TELECOM INDUSTRY

SUBMITTED TO PROF. HARSH ARORA

SUBMITTED BY1. LALIT KUMAR (ST-5_22) 2. ABHISHEK KUMAR (ST-5_02) 3. PRITAM GHOSH (ST-6_44) 4. SAGARIKA GHOSH (ST-6_52)

INTRODUCTION

while revenues from telecom equipment segment stood at 117. None of the telecommunications forms are as prevalent or as advanced as those in modern Western countries.The Republic of India possesses a diversified communications system that links all parts of the country by Internet. but the system includes some of the most sophisticated technology in the world and constitutes a foundation for further development of a modern network.207 crore (US$53. The total revenue of the Indian telecom sector grew by 7% to 283.24 billion). and generate employment opportunities for about 10 million people during the same period. India has the world's second-largest mobile phone users with over 881 million as of October 2011. and television.921 crore (US$65. radio. The industry is expected to reach a size of 344.8 million people and for 7 million indirectly. According to analysts. .81 billion) for 2010-11 financial year. telegraph. the sector would create direct employment for 2.53 billion) by 2012 at a growth rate of over 26 per cent. It has the world's fourth-largest Internet users with over 121 million as of December 2011. telephone. India has come to be regarded as the world's most competitive and one of the fastest growing telecom markets.039 crore (US$22.

and worked towards the development of telecom throughout this period. In 1851. the first experimental electric telegraph line was started between Kolkata and Diamond Harbour.Past.[7] at that time.000 miles (6. Mumbai (then Bombay) through Sindwa Ghats. Dr.400 km) of telegraph lines connecting Kolkata (then Calcutta) and Peshawar in the north along with Agra. Present and Future of Telecom Industry We have analysis the past.William O'Shaughnessy. Bombay. as well as Ootacamund and Bangalore was started in November 1853. Major E. • The Indian postal and telecom sectors saw a slow and uneasy start. Baring. In 1880. Bombay and Madras. the construction of 4. approached the Government of India to establish telephone exchangesin India. Indian telecom sector is more than 165 years old. The exchange in • • • . In 1881. A separate department was opened in 1854 when telegraph facilities were opened to the public. Subsequently. belonged to the Public Works Department. The Posts and Telegraphs department occupied a small corner of the Public Works Department. and The Anglo-Indian Telephone Company Ltd. two telephone companies namely The Oriental Telephone Company Ltd.[8] On the 28th January 1882. the Government later reversed its earlier decision and a licence was granted to the Oriental Telephone Company Limited of England for opening telephone exchanges at Calcutta. Madras andAhmedabad and the first formal telephone service was established in the country. Member of the Governor General of India's Council declared open the Telephone Exchanges in Calcutta. it was opened for the use of the British East India Company. In 1850. who pioneered the telegraph and telephone in India. The permission was refused on the grounds that the establishment of telephones was a Government monopoly and that the Government itself would undertake the work. present and future of Telecommunication Industry. and Chennai (then Madras) in the south.

Later that year. when the private sector was allowed in telecommunication equipment manufacturing only. telephone services were merged with the postal system.Post 2000 PAST Telecommunications was first introduced in India in 1851 when the first operational land lines were laid by the government near Kolkata. The government concretised its earlier efforts towards developing R&D in the sector by setting up an autonomous body – Centre for Development of Telematics (C-DOT) in 1984 to develop state-of-the-art telecommunication technology to meet the growing needs of the Indian telecommunication network. Telephone and Telegraph (PTT). The entire evolution of the telecom industry can be classified into three distinct phases. . although telephone services were formally introduced in India much later in 1881. a body that was governed by the Ministry of Communication.Pre-Libralisation Era (1980-89) Entry of Public Sector in telecommunications equipment manufacturing in 1984. The Indian telecom sector was entirely under government ownership until 1984. • Phase I.Post Libralisation Era (1990-99) • Phase III. Forming of Mahanagar Telephone Nigam Limited(MTNL) in 1986. in 1883. In 1947. Council House Street. was opened at third floor of the building at 7.Calcutta named the "Central Exchange". Further. all foreign telecommunication companies were nationalised to form the Posts. The actual evolution of the industry started after the Government separated the Department of Post and Telegraph in 1985 by setting up the Department of Posts and the Department of Telecommunications (DoT). Phase I.Pre-Libralisation Era (1980-89) • Phase II. after India attained independence. Bombay also witnessed the opening of a telephone exchange. with a total of 93 subscribers.

1990’s Private Sector participation in provision of VAS such as Celullar and Paging services – 1992 National Telecom Policy announced in 1994 Telecom Regulatory Authority of India(TRAI) was established in 1997 New Telecom Policy(NTP) announced – 1999 Further milestones and developments   Pre-1902 . The New Telecom Policy (NTP-99) provided the much needed impetus to the growth of this industry and set the trend for libralisation in the industry. Government policies have played a key role in shaping the structure and size of the Telecom industry in India. Phase II. As a result. Telecom Communication was set up in 1989.Post Libralisation Era (1990-99) Liberalisation in in Indian Economy .First wireless telegraph station established between Sagar Islands and Sandheads.First Central Battery of telephones introduced in Kanpur. 1907 .Cable telegraph 1902 . Until the industry was liberalised in the early nineties. PRESENT Until the late 90s the Government of India held a monopoly on all types of communications – as a result of the Telegraph Act of 1885.  . the Indian telecom market is one of the most liberalised market in the world with private participation in almost all of its segments.Forming of Videsh Sanchar Nigam Limited(VSNL) in 1986. it was a heavily government-controlled and smallsized market.

1953 . 1976 . 1984 .P.First subscriber trunk dialing route commissioned between Lucknow and Kanpur.First analog Stored Program Control exchange for trunk lines commissioned at Mumbai. Bombay. 1995 . 1980 .First optical fibre system for local junction commissioned at Pune..First PCM system commissioned between Mumbai City and Andheri telephone exchanges. 1975 . U.First mobile telephone service started on non-commercial basis on 15 August 1995 in Delhi.Internet Introduced in India starting with Delhi. Chennai and Pune on 15 August 1995            Phase III. Calcutta.Radiotelephone system inaugurated between the UK and India.First satellite earth station for domestic communications established at Sikandarabad. 1927 .Radio-telegraph system between the UK and India.Post 2000 Bharat Sanchar Nigam Limited(BSNL) established in 2000 National Long Distance(NLD) and International Long Distance(ILD) services opened to competition in 2000 . 1960 . with Imperial Wireless Chain beam stations at Khadki and Daund. Inaugurated by Lord Irwin on 23 July by exchanging greetings with King George V.C-DOT established for indigenous development and production of digital exchanges. 1983 . 1995 .  1913-1914 . 1933 . 1979 .12 channel carrier systemoduced.First digital microwave junction.First Automatic Exchange installed in Shimla.

[9] The real transformation in scenario came with the announcement of the National Telecom Policy in 1994 Modern policies  All villages shall receive telecom facilities by the end of 2002. . the year economic reforms were initiated in the country.000 in 1971.07 million in 1991.2005 Number portability was proposed . The number of telephones grew leisurely to 980.CDMA technology launched – 2000 Internat Telephony initiated – 2000 Reduction of License fees – 2000 VSNL privatized – 2002 Launch of Moile Service by BSNL – 2002 Unified Access Lisencing(UASL) regime was introduced – 2003 Calling Party Pays(CPP) was implemented – 2003 Broadband polity was formulated – 2004 Intra circle merger guidelines established – 2004 FDI limits increased from 49% to 74% . growth remained slow because the telephone was seen more as a status symbol rather than being an instrument of utility.000. 2. While certain measures were taken to boost the telecom industry from time to time.2006 While all the major cities and towns in the country were linked with telephones during the British period. the total number of telephones in 1948 numbered only around 80.15 million in 1981 and 5. Post independence. the first waves of change were set going by Sam Pitroda in the eighties. (for example introduction of the telex service in Mumbai in 1953 and commissioning of the first Subscriber trunk dialling route between Delhi and Kanpur and between Lucknow and Kanpur in 1960).

a fourth cellular operator. has been permitted.  Multiple Fixed Service Providers (FSPs) licensing guidelines were announced.  The basic services are open to competition. one each in four metros and thirteen circles.  Steps are being taken to fulfill Universal Service Obligation (USO).  In addition to the existing three. Wireless Local Loop (WLL) has been introduced to provide telephone connections in urban.  Guidelines have been issued by the Government to open up Internet telephony (IP). and administration. 1999 in several new services.  Two categories of infrastructure providers have been allowed to provide end-toend bandwidth and dark fiber. data services and PCOs utilizing any type of network equipment. both Satellite and Landing stations for submarine optical fiber cables. towers. which include Global Mobile Personal Communication by Satellite (GMPCS) Service. VSNL and HTL have been disinvested. semi-urban and rural areas promptly. right of way.  The International Long Distance Services (ILDS) have been opened to competition.  National Long Distance Service (NLD) is opened for unrestricted entry. funding. .  Internet Service Providers (ISPs) have been allowed to set up International Internet Gateways. including circuit and/or package switches that meet certain required standards. Cellular operators have been permitted to provide all types of mobile services including voice and non-voice messages. digital Public Mobile Radio Trunked Service (PMRTS) and Voice Mail/ Audiotex/ Unified Messaging Services. duct space etc. A Communication Convergence Bill introduced in the Parliament on August 31.    Two telecom PSUs.  A decision to permit Community Phone Service has been announced. Policies allowing private participation have been announced as per the New Telecom Policy (NTP). 2001 is presently before the Standing Committee of Parliament on Telecom and IT.

in an effort to set up 5. and such a majority was difficult to obtain. service and regulation of telecommunications infrastructure. They were also successful in establishing joint ventures between state owned telecom companies and international players. many public sector organizations were set up like the Department of Telecommunications (DoT). But still complete ownership of facilities was restricted only to the government owned organizations. the World Bank and ITU had advised the Indian Government to liberalize long distance services in order to release the monopoly of the state owned DoT and VSNL. It was during this period that the Narsimha Rao-led government introduced the national telecommunications policy [NTP] in 1994 which brought changes in the following areas: ownership. During this period. and to enable competition in the long distance carrier business which would help reduce tariff's and better the economy of the country. taking the opposite . During this period.000.000 lines per year. The Rao run government instead liberalized the local services.Privatization The Indian government was composed of many factions (parties) which had different ideologies. under the leadership of Rajiv Gandhi. She invited Sam Pitroda a US based Nonresident Indian NRI to set up a Center for Development of Telematics(CDOT). Many technological developments took place in this regime but still foreign players were not allowed to participate in the telecommunications business. VSNL and MTNL. But soon the policy was let down because of political opposition. after the assassination of Indira Gandhi. The multi-nationals were just involved in technology transfer. given to the number of parties having different ideologies. Liberalization started in 1981 when Prime Minister Indira Gandhi signed contracts with Alcatel CIT of France to merge with the state owned Telecom Company (ITI). however the plan failed due to political reasons. The demand for telephones was ever increasing. When a bill was in parliament a majority vote had to be passed. Foreign firms were eligible to 49% of the total stake. and not policy making. Some of them were willing to throw open the market to foreign players (the centrists) and others wanted the government to regulate infrastructure and restrict the involvement of foreign players. Due to this political background it was very difficult to bring about liberalization in telecommunications.

In March 2008 the total GSM and CDMA mobile subscriber base in the country was 375 million. The DoT opposed this. MTNL. Because of all these factors. The government threw open the bids to one private company per circle along with government owned DoT per circle. the government did face oppositions from ITI. For cellular service two service providers were allowed per circle and a 15 years license was given to each provider. TATA finally took 25% stake in VSNL. Mobile network operators therefore planned to suspend the usage of around 30 million mobile phones (about 8 % of all mobiles in the . the government decided to cut its stake of 53% to 26% in VSNL and to throw it open for sale to private enterprises. the government became more liberal in making policies and issuing licenses to private operators. the service fees finally reduced and the call costs were cut greatly enabling every common middle class family in India to afford a cell phone. The proposal of raising the stake of foreign investors from 49% to 74% was rejected by the opposite political party and leftist thinkers. The data reveals the real potential for growth of the Indian mobile market. Nearly 32 million handsets were sold in India. DoT.one policy maker and the other service provider (DTS) which was later renamed as BSNL. This was a gateway to many foreign investors to get entry into the Indian Telecom Markets. Domestic business groups wanted the government to privatize VSNL. These circles were divided into category A. The country was divided into 20 telecommunication circles for basic telephony and 18 circles for mobile services. but they managed to keep away from all the hurdles. VSNL and other labor unions. During all these improvements. which represented a nearly 50% growth when compared with previous year. As the unbranded Chinese cell phones which do not have International Mobile Equipment Identity (IMEI) numbers pose a serious security risk to the country. After March 2000. After 1995 the government set up TRAI (Telecom Regulatory Authority of India) which reduced the interference of Government in deciding tariffs and policy making. They split DoT in two.political parties into confidence and assuring foreign involvement in the long distance business after 5 years. Finally in April 2002. The political powers changed in 1999 and the new government under the leadership of Atal Bihari Vajpayee was more pro-reforms and introduced better liberalization policies. The government further reduced license fees for cellular service providers and increased the allowable stake to 74% for foreign companies. B and C depending on the value of the revenue in each circle.

In addition to landline and mobile phones. 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. Maldives. In 2005 alone additions increased to around 2 million per month in the year 2003-04 and 2004-05. which summarizes stakeholders’ perception on certain TRE dimensions. v) anti-competitive . the Government was also reported to be blocking Indian service providers from purchasing Chinese mobile technology citing concerns that Chinese hackers could compromise the Indian telecommunications network during times of national emergency. provides insight into how conducive the environment is for further development and progress. India. 5–6 years the average monthly subscribers additions were around 0.15 only. However.5 millions. The mobile tariffs in India have also become lowest in the world.1 million only and the total mobile subscribers base in December 2002 stood at 10.country) by 30 April. Regulatory environment LIRNEasia's Telecommunications Regulatory Environment (TRE) index. The tool measured seven dimensions: i) market entry. after a number of proactive initiatives were taken by regulators and licensors. Indonesia. Thailand. some of the companies also provide the WLL service. Sri Lanka.05 to 0. ii) access to scarce resources. iv) tariff regulation. iii) interconnection. The most recent survey was conducted in July 2008 in eight Asian countries. Pakistan. A new mobile connection can be activated with a monthly commitment of US$0. the Government of India banned the import of several mobile phones manufactured in China citing concerns over quality and the lack of IMEI's which make it difficult for authorities in India to track the sale and use of such phones. and the Philippines. In June 2009. including Bangladesh. the total number of mobile subscribers has increased greatly to 881 million subscribers as of October 2011. A series of attacks on Indian government websites and computer networks by suspected Chinese hackers has also made Indian regulators suspicious with regards to the import of potentially sensitive equipment from China. The companies reported to be affected by this areHuawei Technologies and ZTE. In April 2010.

vii) quality of service. The Total Revenue of Indian Telecom Services company is likely to exceed Rs 200000 Cr ( US$ 44 Bn approx) for FY 11-12 based on FY 10-11 nos and latest quarterly results. will be connected. Other than for Access to Scarce Resources the fixed sector lags behind the mobile sector.6 billion) in 2004-2005. Under the Bharat Nirman Programme.674 crore (US$13.5 billion) in 2005-06 as against 71. It is difficult to ascertain fully the employment potential of the telecom sector but the enormity of the opportunities can be gauged from the fact that there were 3. point out to the fact that the stakeholders perceive the TRE to be most conducive for the mobile sector followed by fixed and then broadband.estimted revenue of FY'2011 is Rs.practices.The total investment in the telecom services sector reached 200. registering a growth of 21%.47 million were broadband connections. The fixed and mobile sectors have the highest scores for Tariff Regulation. up from 178.720 crore (US$16.831 crore (US$34 billion) in the previous fiscal. for the fixed. Telecommunication is the lifeline of the rapidly growing Information Technology industry. and vi) universal services.822 revenue villages in the country.3 million in December 2004.660 crore (US$38. Revenue and growth The total revenue in the telecom service sector was 86. Internet subscriber base has risen to more than a 121 million in 2011. The low penetration of broadband of mere 3.1 billion) in 2005-06.7 million Public Call Offices in December 2005 up from 2. The results for India. Out of this 11. More than a billion people use the Internet globally. the Government of India will ensure that 66. mobile and broadband sectors. The broadband sector has the lowest score in the aggregate.835 crore (US$ 19 Bn Approx).87 against the policy objective of 9 million at then end of 2007 clearly indicates that the regulatory environment is not very conducive. which have not yet been provided with a Village Public Telephone (VPT). Market entry also scores well for the mobile sector as competition is well entrenched with most of the circles with 4-5 mobile service providers. However doubts have been raised about what it would mean for the poor in the country. These are consolidated nos including foreign operation of Bharti .

the incremental teledensity in the country was just 1. The telecom sector in India has developed as a result of progressive regulatory regime.968 SSTL 600 Uninor 660 Loop 560 Stel 60 HFCL 204 Videocon Telecom 254 DB Etisalat/ Allianz 47 Grand Total Rs 201. The government had set a target of 500 million telecom connections by 2010.376 TataTeleservice 9. in fact.931 MTNL 4.Airtel.524 bn in FY09 up from Rs 1.468 Idea Cellular 16. during 1948-1998. Prior to liberalisation.045 Voda 18. FCA FUTURE Globalisation has made telecommunication an integral part of the infrastructure of the Indian economy. The major contributions to this revenue are as follows: Bharti Airtel 65.248 BSNL 32. structural reforms and competition.98 in 2009. the total gross revenue of the Indian telecom services industry was Rs 1. 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.200 Aircel 7.03 mn by the end of September 2009. Besides. According to the TRAI. From . much of this growth can be attributed to the unprecedented growth in mobile telephony as the number of mobile subscribers grew at an astounding rate from 10 million in 2002 to 392 million in 2009. The telecom sector in India experienced a rapid growth over the past decade on account of regulatory libralisation. much of this growth was brought about by the NTP-99 policy changes such as migration from fixed license fee to revenue sharing regime and cost-oriented telecom tariffs. making telecom one of the major catalysts in India’s growth story.291 bn in FY08 registering a growth of 18.03% over FY08 and its subscriber base grew by 43% over FY08 to touch 429. The contribution of the sector to GDP has been increasing gradually (its contribution in GDP has more than doubled to 2.33 in 1999 to 36.060 Reliance Comm 31. However. the total subscriber base (wireless and wireline) in the industry crossed the 500-mn-mark and reached 509. Telecom is one of the fastest-growing industries in India. according to the TRAI.380 TTML 2.83% in FY07 from 1.92%. which took India to the second position in terms of wireless network in the world next only to China. on an average the industry added 8 million wireless subscribers every month in FY08. However.0% in FY92).997 Crs contributed by Sanjay Banka.70 mn subscribers in FY09. however. the growth in the service and IT and ITeS sector also increased the prominence of the telecom industry in India. However. the introduction of NTP’99 accelerated the growth of the sector and the teledensity increased from 2.936 Tata Comm 11. the telecom sector was monopolised by the public sector and recorded marginal growth.

2003 onwards the government has taken certain initiatives such as unified access licensing regime. The wireless segment growth has played a dominant role in taking the teledensity to the current levels. it has already entered a consolidation phase as foreign players are struggling to acquire a pie in this dynamic industry. Currently. The Indian telecom industry is characterised with intense competition. The Indian telecom industry has immense growth potential as the teledensity in the country is just 36 as compared with 60 in the US. in fact. The government has been periodically implementing suitable fiscal and promotional policies to boost domestic demand and to create volumes for the industry. . the industry is poised to grow further. reduced access deficit. and continuous price wars. introduction of calling party pays (CPP) and revenue sharing regime in ADC that has provided further impetus to the sector. In the next few years. there are around a dozen telecom service providers who operate in the wired and wireless segment. 102 in the UK and 58 in Canada.