A

PROJECT STUDY REPORT

ON
BSNL,

“Financial Overview of Telecom Sector in India”

Submitted in partial fulfillment for the

Award of degree of
Master of Business Administration

Submitted By;
Submitted To;
Vishnu Kumar Sharma Ms.Ruchi Khandelwal

MBA – III Sem ,

2009-2011
DEEPSHIKHA INSTITUTE OF MANAGEMENT STUDIES
ISI-17 RIICO INSTITUTIONAL AREA, SITAPURA
JAIPUR

PREFACE

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As the part of my MBA curriculum I was required to undergo summer training in a
business organization for eight or six weeks. I approached BHARAT SANCHAR
NIGAM LIMITTED for this purpose and got an opportunity to get training from Team
Leader who readily agreed to extend his cooperation.
The project was assigned to me by the organization. The topic of my project was
“Financial Overview of telecom Sector in India”. In this record I have put my best
efforts to compile the data to the highest level of accuracy and give my views to the
best of my judgment.

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 ACKNOWLEDGEMENT

I express my sincere thanks to my project guide, Mrs. Rekha Tambi (Sr. Executive-
HR & ES) for guiding me right form the inception till the successful completion of the
project. I sincerely acknowledge her for extending their valuable guidance, support
for literature, critical reviews of project and the report and above all the moral
support She had provided to me with all stage of this project.

Vishnu kumar Sharma,

MBA – III Sem.

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 EXECUTIVE SUMMARY

The project is an extensive report on how the BSNL company

markets its strategies and how the company has been able in
tackling the present tough competition and how it is cooping up by
the allegations of the quality of its products. The report begins with
the history of the products and the introduction of the BSNL
company.
This report also contains the basic marketing strategies that are
used by the BSNL company of manufacturing process, technology,
production policy, advertising, collaboration, export scenario, future
prospect and government policies. The report includes some of the
key salient features of market trend issues.
In today’s world of cut throat fierce competition, it is very essential
to not only exist but also to excel in the market. Today’s market is
enormously more complex. Hence forth, to survive in the market, the
company not only needs to maximize its profit but also needs to
satisfy its customers and should try to build upon there.

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 Contents

S.no. Particulars Pages

1. Introduction

2. Financial Overview
4. Telecom profile

5. Indian Telecom Sector

6. Research Objective

7. Research Methodology
8. A Comprative Swot Analysis
9. Reactivation Of Dormant Retailers Findings
10. Suggestions
11. Annexure
12. Bibliography

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Company Proflie

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 Introduction

Type Communication Service Provider

Availability Countrywide except Delhi & Mumbai

Owner The Government of India

Key people S.D. Saxena (CFO); A.K. Sinha (CEO)

Founded 19th century, incorporated 2000

Website www.bsnl.in

1.1 Overview of the BSNL:

BSNL is India's oldest and largest Communication Service Provider (CSP).

Currently BSNL has a customer base of 64.8 million (Basic & Mobile
telephony). It has footprints throughout India except for the metropolitan cities
of Mumbai and New Delhi which are managed by MTNL. As on March 31, 2010
BSNL commanded a customer base of 33.7 million Wireline, 3.6 million CDMA-
WLL and 27.5 million GSM Mobile subscribers. BSNL's earnings for the
Financial Year ending March 31, 2010 stood at INR 401.8b (US$ 9.09 b) with
net profit of INR 89.4b (US$ 2.02 billion). Today, BSNL is India's largest Telco
and one of the largest Public Sector Undertaking of the country with authorized
share capital of US$ 3.95 billion (INR 17,500 Crores) and networth of US$
14.32 billion.

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1.2 Objective of Study:

The main objective of this study is to carry on brief study on “Financial

Overview Of Telecom Sector in India” through this I am able to get the
difference of various assets and liabilities of the BSNL.

Other objectives of this project are as follows:

 To identify the various assets amount of the BSNL with respect to An-
nual Repots of the BSNL.
 Comparative study of Two year Annual reports.
 To study the various departments for the needs of assets and use-less
assets amount of BSNL Jaipur city center.

1.3 Profile of Organisation:

Over views of Organisation

History

The foundation of Telecom Network in India was laid by the British sometime in
19th century. The history of BSNL is linked with the beginning of Telecom in
India. In 19th century and for almost entire 20th century, the Telecom in India
was operated as a Government of India wing. Earlier it was part of erstwhile
Post & Telegraph Department (P&T). In 1975 the Department of Telecom (DoT)
was separated from P&T. DoT was responsible for running of 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. It is a
well known fact that BSNL was carved out of Department of Telecom to provide
level playing field to private telecoms.Subsequently in 1990s the telecom sector

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was opened up by the Government for Private investment, therefore it became
necessary to separate the Government's policy wing from Operations wing. The
Government of India corporatised the operations wing of DoT on October 01,
2000 and named it as Bharat Sanchar Nigam Limited (BSNL).BSNL operates as
a public sector.

Main Services being provided by BSNL

BSNL provides almost every telecom service, however following are the main
Telecom Services being provided by BSNL in India:-

1. Universal Telecom Sevices : Fixed wireline services & Wireless in

Local loop (WLL) using CDMA Technology called bfone and Tarang
respectively. BSNL is dominant operator in fixed line. As on March 31,
2010 (end of financial year) BSNL had 76% share of fixed and WLL
phones.

BSNL Mobile Pre-paid Mobile

2. Cellular Mobile Telephone Services: BSNL is major provider of Cellular

Mobile Telephone services using GSM platform under brandname
Cellone. Pre-paid Cellular services of BSNL are know as Excel. As on
March 31, 2010 BSNL had 17% share of mobile telephony in the country.

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 BSNL Broadband

3. Internet: BSNL is providing internet as dial-up connection (Sancharnet)

and ADSL-Broadband Dataone. BSNL has around 50% marketshare in
broadband in India. BSNL has planned aggressive rollout in broadband
for current financial year.

4. Intelligent Network (IN): BSNL is providing IN services like tele-voting,

toll free calling, premium calling etc.

BSNL Present & Future

Since its corporatisation in October 2000, BSNL has been actively providing
connections in both Urban and Rural areas and the efficiency of the company
has drastically improved from the days when one had to wait for 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 India. BSNL
has also unveiled very cost-effective Broadband internet access plans
(DataOne) targeted at homes and small businesses. At present BSNL enjoy's
47% of market share of ISP services.

Year of Broadband 2007

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Former Indian Communications Minister Thiru Dayanidhi Maran had declared
year 2010 as "Year of Broadband" in India and BSNL is gearing up to provide 5
million Broadband connectivity by the end of 2010. BSNL has upgraded existing
Dataone (Broadband) connections for a speed of up to 2 Mbit/s without any
extra cost. This 2 Mbit/s broadband service is being provided by BSNL at a cost
of just US$ 5.5 per month. Further, BSNL is planning to upgrade its broadband
services to Triple play (telecommunications) in 2010.

BSNL has been asked to add 108 million customers by 2010 by Former Indian
Communications Minister Thiru Dayanidhi Maran. With the frantic activity in the
communication sector in India, the target appears achievable, however due to
intense competition in Indian Telecom sector in recent past BSNL's growth has
slowed down.

BSNL is pioneer of Rural Telephony in India. BSNL has recently bagged 80% of
US$ 580 m (INR 2,500 crores) Rural Telephony project of Government of India.

Challenges

During Financial Year 2009-2010 (From April 01, 2009 to March 31,2010 )
BSNL has added 9.6 million new customers in various telephone services
taking its customer base to 64.8 million. BSNL's nearest competitor Bharti Airtel
is standing at a customer base of 39 million. However, despite impressive
growth shown by BSNL in recent times, the Fixed line customer base of BSNL
is declining. In order to woo back its fixed-line customers BSNL has brought
down long distance calling rate under OneIndia plan, however, the success of
the scheme is not known. However, BSNL faces bleak fiscal 2009-2010 as
users flee, which has been accepted by the CMD BSNL.

Presently there is an intense competition in Indian Telecom sector and various

Telcos are rolling out attractive schemes and are providing good customer
services. However, BSNL being legacy operator and its conversion from a
Government Department, earns lot of criticism for its poor customer service.

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Although in recent past there have been tremendous improvement in working of
BSNL but still it is much below the Industry's Expectations. A large aging (average
age 49 years(appx)) workforce (300,000 strong), which is mostly semi-illetrate or
illeterate is the main reason for the poor customer service. Further, the Top
management of BSNL is still working in BSNL on deputation basis holding
Government employee status thus having little commitment to the organisation.
Although in coming years the retirement profile of the workforce is very fast and
around 25% of existing workforce will retire by 2010, however, still the workforce will
be quite large by the industry standards. Quality of the workforce will also remain an
issue.

BSNL at Jaipur Circle

BSNL Jaipur Circle office is situated in City Center area. This office is
undertaking of office. This office are works various areas like Marketing, Planning,
Administrative, Operation & Management and Finance. Each department works
under GM telecom district.
GM delegates our some duties to DGM. DGM is the head of the
department. These posts are highly responsible because DGM is the main
person of the department and DGM gives various approvals of works. This
approval leaves various effect of the department like financial, working
efficiency, functions of departments and field officer works.
Basically BSNL city center works in departmental approaches or functions.
This office provides a support to other departments or employees of BSNL. In this
office calculated various function of employees like salary of employees,
departmental information, various tenders, payment of vendors, departmental
expenditure of general provident funds etc.
But this office run a collection center this collection center collect various
telephones/mobiles/broadband bills.

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 VISION

TO BECOME THE LARGEST TELECOM SERVICE PROVIDER IN SOUTH EAST ASIA.

MISSION

To provide world class State-of-art technology telecom services on demand

at affordable price.

To Provide world class telecom infrastructure to develop country's

economy.

Objects

To be the Lead Telecom Services Provider.

To provide quality and reliable fixed telecom service to our customer and
thereby increase customer's confidence.

To provide mobile telephone service of high quality and become no. 1 GSM
operator in its area of operation.

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 To provide point of interconnection to other service provider as per their
requirement promptly.

To facilitate R & D activity in the country.

Contribute towards:

National Plan Target of 500 million subscriber base for India by 2012.

Broadband customers base of 20 million in India by 2010 as per Broadband.

Implementation of Triple play as a regular commercial proposition

The Company

Bharat Sanchar Nigam Limited (known as BSNL) is a public sector

communications company in India. It is the largest telecommunication company
in India and the sixth largest in the world. Its headquarters are at Statesman
House, Barakhamba Road, New Delhi. It has the status of Mini-ratana - a status
assigned to reputed Public Sector companies in India.

During the current financial year, the management based on physical verification
of fixed assets and inventory and reconciliation of various heads of assets and
liabilities in the subsidiary and general ledgers which has resulted into
increase/decrease in the following assets and liabilities taken over as on 01st
October 2000 amounting to net reduction in the assets of Rs. 5,910 lakh (P.Y. - Rs.
25,452 lakh):

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 In pursuance of the Memorandum of Understanding dated 30th September
2000 executed between Government of India and BSNL, all assets and liabilities in
respect of business carried on by DTS and DTO were transferred to the Company
with effect from 01st October 2000 at a provisional value of Rs. 6,300,000 lakh and
up to previous financial year BSNL has identified net assets of Rs. 6,352,028 lakh
against it.

General Information
No. of Revenue District 2
Population 1,629,881
No. of Tehsil 6
Block H.Q. 7
Total Villages 1221
No. of Villages(Inhabited) 1108

Revenues Strategies
The telecom sector is the most competitive sector post liberalization. This has
resulted in a movement from growth based business model that emphasized growth
in numbers to profit-based model where the success is measured by margins. BSNL
as part of the transition has to adopt both cost reduction and revenue enhancement
measures, which would directly impact profitability.

It is evident that there is a declining trend in basic services and there is

stagnation in cellular revenues. Revenue maximization strategies will have two
components, one internal to the organization and the other external. The internal
aspect would involve an initiative for change of process, technology, organizational
structure etc. In this context, revenue assurance is the key to improving the bottom
line for BSNL. This is proactive strategy to capture all revenues due for the services
provided. Presently, BSNL generates bills through different softwares across the

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zones of operation, which are disintegrated and provide only basic solutions. The
industry standard for revenue leakage is about 3 to 7% percent of revenue, which in
money terms translates to about Rs.2100 crores for BSNL. Therefore plugging
revenue leakages is just the first and most obvious part of a Revenue Assurance
initiative. The key concerns for BSNL for effective revenue realization are –
 The delay in customer billing after activation
 Time lag between calls generated and billed
 Scope of fraud
 Non-availability of uniform database.

Therefore the focus should be on immediate implementation of CDR based

billing. This would require huge investment but the return would more than
commensurate. The software should be scalable and be able to incorporate all the
next generation value added services. The implementation of CDR based system
will also generate the following benefits:
 Plugging of leakage of revenue.
 Formulation of appropriate marketing strategies –

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 Management Profile

Chief General Manager

(CGM)

GM Telecom District
Mr. Prashant Trivedi

Deputy General Manager DGM DGM

(DGM) (Operation & (Finance)
(Marketing, Planning & Management) Mr. S. D. Tyagi

Chief Accounting Officer TR CO Strategic Business Plans

Account officer TR AO Mob. AO Telecom

1st Mr. Manoj Yadav Revenue 2nd
Mr. S.S. Bahdoriya Mr. SC Jain

AO SBP AO Pay AO Cash

AONaagar
Mr. Pay
Mr. Ram Sadal Mr. Ram
Mr. Naagar
Avatar

Jr. Account Officer

Mr. R.S. Yogik

Section Supervisor Sr. Trunk Peon

Mr. Chandrshekhar Supervisor Mr. Gyasi Ram
Mr. K.N. Duwedi

Organisation Functional Structure of BSNL Jaipur Circle

SBP Department

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Products

 BSNL LANDLINE
 PHONE PLUS SERVICE
 NEW TELEPHONE CONNECTION
 PERMANENT CONNECTION
 CONCESSION IN RENTALS
 SHIFT OF TELEPHONE

 BSNL MOBILE
 POSTPAID
 PREPAID
 UNIFIED MESSAGING
 GPRS/WAP/MMS
 DEMOs
 TARIFF
 SMS & BULK SMS
 BSNL WLL
 INTERNET SERVICES
 NETWORK
 BROADBAND
 TYPES OF ACCESS
 WI-FI
 CO-LOCATION SERVICE
 BSNL WEB HOSTING
 INTERNET TARIFF
 DIAL UP INTERNET
 SMS& BULK SMS
 BSNL BROADBAND
 REGISTER ONLINE
 TARIFF

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  USO FUNDED RURAL BROADBAND
 FAQ
 CHECK USAGE
 BSNL MANAGED NETWORK SERVICES
 BSNL MPLS-VPN
 ISDN
 INTELLIGENT NETWORK
 FREE PHONE SERVICE
 PREMIUM RATE SERVICE
 INDIA TELEPHONE CARD
 VIRTUAL PRIVATE NETWORK (VPN)
 VOICE VPN
 UNIVERSAL NUMBER
 UNIVERSAL PERSONAL NUMBER
 TELE VOTING
 VIDEO CONFERENCING
 OVERVIEW
 TARIFF
 FAQ
 AUDIO CONFERENCING
 OVERVIEW
 TARIFF
 FAQ
 I NET
 OVERVIEW
 SERVICES ON I NET
 USING ON I NET
 I NET CONNECTIONS
 TARIFF
 TELEX/ TELEGRAPH
 TELEX/ TELEGRAPH

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 TARIFF

 EPABX
  EPABX
 FREE EPABX
 TARIFF
 CENTREX
 CENTREX TARIFF

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Profile of company top Management

Director (Operations) - Shri Rajesh Wadhwa

Shri Kuldeep Goyal has taken over as Chairman & Managing Director of BSNL on
August 1, 2007. Shri Kuldeep Goyal joined the Indian Telecommunication Service of
Govt. of India in 1972. He is an Engineering Graduate from IIT Roorkee.
Just prior to taking over as CMD, BSNL, Shri Goyal has worked as Director
(Planning & New Services) and was responsible for planning and execution of
strategy for expansion of BSNL's network.
With more than 35 years of service, Shri Goyal has vast experience in telecom
sector viz. planning, installation, operation and maintenance of wirelines and
wireless services, data services, computerization of various activities in telecom
network and provision of value added services.
While working as chief General Manager, Maharashtra Telecom circle, he was in
charge for operations, planning and expansion of telecom network of the largest
circle of BSNL and contributed to rapid growth of telecom networks in Maharashtra
and Goa. During his short tenure of ten months as Executive Director, MTNL
Mumbai, he was able to double the connections in GSM network of MTNL Mumbai
and MTNL's market share was enhanced from 8.93% to 15.5%. During his tenure,
broadband service was also started in January 2005 and 40000 subscribers were
enrolled during a short period of nine months. Shri Goyal has worked in Yemen on a
foreign project through Telecommunications Consultants India Ltd. He was also a
Member of National Working Group of ITU-T Study Group 2 on operational aspect
of service,

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PROVISION AND PERFORMANCE OF TELECOM NETWORKS AND PARTICIPATED IN MEETING OF ITU-T

STUDY GROUP 2 AT GENEVA. SHRI GOYAL HAS DELIVERED A NUMBER OF TALKS ON VARIOUS
TOPICS RELATING TO TELECOM IN VARIOUS FORUMS LIKE GSM ASSOCIATION, INSTITUTE OF
ENGINEERS, INSTITUTE OF ELECTRICAL AND TELECOMMUNICATIONS ENGINEERS, CII, DOOR DARSHAN
AND A.I.R. SOME OF HIS ARTICLES - "TELECOMMUNICATION INDUSTRY AT A GLANCE", "UNIVERSAL
ACCESS - AN INTERNATIONAL PERSPECTIVE" AND "TRADE IN TELECOMMUNICATIONS" HAVE BEEN
PUBLISHED IN TELECOMMUNICATIONS JOURNAL.

DIRECTOR (FINANCE)- SHRI S.D.SAXENA

SHRI S.D.SAXENA WAS APPOINTED DIRECTOR (FINANCE), BSNL ON OFFICIATING BASIS IN

APRIL 2002 AND HAS BEEN WORKING AS DIRECTOR (FINANCE) ON REGULAR BASIS SINCE

29.10.2003. SHRI SAXENA HOLDS AN EXCELLENT ACADEMIC RECORD . HE IS M.SC. (PHYSICS)

AND MBA (FINANCIAL MANAGEMENT). W INNER OF MANY AWARDS AND MEDALS , HE WAS

AWARDED CHANCELLOR'S GOLD MEDAL FOR BEING THE MOST OUTSTANDING STUDENT IN THE

AGRA UNIVERSITY IN THE YEAR 1967. PRIOR TO JOINING THE GOVERNMENT OF INDIA THROUGH

THE IAS, ETC. EXAMINATION OF 1972 HE WAS A LECTURER IN PHYSICS AT THE UNIVERSITY OF

RAJASTHAN AT JAIPUR AND TAUGHT FOR SIX YEARS. DURING THIS PERIOD HE WAS ASSOCIATED

WITH VARIOUS ORGANIZATIONS INCLUDING TATA INSTITUTE OF FUNDAMENTAL RESEARCH

(TIFR) AND ATOMIC ENERGY. AMONG THE NOTABLE ASSIGNMENTS OF SHRI S.D. SAXENA,
SPECIAL MENTION CAN BE MADE OF C-DOT WHERE HE WAS INVOLVED IN SETTING UP OF C-DOT
WITH SHRI SAM PITRODA AND PADMSHRI G.B. MEEMAMSI. HE WAS ALSO DIRECTOR (F) IN THE
E-10 B PROJECT FOR INDUCTION OF ELECTRONIC SWITCHING SYSTEM IN INDIAN TELECOM NETWORK.

HE WAS IFA OF MAHANAGAR TELEPHONE NIGAM LTD. FOR 7 YEARS AND WAS ACTIVELY

INVOLVED IN THE GDR ISSUE, RATED AS ONE OF THE BEST GDRS BROUGHT OUT BY AN INDIAN

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 CORPORATE INCLUDING PRIVATE COMPANIES. HE WAS A MEMBER OF RAKESH MOHAN
INFRASTRUCTURE COMMITTEE WHICH MADE SIGNIFICANT RECOMMENDATIONS FOR THE GROWTH
AND DEVELOPMENT OF INDIAN INFRASTRUCTURE SECTOR . SHRI SAXENA HAS BEEN AN ACTING

MEMBER OF THE STUDY GROUP III UNDER THE AEGIS OF INTERNATIONAL TELECOMMUNICATION
UNION. HE WAS THE CHAIRMAN OF THE SPECIAL RAPPORTEUR GROUP OF STUDY GROUP III
FOR TELECOMMUNICATION STATISTICS WHICH MADE SIGNIFICANT CONTRIBUTIONS FOR THE PRESENTATION

OF TELECOM STATISTICS ON A GLOBAL SCALE.

SHRI SAXENA WAS ELECTED CHAIRMAN OF THE TARIFF GROUP FOR ASIA AND OCEANIA
(TAS) GROUP IN THE W ORLD TELECOM STANDARDIZATION ASSEMBLY OF ITU HELD IN

FLORIANOPOLIS , BRAZIL.

HE HAS SPECIALISED IN TECHNO-ECONOMIES AND FINANCIAL MANAGEMENT OF TELECOM

COMPANIES WITH EMPHASIS ON TARIFF AND TARIFF BASED MARKETING.

DIRECTOR (PLANNING & NEW SERVICES)-SHRI R.K.AGGARWAL

SHRI RAKESH KUMAR AGARWAL HAS DONE HIS B.E. FROM INDIAN INSTITUTE OF SCIENCE,
BANGALORE IN 1973 AND THEN M.TECH IN COMMUNICATIONS FROM IIT DELHI IN 1975.
THEREAFTER HE JOINED DEPARTMENT OF TELECOMMUNICATIONS AND WORKED IN VARIOUS FIELDS

OF TELECOMMUNICATIONS . HE DID INSTALLATION OF C-400 CROSS BAR EXCHANGES TILL

1983. HE WAS SENT TO FRANCE FOR TRAINING FOR THE INSTALLATION OF DIGITAL ELECTRONIC
EXCHANGE OF E-10B MAKE IN 1983 AND THEREAFTER WORKED AS DEPUTY GENERAL
MANAGER (INSTALLATION) FOR E-10B EXCHANGES IN MTNL, MUMBAI FROM 1983 TILL

1991.

HE WAS DOT REPRESENTATIVE FOR THE SYSTEM SELECTION COMMITTEE SET UP TO FINALIZE
GATEWAY SWITCHES FOR VSNL. DURING 1990 HE REPRESENTED INDIA FOR APT

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CONFERENCE IN INDONESIA. HE WAS ALSO DEPUTED AS PROJECT DIRECTOR, TCIL TO

SULTANATE-OF-OMAN FROM 1991 TO 1996 WHERE HE HANDLED ALL THE PROJECTS RELATED

TO SETTING UP THE EXTERNAL PLANT NETWORK FOR COPPER CABLE AND OPTICAL FIBER
NETWORK IN SULTANATE -OF-OMAN. FROM 1996-98 HE WORKED AS CHIEF GENERAL
MANAGER, ANDAMAN & NICOBAR TELECOM CIRCLE AND THEREAFTER HANDLED THE CHARGE OF
JAIPUR TELECOM DISTRICT, RAJASTHAN FROM 1998-99. HE WAS POSTED AS GENERAL
MANAGER (DEVELOPMENT) IN PUNE IN 1999 AND WAS IN CHARGE OF COMPLETE PLANNING AND

INSTALLATION OF ALL SWITCHING AND TRANSMISSION NETWORK IN PUNE DISTRICT. HE WAS ALSO IN-
CHARGE OF COMPUTERIZATION AS WELL AS INTRODUCTION OF NEW SERVICES IN THE NETWORK IN

PUNE.

HE WAS CLOSELY INVOLVED WITH PLANNING, EVALUATION OF TENDER AS WELL AS IMPLEMENTATION

AND MAINTENANCE OF GSM MOBILE SERVICES IN MAHARASHTRA SINCE 2002. AS CHAIRMAN OF

THE VALIDATION COMMITTEE HE SUCCESSFULLY CARRIED OUT THE VALIDATION OF MOBILE SWITCH

FOR W EST ZONE INSTALLED AT PUNE. HE WAS IN-CHARGE OF ALL THE CENTRAL PLATFORMS FOR
GSM MOBILE SERVICES FOR W EST ZONE INSTALLED AT PUNE NAMELY PRE-PAID PLATFORM,

BILLING SYSTEM AND VALUE ADDED SERVICES FOR MOBILE. LATER ON THE FINALIZED EXPANSION OF
MOBILE NETWORK IN W EST ZONE FOR 4 MILLION LINES AND WAS INVOLVED IN THE COMMISSIONING

AND MAINTENANCE OF GSM MOBILE NETWORK. HE WAS ALSO CLOSELY INVOLVED WITH THE

SETTING UP OF CALL CENTRE AT PUNE FOR HANDLING CUSTOMER CARE AND MARKETING OF

MOBILE SERVICES TILL MAY, 2006.IN JUNE, 2006, HE WAS POSTED AS CHIEF GENERAL
MANAGER, BSNL BIHAR TELECOM CIRCLE. HE HAS TAKEN OVER THE CHARGE OF DIRECTOR
(PLANNING & NEW SERVICES) IN BSNL BOARD W.E.F. 11TH APRIL, 2008

PROFILE OF THE COMPANY’S BUSINESS

1. BASIC AND LIMITED MOBILE TELEPHONE SERVICES

BSNL IS THE LEADING SERVICE PROVIDER IN THE COUNTRY IN THE BASIC TELEPHONE SERVICES.
AS OF NOW MORE THAN 35 MILLION DIRECT EXCHANGE LINES & MORE THAN 2.2.MILLION
TELEPHONES IN THE LIMITED MOBILE TELEPHONE SERVICES ARE EXISTING. BSNL HAS PROVIDES A

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NUMBER OF ATTRACTIVE TARIFF PACKAGES & PLANS WHICH SHALL FURTHER STRENGTHEN ITS SUBSCRIBER
BASE.

2. CELLULAR MOBILE TELEPHONE SERVICES

BSNL’s GSM Technology based Cellular Mobile Network has reached a long way,
covering more than 6400 towns, with a subscriber base of over 1.54 crore as on
31st Jan. 2009 out of which 1.16 Crore cellular telephones are in the prepaid
segment.

3. INTERNET SERVICES

BSNL offers Dialup Internet services to the customers by Post-paid service with the
brand name ‘Net one’, and pre-paid service with the brand name ‘Sancharnet’. The
post-paid service is a CLI based access service, currently operational in 100 cities.
Sancharnet is available on local call basis throughout India to ISDN and PSTN
subscribers. The Internet Dhaba scheme of the Company aims to further promote
Internet usage in rural and semi urban areas.

To keep pace with the latest and varied value added services to its customers,
BSNL uses IP/MPLS based core to offer world class IP VPN services. MPLS based
VPNs is a very useful service for Corporate, as it reduces the cost involved as well
as the complexity in setting up VPNs for customers networking. As on 31.03.2005,
your Company’s total Internet customer base was 17, 98,089 and total Internet
Dhabas were 4143. A total of 708594 dial up Internet connections have been given
during 2007-2008, against a target of 7 lakhs. BSNL plans to give 1215980 more
dial up connections during the year 2008-09. As on 31.1.2009, there were 2367404
internet subscribers working in BSNL net work.

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4. Intelligent Network
Intelligent Network Services is a service that incorporates several value added
facilities, thoroughly designed to save time and money, and enhance productivity. At
present, your company offers Free Phone (FPH), Premium Rate Service (PRM),
India Telephone Card (ITC), Account Card Calling (ACC), Virtual Private Network
(VPN), Universal Access Number (UAN) and Tele voting IN services. With the
commissioning of five numbers of new technology IN Platforms (Four General
purpose and One Mass Calling) at Kolkata, Bangalore, Ahmadabad and Hyderabad,
the India Telephone Card facility and new value added services are being provided
throughout the country. Activation of these new IN platforms had increased the sale
of ITC Cards taking the figure to Rs.265 crores in 2007-08 alone.

5. BROADBAND SERVICES
BSNL has launched its Broadband Services under the brand NAME ‘DATA One’ on
14/1/2005. This offers services like High Speed Internet Access with speed ranging
from 256 Kbps to 8 Mbps. Other services like streaming video, Video on Demand,
Bandwidth on demand etc., have also been planned. As on 31.12.2005, there were
more than 356000 broad band connection provided by the BSNL. There are plans to
give 2 million and 3 million connections in 2008 and 2009 respectively.

DEVELOPMENT OF RURAL TELECOM NETWORK

1. Rural DELs

AS ON 31.03.2008, IN BSNL’S NETWORK, A TOTAL OF 1.356 CRORE RURAL TELEPHONE

CONNECTIONS WERE WORKING. AS ON 31.1.2009, THERE ARE 1.425 CRORE RURAL TELEPHONES

WORKING IN BSNL NETWORK.

26
2. (a) VILLAGE Public Telephones (VPTs) & RCPs:-

BSNL, in its unstinted efforts to make the slogan ‘Connecting India’, a reality, had
provided VPTs in 5, 18,992 villages up to 31.03.2008. The Company entered into an
agreement with USO Fund for expansion of rural telecom network by November
2009, by providing VPTs in 66,822 undisputed, undisturbed, accessible and
inhabited villages having population more than 100 as per Census, 1991 in the
country. BSNL PROVIDED VPTs in 5, 28,886 villages up to 31.01.2008. There are
plans to replace all MARR VPTs in the COUNTRY. As of now total 123194 MARR
VPTs already replaced in the country by BSNL. BSNL also committed to provide the
Rural Community Phones as per the USO Fund agreement. As of now around
13713 RCPs already provided by BSNL.

(b) Public Telephones:-

There are more than 2 million PCOs working in the BSNL Network out of which
around 1 million PCOs are having STD/ISD.

C. NETWORK MANAGEMENT

BSNL is committed to provide a robust state of the art infrastructure that will provide
stable and superior services to its customers. Accordingly, the MLLN network
covering more than 200 cities was made operational in May 2004. Since then, about
22000 circuits have been provided on this network. This has provided high level of
stability to the leased circuits and capability to offer N X 64 Kbps circuits. Keeping in
view the growing demand of leased circuits, the network is being expanded to cover
about 50 more locations and additional capacity at many existing locations is also
being provided.

27
To improve the operational efficiency of CCS 7 signaling, stand-alone signaling
transfer point (SSTP) equipment is being procured. This will also enable the
Company to measure signaling traffic of other operators, who are using its signaling
network for exchanging messages, especially with regard to cellular services. BSNL
has more than 4.7 Lakhs Route Kilometers of optical fiber network in the country &
has installed capacity more than 6.4 million lines for the TAX meant for the STD/ISD
network.

D. Setting up KU Band VSAT network

As regards the KU Band VSAT network equipment, the hub of this network is being
set up at BANGALORE; The equipment has been installed and expected to be
commissioned shortly. This will help your Company, to become a service provider
with all types of media equipment i.e. OFC, Microwave and satellite for provision of
bandwidth, this will also enable the Company to offer composite solutions to its
customers.

E. Policy on transmission network maintenance

TELECOM CIRCLES HAVE LARGE TRANSMISSION NETWORKS. TO IMPROVE THE MAINTENANCE OF

TRANSMISSION NETWORK, GUIDELINES FOR ROUTE PARTIES AND VEHICLES HAVE BEEN FORMALIZED. TELECOM
TERRITORIAL CIRCLES ARE ALSO BEING CONNECTED WITH COMPUTERIZED NETWORK FOR BOOKING OF

TRANSMISSION SYSTEM FAULTS, WITH A VIEW TO IMPROVE FOLLOW UP AND FASTER RESTORATION OF FAULTS.

F. Annual Maintenance contracts for switching system & WLL

28
COMPREHENSIVE AMC, WHICH INCLUDES HARDWARE AND SOFTWARE MAINTENANCE AND UPGRADE ,

HAS BEEN ARRANGED WITH THE RESPECTIVE EQUIPMENT SUPPLIERS . INITIAL FEEDBACK SUGGESTS

THAT, AS A RESULT OF PREVENTIVE AND CORRECTIVE MAINTENANCE SUPPORT , THE PERFORMANCE OF

SWITCHES IS IMPROVING. DIFFICULTIES IN ENTERING INTO AMC WITH RURAL WLL EQUIPMENTS

SUPPLIERS HAVE BEEN RESOLVED AND PROCEDURES STREAMLINED SO THAT ADEQUATE MAINTENANCE

SUPPORT BECOMES AVAILABLE . AS A RESULT, THE PERFORMANCE OF WLL NETWORK IS IMPROVING .

AMC ARRANGEMENTS HAVE ALSO BEEN MADE WITH SUPPLIERS OF FWTS AND HAND HELD

TERMINALS.

G. Provision of SMPS with rural WLL DELs

W ITH A VIEW TO INCREASE THE TALK TIME AND TO TAKE CARE OF POOR POWER SUPPLY CONDITIONS

IN RURAL AREAS , STEPS ARE TAKEN FOR PROCUREMENT OF SWITCH MODE POWER SUPPLY (SMPS)
WITH 7 AH
BATTERY. ALL NEW PROCUREMENTS OF WLL EQUIPMENT WILL NOW HAVE PROVISIONS FOR SMPS
WITH 7 AH BATTERY TO BE SUPPLIED ALONG WITH FWTS

H. Fault Repair Services –

ACHIEVEMENTS AT A GLANCE (BASIC SERVICE)

SL. NO. PARAMETERS YEAR

2008-09 2009-10
ACHIEVEMENT ACHIEVEMENT
1 FAULT RATE 8.4 7.6
2 TRUNK EFFICIENCY 88.4 89.1
3 CCR
i) LOCAL 57.85 59.89

ii) JUNCTION 47.88 54.18

iii) STD 40.57 43.70

4 FAULT CLEARANCE

29
 i) SAME DAY 75.78 77.30
ii) NEXT DAY 90.29 90.20
iii) W ITHIN 7 DAYS 98.23 98.70
5 REPEAT FAULTS 0.87 0.58

I. COMPUTERISATION

IMPLEMENTATION OF INTER OPERATOR BILLING AND ACCOUNTING SYSTEM (IOBAS) HAS BEEN

COMPLETED. YOUR COMPANY PLANS TO PROVIDE CDR BASED CUSTOMER CARE AND

CONVERGENT BILLING SYSTEM. THIS WILL HELP COMPANY IN PROVIDING EFFECTIVE AND EFFICIENT

BILLING & CUSTOMER CARE SOLUTIONS FOR ITS FIXED LINE SUBSCRIBERS . IT ENVISAGES BUILDING

OF COUNTRY WIDE INTRANET TO REDUCE THE COST OF OPERATION, INCREASE REALIZATION , STOP

LEAKAGE OF REVENUE AND MINIMIZE FRAUDS, BESIDES PROVIDING ROUND THE CLOCK BEST

CUSTOMER CARE SERVICES TO THE COMPANY’S SUBSCRIBERS .

CALL CENTER FACILITY HAS BEEN INTRODUCED FOR 71 SSAS, WHICH IS A SINGLE POINT

APPROACH FOR ADDRESSING ALL CUSTOMER NEEDS CUM GRIEVANCES. W EB BASED PUBLIC
GRIEVANCE MANAGEMENT SYSTEM HAS BEEN IMPLEMENTED FOR SPEEDY DISPOSAL AND MONITORING

OF PUBLIC GRIEVANCES . W EB BASED INVENTORY MANAGEMENT PACKAGE HAS ALSO BEEN

INTRODUCED , THROUGH WHICH; MATERIAL MANAGEMENT FUNCTIONS ARE BEING COMPUTERIZED

GRADUALLY IN DIFFERENT CIRCLES . ONLINE MOBILE BILL VIEWING FACILITY HAS BEEN MADE

AVAILABLE TO ALL CELL ONE MOBILE CUSTOMERS (ALL STATES) THROUGH COMPANY’S PORTAL
(HTTP://BSNL.IN). DUPLICATE TELEPHONE BILL VIEWING FACILITY FOR LANDLINE TELEPHONE HAS

ALSO BEEN MADE AVAILABLE AT MANY PLACES THROUGH W EBSITES OF RESPECTIVE TELECOM

CIRCLES.

J. BUSINESS DEVELOPMENT

BSNL IS OFFERING CUSTOMIZED ENTERPRISE NETWORK SOLUTION AND SERVICES TO THE

CORPORATE CUSTOMERS ON TURNKEY BASIS. THE COMPANY HAS EMPANELLED SYSTEM

INTEGRATORS AS BUSINESS ASSOCIATES TO IMPLEMENT THE WAN SOLUTION THROUGH LEASED

30
LINE/ MPLS. YOUR COMPANY HAS PROVIDED BANDWIDTH FOR WAN NETWORK OF CORPORATE

LIKE SBI, PNB, ICICI, HPCL ETC. SOME OF THE WORKS WERE AWARDED TO BSNL AFTER

COMPETITIVE BID.

BSNL HAS ALSO ENTERED INTO MOUS WITH A NUMBER OF LEADING CORPORATE SUCH AS
NTPC, BPCL, UNION BANK OF INDIA (UBI), INDIAN AIRLINES (IAL), IFFCO, MCX, PNB
IN THE YEAR 2008-2009 FOR PROVIDING TOTAL TELECOM SOLUTION AND FOR HAVING SYNERGY OF

OPERATION WITH THESE ORGANIZATIONS.

EPABX MANUFACTURERS HAVE BEEN EMPANELLED TO PROVIDE “FREE OF COST EPABX

SYSTEMS” TO CORPORATE CUSTOMERS AS A BUSINESS DEVELOPMENT INITIATIVE TO RETAIN THE BIG

CORPORATE SUBSCRIBERS . AN EXCLUSIVE AGREEMENT HAS BEEN SIGNED WITH RAILTEL, TO

PROVIDE TELECOM SERVICE ON REVENUE SHARE BASIS BY CALL CENTRE’S, FOR CENTRALIZED

ENQUIRY FOR RAILWAYS. FURTHERMORE, YOUR COMPANY HAS ENTERED INTO AN AGREEMENT FOR

UTILIZING PRASAR BHARTI AND RAILTEL’S TOWERS FOR INSTALLING THE GSM ANTENNAS FOR

FASTER ROLLOUT OF GSM NETWORK.

K. INTERNATIONAL LONG DISTANCE (ILD)

SUBSEQUENT TO THE SIGNING OF MOU WITH SRI LANKA TELECOM (SLT), MICROWAVE LINK

BETWEEN INDIA AND SRI LANKA HAS BEEN COMMISSIONED . BSNL HAS STARTED ITS DIRECT ILD
SERVICES TO SRI LANKA UTILIZING THIS MICROWAVE LINK , WHICH WAS LAUNCHED BY HON’BLE
MOC AT CHENNAI ON 16TH OCTOBER 2009.

INTERNATIONAL SERVICE AGREEMENTS FOR ILD TRAFFIC WITH LEADING INTERNATIONAL CARRIERS

VIZ. TELEGLOBE CANADA, TELECOM ITALIA, MCI USA, SRI LANKA TELECOM, SINGTEL OPTUS,
FRANCE TELECOM ETC., HAVE BEEN SIGNED. IN THE FIRST PHASE, OUTBOUND ILD TRAFFIC IS

BEING SENT THROUGH THESE CARRIERS .

31
BSNL HAS ALSO PLANNED TO LAY THE UNDERSEA SUBMARINE CABLE BETWEEN SRI LANKA AND

INDIA. THE LANDING STATION FOR SUBMARINE CABLE HAS BEEN IDENTIFIED AS TUTICORIN
(TAMILNADU). THIS CABLE WILL PROVIDE CONNECTIVITY TO OTHER INTERNATIONAL CABLE SYSTEM

FOR CARRYING VOICE & DATA TRAFFIC.

BSNL IS UPGRADING ITS 4 LEVEL-I TAXS I.E., MUMBAI, CHENNAI, NEW DELHI, KOLKATA, TO

INTERNATIONAL GATEWAY CAPABILITY ALONG WITH THE SETTING UP OF MONITORING FACILITY AT THESE

STATION.

L. CUSTOMER CARE

BSNL, WITH ITS ENDEAVOUR FOR HIGH CUSTOMER SATISFACTION , HAS BEEN PAYING GREAT

ATTENTION IN THIS AREA , BY MEANS OF OPENING OF MORE AND MORE CUSTOMER SERVICE CENTERS .

IN ITS ONGOING ENDEAVOUR TO EXPAND MODES OF BILL PAYMENT OPTIONS FOR ITS CUSTOMERS ,

SEVERAL NEW ARRANGEMENTS ARE IN ADVANCED STAGE OF

NEGOTIATION/FINALIZATION/IMPLEMENTATION. SOME OF THESE INCLUDE : RECHARGE OF EXCEL PRE -

PAID CARDS THROUGH THE ATMS OF PNB AND SBI; BILL PAYMENT THROUGH M/S EASY BILL
RETAIL OUTLETS PRESENTLY AVAILABLE AT BANGALORE, GURGAON AND NOIDA LIKELY TO BE

EXPANDED TO OTHER CITIES ; PAYMENT THROUGH INTERNET /ECS USING THE SERVICES OF

INTERMEDIARIES M/S BILL DESK AND M/S BILL JUNCTION RESPECTIVELY , AND, THROUGH

CREDIT /DEBIT CARDS.

M. TELECOM FACTORIES

THE TELECOM FACTORIES OF BSNL LOCATED AT KOLKATA, GOPALPUR, KHARAGPUR, JABALPUR,

RICHHAI, BHILAI AND MUMBAI ARE IN-HOUSE MANUFACTURING UNITS CURRENTLY ENGAGED IN

32
PRODUCTION OF PAY PHONES, MINI PILLAR, CT BOX, DP BOX, LINE JACK UNIT, TOWERS AND
SS DROP WIRE, OFC ACCESSORIES, FDMS ETC. DURING 2008-09,

WITH A VIEW TO USE THE FACTORIES INFRASTRUCTURE AND WORKFORCE GAINFULLY, EFFORTS ARE BEING
MADE TO TIE UP WITH OTHER TECHNOLOGY PROVIDERS ETC.

N. OBLIGATIONS

1. Towards customers and dealers

TO PROVIDE PROMPT, COURTEOUS AND EFFICIENT SERVICE AND QUALITY OF PRODUCTS/SERVICES AT FAIR
AND REASONABLE SERVICES.

2. Towards employees

 DEVELOP THEIR CAPABILITY AND ADVANCEMENT THROUGH APPROPRIATE TRAINING AND

CAREER PLANNING

 EXPEDITIOUS REDRESSAL OF GRIEVANCES

 FAIR DEALINGS WITH RECOGNIZED REPRESENTATIVES OF EMPLOYEES IN PURSUANCE OF

HEALTHY TRADE UNION PRACTICES AND SOUND PERSONNEL POLICIES

3. Towards the Society –Corporate Social Responsibilities

CORPORATE SOCIAL RESPONSIBILITIES

BSNL IS COMMITTED TO PROVIDE QUALITY TELECOM SERVICES AT AFFORDABLE PRICE TO THE

CITIZENS OF THE REMOTEST PART OF THE COUNTRY. BSNL IS MAKING ALL EFFORT TO ENSURE

33
THAT THE MAIN OBJECTIVES OF THE NEW TELECOM POLICY 1999 (SALIENT POINTS INDICATED
BELOW) ARE ACHIEVED:

ACCESS TO TELECOMMUNICATIONS IS OF UTMOST IMPORTANCE FOR ACHIEVEMENT OF THE

COUNTRY 'S SOCIAL AND ECONOMIC GOALS . AVAILABILITY OF AFFORDABLE AND EFFECTIVE

COMMUNICATIONS FOR THE CITIZENS IS AT THE CORE OF THE VISION AND GOAL OF THE NEW

TELECOM POLICY 1999.

STRIVE TO PROVIDE A BALANCE BETWEEN THE PROVISION OF UNIVERSAL SERVICE TO ALL UNCOVERED

AREAS, INCLUDING THE RURAL AREAS, AND THE PROVISION OF HIGH-LEVEL SERVICES CAPABLE OF MEETING

THE NEEDS OF THE COUNTRY'S ECONOMY ENCOURAGE DEVELOPMENT OF TELECOMMUNICATION FACILITIES IN

REMOTE, HILLY AND TRIBAL AREAS OF THE COUNTRY;

TRANSFORM IN A TIME BOUND MANNER, THE TELECOMMUNICATIONS SECTOR TO A GREATER

COMPETITIVE ENVIRONMENT IN BOTH URBAN AND RURAL AREAS PROVIDING EQUAL OPPORTUNITIES AND

LEVEL PLAYING FIELD FOR ALL PLAYERS.

N. Employee’s Welfare Activities

COMMITMENT TOWARDS THE PRINCIPLES OF CORPORATE SOCIAL RESPONSIBILITIES IS INBUILT WITHIN

THE CORPORATE PHILOSOPHY OF BSNL. A VERY WIDE RANGE OF WELFARE PROGRAMMES, WITH A

FOCUS ON THE EMPLOYEES’ WELFARE IS CONTINUOUSLY IMPLEMENTED BY THE STAFF W ELFARE

BOARD OF THE COMPANY.

O. Assistance during natural calamities

BSNL ALWAYS REMAINS AWAKE OF ITS RESPONSIBILITY AS A CORPORATE CITIZEN. WHEN THE
DESTRUCTIVE TSUNAMI WAVES STRUCK THE INDIAN SHORES, BSNL COMPANY SWUNG INTO ACTION

34
IMMEDIATELY FOR PROVIDING RELIEF TO THOSE AFFECTED IN THE COASTAL AREAS . COMMUNICATION
NETWORKS AT THE COASTAL AREAS OF TAMIL NADU, KERALA AND THE ANDAMAN AND NICOBAR
ISLANDS – WORST HIT IN THE TSUNAMI - WERE PROMPTLY RESTORED WITHIN THE SHORTEST

POSSIBLE TIME . BSNL ALONG WITH THE EMPLOYEES CONTRIBUTED AN AMOUNT OF R S. 2,207
LAKHS TO THE PRIME MINISTER’S RELIEF FUND. TELEPHONE SERVICES WERE RESTORED IN

RECORD TIME IN THE FLOOD -HIT AREAS OF GUJARAT AND MAHARASHTRA.

1.2 POWERS & DUTIES OF OFFICERS AND WORKMEN

THE POWERS & DUTIES OF THE OFFICERS AND WORKMEN OF THE COMPANY ARE DERIVED MAINLY

FROM JOB DESCRIPTIONS , MANUALS, TERMS AND CONDITIONS OF APPOINTMENT AND DELEGATION OF

AUTHORITIES ENUNCIATED BY THE COMPANY. THE WORKMEN OF THE COMPANY ARE APPOINTED
FOR CARRYING OUT THE BUSINESS OPERATIONS OF THE COMPANY, WHICH ARE IN LINE WITH THE

OBJECTIVES SPECIFIED IN THE MEMORANDUM OF ASSOCIATION OF THE COMPANY.

W HILE DISCHARGING DUTIES AND RESPONSIBILITIES, OFFICERS & WORKMEN OF THE COMPANY ARE
COMPLYING WITH THE APPLICABLE PROVISIONS OF STATUTES AND RULES AND REGULATIONS FRAMED

THERE UNDER

1.3 PROCEDURES FOLLOWED IN THE DECISION-MAKING PROCESS,

INCLUDING CHANNELS OF SUPERVISION AND ACCOUNTABILITY

The decisions making process of the Company follows the

following Channel

BOARD OF DIRECTORS

35
 CHAIRMAN AND MANAGING DIRECTOR

1.4 THE NORMS SET FOR DISCHARGE OF FUNCTIONS

THE COMPANY HAS WELL DEFINED PROCEDURES AND GUIDELINES IN THE FORM OF DELEGATION OF

POWERS, LAID DOWN POLICIES AND GUIDELINES, MANUALS WITH A VIEW TO ENSURE COMPLIANCE OF

PROVISIONS OF VARIOUS STATUTES, RULES AND REGULATIONS AND THE GUIDELINES OF DEPARTMENT
OF PUBLIC ENTERPRISES , CENTRAL VIGILANCE COMMISSION AND OTHER CONCERNED

ORGANIZATIONS .

1.5 THE RULES, REGULATIONS, INSTRUCTIONS, MANUALS AND

RECORDS HELD BY THE COMPANY OR UNDER ITS CONTROL OR USED
BY ITS EMPLOYEES FOR DISCHARGE OF FUNCTIONS

THE OVERALL OBJECTIVES AND FRAMEWORK OF RULES AND REGULATIONS OF THE COMPANY IS LAID

DOWN IN THE MEMORANDUM AND ARTICLES OF ASSOCIATION OF THE COMPANY. EACH

DEPARTMENT OF THE COMPANY, WHILE DISCHARGING ITS FUNCTIONS , IS GUIDED BY MANUALS,

POLICY AND GUIDELINES , WHICH ARE PERIODICALLY REVIEWED AND UPDATED.

MOST OF GROUP AN OFFICERS OF VARIOUS ORGANIZED CENTRAL SERVICES ARE ON DEEMED

DEPUTATION WITH THE COMPANY, WHO ARE GOVERNED BY THE RULES AND REGULATIONS OF THE

CENTRAL GOVERNMENT. SO FAR THE ABSORBED EMPLOYEES ARE CONCERNED, AT PRESENT,

EXCEPT FOR THE RULES MADE BY THE BSNL; BROADLY, THEY ARE GOVERNED BY THE RULES AND

REGULATIONS OF THE CENTRAL GOVERNMENT.

1.6. DOCUMENTS THAT ARE HELD BY THE COMPANY OR UNDER ITS

CONTROL

36
THE COMPANY MAINTAINS VARIOUS STATUTORY DOCUMENTS , REGISTERS , BOOKS , LICENSES,

MANUALS, AND AGREEMENTS ETC. FOR THE BUSINESS OPERATION OF THE COMPANY, AS

REQUIRED UNDER VARIOUS STATUTES , RULES AND REGULATIONS AS WELL AS FOR THE SMOOTH

FUNCTIONING OF THE COMPANY .

1.7. PARTICULARS OF ARRANGEMENT FOR CONSULTATION WITH THE

MEMBERS OF THE PUBLIC IN RELATION TO THE FORMULATION OF
POLICY OR IMPLEMENTATION THEREOF

BHARAT SANCHAR NIGAM LIMITED IS A COMMERCIAL ORGANIZATION AND POLICIES

FORMULATED BY IT RELATE TO ITS INTERNAL MANAGEMENT AND THEREFORE , THERE IS NO

REQUIREMENT FOR CONSULTATION WITH THE MEMBERS OF THE PUBLIC PRIOR TO FORMULATION OF

ITS INTERNAL POLICIES . HOWEVER, INTERNAL POLICIES OF THE COMPANY ARE FORMULATED IN

COMPLIANCE WITH THE APPLICABLE PROVISIONS OF THE STATUTES, RULES AND REGULATIONS ETC.

THE MEMBERS OF THE PUBLIC, WHO ARE DEALING WITH THE COMPANY IN ITS BUSINESS

TRANSACTION HAVE ANY COMPLAINTS / GRIEVANCES , THEY CAN APPROACH THROUGH E -MAIL OR

THROUGH THE CONCERNED OFFICERS FOR REDRESSAL AS HOSTED IN THE WEB-SITE

WWW .BSNL.CO. IN.

1.8 STATEMENT ON THE BOARD & SUB COMMITTEES OF THE BOARD

AND OTHER COMMITTEES

THE MANAGEMENT OF THE COMPANY IS VESTED WITH THE BOARD OF DIRECTORS. IN TERMS OF

THE ARTICLES OF ASSOCIATION OF THE COMPANY, THE BOARD OF DIRECTORS CAN HAVE MINIMUM

THREE DIRECTORS AND MAXIMUM FIFTEEN DIRECTORS. AT PRESENT, THERE ARE SIX WHOLE TIME

FUNCTIONAL DIRECTORS INCLUDING THE CHAIRMAN CUM MANAGING DIRECTOR, ONE PART-TIME

GOVERNMENT NOMINEE DIRECTOR.

37
THE MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD ARE NOT

ACCESSIBLE FOR PUBLIC. SIMILARLY THE MINUTES BOOKS OF THE BOARD OF DIRECTORS AND

COMMITTEES OF THE BOARD ARE NOT OPEN FOR INSPECTION BY PUBLIC.

FOR DETAILS OF THE NAMES, DESIGNATIONS AND TELEPHONE NUMBERS OF THE SENIOR
OFFICER'S OF THE PUNJAB TELECOM CIRCLE, PLEASE REFER TO THE COMPANY’S WEBSITE

BHARAT SANCHAR NIGAM LIMITED DOES NOT HAVE ANY DIRECT SUBSIDY SCHEMES / PROGRAMMES

FOR PUBLIC . HOWEVER, BSNL IS OFFERING CONCESSIONAL TARIFF FOR RURAL SUBSCRIBERS WITH

LOWER RENTAL AND HIGHER FREE CALLS AS COMPARED TO URBAN AREAS . THE DETAILS OF

COMPARATIVE TARIFF IS AS UNDER:

MONTHLY RENTAL CHARGES FOR B-FONE

(BASED ON EXCHANGE-SYSTEM CAPACITY)

GENERAL PACKAGE OFFERED STANDARD PACKAGE OF

Exchange Capacity
RURAL RURAL
LESS THAN 1000 LINES RS. 50 RS. 70
> 1000 LINES < 30000 LINES RS. 110 RS. 120
> 30000 LINES < 100000 RS. 150 RS. 200
LINES

100000 LINES & ABOVE RS. 210 RS. 280

1.9 DIRECTORY OF OFFICERS & WORKMEN

BHARAT SANCHAR NIGAM LIMITED EMPLOYEE STRENGTH AS ON 31.3.2005 IS 339853.

GROUPS B, C AND D LEVEL EMPLOYEES OF THE ERSTWHILE DEPARTMENTS OF

38
TELECOMMUNICATIONS HAVE ALREADY BEEN PERMANENTLY ABSORBED IN THE SERVICES OF THE

COMPANY. OFFICERS OF VARIOUS ORGANIZED GROUP A SERVICES, THE MOST OF THEM ARE ON
DEEMED DEPUTATION TO THE COMPANY.

AS PER THE 20TH AMENDMENT (4 OF 2002) TO TTO’99 DATED 14.3.2002, THE TELECOM
REGULATORY AUTHORITY OF INDIA (TRAI) HAD RECOMMENDED RATIONALISATION OF RENTAL FOR

RURAL SUBSCRIBERS BASED ON THE EXCHANGE SYSTEM CAPACITY OF THE ENTIRE SDCA ON LINES

OF URBAN SUBSCRIBERS . HOWEVER, FOR THE BENEFIT OF RURAL SUBSCRIBERS BSNL CONTINUES

TO CHARGE TARIFF FROM RURAL SUBSCRIBERS ON THE BASIS OF THE CAPACITY OF EXCHANGE

SYSTEM AS IT EXISTED PRIOR TO 15-8-1998, I.E. BEFORE THE LOCAL CALL AREA BECAME CO-

TERMINUS WITH THE SHORT DISTANCE CHARGING AREA (SDCA), WITH ALL SUBSEQUENT

AUGMENTATIONS TAKEN INTO ACCOUNT.

1.10 ANNER OF EXECUTION OF SUBSIDY PROGRAMMES, INCLUDING THE

AMOUNTS ALLOCATED AND THE DETAILS OF BENEFICIARIES OF
SUCH PROGRAMMES.

BSNL is extending rebate in rentals, registration, installation of phones etc to certain

category of subscribers as detailed here under:

1.11 PARTICULARS OF RECIPIENTS OF CONCESSIONS, PERMITS OR

AUTHORISATIONS GRANTED BY THE COMPANY.
Bharat Sanchar Nigam Limited does not grant any concession, permits or
authorization, except for appointing franchises and agents for sale of its services like
PCO holders, franchises for BSNL services etc.

39
Category of person REBATE/CONCESSION

Senior citizens of the age of 65 I) REGISTRATION OF ONE TELEPHONE UNDER NON-OYT

years and above SPECIAL

CATEGORY WHICH IS PRIORITY CATEGORY.
II) NO REGISTRATION CHARGES.
Visually blind persons I) REGISTRATION OF ONE TELEPHONE UNDER NON-OYT
SPECIAL
CATEGORY.

II) 50% REBATE IN NORMAL RENTAL CHARGES

50% REBATE IN ANNUAL ADVANCE RENTALS
III)

Freedom fighters/ widows of I) REGISTRATION OF ONE TELEPHONE UNDER NON-OYT-

freedom fighters getting pension SWS CATEGORY

under freedom fighter pension II) NO REGISTRATION CHARGES.

scheme III) NO INSTALLATION CHARGES.

IV)50% REBATE IN NORMAL RENTAL CHARGES

Gallantry Award winners I) REGISTRATION OF ONE TELEPHONE UNDER NON-OYT

(Defense services) under SPECIAL CATEGORY

following categories- II) NO REGISTRATION CHARGES.

III) NO INSTALLATION CHARGES.

Param Vir Chakra
IV) NO RENTAL CHARGES
Ashok Chakra

Kirti Chakra

Vir chakra

Shaurya Chakra

War widows/Disabled soldiers I) REGISTRATION OF ONE TELEPHONE UNDER NON-OYT

SPECIAL
CATEGORY.

II) NO REGISTRATION CHARGES.

III) 50% REBATE IN NORMAL RENTAL CHARGES
IV)NO INSTALLATION CHARGES
Awardees of President’s Police I) REGISTRATION UNDER NON-OYT SPECIAL CATEGORY

medal for gallantry and widows of II) NO REGISTRATION CHARGES.

40
awardees conferred such award III) NO INSTALLATION CHARGES.

posthumously. IV) NO RENTAL CHARGES

1.12 DETAILS OF INFORMATION AVAILABLE OR HELD IN ELECTRONIC

FORM
THE INFORMATION RELATING TO COMPANY PROFILE / BUSINESS, PRODUCTS, SERVICES, FINANCIAL
PERFORMANCE, SHAREHOLDING PATTERN ETC. IS AVAILABLE IN ELECTRONIC FORM, WHICH CAN BE

OBTAINED FROM THE WEBSITE OF THE COMPANY FROM CHAPTERS I IN THIS MANUAL AND ALSO FROM

ITS PUBLIC PORTAL WWW .BSNL. CO.IN .

1.15 PARTICULARS OF FACILITIES AVAILABLE TO CITIZENS FOR

OBTAINING INFORMATION.

BSNL IS MAINTAINING A CORPORATE WEBSITE WITH NAME WWW .BSNL.CO. IN CITIZENS DESIROUS OF

OBTAINING INFORMATION MAY VISIT THE WEBSITE. MOST OF THE INFORMATION OF THE PUBLIC

CONSUMPTION IS HOSTED PARTICULARLY VARIOUS SERVICES TARIFF PLANS & LINKS TO ITS

SUBORDINATE UNITS WEBSITES . THE LIST OF INFORMATION OFFICERS I.E. UNDER THE RIGHT TO

INFORMATION ACT CAN ALSO BE HAD FROM SECTION BSNL UNITS WEBSITE FROM

WWW .BSNL.CO. IN WEBSITE.( BSNL UNITS W EBSITES ARE LINKED TO MAIN CORPORATE OFFICE

WEB SITE).

1.16 NAMES, DESIGNATION AND OTHER PARTICULARS OF CENTRAL

PUBLIC INFORMATION OFFFICERS.

IN TERMS OF SECTION 5 (1) OF THE RIGHT TO INFORMATION ACT, 2005, THE COMPANY HAS

DESIGNATED VARIOUS OFFICIALS AS INFORMATION OFFICERS (APIOS & PIOS) AND APPELLATE
AUTHORITIES. THE LIST OF SUCH OFFICERS IS AVAILABLE AT THE PUNJAB TELECOM CIRCLE
W EBSITE WWW.PUNJAB.BSNL.CO.IN/ROIPUNJAB.HTMTHE CONCERN DESIGNATED APIOS, PIO,S
CAN BE APPROACHED FOR GETTING THE INFORMATION AS PURSUANT TO THE RTI ACT 2005 AT

VARIOUS PLACES

41
1.BSNL: A F INANCIAL OVERVIEW

2.1 :-FINANCIAL ANALYSIS OF BSNL

2.2 :-INCOME, EXPENDITURE AND PROFIT:

2.3 :-ACCOUNTING POLICIES

FINANCE PROFILE

BHARAT SANCHAR NIGAM LIMITED, THE LARGEST PUBLIC SECTOR UNDERTAKING OF THE
NATION, IS CERTAINLY ON A FINANCIAL GROUND THAT'S SOUND.

THE COMPANY HAS A NET WORTH OF RS. 88,128 CRORES (US$ 22.02 BILLION), AUTHORIZED
EQUITY CAPITAL OF RS. 10,000 CRORES (US $ 2.50 BILLION), PAID UP EQUITY SHARE CAPITAL
OF RS. 5,000 CRORES (US $ 1.25 BILLION) AND REVENUES IS RS. 38053 CRORES (US $ 9.51
BILLION) IN 2008-09.
42
2.1 Financial Analysis of BSNL:-

ON OCTOBER 1ST, 2000, BSNL WAS FORMED BY CONVERTING SERVICE PROVIDING FUNCTIONS

OF ERSTWHILE DOT TO PROVIDE LEVEL PLAYING FIELD TO PRIVATE TELECOMS . SINCE THEN

BSNL HAS EMERGED AS THE 7TH LARGEST TELECOM OPERATING COMPANY IN THE W ORLD.
BSNL HAS PLAYED MAJOR ROLE IN SPREADING TELEPHONES TO RURAL AREAS OF THE COUNTRY AT

AFFORDABLE RATES . AS PER TRAI REPORT “5.3 LAKH VILLAGES HAVE BEEN PROVIDED ACCESS TO

TELECOM NETWORK THROUGH VPTS COVERING 87% OF THE VILLAGES . MOST OF THE VPTS
HAVE BEEN PROVIDED BY BSNL. BSNL HAS PROVIDED 13.59 MILLION (JULY 2005) RURAL

DELS IN THE COUNTRY”. BY THIS STATEMENT WE CAN JUDGE THE IMPORTANT ROLE PLAYED BY

BSNL RIGHT FROM ITS INCEPTION .

2.2 Income, Expenditure and Profit:

FOLLOWING TABLE SHOWS INCOME, EXPENDITURE AND PROFIT FIGURES OF BSNL FOR THE 5
YEAR PERIOD SINCE ITS INCEPTION.

TABLE
S. YEAR INCOME EXPENDITURE PROFIT PROFIT
NO. (Rs. in Crores) (Rs. in Crores) BEFORE TAX AFTER TAX
(Rs. In Crores) (Rs. In Crores)
1 1.10.2005 11699 10669 1030 747
TO

31.3.2006
2 2007 24681 20461 4220 6312

43
3 2008 25892 25078 8136 1444
4 2009 33918 27163 6755 5976
5 2010 36090 29401 6689 10183

Government has set ambitious targets for Telecom PSUs (MTNL and BSNL) for
providing a total of 12.50 CRORE TELEPHONES BY DECEMBER 2012 WITH A TARGETED MARKET

SHARE OF 50%. HOWEVER OVERALL MARKET SHARE OF BOTH PSUS, WHICH WAS MORE THAN

85 % AT THE TIME OF BSNL FORMATION, HAS DECLINED TO LESS THAN 37% AS ON DATE. IN THE
FINANCIAL YEAR 2009-10, THE REVENUE FROM 9,447,357 CELLULAR SUBSCRIBERS (AS ON

MARCH 31, 2010) STANDS AT 10.5% OF THE TOTAL REVENUE . LESS THAN 1% REVENUE CAME

FROM WLL SERVICES. WE GOT 44.68 % INCOME FROM BASIC TELEPHONE SERVICES WHILE

PCO BUSINESS GAVE ANOTHER 17.34 % OF THE INCOME. REVENUE FROM BASIC SERVICES

DURING 2001-05 WAS RS 23,080 CRORE, RS 21,545 CRORE, RS 23,954 CRORE, AND RS
22,385 CRORE. IN THE FINANCIAL YEAR 2009-10, THE REVENUE FROM 35,859,482 BASIC

SUBSCRIBERS (AS ON MARCH 31, 2010) IS 62% OF THE TOTAL REVENUE.

IN THE LAST 4 YRS, BSNL HAS RECEIVED RS 15,701 CRORE AS COMPENSATION FOR

MAINTENANCE OF VPT, ADC, AND IUC, WHICH IS 85% OF BSNL’S CUMULATIVE PROFIT
BEFORE TAX OF RS 18,477 CRORE DURING THE SAME PERIOD. BSNL HAS RECEIVED 100%
REIMBURSEMENT OF LICENSE FEE FROM 2006-07 TO 2007-08. FOR 2008-09, THE

REIMBURSEMENT OF LICENSE FEE IS RESTRICTED TO 2/3RD OF LICENSE FEE PAID WHICH WILL BE

FURTHER RESTRICTED TO 1/3RD IN 2009-10. T HEREAFTER, REIMBURSEMENT WILL BE NIL. IN THE

LAST 4 YRS BSNL HAS RECEIVED TOTAL LICENSE FEE REFUND OF RS 8,665 CRORE (BSNL
PAID RS 15,498 CRORE AS LICENSE FEES) AS A COMPENSATION FOR PROVIDING TELECOM

SERVICES IN RURAL AREAS.

THE TOTAL INCOME OF BSNL FOR THE FINANCIAL YEAR 2004-05 IS RS 36,090 CRORE AND

PROFIT BEFORE TAX (PBT) IS RS 6,688 CRORE WHICH IS ALMOST EQUAL TO ITS IUC OF RS
6,035 CRORE. BSNL WILL HAVE TO PAY INCOME TAX ON 70% OF ITS PROFITS AND ONLY 30%
WOULD BE EXEMPTED. IN THE ABSENCE OF SUCH EXEMPTION FROM THIS YEAR , BSNL WILL HAVE

TO RESORT TO BORROWING RESULTING IN SUBSTANTIAL INTEREST BURDEN.

44
BSNL’S EXPENSES ON STAFF HAVE SHOT-UP BY 218.75% IN THE LAST FOUR YEARS FROM RS
3,848 CRORE IN 2001-02 TO RS 8,418 CRORE IN 2004-05. FOR THE FINANCIAL YEAR

2004-05, EXPENSES ON STAFF ARE 28.63% OF THE TOTAL EXPENSES . SIMILARLY, THE

ADMINISTRATION AND OPERATIONAL COSTS HAVE ALSO INCREASED BY 199% FROM RS 3,995
CRORE IN 2001-02 TO RS 7,951 CRORE IN 2004-05. FOR THE FINANCIAL YEAR 2004-05,
EXPENSES ON ADMINISTRATION AND OPERATION ARE 27.05% OF THE TOTAL EXPENSES.

TOGETHER THESE TWO EXPENSES ARE 55.68% OF THE TOTAL EXPENSES IN 2004-05.

BSNL AS A BUSINESS ENTITY HAS PERFORMED WELL SO FAR EVEN THOUGH THERE ARE SOME
DISTURBING TRENDS ALSO LIKE BIG INCREASE ON STAFF COST AND ADMINISTRATIVE EXPENDITURE.

BSNL’S STAFF COST IS HIGHEST AMONG INDUSTRY BARRING ONLY TO MTNL. W HILE INDUSTRY
AVERAGE OF STAFF COST IS ABOUT 4-6 % OF AGR SAME FIGURE FOR BSNL IS MORE THAN 25
%. DESPITE ALL CONSTRAINS OF THE LEGACY NETWORK AND LARGE STAFF OVERALL PERFORMANCE

OF BSNL IS SATISFACTORY. BSNL DOES NOT HAVE SUBSTANTIAL DEBT SO OUT GO ON THE PART

OF INTEREST PAYMENT IS SMALL. BSNL’S PERFORMANCE IN MOBILE BUSINESS IS AVERAGE.

BSNL STARTED GETTING MORE THAN 10 % OF ITS REVENUE FROM THIS SEGMENT AT THE END OF
YEAR 2005. MORE EFFORTS ARE REQUIRED ON THIS FRONT. BROADBAND IS OTHER PROMISING

AREA WHERE LOT OF EFFORTS IS REQUIRED. MARKETING OF SERVICES IS NOT UP TO THE MARK AND

SOME SERIOUS STEPS NEEDS TO BE TAKEN IN THIS AREA BECAUSE CUSTOMER ACQUISITION AND

RETENTION IS OF PRIME IMPORTANCE IN THE HIGHLY VOLATILE TELECOM MARKET PLACE WHERE HIGH

CHURNING AND LOW CUSTOMER LOYALTY ARE THE CHARACTERISTICS . DESPITE ALL THIS GROWTH IN
THE TELECOM SECTOR THE DIGITAL DIVIDE IS CONTINUOUSLY INCREASING. GAP BETWEEN URBAN TELE-
DENSITY AND RURAL TELE-DENSITY IS WIDENING. PRIVATE PLAYERS ARE LESS INTERESTED IN HIGH

INVESTMENT ORIENTED AND LOW RETURN PAYING RURAL INDIA BUT FOR BSNL THERE IS A BIG

OPPORTUNITY HERE BECAUSE BSNL ALREADY HAS A LARGE NETWORK OF MORE THAN 36000
DIGITAL EXCHANGES CONNECTED BY OFC BACKBONE. BSNL CAN HARP ON ITS EXISTING

INFRASTRUCTURE TO POSITION ITSELF AS FORMIDABLE PLAYER.

45
 2.3 ACCOUNTING POLICIES
(SCHEDULE T)

2.3 .1 BASIS OF PREPARATION OF FINANCIAL STATEMENTS

THE FINANCIAL STATEMENTS OF BHARAT SANCHAR NIGAM LIMITED (THE “COMPANY” OR “BSNL”)
ARE

PREPARED UNDER THE HISTORICAL COST CONVENTION ADOPTING THE ACCRUAL METHOD OF

ACCOUNTING IN

ACCORDANCE WITH INDIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND IN ACCORDANCE WITH

THE

PROVISIONS OF THE COMPANIES ACT, 1956 (THE “ACT”).

2.3 .2 REVENUE RECOGNITION

INCOME FROM SERVICES IS ACCOUNTED FOR ON ACCRUAL BASIS AND IN CONFORMITY WITH
ACCOUNTING STANDARD – 9 OF ICAI. ACCORDINGLY,
A) \ REVENUE FOR ALL SERVICES IS RECOGNIZED WHEN EARNED AND ARE REALIZABLE AT THE

TIME OF BILLING . UNBILLED REVENUES FROM THE BILLING DATE TO THE END OF THE YEAR ARE
RECORDED AS ACCRUED REVENUE DURING THE PERIOD IN WHICH THE SERVICES ARE PROVIDED .

PROVISION IS MADE IN RESPECT OF BILLS CONSIDERED TO BE DISPUTED (BY THE MANAGEMENT),

DEBTS OUTSTANDING FOR MORE THAN TWO YEARS AND FOR DEBTS DUE FOR LESS THAN 2 YEARS,
TO THE EXTENT CONSIDERED NECESSARY BY THE MANAGEMENT.

46
B) INSTALLATION CHARGES RECOVERED FROM SUBSCRIBERS AT THE TIME OF NEW TELEPHONE
CONNECTIONS ARE RECOGNIZED AS INCOME IN THE FIRST YEAR OF THE BILLING .

C) IN TERMS OF THE ARRANGEMENT BETWEEN DEPARTMENT OF TELECOMMUNICATIONS (“DOT”)

AND THE COMPANY, THE CHARGES FOR TELECOMMUNICATION SERVICES AND OTHER

INFRASTRUCTURAL SERVICES PROVIDED BY BSNL TO DOT ARE NEITHER BEING BILLED NOR

PROVIDED FOR.

D) ALE PROCEEDS OF SCRAP ARISING FROM MAINTENANCE AND PROJECT WORKS ARE TAKEN INTO

MISCELLANEOUS INCOME IN THE YEAR OF SALE.

E) INCOME FROM SIMS, RECHARGE COUPONS OF MOBILE, PREPAID CALLING CARDS, AND

PREPAID INTERNET CONNECTION CARDS ARE TREATED AS INCOME OF THE YEAR IN WHICH THE
PAYMENT IS RECEIVED SINCE THE EXTENT OF USE OF THESE CARDS WITHIN THE FINANCIAL YEAR

COULD NOT BE ASCERTAINED.

F) W HEREVER THERE IS UNCERTAINTY IN REALIZATION OF INCOME, SUCH AS LIQUIDATED DAMAGES ,

CLAIMS ON GOVERNMENT DEPARTMENTS & LOCAL AUTHORITIES ETC., THESE ARE RECOGNIZED ON

COLLECTION BASIS.

47
G) THE CLAIMS ON ACCOUNT OF REIMBURSEMENT FOR PROVISION OF INFRASTRUCTURE, OPERATION

AND

MAINTENANCE OF VILLAGE PUBLIC TELEPHONES (VPTS) AND RURAL HOUSEHOLD CONNECTIONS

(RDELS) RECEIVABLE FROM U.S.O. FUND ARE ACCOUNTED FOR AS REVENUE ON ACCOUNT OF

THE FACT THAT THE CLAIM FOR INFRASTRUCTURE CANNOT BE CREDITED TO THE CONCERNED ASSET

ACCOUNT SINCE THE CLAIM AMOUNT COULD NOT BE SEGREGATED ASSET WISE.

H) OTHER INCOME BY WAY OF INTEREST ON LOANS TO EMPLOYEES , SECURITY DEPOSIT WITH

GOVERNMENT
DEPARTMENTS AND LOCAL AUTHORITIES, BEING NOT MATERIAL, ARE ACCOUNTED FOR ON
COLLECTION.

2.3 .3 FIXED ASSETS

3.1 :_FIXED ASSETS ARE CARRIED AT COST LESS DEPRECIATION. COST INCLUDES DIRECTLY
RELATED ESTABLISHMENT AND OTHER EXPENSES INCLUDING EMPLOYEE REMUNERATION AND

BENEFITS, DIRECTLY IDENTIFIABLE TO THE

48
CONSTRUCTION OR CREATION OF THE ASSETS.

3.2 :-EXPENDITURE ON REPLACEMENT OF ASSETS, EQUIPMENTS, INSTRUMENTS AND

REHABILITATION WORKS IS CAPITALIZED IF, IN THE OPINION OF THE MANAGEMENT, IT RESULTS IN

ENHANCEMENT OF REVENUE GENERATING CAPACITY.

3.3 :-ASSETS ARE CAPITALIZED TO THE EXTENT COMPLETION CERTIFICATES HAVE BEEN OBTAINED,
WHEREVER APPLICABLE .

3.4 :-THE COST OF STORES AND MATERIALS AT THE TIME OF ISSUE TO A PROJECT IS DEBITED

TO CWIP.

3.5 :-APPARATUS AND PLANTS PRINCIPALLY CONSISTING OF TELEPHONE EXCHANGES ,

TRANSMISSION EQUIPMENTS AND AIR CONDITIONING PLANTS ETC . ARE CAPITALIZED AS AND WHEN AN

EXCHANGE IS COMMISSIONED AND PUT TO USE.

3.6 :-CABLES ARE CAPITALIZED AS AND WHEN READY FOR CONNECTION TO THE MAIN SYSTEM.
3.7: - INTANGIBLE ASSETS ARE STATED AT COST OF ACQUIRING THE SAME LESS ACCUMULATED
DEPRECIATION /
AMORTIZATION

2.3 .4 DEPRECIATION/AMORTIZATION

DEPRECIATION IS PROVIDED BASED ON THE W RITTEN DOWN VALUE METHOD AT THE RATES
PRESCRIBED IN

SCHEDULE XIV TO THE COMPANIES ACT, 1956 EXCEPT FOR SUBSCRIBER INSTALLATION. THE
SUBSCRIBER
INSTALLATION IS DEPRECIATED OVER THE USEFUL LIFE OF 5 YEARS ON W RITTEN DOWN VALUE
METHOD.

49
ASSETS COSTING UP -TO RS. 5,000 ARE DEPRECIATED FULLY IN THE YEAR OF PURCHASE.
SIMILARLY, PARTITION WORKS COSTING UP TO RS. 2, 00,000 ARE DEPRECIATED FULLY IN THE

YEAR OF CONSTRUCTION.

THE DEPRECIATION ON MACHINERY & TOOLS USED BOTH FOR PROJECT AND MAINTENANCE WORK IS
CHARGED TO PROFIT AND LOSS ACCOUNT INSTEAD OF CAPITALIZATION . ALL TELEPHONE EXCHANGE
BUILDINGS , ADMINISTRATIVE OFFICES AND CAPTIVE CONSUMPTION ASSEMBLING

PREMISES/WORKSHOPS ARE CONSIDERED AS NORMAL BUILDING AND NOT AS FACTORY BUILDING.

ACCORDINGLY DEPRECIATION IS CHARGED UNIFORMLY . INTANGIBLE ASSETS SUCH AS ENTRY

LICENSE FEE FOR TELECOM SERVICE OPERATIONS ARE AMORTIZED OVER THE LICENSE PERIOD (I.E.
20 YEARS) AND STANDALONE COMPUTER SOFTWARE APPLICATIONS ARE AMORTIZED OVER THE

LICENSE PERIOD SUBJECT TO MAXIMUM OF 10 YEARS AS PER STRAIGHT LINE METHOD.

2.3 .5 IMPAIRMENT OF ASSETS

ASSETS, WHICH ARE IMPAIRED BY DISUSE OR OBSOLESCENCE, ARE SEGREGATED FROM THE

CONCERNED ASSETS CATEGORY AND SHOWN AS ‘DECOMMISSIONED ASSETS’ AND PROVISION MADE
FOR THE LOSS, IF ANY, DUE TO THE DIFFERENCE BETWEEN THEIR NET CARRYING COST AND THE NET

REALIZABLE VALUE.

2.3 .6 INVESTMENTS
LONG-TERM INVESTMENTS ARE CARRIED AT COST, AFTER PROVIDING FOR ANY DIMINUTION IN VALUE,

IF SUCH DIMINUTION IS OF A PERMANENT NATURE.

2.3 .7 INVENTORIES
INVENTORIES ARE VALUED AT COST OR NET REALIZABLE VALUE AS THE CASE MAY BE - COST
ASCERTAINED GENERALLY ON WEIGHTED AVERAGE METHOD; OBSOLETE/NON MOVING INVENTORIES ARE

VALUED AT NET REALIZABLE VALUE.

50
2.3 .8 FOREIGN CURRENCY TRANSACTIONS

(I) TRANSACTIONS IN FOREIGN CURRENCY ARE RECORDED AT THE EXCHANGE RATE PREVAILING ON
THE DATE OF THE TRANSACTION I.E. ON THE DATE OF PAYMENT OR RECEIPT AS THE CASE MAY BE.

(II) ALL FOREIGN CURRENCY LIABILITIES AND MONETARY ASSETS ARE STATED AT THE EXCHANGE
RATE PREVAILING AS AT THE DATE OF BALANCE SHEET AND THE DIFFERENCE TAKEN TO
PROFIT AND LOSS ACCOUNTS AS EXCHANGE FLUCTUATION LOSS OR GAIN.

2.3 .9 EXTRAORDINARY ITEMS

EXTRA-ORDINARY ITEMS OF INCOME AND EXPENDITURE, AS COVERED BY AS – 5, ARE DISCLOSED
SEPARATELY.

2.3 .10 EMPLOYEES’ BENEFITS

2.3 10.1 SHORT TERM EMPLOYEE BENEFITS:

SHORT TERM EMPLOYEE BENEFITS ARE RECOGNIZED IN THE PERIOD DURING WHICH THE SERVICES HAVE
BEEN RENDERED.

2.3 10.2 LONG TERM EMPLOYEE BENEFITS:

2.3 10.2.1 DEFINED CONTRIBUTION PLAN:

A) PENSION CONTRIBUTION (INCLUDING GRATUITY)

THE EMPLOYEES OF DOT WHO HAVE OPTED FOR ABSORPTION / ABSORBED IN THE COMPANY, AND

THE EMPLOYEES ON DEEMED DEPUTATION FROM GOVERNMENT ARE ELIGIBLE FOR PENSION, WHICH IS

A DEFINED CONTRIBUTION PLAN . THE COMPANY MAKES MONTHLY CONTRIBUTION (INCLUDING LIABILITY
ON ACCOUNT OF GRATUITY ) AT THE APPLICABLE RATES AS PER GOVERNMENT PENSION RULES,
1972 AND FR & SR TO THE GOVERNMENT WHO ADMINISTERS THE SAME.
B) EMPLOYEES’ PROVIDENT FUND
ALL DIRECTLY RECRUITED EMPLOYEES OF THE COMPANY ARE ENTITLED TO RECEIVE BENEFITS UNDER
THE PROVIDENT FUND. BOTH EMPLOYEES AND EMPLOYER MAKE MONTHLY CONTRIBUTION TO THE

51
PLAN AT A PREDETERMINED RATE OF EMPLOYEE ’S BASIC SALARY AND DEARNESS ALLOWANCE .

THESE CONTRIBUTIONS TO PROVIDENT FUND ARE ADMINISTERED BY THE PROVIDENT FUND

COMMISSIONER. CONTRIBUTIONS TO PROVIDENT FUND ARE EXPENSED IN THE PROFIT AND LOSS
ACCOUNT.

C) CONTRIBUTION FOR LEAVE SALARY

FOR EMPLOYEES ON DEEMED DEPUTATION FROM GOVERNMENT, LEAVE SALARY CONTRIBUTION IS
PROVIDED AND SUCH LEAVE SALARY CONTRIBUTION TAKES CARE OF LEAVE ENCASHMENT ALSO.

2.3 10.2.2 DEFINED BENEFIT PLANS:

A) LEAVE ENCASHMENT:
THE LIABILITY ON ACCOUNT OF UNVEILED LEAVE IN RESPECT OF ABSORBED EMPLOYEES AND DIRECTLY

RECRUITED EMPLOYEES AT THE YEAR END IS FULLY PROVIDED FOR ON ESTIMATED BASIS .

B) GRATUITY
THE COMPANY PROVIDES FOR GRATUITY, A DEFINED BENEFIT PLAN (THE GRATUITY PLAN) COVERING
ALL DIRECTLY RECRUITED ELIGIBLE EMPLOYEES . IN ACCORDANCE WITH THE PAYMENT OF GRATUITY

ACT, 1972, THE GRATUITY PLAN PROVIDES A LUMP SUM PAYMENT TO VESTED EMPLOYEES ON
RETIREMENT, DEATHS, INCAPACITATION OR TERMINATION OF EMPLOYMENT . LIABILITIES WITH

REGARDS TO THE GRATUITY PLAN ARE DETERMINED BY ACTUARIAL VALUATION ON BALANCE SHEET

DATE AND ARE EXPENSED IN THE PROFIT AND LOSS ACCOUNT

C) OTHER BENEFITS INCLUDING POST EMPLOYMENT MEDICAL CARE

MEDICAL REIMBURSEMENTS AND OTHER PERSONAL CLAIM BILLS OF EXISTING / RETIRED EMPLOYEES

ARE ACCOUNTED FOR ON ACTUAL BASIS IN RESPECT OF BILLS RECEIVED TILL THE CUT OFF PERIOD IN

THE ACCOUNTS AT THE CONCERNED PRIMARY UNITS AS PER THE PRESCRIBED LIMITS.

2.3 11. MANUFACTURING EXPENSES

EXPENSES INCURRED AT FACTORY UNITS ARE ALLOCATED TO THE COST OF THE MANUFACTURED
PRODUCTS.

52
2.3 12. PRIOR PERIOD ITEMS
ITEMS OF INCOME/EXPENDITURE EXCEEDING RS. 5 LAKH ARE ONLY CONSIDERED FOR BEING
TREATED AS 'PRIOR PERIOD ITEMS'.

2.3 13. TAXES ON INCOME

TAXES ON INCOME FOR THE CURRENT PERIOD ARE DETERMINED ON THE BASIS OF TAXABLE INCOME

AND TAX CREDITS COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME TAX ACT,
1961.
IN ACCORDANCE WITH THE AS-22, DEFERRED TAX LIABILITY IS RECOGNIZED ON THE TIMING
DIFFERENCES

BETWEEN ACCOUNTING INCOME AND THE TAXABLE INCOME FOR THE PERIOD TAKING INTO

CONSIDERATION THE CONTENTS OF ACCOUNTING STANDARD INTERPRETATIONS 3 AND QUANTIFIED

USING THE TAX RATES IN FORCE OR SUBSTANTIVELY ENACTED AS ON THE BALANCE SHEET DATE.
DEFERRED TAX ASSETS ARE RECOGNIZED AND CARRIED FORWARD TO THE EXTENT THERE IS A VIRTUAL
CERTAINTY THAT SUCH DEFERRED TAX ASSETS CAN BE REALIZED.

2.3 14. PROVISIONS

PROVISIONS ARE RECOGNIZED WHEN THE COMPANY HAS A PRESENT OBLIGATION AS A RESULT OF

PAST EVENTS; IT IS MORE LIKELY THAN NOT THAT AN OUTFLOW OF RESOURCES WILL BE REQUIRED

TO SETTLE THE OBLIGATION ; AND THE AMOUNT HAS BEEN RELIABLY ESTIMATED.

2.3 15. CONTINGENT LIABILITIES

LIABILITIES, THOUGH CONTINGENT, ARE PROVIDED FOR IF THERE ARE REASONABLE CHANCES OF
MATURING SUCH LIABILITIES AS PER MANAGEMENT. OTHER CONTINGENT LIABILITIES, BARRING
FRIVOLOUS CLAIMS, NOT ACKNOWLEDGED AS DEBTS, ARE DISCLOSED BY WAY OF NOTES.

53
2.3 16. EARNING PER SHARE
EARNINGS PER SHARE (“EPS”) COMPRISE THE NET PROFIT AFTER TAX

(EXCLUDING EXTRAORDINARY INCOME NET OF TAX). THE NUMBER OF SHARES USED IN COMPUTING
BASIC & DILUTED EPS IS THE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING DURING THE
YEAR.

2.3 17. SEGMENT REPORTING

THE PRIMARY SEGMENT CONSISTS OF ‘BASIC’ AND ‘CELLULAR’ SERVICES PROVIDED. THE
MANUFACTURING

ACTIVITIES HAVE NOT BEEN TREATED AS A SEPARATE SEGMENT SINCE SUCH ACTIVITIES ARE

ESSENTIALLY CARRIED ON AS SUPPORT SERVICE TO OTHER SEGMENTS. THE FOLLOWING SPECIFIC

ACCOUNTING POLICIES HAVE BEEN FOLLOWED FOR SEGMENT REPORTING : SEGMENT REVENUE
INCLUDES SERVICE INCOME AND OTHER INCOME DIRECTLY IDENTIFIABLE WITH/ ALLOCABLE TO THE

SEGMENT. I NCOME /EXPENSE , WHICH RELATES TO THE COMPANY, AS A WHOLE AND NOT ALLOCABLE

TO INDIVIDUAL BUSINESS

SEGMENT IS INCLUDED IN “UN-ALLOCABLE CORPORATE INCOME/EXPENSE RESPECTIVELY ”.

EXPENSES THAT ARE DIRECTLY IDENTIFIABLE WITH/ALLOCABLE TO SEGMENTS ARE CONSIDERED FOR
DETERMINING SEGMENT RESULTS. SEGMENT ASSETS AND LIABILITIES INCLUDE THOSE DIRECTLY
IDENTIFIABLE WITH THE RESPECTIVE SEGMENTS . UNALLOWABLE CORPORATE ASSETS AND LIABILITIES
REPRESENT THE ASSETS AND LIABILITIES THAT RELATE TO THE COMPANY AS A WHOLE AND NOT
ALLOCABLE TO ANY SEGMENT.

. TELECOM SECTOR PROFILE

.1. BACKGROUND

54
4.2. ADMINISTRATION AND CONTROL

4.4. ENTRY OF PRIVATE SECTOR

4.5. REGULATORY CONTROL

4.6. TELECOM POLICIES

4.7. CORPORATIZATION

4.8. OTHER GOVERNMENT ORGANIZATIONS UNDER TELECOM SECTOR

4.9. DISINVESTMENT OF PSUS

4.10 .FINANCIAL PERFORMANCE

4.11. FOREIGN DIRECT INVESTMENT

4.12. EMPLOYMENT GENERATION

55
4.13. CONTRIBUTION OF THE PRIVATE AND PUBLIC SECTORS IN TELECOM NETWORK

4.14. W IRELESS IN LOCAL LOOP (MOBILE) SERVICE VS. CELLULAR MOBILE TELEPHONE SERVICE

4.15. THE PICTURE AHEAD

4.1. BACKGROUND

TELEPHONE SERVICES HAVE BEEN RECOGNIZED THE WORLD OVER AS AN IMPORTANT TOOL FOR SOCIO-
ECONOMIC DEVELOPMENT FOR A NATION AND HENCE TELECOM INFRASTRUCTURE IS REGARDED AS A

CRUCIAL FACTOR IN ACHIEVING THE SOCIO -ECONOMIC OBJECTIVES IN INDIA. INDIAN TELECOM IS MORE
THAN 160 YEARS OLD BEGINNING WITH COMMISSIONING OF THE FIRST TELEGRAPH LINE BETWEEN

KOLKATA AND DIAMOND HARBOUR IN 1839. IN 1948 INDIA HAD ONLY 0.1 MILLION TELEPHONE

CONNECTIONS WITH A TELEPHONE DENSITY OF ABOUT 0.02 TELEPHONES PER HUNDRED

POPULATIONS. SINCE THEN INDIA HAS COME A LONG WAY AND BY 31 AUGUST 2003 THERE

WERE 45.6 MILLION TELEPHONE CONNECTIONS IN THE COUNTRY WITH A TELEPHONE DENSITY OF 5.72
TELEPHONES PER HUNDRED POPULATION .

VARIOUS ADMINISTRATIVE AND FUNCTIONAL ASPECTS OF THE TELECOM SECTOR IN THE COUNTRY ARE
DISCUSSED BELOW :

4.2. ADMINISTRATION AND CONTROL

THE TELECOM COMMISSION, SET UP IN APRIL 1989 HAS THE ADMINISTRATIVE AND FINANCIAL
POWERS OF THE GOVERNMENT OF INDIA TO DEAL WITH VARIOUS ASPECTS OF TELECOMMUNICATIONS.

THE TELECOM COMMISSION AND THE DEPARTMENT OF

56
TELECOMMUNICATIONS (DOT) ARE RESPONSIBLE FOR POLICY FORMULATION, LICENSING, WIRELESS

SPECTRUM MANAGEMENT , ADMINISTRATIVE MONITORING OF PUBLIC SECTOR UNDERTAKINGS

(PSUS) ENGAGED IN TELECOMMUNICATION SERVICES , RESEARCH AND DEVELOPMENT AND

STANDARDIZATION/VALIDATION OF EQUIPMENT , ETC.

4.3. TELECOM REFORMS

TELECOM SERVICES AND MOST OF THE MANUFACTURING ACTIVITIES WERE TOTALLY UNDER GOVERNMENT
DOMAIN TILL TELECOM REFORMS BEGAN IN 1980S WITH THE LAUNCH OF A “MISSION BETTER

COMMUNICATION” PROGRAMME. PRIVATE MANUFACTURING OF EQUIPMENT FOR

CUSTOMERS ' USE WAS ALLOWED IN 1984 AND THE CENTRE FOR DEVELOPMENT OF TELEMETRIC (C-
DOT) WAS ESTABLISHED FOR THE DEVELOPMENT OF INDIGENOUS TECHNOLOGIES . TWO LARGE
CORPORATE ENTITIES WERE SPUN OFF FROM DOT NAMELY, MAHANAGAR TELEPHONE NIGAM
LIMITED (MTNL) IN FEBRUARY 1986 FOR DELHI AND MUMBAI AND VIDESH SANCHAR NIGAM
LIMITED (VSNL) IN MARCH 1986 FOR ALL INTERNATIONAL SERVICES . THIS BEGAN THE PROCESS

OF CORPORATIZATION OF SERVICES THAT HAD HITHERTO BEEN UNDER A GOVERNMENT DEPARTMENT.

4.4. ENTRY OF PRIVATE SECTOR

A PARADIGM SHIFT IN GOVERNMENT POLICY CAME IN THE EARLY NINETIES WHEN THE
TELECOMMUNICATION SECTOR WAS OPENED UP TO THE PRIVATE SECTOR. THE PROCESS OF ENTRY

OF PRIVATE OPERATORS IN PROVIDING TELECOMMUNICATION SERVICES IN INDIA COMMENCED IN

1992. APART

FROM PRIVATIZING BASIC TELEPHONE SERVICES GOVERNMENT ALSO DECIDED TO INTRODUCE A

NUMBER OF VALUE ADDED SERVICES THROUGH PRIVATE OPERATORS , SUCH AS CELLULAR MOBILE

TELEPHONES, RADIO PAGING, E -MAIL, INTERNET, CLOSED USER GROUPS (CUG), ETC., WHICH ADD

TO THE VALUE OF THE EXISTING BASIC TELEPHONE SERVICES.

57
4.5. REGULATORY CONTROL

ENTRY OF PRIVATE SERVICE PROVIDERS BROUGHT WITH IT THE INEVITABLE NEED FOR INDEPENDENT
REGULATION. TELECOM REGULATORY AUTHORITY OF INDIA (TRAI) WAS THUS ESTABLISHED WITH
EFFECT FROM 20 FEBRUARY 1997 BY AN ACT OF PARLIAMENT CALLED TELECOM REGULATORY
AUTHORITY OF INDIA ACT, 1997, TO REGULATE THE TELECOM SERVICES, INCLUDING FIXATION/REVISION
OF TARIFFS FOR TELECOM SERVICES WHICH WERE EARLIER VESTED IN THE

CENTRAL GOVERNMENT. THE TRAI ACT WAS AMENDED BY AN ORDINANCE EFFECTIVE FROM 24
JANUARY 2000 SEPARATING THE ADJUDICATORY AND DISPUTES FUNCTIONS FROM THE TRAI BY

ESTABLISHING A TELECOMMUNICATIONS DISPUTE SETTLEMENT AND APPELLATE TRIBUNAL

(TDSAT). TDSAT ADJUDICATES ANY DISPUTE BETWEEN A LICENSOR AND A LICENSEE, BETWEEN

TWO OR MORE SERVICE PROVIDERS , BETWEEN A SERVICE PROVIDER AND GROUP OF CONSUMERS,

AND TO HEAR AND DISPOSE OF APPEALS AGAINST ANY DIRECTION, DECISION OR ORDER OF TRAI. A
BETTER MODEL WOULD HAVE BEEN TO PUT THE INDEPENDENT REGULATOR IN PLACE EARLY IN THE

NINETIES ALONG WITH THE OPENING UP OF SERVICES TO THE PRIVATE SECTOR.

KEEPING IN VIEW THE INCREASING CONVERGENCE OF TELECOM, COMPUTERS, TELEVISION AND

ELECTRONICS THE GOVERNMENT OF INDIA INTRODUCED THE COMMUNICATION CONVERGENCE BILL

2001 IN THE LOK SABHA ON 31 AUGUST 2001; THIS WAS THEREAFTER SENT TO THE PARLIAMENTARY
STANDING COMMITTEE ON COMMUNICATIONS AND INFORMATION TECHNOLOGY
WHICH HAS PRESENTED ITS REPORT TO THE PARLIAMENT IN NOVEMBER 2002 AND THE

OBSERVATIONS AND RECOMMENDATIONS MADE BY IT WERE UNDER CONSIDERATION . THE BILL AIMS

AT PROMOTING, FACILITATING AND DEVELOPING IN AN ORDERLY MANNER THE CARRIAGE AND

CONTENT OF COMMUNICATIONS (INCLUDING BROADCASTING, TELECOMMUNICATIONS AND MULTIMEDIA), IN

VIEW OF THE NECESSITY TO FACILITATE DEVELOPMENT OF A NATIONAL INFRASTRUCTURE FOR AN

INFORMATION BASED SOCIETY , AND TO ENABLE ACCESS THERETO . IT ALSO SEEKS TO PROVIDE A

CHOICE OF SERVICES TO THE PEOPLE WITH A VIEW TO PROMOTING PLURALITY OF NEWS, VIEWS AND

INFORMATION. THIS REGULATORY AND LICENSING AUTHORITY WILL BE KNOWN AS THE

“COMMUNICATION COMMISSION OF INDIA”. THE LICENSING FUNCTION, PRESENTLY BEING HANDLED

BY DOT, WILL PASS ON TO THIS COMMISSION. HOWEVER, THE BILL IS YET TO BE PASSED.

4.6 TELECOM POLICIES

THE FIRST NATIONAL TELECOM POLICY WAS ANNOUNCED IN 1994, WITH A MAJOR THRUST ON

58
UNIVERSAL SERVICE AND QUALITATIVE IMPROVEMENT IN TELECOM SERVICES AND ALSO , OPENING OF

PRIVATE SECTOR PARTICIPATION IN BASIC TELEPHONE SERVICES . IN THE INITIAL ENTHUSIASM OF

OPENING UP OF THE TELECOMMUNICATIONS SECTOR, THE PRIVATE OPERATORS , IN THEIR BIDS,

OFFERED MUCH HIGHER AMOUNTS OF LICENCE FEE THAN THEY COULD EVENTUALLY MUSTER . AS A
RESULT BY MAY 1999, THEY HAD ACCUMULATED ARREARS TOTALING RS 3779.45 CRORE

PAYABLE TO G OVERNMENT. A MAJOR LANDMARK IN THE TELECOM SECTOR CAME WITH THE NEW
TELECOM POLICY 1999 (NTP-99) WHICH ALLOWED PRIVATE OPERATORS TO MIGRATE FROM FIXED
LICENSE FEE REGIME TO A REVENUE SHARING REGIME . OTHER PROVISIONS IN NTP-99 WERE TO

PERMIT INTERCONNECTIVITY AND SHARING OF INFRASTRUCTURE AMONG VARIOUS SERVICE PROVIDERS

WITHIN THE SAME AREAS OF OPERATIONS, SEPARATION OF POLICY AND LICENSING FUNCTIONS OF

DOT FROM THE SERVICE PROVISION FUNCTION , OPENING OF NATIONAL LONG DISTANCE SERVICES TO

COMPETITION AND CARRYING OF BOTH VOICE AND DATA TRAFFIC BY SERVICE PROVIDERS . AS OF 31
MARCH 2003, UNRESTRICTED ENTRY HAS BEEN ALLOWED IN BASIC SERVICES ON REVENUE SHARING

BASIS, ALL TELECOM SERVICES HAVE BEEN OPENED UP FOR PRIVATE SECTOR PARTICIPATION ,

NATIONAL AND INTERNATIONAL DATA CONNECTIVITY HAS BEEN OPENED TO ALL AND INTERNET

SERVICES HAVE ALSO BEEN OPENED UP WITHOUT ANY RESTRICTION ON THE NUMBER OF ENTRANTS

AND WITHOUT ANY ENTRY FEE. NATIONAL FREQUENCY ALLOCATION PLAN (NFAP-2002) HAS BEEN

EVOLVED IN LINE WITH THE RADIO REGULATIONS OF THE INTERNATIONAL TELECOM UNION (ITU)
FOR CATERING TO THE CONFLICTING DEMAND ON SPECTRUM.

4.7. CORPORATIZATION
AS A PART OF THE CONTINUING PROCESS OF OPENING UP OF THE SECTOR, AND IN PURSUANCE OF NTP-

99, DEPARTMENT OF TELECOM SERVICES (DTS) WAS CARVED OUT FROM DOT IN OCTOBER
1999 FOR PROVIDING TELECOMMUNICATIONS SERVICES IN THE COUNTRY. SUBSEQUENTLY
IN JULY 2000, DTS WAS BIFURCATED AND A NEW DEPARTMENT KNOWN AS THE DEPARTMENT OF

59
TELECOM OPERATIONS (DTO) WAS CREATED. DTS AND DTO WERE FINALLY CORPORATIZED

INTO A WHOLLY OWNED GOVERNMENT COMPANY NAMELY BHARAT SANCHAR NIGAM LIMITED
(BSNL) (INCORPORATED ON 15 SEPTEMBER 2000) AND THEIR BUSINESS OF PROVIDING TELECOM
SERVICES IN THE COUNTRY WAS TRANSFERRED TO THIS COMPANY WITH EFFECT FROM 1 OCTOBER
2000. THE CREATION OF BSNL IS EXPECTED TO PROVIDE A LEVEL PLAYING FIELD IN ALL AREAS

OF TELECOM SERVICES , BETWEEN GOVERNMENT OPERATORS AND PRIVATE OPERATORS.

4.8. OTHER GOVERNMENT ORGANIZATIONS UNDER TELECOM SECTOR

BESIDES MTNL, BSNL AND VSNL, OTHER GOVERNMENT OWNED PUBLIC SECTOR

UNDERTAKINGS UNDER TELECOM SECTOR WERE ITI LIMITED (ITI), HINDUSTAN TELEPRINTERS
LIMITED (HTL), TELECOMMUNICATIONS CONSULTANTS INDIA LIMITED (TCIL), I NTELLIGENT
COMMUNICATION SYSTEMS INDIA LIMITED (ICSIL) AND MILLENNIUM TELECOM LIMITED (MTL).
ITI LIMITED WAS FORMED IN 1948 FOR MANUFACTURING A WIDE RANGE OF EQUIPMENT , WHICH

INCLUDES ELECTRONIC SWITCHING EQUIPMENT , TRANSMISSION EQUIPMENT AND TELEPHONE

INSTRUMENTS OF VARIOUS TYPES . HTL WAS ESTABLISHED IN DECEMBER 1960 FOR MANUFACTURE

OF TELEPRINTERS AND ANCILLARY EQUIPMENT. TCIL WAS ESTABLISHED IN 1978 FOR PROVIDING

KNOW -HOW IN ALL THE FIELDS OF TELECOMMUNICATIONS AT GLOBAL LEVEL. THE CORE COMPETENCE

OF TCIL IS IN COMMUNICATIONS NETWORK PROJECTS , SOFTWARE SUPPORT, SWITCHING AND

TRANSMISSION SYSTEMS, CELLULAR SERVICES, RURAL TELECOMMUNICATIONS AND OPTICAL FIBER

BASED BACKBONE NETWORK. ICSIL WAS ESTABLISHED IN APRIL 1987 FOR MANUFACTURING
COMPUTER BASED COMMUNICATION SYSTEMS AND EQUIPMENT. IT ALSO PROVIDES ENGINEERING ,

TECHNICAL AND MANAGEMENT CONSULTANCY SERVICES FOR COMPUTERS AND COMMUNICATIONS

SYSTEMS IN INDIA AND ABROAD. MTL WAS ESTABLISHED IN FEBRUARY 2000 AS A WHOLLY OWNED
SUBSIDIARY OF MTNL FOR PROVISIONING OF INTERNET SERVICES IN THE COUNTRY . IT IS PURSUING

ESTABLISHMENT OF BROADBAND INTERNET ACCESS FOR THE CORPORATE SEGMENT AND VOICE

60
OVER INTERNET PROTOCOL (VOIP) TELEPHONY SERVICES THROUGHOUT INDIA WITH USE OF
RELEVANT TECHNOLOGIES LIKE VSATS ETC.

IN ADDITION TO C-DOT AND TELECOM COMMISSION, OTHER GOVERNMENT ORGANIZATIONS

ENGAGED IN THE TELECOM SECTOR (AS A PART OF DOT) WERE TELECOM ENGINEERING CENTRE
(TEC) AND THE W IRELESS PLANNING AND COORDINATION (WPC) WING. C-DOT WAS
ESTABLISHED IN 1984 WITH THE OBJECTIVE OF DEVELOPING A NEW GENERATION OF DIGITAL

SWITCHING ITEMS . C-DOT HAS DEVELOPED A WIDE RANGE OF SWITCHING AND TRANSMISSION

PRODUCTS BOTH FOR THE RURAL AND URBAN APPLICATIONS . TEC IS AN INSTITUTION , WHICH WORKS

AS A PART OF DOT AND IS DEVOTED TO PRODUCT VALIDATION AND STANDARDIZATION FOR THE USER
AGENCIES. IT ALSO PROVIDES TECHNICAL AND ENGINEERING SUPPORT TO TELECOM COMMISSION
AND FIELD UNITS . WPC IS A WING OF DOT THAT DEALS WITH THE POLICY OF SPECTRUM

MANAGEMENT, LICENSING, FREQUENCY ASSIGNMENTS , INTERNATIONAL COORDINATION FOR SPECTRUM

MANAGEMENT AND ADMINISTRATION OF THE INDIAN W IRELESS TELEGRAPH ACT 1933.

4.9. DISINVESTMENT OF PSUS

61
GOVERNMENT HAS DISINVESTED ITS MAJOR SHAREHOLDING IN HTL
DURING OCTOBER 2001 AND IN VSNL DURING FEBRUARY 2002 AND
SINCE THEN THESE UNDERTAKINGS HAS CEASED TO BE GOVERNMENT OWNED
PSUS.

4.10. FINANCIAL PERFORMANCE

62
TELECOM LANDSCAPE IN INDIA HAS CHANGED COMPLETELY SINCE LIBERALIZATION AND MONOPOLIES
IN TELECOM SECTOR HAVE BEEN REPLACED WITH COMPETITIVE REGIME (OLIGOPOLIES ). IT IS A

WELL-KNOWN FACT THAT BSNL WAS CARVED OUT OF ERSTWHILE DOT TO PROVIDE LEVEL PLAYING FIELD

TO PRIVATE TELECOMS. SINCE THEN MANY NEW BUSINESS FIRMS HAVE ENTERED IN THE
ARENA AND TODAY THERE IS MERCILESS CUTTHROAT COMPETITION IN THIS SECTOR. EVEN THOUGH
COMPETITION IS BONANZA FOR SUBSCRIBERS BUT FOR CORPORATES IT IS THE QUESTION OF

SURVIVABILITY . IF THEY ARE NOT IN A POSITION TO EARN SUFFICIENT REVENUE FROM THE

OPERATIONS WHICH NOT ONLY MEETS THEIR GROWTH AND EXPANSION PLANS BUT ARE NECESSARY

FOR PAYING ALL GOVERNMENT LEVIES AND DUES AS REVENUE SHARE, SPECTRUM CHARGES, USO FUND
CONTRIBUTION ETC. AS WELL AS MEETING INTERNAL REQUIREMENTS LIKE OPERATION AND

ADMINISTRATION EXPENDITURES, STAFF COSTS, INTEREST AND REPAYMENT OF DEBT ETC.

CORPORATES ARE ALSO UNDER TREMENDOUS PRESSURE FROM INVESTORS TO SHOW BETTER
RESULTS SO THAT THEY ALSO GET HANDSOME RETURNS ON THEIR INVESTMENTS IN THE FORM OF

DIVIDENDS OR APPRECIATION IN SHARE VALUES. TO MEET ALL SUCH REQUIREMENTS CORPORATE

MANAGEMENT SOME TIME INDULGES INTO CREATIVE ACCOUNTING TO ARTIFICIAL BOOST THE PROFIT

FIGURES BECAUSE AT THE END OF DAY IT IS THE PROFIT, WHICH MATTERS MOST TOO ANY
BUSINESS ORGANIZATION IF IT IS NOT A NON-PROFIT ORGANIZATION . THERE IS MANDATORY
REQUIREMENT FOR ALL COMPANIES TO FILE FOLLOWING THREE AUDITED STATEMENTS TO COMPANY
LAW BOARD AT THE CLOSURE OF EVERY FINANCIAL YEAR I.E. BALANCE SHEET AS ON THE LAST

DAY OF FINANCIAL YEAR, PROFIT AND LOSS ACCOUNT FOR THE WHOLE ACCOUNTING YEAR AND CASH
FLOW STATEMENT . FOR STAKE HOLDERS AND INVESTORS IT BECOMES NECESSARY TO LOOK BEYOND
THE FIGURES QUOTED IN THESE STATEMENTS AND CARRY OUT THE IN DEPTH FINANCIAL ANALYSIS TO

TAKE APPROPRIATE DECISION REGARDING THEIR INVESTMENT AND OTHER IMPORTANT DECISIONS . IN

RESPECT OF BSNL ANALYSIS CARRIED OUT IS BASED ON ITS AUDITED BALANCE SHEET AND

PROFIT AND LOSS ACCOUNTS TAKEN FROM ITS ANNUAL REPORTS.

ROLE OF COMMUNICATION SERVICES IN NATIONAL GROWTH:

PROPORTION OF COMMUNICATION SERVICES IN GDP IS INCREASING AT FASTER RATE, AS IT IS
EVIDENT FROM THE FOLLOWING TABLE.

63
 Service Sector Share in GDP
Share % in Growth
GDP (2002-03) 2002-03
Construction 5.4 7.3
Trade 14.0 4.5

Hotels & Restaurants 1.1 4.0

Railway 1.1 5.7
Other Transport 4.3 6.0
Storage 0.1 -7.8
Communications 3.5 22.0
Banking & Insurance 6.9 11.6
Real Estate, Business / Legal
6.1 5.9
Services
Defence 5.9 5.3
Other Community & social
7.8 6.2
Services
Total Service Sector 56.1 7.2

FROM ABOVE TABLE IT IS CLEAR THAT GROWTH RATE (22%) OF COMMUNICATION SERVICES IN

GDP IS HIGHEST AND PROPORTION AND IMPORTANCE OF COMMUNICATION SERVICES IS

CONTINUOUSLY INCREASING . IT IS CONSIDERED AS GROWTH ENGINE FOR OVERALL ECONOMIC

GROWTH. GRAPH GIVEN BELOW INDICATES THE EXPONENTIAL GROWTH OF TELECOMMUNICATION

INFRASTRUCTURE IN INDIA. AS OF NOW TOTAL TELEPHONES (BASIC + MOBILE) OF ALL OPERATORS

PUT TOGETHER HAS CROSSED 15 CRORES. IN THE MONTH OF AUGUST-2006 THERE WAS ADDITION

OF 58 LACKS OF NEW MOBILE SUBSCRIBER. SUCH IS A GROWTH OF TELECOMMUNICATION IN INDIA,

EVEN NOW SURPASSING TO THE GROWTH IN CHINA.

64
 Growth of Telecommunications in India

Growth of Telecommunications in India

Fixes Line
80 Telephones
70
60 Cellular Mobile
50 Telephones
40
30 Private Basic
20 Telephone
10
0 Tot al Telephones

IN SUCH A VOLATILE SCENARIO , KNOWING ABOUT THE PERFORMANCE OF A COMPANY BECOMES VERY

IMPORTANT. FINANCIAL PERFORMANCE IS A BED ROCK FOR OVERALL PERFORMANCE AND FUTURE

GROWTH OF ANY COMPANY. KEEPING THIS VIEW IN MIND I HAVE TRIED TO PUT SOME RELEVANT

FACTS THROUGH THIS ARTICLE.

65
 A. FINANCIAL PERFORMANCE OF PSUS UNDER TELECOM SECTOR

AS ON 31 MARCH 2003, SIX PSUS NAMELY BSNL, MTNL, ITI, TCIL, ICSIL AND MTL
WERE IN THE TELECOM SECTOR. SOME OF THE IMPORTANT FINANCIAL PERFORMANCE INDICATORS
OF THESE PSUS FOR THE YEAR ENDED 31 MARCH 2003 WERE AS UNDER:

PSU INVESTMEN GOVT. LOANS TOTA DIVIDEND CAP PROFIT PERCENTAGE OF

T IN L PAID ON ITAL BEFORE TAX PBT TO CAPITAL
SHARES BY INCO GOVT. EMP (PBT) EMPLOYED

GOVERNME ME EQUITY LOY

NT EARN INVESTMENT ED

ED

EQUITY PREFERENCE TOTAL

SHARES SHARES

(RUPEES IN CRORE) %

BSNL 5000.00 7500.00 12500.00 750 2819 250.0 54612.57 2657.90 5

1.00 2.60 0

MTNL 354.37 0.00 354.37 0.00 6030 159.4 8451.15 1237.19 15

.67 7

ITI 67.47 0.00 67.47 0.00 1767 0.00 1460.49 (376.67) (26)
.96

TCIL 14.40 0.00 14.40 0.00 590. 21.60 411.01 51.50 13

44

ICSIL 0.00 0.00 0.00 0.00 16.9 0.00 0.44 0.57 130
2

MTL 0.00 0.00 0.00 0.00 2.66 0.00 3.21 1.02 32

TOTAL 5436.24 7500.00 12936.24 750 3660 431.0 64938.87 3571.51 5

1.00 1.25 7

66
As could be seen from the above table, on Equity capital investment of Rs 5,436.24
crore in these five PSUs, Government received dividend of Rs 431.07 crore which
works out to only 7.93 per cent. On Preference capital investment of Rs 7,500 crore
Government did not receive any dividend as BSNL has been exempted from
payment of dividend up to 31 March 2004. The total income and ‘profit before tax’
earned by these PSUs during the year were Rs 36,601.25 crore and Rs 3,571.51
crore, respectively. On total capital employed of Rs 64,938.87 crore in above PSUs,
the overall percentage of ‘profit before tax’ worked out to only 5 per cent.

The individual financial performance of each of these PSUs is also discussed in the
succeeding chapters

4.11 FOREIGN DIRECT INVESTMENT

AS A RESULT OF POSITIVE RESPONSE TO THE INVESTMENT POLICY BEING PURSUED FOR THE

TELECOM SECTOR, MORE THAN 11 PER CENT OF THE TOTAL INFLOW OF FOREIGN DIRECT

INVESTMENT (FDI) OF RS 9,562 CRORE DURING AUGUST 1991 TO DECEMBER 2002 HAS COME

DURING THE LAST ONE YEAR (JANUARY TO DECEMBER 2002) ITSELF . OF RS 9,562 CRORE OF

FDI IN TELECOM SECTOR, MORE THAN 28 PER CENT HAS COME FOR CELLULAR MOBILE AND BASIC
TELEPHONE SERVICES.

4.12 EMPLOYMENT GENERATION

AS ON 31 MARCH 1981 THERE WERE AROUND 2.80 LAKH GOVERNMENT EMPLOYEES (EXCLUDING
INDUSTRIAL WORKERS ) WORKING IN THE TELECOM SECTOR. W ITH THE GROWTH OF THE SECTOR,

THIS NUMBER HAS ALSO GONE UP AND AS AT THE END OF 31 MARCH 2003 THERE WERE AROUND

4.12 LAKH GOVERNMENT EMPLOYEES (EXCLUDING INDUSTRIAL WORKERS ) WORKING IN THIS SECTOR

(DOT, BSNL AND MTNL); THIS REPRESENTED GROWTH IN EMPLOYMENT GENERATION BY AROUND

47 PER CENT OVER THE LAST 22 YEARS.

4.13 CONTRIBUTION OF THE PRIVATE AND PUBLIC SECTORS IN TELECOM NETWORK

67
 PRIVATE SECTOR HAS BEEN ALLOWED ENTRY IN BASIC AS WELL AS VALUE ADDED SERVICES

SUCH AS CELLULAR MOBILE TELEPHONE SERVICE , RADIO PAGING, INTERNET, NATIONAL AND

INTERNATIONAL LONG DISTANCE SERVICES, GLOBAL MOBILE PERSONAL COMMUNICATION SERVICE, V-

SAT SERVICE, ETC. THE CONTRIBUTION OF PRIVATE SECTOR AND PUBLIC SECTOR (MTNL &
BSNL) IN SOME OF THE IMPORTANT FIELDS OF NATIONAL TELECOM NETWORK AS ON 31 AUGUST
2003 WAS AS UNDER:

S L. TELECOM NETWORK PUBLIC SECTOR PRIVATE TOTAL

NO. (MTNL & BSNL) SECTOR

(FIGURES IN LAKH)

1. DIRECT EXCHANGE LINES (INCLUDING 404.20 51.80 456.00

WLL)

2. RURAL DIRECT EXCHANGE LINES 114.97 NIL 114.97

(INCLUDING WLL)

3. VILLAGE PUBLIC TELEPHONES 5.05 0.12 5.17

4. CELLULAR MOBILE CONNECTIONS 39.90 134.00 173.90

5. PUBLIC CALL OFFICES (AS ON 30 14.80 NIL 14.80

JUNE 2003)

6. INTERNET CONNECTIONS (AS ON 31 9.91 22.00 31.91

MARCH 2003)

The growth in fixed lines (DELs) and cellular mobile telephones in India during 31
March 1999 to 31 August 2003 was as given in the chart.

68
FIXED LINES TELEPHONES (DELS INCLUDING WLL) INCREASED FROM 215.90 LAKH AS ON 31

MARCH 1999 TO 456.00 LAKH AS OF 31 AUGUST 2003 WHICH REPRESENTED GROWTH OF MORE
THAN 111 PER CENT DURING THIS PERIOD. IN CASE OF CELLULAR MOBILE TELEPHONES , HOWEVER,

THE NUMBER OF CONNECTIONS HAS INCREASED DRAMATICALLY FROM 12.00 LAKH AS ON 31

MARCH 1999 TO 173.90 LAKH AS OF 31 AUGUST 2003, WHICH REPRESENTED A TREMENDOUS
GROWTH OF MORE THAN FOURTEEN -FOLD DURING THIS PERIOD.

SIMILARLY THE POSITION OF DEMAND AND SUPPLY OF TELEPHONES (DELS, WLL AND CELLULAR)
IN INDIA DURING THE YEARS 1980-81 TO 2002-03 (UP TO AUGUST 2003) WAS AS UNDER:

69
AS CAN BE SEEN, AGAINST THE DEMAND OF 26 LAKH TELEPHONES AS ON 31 MARCH 1981, THE

DEMAND AS ON 31 AUGUST 2003 WAS 649 LAKH REPRESENTING AROUND TWENTY-FOUR-FOLD

GROWTH IN DEMAND. THE SUPPLY OF TELEPHONES AGAINST ABOVE DEMAND WAS 22 LAKH
TELEPHONES AS ON 31 MARCH 1981 AND 630 LAKH AS ON 31 AUGUST 2003 REPRESENTING

AROUND TWENTYEIGHT -FOLD GROWTH IN SUPPLY . HOWEVER, SUPPLY OF TELEPHONE CONNECTIONS

IN INDIA WAS NEVER ADEQUATE TO MEET THE DEMAND FULLY IN ANY OF THE LAST OVER 22 YEARS.

4.14 WIRELESS IN LOCAL LOOP (MOBILE) SERVICE VS. CELLULAR MOBILE TELEPHONE SERVICE

BASED ON TRAI’S RECOMMENDATIONS OF 8 JANUARY 2001, DOT ALLOWED IN JANUARY 2001

THE BASIC SERVICE PROVIDERS (BSPS) TO PROVIDE MOBILITY TO THEIR SUBSCRIBERS

RESTRICTED TO LOCAL AREA I .E. SHORT DISTANCE CHARGING AREA (SDCA). HOWEVER, CELLULAR

MOBILE SERVICE PROVIDERS (CMSPS) CHALLENGED THIS DECISION OF DOT IN THE TELECOM
DISPUTES SETTLEMENT AND APPELLATE TRIBUNAL (TDSAT), PARTICULARLY ON THE GROUND

THAT THE DECISION WAS AGAINST THE NTP-99. INITIALLY TDSAT DISMISSED CMSPS’ PETITION
ON 15 MARCH 2002 BUT ON THE DIRECTION OF HON’BLE SUPREME COURT OF INDIA TO

RECONSIDER THE MATTER ON SPECIFIC POINTS, TDSAT ON 8 AUGUST 2003 OBSERVED THAT IT

WAS IMPORTANT TO ENSURE THAT MOBILITY OF WLL (M) SERVICE REMAINED RESTRICTED TO

SDCA AND NO HANDOVER FROM ONE SDCA TO ANOTHER WAS ALLOWED UNDER ANY

CIRCUMSTANCE . TDSAT FURTHER OBSERVED THAT TRAI SHOULD CONSIDER ISSUING

RECOMMENDATIONS TO GOVERNMENT ON THE FOLLOWING ISSUES TO RESOLVE THE MATTER

BETWEEN WLL (M) OPERATORS AND CELLULAR MOBILE OPERATORS:

 ADDITIONAL ENTRY FEE PAYABLE BY BSPS FOR PROVIDING WLL (M) SERVICE,

 ADDITIONAL SPECTRUM FEE CHARGEABLE FOR THE ADDITIONAL SPECTRUM BEYOND 5 MHZ
FOR WLL (M) SERVICE,
 RELIEF TO CELLULAR MOBILE OPERATORS WITH REGARD TO POINTS OF INTERCONNECTION
BETWEEN CMSPS AND BSPS, AND

 INCREASING THE RETENTION OF 5 PER CENT ACCESS CHARGE TO A REASONABLE LEVEL.

ACCORDINGLY, DOT ON 18 AUGUST 2003 SOUGHT TRAI’S RECOMMENDATIONS ON THE ABOVE ISSUES.
THEREAFTER, ON 28 AUGUST 2003 TRAI HAS RELEASED A CONSULTATION PAPER TO ALL

70
STAKEHOLDERS FOR OBTAINING THEIR FEEDBACK ON THESE ISSUES BEFORE IT FORMULATES

RECOMMENDATIONS TO THE GOVERNMENT.

4.15 THE PICTURE AHEAD

W ITH THE RAPID UP GRADATION OF TECHNOLOGY AND THE ENTRY OF PRIVATE PLAYERS IN THE

TELECOM SECTOR IT IS EXPECTED THAT THE COMPETITIVE ENVIRONMENT WILL LEAD TO GREATER

FACILITIES FOR THE SUBSCRIBERS AT LOWER COST. EVEN BY WAY OF COVERAGE, THE TELE -DENSITY

IS PROPOSED TO BE INCREASED FROM THE PRESENT 5.72 TELEPHONES PER HUNDRED

POPULATIONS TO 7 BY 2005 AND TO 15 BY 2010.

5. INDIAN TELECOM
5.1 :- MARKET OVERVIEW
5.2 :- MARKET TRENDS
5.3 :- COMPETITION
5.4 :- SALES PROSPECTS
5.5 :-MARKET ACCESS
5. 6:-TELECOM EXHIBITIONS

71
5.0 SUMMARY
THE INDIAN TELECOMMUNICATIONS NETWORK WITH 70 MILLION CONNECTIONS IS THE FIFTH LARGEST

IN THE WORLD AND THE SECOND LARGEST AMONG THE EMERGING ECONOMIES OF ASIA. TODAY, IT
IS THE FASTEST GROWING MARKET IN THE WORLD AND REPRESENTS UNIQUE OPPORTUNITIES FOR

INTERNATIONAL COMPANIES IN THE STAGNANT GLOBAL SCENARIO . THE TOTAL SUBSCRIBER BASE IS
EXPECTED TO REACH 203 MILLION IN 2007. THE WIRELESS SUBSCRIBER BASE HAS JUMPED FROM

1.6 MILLION IN 1999 TO 28.2 MILLION IN 2003. IN THE LAST 3 YEARS, TWO OUT OF EVERY

THREE NEW TELEPHONE SUBSCRIBERS WERE WIRELESS SUBSCRIBERS . CONSEQUENTLY, WIRELESS

NOW ACCOUNTS FOR 40% OF THE TOTAL TELEPHONE SUBSCRIBER BASE, AS COMPARED TO ONLY

9.5% IN 2000. W IRELESS SUBSCRIBER GROWTH IS EXPECTED TO ACCELERATE FURTHER FROM 2

MILLION NEW SUBSCRIBERS PER MONTH NOW TO 2.5 MILLION BY 2005.

GIVEN THE PERSISTENT LOW TELEPHONE PENETRATION RATE OF ABOUT 7 PER ONE HUNDRED AND
HIGH LEVELS OF OVERALL ECONOMIC GROWTH , THE TELECOM SECTOR OFFERS VAST POTENTIAL .

THE MOBILE MARKET RECENTLY TOPPED 31 MILLION CUSTOMERS. IT IS THEREFORE NOT

SURPRISING THAT INDIA IS ONE OF THE FASTEST GROWING TELECOM MARKETS WITH AN AVERAGE

ANNUAL GROWTH OF ABOUT 22% FOR BASIC TELEPHONY AND OVER 100% FOR CELLULAR AND

INTERNET SERVICES.

RECOGNIZING THAT THE TELECOM SECTOR IS ONE OF THE PRIME MOVERS OF ECONOMY, THE

GOVERNMENT'S REGULATORY AND POLICY INITIATIVES HAVE BEEN DIRECTED TOWARDS ESTABLISHING
A WORLD-CLASS TELECOMMUNICATIONS INFRASTRUCTURE . CAPITAL REQUIREMENTS ARE
CONSIDERABLE . INDIA REQUIRES INVESTMENTS OF AT LEAST $37 BILLION BY 2005 AND $69
BILLION BY 2010.

THE TECHNOLOGIES CURRENTLY IN USE ARE GLOBAL SYSTEM FOR MOBILE COMMUNICATIONS
(GSM) AND CODE DIVISION MULTIPLE ACCESS (CDMA). THERE ARE PRIMARILY 10
COMPANIES PROVIDING MOBILE SERVICES IN 19 TELECOM CIRCLES AND 4 METRO CITIES, COVERING

2000 TOWNS ACROSS THE COUNTRY. PRESENTLY THERE ARE 4 GSM OPERATORS AND 2
CDMA OPERATORS IN EACH CIRCLE. THERE ARE 100 STATE-OF-THE-ART NETWORKS (GSM +
CDMA) ON AIR WITH A TOTAL INVESTMENT OF $8 BILLION.

The Wireless Planning and Co-ordination wing of the Department of

Telecommunications allocates

72
spectrum in accordance with the National Frequency Allocation Plan (NFAP). The
NFAP is revised every two years according to the radio regulations of ITU.
According to the frequency plan, the frequency band 824-844 MHz paired with
869-889 MHz has been earmarked for CDMA operators; 890-915 paired with
935-960 MHz has been earmarked for GSM mobile operators; 1710-1785 MHz
paired with 1805-1880 MHz is also reserved for GSM and CDMA operators.

73
 5.1 MARKET OVERVIEW
THE GROWTH TRENDS IN INDIAN TELECOM MIRROR THOSE IN THE GLOBAL INDUSTRY. WIRELESS
HAS BEEN THE PRINCIPAL GROWTH ENGINE, ACCOUNTING FOR TWO-THIRDS OF THE TOTAL TELECOM

DSeUsBSpCitReIBtEhRe ArDeDgITuIlOaNrScDoUnRcIessTio
NG nsLAtSoT th
HE eRp
TH EErivYaEtAeRSo.peTrHaEtoIrNsDIaAn
N dTEth
LEeCO
raMpIiNdDpUa
STcReY aIS
t which
POISED TO GROW EXPONENTIALLY . W IRELESS SECTOR WILL BECOME STRONGER IN THE UNIFIED
LICENSING ENVIRONMENT , AND WIRELESS HAS ALREADY SURPASSED WIRE LINE CONNECTIONS .

TELEDENSITY WILL CROSS 20 PERCENT IN THE NEXT FIVE YEARS, BEATING THE GOVERNMENT OF
INDIA’S TARGET BY THREE YEARS, WHILE TELECOM REVENUES WILL ALMOST TRIPLE FROM $9
BILLION IN 2003 TO $23-25 BILLION BY 2007.

THE WIRELESS REVOLUTION WILL BE FUELLED BY SEVERAL FACTORS. THE AFFORDABILITY OF

WIRELESS FOR THE MASSES WILL BE SUSTAINED ON ACCOUNT OF LOW TARIFFS, CHEAP HANDSETS

AND ATTRACTIVE FINANCING SCHEMES . W IRELESS OPERATORS WILL CONTINUE TO FOCUS ON

PREPAID PRODUCTS IN ORDER TO INCREASE THE ADOPTION OF WIRELESS AMONG THE LOWER

MIDDLE INCOME AND LOW -INCOME GROUPS . W IRELINE USERS WILL INCREASINGLY MIGRATE TO
WIRELESS, LURED BY THE BENEFITS OF MOBILITY AND THE ATTRACTIVE BUNDLED PLANS THAT ARE

BEING LAUNCHED BY THE WIRELESS OPERATORS. W IRELESS DATA SERVICES WILL ALSO BECOME A
GROWING REVENUE STEAM. SOME OPERATORS HAVE ALREADY DEPLOYED 3G TECHNOLOGIES ON

THEIR NETWORKS . W ITH FURTHER ROLLOUT, IT WILL ACCOUNT FOR A SIGNIFICANT PORTION OF THE

WIRELESS REVENUE PIE.

AS OF FEBRUARY 2004 THE TOTAL MOBILE MARKET HAD REACHED 31.67 MILLION, OF WHICH
24.65 MILLION SUBSCRIBERS WERE GSM AND 7.02 MILLION WERE CDMA (EXCLUDING BHARAT
SANCHAR NIGAM LIMITED [BSNL] AND MAHANAGAR TELEPHONE NIGAM LIMITED [MTNL]). OF
THESE TOTALS, RELIANCE INFOCOMM HAD 6.822 MILLION SUBSCRIBERS (6.065 CDMA AND
0.757 GSM), BHARTI HAD 6.199 MILLION (GSM), BSNL HAD 4.954 MILLION , (GSM)
HUTCH HAD 4.826 MILLION (GSM), AND IDEA CELLULAR HAD 2.584 MILLION (GSM). MOBILE
CONNECTIONS HAVE REACHED TO 56 MILLION BY THE END OF 2004, REPRESENTING A 96 PER
CENT INCREASE OVER 2003, ACCORDING TO GARTNER. AS PER THE CELLULAR OPERATORS
ASSOCIATION OF INDIA, GSM MOBILES PHONE WILL REACH 471 MILLION BY 2010. THE PACE OF
GROWTH WILL ACCELERATE WITH THE INTRODUCTION OF “FULL MOBILITY ” CDMA LOOP SERVICES

AND THE ADOPTION OF UNIFIED LICENSES.

5.2 MARKET TRENDS

THE MARKET FOR TELECOM SERVICES IN 2002-03 HAS BEEN ESTIMATED TO BE $10.7 BILLION.

THE EQUIPMENT MARKET IS ESTIMATED TO HAVE REACHED A TURNOVER OF $6.27 BILLION IN

2002-03, UP FROM $5.71 BILLION IN 2001-02. THE TELECOM INDUSTRY COMPRISING

SERVICES AND EQUIPMENT IS EXPECTED TO INCREASE TO $24.29 BILLION BY 2006.

PRIVATE PLAYERS ARE STEADILY ACQUIRING AN 7

IN4
CREASING SHARES OF THE TELECOM SERVICES

MARKET. TEN YEARS AFTER THE SECTOR WAS OPENED TO PRIVATE PARTICIPATION , THEY ACCOUNT

FOR MORE THAN A THIRD OF THE TOTAL SUBSCRIBER BASE IN INDIA. PRIVATE OPERATORS PLAY
acquisition of AT&T’s stake will give BPL flexibility in approaching other financially
strong investors. Telesystem International Wireless of Canada sold its 27.5%
stake in Hexacom, operator of mobile services in Rajasthan, to Hexacom. First
Pacific sold its 49% stake in Escotel to Idea Cellular. And Qualcomm dropped
plans to invest $200 million for a 4% equity stake in Reliance Infocomm.

5.3 COMPETITION
AS NOTED EARLIER, THE GOVERNMENT INITIALLY ONLY PERMITTED TWO OPERATORS IN EACH

CIRCLE. BUT THE GOVERNMENT HAS NOW MOVED TO UNRESTRICTED ENTRY AND UNLIMITED
COMPETITION IN ALL TYPES OF SERVICES. AS A RESULT, THERE ARE NOW MULTIPLE OPERATORS

IN EACH SERVICE AND IN EACH LICENSE AREA . THE ENTRY OF ADDITIONAL OPERATORS

(TYPICALLY BSNL OR MTNL) HAD LED TO DRASTIC TARIFF REDUCTIONS . INDEED, THE

COMPETITION WAS SO INTENSE THAT THE TELECOM REGULATORY AUTHORITY OF INDIA (TRAI)
STOPPED SETTING THE PRICE FOR MOBILE SERVICES AND ALLOWED THE MARKET TO SET PRICES.

THE UNIFIED ACCESS LICENSE AND THE LIBERAL TAKEOVER AND FOREIGN DIRECT INVESTMENT
NORMS ARE EXPECTED TO CATALYZE CONSOLIDATION. IN ADDITION , IN EARLY 2004, TRAI
PUBLISHED NORMS THAT WOULD, UNDER CERTAIN CONDITIONS , ALLOW INTRA -CIRCLE MERGERS

(I.E., AT THE REGIONAL LEVEL ) BETWEEN OPERATORS . MERGERS WILL BE ALLOWED, FOR

EXAMPLE, IF THE NEW ENTITY DOES NOT HAVE A MARKET SHARE ABOVE 50%, OR IF THE TOP

TWO FIRMS IN A GIVEN CIRCLE DOES NOT TOGETHER ACCOUNT FOR A MARKET SHARE OF 75%
OR HIGHER. IF THESE CONDITIONS ARE NOT MET, TRAI HAS ASKED THE DOT TO CONDUCT A

DETAILED IMPACT STUDY ON THE PROPOSED MERGER BEFORE GRANTING ITS APPROVAL .

THE COMPETITIVE NATURE OF THE INDIAN MARKET LEADS ANALYSTS TO PREDICT THAT THERE WILL

BE A SPATE OF TAKEOVERS AT THE NATIONAL LEVEL IN 2004 AND 2005, AND THAT ONLY THE

LARGE OPERATORS - BSNL/MTNL, RELIANCE INFOCOMM, TATA, HUTCHISON-ESSAR, IDEA

AND BHARTI - WILL SURVIVE. THE CONSOLIDATION HAS ALREADY BEGUN. AIRCEL, WHICH

OPERATES GSM MOBILE SERVICES IN THE SOUTHERN STATE OF TAMIL NADU (EXCEPT
CHENNAI), HAS IN 4Q03 TAKEN 100% STAKE IN RPG CELLULAR IN THE CITY OF CHENNAI.
AIRCEL WILL NOW BE ABLE TO OFFER SERVICES IN THE CAPITAL CITY ALSO . AIRCEL HAD

475,705 CUSTOMERS IN TAMIL NADU WHILE RPG CELLULAR HAS 212,823 CUSTOMERS IN

CHENNAI.

A. IDEA CELLULAR
, THE THREE -WAY JOINT VENTURE BETWEEN TH7E5TATA GROUP , THE ADITYA BIRLA GROUP AND

AT&T, HAS SIGNED A PURCHASE AGREEMENT TO BUY 100% STAKE IN ESCOTEL, WHICH

OPERATES IN THE SIX STATES OF KERALA, HARYANA AND UP (WEST), UTTAR PRADESH (EAST),
76
c. BHARTI
ESTABLISHED IN 1985, BHARTI HAS BEEN A PIONEERING FORCE IN THE TELECOM SECTOR WITH
MANY FIRSTS AND INNOVATIONS TO ITS CREDIT, SUCH AS BEING THE FIRST MOBILE SERVICE IN

DELHI, THE FIRST PRIVATE BASIC TELEPHONE SERVICE PROVIDER IN THE COUNTRY , THE FIRST

INDIAN COMPANY TO PROVIDE COMPREHENSIVE TELECOM SERVICES OUTSIDE INDIA IN THE

SEYCHELLES, AND THE FIRST PRIVATE SECTOR SERVICE PROVIDER TO LAUNCH NATIONAL LONG
DISTANCE SERVICES IN INDIA. BHARTI TELE-VENTURES LIMITED WAS INCORPORATED ON JULY
7, 1995 FOR PROMOTING INVESTMENTS IN TELECOMMUNICATIONS SERVICES. ITS SUBSIDIARIES

OPERATE TELECOM SERVICES ACROSS INDIA.

BHARTI’S OPERATIONS ARE BROADLY HANDLED BY TWO COMPANIES: THE MOBILITY GROUP, WHICH
HANDLES MOBILE SERVICES IN 16 CIRCLES OUT OF A TOTAL 23 CIRCLES ACROSS THE COUNTRY,

AND THE INFOTEL GROUP , WHICH HANDLES THE NLD, ILD, FIXED LINE, BROADBAND, DATA, AND

SATELLITE -BASED SERVICES. TOGETHER THEY HAVE SO FAR DEPLOYED AROUND 23,000 KM OF

OPTICAL FIBER CABLES ACROSS THE COUNTRY, COUPLED WITH APPROXIMATELY 1,500 NODES,

AND HAVE PRESENCE IN AROUND 200 LOCATIONS . THE GROUP HAS A TOTAL CUSTOMER BASE OF
6.45 MILLION , OF WHICH 5.86 MILLION ARE MOBILE AND 588,000 FIXED LINE CUSTOMERS , AS

OF JANUARY 31, 2004. IN MOBILE, BHARTI’S FOOTPRINT EXTENDS ACROSS 15 CIRCLES. THE
COMPANY PLANS TO INVEST $444 BILLION IN THE CURRENT FINANCIAL YEAR. IT PLANS TO
INSTALL 29 MOBILE SWITCHING CENTERS, BUY TRANSMISSION EQUIPMENT AND ALSO ROLL OUT

NEW NETWORKS IN FIVE NEW CIRCLES WITH AN ADDITIONAL INVESTMENT OF $155 MILLION.

D. MTNL
MAHANAGAR TELEPHONE NIGAM LIMITED (MTNL) WAS SET UP ON 1ST APRIL 1986 BY THE

GOVERNMENT OF INDIA TO UPGRADE THE QUALITY OF TELECOM SERVICES, EXPAND THE TELECOM

NETWORK , AND INTRODUCE NEW SERVICES AND TO RAISE REVENUE FOR TELECOM

DEVELOPMENT NEEDS OF INDIA’S KEY METROS IN DELHI, THE POLITICAL CAPITAL, AND MUMBAI,
THE BUSINESS CAPITAL. IN THE PAST 17 YEARS, THE COMPANY HAS TAKEN RAPID STRIDES TO
EMERGE AS INDIA’S LEADING AND ONE OF ASIA’S LARGEST TELECOM OPERATING COMPANIES .

MTNL OPERATES BASIC, CELLULAR AND INTERNET SERVICES IN THE METRO CITIES OF DELHI AND
MUMBAI. THESE TWO CITIES ALREADY HAVE A HIGH TELEPHONE DENSITY COMPARED TO THE

REST OF INDIA. MTNL HAS OVER 5 MILLION SUBSCRIBERS AND 330,000 MOBILE

SUBSCRIBERS .

MTNL PLANS TO ADD 1.6 MILLION LANDLINE/CDMA PHONES AND 1.15 MILLION GSM MOBILE
77
PHONES BETWEEN 2002-2007. THE COMPANY PLANS TO INVEST $500 MILLION DURING

2004-2005 TO EXPAND GSM AND CDMA SERVICES.

E. RELIANCE INFOCOMM
RELIANCE IS A $16 BILLION CONGLOMERATE INVOLVED IN BUSINESSES RANGING FROM OIL

EXPLORATION AND REFINERY TO POWER AND TEXTILES. IT IS ALSO AN INTEGRATED TELECOM

SERVICE PROVIDER WITH LICENSES FOR MOBILE, FIXED, DOMESTIC LONG DISTANCE AND

INTERNATIONAL SERVICES. RELIANCE INFOCOMM OFFERS A COMPLETE RANGE OF TELECOM

SERVICES , COVERING MOBILE AND FIXED LINE TELEPHONY INCLUDING BROADBAND , NATIONAL AND

INTERNATIONAL LONG DISTANCE SERVICES, DATA SERVICES AND A WIDE RANGE OF VALUE ADDED

SERVICES AND APPLICATIONS . RELIANCE INDIA MOBILE, THE FIRST OF I NFOCOMM'S INITIATIVES WAS

LAUNCHED ON DECEMBER 28, 2002. RELIANCE INFOCOMM PLANS TO EXTEND ITS EFFORTS

BEYOND THE TRADITIONAL VALUE CHAIN TO DEVELOP AND DEPLOY TELECOM SOLUTIONS FOR INDIA'S

FARMERS, BUSINESSES , HOSPITALS, GOVERNMENT AND PUBLIC SECTOR ORGANIZATIONS .

UNTIL RECENTLY, RELIANCE WAS PERMITTED TO PROVIDE ONLY “LIMITED MOBILITY ” SERVICES

THROUGH ITS BASIC SERVICES LICENSE . HOWEVER, IT HAS NOW ACQUIRED A UNIFIED ACCESS

LICENSE FOR 18 CIRCLES THAT PERMITS IT TO PROVIDE THE FULL RANGE OF MOBILE SERVICES. IT
HAS ROLLED OUT ITS CDMA MOBILE NETWORK AND ENROLLED MORE THAN 6 MILLION SUBSCRIBERS
IN ONE YEAR TO BECOME THE COUNTRY’S LARGEST MOBILE OPERATOR. IT NOW WANTS TO INCREASE
ITS MARKET SHARE AND HAS RECENTLY LAUNCHED PRE-PAID SERVICES.

78
 F. TATA TELESERVICES
TATA TELESERVICES IS A PART OF THE $12 BILLION TATA GROUP, WHICH HAS 93 COMPANIES,
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Panasonic
THE COMPANY IS ALSO EXPANDING ITS FOOTPRINT, AND HAS PAID $90 MILLION TO DOT FOR 11
NEW LICENSES UNDER THE IUC (INTERCONNECT USAGE CHARGES ) REGIME. THE NEW

LICENSES, COUPLED WITH THE SIX CIRCLES IN WHICH IT ALREADY OPERATES , VIRTUALLY GIVES

THE CDMA MOBILE OPERATOR A NATIONAL FOOTPRINT THAT IS ALMOST ON PAR WITH BSNL
AND RELIANCE INFOCOMM. THE COMPANY HOPES TO START OFF SERVICES IN THESE 11 NEW
CIRCLES BY AUGUST 2004. THESE CIRCLES INCLUDE BIHAR, HARYANA, HIMACHAL PRADESH,
KERALA, KOLKATA, ORISSA, PUNJAB, RAJASTHAN, UTTAR PRADESH (E AST) & WEST AND
W EST BENGAL.

MARKET SHARE OF MOBILE SERVICE OPERATORS:

COMPANY MILLION SUBS (FEB 2004) % SHARE

RELIANCE 6.82 21.53

BHARTI 6.19 19.58
HUTCHISON 4.82 15.03
IDEA CELLULAR 3.52 11.13
BPL 1.76 5.58
SPICE 1.18 3.74
AIRCEL 0.84 2.68
TATA INDICOM 0.63 1.99
MTNL 0.40 1.29
HEXACOM 0.27 0.87
HFCL 0.02 0.08

SALES PROSPECTS

79
EQUIPMENT MARKET:

THE TOTAL NETWORK EQUIPMENT MARKET IS ESTIMATED AT APPROXIMATELY $6.3 BILLION IN

Siemens, Phillips and Mitsubishi together hold the remaining 26% market share.

The cellular sector is witnessing dynamic technology trends across the globe with
the entry of GPRS/EDGE networks and the anticipated entry of 3G networks in the
future. With voice revenues projected to shrink in the near future, GSM cellular
operators are turning to GPRS to keep their business growing. These technologies
would help enhance revenues for telecom operators by allowing data applications
such as:

Value-added services (news, stocks, sports results, weather information),

GEOGRAPHIC positioning systems (one’s whereabouts, the nearest hotel, the route
to any destination), E-commerce for micro-payments, banking,
e-mails and images

UNTIL LATE 2003, CONTINUAL LITIGATION BETWEEN GSM AND CDMA OPERATORS AROUND THE

ISSUE OF FULL VERSUS LIMITED -MOBILITY FRANCHISE RIGHTS HAD STALLED MARKET PROGRESS .

W ITH THE ENDING OF LITIGATION AND THE ADOPTION OF A UNIFIED LICENSING REGIME, ALL

OPERATORS CAN NOW CONCENTRATE ON ROLLING OUT NETWORKS,

ATTRACTING SUBSCRIBERS AND IMPROVING SERVICES INSTEAD OF FIGHTING BATTLES IN THE PRESS AND

IN COURT.

INDIA’S TELECOMMUNICATIONS SECTOR IS NOW AMONG THE MOST DEREGULATED IN THE WORLD AND
PRESENTS POTENTIALLY LUCRATIVE OPPORTUNITIES FOR SERVICE PROVIDERS AND EQUIPMENT VENDORS

ALIKE. A FEW OF THE INTERNATIONAL COMPANIES THAT HAVE SUCCESSFULLY SEIZED THE OPPORTUNITY
ON BIG SCALES ARE AGILENT, CISCO, HP, HUGHES NETWORK SYSTEMS, LUCENT

80
TECHNOLOGIES, MOTOROLA, QUALCOMM, TEKELEC, SPRINT, AT&T, MCI, LIGHTBRIDGE, AND
UT STARCOM.

OPPORTUNITIES FOR TELECOM EQUIPMENT VENDORS

BUYER PROJECT NAME POTENTIAL U.S. EXPORT VALUE

(IN MILLIONS )

BSNL FIXED AND MOBILE NETWORK EXPANSION $2,900

MTNL FIXED AND MOBILE NETWORK EXPANSION

$120

RELIANCE RELIANCE CDMA & |OPTIC FIBER NETWORK $4,000

BHARTI BHARTI TELE-VENTURES

$250

IDEA IDEA GSM ROLLOUT $1,100

HEXACOM EXPANSION OF GSM NETWORK IN RAJASTHAN $10

HUTCHISON HUTCHISON-ESSAR GSM NETWORK EXPANSION

$400

BPL GSM EXPANSION $700

TATA EXPANSION OF CDMA FIXED AND MOBILE SERVICES $4,000

5.1 1 INDIAN COMMUNICATION EQUIPMENT INDUSTRY:

81
CATEGORY REVENUE IN US$ MILLION GROWTH

FY 2002-03 FY 2001-02
(STATED AS %)
CARRIER EQUIPMENT

PRODUCT 2,813

SERVICES 522
ENTERPRISE EQUIPMENT

PRODUCT 897 828

1.39

SERVICES 158 127

21.99
OTHERS

GSM PHONES 398 224

78.07

CDMA PHONES 125

T&M 65 49
34.09

TELECOM SOFTWARE 1238 1038

19.25

82
 CELLULAR SERVICE 243 161
50.05

OTHERS 1886 1466

28.65

ACCORDING TO JP MORGAN STANLEY, THE CELLULAR SEGMENT WILL BE A KEY DRIVER IN THE

GROWTH IN TELECOM SERVICES IN INDIA. THE SHARE OF PUBLIC OPERATORS IN THIS MARKET IS

LIKELY TO DIMINISH AND COMPETITION WOULD ESTABLISH ITSELF FASTER AND GET A BIGGER CHUNK

OF THE MARKET. THIS WOULD BE LED BY FURTHER LIBERALIZATION, INCREASING CUSTOMER

EXPECTATIONS , CONVERGENCE OF TECHNOLOGIES , AND THE ABILITY OF PRIVATE PLAYERS TO OFFER

IT TO THE MARKET FASTER THAN THE INCUMBENT OPERATOR. THE MARKET SHARE OF CDMA
SERVICES WOULD INCREASE CONSIDERABLY , WITH RELIANCE DEPLOYING IT ON A NATIONAL SCALE

AND USING IT AS THEIR PRIMARY SERVICE OFFERING. TELECOM SERVICE PROVIDERS ARE

INCREASINGLY FOCUSING ON CORPORATE TELECOM SERVICES . THOUGH RETAIL CONTRIBUTES MORE

THAN 95 PERCENT OF THE MARKET, IT IS THE REMAINING 4-5 PERCENT OF THE MARKET, WHICH IS
GETTING MORE IMPORTANT FOR REVENUE GENERATION .

5.4 MARKET ACCESS

IN ORDER FOR INTERNATIONAL COMPANIES TO ENTER THE MOBILE SERVICES IN INDIA, THEY HAVE TO
COMPLETE THE FOLLOWING FORMALITIES:

FIND A JV PARTNER (INDIAN COMPANY ) WHO WILL HAVE 51 PERCENT STAKE;

IF A NEW COMPANY, IT HAS TO FILE FOR UNIFIED ACCESS SERVICE LICENSE;

83
ONE TIME ENTRY FEE OF RANGING FROM $ 0.44 TO $44 MILLION, DEPENDING ON THE CIRCLE;
QUARTERLY REVENUE SHARE (AS PART OF LICENSE FEE): RANGING FROM 6-10% DEPENDING ON THE
CIRCLE;

PERFORMANCE BANK GUARANTEES WHICH IS EQUIVALENT TO FOUR TIMES THE REVENUES/LICENSE FEE.

IN ADDITION TO LICENSE FEES, THE CELLULAR LICENSEES PAY SPECTRUM CHARGES ON A REVENUE

SHARE BASIS OF 2% OF AGR FOR SPECTRUM UP TO 4.4 MHZ OR 3% OF AGR FOR SPECTRUM

UP TO 6.2 MHZ THE CHARGES WILL BE 4% OF AGR FOR SPECTRUM BEYOND 6.2 MHZ,
WHICH SHALL BE GIVEN IF THE SUBSCRIBER BASE IS MORE THAN 500 THOUSAND .

IN TERMS OF NTP-99, CELLULAR OPERATORS WILL BE FREE TO PROVIDE, WITHIN THEIR AREA OF
OPERATIONS, ALL TYPES OF MOBILE SERVICES, INCLUDING VOICE AND NON-VOICE MESSAGES, DATA

SERVICES AND PCOS UTILIZING ANY TYPE OF NETWORK EQUIPMENT, INCLUDING CIRCUIT AND/OR PACKAGE

SWITCHES THAT MEET THE RELEVANT INTERNATIONAL TELECOMMUNICATION UNION (ITU)/ TELECOM
ENGINEERING CENTER (TEC) STANDARDS.

THE TELECOM SECTOR HIGHLY CAPITAL-INTENSIVE AND REQUIRES HUGE INVESTMENTS OVER A
PROLONGED PERIOD OF TIME. SEVERAL DOMESTIC OPERATORS AND OVERSEAS INVESTORS WANT:

84
- FDI limit to be increased from the present cap of 49% to 74% and the same
has been done.
Investments by FIIs to be exempt from the sect oral limit imposed on FDI.
There are a few other market barriers for entry into the Indian mobile services
market, such as:
- High import duty on hand sets and infrastructure import ranging between
20-40 percent
- Huge entry/license fees
- Lack of adequate spectrum for expansion of wireless services
- Lack of coherent policy on spectrum management and allocation.
Upcoming Trade Shows in the Telecom sector

85
6. RESEARCH OBJECTIVE

Marketing research is a systematic collection, analysis, interpretation and reporting

marketing managers to solve some marketing opportunities. This particular research
study was undertaken and design with some predetermined objectives. The main
objective of the study is to evaluate the” Penetrate the Market for BSNL.

The objectives of the research are:

 To know about the popularity of BSNL plan among the consumers in India
 To know about the brands of GSM and their market capitalization.
 To study about the competitive strength of BSNL.
 To know about the consumer’s preferences and expectations with regard to
the choice of GSM SIM for various plan of BSNL
 To motivate the dormant retailers for continuing trade with BSNL
 To create awareness in dormant retailers about benefits which offered by
BSNL to small retailers directly or indirectly?
 To know about the visibility of nearest competitors or rivals of BSNL in the
Rajasthan market.

7. RESEARCH METHODOLOGY

Research methodology is the way to systematically solve the research problem. It

may be understand as a science of studying how research is done scientifically. In it
I study the various steps that are generally adopted by a researcher in his research
problem along with the logic behind them. It is necessary for the researcher to know
not only the research method but also the methodology.

I not only talk off research method but also consider the logic behind the methods.
The use in conduct of my research study and explain why I am using a particular

86
matter for technique and why I am using others. So those research results are
capable for being well evaluated by others.

7.1 Research Design:

Research design is the arrangement of conditions for collection & analysis in
a manner that aims to combine relevance to the research purpose with
economy in procedure.

7.2 Research Instruments: -

A complete questionnaire is prepared on the basis of consumer behavior &
satisfaction with regard to radial tires.

The questionnaire was designed keeping the following point / question in mind:

Is the question required?

Has the respondent experienced the situation described in the question?

Is the question testing the respondent’s memory?

Is the respondent likely to remember such information?

Will the respondent part with the information voluntary?

Can a single question be fragmented into small but multiple questions for better
understanding?

7.3 Sampling Plan: -

a) Sample method: Non-probability sampling (random & stratified)

87
Sample Size: 20 colleges & 200 dormant retailers of handsets in prepaid sales.
There are near about 225 educational institutions in Raipur including all technical
and professional institutions. So for 1st project I select 20 colleges including boys
and girls colleges, technical and non-technical colleges, professional and non
professional institutions. Hence in this project sample size is around one fourth of
population size. In the 2nd project we cannot go with sampling. We just collect
information about dormant retailers and ask question accordingly questionnaire.

A definite plan was drawn up for obtaining a sample from different areas of
educational institute of Jaipur.and sawaimadhopur Thus sample size has been
determined using a particular method. The availability of resources in terms of
infrastructure of field force. Time and cost was also taken into account.

Sampling Frame: - The sampling frame is the whole population since is based
on the selling behavior of all units’ presents in the population that is the
targeted to all the units in the population.

The process involved breaking up the various types educational institute of Jaipur
& Sawaimahdhopur city. This division was made in such a way that each one major
area of education get place in the study, be it technical or professional or other area
of study. There by each of these areas of study sample were drawn randomly or by
stratified sampling.

b) Sample Design: -
A sample design is a definite plan for obtaining technique or procedure. The
researcher would adopt in selecting items for the sample.

7.4 Types of sample design: -

88
Random sampling: - In random sampling, each of the population has a definite
reassigned probability of being selected in the sample.

Stratified sampling: - Under stratified sampling the population is divided into several
sub population (strata) that are individually more homogeneous than the total
population & then select items from each stratum to constitute a sample.
7.5 Data collection: -
Since the study, undertaken by me is descriptive research, I have
concentrated on primary data through survey and collection secondary data.
7.6 Source of data collection:
Data is collected from two methods: -

a) Primary data: -
b) The questionnaire for data collection according to the information required from
the consumers was designed. The region undertaken for the research is Jaipur
Sawaimadhopur (Raj.). Different areas selected for collection of data through
questionnaire and interviews.
b) Secondary data: - Secondary data is collected from books, newspaper,
magazine and websites.

8. COMPARATIVE SWOT ANALYSIS

Structural changes have had a positive impact on the telecommunications sector

and a compound annual growth rate (CAGR) of 13.42 percent is estimated for 2002-
2006. The future of the industry lies in the mainline and cellular segments and
constant technological innovations such as Internet Protocol (IP) based services.

The telecom sector in India has been witnessing a continuous process of reforms
since 1991. With the opening of international long distance services and internet
telephony from April, 2002, the process of liberalization and opening up the sector
for competition is complete. Convergence of services is a major new emerging area
and the telecom sector will have to address this in the Tenth Plan.

89
BSNL is a major player in the rapidly growing Indian wireless market, as well as an
emerging leader among GSM operators worldwide.

8.1 How to Perform a Swat Analysis

A SWOT Analysis is an integral part of a marketing plan and can also be part of a
business plan. Knowing what a SWOT Analysis is and how to perform one is very
important.

8.2 What is a SWOT Analysis?

A SWOT (Strengths, Weaknesses, Opportunities, and Threats) is a tool used to

provide a general or detailed snapshot of a company's health. A SWOT analysis
stands for Strengths, Weaknesses, Opportunities, and Threats and is a simple and
powerful way to analyze your company's present marketing situation. The best way
to understand SWOT is to look at an actual example

8.3 Why use a SWOT Analysis?

In any business, it is imperative that the business be its own worst critic. A SWOT
analysis forces an objective analysis of a company's position vies a Vis its competi-
tors and the marketplace. Simultaneously, an effective SWOT analysis will help de-
termine in which areas a company is succeeding, allowing it to allocate resources in
such a way as to maintain any dominant positions it may have. Below are numer-
ous, current example SWOT analyses for sale.

a) Strengths

1. Knowledge. BSNL is ranked fastest growing company in Rajasthan state.

2. Relationship selling. We get to know our customers, one by one. Our direct
sales force maintains a relationship.

90
 3. History. It has loyalty of customers and vendors. It is local.
4. The other company in telecom sector was merged different companies. But
BSNL did not take over any small telecom company. It establishes and devel-
op broad network on its own. It has 5, 58,510 mobile user till July, 2005.

b) Weaknesses

1. Company has a large physical network, so some times it is very difficult to

manage all this in an idle manner.
2. In comparison to strong competitors the visibility of BSNL is not satisfactory.

c) Opportunities

1. The financial strength of this is a backbone of India

2. Training. The company provides in-depth training to their employees and
frontline sales executives.
3. Service. As BSNL target market needs more service, the competitors are less
likely than ever to provide it. Their business model doesn't include service,
just selling.
4. The large number of population which have still do not have mobile could be
target customer of BSNL
5. The brand image of BSNL is strong plus point with BSNL so it is a great op-
portunity in front of Reliance infocomm that they should avail this brand im-
age.

d) Threats

1. The strong competitors of BSNL Rim, Airtel just signed an agreement with
Nokia by which Airtel will increase its network across country.
2. Some companies like Idea planning to open its services in Rajasthan. So
coming time is going to be very tough and competitors.

91
9. Reactivation of Dormant Retailers
In today’s business scenario retailers play a vital role in physical distribution channel
of every company. Retailers make a strong bond between customers and
organization. Today’s retailers are becoming harder to please. They are smarter,
more demanding, less forgiving. The challenges are not to produce retailer’s chain.
The challenges are to retain the retailers.
It is not enough to attracting new retailers; the company must keep them and
increase their business. Too many companies suffer from high retailers’ defection. It
is like adding water to a leaking bucket.
There are some steps to reduce the defection rate. First, the company must define
and measure its retention rate. Second, the company must distinguish the cause of
retailers’ attrition and identify those that can be managed better. Third, the company
needs to estimate how much profit it loses when it loses retailers.
Unfortunately, most marketing theory and practices centers on the art of attracting
new retailers rather than on retaining and cultivating existing ones. The traditionally
has been on making sales rather than building good relationship between retailers
and company.
In this study I have cover ten zones of Jaipur & sawaimadhopur city and ask
question to small retailers according to questionnaire. All retailers came out with
different views and express why they stop trading with Direct sales associate i.e.
Advent Communication. Many of them still dealing in BSNL products but they
purchase from outside
Zone one covers Adarsh nagar, Jawahar nagar, Raja Park, Janta colony and
Transport nagar. Zone two covers Malviya nagar, Jagatpura and Bapu nagar. Zone
three covers Durgapura, Sanganer and Tonk road. Zone four covers Johri bazaar,
Brahmpuri, Amer and Ramganj. Zone five covers Mashesh nagar, Mansarover,
Aggarwal farm and new sanganer road. Zone six covers Ajmer road, Hasanpura,
Hawa sarak, Sodala and Vaishali nagar. Zone seven covers Bani park, Shastri

92
nagar and Station road. Zone eight covers Jhotwara, Kalwar road, Murlipura,
Harmada and Sikar road.

Zone nine consist C scheme, Jayanti market, Raiser plaza and M I road. Zone ten
covers Chandpole, Gangori bazaar, Kishanpole bazaar, Choura Rasta and
Chaugan stadium.

And in Sawaimadhopur – Kherda, Bajriya, Adrsh Nagar , MP colony ,Mena colony,

P.G. college sawaimadhopur and nearest village, So I have cover all above
mentioned area and find some surprisingly facts that some very very big retailers
create such kind of problem. Big players of market purchase BSNL products from
Advent communication and get additional benefits given by BSNL. And then they
give these sets to small retailers at cutting their own discount at lower price. In this
situation small retailers become sick due to price discrimination, lack of demand and
less margin and profit. So they either stop to sale BSNL products or switch over to
other place to purchase BSNL products.

Reasons No of Retailer
Other Reason 5
Focused on Core Business 10
Lack of Demand and Less Margin 12
Price Discrimination 9
Frequent Changes in Schemes 13
Services is not Up to the Mark 7

93
 Table: 1- Retailers List of Zone 1

REASONS FOR STOPPING TRADE OF ZONE 1

13% 9%
18%
23%

16% 21%

Other Reason Focused on Core Business

Lack of Demand and Less Margin Price Discrimination
Frequent Changes in Schemes Services is not Up to the Mark

Table: 2- Retailers List of Zone 2

Zone 2
Reasons No of Retailer
Other Reason 5
Focused on Core Business 4
Lack of Demand and Less Margin 10
Price Discrimination 14
Frequent Changes in Schemes 8
Services is not Up to the Mark 7

REASONS FOR STOPPING TRADE OF ZONE 2

15% 10%
8%
17%

21%
29%

Other Reason Focused on Core Business

94 Price Discrimination
Lack of Demand and Less Margin
Frequent Changes in Schemes Services is not Up to the Mark
 Table: 3 –Retailers list of Zone 3

Zone 3
Reasons No of Retailer
Other Reason 5
Focused on Core Business 4
Lack of Demand and Less Margin 7
Price Discrimination 11
Frequent Changes in Schemes 6
Services is not Up to the Mark 5

REASONS FOR STOPPING TRADE OF ZONE 3

13% 13%
16% 11%

18%
29%

Other Reason Focused on Core Business

Lack of Demand and Less Margin Price Discrimination
Frequent Changes in Schemes Services is not Up to the Mark

95
 Table: 4 –Retailers list of Zone 4

Zone 4
Reasons No of Retailer
Other Reason 8
Focused on Core Business 3 Table: 5 –
Lack of Demand and Less Margin 12 Retailers list
Price Discrimination 14
Frequent Changes in Schemes 5 of Zone 5
Services is not Up to the Mark 9
Zone 5TRADE OF ZONE 4
REASONS FOR STOPPING

Reasons No of Retailer
Other Reason 18% 16% 78
6%
Focused on Core 10% Business 40
Lack of Demand and Less Margin 125
Price Discrimination 24% 110
26%
Frequent Changes in Schemes 49
Services is not
Other Reason Up to the Mark
Focused on Core Business 66
Lack of Demand and Less Margin Price Discrimination
Frequent Changes in Schemes Services is not Up to the Mark

REASONS FOR STOPPING TRADE OF ZONE 5

16% 12%
5%
9%

23% 35%

Other Reason Focused on Core Business

Lack of Demand and Less Margin Price Discrimination
Frequent Changes in Schemes Services is not Up to the Mark

96
 Table: 6 –Retailers list of Zone 6

Zone 6
Reasons No of Retailer
Other Reason 5
Focused on Core Business 2
Lack of Demand and Less Margin 17
Price Discrimination 8
Frequent Changes in Schemes 7
Services is not Up to the Mark 12

REASONS FOR STOPPING TRADE OF ZONE 6

24% 10% 4%

14% 32%
16%

Other Reason Focused on Core Business

Lack of Demand and Less Margin Price Discrimination
Frequent Changes in Schemes Services is not Up to the Mark

Table: 7 –Retailers list of Zone 7

Zone 7
Reasons No of Retailer
Other Reason 11
Focused on Core Business 10
Lack of Demand and Less Margin 9
Price Discrimination 10
Frequent Changes in Schemes 5
Services is not Up to the Mark 8

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 REASONS FOR STOPPING TRADE OF ZONE 7

15% 21%
9%

19%
19%
17%

Other Reason Focused on Core Business

Lack of Demand and Less Margin Price Discrimination
Frequent Changes in Schemes Services is not Up to the Mark

Table: 8 –Retailers list of Zone 8

Zone 8
Zone 8 No of Retailer
Other Reason 15
Focused on Core Business 7
Lack of Demand and Less Margin 7
Price Discrimination 15
Frequent Changes in Schemes 4
Services is not Up to the Mark 6

REASONS FOR STOPPING TRADE OF ZONE 8

11%
7% 28%

28% 13%
13%

Other Reason Focused on Core Business

Lack of Demand and Less Margin Price Discrimination
Frequent Changes in Schemes Services is not Up to the Mark

98
 Table: 9 –Retailers list of Zone 9

Zone 9
Reasons No of Retailer
Other Reason 10
Focused on Core Business 5
Lack of Demand and Less Margin 8
Price Discrimination 15
Frequent Changes in Schemes 4
Services is not Up to the Mark 7

REASONS FOR STOPPING TRADE OF ZONE 9

14% 20%
8%

10%
32% 16%

Other Reason Focused on Core Business

Lack of Demand and Less Margin Price Discrimination
Frequent Changes in Schemes Services is not Up to the Mark

Table: 10–Retailers list of Zone 10

Zone 10
Reasons No of Retailer

99
 Other Reason 9
Focused on Core Business 4
Lack of Demand and Less Margin 8
Price Discrimination 7
Frequent Changes in Schemes 3
Services is not Up to the Mark 5

REASONS FOR STOPPING TRADE OF ZONE 10

14%
26%
8%

19% 11%
22%

Findings &
Other Reason Focused on Core Business
Lack of Demand and Less Margin Price Discrimination conclusions
Frequent Changes in Schemes Services is not Up to the Mark

 BSNL offered some attractive plans only for big player of the market, which
purchases the products in bulk so that small retailer of the market suffered
from lack of demand and other problems.
 In almost ten zones above twenty per cent retailers express that price dis-
crimination is the basic cause to stop trade with of BSNL. Some big retailers
offered the same product at lower price. They directly or indirectly entertain
the benefits offered by company.
 Almost twenty percent said that they focused on core business because it’s
negatively affecting their core business. So their overall sales decreased.
Frequent change in schemes also make uncomfortable to focused on core
business
 Ten to fifteen per cent retailers are not satisfied with the services provided by
of BSNL. Particularly in area small retailers are not satisfied with salesman
services. Sometimes salesman did not give additional benefits offered by
company whereas some retailers demanded hoarding and other things.
 Almost more than twenty five percent retailers are suffered from lack of de-
mand and less margin. If a same product available at cheaper rate at big

100
 players shop then why they purchased from small shops. Price discrimination
is in the root of lack of demand.
 Less than ten percent stop trade due to other reasons like some suffered
from financial problems, some opened a new business and some due to fa-
miliar problems.

10. Suggestions
 BSNL should also plane such kind of schemes, which are benefited to small re-
tailers. Big players of the market later on directly or indirectly affect the sale and
performance of company and direct sales associates.
 BSNL can start a training and awareness programme for small retailers
 .make sure that its salesman maintain its brand name and prestige of company.
 Company should not change the schemes frequently because it creates uncom-
fertability among small retailers.

11. Annexure

BSNL Sales Coverage in Education Institutions of

. Jaipur. & Sawaimadhopur

101
1. Name of the College:

Courses Offered No. of Seats No. of Boys No. of Girls Localities Outsiders

ii

2. No. of Faculty Members:

\3. Hostel Facility: a) Yes b) No

If Yes,
No. Of Hostellers No. Of Boys No. Of Girls

4. Canteen: a) Yes b) No
a) Telecom Operator Available.
BSNL RIM Airtel Hutch Tata-indicom
b) Can we place BSNL stocks?
Yes No
If Yes, Contact Person:
Tel. No.:
5. Nearest Telecom Retailers:
Name: 1 2
Address:
Tel. No.:
Distance from college:

102
6. Nearby Markets: l. Distance
2.

7. A) Visibility of BSNL
Excellent Good Average Bad
8. A) Availability of Other Operators:
Airtel Vodaphon Rim Tata-inadicom

b) Visibility of Other Operators:

Airtel Vodaphon RIM Tata-inadicom

9. Remarks:

RETAILERS RETENTION

1. Name of the Retailers

2. Address

3. Zone No.

4. Still Deal in pro BSNL ducts (Y/N)

6. Total sales / monthly : SIM

103
 7. Total sales of BSNL : SIM

12. BIBLIOGRAPHY
Books:
 Agrawal M.R., Finacial Management, Garima Publication, Second
Edition 2010 .

104
  Avadhani V.A., Securities Analiysis and Portfolio Management,
Himalaya Publishing House, Ninth Edition 2008.
 Chunawala S.A., Financial Management, Himalaya Publishing House,
Second Edition 2008.

 Gordon , Natarajan ,Managementof financial services ,Himalaya

Publish House,Fifth Edition 2006.

 Gupta V.k., Marketing of Financial Services, Mohit Publication, Third

Edition 2004.
 Kothari C.R, Research Methodology, New Age International Publisher,
Second Edition 2004.
 Kotler Philip, Keller Kelvin Lane, Marketing Management, New Delhi,
Published by Dorling Kindersley (India) Pvt. Ltd, Second Edition 2006.
 Max Manfred Bengamin, Method Research, Sanga Publication, New
Edition.

Magazines & Publications:

1. Economics and Business Facts for you (Jan 2009)
2. India page of HT paper (Dec. 27,2009)
3. The Business world (Feb 2009)

Websites:

1. http://www.slideshare.net/nusantara99/marketing-mnagement
2. http://en.wikipedia.org/wiki/Bharti_Airtel
3. http://www.financialexpress.com/news/airtel_brand_promotion_in_india
4. www.bsnl.co.in
5. www.punjab.bsnl.co.in/directoryofofficers.php

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