Report on India's mobile telecom services business

India's mobile telecom sector is one of the fastest growing sectors. Unlike in the 1990s when the mobile phone was an elitist product, mobile operators now tap a mass market with mass marketing techniques. "Unified licensing" rules allow basic and mobile operators into each other's territory, and have ushered in perhaps the final phase of industry consolidation. It seems that only companies with deep pockets can effectively compete as primary operators mobile markets. Economies of scale, scope, and end-to-end presence in long-distance as well as local telecom, are desirable. There are, besides, new challenges. Operators are having to find new growth drivers for the wire line business. There are problems of getting broadband to take off, of technology choice, of when to introduce new technologies, and of developing a viable business model in an era of convergence. This report analyses the changing features, opportunities and challenges facing the basic and mobile telecom services business. It covers the regulatory environment, markets, new services and revenue sources, tariff structures, economics of the industry, investment and technology issues, and the current and emerging competitive environment.

Growth of mobile technology
India has become one of the fastest growing mobile markets in the world. The mobile services were commercially launched in August 1995 in India. In the initial 5-6 years the average monthly subscribers additions were around 0.05 to 0.1 million only and the total mobile subscribers base in December 2002 stood at 10.5 millions. However, after the number of proactive initiatives taken by regulator and licensor, the monthly mobile subscriber additions increased to around 2 million per month in the year 2003-04 and 2004-05. Although mobile telephones followed the New Telecom Policy 1994, growth was tardy in the early years because of the high price of hand sets as well as the high tariff structure of mobile telephones. The New Telecom Policy in 1999, the industry heralded several pro consumer initiatives. Mobile subscriber additions started picking up. The number of mobile phones

added throughout the country in 2003 was 16 million, followed by 22 millions in 2004, 32 million in 2005 and 65 million in 2006. The only countries with more mobile phones than India with 156.31 million mobile phones are China – 408 million and USA – 170 million. India has opted for the use of both the GSM (global system for mobile communications) and CDMA (code-division multiple access) technologies in the mobile sector. The mobile tariffs in India have also become lowest in the world. A new mobile connection can be activated with a monthly commitment of US$ 5 only. In 2005 alone 32 million handsets were sold in India. The data reveals the real potential for growth of the Indian mobile market.

Next generation networks
In the Next Generation Networks, multiple access networks can connect customers to a core network based on IP (internet protocol) technology. These access networks include fibre optics or coaxial cable networks connected to fixed locations or customers connected through wi-fi as well as to 3G networks connected to mobile users. As a result, in the future, it would be impossible to identify whether the next generation network is a fixed or mobile network and the broadband wireless access would be used both for fixed and mobile services. It would then be futile to differentiate between fixed and mobile networks – both fixed and mobile users will access services through a single core network. Indian telecom networks are not so intensive as developed country’s telecom networks and India's teledensity is low only in rural areas. 670,000 route kilometers of optical fibres has been laid in India by the major operators, even in remote areas and the process continues. A rural network based on the extensive optical fibre network, using Internet Protocol and offering a variety of services and the availability of open platforms for service development, viz. the Next Generation Network, appears to be an attractive proposition. Fibre network can be easily converted to Next Generation network and then used for delivering multiple services at cheap cost.


Cellular Service Providers
As on Apr 2007 India has 167 million mobile phone subscribers. Out of this 125 million are GSM users and 41 million CDMA users. BSNL, Bharti Airtel, Hutch, Idea, Aircel, Spice and MTL are the main GSM providers in India. Reliance Communications and Tata Indicom are the main CDMA providers in India. Bharti Airtel Airtel is providing cellular services in Delhi, Mumbai, Kolkata, Chennai, Andhra Pradesh, Gujarat, Haryana, Himachal Pradesh, Jammu and Kashmir, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Goa, Orissa, Punjab, Rajasthan, Tamil Nadu, UP and West Bengal. Airtel is the No.1 cellular service provider in India using GSM technology. Airtel has 23% market share in India with a total subscriber base of 38 million. Reliance Communications Reliance has both CDMA and GSM networks and total subscriber base of 29 million or 17% market share. It has GSM network in Assam, Bihar, Himachal Pradesh, Kolkata, North East, Madhya Pradesh, Orissa and West Bengal. Reliance has CDMA networks in other states and cities. Bharat Sanchar Nigam Limited (BSNL) BSNL is a state owned telecom company which has GSM presence in almost every cities and towns. BSNL has 27 million subscribers with a market share of 16%. Hutch Hutch is another emerging GSM provider in India with coverage in Kerala, Mumbai, Delhi, Kolkata, Chennai, Gujarat, Andhra Pradesh, Karnataka and Punjab with a total subscriber base of 27 million. Tata Indicom Tata Indicom is a main CDMA provider in India with 16 million subscribers all over India. Tata Indicom has presence in almost every states and cities in India.


Technology: GSM vs. CDMA
GSM and CDMA are the two main competing network technologies deployed by cellular service providers world over. Understanding the pros and cons of both the technologies will help you make right decision according to your requirement. GSM (Global System for Mobile Communications) originated in Europe in 1990. The GSM Association is an international organization founded in 1987, dedicated to developing, providing and overseeing the worldwide wireless standard of GSM. While CDMA (Code Division Multiple Access) is a proprietary standard designed by Qualcomm Inc in United States and has been the dominant network standard for North America and parts of Asia. It became an international standard in 1995. However now, GSM networks have penetrated the United States and the CDMA networks have spread in other parts of the world. People of both the camps claim that their architecture is superior to the other.

The Technology:
Mobile personal communication systems use microwave frequencies above 800 MHz for transmission and reception. All service providers operate in some pre allocated frequency bands according to international standards. For operating in these microwave frequencies there are following access methods:

FDMA (Frequency Division Multiple Access) - FDMA puts each call on a separate frequency. TDMA (Time Division Multiple Access) - TDMA assigns each call a certain portion of time on a designated frequency. CDMA ( Code Division Multiple Access) - CDMA gives a unique code to each call and spears it over available frequencies.


GSM is a global standard based on TDMA. It is very popular in entire Europe, Middle East and Asia while CDMA is the dominant technology in United States and some parts of Asia. But how does it effects the ultimate consumer ? For understanding further considerations may be helpful. GSM 1.In case of GSM you can choose a handset seperately from a wide variety available in the market. It should be GSM 900/1800 compatible for use in India. Then buy a pre-paid or post-paid SIM card (Subscriber Identity Module that contains user account information) from any of the GSM Service Providers like Airtel, Hutch, Idea, MTNL, BSNL, Aircel, Spice etc. Just insert this SIM into your handset and start talking. CDMA 1. Handset is network locked. You buy a package from the Service Provider like Reliance or Tata Indicom that includes a handset and a pre-paid or post-paid plan. Earlier it was difficult to change the handset and keep the same number but now to change a Reliance handset in future, you just need a handset change card costing a nominal amount.T-SIM enabled handsets of Tata Indicom can be changed easily.

2. A very large range of handsets to choose 2. Choice of handsets is limited to the models from as the big handset companies like Nokia, offered by the Service Provider. Although both Motorola, SonyEricsson, LG, Samsung etc. Reliance and Tata have now a range of entry are marketing their products through level, mid-segment and features rich advance independent distribution and retail network. handsets available with them. 3. You can easily change the service provider 3. You can't change service provider and and continue with the same handset. continue with the same handset. It could be technically possible but not easy. 4.In GSM different frequencies are used across 4.Voice clarity is supposed to be better in different cells but that does not mean that voice CDMA network as it uses same frequency clarity is necessarily compromised. Actually it across all cells. depends upon the location and network traffic too. 5. EDGE (Enhanced Data Rates for GSM 5. Data Transfer Speed is traditionally more in Evolution) enabled GSM networks are case of CDMA. BREW(Binary Runtime comparable in terms of download speed. Please Environment for Wireless) technology which is note an EDGE enabled handset is also exclusive to CDMA networks enables faster

required. data downloads. 6. GSM service providers are better networked 6. Check for International roaming tie ups if globally to offer international roaming. But you you travel abroad frequently. Also check for must check for roaming call rates and coverage the coverage in the region where you intend to in the regions or countries where you visit use your cellphone within India. Tata is soon frequently. launching T-SIM to enable international roaming with one world one number concept. 7. If you travel to other countries you can even 7. CDMA phones that are not card-enabled do use your same GSM cell phone abroad if it is a not have this capability. quad-band phone (850/900/1800/1900 MHz). By purchasing a local SIM card with call value and a local number in the country you are visiting, you can make calls against the card to save yourself international roaming charges from your home service provider. Also you must consider the following while selecting a Service Provider: 1. First of all you must check which Service Providers are providing services in the areas where you will be using your phone. 2. If you want National or International Roaming then also check whether the Service Provider you have chosen facilitates roaming in the regions or countries where you visit frequently. 3. Cost of owning a handset 4. Cost of having a connection 5. Fixed monthly expenses 6. Usage charges. 7. Also it is helpful to check with the people using mobile in your area for the quality of service.

The leading cellular service providers have the following number of subscribers:
Service Provider No. of CDMA Subscribers No. of GSM Subscribers


Reliance Tata Airtel MTNL BSNL Hutch Idea Spice BPL Aircel

2.75 crores 1.07 crores

38.76 lakhs

3.37 crores 24.98 lakhs 2.44 crores 2.44 crores 1.3 crores 25.56 lakhs 10.62 lakhs 48 lakhs

Bharti Airtel has the largest customer base with 31% market share, followed by Hutch and BSNL with each holding 22% market share. The 2007 budget has brought further relief to the customers with the reduction in the tariffs, both local and long distance, and with slashing down the roaming rentals. This is likely to lead to even more people going for cellular services and more and more use of the value added services. However, landline telephony is likely to remain popular, too, in the foreseeable future. MTNL, the largest landline service provider, has recently taken some bold initiatives to retain its market share and, if possible, expand it.

Revenue and growth
The total revenue in the telecom service sector was Rs. 86,720 crore in 2005-06 as against Rs. 71, 674 crore in 2004-2005, registering a growth of 21%. The total investment in the telecom services sector reached Rs. 200,660 crore in 2005-06, up from Rs. 178,831 crore in the previous fiscal. Telecommunication is the lifeline of the rapidly growing Information Technology industry. Internet subscriber base has risen to 6.94 million in 2005- 2006. Out of this 1.35 million were broadband connections. More than a billion people use the internet globally.


The value added services (VAS) market within the mobile industry in India has the potential to grow from $500 million in 2006 to a whopping $10 billion by 2009 (Music, games to drive mobile VAS growth).

India is huge market and none of service providers can dare to ignore its potential. That’s why Indian mobile service provider industry is growing leap and bounce for the last decade. This journery of 1 million to 50 million will keep it pace until each citizen in india will have his own mobile. Industry has many phases in its growth. Now mobile doesn’t mean a only a medium of communication. Services providers are now willing to provide varies facilities like entertailment (music, video etc.) and even banking also. We can say that business is transforming in e-commerce to m-commerce (mobile-commerce). In short we can say drastic change has came in the industry along with expanding its base in subscribers, they are keeping eye not only to offer new facilities but also to be the first to provide it.


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