisee model
basis.

Tata Teleservices Provides mobile services under 3 Brand names:

✔ Tata Indicom (CDMA Mobile operator)


✔ Tata DoCoMo (GSM Mobile operator)
✔ Virgin Mobile (CDMA Mobile operator)

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Company background:

Tata Teleservices is part of the Tata Group. Tata Teleservices spearheads


the Group’s presence in the telecom sector. Incorporated in 1996, Tata
Teleservices was the first to launch CDMA mobile services in India with
the Andhra Pradesh circle.

The company acquired Hughes Telecom (India) Limited [now renamed


Tata Teleservices (Maharashtra) Limited] in December 2002. With a total
Investment of Rs 19,924 Crore, Tata Teleservices has created a Pan India
presence spread across 20 circles that include Andhra Pradesh, Chennai,
Gujarat, J & K, Karnataka, Delhi, Maharashtra, Mumbai, North East, Tamil
Nadu, Orissa, Bihar, Rajasthan, Punjab, Haryana, Himachal Pradesh, Uttar
Pradesh (E), Uttar Pradesh (W), Kerala, Kolkata, Madhya Pradesh and
West Bengal.

Having pioneered the CDMA 3G1x technology platform in India, Tata


Teleservices has established 3G ready telecom infrastructure. It partnered
with Motorola, Ericsson, Lucent and ECI Telecom for the deployment of its
telecom network.

The company is the market leader in the fixed wireless telephony market
with a total customer base of over 3.8 million.

Tata Teleservices’ bouquet of telephony services includes Mobile services,


Wireless Desktop Phones, Public Booth Telephony and Wire line services.
Other services include value added services like voice portal, roaming,
post-paid Internet services, 3-way conferencing, group calling, Wi-Fi
Internet, USB Modem, data cards, calling card services and enterprise
services. Some of the other products launched by the company include
prepaid wireless desktop phones, public phone booths, new mobile
handsets and new voice & data services such as BREW games, Voice
Portal, picture messaging, polyphonic ring tones, interactive applications
like news, cricket, astrology, etc.

Tata Indicom "Non Stop Mobile" allow pre-paid cellular customers to


receive free incoming calls.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Tata Teleservices Limited along with Tata Teleservices (Maharashtra)


Limited have a subscriber base of 57 million customers (as of Jan 2010) in
more than 5,000 towns. Tata Teleservices has also acquired GSM licenses
for specific circles in India.

Tata Teleservices is an unlisted entity. Tata Group and group firms own
the majority of the company; NTT DoCoMo holds 26% while investor C.
Sivasankaran holds 8%.

Senior Management:

The Board of Directors for TTSL includes Tata Sons Chairman Ratan Tata,
while the company is currently headed by its Managing Director, Mr. Anil
Kumar Sardana.

Market Data:

Tata Indicom in Jan 2010 crossed the 57 million subscribers mark in the
wireless category with an overall subscriber base of over 57 million.

Tata Teleservices is no. 2 slot in terms of Market Share in Delhi NCR


region with a subscriber base of 5.4 million.

Network:

Tata Teleservices operates primarily on the CDMA network. Tata


Indicom’s enterprise solutions work on the CDMA 3G-1X technology.
The total tower strength of Tata Indicom is currently at 18,000 towers
nationwide.

Business Areas:

Tata Teleservices offers multiple tariff plans in both the Post-paid and Pre-
Paid category. It also offers Mobile Value Added Services to subscribers.

Branding:

The Tata Indicom brand is endorsed by bollywood actress Kajol&


cricketers IrfanPathan and YousufPathan.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Tata Teleservices has recently launched the Virgin Mobile Brand to target
the youth segment.

Rural Telephony:

TTSL also maintains a distribution network across villages , where in


people are appointed and trained by TTSL – who visit villages on a bicycle
or a two-wheeler at defined times on defined days of the week, selling
recharge vouchers and servicing equipment; each runner covers between
200 to 300 customers.

The company joined hands with Tata Chemicals, Tata KisaanSansar


network, disseminating information through these centres and using them
as local distributors.

Retail:

The company's retail business has around 3,000 outlets nationally;


comprising 600 TTSL owned stores and around 2,500 stores in the
Franchisee format. Tata Indicom already covers the top 700 towns in India
in terms of population through Tata Indicom Exclusive Stores.
Tata Indicom also maintains an online portal for its customers i-choose
where the customers can buy Tata Indicom post-paid connections and
prepaid recharge vouchers with an upfront commitment of activation and
delivery of the handset within 72 hours.

Value Added Services:

Tata Teleservices, in October 2007 launched Tata Zone, an infotainment


portal on Tata Indicom BREW-enabled mobile phones, in Hindi. This
service has applications, pricing details, downloads and browsing
instructions in Hindi. The rationale behind this was simple:- 66% of all
Indians speak Hindi, while less than 5% understand English.

Under its VAS bouquet, TTSL offers services such as News, Games, Faith
and Prayers, Ringtones, Streaming TV, Fun Shows, Video Zone, Song
Download Express, Cricket, Internet Surfing, Astrology, and Mobile Office
among others.

Tata Indicom plans to provide m-commerce, mobile advertising and social


networking under its VAS offerings.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Subscriber base:

The Tata teleservicesl’s subscriber base according to TRAI - Telecom


Regulatory Authority of India as of January 2010 was

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Tata teleservices ’s Subscriber (Tata Indicom, DoCoMo, virgin)

Metro/circl Dec'09 Jan-10 Monthly %Market %


e Additions Share Growt
h over
previo
us
month

Andhra 6,075,177
Pradesh
Assam 72,196
Bihar 2,407,872
Chennai 1,246,101
Delhi 5,161,235
Gujarat 1,560,651
Himachal 143,420
Pradesh
Haryana 2,030,792
J&K 112,837
Karnataka 4,157,341
Kerala 2,045,409
Kolkata 1,992,435
Madhya 2,651,632
Pradesh
Maharashtra 6,674,368
Mumbai 3,620,828
North East 51,866
Orissa 1,583,077
Punjab 1,714,520
Rajasthan 2,719,185
Tamilnadu 2,466,343
U.P. (E) 1,805,549
U.P (W) 2,615,399
W.B. 1,084,740
Total 53,992,97 57,329,4 17.46%
3 49
Additions

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Aircel

Introduction:

Aircel is a mobile phone service provider in India. It offers both prepaid

Type Private
Founded 1999
Headquarters Chennai
Key people Gurdeep Singh, COO
Industry Telecommunications
Products Mobile
Telecommunication operator
Owner(s) Maxis Communications (74%)
Apollo Hospital
Website Aircel.com
and postpaid GSM cellular phone coverage throughout India. Aircel is a
joint venture between Maxis Communications of Malaysia and Apollo
Hospital Enterprise Ltd of India. Maxis have a 74% stake in Aircel and the
remaining 26% is with Apollo Hospitals. It is India’s fifth largest GSM
mobile service provider with a subscriber base of over 27.7 million, as of
October 31, 2009. It has a market share of 12.8% among the GSM
operators in the country. As on date, Aircel is present in 18 of the total 23
telecom circles (including Andhra Pradesh, Assam, Bihar & Jharkhand,
Chennai, Delhi & NCR, Himachal Pradesh, Jammu & Kashmir, Karnataka,
Kerala, Kolkata, Mumbai, North East, Orissa, Rest of Maharashtra & Goa,
Rest of Tamil Nadu, Rest of West Bengal, Uttar Pradesh East, Uttar
Pradesh West) and with licenses secured for the remaining 5 telecom
circles, the company plans to become a pan-India operator by 2010.
Additionally, Aircel has also obtained permission from Department of
Telecommunications (DoT) to provide International Long Distance (ILD)
and National Long Distance (NLD) telephony services. It is also a category
A ISP. It is also having the largest service in Tamilnadu.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Aircel Business Solutions (ABS), part of Aircel, is an ISO 9000 certified


company. ABS is a registered member of WiMAX forum – both in the
Indian and International Chapters. ABS’ product range includes enterprise
solutions such as Multiprotocol Label Switching Virtual Private Networks
(MPLS VPNs), Voice over Internet Protocol (VoIP) and Managed Video
Services on wireless platform including WiMAX.

Aircel has won many awards for its services. Aircel was honored at the
World Brand Congress 2009 with three awards, Brand Leadership in
Telecom, Marketing Campaign & Marketing Professional of the Year. Aircel
was honored by CMAI INFOCOM National Telecom Award 2009 for,
‘Excellence in Marketing of New Telecom Service’. Aircel had been
selected as the best regional operator in 2008 by Tele.net. Aircel was
rated as the top mid-size utility company in Business World’s ‘List of Best
Mid-Size Companies’ in 2007. Aircel got the highest rating for overall
customer satisfaction and network quality in 2006 by Voice and Data.

Aircel is one of the sponsors of the Indian Premier League Cricket Team
Chennai Super Kings, which is captained by Mahendra Singh Dhoni. It is
also the major sponsors for Chennai Open (the only ATP tennis
tournament in India), and Professional Golf Tour of India.

In latest news, Maxis, Aircel's majority stake holder, raised RM 11.2 billion
(USD 3.36 billions) for its shareholders, making it the largest IPO in
Malaysia and Southeast Asia.

Aircel boat.Aircel placed an actual dinghy lifeboat to a downtown


billboard. A rope with a sign reading, “In case of emergency, cut rope”,
held up the branded raft. July 15, 2009 the monsoon arrived and so did
Aircel customer service. The dinghy was cut down and pedestrians were
safely transported. What Aircel calls “Corporate Social Responsibility – A
Solution”? The company was able to generate positive publicity and show
consumers that they care.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Aircel’s Subscriber

Metro/circle Dec'09 Jan-10 Monthly %Market %


Additions Share Growt
h over
previo
us
month

Chennai 2926191 2995172 68981

TN 10573205 11092259 519054

W.B. 2000770 2034483 33713

Assam 2208292 2366416 158124

Orissa 1414870 1535259 120389

N.E. 1423543 1591334 167791

J&K 1484090 1586041 101951

Bihar 2769654 2841955 72301

HP 339961 367054 27093


Kolkata 1086809 1135045 48236
Karnataka 614756 668731 53975
Kerala 660643 792936 132293
AP 654782 713305 58523
Delhi 770353 874437 104084
UP (West) 626143 672262 46119
UP (East) 666602 758529 91927
Mumbai 668676 763209 94533
Maharashtra 134657 247480 112823
Total 31023997 3303590 8.38% 6.49%
7
Additions 1669627 2011910

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Subscriber base:

The Aircel’s subscriber base according to TRAI - Telecom


Regulatory Authority of India as of January 2010 was

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

MTNL

Type State-ownedPublic

Founded 1986
Headquarters New Delhi, India
Key people Kuldi Singh
(CMD)
AnitaSoni
(CFO)
S.M.Talwar
(ED-NewDelhi)
J.Gopal
(ED-Mumbai)
Industry Telecommunications
Products Wireless
Telephone
Internet
Television
Revenue ▼INR 52.895 million (2009)
Net income ▼INR 1.626 million (2009)
Owner(s) The Government of India
Website www.mtnl.net.in

Introduction:

Mahanagar Telephone Nigam Limited is an Indian Government-owned


telephone service provider in the cities of Mumbai, Thane, New Delhi, and
Navi Mumbai in India. The company was a monopoly until 1992, when the
telecom sector was opened to other service providers.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Products:

MTNL provides fixed line telephones, cellular connection of both GSM —


Dolphin(Postpaid) and Trump (prepaid) and WLL (CDMA) — Garuda-FW
And Garuda-Mobile and internet services through dialup and DSL —
Broadband internetTriBand. MTNL has also started Games on demand,
video on demand and IPTV services in India through its Broadband
Internet service called Triband. Phone numbers belonging to MTNL start
with the prefix 2 infixed line telephones andWLL& in GSM Mobile services
start from 901x/ 9869/9969/9868/9968. MTNL also provides other services
such as VPN,Internet Telephony- VOIP and leased lines through BSNL and
VSNL.

MTNL has been actively providing connections in both Mumbai and New
Delhi areas and the efficiency of the company has drastically improved
from the days when one had to wait years to get a phone connection to
now when one can get a connection in even hours. Pre-activated Mobile
connections are available at many places across both Metros. MTNL has
also unveiled very cost-impactive Broadband Internet access plans
(TriBand) targeted at homes and small businesses. At present MTNL
enjoys the largest of the market share of ISP services in Mumbai and
Delhi.

Former Indian Communications Minister ThiruDayanidhiMaran had


declared year 2007 as "Year of Broadband" in India and MTNL is gearing
up to provide five million Broadband connectivity by the end of 2007.
MTNL has upgraded existing TriBand (Broadband) connections for a speed
of up to 2 MB/s without any extra cost. This 2 MB/s broadband service is
being provided by MTNL at a cost of just US$5.00 per month.

India's First 3G Mobile Service By MTNL

MTNL started 3G services in India under the name of


"MTNL 3G Jadoo" Services offered include Video call, Mobile TV and Mobile
Broadband with high speed data connectivity up to 2 Mbit/s speed from
11th December 2008, getting India on the 3G map of the world. MTNL
plans to offer 3G services across India by mid-2009. After that MTNL
Mobile users would be able to surf the internet with speeds up to 2 Mbit/s

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

on their smart phones. MTNL also provides data cards for surfing internet
on the PC and Laptop at 3.6 Mbps. MTNL will be installing 15 lakh 3G lines
in the first phase of its 3G roll-out in Mumbai and Delhi (which currently
have 40 lakh existing mobile lines).

India's First 3GBlackBerry Service By MTNL

MTNL rolled out its BlackBerry solutions on the 2G and 3G networks by


launching India’s first 3G enabled BlackBerry Bold smart phones.

Joint Venture(s) of MTNL

Mahanagar Telephone Mauritius Limited (MTML)

MTNL has set up its 100% subsidiary, Mahanagar Telephone Mauritius


Limited (MTML), in Mauritius.For providing basic, mobile and international
long distance services as second operator in Mauritius. Necessary licenses
were obtained in January 2004. MTML has already started its ILD&CDMA
based basic services in Mauritius. In Mauritius, 44,312 telephone
connections are actually operational from a total switching capacity of
50,000. Moreover, through joint ventures with local telecommunications
providers, MTML plans to offer internet access through its wireless
network to its users in February 2007.

MTNL-STPI IT Services Limited:

MTNL-STPI IT Services Ltd. is a 50:50 Joint Venture between Software


Technology Parks of India (STPI) and Mahanagar Telephone Nigam
Limited, (MTNL). The JV formed in 2006 combines the STPI's rich
experience as an ISP and MTNL's track record of being India's leading
telecom operating company to offer niche portal services to the Indian
community. The JV was formed to realize one of the 10-point agenda of
MoC&IT, which are of extreme importance to India for bringing about an
all-round economic development. The JV aims to provide exclusive data
center services, messaging services, business application services to the

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

identified sectors of economic activity and thereby also popularizing the


.in domain in the networked community across the world.

Millennium Telecom Limited (MTL)

MTNL has restructured Millennium Telecom Ltd. (MTL) as a Joint Venture


company of MTNL and BSNL with 51% and 49% equity participation
respectively. The company will now be entering into new business stream
of international long distance operations and will be executing a project of
submarine cable system, both east and west from India.

Recent happenings:

Recently MTNL delayed the implementation of pay revision to its


employees citing cash crunch as main reason. Due to this employees
went on strike but the issue is still pending, if MTNL implements pay
revision to its entire staff the operating cost will raise dramatically.

On December 11, 2008 MTNL became the First Telco in India to launch 3G
mobile phone services with roll out of Video call and Mobile TV service in
New Delhi.

In July, 2006Mahanagar Telephone Nigam Ltd. (MTNL) has launched its


new Garuda mobile service from its CDMA 2000 1x network.

Mr. RSP Sinha, the CMD of MTNL resigned from the post on 12th January,
2010 in wake of the non-extension of the period by Govt. Sh. Sinha has
been facing charges of corruption and accepting bribe from Motorola Inc.
and a criminal case has been going against him in a CBI court at Delhi.

Subscriber base:
The MTNL subscriber base according to TRAI - Telecom Regulatory
Authority of India as of January 2010 was:

MTNL’s Subscriber

Metro/circle Dec'09 Jan-10 Monthly %Marke %


Addition t Share Growt
s h over

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

previo
us
month

Delhi 2164120 2189841 25721

Mumbai 2401140 2420486 19346

Total 4565260 4610327 1.17% 0.99%

Additions 57009 45067

Sistema-Shyam Teleservices (MTS India)

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Introduction:

ShyamTelelink is an Indian telecom service provider. Shyam holds the


Unified Service Access License for the Rajasthan circle and operates Basic
Telephony, mobile telephony (CDMA) and broadband services in the
province. ShyamTelelink is the end-to-end service provider in Rajasthan
with more than 269,000 subscribers as on August 2008 and a strong
brand - Rainbow.

Founded 2009 as SistemaShyamTeleServices


Limited
Headquarters New Delhi, Delhi, India
Industry Mobile telecommunications
Products CDMA
Owner(s) Sistema (73.71%)
Shyam Group (23.70%)
Website www.mtsindia.in

Acquisition by Sistema:

The largest public diversified corporation in Russia and the CIS - Sistema
acquired a 10% stake in ShyamTelelink for a total cash consideration of
US$ 11.4 million at the end of September 2007. In October 2007, Sistema
signed a share purchase agreement for the acquisition of an additional
41% stake in ShyamTelelink and a call option agreement, which gives
Sistema the right to increase its stake in ShyamTelelink from 51% up to a
maximum of 74%. Later in December 2007, Sistema received an approval
for the acquisition of the blocking stake in ShyamTelelink from the
Foreign Investment Promotion Board (FIPB) of India. As a result of the
acquisition of the additional 41% stake, the overall purchase price totaled
US$ 58.1 million.

Pan-India rollout:

Shyam Telecom along with their partner Sistema had applied for UASL
license in 21 telecom circles of India. In August 2008, they became the
first new mobile operator to get a pan-India start-up spectrum to start

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

their mobile service operations in the country. They would be providing


mobile services based on CDMA technology under the brand name
MTS.Shyam Telecom given Project to ZTE and Huawei for network
expansion.
As of Sep 30, 2009 the total subscriber base of MTS India is 1,960,532
present in 7 circles,
Just launched in Delhi.
Subscriber base:
The MTS’s subscriber base according to TRAI - Telecom Regulatory
Authority of India as of January 2010 was

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Mts ’s Subscriber

Metro/circle Dec'09 Jan-10 Monthly %Market %


Additions Share Growt
h over
previo
us
month

Andhra
Pradesh
Assam
Bihar 240,432
Chennai 104,900
Delhi 175,867
Gujarat
Himachal
Pradesh
Haryana 331
J&K
Karnataka 105,948
Kerala 159,704
Kolkata 278,552
Madhya
Pradesh
Maharashtra 2
Mumbai 5,261
North East
Orissa
Punjab
Rajasthan 1,160,142
Tamilnadu 367,940
U.P. (E)
U.P (W)
W.B. 443,662
Total 3,042,741
Additions

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

LOOP Mobile

Introduction:

Type Private
Founded 1994 as BPL Mobile
2009 as Loop Mobile
Headquarters Mumbai, Maharashtra, India
Key people CEO Sandip Basu
Industry Telecom
Products Mobile
Telecommunication operator
Owner(s) Essar Group (8%)
Website www.loopmobile.in
Loop Mobile (Formerly BPL Mobile) is a mobile phoneservice provider in
India. It offers both prepaid and postpaidGSM cellular phone coverage in
Mumbai circle

BPL Mobile Communications, the country’s oldest mobile telecom service


provider, has changed its name to Loop Mobile, following the expiry of its
brand-use agreement with the TPG Nambiar-owned BPL Group.

Loop Mobile will also have the latest NGIP (Next Generation Internet
Protocol) and EDGE (Enhanced Data rates for GSM Evolution) technology.
The operator is hoping to leverage these technologies to introduce
innovative VAS, as well as micro-segmented tariffs for subscribers.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Subscriber base:
The Loop mobile’s subscriber base according to TRAI - Telecom
Regulatory Authority of

Loop mobile’s Subscriber

Metro/circl Dec'09 Jan-10 Monthly %Mark %


e Addition et Growt
s Share h over
previo
us
mont
h

Mumbai 2649730 2701583 51853

Total 2649730 2701583 0.69% 1.96%

Additions 54276 51853

India as of January 2010 was:

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Uninor

Introduction:

Uninor is a mobile telephony and network operator in India. The company

Founded 2009
Type Joint Venture
Headquarters Gurgaon, India
Key people Stein-ErikVellan
(CEO)
SanjayChandra
(Chairman)
Industry Telecommunications
Products Wireless
Telephone
Internet
Owner(s) Telenor (67.25%)
Unitech Group (32.75%)
Employees 2,000
Website Uninor. In
holds a pan-India UAS license to offer telecommunications services in
each of India’s 22 circles. It has also received spectrum to roll out these
services in 21 of the 22 telecom circles. From November 2009, Uninor will
be owned 67.25% by Norwegian telecom giant Telenor, and 32.75% by
India's Unitech Group. Uninor has started mobile services in India at the
end of 2009, focusing on the GSM technology.

History:

The company Unitech Wireless was until 2009 a subsidiary of Unitech


Group, holding a wireless services license for all 22 Indian telecom circles
since 2008. In early 2009, Unitech Group and Telenor agreed on a
majority take-over by Telenor of Unitech's wireless business, including

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Unitech Wireless' national-wide mobile license. By March, May and


November, Telenor acquired a 33%, 49% and 60% stake in Unitech
Wireless, respectively. In September, the mobile operation changed its
name to Uninor. On October 19 the Indian Cabinet Committee of
Economic Affairs (CCEA) announced that it has approved Telenor's
acquisition of up to 74% in Unitech Wireless, and the shareholder's
agreement sets a 67.25% Telenor ownership in Uninor.
Uninor's strategy:

Uninor is India's eighth nation-wide mobile operator, in a competitive


landscape of 13 nation-wide or regional mobile operators. The company is
targeting an 8 % pan-Indian market share, and the opening of one million
retail points and breaking even on EBITDA within three years. It will
provide mobile communication and Value Added Services.

In order to reduce time-to-market, Uninor will outsource infrastructure


and back-end services to partner organizations with established core
competencies.[5] The operational model is low-cost with a gradual
network-build up, infrastructure sharing, GSM equipment at competitive
cost, full-scale IT-outsourcing and a long term cost and capex efficiency.

Uninor will organize with headquarters just outside Delhi (Gurgaon), and
11 regional hubs covering one or more of the total of 22 telecom circles.
To quickly launch mobile services only nine months after the foundation
of the new company, Uninor has entered into network and base station
service agreements with partners. Tower sharing agreements are
concluded with Wireless-TT Info Service Limited and Quippo Telecom
Infrastructure Limited. Telecommunications, network and radio equipment
is to be supplied by Alcatel-Lucent, Huawei Technologies India, Nokia
Siemens Networks and Ericsson. The company's IT services and
infrastructure is to be shared with Wipro Technologies.

Subscriber base:
The Uninor subscriber base according to TRAI - Telecom Regulatory
Authority of India as of January 2010 was:

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Uninor’s Subscriber

Metro/circ Dec'09 Jan-10 Monthl %Marke % Growth


le y t Share over
Additio previous
ns month

Kerala 90210 151970 61760


T.N. 202032 391708 189676
Karnataka 264141 510250 246109
A.P. 157065 440011 282946
Orissa 44071 124926 80855
Bihar 127261 307379 180118
U.P.(E) 172288 319259 146971
UP (W) 151062 292903 141841
Total 1208130 2538406 0.64% 110.11%
Additions 1208130 1330276

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Stel

Introduction:

S Tel Private Limited (S Tel), a new telecom operator in the lndian


marketplace, is a joint venture between Siva Group (formerly Sterling
Infotech Group) and Bahrain Telecommunications Company (Batelco).

S Tel has acquired Unified Access Services


Type LimitedLicenses (UASL) and spectrum
to operate in six Category C circles2009,
Founded – Orissa, Bihar, Himachal Pradesh,
North East,
Headquarters Assam and Jammu & Kashmir. These
NCR region of licenses will enable the
Delhi, India
company
Industry to provide Unified Mobile service,
Mobile wireless broadband and
telecommunications
innovative
Products Value Added Services (VAS) covering a population of over 226
Mobile networks,
million across these circles. Telecom services, Etc.
Owner(s) StelIs a joint venture between Siva
Headquartered in NCR region of Delhi,Groupthe companyandplans to launch its
Bahrain
mobile telephony service in India before close of 2009.
Telecommunications Siva Group is
Company a
USD 3 billion group (about Rs.14, 000 Crores), with diversified business
(Batelco).
interests
Employees in verticals such as wind energy,
10,000shipping
– March & logistics,
31, 2009 hospitality
& realty, media, EPC, education and www.stel.com
Website agro business.

Bahrain headquartered Batelco is a diversified, integrated


telecommunications operator with Mobile, fixed and wireless broadband,
Datacom and fixed line services. It has operations in 7 markets across the
Middle East, North Africa and Asia.

Investors:

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Batelco (Bahrain Telecommunications


Company)

Established in 1981, BATELCO has evolved from a


local telephone company to become a regionally
diversified, integrated telecommunications operator
with Mobile, fixed and wireless broadband,
Datacom and fixed line services.

Batelco Group, listed on the Bahrain Stock Exchange, is the leading


integrated communication provider in the Kingdom of Bahrain and a
company of reference among the region’s key telecommunications
players for innovation and customer experience.

Batelco serves both the corporate and consumer markets in the most
liberalized and competitive environment in the Middle East Africa
region. It delivers cutting-edge fixed and wireless telecommunications
services to its customers in Bahrain, Kuwait, Saudi Arabia, Jordan,
Yemen, Egypt and India.

The Batelco Group of companies offers end-to-end telecommunications


solutions for its residential, business and government customers in
Bahrain on Next Generation, all IP fixed and 3.5G wireless networks,
MPLS based regional data solutions and, GSM mobile and WiMax
broadband services across the countries in which it operates.

Siva Group

IT’S A RARE BREED THAT KNOWS WHAT THE


FUTURE HOLDS.

Foresight is a gift. And when you combine it with


skill and commercial acumen, the result is often
breathtaking. That in a nutshell is the story of the
Siva Group, a future spotter, early entrant, market
maker…a story of vision, speed, consolidation and
operational excellence. Started in 1986 by Mr. C
Sivasankaran, the Group today is a US$ 3 billion
conglomerate, with operations in Realty, Telecom,
Project Engineering, Shipping, Energy, Agri exports

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Subscriber base:
The Stel subscriber base according to TRAI - Telecom Regulatory
Authority of India as of January 2010 was:

Stel’ Subscriber

Metro/circle Dec'09 Jan-10 Monthly %Marke %


Addition t Share Growt
s h over
previo
us
month

HP 16327 94390 78063


Orissa 67675 153949 86274
Bihar 57409 257840 200431
Total 141411 506179 0.13% 257.9
5%
Additions 141411 364768

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

HFCL Infotel

Introduction:

HFCL Infotel Ltd. (Infotel) is a business venture of the HFCL Group. Infotel
is a "Total Telecom Solutions Provider" offering Fixed Line telephony

Founded 2000(with new name.2009)


Type public
Headquarters Mohali, Punjab
Key people Chairman, MahehdraNahata
Industry Telecommunications
Products Wireless
Telephone
Internet
Owner(s) HFCL Group
Website www.hfcl.com
(Telephone Services), Mobile telephony, Broadband Services, Customized
Data Services and Value Added Services.

Infotel provides a world class telecom experience when it comes to


technology, products, customer services, Launched in Punjab in the year
2000 under the Connect brand name. Infotel has set up state-of-the-art
networks with coverage in over 200 towns of Punjab with extensive
optical fiber network coverage of over 4,000 km. Today, Infotel is one of
Punjab's leading private sector telecommunication service providers with
an aggregate customer base of 5,10,263 as on 31st Dec 09.

Infotel Broadband network supports interactive multimedia services, and


can handle high quality content, high speed internet access and a large
number of interactive applications including B2B and B2C e-commerce.

Infotel supports a wide Public Call Office (PCO) network across the state of
Punjab & Chandigarh. Now with over 45,000 PCOs, Infotel is deemed to

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

have the largest PCO network in India among all private fixed line services
operator in a single circle.

The Average Revenue per Line (ARPL) for Infotel is among the highest in
the country. There is a clear focus on acquiring quality subscribers
through well planned rollouts and focused revenues in marketing
strategy.

Subscriber base:
The HFCl Infotel subscriber base according to TRAI - Telecom Regulatory
Authority of India

HFCl Infotel Subscriber

Metro/circle Dec'09 Jan-10 Monthly %Market %


Addition Share Growt
s h over
previo
us
month

Punjab 342749 341862 - - -


Total 342749 341862 - -
Additions - -

As of January 2010 was:

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Price-war
How it happens!

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Rs. 16.80 per minute to ½ paisa per second

Cellular tariffs have dropped by over 56X since May 1999 - a feat
unparalleled by any other sector or industry in India. The average a
mobile tariff in Year 2010 was prevailing around ½ paisa per second as
against the peak ceiling tariff of Rs. 16.80 per minute, when NTP 99 was
announced.

'Simply Reliance'; to lead tariff war

Reliance communication is the first company who starting price-war in


Indian telecom. RCOM on October 5, 2009 launched a new 'Simply
Reliance' plan on its CDMA and GSM networks, which offers a single rate
of 50 paise per minute across the country with no hidden charges.
(Finally, Anil Ambani fulfilling Dhirubai Ambani’s dream to make a phone
call cheaper than a post card) The Telco will pull out all existing plans to
offer only the new plan to all pre-paid and post-paid users. The single rate
of 50 paise per minute applies to all local and STD calls as well as any
mobile, landline, CDMA or GSM from anywhere in India. This is expected
to lead to an average 46% savings in consumers' monthly bills. Existing or
new pre-paid customers have to purchase a one-time special tariff
voucher for Rs 48 to enjoy lifetime validity, while post-paid users can
migrate to the plan by paying a monthly subscription fee of Rs 99.

In 2009, Japanese telecom giant NTT DOCOMO entered in Indian market


with the help of TATA teleservices strategic alliances. Tata DoCoMo is the
first company who offering acall charge in paisa. And then all the other
company follows them for the surviving.

Indian telecom market might be growing fast, but surviving in this highly
competitive market is not easy for telecom companies. Here’s the list of
schemes that fuelled the tariff war in India and brought down the ARPU
significantly.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Mobile scheme change the scenario of cellular services in India.

Post card or Phone call:

Reliance Infocom launched mobile services in India at 40 paise per minute


(R2R, local call) fulfilling Dhirubai Ambani’s dream to make a phone call
cheaper than a post card in 2003.

Chotta Recharge:

Hutch (Vodafone now) launched the Chotta recharge voucher at Rs.10


when the lowest add-on recharge card available was about Rs 50. What’s
the message? Lowering the price by 20-30% to the competitors won’t
help much in gaining the market share. Think five times cheaper to make
an impact.

Non-stop Mobile:

So Life went good with Chotta recharge. But there was a problem in
prepaid mobile. You need to recharge regularly as the validity period is
limited. With the recharge card of Rs 200, you will get validity only for one
month. So people have to spend at least Rs2000 per year for their mobile
just to receive the incoming calls. Not so long.

Tata Indicom launched Non-stop mobile, a scheme where you don’t need
to recharge for 2 years but still get free incoming calls. Soon other players
responded to Tata Indicom’s plan and then come in Lifetime validity
(“lifetime validity in 999” Rupees plan launched in Nov/Dec. 2005) plan by
all major telecom players in India.

Get paid for incoming:

Customers are happy with their free incoming calls. Not the new telecom
players. Virgin Mobile jumped into the competitive Indian mobile telecom
market with the breakthrough-marketing scheme, Get paid for incoming
calls. 10 paisa free for every minute of incoming call. That’s the deal.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

After Simply Reliance:

RCOM on October 5, 2009 launched a new 'Simply Reliance' plan on its


CDMA and GSM networks, which offers a single rate of 50 paise per minute
across the country with no hidden charges. The Telco will pull out all existing
plans to offer only the new plan to all pre-paid and post-paid users. The
single rate of 50 paise per minute applies to all local and STD calls as well
as any mobile, landline, CDMA or GSM from anywhere in India. This is
expected to lead to an average 46% savings in consumers' monthly bills.
Existing or new pre-paid customers have to purchase a one-time special
tariff voucher for Rs 48 to enjoy lifetime validity, while post-paid users
can migrate to the plan by paying a monthly subscription fee of Rs 99.

this plan to significantly increase the competitive intensity in the Indian


telecom sector, already high with the launch of TTSL's GSM services,
'Tata DoCoMo' and its seconds-based pulse and 'Re 1 per call' (talked
un-limited in a call) offerings to its customers. It should be noted that the
average revenues per minute (RPMs) stand in the region of 55-60 paise for
the mobile segment. With TTSL's 1 paisa per second offer and the 'Simply
Reliance' scheme, RPMs, which are already under pressure to dip further,
thus slowing down revenue growth and leading to margin pressures and
falling bottom-line growth? It should be noted that Bharti Airtel has also
responded in its own way to TTSL's '1 paisa per second' plan,
launching the 'Airtel Advantage Plan', whereby both long distance and local
calls from Airtel-to-Airtel mobiles will be charged at 50 paise per minute.
Thus, this in a way reflects the fact that incumbent operators will have to in
some shape or form respond to the cut-price offerings of RCOM and TTSL.

All major operators follow TTSL, launch 'pay per second' plans across various
circles; Idea, Aircel, SSTL, Vodafone-Essar, market leader Bharti Airtel, RCOM,
PSU behemoth BSNL and Loop Mobile all join the dogfight, no respite from
competitive intensity and tariff wars
With TTSL being the first to launch a 'pay per second' tariff plan, thus
throwing down the gauntlet
to other operators in a bid to garner initial subscriber traction for its
recently-launched GSM
services in partnership with Japanese telecom major, NTT DoCoMo, it has not
taken long for other.

Operators to follow suit in some shape or form. Idea Cellular, Aircel and

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Sistema-Shyam Teleservices. (SSTL) all launched these plans. Apart from


these operators, the top-3 Telcos by subscriber market

Bharti Airtel, RCOM and Vodafone-Essar; themselves launched per-


second billing plans
in response to competition. Bharti Airtel launched the 'Freedom Plan',
charging users 1 paisa per
second to make local and long distance (STD) calls within its own network
(on-net calls), while
for off-net calls (calls to other operators' networks), it is charging 1.20
paise per second. RCOM and Vodafone-Essar have also launched such
plans. Vodafone-Essar is charging users 1 paisa per second for on-net calls.
RCOM on the other hand, has launched a couple of more initiatives in
addition to its 50 paise per minute scheme across India to all networks,
launched in early October 2009. The Telco is offering its users 1 paisa per
second tariffs for short duration calls and is charging just Re 1 for 3 minutes'
call rate for long duration calls in addition to the continuation of the 50
paise per minute scheme. This will further heighten competition for minute’s
market share, even as revenue market share may not improve
proportionately.

The PSU telecom behemoth, BSNL followed suit too, with plans to offer
such schemes to its post-paid subscribers also on the anvil, apart from pre-
paid subscribers. The one-circle operator,

Loop Mobile (Mumbai) has also launched a per-second pulse plan to its
subscribers, taking the total number of operators who have launched such
plans to nine. This clearly reflects the 'lack’ of freedom of choice' for
operators including the market leader to respond to competitive pressures
to ensure that they do not lose minutes and revenue market share. While the
launch of these plans is likely to make it tougher for newer entrants to gain
subscriber traction and could neutralize to an extent the usage of dual SIM
cards and 'price arbitrage' by subscribers, as users are likely to stick to the
network of the incumbent operator, in the interim it is likely to hurt RPMs and
slow revenue growth. We believe these competitive moves will accentuate
pressure on ARPUs and RPMs for the sector.

Bharti shifts price-war to another turf, slashes roaming charges by 60%;


major operators follow suit Bharti Airtel moved the price-wars in the
telecom sector to yet another turf-roaming-slashing roaming charges by as
much as 60% in November 2009. Under the new plan,called'AirtelTurbo',
subscribers would be billed 60 paise per minute for all incoming calls on

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

roaming, while outgoing calls would cost 60 paise per minute for 'on-net
calls' and 80 paise per minute for 'off-net calls'. Airtel pre-paid mobile
customers wishing to avail this benefit would be charged Rs 98, which
would give an incoming validity of one year, while post-paid users can
subscribe to a monthly rental plan. Bharti's move was followed by
other major operators like BSNL, TTS and Vodafone-Essar, which also
slashed roaming charges for their respective subscribers. Thus, with price-
wars being witnessed on all major fronts, pressure on RPMs is expected to
intensify in the near-term for all operators.

RCOM slashes SMS rates:

RCOM is the company to take the current price-war in the Indian telecom
sector to another level, slashing SMS rates in an attempt to garner greater
SMS volumes and attract more customers from the high SMS usage
customer bracket, such as the youth and young professionals. The Telco
has launched two new SMS tariff plans - one paisa per SMS, and unlimited
SMS at Re 1 per day. The new SMS tariffs are add-on plans and are
applicable for all RCOM customers (CDMA and GSM) as well as pre-paid and
post-paid customers. Customers can avail of the 1 paisa per SMS plan by
subscribing to a Standard Tariff Voucher on a payment of a rental of Rs 11
per month. Alternatively, the unlimited SMS plan can be subscribed to by the
Telco’s customers on a daily deduction of Re 1 per day from the pre-paid
balance (Rs 30 per month). For post-paid subscribers, the unlimited SMS
plan comes at a monthly rental of Rs 25. These tariffs are applicable across
local, national and roaming SMS.

As per TRAI data, the blended average revenues per user (ARPUs) per month
for the GSM segment stood at Rs 185 for 1QFY10, whereas for the CDMA
segment, they stood at Rs 92. For GSM, revenues from SMS stood at 4.2%
of the total, thus translating into around Rs 8 ARPU from SMS on a monthly
basis. For CDMA, SMS revenues as a percentage of ARPU stood at 6% in
1QFY10, translating into nearly Rs 6 ARPU from SMS on a monthly basis.
Thus, these figures are a clear reflection that SMS revenues are not a very
significant proportion of monthly ARPU for the industry.

For RCOM itself, in 3QFY09, the last quarter when the Telco had given out
details of the proportion of non-voice and SMS revenue, the latter accounted
for a mere 1.3% of ARPU, translating into just Rs 3 per user/month. The
plans launched by RCOM are likely to boost SMS volumes. The rentals being
charged by the Telco for the 1 paisa per SMS and unlimited SMS packs of
Rs 11 and Rs 30 per month, respectively (Rs 25 per month for the

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

unlimited SMS plan for post-paid users) are expected to more-than-


compensate for the cut-price cost per SMS for subscribers. Consequently,
we believe this plan is more of an effort to gain high SMS usage customers
and to aid the proportion of non-voice revenues as a percentage of total
ARPUs, even as it may not have a major impact on the telco's overall
revenue profile.

Uninor, S Tel launch operations, become the first among the


'newer entrants' to do so;

Uninor, the telecom venture between Norwegian telecom major Telenor and
Indian real estate firm
Unitech launched its services across eight circles, namely Tamil Nadu,
Kerala, Karnataka, Andhra Pradesh, Uttar Pradesh (East and West), Bihar and
Orissa and added an impressive 1.2 mn subscribers in December 2009. The
launch has taken place eight months after Telenor Group finalized its
transaction with Unitech Group and made the first investment into Uninor
on March 20.Uninorhas established 11 regional hub offices and recruited
more than 1,800 employees. The Telco’s services will be retailed at over
210,000 points of sale through nearly 1,000 exclusive distributors across
its seven circles of operations. Uninor services will also be available in 17
exclusive company-owned shops and 50 exclusive franchisee shops. The
next phase of its launch is expected to take place in early 2010. Thus, the
telecom company was expecting to launch towards the end of CY09, which
has been achieved. Uninor is targeting 8% market share by 2018, EBITDA
break-even in 3 years and cash flow break-even in five years.

Uninors Price Plans increase price-war:

(1) Talkmore@29paisa: This plan offers customers local calls at 29 paise


per minute and STD calls at 49 paise per minute.

(2) Callmore@29paisa: the plan offers local calls at 29 paise per minute
and STD calls at 49 paisa per minute, with a daily rental of Rs 2.

The company does not plan to offer per-second billing plans, which were
started by Tata DoCoMo, the GSM arm of Tata Teleservices, followed by all
major telecom operators.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

On the other hand, S Tel also launched services in the telecom circles of
Himachal Pradesh, Orissa Andhra Pradesh, Uttar Pradesh (East and West),
Bihar and Orissa and added an impressive 1.2 mn subscribers in December
2009.

Daily telephone allowance;

Getting paid for incoming calls is fine. But what if you don’t get incoming
calls don’t worry; Anil Ambani is ready to help you now. Reliance
Communication launched its GSM services in Mumbai offering subscribers
Rs 10 talk-time every day for the first 90 days. That’s free talk-time worth
Rs 900!

MTS Offers Free Calls in Rajasthan for 999 Days;

Telecom price-war in India has got even fiercer with the introduction of
MCard by MTS. So, for those customers who are not that happy with free
incoming calls for life, MTS has come up with a plan, 10, 00,000 minutes
free or simply lifetime free outgoing. Of course conditions apply.
Minimum of Rs 200 top-up over a period of 6 months is mandatory. And
most importantly free call limit 150 minute/day is applicable only on local
calls from MTS to MTS.

With more new players waiting to enter the Indian mobile market, it’s
going to be an uphill task for the established players like Airtel, Reliance
and Vodafone to retain their subscribers. They can’t wait and watch the
new players like MTS eat into their market share with their aggressive
plans. How about launching new brands focused on niche customer
segments to tackle the competition.

South India based media giant, Sun TV Network use this strategy to the
core to beat the competition. It uses group channels Sun Music, KTV and
Sun News to fight the competition and protect the flagship channel Sun
TV’s leadership in Tamil Nadu. To counter the TRP of Star Vijay’s popular
investigative reporting show at 10 pm, NadnathathuEnna, Sun News runs
a similar show – Nijamat 10 pm. Sun Music has comedy show, SiriSiriat
10:30 pm to counter Kalaignar TV’s Comedy Clips at the same time. And
then there is movie channel KTV, to counter any new or popular films
from Kalaignar or Vijay TV.

Will a similar multiple brand strategyworks in the Indian mobile


industry? Well, it’s not a new concept in India. Tata Teleservices is already

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

doing that indirectly with its Virgin Mobile alliance. Reliance


communications also has options to differentiate as it provides both GSM
and CDMA services in the same circle. That leaves Airtel and Vodafone.

Will BhartiAirtel and Vodafone lauch new brands to fight against the new
players in the Indian mobile market and With more new players like Swan-
Etisalat, Unitech-Telenor and Datacom (subsidiary of Videocon) entering
the Indian mobile market, this tariff war is not going to end soon.

Reason behind India's lowest telecom tariffs in the


world

High Competition between 13 players is a common reason to all of us, but


some other reason that real mattered more than competition!

India today boasts of the lowest telecom tariffs in the world. If it is down
to a tariff in the range of 30 paisa per minute, which did not really happen
overnight. It was the result of continuous innovation and fine-tuning of
costs that operators worked on assiduously.

What transpired was India putting in place the world’s low-cost telecom
model. For its part, the government lowered termination charges, offered
spectrum at prices lower than many other countries and setting the base
for full-fledged competition. The cost benefits were eventually passed on
to the consumer.

What really happened? A combination of outsourcing non-core processes


and infrastructure sharing enabled operators to shave costs to the bone.
India’s largest operator by subscribers and revenues, Bharti Airtel set the
process in motion which its competitors adopted quickly. The company
challenging paradigms like ‘high average revenue per user per month
(ARPU) is good’ or ‘post-paid is better’ or for that matter, ‘technology
must be in-house’.

“All company knew to succeed in this market; all company had to address
affordability because there is a huge disparity in the country. Since there
are customers who make a one-minute call as well as a ten-minute call,

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

we decided to concentrate on minutes and not ARPUs. All company


started building cost structures around minutes,”

In 2004, the company first outsourced the management of its IT functions


to technology giant, IBM in a $750 million contract. This was then followed
by outsourcing its networks and call Centre operations.

“All company started outsourcing all non-core processes to people who


could handle them better than us. The advantages of outsourcing come in
terms of improved productivity, scaling up and qualitative aspects,” he
explains. The IBM contract was unique then and began a debate around
the rationale of outsourcing. Not much later, it became a trend-setter,
with other Telcos like Idea Cellular and Vodafone Essar following suit.

Company’s outsourcing deal with IBM helped in reducing overall costs.


“With outsourcing, the costs are predictable in percentage and absolute
terms. It is a critical component of Idea’s ability to optimize costs,”

Sharing of passive infrastructure like telecom towers, generators and


shelters was the next step in bringing down costs. “The advantages of
infrastructure sharing are huge. It has an impact on long term
productivity for a capital-intensive model and helps in conserving cash,”

The disaggregation of the industry’s value chain freed capital from the
books of operators, which facilitated the process of slashing costs.
“Outsourcing allowed for conversion of capital expenditure (capex) model
into an operational expenditure model (opex). This allowed operators to
align costs on a per minute revenue model,” the decision of the regulator
in bringing down the termination charges was critical. This is paid by one
operator for terminating calls on the network of another operator.
Likewise, having a fierce competition scenario kept a lid on pricing which
has still augured well for the consumer. Quite clearly, nothing works like a
healthy value for money proposition in India.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Price-war’s impact on
industry

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Price-wars impact on stock-market

What happen after price-war?

The real price-war started by two companies: Rcom and Tata DoCoMo
(Tata teleservices), then other follow them for saving her market share.

After price-war both company’s market price down higher than other
company. Rcom market price nearly down by 45% and Tata teleservices
down by 30.6% during lastqtr. (During last qtr. BSE Sensex gain 2%)

Price-war crash stock price:

3QFY10 performance of key telecom stocks v/s Sensex - Price-


wars take toll

(Rs, except for BSE Sensex) 30-Sep-09 31-Dec-09 Chg.


(%)
Bharti Airtel 418.6 328.8
(21.4)
Reliance Communications 308.0 172.9
(43.9)
Idea Cellular 75.4 58.2
(22.8)
MTNL 91.5 73.8
(19.4)
Tata Communications 484.5 336.1
(30.6)
Tata Teleservices (Maharashtra) 36.1 26.8
(25.9)
BSESensex 17,126.8 17,464.8 2.0

During 3QFY10, telecom stocks saw a significant correction on the


bourses, as the heightened competition in the sector with the launches of
newer operators led to a major price-war, leading to fears of major
pressures on average revenues per user (ARPUs), slowing sales growth,
margin pressures and falling earnings for telcos going forward. The

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

gauntlet was thrown down by Tata Teleservices (TTSL), which in


partnership with Japanese telecom major NTT DoCoMo launched GSM
services, pricing voice calls on a per-second basis as opposed to the per-
minute pulse hitherto charged by incumbent operators. In response, all
major operators including market leader Bharti Airtel launched per-second
billing plans to prevent churn rates from increasing. Reliance
Communications (RCOM) joined the bandwagon, launching a plan
charging just 50 paise per minute for all calls, local and STD to any mobile
or landline across the country, apart from also offering a seconds-based
pulse to its customers. TTSL and RCOM also cut SMS rates, while Bharti
slashed roaming charges, again to be followed by other major operators.

These price-wars consequently took their toll on telecom stocks, which


significantly under-performed the BSE Sensex during the quarter. It was
the stock of RCOM that took the maximum beating, crashing by 44%,
followed by Tata Communications, which shed 31%. Tata Teleservices
(Maharashtra) on the other hand lost 26%, Idea Cellular 23%, Bharti Airtel
21% and MTNL 19%. As has been the case over the past 2 quarters as
well, it was the stock of mid-sized enterprise telecom solutions provider,
Tulip Telecom that out-performed its peers as well as the Sensex,
recording gains of 3% over the quarter. During this period Sensex grow
nearly 2%.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Tata teleservices stock price:

Airtel’s stock price:

Idea’s stock price:

Rcom’s stock price:

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Price-war’s impact on ARPU

What is an ARPU?

ARPU: Average revenue per subscriber per month, or ARPU, is the


amount of money that a CMSP generates per subscriber per month. It can
be obtained by dividing the total wireless revenues by number of
subscribers and then dividing the output by number of months in a period
(i.e., 3 months for a quarter and 12 months for a year's calculation of
ARPU). To even out the volatility in ARPUs, if any, it is better to arrive at
the figure by averaging the wireless revenues and subscriber base for the
latest two years. However, considering the rapid pace of subscriber
addition for Indian CMSPs, ARPU calculated as dividing the trailing 12-
months wireless revenues by latest subscriber base is also an appropriate
figure. For instance, if a CMSP has earned a total of Rs 50,000 m as
wireless revenues in the past 4 quarters (or trailing 12 months) and its
current subscriber base stands at 20 m, its ARPU will be Rs 208 per month
(Rs 50,000 m of wireless revenues divided by 20 m subscribers divided by
12 months).

Another way to arrive at ARPU is to multiply the average number of


minutes of usage (MOU) per subscriber per month with per minute tariff.
Most of the Indian CMSPs generally disclose their MOUs and per minute
tariff and as such, these can be used to determine the ARPU. While there
might be a direct correlation between change in MOU and change in
ARPU, it might not work the same in India's case as tariffs are falling at a
rapid pace. As such, even if a subscriber talks for a longer time, the
CMSP's ARPU might not increase at the same rate as per minute rate
might decrease.

Price-wars to take their toll, ARPU* reduced 10.4%

o %
Name of the jul- oct- % Change over previous

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Company sep'09 dec'09 quarter

Aircel Limited 112.12 91.89 -18.05%


Loop Mobile 164.97 157.39 -4.59%
Idea Cellular 172.08 158.65 -7.80%
Vodafone Essar 170.54 156.84 -8.03%
Bharti Airtel Ltd 200.58 177.31 -11.60%
Reliance Telecom 97.32 92.18 -5.28%
All India 173.66 155.60 -10.40%
*Monthly; Average revenue per user

57.41% ARPU decline in last 5 year

Price-war’s impact on financial


performances

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Price-wars to take their toll, lead to reduction in top-line on both


qoq and yoy basis

Bharti Airtel, RCOM and Idea Cellular - to report a decline in top-line


growth to the tune of 2.5% yoy, while on a sequential basis, a decline of
nearly 5% is expected. This is the first time ever that these companies will
post a yoy decline in top-line, even as subscriber growth has been quite
decent.

Bharti Airtel is estimated to clock a 2% yoy and 4% qoq fall in


consolidated net revenue, with the key mobile services business unit
expected to clock a 7% yoy and 8% qoq fall in revenues. This is the case;
even as the Telco’s mobile subscriber base grew 39% yoy and 8% qoq to
touch 118.9 mn. The fall in revenues is owing to steep pressure on
realizations, with ARPUs estimated to decline by as much as 34% yoy and
15% qoq to Rs 216 per user per month on account of the price-wars in the
sector. the telemedia business to grow by 4% yoy and 3% qoq, while the
enterprise business is expected to remain flat yoy and grow marginally by
2% qoq. The Passive Infrastructure Services Business is expected to
decline by 24% yoy on account of the transfer of 35,066 towers to Indus
wef. January 1, 2009, while sequentially, 13.2% growth is expected.

RCOM on the other hand is expected to clock an 8% yoy and 5% qoq


decline in net revenues. The key wireless business is estimated to fall by
as much as 16% and 8% qoq in spite of the strong 53% yoy and 9% qoq
growth in the mobile subscriber base of the Telco, which is expected to hit
93.8 mn. As with Bharti, ARPUs to remain under severe pressure and
decline by a massive 45% yoy and 15% qoq to Rs 137 per user per
month. As regards the other business segments of the company, the
Global Business to grow by a strong 35% yoy (flat qoq) and the
Broadband Business by 17% yoy (fall of 0.7% qoq).

Idea Cellular is expected to record a marginal 0.2% yoy decline in net


revenues, while sequentially, an 8% fall is estimated. Even as Idea's
mobile subscriber base (ex-Spice) grew 53% yoy and 12% qoq to 52.3
mn, the significant pressure on ARPUs (estimated to fall 35% yoy and
15% qoq) will lead to standalone wireless revenues falling by a marginal
0.1% yoy and by nearly 10% qoq.

Well other players are not safe in this situation, all are facing same
problem. Rcom and Tata teleservices are so aggressively launched lower
tariff scheme that hunting her revenue more than any other, so now

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

picture is clear more customer doesn’t helping in generate revenue. Low


tariff hunting your revenue and it’s not good for company health.

Bharti Airtel’s Qoq performances

Rs. (million) 3QFY09 2QFY10 3QFY10E* Qoq Yoy (%)


(%)
Net Sales 96334 98,455 94,393 (4.10) (2.00)
Operating Costs 56884 57,039 56,824 (0.40) (0.10)
EBITDA 39450 41,416 37,570 (9.30) (4.80)
EBITDA Margin (%) 41.0 42.1 39.8 (2.30) (1.20)
Other Income 239 409 409 0.0 71.1
Interest Earned (Net) (1904) (428) 322
Depreciation 12,702 14,796 15,536 5.0 22.3
Profits in (451) (8)
Associates/JVs (8)
Non-Operating 3 4 4
Expenses
Profit before Tax 24,629 26,589 22,753 (14.40) (7.60)
Tax 2,558 2,873 2,275 (20.80) (11.10)
Tax rate (%) 10.4 10.8 10.0 (0.80) (0.40)
Minority Interest 478 506 506 0.0 28.0
Net Profit 21,593 23310 19,971 (14.00 (7.50)
)

Bharti Airtel’s Yoy performances

Y/E March FY FY200 FY200 FY2010 FY2011E*


(million 2007 8 9 E*
Net Sales 185,196 270,2 369,6 383,670 406,760
49 16
EBITDA 74,499 113,7 151,6 155,856 159,124
15 79
Net Profit 42,572 67,00 84,70 85,744 75,828
7 0
Note:*estimated by KSBL Research

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Reliance Communication’s Qoq performances

Rs. (million) 3QFY0 2QFY1 3QFY10E Qoq Yoy (%)


9 0 * (%)
Net Sales 56,718 54,963 52,478 (4.50) (7.50)
Operating Costs 34,977 36,827 36,456 (1.00) 4.2
EBITDA 21,741 18,136 16,021 (11.70) (26.30)
EBITDA Margin (%) 38.3 33.0 30.5 (2.50) (7.80)
Other Income 1,784 2,063 2,063 0.0 278.9
Interest Earned (Net) (1,496) 6,551 4,551
Depreciation 10,070 7,144 7,501 5.0 (25.50)
Profits in 358 0 0
Associates/JVs
Non-Operating 0 (29) 0
Expenses
Profit before Tax 14,594 6,475 6,032 (6.80) (58.70)
Tax 153 (1,739) (1,239)
Tax rate (%) 1.0 (26.90) (20.50) 6.3 (21.60)
Minority Interest 339 811 811 0.0 472.2
Net Profit 14,103 7, 6,461 (12.70) (
404 54.2)

Reliance Communication’s Yoy performances

Y/E March FY2007 FY200 FY200 FY2010 FY2011


(million) 8 9 E* E*
Net Sales 142,625 188,27 222,50 212,872 222,691
4 5
EBITDA 55,148 79,749 86,070 72,376 72,931
Net Profit 31,676 54,011 60,449 42,875 29,662
Note:*estimated by KSBL Research

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Idea’s Qoq performances

Rs. (million) 3QFY0 2QFY1 3QFY10 Qoq Yoy (%)


9 0 E* (%)
Net Sales 27,30 29,73 27,253 (8.40) (0.20)
5 9
Operating Costs 20,33 21,64 20,449 (5.50) 0.6
6 4
EBITDA 6,968 8,095 6,803 (16.00 (2.40)
)
EBITDA Margin (%) 25.5 27.2 25.0 (2.30) (0.60)
Other Income 6 317 317 0.0 5,661.80
Interest Charges 874 1,057 951 (10.00 8.9
(Net) )
Depreciation 3,937 4,797 4,557 (5.00) 15.7
Profit before Tax 2,163 2,559 1,612 (37.00 (25.50)
)
Tax (31) 357 81 (77.40
)
Tax rate (%) (1.40) 14.0 5.0 (9.00) 6.4
Net Profit 2,194 2,201 1,531 (30.40 (30.20)
)

Idea’s Yoy performances

Y/E March (Rs FY2007 FY200 FY200 FY2010 FY2011


million) 8 9 E* E*

Net Sales 43,664 67,37 101,5 115,650 136,358


5 44
EBITDA 14,652 22,69 28,36 32,192 35,107
3 4
Net Profit 5,022 10,42 8,816 8,384 5,016
3
Note:*estimated by KSBL Research

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Telcos business model

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

REVENUE;

I. Mobile/Cellular services:

The cellular mobile service providers (CMSPs) make available mobile


telephone services where by a customer on possession of a handset and
obtaining a connection by way of SIM (Subscriber Identification Module)
card (for GSM based technology phones) is able to connect to the network
of the service provider. This is a wireless service that allows the customer
to connect with other wireless customers as also wire line customers.

A CMSP derives its revenues by way of tariff charges for outgoing calls
made by subscribers on its network. As such, revenue for a CMSP is
simply a multiple of average revenue per subscriber per month (ARPU)
and number of subscribers. Let us now understand what determines the
ARPUs and subscriber base.
ARPU: Average revenue per subscriber per month, or ARPU, is the
amount of money that a CMSP generates per subscriber per month. It can
be obtained by dividing the total wireless revenues by number of
subscribers and then dividing the output by number of months in a period
(i.e., 3 months for a quarter and 12 months for a year's calculation of
ARPU). To even out the volatility in ARPUs, if any, it is better to arrive at
the figure by averaging the wireless revenues and subscriber base for the
latest two years. However, considering the rapid pace of subscriber
addition for Indian CMSPs, ARPU calculated as dividing the trailing 12-
months wireless revenues by latest subscriber base is also an appropriate
figure. For instance, if a CMSP has earned a total of Rs 50,000 m as
wireless revenues in the past 4 quarters (or trailing 12 months) and its
current subscriber base stands at 20 m, its ARPU will be Rs 208 per month
(Rs 50,000 m of wireless revenues divided by 20 m subscribers divided by
12 months).

Another way to arrive at ARPU is to multiply the average number of


minutes of usage (MOU) per subscriber per month with per minute tariff.
Most of the Indian CMSPs generally disclose their MOUs and per minute
tariff and as such, these can be used to determine the ARPU. While there
might be a direct correlation between change in MOU and change in
ARPU, it might not work the same in India's case as tariffs are falling at a
rapid pace. As such, even if a subscriber talks for a longer time, the

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

CMSP's ARPU might not increase at the same rate as per minute rate
might decrease.

Subscribers: Growth in a CMSP's subscriber base is dependent on


several factors, the key amongst them being:

Economic growth: With growth in the economy, and the consequent


increase in activity, it requires people to be in touch even when on the
move. This brings out a pressing need for owning mobile/cellular phones.
Thus, with a growth in economic activity there will be more and more
people subscribing to telecom services, thus leading to growth in
subscriber base for CMSPs.
Rising income level: As the real income levels in a society rise, more
and more people are able to afford usage of cellular phones. Also, with
rising incomes, as personal consumption expenditure (as percentage of
income) reduces, the consumer does not feel the pinch of rising telephone
bill, thus having the propensity to talk more, thus leading to higher MOUs
for telecom services providers.

Affordability: While there may be a need to be in constant touch as


outlined by the above two factors, it is the increased affordability that
really increases the demand for such services. The affordability is
interplay of lower tariff charges and availability of cheaper handsets.
While lower handset costs make mobile more affordable at the entry level
thus allowing more people to be a part of the 'mobile community', lower
tariffs allow for an increased usage of telecom services, while not having
such an overbearing impact on telephone bills.

II. Fixed line services:

The fixed (wire line) services are dominantly provided for by the PSUs
(BSNL and MTNL) in India. A customer can obtain a connection where by a
wire line provides him with the last mile connectivity on the national
telecom network. Although this had been a dominant mode of
telecommunication in the past, it is fast being replaced with mobile
telephony, which has the advantage of connectivity on the move. The
fundamental business of a fixed line operator is almost similar to that of a
CMSP, in terms of ARPU and Subscriber base.

III. Internet/Broadband:

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

The Internet services are provided either by telecom service providers or


independent Internet service providers (ISP) who deal exclusively in
providing this service. There are two forms of Internet that are currently
popular - the dial-up connections and the broadband connections. While
both these forms are used for transmitting and receiving data, a
broadband connection (Internet access that allows minimum download
speed of 256 kilobits per second from the point of presence of the service
provider) allows you to transmit data at faster rate.
The Internet business also works like a generic telecom business but for
the fact that here, a personal computer (PC) is used for data/voice
transmission instead of a phone unit (mobile or fixed line handset). Apart
from the usual - economic growth and rising income levels - the growth of
the Internet business is dependent upon:

PC penetration: Internet penetration in India is currently at very low


levels, as compared to its developing peers. This is set to take off with the
rise in PC penetration, which will again be a consequence of affordability
in terms of lower PC costs and reduced cost of data transfer. The cost of
data transfer depends on whether one is using a dial-up or a broadband
connection. The dial-up package entails a fixed charge for Internet access
and a variable charge for the telephone connection. On the other hand,
tariffs for broadband are usually designed on the basis of quantum of data
transmission. As there is rationalization of these tariffs going forward,
Internet will become more affordable and this will drive growth, as the
recurring expenditure will reduce.

Parental encouragement: An interesting change that has come is the


way parents now look at computers. The age of a typical computer user
has dropped significantly as parents increasingly realize the growing
importance of computers in education in the years to come. So, unlike
most products where children are targeted to drive sales of consumer
durables, in the case of computers, it is the parents who are going all out
to ensure that their child grows up to be a computer literate. Thus, with
computers coming into homes, it will not be long before parents will wish
their children to be wired to the web owing to the rich source of
information.

IV. Enterprise services


Moving on from the individual, who is the major user of mobile, fixed line
and Internet services, let us now briefly analyses the 'Enterprise services'
business of telecom companies. These services are used by large and
medium corporates for data transfer between their offices and/or their

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

suppliers' offices, which may be spread in a city, or a country, or even


across continents. The need of users to have a seamless connectivity with
their associates is what drives this business for telecom companies.
Considering that this business takes care of data transfer needs of
corporates, who are not as 'affordability' conscious as the individuals (who
use mobile, fixed line or Internet services), telecom companies generally
earn higher margins on Enterprise services than they earn on any of the
other three business lines. IT and BPO sectors, whose business is so data
dependent, are the major users of Enterprise services.

COST ANALYSIS;

After discussing the revenue aspects of telecom service providers, let us


now understand the major cost heads for these companies. These cost
heads can be broken up into regulated and non-regulated costs. Entry
fee, access deficit charge and license fee are regulated. On the other
hand, sales, general and administrative (SG&A) and employee expenses
are non-regulated in nature.

Entry fee: The companies providing national and international long


distance (NLD and ILD) services are required to pay a flat entry fee of Rs
25 m each (from earlier fees of Rs 1,000 m and Rs 250 m respectively).
These fees are to be paid to the central government for obtaining a
license for providing these services.

Access deficit charge: The government also collects from the cellular
operators an access deficit charge. The charge payable is 1.5% percent of
non-rural annual gross revenue (AGR) of the telecom service providers
and the amount collected is used to subsidies the telecom service
provided by BSNL in rural areas.

License fees: Telecom companies are required to pay an annual license


fee of 6% of their AGR to the Government of India. Licenses offered to the
telecom players are for a limited period of time and these are required to
be renewed on expiry.

SG&A expenses: Telecom companies incur expenditure in the form of


advertisement costs for enhancing their visibility and also to make their
brand more appealing to the consumers. Expenses are also incurred on
customer acquisition and on maintenance of telecom equipment and
network.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Personnel expenditure: These are costs incurred for maintaining the


staff for executing the telecom companies' marketing strategies, for
general administrative purposes, for maintenance and repair of telecom
infrastructure, and customer relationship management in call centers.

Apart from these operating costs, telecom companies also incur cost for
servicing debt and tax payments. Telecom is an operating leverage play
(indicates that each new subscriber will come at a higher profitability than
the previously added subscriber), and, as such, the benefits of faster
subscriber addition are directly seen on companies' improving operating
profitability (as fixed costs are apportioned over a larger subscriber base).

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Value added services


It’s helpful to overcome the price-wars
impact!

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

It’s helpful to overcome the price-wars impact

“VAS is a most lucrative revenue segment of telecom industry and I think


it is the only segment that have ability to saves Telecom Company’s in
price-war situation”

Business model of VAS is not only profitable but also workable against
price-war deficit and overcome price-war impact.

“Higher price of VAS”

“Low expenses of services”

“More used” is helped in overcome the price war loss.

Mobile value-added services (VAS) are those services that are not part of
the basic voice offer and are availed off separately by the end user. They
are used as a tool for differentiation, promotion and allow the mobile
operators to develop another stream of revenue.

The nature of value added services change over time. A VAS may become
commoditized and becomes so common place and widely used that it no
longer provides meaningful differentiation on a relative basis.

Mobile phones today have moved beyond their fundamental role of


communications and have graduated to become an extension of the
persona of the user. We all are witnessing an era when users buy mobile
phones not just to be in touch, but to express themselves, their attitude,
feelings & interests.

Customers continuously want more from their phone. They use their
cellular phones to play games, read news headlines, surf the Internet,
keep a tab on astrology, and listen to music, make others listen to their
music, or check their bank balance.

Thus, there exists a vast world beyond voice that needs to be explored
and tapped and the entire cellular industry is heading towards it to
provide innovative options to their customers. Spoilt by choice, the mobile

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

phone subscribers are beginning to choose their operators on the basis of


the value added services they offer. The increased importance of VAS has
also made content developers burn the midnight oil to come up with
better and newer concepts and services.

The Role of VAS in revenue generation

Total telecom revenue in 2009 end is nearly $24 billion

• Revenue from call charge is 56%


• Revenue from VAS is more than 17%
• Revenue from other

Above figure told everything! How VAS helped in revenue generating.

The Mobile VAS in India is $5 billion at the end of 2010 and is estimated to
grow at 60% to touch $8 billion’s at the end of 2012.

This space is currently completely dominated by entertainment


services and comprises of; P2P SMS -Rs. 9000crore; Ringtones
(including CRBT) - Rs.7750 crore; P2P & A2P- Rs 3375 crore; Games &
Data- Rs. 1575 crore; Others - Rs 675 crore.

VAS is a most lucrative revenue segment of telecom industry and I think it


is the only segment that saves Telecom Company’s revenue in price-war
situation. Profit margin in VAS is very high in compared with call-charge
margin.

Currently VAS part in revenue generating is 17% and segment growth is


more than 50%. I think after 4 to 5 year VAS revenue beat call-charge
revenue, due to law call charge rate and higher used of VAS.

This is where the (because of this reason) role of VAS (Value Added
Services) comes into focus. Operators are facing cutthroat competition
and with the call rates in India being one of the cheapest in the world, the

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

margins are very low. Therefore they are looking at VAS as the next wave
for growth. It has become the flywheel of telecom growth and a large
chunk of revenue (nearly 20%) for operators is likely to come from VAS
services in the years to come. But it is not only effort from operators
which is driving the growth of VAS.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Market size of VAS

Total telecom revenue in 2009 end is nearly $24 billion

• In the $24 billion, revenue from call charge is 56%


• Revenue from VAS is more than 17%

Above figure told everything! How VAS helped in revenue generating.

The Mobile VAS in India is $5 billion at the end of 2010 and is estimated to
grow at 60% to touch $8 billion’s at the end of 2012.

This space is currently completely dominated by entertainment


services and comprises of; P2P SMS -Rs. 9000crore; Ringtones
(including CRBT) - Rs.7750 crore; P2P & A2P- Rs 3375 crore; Games &
Data- Rs. 1575 crore; Others - Rs 675 crore.

Revenue distribution of VAS

As the P2P SMS component accrues completely to the Telco’s, the


remaining 60% is where revenue sharing arrangements exist between
content owners/developers & Telco’s as follows

Operators typically retain the biggest chunk of revenues. Copyright fee


given to content
developer/owner comes from the margin of Content Aggregator or

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Operator or both. Revenue sharing arrangement is typically 60% for the


operator, 25% for the aggregator and 15% for the owner. This model is
significantly different from evolved market like China where the share of
operator is typically 20-30% in the entire chain and aggregators & owners
keep a much higher share.

Revenue sharing in enterprise solution services

Enterprise service providers are increasingly using VAS as a


marketing and customer development tool. It is being increasingly used
to connect to users through the mobility platform. E.g. “Tracking of DHL
courier through SMS- Send POD number as DHL-XYZ to 53456” The end
user requests for this service by sending an SMS, this is routed through
the mobile service operator to the Short code service provider. The short
code provider collects all the information on the server and passes it to
the client.

The per unit revenue accrual in this VAS is low (Rs 3/SMS) as compared to
other types of VAS, but it offers two streams of revenues as both the end-
user & the enterprise service provider pay for the VAS. We expect this to
grow significantly as enterprises look beyond mass media for solutions to
reach out to their customers. It is also cost impactive for the enterprise as
it serves both as a data base development initiative and also leads to cost
savings as queries can be handled through automated response

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

The Road Ahead

There are a lot of services which cannot be introduced in India because


of lack of supporting infrastructure

To avail of new and high end VAS, technologies like 3G need to be


installed. However, 3Gnetworks are not mere upgrades of 2G networks;
rather, entirely new networks need to be built and frequencies need to be
assigned to mobile operators.

Another reasons for players playing safe and not investing in novel
applications and content is
Because this market is greatly affected by piracy. This is acting as a barrier
for companies to
Investing into content development.

One of the solutions to increase customer retention is by providing


exclusive content to them; however this is hampered by piracy. Thus
piracy is hurting the operators both ways, neither can they stop customer
churn by exclusive content development nor can they go in for investment
in innovative applications to spread their demographic reach.

Currently the cost of most VAS is high. This is mainly because of the fact
that VAS market is led by Entertainment VAS which has a high perceived
value. People are paying for it as they
perceive it highly but over a period of time as they get used to it, the
willingness to pay high amounts may come down.

There are high volumes of spam in the VAS market currently. Spam is an
uninvited message urging the consumer to avail of some service.
Example “Bid for a Laptop by messaging your bid amount to XXXX”

SPAM has a high nuisance value and can discourage users to avail of a
genuine service as they feel that once they have availed of a service &
their number becomes a part of a database, their inbox will be flooded
with uninvited messages.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

As an industry initiative there is a pressing need to take charge of as it


goes against the long term interest of the industry. Taking cognizance,
some operators have already started offering a service to their
subscribers where they can choose not to receive any promotional SMS’s.

While the mobile VAS space is all set to grow rapidly, all the stakeholders
will have to work together and create a self-sustaining ecosystem for this
growth to sustain. Similarly it would take a joint effort of all concerned to
address the significant roadblocks and thus unlock the true potential of
Mobile VAS in India.

The key addressable barriers would be to ensure greater rationality in


revenue sharing between Telcos & content developers; ensure copyright
protection, develop higher quality content which goes beyond Bollywood
and cricket and also to have a focused WAP strategy.

While pure entertainment service would continue to appeal to the


younger consumers, the overall focus for Mobile VAS would shift to utility
based services like location information & mobile transactions; as security
concerns are addressed mobile transactions will also have a good
potential in India.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Marketing mix of Value


added services
“Next wave for revenue growth”

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Why marketing mix of VAS?

Marketing mix is the set of marketing tools that the firm uses to pursue its
marketing objectives in the target market. McCarthy classified these tools
into four broad groups that he called the fours Ps of marketing: product,
price, place, and promotion. Marketing-mix decisions must be made to
influence the trade channels as well as the final consumers. Typically, the
firm can change its price, sales-force size, and advertising expenditures in
the short run. However, it can develop new products and modify its
distribution channels only in the long run. Thus, the firm typically makes
fewer Target market

Marketing mix of VAS is little beat unique in the specific segment but the
price war situation boost-up the company to deliver VAS product in
different way to the customer, good promotional activity, value chain of
product, pricing strategy of services and differentiations in product is
helping the company to overcome the price-wars financial loss.

With the help of marketing mix, company can increase the more demand
of VAS throughout promotional activity; variety in the product can attract
the more customers for using services. Good value chain helping the
customer to find out best of best. Also dispute settlement between
various content owners and operator make value chain better for
customer and helping in product innovation. In old product, Bundle-price
policy increases the demand. In premium and innovative product,
Skimming price strategy increases the revenue.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Product

VAS businesses are guided by the product, which holds that consumers
favor those products that offer the most quality, performance, or
innovative features. Managers in these organizations focus on making
superior products and improving them over time, assuming that buyers
can appraise quality and performance. Product-oriented companies often
design their products with little or no customer input, trusting that their
engineers can design exceptional products. However, the product concept
can lead to marketing myopia. These VAS organizations too often are
looking into a mirror when they should be looking out of the window.

Five points someone; prevent the new product development in


VAS:

⇒ Shortage of important ideas in certain areas and copy of unique


idea

⇒ Shorter product life cycles

⇒ Governmental constraints

⇒ Costliness of the development process and piracy of the product

⇒ Un-fair revenue distribution between content owner and operator

Typical Product life cycle of new movie song

(Downloading of new movies


songs/callertune/ringtone/wallpaper/game)

The life cycle of VAS product is so tiny due to people interest in other new
product. Market hype of other song pursues the customer to downloading
new existing song.

Tiny life cycle (less than two month) of VAS are real helped the company
in attract customer for re-purchasing.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Maturity
Decline
Growth
Introduction

Launching time Promotion time At the movie After Release


Of Music of movie Release time (Hit or Flop)

Introduction (5-days):

⇒ A period of slow sales growth as the product is introduced in the


Market. Profits are nonexistent in this stage because of the heavy
expenses incurred with product introduction

⇒ Music launching of particular movie create an awareness of product


in market.

⇒ During this period customer try to understand the music “it’s hit or
flop” and then downloading the song.

Growth (15-days):

⇒ A period of rapid market acceptance and substantial profit


improvement.

⇒ Movies promo on television, radio, internet and direct marketing call


from operator make them famous.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

⇒ During this period promotional activity of movie like, actress/actor


interview and market gossip, mouth publicity and new feature
motivate the user for downloading/callertune.

⇒ Due to the market force customer experimented the song.

Maturity (week of movie release):

⇒ A period of a slowdown in sales growth because the product has


achieved acceptance by most potential buyers. Profits stabilize or
decline because of increased competition.

⇒ During this period music is hit or flop, depend on music quality.

⇒ The hype of promotion also in last the stage that create the special
position for song but due to full availability of song in all media or
acceptance by potential buyers songs downloading is on slowdown.

Decline (after movie release):

⇒ The period when sales show a downward drift and profits


erode.

⇒ Movies are hit or flop also play an important role in


motivating the customer to buy the product.

⇒ Hit movie create the positive “Psychological” impact on rest


of customer mind these are motivate them for buying.

⇒ Flop movie create the negative “Psychological” impact on entire


market and due to this product selling continuously reduced.

⇒ Due to Other new song, boringness of present song reducing the


customer interest and then customer looking forward for new song.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

⇒ Other songs success automatically reduced the present song


selling.

⇒ After movie release, full song available in all media that also
reduced the selling of song.

Product variety

VAS categorized in 4 categories, P2P, P2A, Game and data downloading


and other new existing services. 4 categories of VAS providing a various
variety that make interest in consumer. Due to limited spectrum company
are not able to provide more variety in VAS like, T.V. facility, On-line video
sharing, call conferences and high-speed internet. Delay in 3G spectrum
prevents the operator to providing more facility and revenue generation.
May be end of this year, all the company can able to (after government
3G licenses) providing more variety in VAS.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

3G facility is the next wave for revenue generation. It’s helping the
Telcos in more revenue generation and also provided better quality in
VAS. That attracts the more customers.

Various Product category of VAS

⇒ P2P:

Person to Person SMS, the most common form of mobile


communication apart from voice Ringtones: This is inclusive of
monotones, polytunes, truetunes and CRBT (Caller ring back tones).

⇒ P2A & A2P:

P2A (Person to Application) SMS inclusive of messages sent by end


users for contests & for seeking other information like news &
updates; (A2P)Application to Person SMS inclusive of service push
by enterprise service providers; Also include calls on IVRS for all
other services like astrology

⇒ Games & Data:

Games include download of one play games offered by Reliance &


full play games offered by other operators; Data include download
of wallpapers & logos
Others: Include MMS (Multi Media Messages) & subscription charges
for WAP services

⇒ Other:

M-banking, ATM-recharge, Ticket booking, Bill paying and M-


commerce

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

The Role of VAS products in revenue generation:

It is the only product that real helped the telecom company to overcome
the price war impact

Total telecom revenue in 2009 end is nearly $24 billion

• Revenue from call charge is 56%


• Revenue from VAS is more than 17%
• Revenue from other

The Mobile VAS in India is $5 billion at the end of 2010 and is estimated to
grow at 60% to touch $8 billion’s at the end of 2012.

Above figure told everything! How VAS helped in revenue generating.

This space is currently completely dominated by entertainment


services and comprises of; P2P SMS -Rs. 9000crore; Ringtones
(including CRBT) - Rs.7750 crore; P2P & A2P- Rs 3375 crore; Games &
Data- Rs. 1575 crore; Others - Rs 675 crore.

VAS is a most lucrative revenue segment of telecom industry and I think it


is the only segment that saves Telecom Company’s revenue in price-war
situation. Profit margin in VAS is very high in compared with call-charge
margin.

Currently VAS part in revenue generating is 15% to 17%+ and segment


growth rate is more than 50%. I think after 4 to 5 year VAS revenue beat
call-charge revenue, due to law call charge rate and higher used of VAS.

This is where the (because of this reason) role of VAS (Value Added
Services) comes into focus. Operators are facing cutthroat competition
and with the call rates in India being one of the cheapest in the world, the
margins are very low. Therefore they are looking at VAS as the next wave
for growth. It has become the flywheel of telecom growth and a large
chunk of revenue (nearly 20%) for operators is likely to come from VAS
services in the years to come. But it is not only effort from operators
which is driving the growth of VAS.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Quality:

Quality of services is the best strategy for any VAS. It’s directly helping in
the selling and if customer likes the quality of product they re-purchase
from same resources and also do mouth publicity for you.

When customer downloads a game or any other application, they not


have any idea about your product. On-behalf of your trust customer
download game. So, company must be considering the quality and win
the customer. If one time customer not satisfied with your product, in
future they not used your product. Always try for quality is more worthy
than any other.

Indian companies are not provided high class quality. Some time without
using any services company can deducted the money from customers
account is destroy the customers trust on company.

Innovative product and quality of services always attract more customers.


So, company can focus on quality of services is more worthy than any
other thing.

Design:

Design of Application or Design of game or any other product is directly


helping the company to attract. Good design of application is key
attractiveness for customer.

Feature:

Innovative product always curiosities the customer foe purchase.


Customer always want extra feature in product.

Innovation in product directly attracts the user for experiment. VAS life
cycle is very shortly, after 2 to 3 month customer don’t like her ring-tone

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

or application and then customer download the extra feature ring-tone


(like, Remixed of the ring-tone or new version of any application)

Throughout new feature, customer can replace old one into new product.

Packaging:

Virus is the biggest threat when customer download from companies own
downloading center. Make sure product is virus free and build the
customer trust on your web site.

Size:

When customer downloads any product from GPRS, size does matter.

Un-limited or limited downloading in specific time or in specific price is


directly attract the internet-savvy user. Also, Un-limited downloading or
free downloading in initial stage creates a habit in customer behavior is
like a make a customer for life time.

Due to low spectrum, downloading speed in internet is low. So, make full
feature product in specific size (Size means, how much Kb used by
particular application, game or song). Company must be consider the size
of application, lowest size of application or song, save the users mobile
memory and also consuming the time of user.

Company must be focus on product size and make them easiest for
downloading.

Price

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Demand and supply deciding the price is the basic concept of pricing
strategy but in the VAS competition between operators deciding the price
of VAS.

VAS is the premium category of revenue generation so; all the players
concentrate on VAS. Keen of attracting new customer throughout VAS
promotion is create a high competition. As usual price in competition in
always list. But in some premium category price are high that real helping
the company in revenue generation.

Due to high competition SMS rate is reduce near to 1 paisa from 1 rupee
in last six month, but now people send more sms and helping the
company in revenue generation.

List price:

⇒ Telecom Company using a list price strategy due to high


competition in market

⇒ List price attract more customer

⇒ Helping the company in surviving

⇒ In list price strategy, customer more used services that balanced


the companies account

Premium price

⇒ Some content of product are helping the company to charge


premium price

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

⇒ Company charges a premium price in Application download, e-mail


check.

⇒ For exclusive content like; IPL wallpaper, Indian idol audition pass

⇒ Exclusive licenses for selling Blackberry, I-phone is helping the


company to charge premium

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Promotion

VAS is the only tool for promotion in telecom industry and also helped the
company in making Brand.

Advertising

Advertising can be used to build up a long-term image for a product or


trigger quick sale. Advertising can reach geographically dispersed buyers
efficiently. Certain forms of advertising (TV advertising) typically require a
large budget, whereas other forms (newspaper advertising) can be done
on a small budget.

Television:

⇒ Throughout them company can reach the more people and time to
time remember them the VAS product.

⇒ Next target market of Telecom Company is ruler people and they


are not aware about VAS. So, television is the only media that reach
in ruler area and helped the company in VAS awareness.

Booklets:

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

⇒ All the company providing a booklet, when customer purchases new


sim-card.

⇒ Booklet providing a entire information about VAS, that helping the


customer in VAS use.

Posters:

⇒ Company’s retailer is best choice for poster display, when time to


time customer comes for recharge.

⇒ Direct impact of poster motivates the customer to purchase existing


product from same place.

Display signs:

⇒ All the major point of city is best option for display the board.

Web sites:

⇒ VAS’s dominances in company’s web site.

⇒ Web site of company is a Tool of information

⇒ When customer get the all types information about VAS

⇒ Helping the customer to understand product

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Sales promotion:

Sales promotion can be used for short-run effects such as dramatizing


product offers and boosting sales

Although sales-promotion tools they offer three distinctive benefits:

Communication: They gain attention and usually provide information


that may lead the consumer to the product….
(“Free sms about new scheme”)

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Incentive: they incorporate some concession or inducement that gives


value to the consumer… (“Quiz of the day” or “check balances and win
price”)

Invitation: they include a distinct invitation to engage in the transaction


now…
(“Flash message of push and use services”)

Contests:

⇒ Download the IPL game and win chances to participate in IPL night’s
party

Games:

⇒ Various general knowledge or cricket quiz games

Sampling:

⇒ Free usage of internet for specific time

⇒ Free applications downloading

⇒ Free e-mail check

⇒ Free Caller tune for 10 days

Demonstrations:

⇒ Listening song before downloading

⇒ Listening song before set as a caller tune

⇒ Wall paper small icon on companies WAP portal

Public relations and publicity

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

The appeal of public relations and publicity is based on three distinctive


qualities:

High credibility: news stories and features are more authentic and
credible than ads

Ability to catch buyers off guard: reach prospects that prefer to avoid
salespeople and advertisements

Dramatization: the potential for dramatizing a company or product

Press kits:

⇒ Time to time release a press notes about new feature, that


providing information about your innovation to customer.

Community:

⇒ Social networking is best option for making community also It is the


target market of company. so, double benefit for company

⇒ Write in your blog about your feature product

⇒ Make followers on twitter and time to time tweet about your product

⇒ Free of cost

Sponsorships:

⇒ Sponsor of players

⇒ Sponsor of specific event like, cricket tournament or Mumbai


marathon

⇒ Sponsor of social activity like, free education or tiger saving

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Direct Marketing

In all form of direct marketing, telemarketing is best for the VAS to


promote the product due to own network and free of cost.

SMS, Voice mail or voice call:

Nonpublic type’s sms:

⇒ The message is normally addressed to a specific person who used


the same services in past

⇒ For special target market

Customized sms:

⇒ the message can be prepared to appeal to the addressed individual

⇒ Specific product

Interactive voice call:

⇒ The message can be changed depending on the person’s response

⇒ Call for ring tone download, when customer can find out own
favorite ringtone in various category

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Place

Supply Chain:

Whereas marketing channels connect the marketer to the target buyers,


the supply chain describes a longer channel stretching from raw materials
to components to final products that are carried to final buyers. For
example, the supply chain for application download starts with hides,
tanning operations, cuts operations, manufacturing, and the marketing
channels that bring products to customers. This supply chain represents a
value delivery system. Each company captures only a certain percentage
of the total value generated by the supply chain. When a company
acquires competitors or moves upstream or downstream, its aim is to
capture a higher percentage of supply chain value.

Typical Value Chain model of VAS

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot

H
A
N
D
S
A
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E

A study report on Indian telecom Industry: “Price-War and its


impact on industry”

Value Supply Chain of VAS

VAS has also resulted in the emergence of an entirely new business eco-
system giving rise to supporting industries such as content development
and aggregation. There are multiple stakeholders playing across the VAS
value chain many with overlapping roles and functions.
A well demarcated value chain of VAS is yet to evolve.

The main stakeholders involved in the VAS value chain are.

⇒ Content copyright owners: At the first level of the MVAS value


chain are the content copyright owners, which develop original
copyright content. Examples include music production houses
(SaReGaMa, Sony, and T-series), Bollywood production houses
(Yash Raj Films), and media houses (Sony, Star, Zee, Espn, Times
Group etc.)

⇒ Customized content creators: Refers to companies that


generate customized content for users through their own portals.
Examples include Mauj, One 97, Google, Spice lab, Tcs and
Hungama Mobile. this portal providing a song, game, Applications
downloading services to customer throughout WAP network

⇒ Content portals/aggregators: These are individuals/


organizations that gather web content and in some cases distribute
content to suit customer needs. Examples include Indiatimes and
Hungama Mobile.

⇒ Mobile operators: They provide transport and support


mechanisms for delivery of mobile content. Examples include Airtel,
Reliance, BSNL, MTNL, Vodafone, Idea Cellular, etc.

⇒ Technology enablers: On the other end of the value chain are


technology enablers. These provide technology platforms that
enable access to MVAS. Players include OnMobile, Bharti Telesoft,
Webaroo, etc.

⇒ Handset manufacturers: Mobile handset manufacturers have also


started playing an important role, through their interaction with all

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

other stakeholders across the value chain. Their activities include


embedding software links in their handsets, allowing direct access
to content portals, creating services customized to the need of
certain regions, etc. Key players in the Indian market include Nokia,
LG and Samsung.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Value Chain model of


Enterprise VAS

Enterprise VAS

VAS has also provided a platform to enterprises to communicate with


existing and potential customers using technology as a common
denominator. In the context of VAS, enterprise service providers are
companies that reach out to the consumer through the mobile platform.
Enterprises across a wide range of industries such as financial services,
retail, real estate, cargo and courier, and FMCG companies are using VAS H
as a marketing and customer development tool(6). The flow of information A
from the enterprise to the end-user can be either via automated alerts or N
user-generated requests. Though the inflow of revenue per unit may be D
low in the case of Enterprise VAS (usually USD 0.07/minute or INR S
3/minute), this segment is likely to drive a sizeable contribution to the A
total VAS market, given that an increasing number of industry verticals T
that interface directly with the consumer continue to adopt this channel E
as a means to communicate with their customers.

Enterprise services provider (ESP):

ESP provides the interface between the enterprise and the mobile
operator. ESPs are companies that send messages in bulk to the target
end-users. Examples include One 97, Cell next, and ACL Wireless.

Mobile operators:

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Operator provide transport and support for delivery of information from


enterprises to end-users
Through the ESP. Examples include Airtel, Reliance, BSNL, MTNL, Idea
Cellular, etc.

Coverage:

Anywhere, when network available.

Transport:

VAS transported throughout operators network.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Opportunities and Threats


analysis

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Opportunities

⇒ Out of 1.16 billion people, 525.15 Million people have the Mobile
phone. Mean’s for future telecom company have the 475 million new
targets.

⇒ Monthly growth rate of 3.78%

⇒ Avg.19.20 million New Subscriber added every month

⇒ In year 2015E India have 'billion plus' Subscriber.

⇒ Lowest handset price

⇒ People more love mobile phone than fixed line, so BSNL customer
looking for you.

⇒ 7.9% economics growth rate

⇒ Budget reduce tax-duty on handsets

⇒ Dual-sim card mobile phone

⇒ And last but not least, 3G

All Above figure described the telecom industry has a great


opportunity,buthow?

Highly potential market:

Cellular service is one of the fastest growing sectors in India and still has
immense potential for growth; India’s 525million cellular network is
2ndlargest in the world after china. Indian total population is near about
1.16 billion and total telephone user is 44.73% of population, means now
a day 650 million people of India have not a mobile.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

In 44.73% teledensity, Ruler areas part is just 15%. So ruler area is a


biggest opportunity for operators.

Most of Europe and American regions teledensity is higher than 100, so all
big players eye on India and they have huge amount of money invest in
Indian market. In price-wars situation investment is come from FDI, it’s
good for the industry.

The government should address the situation fast. Bigger players will
drive consolidation and restructure their operations leading to a greater
ability invest in the growth of the telecom sector in India. This process
should result in 3-5 large players, with a pan India footprint and focus.
Industry also expects India’s teledensity levels to touch 60 %, in 2012.

Reduction in Cellular handsets prices:

Mobile phone prices dipped by 15-30% in the year 2009. The market is
estimated to grow 20% faster than predicted earlier and would rise to 5.5
Crores units from 4.3 Crores last year. Major mobile handsets companies
have reduced price to the extent of 26% across all segments following the
reduction of basic customs duty to 5% along with abolition of 4% SAD
announced earlier. If all their other recommendation on SAD and CVD are
meet too, ICA expects industry to achieve a size of 1 billion subscribers
by 2015 and legal market to grow to 90%.This shows that cellular market
is growing and no of mobile user are expected to increase. Government
has announced cut in customs duty on mobile handsets to 5% and abolish
4% SAD (special additional duty). Bigger price differential is expected in
the high-end mobile handsets that are GPRS and MMS compatible or the
camera phones. Indian cellular association, and apex body for cellular
handsets manufacturers in the country now expects that the gray market
would be destroyed completely and the legal market for handsets would
grow from the current 50% to 80%.

Growing Industry:

As per TRAI, two other associated aspects for market growth as


availability of spectrum and availability of resources for network rollout
and expansion. The government is currently looking into these two areas.
The 74% hike in FDI has been cleared by the government to ensure
continuous flow of investments to expand the reach of the mobile

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

operators. To realize full market potential and achieve the forecasts,


telecom operators have to work on a segmented approach and focus on
the five key strategies given below:

⇒ Mobile in the hand of every urban youth (age group 15 to 24 years).


⇒ Mobile in the hand of every executive/businessman/ skilled worker.
⇒ Mobile in every household with income above Rs. 6000.
⇒ Mobile penetration in every town/village, with a population of over
5,000.
⇒ Mobile Phones affordable and available wherever mobile services
available.

Having bright Future:


Despite a strong base of a billion+ people, the country has a 44.73%
teledensity and 55% people now a day not have a mobile, so for the next
few years you can estimate the growth.
➢ The government is planning to divest its holdings in state-owned
enterprises.
➢ The rapid and sustained growth in the telecom market in the
country also provides major investment opportunities for
manufacturing and marketing telecom equipment.

Threats

⇒ price-war

The biggest threat to the industry is price-war in tariff. Cellular


tariffs have dropped by over 56X time since May 1999 - a feat
unparalleled by any other sector or industry in India. The average a
mobile tariff in Year 2010 was prevailing around ½ paisa per second
as against the peak ceiling tariff of Rs. 16.80 per minute when NTP
99 was announced.

⇒ Competition cum rivalry more

This is a very highly competitive market. There are 13 players in the


market, who are giving tough competition to one another. So, every

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

player has to constantly update them to stay in the market in terms


of service, innovation & call charges.

⇒ New entry

Last year 4 new players come in industry and start the services and
this year three new player (datacom, etisalat and qualocom)
possibly joining the industry

⇒ Lowest call charge in the world

Lowest call charge in the world, mean’s your revenue (ARPU) also
lowest in the world.

Indian consumer just ½ paisa pay for a 1 second call mean’s if you
like to talk 1 minute just pays 30 paisa. An Indian call charge is 5
time less in compare sub-continent.

⇒ Lowest ARPU

During last qtr. ARPU down 10.40%

In the year 2005 ARPU (monthly) is Rs. 370, presently it have Rs


155.
58% ARPU decline in last for month. ARPU directly affected
company’s revenue and reduce them.

⇒ Telecoms company’s poor performances in Stock-market

After Price-war biggest threat for industry isstock-markets poor


performances.

During last qtr. Rcom market price nearly 45% down,Tata


communication down 30.6%, Tata teleservices down 30.6%,Bharti
Airtel down 21%, MTNL down 19.4%, idea cellular down22.8%.
(During the qtr. BSE Sensex gain 2%)

Poor performances in stock market preventing the company’s future


expanses plan. After poor performances in stock market, you can’t
easily borrowed money from market.

⇒ Manage consolidation and mergers & acquisition:

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

This would tie back to point of new player’s entry and a possible
consolidation in the telecom business and the tower business.

⇒ Mobile Number portability:

Losing ownership of the client as the number one threat for old
player’s. It does not feature as a risk for Indian telecom. Reason is -
India is still in the growth phase and losing a customer is not yet on
the minds of the service providers.

It might take a year but a risk nevertheless.

⇒ High inflations and commodity price:

Company’s next target market is ruler area and they people have
some specific income-expenses budget and High commodity price
already deficit her budget.
So, they not have extra money for mobile.

⇒ Changes in government policies:


Since, government has given permission to private player to enter
in to the communication market; all big mobile players come into
Indian market. But constant changes in rules by TRAI and COAI
affected these companies so there is always a threat of government
policies for mobile service providers.

⇒ lower buying power of remaining customer

⇒ Higher licenses fees, tax and other levy

⇒ Foreign company’s eyes on India

⇒ Maintaining good QoS (quality of services)

⇒ Delay of 3g auction

⇒ Future infrastructure and network development

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Finding & Suggestions

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Finding

525.15 Million Mobile Subscriber based Indian telecom industry faced a


high competition and due to this all 13 player reduce call tariff. After
world’s lowest call charge all the company faced same problem!

⇒ New players entry

Presently 13 companies providing a cellular service in India and 3


new players may be ready for joining the competition.

⇒ High competition

Due to new player’s entry cellular operator faced a high


Competitions cum more rivalry.

⇒ Lowest call tariff due to Price-war

Lowest call charge is biggest problem of the industry. In the year


1999 per minute call terrif is 16.8 rupees and it’s now a 30 paisa.
Cellular tariffs have dropped by over 56X since May 1999

⇒ crash in stock price

During 3QFY10, telecom stocks saw a significant correction on the


bourses, Airtel’s stock price reduce by 21.4% , Rcom reduce by
43.9%, idea reduce by 22.8%, MTNL reduce by 19.4%, Tata
teleservices reduced by 25.9% and Tata communication reduce by
30.9%.But same quarter sensex increase by 2.0%.

⇒ Continues reduction in ARPU

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

In 2005 ARPU is 370 rupees and now it is 156. Due to price wars
impact last quarter ARPU decline by 10.40%.

⇒ Poor financial performances

All major player of industry like…Bharti Airtel, RCOM and Idea


Cellular - to report a decline in top-line growth to the tune of 2.5%
yoy, while on a sequential basis, a decline of nearly 5% is expected.
This is the first time ever that these companies will post a yoy
decline in top-line, even as subscriber growth has been well-
brought-up.

⇒ High services charge and lack of innovation in VAS

VAS is most lucrative segment of the industry but they faced some
problem in innovation, piracy, revenue distribution and future
infrastructure and next generation network.

Due to high services charge and lack of awareness lot of customer


are not able for VAS used.

⇒ Delay in 3G allocation and Mobile Number portability

Losing ownership of the client as the number one threat for old
playersbut it does not feature as a risk for Indian telecom. Reason is
- India is still in the growth phase and losing a customer is not yet
on the minds of the service providers.

Due to government’s burocretic problem, 3G allocation is dely.


Indian telecom industry must be want a high spectrum, which
helping them to providing more innovative VAS and overcomes the
price war loss.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Suggestions

India’s 44.76% population enjoyed a world’s lowest call tariff but they
don’t know how it is possible and what happened in future!

Due to price-wars impact most of company’s revenue reducing in next


few years and because of financial loss small company is not able to run
own business andshut down its Sutter otherwise sold out business to big
player.

And then few big players enjoyed the market share and increase the call
tariff in future, it is not a prediction, same situations faced by all the
developing country in the growths last stage. Same as to other country,
Indian telecom industry also faced problem but in future how overcome
from them is biggest challenges for Telecom Company.

Vas is the “next wave for revenue growth”.

More use of VAS is the only way to overcome the price-war impact!

⇒ Reduce charge of VAS

Paying 3 rupees for a cricket score is little more for user in term of
return. Due to the high cost of vas, lot of customer not interested
otherwise not able to use more vas. So simple thing is reduce
charge and attract more customers for vas used.

⇒ Make innovation in VAS

In the services industry, business revenue depends on quality of


services and innovation of services.

More innovative services atomically attract the customer to the use


and from the new services you can earn more than old services due
to its premium charge.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

⇒ Increase the awareness of VAS

Next target market of the industry is ruler area and I think they are
not aware about vas, so throughout promotional activity first you
can aware them about VAS and then generating revenue.

⇒ Fair distribution of revenue

Revenue distribution between operator and services provider is not


fair. The ratio is 35:65; less revenue stopped an innovation from the
services provider side.

⇒ Make it simple

The process of VAS activation/deactivation is confused the


customer, also un-fair system of activation, automatic renewal
system and hidden charges of services prevent the customer to use
the VAS. So make them fair and simple.

⇒ Right use of 3G technology and next generation network


development is helpful in future.

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

Bibliography

Books:

⇒ C.R. Kothari, Research Methodology, Wishwa Prakashan, New Delhi

⇒ Philip kotler, Marketing Management, Pearson Education, New Delhi

Report:
⇒ Dot, 2009 annual report

⇒ Airtel, 2008-2009 annual report

⇒ Idea, 3Qtr 2009 report

⇒ Tata teleservices, 3Qtr 2009 report

⇒ Rcom, 2006-2007, 2007-2008 annual report

⇒ TRAI, performances indicator report

⇒ TRAI, 2009 annual report

⇒ COAI industry report

⇒ Various broking houses report

Web-site:
⇒ www.wikipedia.org

⇒ www.trai.gov.in

⇒ www.dot.gov.in

⇒ www.coia.com

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

⇒ www.auspi.in

⇒ www.itu.int

⇒ www.airtel.com

⇒ www.reliancecommunication.com

⇒ www.vodafone.co.in

⇒ www.bsnl.co.in

⇒ www.tatateleservices.com

⇒ www.ideacellular.com

⇒ www.aircel.com

⇒ www.mtnl.net.in

⇒ www.mtsindia.in

⇒ www.loopmobile.in

⇒ www.uninor.in

⇒ www.stel.com

⇒ www.hfcl.com

⇒ www.tatadocomo.com

⇒ www.economicetimes.com

⇒ www.news.yahoo.com

⇒ www.rediff.com

⇒ www.bse-india.com

⇒ www.karvy.com

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot
A study report on Indian telecom Industry: “Price-War and its
impact on industry”

⇒ www.imrbnit.com

⇒ www.globaleqation.com

bhuvar.rajsee@yahoo.com
R D Gardi Department Of Business Management, Saurashtra University, Rajkot