Telecommunications Reforms in India

Mushtaq Khan 03 Himanshu Ahire 13

Presentation Plan

1 2 3 4 5 6 7

Introduction History Major Players in Telecom Sector Growth of the Industry (Analysis) Major reforms SWOT analysis Problems and prospects

Presentation Plan

1 2 3 4 5 6 7

Introduction History Major Players in Telecom Sector Growth of the Industry (Analysis) Major reforms SWOT analysis Problems and prospects

Introduction to Indian Telecom Industry – Recent facts & figures

 The total wireless subscriber base {GSM, CDMA and WLL (F)} stood at 391.76 million at the end of financial year.  The number of wireline subscribers on 31st March 2009 was 37.96 million.  On an average, more than 10 million subscribers were added every month during the financial year.  The overall teledensity at the end of March 2009 was 36.98% as compared to 26.22% ending March 2008.  The rural teledensity at the end of March 2009 was 15.20% as compared to 9.20% ending March 2008  There were 13.54 million internet subscribers on 31st March 2009 as compared to 11.09 million on 31st March 2008.  The number of broad-band connections on 31st March 2009 was 6.22 million compared to 3.87 million for the same period during previous year. *Source : http://www.trai.gov.in/ Annual Report

Presentation Plan

1 2 3 4 5 6 7

Introduction History Major Players in Telecom Sector Growth of the Industry (Analysis) Major reforms SWOT analysis Problems and prospects

History of Indian Telecom Industry

• 1851 First operational land lines were laid by the government near Calcutta (seat of British power) • 1881 Telephone service introduced in India • 1883 Merger with the postal system • 1923 Formation of Indian Radio Telegraph Company (IRT) • 1932 Merger of ETC and IRT into the Indian Radio and Cable Communication Company (IRCC) • 1947 Nationalization of all foreign telecommunication companies to form the Posts, Telephone and Telegraph (PTT), a monopoly run by the government's Ministry of Communications

History of Indian Telecom Industry

• 1985 Department of Telecommunications (DOT) established, an exclusive provider of domestic and long-distance service that would be its own regulator (separate from the postal system) • 1986 Conversion of DOT into two wholly governmentowned companies: the Videsh Sanchar Nigam Limited (VSNL) for international telecommunications and Mahanagar Telephone Nigam Limited (MTNL) for service in metropolitan areas. • 1997 Telecom Regulatory Authority of India created. • 1999 Cellular Services are launched in India. New National Telecom Policy is adopted. • 2000 DoT becomes a corporation, BSNL

Presentation Plan

1 2 3 4 5 6 7

Introduction History Major Players in Telecom Sector Growth of the Industry (Analysis) Major reforms SWOT analysis Problems and prospects

Major Players in different segments of Indian telecom industry
Basic Services Operators
BSNL Airtel MTNL Reliance TTSL Reliance BSNL Vodafone Idea

MOBILE SERVICES

GSM Services Operators

Internet Services Operators
BSNL MTNL Reliance

CDMA Services Operators
Reliance

TTSL TTSL BSNL Airtel

MTNL – Mahanagar Telecom Nigam Ltd. BSNL – Bharat Sanchar Nigam Ltd.

TTSL – Tata Teleservices Ltd.

Subscribers (Rural & Urban) & Market share (GSM & CDMA) - 2009

Subscribers (Rural & Urban) & Market share (GSM & CDMA)

Presentation Plan

1 2 3 4 5 6 7

Introduction History Major Players in Telecom Sector Growth of the Industry (Analysis) Major reforms SWOT analysis Problems and prospects

Growth of Subscriber base from 1999 to 2009

Growth of Indian Telecom Sector

Wirelline Subscriber in Million

Growth of Indian Telecom Sector

Wireless Subscriber in Million

Growth of Indian Telecom Sector

Internet Subscriber in Million

Growth of Indian Telecom Sector

Broadband Subscriber in Million

Growth of Indian Telecom Sector

Growth of Teledensity

Presentation Plan

1 2 3 4 5 6 7

Introduction History Major Players in Telecom Sector Growth of the Industry (Analysis) Major reforms SWOT analysis Problems and prospects

Regulatory Framework provides level playing field for all operators

The Department of telecommunications (Government of India) is the main governing body for the industry. Telephone Regulatory Authority of India (TRAI) assists the Government of India (GoI) to take timely decisions and introduce new technologies in the country.

Indian Telecom Industry Framework

Indian Government Bodies

Independent Bodies

They formulate various policies and pass laws to regulate the telecom industry in India.

They undertake various research activities and monitor the quality of service provided in the Indian telecom industry. They also provide various recommendations to improve the status of telecom operations in India.
Telecom Regulatory Authority of India (TRAI)

Wireless Planning and Coordination (WPC)

Handles spectrum allocation and management DoT – Licensee and frequency management for telecom Exclusive policy making body of DoT Handles ad hoc issues of the telecom industry

Independent regulatory body

Department of Telecommunications

Telecom Disputes Settlement and Appellate Tribunal (TDSAT)

Telecom disputes settlement body

Telecom Commission

Group on Telecom and IT (GoT-IT)

Ministry of Communication & Information Technology
Licensor Dept of Telecom Regulator Telecom Regulatory Authority of India Judiciary Telecom Dispute Settlement Appellate Tribunal

Unified License Operators Fixed Line Operators National Long Distance Operators International Long Distance Operators Wireless Operators GSM 900 & 1800

CDMA 1800M hz

FDI in telecom recently revised to 74%. Government gets 15% of revenues from Unified Licensing

Various important regulations and laws have been passed in the Indian telecom industry post-liberalisation era INDIA
3G Spectrum Was Auctioned. In April Airtel launched 3G Number portability Intra-circle merger Service and was proposed guidelines were MTNL in established Attempted to (pending) December 11 boost Rural telephony 2005 2006 Broadband policy 2004 Decision on 3G was formulated services (awaited) FDI limit was —targeting 20 increased from million 49 to 74 percent subscribers by 2010 2007 2008

Private players were allowed in Value Added Services 1994 1992

Independent regulator, TRAI, was established

BSNL was established by DoT

ILD services was opened to competition Go-ahead to the CDMA technology 2002

Calling Party Pays (CPP) was implemented 2003

1999 1997 2000

2004

Internet telephony initiated Reduction of licence fees

National Telecom Policy (NTP) was formulated

NTP-99 led to migration from highcost fixed license fee to low-cost revenue sharing regime

Unified Access Licensing (UASL) regime was introduced Reference Interconnect order was issued

Department of Telecommunication (DoT) is the main body formulating laws and various regulations for the Indian telecom industry.

ILD – International Long Distance

Presentation Plan

1 2 3 4 5 6 7

Introduction History Major Players in Telecom Sector Growth of the Industry (Analysis) Major reforms SWOT analysis Problems and prospects

Market SWOT Analysis
Strengths
• • • • • Huge wireless subscriber potential Fastest growing mobile market in the world Consumers are ready to pay for cutting edge services Government proposes to hike FDI limit in Telecom to 74% Unified license regime

Weaknesses
• • • • • • • Lowest call tariffs in the world Market strongly regulated by Govrenment body – Governing both ISP and Telecom sectors Too many authorities ruling the sector Huge potential for low end and cheap handsets Wide scale Consumer churn in Telecom and ISP Wide spread VAS deployment is restricted due to language and literacy problems Primarily a voice based market

Opportunities
• • • • • • • To offer value added services on GSM, CDMA and IP Language independent services Mobile Marketing concepts Content influenced by local culture and Global success stories M-Commerce Unified messaging platforms Foreign investment in form of equity or technology • • • • •

Threats
Low cost service providers – no possibility of breaking even in short term Weak IPR protection Software and digital content Piracy Political instability Regulatory interference

Presentation Plan

1 2 3 4 5 6 7

Introduction History Major Players in Telecom Sector Growth of the Industry (Analysis) Major reforms SWOT analysis Problems and prospects

Prospects of Indian Telecom sector

Fifth largest telecom network in the world; second largest among the emerging economies after China On an average, about 6–7 million new users added per month, making India the world’s fastest growing wireless services market Liberal Foreign Investment Regime–FDI limit increased from 49 percent to 74 percent; the rural telecom equipment market is also open to large investments Among the countries offering the highest rates of return on investment The large untapped potential in India’s rural markets–1.9 percent teledensity in rural markets as compared to the national level of 18 percent The government promoting telecom manufacturing by providing tax sops and establishing telecom specific Special Economic Zones

FDI and other M&A activities increasing in number
Major trends in the telecom sector is increasing M&A activity, de-regulation of telecom policies and growing interest of international investors. Recent Deals in Telecom Sector

Vodafone purchased stake in Hutch from Hong Kong's Hutchison Telecom International for USD 11.08 billion. Reliance Communications Limited has sold a five percent equity share capital of its subsidiary Reliance Telecom Infrastructure Limited to international investors across the US, Europe and Asia. The deal was worth USD 337.5 million.

Telekom Malaysia acquired a 49 percent stake in Spice Communications for USD 179 million.

Fight for the Sweet pie

Maxis Communications acquired a 74 percent stake in Aircel for USD 1.08 billion.

Ericsson to design, plan, deploy and manage Bharti Airtel network and facilitate their expansion in the rural areas, under a USD 2 billion contract.

FDI and other M&A activities increasing in number
Major trends in the telecom sector is increasing M&A activity, de-regulation of telecom policies and growing interest of international investors. Recent Deals in Telecom Sector
The Indian telecom industry has a 74 percent FDI limit in the telecom services segment. The GoI has permitted 100 percent FDI in manufacturing of telecom equipment in India.

Vodafone purchased stake in Hutch from Hong Kong's Hutchison Telecom International for USD 11.08 billion. Reliance Communications Limited has sold a five percent equity share capital of its subsidiary Reliance Telecom Infrastructure Limited to international investors across the US, Europe and Asia. The deal was worth USD 337.5 million.

FDI in Telecom Sector
700 FDI (USD million) 500 300 116 100 2003–04 2004–05 2005–06 2006–07 129 680 521

Telekom Malaysia acquired a 49 percent stake in Spice Communications for USD 179 million.

Maxis Communications acquired a 74 percent stake in Aircel for USD 1.08 billion.

Ericsson to design, plan, deploy and manage Bharti Airtel network and facilitate their expansion in the rural areas, under a USD 2 billion contract.

The Indian telecom industry has always attracted foreign investors. In fact, the cumulative FDI inflow, during the August 1991 to March 2007 period, in the telecommunication sector amounted to USD 3,892 million. It is the third largest sector to attract FDI in India in the post-liberalisation era. FDI calculation takes into account radio paging, cellular mobile and basic telephone services in the telecommunication sector.

Problems of Indian Telecom sector

• Lowest call tariffs in the world • Market strongly regulated by Govrenment body – Governing both ISP and Telecom sectors • Low cost service providers – no possibility of breaking even in short term • Political instability • Wide scale Consumer churn in Telecom and ISP • Wide spread VAS deployment is restricted due to language and literacy problems • Primarily a voice based market

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