1.1.

Historical Background of Telecom Sector

The development of telecommunication infrastructure is a crucial factor in achieving

socio-economic development of the country. Indian telecom is more than 165 years
old1, beginning with commissioning of the first telegraph line between Kolkata and
Diamond Harbour in 1850. Initially, in 1851, Post and Telegraph Department,
occupied a small corner of the Public Works Department. A regular, separate
department was opened in 1854, when telegraph facilities were thrown open to the
public, although telephone services formally introduced in India much later in 1881.
In 1914 during the World War-I, Postal Department and the Telegraph Department
were amalgamated. In April, 1925, the accounts of the Indian Posts and Telegraphs
were reconstituted to examine the true fiscal profile of the department.

In 19472, after India attained independence, all foreign telecommunication

companies were nationalized to form the Posts, Telephone and Telegraph (PTT), a
body that was governed by the Ministry of Communication.

In 19503, the number of Telephone Exchanges absorbed from princely states was
196. The installed capacity of these 196 exchanges was 13,362 lines with 11,296
working connections. In 1948, India has a telephone density of about 0.02
telephones per hundred populations, since then, India has come a long way. Up to
31st December, 1984, Postal, Telegraph and Telephone services were managed by
the Posts and Telegraphs Department. In January 1985, two separate Departments
for the Posts (DoP) and the Department of Telecommunications (DoT) were created.
The actual evolution of this industry started after the Government separated these
two departments. In 1986, Bombay and Delhi Telephones were separated to create

1
http://www.history.com
2
“Indian Telecom Industry” by Dun & Bradstreet India under the “D&B Sectoral Round Table Conference” Series,
available online.
3
“Indian Telecom History, Volume – 1 by Telecom India Daily, available online at
http://www.telecomindiaonline.com

1
 the new entity called Mahanagar Telephone Nigam Ltd.(MTNL), a Public Sector
Undertaking of Government of India. .

Historically, the telecom network in India was owned and managed by the
Government considering it to be a natural monopoly and strategic service, best
under state's control. However, in 1990's, examples of telecom revolution in many
other countries, which resulted in better quality of service and lower tariffs, led Indian
policy makers to initiate a change process finally resulting in opening up of telecom
services sector for the private sector. The Indian telecom sector was entirely under
government ownership until 1984, when the private sector was allowed in
telecommunication equipment manufacturing only.

In 19944, the telephone density was 0.8 per hundred persons as against the world
average of 10 per hundred persons. It was lower than China (1.7), Pakistan (2),
Malaysia (13) and various other countries. There were 8 million lines with a waiting
list of about 2.5 million. Only 1.4 lakhs villages were covered out of a total of
5,76,490 villages in the country. There were more than 1 lakh public call offices in
the urban areas.

Indian telecom sector has undergone a major process of transformation through

significant policy reforms. Until the late 90s the Government of India held a
monopoly on all type of communications. Government policies have played a key
role in shaping the structure and size of the Telecom Industry in India. The major
reforms began with opening of telecom sector for private sector with the introduction
of National Telecom Policy (NTP) in 1994, National Telecom Policy 1999,
Broadband Policy 2004 and National Telecom Policy 2012. As a result, the Indian
Telecom Market has become one of the most liberalized markets in the world with
private participation in almost all of its segments. The Telecom Policies have

4
Indian Telecom History, Volume – 1 by Telecom India Daily, available online at
http://www.telecomindiaonline.com
provided the much needed impetus to the growth of the industry and set the trend for
liberalization in the Industry.

In August, 1995, GSM (Mobile Services) entered India. Mobile revolution began in
Kolkata. Initially, cost of Handset was around Rs. 40,000 & Call tariff was Rs. 17
Rs/min. In January 1997, Telecom Regulatory Authority of India (TRAI)I was formed
to provide an effective regulatory framework and adequate safeguards to ensure fair
competition and protection of consumer interests. Section 13 of the TRAI Act gives
adequate powers to TRAI to issue directions to service providers. Section 14 of the
Act, the TRAI has full adjudicatory powers to resolve disputes between service
providers. TRAI has also be assigned the arbitration function for resolution of
disputes between Government (in its role as licensor) and any licensee.

Figure 1: Teledensity (1948-1998)

Teledensity per 100 persons

1948 0.02
1994 0.80
1998
1.94
Source: Indian Telecom History, Volume – 1 by Telecom India Daily, available online at
http://www.telecomindiaonline.com

On 1st October 2000, Department of Telecommunication has created Bharat

Sanchar Nigam Limited (BSNL), a new entity to operate services in different parts of
the country (except Mumbai and Delhi, where, already a PSU namely Mahanagar
Telephone Nigam Ltd was an operator) as a public sector undertaking of
Government of India with an understanding that being a Public Sector Undertaking,
it will operate more efficiently and a level playing field has been provided to the
Private Telecom Service Operators being now they have to compete with a Public
Sector Undertaking instead of competing with the Government of India.

During 1998-2005, PSU operators have shown remarkable growth in competitive

environment. They have added 342.80 Lakhs subscribers during this period. Private
operators have contributed very largely to post 1998 growth. They have added
454.50 Lakhs subscribers during this period. Overall there was an addition to
subscriber base by almost 8 crores new subscribers. It was a significant addition for
that period and this has resulted into a 5 fold increase in the teledensity from 1.94 to
9.11 per 100 persons.

Year 2006 was the year of dynamic growth for Telecom Sector. New policies, rules,
faces popped in and the market saw a huge growth in terms of subscriber additions.
India surpassed China in monthly additions and teledensity crossed the figure of 20.
July 2007 was the highest subscriber addition in the world with 73.40 Lakhs new
subscribers. There was an exponential growth in teledensity thereafter till 2011. It
was a telecom revolution in India during which teledensity has increased from 9.11
to 76.86. After 2011, it has stabilized around 75 per 100 persons in relative terms.
As on 30/06/2014, total number of subscribers reached to 942.95 Million. Out of
which Urban Subscribers stands at 559.77 Million and Rural subscribers stands at
383.18 Million. Urban Teledensity was 146.24 and Rural Teledensity at 44.50 per
100. Total Wire line Subscribers were at 28.03 Million and Wireless Subscriber were
at 914.92 Million. In other words, out of total subscribers, Share of Wireless
subscribers is 97.03%. Teledensity over the years has expressed as below:
 Figure 2: Teledensity (2005-June 2014) (Source: TRAI Website)

1.2. Role of Telecommunication in the Socio-Economic Development

1.2.1. Importance of Telecom Sector

The telecom services have been recognized the world-over as an important tool for
socio-economic development for a nation. It is one of the prime support services
needed for rapid growth and modernization of various sectors of the economy.
Narrowing access gaps and removing barriers to information dissemination are
prerequisites for promoting equitable and sustainable development as well as
political and social cohesion. Increasing connectivity is highly instrumental in
improving governance, business communication, security, response to emergencies
and in the overall strengthening of the socio-cultural ethos of the country.
Globalization, liberalization and privatization are the three most spoken words in
today’s world. These initiatives paved way for all-round reforms, especially in
 developing economies, like India. These countries realized that development of
effective and efficient means of communications and information technology is
important to push them on to the path of development.

At the dawn of the 21st century, the developing countries started to make full use of
the technology revolution taking place around the world, with many countries
liberalizing the existing stringent policies and regulations. To improve information
and telecommunication technology, 189 countries of the UN met at the Fifty-Fifth 5
General Assembly on September 2000. A millennium declaration was made,
according to which the countries reaffirmed their commitment to improve the living
conditions of poor and downtrodden in the world by adopting intense poverty
programmes. One of the targets of this declaration was adherent to “In co-operation
with the private sector make available the benefits of new technologies, especially
information and communication”.

In today’s information age, the telecommunication industry considered as the back-

bone of industrial and economic development, the industry has been aiding delivery
of voice and data services at rapidly increasing speeds, and thus, has been
revolutionizing human communication.

The process of liberalization in the country began in the right earnest with the
announcement of the New Economic Policy in July 1991 6. The new economic policy
adopted by the Government aims at improving India's competitiveness in the global
market and rapid growth of exports. Another element of the new economic policy is
attracting foreign direct investment and stimulating domestic investment.
Telecommunication services of world class quality are necessary for the success of
this policy. Globalization has made telecommunication an integral part of the
infrastructure of the Indian economy.

5
http://www.un.org/ga/55/
6
India’s Economic Policy (Preparing for the Twenty-First Century) by Dr. Bimal Jalan
 The telecom sector in India experienced such a rapid growth over on account of
regulatory liberalization, structural reforms and competition, making telecom one of
the major catalysts in India’s growth story. However, much of this growth can be
attributed to the unprecedented growth in mobile telephony as the number of mobile
subscribers grew at an astonishing rate from 10 million in 2002 to 914.92 7 million up
to June 2014. Telecom has emerged as a key infrastructure for economic and
consumer growth because of its multiplier effect and the fact that it is beneficial to
trade in other industries. The contribution of the sector to GDP has increased
significantly over the years.

Indian telecom industry has grown from a teledensity of 3.58% in March 2001 to
75.80%7 in June 2014. This great leap in both numbers of consumers as well as
revenues from telecom services has not only provided sufficient contribution in
Indian GDP growth but also provided much needed employment to India youth.

Telecommunication has emerged as a key driver of economic and social

development in an increasingly knowledge intensive global scenario. Sustained
adoption of technology offers viable options in overcoming developmental
challenges in education, health, employment generation, financial inclusion and
much else.

1.2.2. Job Creation

Besides being one of the largest revenue generators, telecom is also a major creator
of jobs. The telecom sector has led to the growth of a range of communication
technology-enabled activities and services. Further, the spread of telecom and
information services to rural areas is enabling the setup of rural business process
outsourcing (BPO). It aims to introduce rural youth to BPO and to provide
employment in their village.

7
“The Indian Telecom Services Performance Indicators”, April –June 2014, by TRAI Website
1.2.3. Social Development

Connectivity fosters social development, including improved education, health and

increased citizen participation in civil society. Telecommunication helps provide
access to health care and allied services. It helps combat epidemics such as
HIV/AIDS and malaria by supplying information on treatment and control, generating
awareness, improving access to and connectivity with health centers, and
establishing the mobile testing of diseases. The current synergy between health
reform initiatives and advantages in technologies has resulted in the proliferation of
e-medicine projects.

1.2.4. Rural Development

The provision of telecom services in rural areas and the obscure vicinity has made
previously abandoned areas highly accessible. Communication facilities in rural
areas are critical for the development of rural India.

1.2.5. E-Governance

E-governance helps in accessibility, qualitative, transparent and the cost-effective

public services. Significant progress has been made in the computerization of
railway bookings, allocation of the Permanent Account Number (PAN) to income tax
payers, processing of passport application, conduct of public examination and
customs clearance, among others.

1.2.6. Gender Equality

The advent of communications technology has helped overcome institutional and

social barriers of mobility, high illiteracy and negative social norms. It is facilitating
women’s participation in the political and economic processes of the country. Mobile
telephones and the internet can advance gender equality by:
  Empowering women and surmounting gender inequality : this is being
achieved by promoting the awareness among women about their social and
political status, and creating new economic opportunities for women through
digital empowerment.

 Delivering literacy and education to women wherever they live or work : this
opens up new avenues and allows for flexible learning times. One prime success
story of communication technology promoting women’s education is India’s
“Distance education for women’s development and empowerment” jointly run by
the Department of Women and Child Development and the Indira Gandhi
National Open University. This is one of the most befitting instances of the
telecom and internet revolution, taking relevant education that is well aligned to
the needs of the communities to their doorstep, thus overcoming cultural and
language barriers.

 Helping lower child mortality and improve maternal health : this is done by
providing information on nutrition, strengthening health networks, monitoring
health trends and provisioning primary health care.

1.2.7. Facilitating Research and Development

The growth in high-speed communication and advances in internet technology are

making India a major R&D hub. NTP-1999 8 formulated by the Government of India
places great emphasis on research and development (R&D). In pursuance of the
NTP 1999’s objective toward R&D, organizations such as Telecom Centers of
Excellence (TCOE), the Center of Excellence in Wireless Technology (CEWIT) and
the Broadband Wireless Consortium of India (BWCI) have been established. TCOEs
have focused on the technological and management challenges that Indian
operators face in reaching all sections of society while offering affordable solutions,
leading class services and a global presence.

8
http://www.dot.gov.in/telecom-polices/new-telecom-policy-1999
1.2.8. Provide impetus to initiatives such as MNREGA and Aadhaar

The Government of India has undertaken programs such as the Mahatma Gandhi
National Rural Employment Guarantee Act (MNREGA) and Aadhaar — Unique
Identification Authority of India (UIDAI), which aim to provide inclusive growth. The
challenges surrounding these programs include job cards for those demanding work,
the elimination of ghost workers, the introduction of electronic muster rolls, wage
payments and the authorization of wages electronically. An integrated system for
taking biometric attendance through handheld devices and transmitting it through
mobile phones for authentication is expected to solve the challenge of attendance.
Once a worker has logged in, this data could be transmitted to MNREGA, making
sure the worker is paid for the day.

1.2.9. Conclusion

Mobile telecommunication is creating a great transformation in rural India and

resulting in all round economic as well as social development. Information received
through mobile like weather reports and market prices, has begun to have an impact
on productivity for the agricultural sector. There are various areas which have been
identified where mobiles can affect rural communities- micro commerce, education,
information, healthcare, governance, finance and transport. With increasing
teledensity, competition and urge to boost subscriber base, mobile operators are
exploring the rural India markets with greater interest. The rural population is also
accepting modernization and change.

Another beneficiary of the telecom revolution is the financial services industry, which
has been on a growth trajectory. This is the next revolution that is expected to
emerge through the use of mobile phones. Mobile phones provide consumers an
opportunity to transact anytime and anywhere. M-commerce finds its applications
across various end markets such as banking and financial institutions, paying bills
for utilities such as power and gas, booking tickets for transportation services such
 as trains and taxis and online shopping. Mobile banking enables customers of banks
and other financial institutions to access their account information, transfer funds,
trade stocks and purchase financial products such as insurance. Financial inclusion
is central to the overall task of inclusive growth. (TRAI: 2011).

1.3. Current Status of Telecom Sector in India

Over the past decade, Indian telecom industry has witnessed many positive
developments. India has attained the second largest subscriber network after China
with the total number of subscribers scaling up to about 950 million and claiming an
urban teledensity in excess of 140 and rural teledensity of 40. With an estimated
base of 67 million Smartphone users in 2013, India also ranks fifth amongst the top
countries in this category. With an increasing Smartphone penetration in the country,
subscribers accessing internet through mobile devices stand at more than 175
million. The Indian telecom industry is one of the fastest growing in the world and is
projected that India have 'billion plus' mobile users by 2015. The current status of
Telecom Sector in India has expressed with the help of following Tables and
Figures9

Table 1-Snapshot of Current Status of Telecom Sector in India

(Data As on 30th June, 2014)

Telecom Subscribers (Wireless + Wire line)
Total Subscribers 942.95 Million
Urban Subscribers 559.77 Million
Rural Subscribers 383.18 Million
Market share of Private Operators 87.87%
Market share of PSU Operators 12.13%
Teledensity 75.80

9
“The Indian Telecom Services Performance Indicators dated 07/11/2014; TRAI Website
Urban Teledensity 146.24
Rural Teledensity 44.50

Wireless Subscribers
Total Wireless Subscribers 914.92 Million
Urban Subscribers 537.56 Million
Rural Subscribers 377.36 Million
GSM Subscribers 859.36 Million
CDMA Subscribers 55.56 Million
Market share of Private Operators 89.85%
Market share of PSU Operators 10.15%
Teledensity 73.55
Urban Teledensity 140.44
Rural Teledensity 43.82

Wire-line Subscribers
Total Wire-line Subscribers 28.03 Million
Urban Subscribers 22.21 Million
Rural Subscribers 5.81 Million
Market share of Private Operators 23.09%
Market share of PSU Operators 76.91%
Teledensity 2.25
Urban Teledensity 5.80
Rural Teledensity 0.68
No. of Village Public Telephones (VPT) 587,201
No. of Public Call Office (PCO) 912,628

Internet Subscribers
Total Internet Subscribers 259.14 Million
Narrowband subscribers 190.31 Million
 Broadband subscribers 68.83 Million
Wired Internet Subscribers 18.55 Million
Wireless Internet Subscribers 240.60 Million
Total Internet Subscribers per 100 population 20.83

Telecom Financial Data (01/07/2013 to 30/06/2014)

Gross Revenue(GR) 239473 Crores

Revenue & Usage Parameters (QE Jun-14)

Monthly Average Revenue Per User (ARPU) 122
Monthly ARPU GSM Full Mobility Service 119
Monthly ARPU CDMA Full Mobility Service 112

Table 2-State-Wise (Wireless+Wireline) Subscriber base

Service Area Subscribers (Million)

Jun-13 Jun-14 Net Growth
Additions (%)
Andhra Pradesh 67.28 69.29 2.01 2.99
Assam 14.93 15.75 0.82 5.49
Bihar 60.40 63.55 3.15 5.22
Delhi 43.15 46.32 3.17 7.35
Gujarat 53.71 56.77 3.06 5.70
Haryana 20.45 21.35 0.90 4.40
Himachal Pradesh 7.28 7.52 0.24 3.30
Jammu & Kashmir 7.34 8.44 1.10 14.99
Karnataka 55.51 56.76 1.25 2.25
Kerala 34.17 33.51 -0.66 -1.93
Madhya Pradesh 54.34 56.76 2.42 4.45
Maharashtra 70.54 75.03 4.49 6.37
(Excluding Mumbai)
 Mumbai 32.37 34.11 1.74 5.38
North East 9.37 9.68 0.31 3.31
Orissa 25.21 25.98 0.77 3.05
Punjab 31.12 31.31 0.19 0.61
Rajasthan 50.51 54.55 4.04 8.00
T.N. (incl. Chennai) 75.89 79.34 3.45 4.55
U.P.(E) 76.06 80.18 4.12 5.42
U.P.(W) 48.98 49.72 0.74 1.51
Kolkata 22.67 22.53 -0.14 -0.62
West Bengal 41.80 44.49 2.69 6.44
(Excluding Kolkata)
All India 903.09 942.95 39.86 4.41

Table 3-State wise Rural-Urban Subscribers (Wireless+Wireline)

Service Area Subscribers (Million) as on 30/06/2014

Total Rural Urban % of Rural Subs

Andhra Pradesh 69.29 29.06 40.23 41.94

Assam 15.75 9.47 6.28 60.10

Bihar 63.55 34.98 28.57 55.05

Delhi 46.32 2.33 43.99 5.03

Gujarat 56.77 20.85 35.91 36.74

Haryana 21.35 10.16 11.19 47.59

Himachal Pradesh 7.52 4.88 2.64 64.83

Jammu & Kashmir 8.44 3.98 4.45 47.21

Karnataka 56.76 17.28 39.48 30.45

Kerala 33.51 16.84 16.67 50.24

Madhya Pradesh 56.76 24.75 32.01 43.60

Maharashtra 75.03 35.19 39.83 46.91

Mumbai 34.11 0.37 33.75 1.08

North East 9.68 4.47 5.21 46.21

Orissa 25.98 14.16 11.83 54.49

Punjab 31.31 11.82 19.49 37.74

Rajasthan 54.55 26.87 27.68 49.26

T.N. (incl. Chennai) 79.34 22.12 57.22 27.88

U.P.(E) 80.18 39.85 40.33 49.70

U.P.(W) 49.72 23.05 26.67 46.36

Kolkata 22.53 1.66 20.87 7.36

West Bengal 44.49 29.03 15.46 65.25

All India 942.95 383.18 559.78 40.64

Table 4- List of Wireless (GSM & CDMA) Service Providers

S.No. Service Provider Area of Operation

1 Bharti All India
2 Aircel Group All India
3 Reliance Communications Ltd (Group) All India
4 Vodafone All India
5 Tata Teleservices All India except Assam, NE &
J&K
6 IDEA/Spice All India
 7 Sistema Shyam Telelink Delhi, Kolkata, Gujarat,
Karnataka, Tamil Nadu (incl.
Chennai), Kerala, UP(W),
Rajasthan & W.B.
8 BSNL All India (except Delhi &
Mumbai)
9 MTNL Delhi & Mumbai
10 Loop Telecom Mumbai
11 Quadrant (HFCL) Punjab
12 Telewings Communications Services MH, Gujarat, AP, UP(W), UP(E),
(Earlier known as Unitech Group) Bihar
143 Videocon Telecommunications Ltd Gujarat, Haryana, UP(W),
UP(E), MP, Bihar

Table 5 -State wise Rural-Urban Subscribers (Wireless)

Service Area Subscriber base (in millions)-Jun 2014

Total Rural Urban % of Rural
Subscribers
Andhra Pradesh 67.29 28.54 38.75 42.41
Assam 15.57 9.43 6.13 60.59
Bihar 63.17 34.87 28.30 55.21
Delhi 43.21 2.33 40.88 5.39
Gujarat 55.12 20.51 34.61 37.21
Haryana 20.86 10.02 10.84 48.04
Himachal Pradesh 7.27 4.70 2.58 64.55
Jammu & Kashmir 8.26 3.95 4.30 47.87
Karnataka 54.49 16.98 37.51 31.15
Kerala 30.67 14.97 15.70 48.80
Madhya Pradesh 55.66 24.59 31.07 44.18
 Maharashtra 72.76 34.66 38.10 47.64
Mumbai 31.07 0.37 30.70 1.19
North East 9.55 4.44 5.11 46.51
Orissa 25.64 14.07 11.58 54.86
Punjab 30.12 11.49 18.63 38.15
Rajasthan 53.65 26.67 26.98 49.70
T.N. (incl. Chennai) 76.47 21.63 54.84 28.28
U.P.(E) 79.43 39.70 39.73 49.98
U.P.(W) 49.19 22.98 26.21 46.72
Kolkata 21.47 1.66 19.81 7.73
West Bengal 44.00 28.80 15.20 65.46
All India 914.92 377.36 537.56 41.24

Table 6-State wise Teledensity (Rural + Urban)

Service Area As on 30/06/2014

Rural Teledensity Urban Teledensity Total
Teledensity
Andhra Pradesh 46.19 165.64 79.47
Assam 35.29 125.79 49.50
Bihar 30.07 154.21 47.13
Delhi - - 228.30
Gujarat 57.09 139.40 91.13
Haryana 58.57 118.31 79.65
Himachal Pradesh 78.71 328.83 107.46
J&K 45.06 132.73 69.18
Karnataka 45.61 167.91 92.44
Kerala 63.75 185.38 94.65
Madhya Pradesh 33.51 116.53 56.02
Maharashtra 56.91 128.83 91.25
North East 43.44 153.50 70.72
Orissa 40.90 162.22 62.00
 Punjab 68.28 149.67 103.23
Rajasthan 49.64 161.23 76.51
T.N. 75.06 139.89 112.74
U.P. 36.51 132.66 58.31
West Bengal 46.06 135.94 71.79
All India 44.50 146.24 75.80

Table 7-State wise WirelessTeledensity (Rural + Urban)

Service Area Rural Urban Total

Teledensity Teledensity Teledensity
Andhra Pradesh 45.37 159.53 77.17
Assam 35.16 122.82 48.92
Bihar 29.98 152.74 46.85
Delhi - - 212.98
Gujarat 56.15 134.33 88.49
Haryana 57.78 114.59 77.83
Himachal Pradesh 75.81 320.54 103.94
Jammu & Kashmir 44.70 128.23 67.68
Karnataka 44.79 159.55 88.73
Kerala 56.67 174.58 86.62
Madhya Pradesh 33.30 113.10 54.93
Maharashtra 56.06 120.45 86.81
North East 43.13 150.53 69.75
Orissa 40.64 158.79 61.19
Punjab 66.40 143.02 99.30
Rajasthan 49.26 157.16 75.24
T.N. 73.38 134.08 108.66
U.P. 36.39 130.57 57.74
West Bengal 45.72 131.00 70.13
All India 43.82 140.44 73.55
Table 8- Market Share of the operators in total rural subscribers (Wireless +
Wireline) as on 30/06/2014

Service No. of Total No. of Rural Percentage of Market share

Provider Subscribers Subscribers Rural of Rural
(in millions) (in millions) subscribers subscribers
(%)
Bharti 212.60 96.63 45.45 25.22
Vodafone 169.96 90.92 53.49 23.73
IDEA 139.01 76.85 55.28 20.06
BSNL 107.50 35.76 33.26 9.33
Reliance 110.06 27.02 24.55 7.05
Aircel 73.07 25.96 35.52 6.77
Tata 64.44 15.46 24.00 4.04
Telewings 39.31 12.38 31.49 3.23
Sistema 9.21 2.14 23.27 0.56
Quadrant 2.50 0.06 2.27 0.01
Loop Mobile 2.84 0.00 0.00 0.00
Videocon 5.55 0.00 0.00 0.00
MTNL 6.90 0.00 0.00 0.00
Total 942.95 383.18 40.64 100

Table 9- Market Share of Wireless Service Providers as on 30/06/2014

Service Provider No. of Total Subscribers Market Share (%)

(in millions)
Bharti 209.25 22.87
Vodafone 169.90 18.57
IDEA 139.01 15.19
Reliance Comm. Group 108.85 11.90
 BSNL 89.47 9.78
Aircel 73.07 7.99
Tata 62.87 6.87
Telewings 39.31 4.30
Sistema 9.15 1.00
Videocon 5.55 0.61
MTNL 3.37 0.37
Loop 2.84 0.31
Quadrant 2.28 0.25
Total 914.92 -

Table 10- List of Wireline Service Providers

Sl. No. Name of the Service Provider Area of Operation

1 BSNL All India except Delhi & Mumbai
2 MTNL Delhi & Mumbai
3 Bharti Airtel Ltd Andhra Pradesh, Delhi, Gujarat,
Haryana, Madhya Pradesh &
Chhatisgarh, Maharashtra,
Mumbai, Punjab, Tamil Nadu
(incl. Chennai), Karnataka,
Kerala, Kolkata, Rajasthan,
UP(East) and UP(West)
4 Tata Teleservices Ltd. & All India except N.E., Assam and
Tata Teleservices (Mah) Ltd. J&K
5 Quadrant Televentures Ltd. (HFCL) Punjab
6 Sistema Shyam Telelink Ltd. Rajasthan
7 Reliance Communications Ltd. All India except Assam & North-
East
8 Vodafone All India except H.P. and J&K
Table 11- Service Provider wise Wireline Subscriber base (Rural & Urban)

Service Subscriber Base Market Market Market

Provider (Million) Share- Share- Share-
as on 30/06/2014 Total Urban Rural
Rural Urban Total (%) (%) (%)
BSNL 5.75 12.27 18.03 64.32 55.25 98.97
MTNL - 3.53 3.53 12.59 15.89 -
Bharti - 3.35 3.35 11.95 15.08 -
Tata 0.05 1.52 1.57 5.60 6.84 0.86
Reliance 0.002 1.21 1.21 4.32 5.45 -
Quadrant - 0.22 0.22 0.78 0.99 -
Sistema 0.01 0.05 0.06 0.22 0.23 0.17
Vodafone - 0.06 0.06 0.22 0.27 -
Total 5.81 22.21 28.03 100 100 100

Table 12- Internet Subscriber Base and Market Share – Jun-14

Sl.No ISP Subs Share (%)

1 Bharti 65913096 25.43
2 Vodafone 57157946 22.06
3 BSNL 41423859 15.98
4 Reliance 28793074 11.11
5 Idea 27879929 10.76
6 Aircel 16830144 6.49
7 Telewings 7972538 3.08
8 Tata 3169507 1.22
9 Loop 2690445 1.04
10 MTNL 1808061 0.70
Total of Top 10 ISPs 253638599 97.88
Others 5505141 2.12
Grand Total 259143740 100.00
Figure 3-Trends in Telephone subscribers and Teledensity in India

Figure 4-Wireless Subscriber Base and Teledensity

Figure 5-Wireline Subscriber Base and Teledensity

Figure 6-Market Share - Rural & Urban

Figure 7-Wireless Market Share-Rural & Urban

Figure 8-Wireline Market Share - Rural & Urban

Figure 9-Composition of Access subscription - Wireline & Wireless

Figure 10-Composition of Telephone Subscribers

Figure 11-Composition of internet subscription

Figure 12-Number of PCOs

Figure 13-Composition of Wireless Internet subscription

Figure 14-Technology trend for Wireless Internet Access – Jun-14

 Figure 15-Growth/decline Trend in VPTs

There are 5,93,731 inhabited villages in India as per census 2001. At the end of the
quarter, 98.90% of the total inhabited villages in India have been connected by VPT.
BSNL (5,82,401) has 99.18% market share of total VPTs followed by Sistema (3010)
with 0.51%

1.4. Study Related to Telecom Policies in India:

Communications are an essential means for reaching the ”Bottom of the Pyramid”
and enabling individuals to reduce poverty and improve the quality of their lives. The
widespread technological dissemination creates new opportunities across all
segments of society, but also presents new challenges requiring adaptable
strategies. Competitive and open communications markets have created
opportunities in countries that previously lagged behind. It was needed that a solid
basis on which to build sound foundations for the future digital economy. A trans-
sector focus tailoring regulation to help multiply the effects of telecommunication
 across all sectors of the economy can prove helpful – whilst ensuring that large
segments of society are not excluded from the benefits of access to
telecommunication. Last but not least, Government needed to seek and apply
durable policies and principles that can be continually brought to bear in a changing
market.

1.4.1. Developing Telecom Policy:-

The following steps have been suggested for developing the Telecom Policy for
achieving desired objectives:-

First Step: Assessing Present Status of Telecom Growth in our country

Second Step: Assessing present status of Telecom Growth in the other countries
Third Step: Setting Telecom Development Objectives
Fourth Step: Defining Role of Government, PSU and Private Sector
Fifth Step: Defining Role of Regulator
Sixth Step: Defining Policy regarding FDI in Telecom Sector
Seventh Step: Time bound evaluation of effectiveness of Telecom Policy

1.4.2. National Telecom Policy 1994:

(Source: http://www.dot.gov.in/telecom-polices/national-telecom-policy-1994)

1.4.2.1. Introduction:

Telecommunication services of world class quality are necessary for the success of
the economic policy. It is, therefore, necessary to give the highest priority to the
development of telecom services in the country. The first National Telecom Policy
was announced in 1994 with a major thrust on universal service and qualitative
improvement in telecom services; and also, opening of private sector participation in
basic telephone services. The then telephone density in India was about 0.8 per
hundred persons as against the world average of 10 per hundred persons.
1.4.2.2. Objectives:

a) The main focus was of the Telecom Policy was telecommunication for all and
telecommunication within the reach of all. Universal service covering all villages
as early as possible at affordable and reasonable prices. Telephone should be
available on demand by 1997.

b) The quality of telecom services should be of world standard.

c) To ensure that India emerges as a major manufacturing base and major exporter
of telecom equipment.

d) The defense and security interests of the country shall be protected.

e) All value-added services available internationally should be introduced in India.

1.4.2.3. Evaluation

NTP 94 spelt out five basic objectives of which two objectives of availability of
telephone on demand and universal service (connecting all villages) were targeted
to be realized by 1997. Both of these objectives have remained unrealized. In regard
to quality of service, matching "world standard" and providing "widest possible range
of services" "at reasonable prices" were stated aims. Two other objectives were to
make the country a major manufacturing base and exporter of telecom equipment
and to ensure the country's defense and security needs. (The powers of licensing
and spectrum management were retained by the Government on the ground that
both need to be strictly monitored in order to protect the strategic interests and
security of the country).

There were serious gaps in the policy document as regards provision of a suitable
environment for entry of private service provider and on the issue of regulation.
Efforts to involve the private sector under that regime encountered certain obstacles.
In addition, while major targets were specified in NTP 94, an accurate assessment
of the underlying resource requirements was not done. For example, to realize the
enunciated objectives, an estimated Rs. 230 billion of additional resources were
required. NTP 1994 recognized that the required resources for achieving these
targets would not be available only out of Government sources and concluded that
private investment and involvement of the private sector was required to bridge the
resource gap. The Government invited private sector participation in a phased
manner from the early nineties, initially for value added services such as Paging
Services and Cellular Mobile Telephone Services (CMTS) and thereafter for Fixed
Telephone Services (FTS).

Meanwhile, convergence arising due to changes in technology and the overall

market structure for service provision had changed and there was a need to provide
fresh directions through another policy. The Government recognizes that the result
of the privatization has so far not been entirely satisfactory. While there has been a
rapid rollout of cellular mobile networks in the metros and states with currently over
1 million subscribers, most of the projects were facing problems. The main reason,
according to the cellular and basic operators, has been the fact that the actual
revenues realized by these projects have been far short of the projections and the
operators are unable to arrange financing for their projects. As a result, some of the
targets as envisaged in the objectives of the NTP 1994 have remained unfulfilled.
The private sector entry has been slower than what was envisaged in the NTP 1994.

In the initial enthusiasm of opening up of the telecommunication sector, the private

operators, in their bids, offered much higher amounts of license fee than they could
eventually muster. The government viewed the above developments with concern
as it would adversely affect the further development of the sector and recognizes the
need to take a fresh look at the policy framework for this sector.
1.4.3. National Telecom Policy 1999:
(Source: http://www.dot.gov.in/telecom-polices/new-telecom-policy-1999)

1.4.3.1.Introduction:

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

1.4.3.2. The objectives of the NTP 1999 are as under:-

Availability of affordable and effective communications for the citizens;

Strive to provide a balance between the provision of universal service to all

uncovered areas (including Rural, Remote, Hilly and Tribal areas) and the
provision of high-level services capable of meeting the needs of the economy;

Create a modern and efficient telecommunications infrastructure taking into

account the convergence of IT, media, telecom and consumer electronics and
thereby propel India into becoming an IT superpower;
 Convert PCO's, wherever justified, into Public Tele infocentres having multimedia
capability like ISDN services, remote database access, government and
community information systems etc.

Transform the telecommunications sector to a greater competitive environment in

both urban and rural areas providing equal opportunities and level playing field
for all players;

Strengthen R&D efforts in the country and provide an impetus to build world-
class manufacturing capabilities.

Achieve efficiency and transparency in spectrum management.

Protect defense and security interests of the country.

Enable Indian Telecom Companies to become truly global players.

In line with the above objectives, the specific targets that the NTP-1999 seeks to
achieve would be:

Make available telephone on demand by the year 2002 and sustain it thereafter
so as to achieve a teledensity of 7 by the year 2005 and 15 by the year 2010

Encourage development of telecom in rural areas making rural communication

mandatory for all fixed service providers.

Increase rural teledensity from the current level of 0.4 to 4 by the year 2010 and
provide reliable transmission media in all rural areas.

Achieve telecom coverage of all villages in the country and provide reliable
media to all exchanges by the year 2002.
 Provide Internet access to all district head quarters by the year 2000

Provide high speed data and multimedia capability using technologies including
ISDN to all towns with a population greater than 2 lakh by the year 2002.

The New Policy framework focused on creating an environment, which enables

continued attraction of investment in the sector and allows creation of
communication infrastructure by leveraging on technological development.

1.4.3.3. Evaluation of National Telecom Policy 1999

NTP-99 laid emphasis on universal service and sought to achieve telephone on

demand and increase in rural teledensity. In pursuance of these objectives, a fund
named Universal Service Obligation Fund (USO Fund) was established in April 2002
under the administrative control of DoT, to exclusively meet the universal service
obligations. The resources for implementation of USO are raised through a Universal
Service Levy which has been fixed at 5 per cent of the Adjusted Gross Revenue of
all telecom service providers. The key achievements of National Telecom Policy
1999 are summarized as below:

1.4.3.3.1. Teledensity

Reforms in the telecom sector have been encouraged by the active participation of
the public and private sector. Following independence, the teledensity level in the
country was 0.02%; by 1998, the level had increased to only 1.94%. NTP 1999 has
been instrumental in the growth of telecom in both urban and rural areas, and its
targets have been achieved well in advance. The overall teledensity target of 15%
by 2010 was achieved in FY07. Furthermore, the overall teledensity as of
December 2011 stood at 76.86%. Urban teledensity and rural teledensity at the
end of December 2011 were 137.3% and 37.48%, respectively, with rural
teledensity being far ahead of the NTP 1999 target, which was set at 4% by 2010.
 Figure 16:Teledensity (Overall, Urban and Rural Teledensity)(NTP-99)

1.4.3.3.2. Employment

Over the past decade, private telecom players have considerably expanded their
operations, which have resulted in an increase in employment opportunities in the
telecom sector. The sector has created direct employment across various business
areas such as sales and marketing, technology, R&D and customer care, as well
as indirect employment. The expansion of the Indian BPO industry is a classic
example of indirect employment. It has paved the way for a knowledge- and
information-based economy. The majority of direct employees is the part of the
Public Sector Undertakings (PSU). The ratio of the number of subscribers per
employee is very high in the case of private operators in India. As per latest data 10
available regarding Subscribers per employee ratio in India was as follows:

10
Overview of Telecom Industry, Dun & Bradstreet website, December 2009
 Table 13-Subscribers per employee

FY 05 FY 06 FY 07
PSU Operators 132 158 193
Private Operators 1089 1678 2110

1.4.3.3.3. Contribution to GDP

The revenues of the Indian telecom sector have increased significantly from US$7
billion in FY00 to 38.31 11 US$ billion in FY 2012. The contribution of the telecom
sector to India’s GDP is estimated to increase from 1.5% in 2006 to almost 3% in
2012. The contribution of the telecom sector also has a multiplier effect on growth,
due to associated individuals and businesses.

Figure 17-Gross Revenue in Telecom Sector

11
TRAI Website

36
1.4.3.3.4. FDI in Telecom Sector

FDI in the telecom sector has grown at a Compound Annual Growth Rate (CAGR)
of 24.8% between 2000-1 and 2011-12. Most of the FDI in telecom industry has
gone to the cellular mobile segment, the sector which has experienced the fastest
growth. Cellular mobile and basic telephone services received the highest share
of FDI in telecommunications-Rs. 6635 crore during January-March 2011.

Table: 14- FDI in Telecommunication Sector: April 2000-August 2010

S.N. Country FDI inflow (Rs. Crores) % of Inflow

1 Mauritius 29883.09 65.68
2 Singapore 6642.95 14.60
3 Russia 1902.39 4.18
4 Japan 1533.44 3.37
5 USA 1059.76 2.33
6 Other Countries 4473.22 9.84
Total 45494.95 100
[Source: DOT. Available online at www.dot.gov.in]

1.4.3.3.5. Affordable Tariff

Since the formulation of NTP 1999, the industry has experienced a decline of
about 95% in mobile tariffs. The effective price per minute for an outgoing mobile
call has declined from approximately INR16.40 in 1995 to almost INR0.30 today.
The entry of new service providers has resulted in a tariff war. Per-second billing
has emerged as an industry norm.

1.4.3.3.6. Investment

Plan Outlay on telecommunications has significantly increased. The total outlay

on telecommunications for the first nine five year plans (beginning from 1951 to
2002) was Rs.84708 Crores, while Plan outlay for the 10th Five Year Plan was of
Rs. 98968 Crores and for the 11th Five Year Plan was of Rs. 258439 Crores.

Table 15- Investment in Telecommunication Sector (Plan-wise):

Plan Communication Outlay (Rs. Crores)

First Five Year Plan (1951-56) 47
Second Five Year Plan (1956-61) 66
Third Five Year Plan (1961-66) 164
Fourth Five Year Plan (1969-74) 415
Fifth Five Year Plan (1974-78) 781
Sixth Five Year Plan (1980-85) 2722
Seventh Five Year Plan (1985-90) 8123
Eighth Five Year Plan (1992-97) 25110
Ninth Five Year Plan (1997-2002) 47280
Tenth Five Year Plan (2002-2007) 98968
Eleventh Five Year Plan (2007-2012) 258439

[Sources: Department of Telecommunications (DoT), (2006), Report of the Working Group

on the Telecom Sector for the Eleventh Five Year Plan. Available online at
www.planningcommission.nic.in Planning Commission, Government of India (2008),
Eleventh Five Year Plan Document 2007-2012. Available online at
www.planningcommission.nic.in]

The overall trend shows private sector is leading in total investments. Private
versus public investments are examined using capital employed, return on capital
employed, capital investment and employment in telecom sector.

Table 16- Capital Employed in Telecommunication Sector (Sector-wise):

Particulars 2005-06 2010-11

Public Private Total Public Private Total
Capital Employed 105784 64303 170087 89066 240866 329932
Gross Block 126546 73297 199843 197339 271018 468356

[Source: Available online at TRAI Website]

1.4.3.3.7. Global outreach of Indian Telecom Companies

Indian companies have reached overseas destinations to tap new markets and
have acquired technologies. M&A provide benefits such as expansion of global
footprint, access to niche technologies, new product mix, a wider customer base
and growth momentum.

Table 17: Key Overseas M&A by Indian Telecom Companies

Year Target Company Acquirer Company Deal Value

(US$
Million)
2000 Astratel Nusantara PT CDC Capital Partners 30.0
2003 Flag Telecom Reliance Group 194.80
2005 Teleglobe International TCL 177.0
Holdings
2010 Telecom Seychelles Bharti Airtel 62.0
2010 Warid Telecom, Bangladesh Bharti Airtel 300.0
2010 Zain Africa BV Bharti Airtel 10700
[Source: Thomson ONE Banker]

1.4.3.3.8. Key Challenges of NTP 1999

a) Inadequate growth of Wireline Subscribers. The Wireline segment has

added just 10 million users since the introduction of the NTP 1999, and the
number of Wireline subscribers has fallen from 41.5 million in FY06 to 32.11
million in FY12.

b) Spectrum Challenges. In line with the growth of subscribers, the need for
spectrum to service these subscribers has also increased. The availability of
spectrum for commercial services in India is below the required levels.
c) Licensing Challenges. Globally, the allocation of spectrum is separate from
the grant of license to provide service. However, in India, licenses are
bundled with the allotment of a certain amount of spectrum.

d) Equipment Manufacturing is inadequate . Telecom manufacturing in India

has not been able to keep pace. Currently, service providers tend to be highly
dependent on imported equipment. Moreover, the country lags behind in
terms of telecom R&D and continues to be reliant on imports.

e) Telecom Infrastructure is inadequate. Telecommunications infrastructure,

despite being a “key infrastructure,” is far from omnipresent. There are huge
gaps in low-income or meagerly populated areas, especially away from cities
and towns, where telecom companies see poor returns on the expensive
investment required in setting up the infrastructure. Telecom infrastructure
service providers face several challenges, which are highlighted below:

(i) Role played by multiple state agencies: there is no uniform approval

process across the states, and the biggest barrier to setting up telecom
towers and other infrastructure is the wide variation in the approval
process adopted by local bodies.

(ii) Inadequate utilization of towers: towers are not fully utilized as no law
ensures that no new tower is built in an area where an existing tower is
underutilized.

(iii) Civic issues: there is a need to address civic issues such as zoning
regulation, single window clearance, preferential treatment for sharing and
incentives in a timely manner.

(iv) Utilization of USOF and incentives : since the next level of growth is
expected to come from rural areas, there is a need to accelerate the pace
of setting up the tower infrastructure in these areas.
1.4.4. Broadband Policy 2004:
(Source: http://www.dot.gov.in/telecom-polices/broadband-policy-2004)

1.4.4.1.Introduction:

Recognising the potential of ubiquitous Broadband service in growth of GDP and

enhancement in quality of life through societal applications including tele-
education, tele-medicine, e-governance, entertainment as well as employment
generation by way of high speed access to information and web-based
communication, Government has finalised a policy to accelerate the growth of
Broadband services.

1.4.4.2.Broadband Connectivity:

Keeping in view the present status, Broadband connectivity is defined at present

as “An ‘always-on’ data connection that is able to support interactive
services including Internet access and has the capability of the minimum
download speed of 256 kilo bits per second (kbps) to an individual
subscriber from the Point Of Presence (POP) of the service provider”. The
estimated growth for Broadband and Internet subscribers in the country envisaged
is as follows:

Table 18: Estimated Growth for Broadband and Internet Subscribers

Year Ending Internet Subscribers Broadband Subscribers

2005 6 million 3 million
2007 18 million 9 million
2010 40 million 20 million

1.4.4.3.Evaluation of Broadband Policy 2004

As of June 2014, there were 18.55 million wired internet subscribers out of which
14.97 million broadband subscribers in India; the Broadband Policy 2004 had
 anticipated 40 million internet subscribers and 20 million broadband subscribers by
2010. The sluggish growth in broadband services is attributable to the absence of
low-cost devices, inadequate content and applications in regional languages, the
affordability and availability of broadband services and inadequate infrastructure.

1.4.5. National Telecom Policy 2012:

(Source: http://www.dot.gov.in/telecom-polices/national-telecom-policy-2012)

1.4.5.1.Introduction:

The last decade is characterized by significant penetration of telecommunications

in India. The New Telecom Policy 1999 has been a catalyst for growth of the
telecom sector. The number of telephone connections, at the end of February
2012, was 943 million, as compared to 41 million at the end of December 2001.
This growth has been fuelled by the cellular segment (mobile phones) which alone
accounted for 911 million connections at the end of February 2012. The
composition of the telecom sector too has witnessed a structural change, with the
private sector accounting for 88 % of the total connections.

Although India has witnessed a steep rise in teledensity over the past few years,
the disparity between urban and rural areas in terms of mobile penetration has
increased significantly. The improvement in rural teledensity poses a critical
challenge due to low population density, geographical spread, low per capita
income and the cost of maintaining phones in rural areas. As a result, there is an
uneven distribution of teledensity among Indian states resulting in slow economic
development of the states and their surrounding regions. Currently, about 70% of
the population in India lives in rural areas, and mobile penetration stands at a
meager 37.48% in rural India. There is a significant opportunity for service
providers to increase penetration in rural areas and generate revenues.

National Telecom Policy-2012 is designed to ensure that India plays this role
effectively and transforms the socio-economic scenario through accelerated
equitable and inclusive economic growth by laying special emphasis on providing
affordable and quality telecommunication services in rural and remote areas.
Thrust of this policy is to underscore the imperative that sustained adoption of
technology would offer viable options in overcoming developmental challenges
in education, health, employment generation, financial inclusion and much
else. NTP-2012 is an initiative to create a conducive policy framework to address
these issues and to touch lives of all citizens and transform India. By formulating a
clear policy regime, NTP-2012 endeavors to create an investor friendly
environment for attracting additional investments in the sector apart from
generating manifold employment opportunities in various segments of the sector.
Availability of affordable and effective communications for the citizens is at the
core of the vision and goal of the National Telecom Policy – 2012. The National
Telecom Policy 2012 (NTP 2012) is conceived against this backdrop.

NTP-2012 has the vision Broadband on Demand and envisages leveraging

telecom infrastructure to enable all citizens and businesses, both in rural and
urban areas, to participate in the Internet and web economy thereby ensuring
equitable and inclusive development across the nation.

NTP-2012 envisages support to platform neutral services in e-governance and

m-governance in key social sectors such as health, education and agriculture
that are at present limited to a few organizations in isolated pockets, to move
towards convergence between telecom, broadcast and IT services, networks,
platforms, technologies and overcome the existing segregation of licensing,
registration and regulatory mechanisms in these areas to enhance affordability,
increase access, delivery of multiple services and reduce cost. It will be a key
enabler of equitable and inclusive growth.

It aims to provide secure, reliable, affordable and high quality converged

telecommunication services anytime, anywhere for an accelerated inclusive socio-
economic development.
1.4.5.2.Mission:

1) To develop a robust and secure state-of-the-art telecommunication network

providing seamless coverage with special focus on rural and remote areas for
bridging the digital divide and thereby facilitate socio-economic development.

2) To create an inclusive knowledge society through affordable and high quality

broadband services across the nation.

3) To reposition the mobile device as an instrument of socio-economic

empowerment of citizens.

4) To make India a global hub for telecom equipment manufacturing and a

centre for converged communication services. To promote R&D, Design in
cutting edge ICTE technologies, products and services for meeting the
infrastructure needs of domestic and global markets with focus on security
and green technologies.

5) To promote development of new standards to meet national requirements,

generation of IPRs and participation in international standardization bodies,
thereby making India a leading nation in the area of telecom standardization.

6) To attract investment, both domestic and foreign.

7) To promote creation of jobs through all of the above.

The primary objective of NTP-2012 is maximizing public good by making

available affordable, reliable and secure telecommunication and broadband
services across the entire country. It also recognizes the predominant role
of the private sector in this field and the consequent policy imperative of
ensuring continued viability of service providers in a competitive
environment.