Submitted by:Vaibhav Metre (52) MBA IInd Sem MERC Institute of Management
1. Background information on the Country
a. Telecom Sector contribution to GDP
The Indian telecommunications industry is one of the fastest growing in the world and India is projected to become the second largest telecom market globally. According to the Telecom Regulatory Authority of India (TRAI), the number of telecom subscribers in the country increased to 562.21 million in December 2009, an increase of 3.5 per cent from 543.20 million in November 2009. With this the overall teledensity (telephones per 100 people) has touched 47.89. The telecom industry notched up US$ 8.56 billion in revenues during the quarter ended December 31, 2009 helped by a recovery in earnings from both mobile and landline services. The contribution of Indian telecom sector to the growth of India s economy is immense. It is directly contributing more than 1.5 per cent GDP of the country, and has a multiplier effect on growth because of connecting the people and business around it.
b. Main Economic activities related o telecom sector
On an average, approximately 8 million users are added per month in telecom sector, which made India the world s fastest growing telecom market. FDI limit is increased from 49 percent to 74 percent in telecom sector. The rural telecom equipment market also opened to large investments. Among countries offerings, the highest rate of return on investment is contributed by telecom sector. The large untapped potential in India s rural markets revealed by 9.21 percent teledensity in rural markets as compared to the national level of 28 percent in 2008. The government is promoting telecom manufacturing by providing tax sops and establishing telecom-specific Special Economic Zones. Fully repatriable dividend income and capital invested in telecom equipment manufacturing. One of the most significant contributors to India s booming economy is the focus of Foreign Direct Investment in the Telecommunication sector. Over the past two decades, the service sector has expanded rapidly and has come to play an increasingly important role in national economies and in the international economy. Services account for large shares of production and employment in most Economies around the world. The share of services in world trade and investment too has been increasing. The reason why India was one of the fastest growing economies in the 1990 s was due the rapid growth of the service sector. The structure of Foreign Direct Investment (FDI) worldwide has also shifted towards services.
FDI in Telecom sector
1. Historical & present situation of the telecom sector a. General Description
Telecommunication is the transmission of signals over a distance for the purpose of communication. In earlier times, this may have involved the use of smoke signals, drums, semaphore, flags or heliograph. In modern times, telecommunication typically involves the use of electronic devices such as telephones, television, radio or computers. Over the last 3 years, two out of every three new telephone connections were wireless. Consequently, wireless now accounts for 54.6% of the total telephone subscriber base, as compared to only 40% in 2003. Wireless subscriber growth is expected to grow at 2.5 million new subscribers every month in 2007. The wireless subscriber base skyrocketed from 33.69 million in 2004 to 62.57 million in FY 2004 -2005. The wireless technologies currently in use Indian Telecom Industry are Global System for Mobile Communications (GSM) and Code Division Multiple Access (CDMA). There are primarily 9 GSM and 5 CDMA operators providing mobile services in 19 telecommunication circles and 4 metro cities, covering more than 2000 towns across the country. And the numbers are still growing for Indian Telecom Industry. Telecom Industry in India is regulated by 'Telecom Regulatory Authority of India' (TRAI). It has earned good reputation for transparency and competence.
b. Production & Services Overview
Telecommunication sector in India is primarily subdivided into two segments, which are Fixed Service Provider (FSPs) and Cellular Services. Telecom industry in India constitutes some essential telecom services like telephone, radio, television and Internet. Telecom industry in India is specifically emphasizing on latest technologies like GSM (Global System for Mobile
Communications), CDMA (Code Division Multiple Access). It also has smaller segments such as radio paging services, Very Small Aperture Terminals (VSATs), Public Mobile Radio Trunked Services (PMRTS) and Global Mobile Personal Communications by Satellite (GMPCS). India has a prospering market specifically in GSM mobile service and the number of subscribers is growing very fast.
Telecom Services in India
Internet PMRTS VSATs Radio Paging GMPCs Basic Services Cellular Mobile Services
Public Mobile Radio Trunked Service (PMRTS) is an easy to use two-way radio communication, mainly used for command and control and group talking while on the move. Mainly this application is useful in the areas of:
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Services - Courier, Ambulance, Taxi services, Transportation, Tourism - Hotel chains, Tourist operation, Business - Large industrial establishment, Construction companies. Government - Disaster relief, Traffic control Security - Police, Security Agencies, Fire brigades.
A Very Small Aperture Terminal (VSAT) is a two-way satellite ground station with a dish antenna that is smaller than 3 meters. VSATs are most commonly used to transmit narrowband data (point of sale transactions such as credit card, polling or RFID data; or SCADA), or broadband data (for the provision of Satellite Internet access to remote locations, VoIP or video). VSATs are also used for transportable, on-the-move (utilizing phased array antennas) or mobile maritime communications.
GMPCS is a personal communication system providing transnational, regional or global coverage from a constellation of satellites accessible with small and easily transportable terminals. GMPCS services include two-way voice, fax, messaging, data and even broadband multimedia. Global M-Payment Consortium (GMPC) has launched CodeOne Mobile Payment Platform, a global m-payment and m-banking platform aimed at both consumers and merchants.
c. Employment Scenario
With telecom sector booming, career in the industry is very lucrative. The career path to the leading companies goes via telecom engineering. The telecom sector offers a variety of career options. There is room for everyone- a degree holder or a diploma holder, a candidate with a part-time certification course or one with a full-time degree. With more and more players entering the industry, the competition in the industry in terms of attracting and retaining the best talent is also increasing. The employment scenario in the telecom sector is very promising. The sector is creating employment opportunities and adding around 1lakh people in its workforce. The telecom sector has a huge demand for the trained and qualified engineers and other professionals specializing in telecommunications. According to various studies in recent times, the telecom sector offers the best salary packages at the entry level i.e. an average of 20k. The average hike in salaries across the various levels in the telecom sector ranges from 15 to 20 percent. Incentives also form a part of the compensation till the middle levels. Although the sector faces the moderate attrition rates of 20 to 25 percent, the HR s prime strategic function in the sector is retaining the talent and employee engagement. The only functional area which faces the high attrition rate is the sales people in the telecom industry.
2. Players in the Telecom Sector
There are three types of players in telecom services: State owned companies (BSNL and MTNL) Private Indian owned companies (Reliance GSM, Tata Teleservices,) Foreign invested companies (Vodafone-Essar, Bharti Airtel, Aircel, Idea Cellular, Loop Mobile)
As of june 30th 2009
Bharti Airtel Vodafone Essar BSNL IDEA Aircel
Reliance GSM MTNL Loop Mobile 11% 18% Tata Teleservices
3. Sector Specific Policies
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.
National Telecommunications Policy The government of India has adopted a new economic policy for the telecommunication market in India. This policy has been effective 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 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: y Telephone should be made available everywhere which will be in need of it y All the villages should be entitled to universal telecom services, that is, all the people should be able to enjoy the telecom services at low-priced range y The telecom services should be of global standard and all the grievances from consumers, disputations and public interface should be taken care of at the earliest possible time y India being one of the biggest country should encompass a major manufacturing unit as well as exporter of the telecom products across the globe y The telecom department is also responsible for the security issues of the country At present, about 0.8 percent of Indians possess telephones as compare to around 10 percent of telephone owners per hundred persons. The statistics is also quite less than many developing countries of Asia such as, China which has 1.7 percent of persons possessing telephones, Pakistan with 2 percent, and Malaysia is having 13 percent of the same. The government of India has planned up for a revision of the VII Telecom plan for 1997 and set some new targets for it. The targets for the revised telecom plan demands the availability of telephone as per the requirement, by 1997 all the villages should be availed the telecom facilities, a PCO should be set up within the range of every 500 persons in urban areas, the globally organized value added services in the telecom department should also be introduced in India to make its standard at par with the global market. New telecom Policy Policy Initiatives by Govt. of India in the Telecommunication Sector also include the new telecom policy which was formulated by the government of India in 1999 has been designed by the government of India with the aim to create an ambiance that will attract foreign direct investment and will also permit infrastructure for communication purposes by making investments on technological development. The following sectors in the telecommunication department should be licensed:
All the telecommunication or telegraphed services should be licensed that might cover any geographical region by using any kind of technology License for an integrated access to cellular services within a specific area
Policy Initiatives by Govt. of India in the Telecommunication Sector also covers broadband policy effective from 2004 that implies availing Internet connectivity in the houses as per their requirement as well as tele-calling services. The broadband service offered by the telecommunication department
includes tele-education, tele-medicine, e-governance, entertainment along with employment generation with the help of high-speed access to information and web-based communication.
Future projections of Telecom Sector
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The Telecom sector revenues would touch $30 billion by 2013 registering a compound annual growth rate (CAGR) of 12.5 percent between 2009-2013. The Telecom subscriber base is also expected to grow at a CAGR of 12.5 percent and would cross 770 million by 2013. Mobile market penetration is projected to increase to 63.5 percent in 2013 from 38.7 percent in 2009. The churn rate the rate at which a subscriber switches their operator would cross 59 percent in 2013 from 53 percent currently. The number of people with prepaid connections, accounting for 93 percent of the subscriber base in 2008, will continue to swell to exceed 96 percent by 2013, surpassing 740 million. The revenues from data services will significantly contribute to mobile services in India, with a CAGR of 16.8% from 2009 to 2013. The mobile subscriber base is expected to zoom to 1019 million by 2013.