TELECOM SECTOR

OVERVIEW-2009
-A Kshitiz Initiative
Introduction
Although India's teledensity has improved from under 4% in
March 2001 to over 36% by the end of March 2009, we are still
way behind other developing nations. Cellular telephony has
emerged as the fastest growing segment in the Indian telecom
industry. Tariff reduction and decline in handset costs has
helped the segment to gain in scale. The cellular segment is
playing an important role in the industry by making itself
available in the rural and semi urban areas where teledensity is
the lowest.
Telecommunication sector in India is subdivided into two segments,
which are Fixed Service Provider (FPS) and Cellular Services. Telecom
Industry in India is specifically emphasizing on latest technologies like
GSM, CDMA, PMRTS, and WLL. India has a prospering market
specifically in GSM mobile service and the number of subscriber is
growing very fast.

Network Infrastructure companies: Telecom Solutions

Cisco, Ericsson Providers:Mahindra,Aricent,IBM,Wipro

Telecom

Telecom Service Providers: Airtel, Idea, Telecom Equipment Manufacturer:

Reliance, Vodafone Nokia, Motorola, Samsung
 October 2009 - The number of telephone subscribers in
India increased to 525.65 Million from 509.03 Million in
September - 2009, thereby registering a growth rate of
3.26%. With this, the overall Tele-density in India reaches
44.87% while broadband subscriber reaches to 7.40 million.

Indian Telecom Statistics (October 2009)

Total telephone subscriber base 525.65
Over all Tele-density 44.87%
Fixed-line user base 37.25
Wireless user base (GSM+CDMA+WLL(F)) 488.40
GSM Subscribers 355.25
CDMA Subscribers 133.15
Monthly additions (Wireline + Wireless) 16.62
Monthly additions (Wireline) -0.02
Monthly additions (Wireless) 16.67
Broadband subscribers 7.40
 Total GSM subscriber base reached
355.25 million in October 2009

Service Provider Name Subscriber (Mn) Market Share (%)

Bharti Airtel 113.21 31.87

Vodafone Essar 85.83 24.16
BSNL 53.96 15.19
IDEA 53.35 15.02
Aircel 27.75 7.81
Reliance Telecom 14.17 3.99
MTNL 4.44 1.25
Loop Mobile 2.55 0.72
All India 355.25 100.00
 Total CDMA subscriber base reached
133.15 million in October 2009

Service Provider Name Subscriber (Mn) Market Share (%)

Reliance Com 74.04 55.61

Tata Teleservices 50.66 38.05

BSNL 5.47 4.11

Sistema Shyam 2.3 1.73

HFCL Infotel 0.37 0.28

MTNL 0.3 0.23

Total 133.15 100

Telecom Regulatory Authority of India (TRAI)
Mission
To ensure that the interest of consumer is protected and at
the same time encourage the development of
telecommunications, broadcasting and cable services in a
manner and at a pace which will enable India to play a
leading role in the emerging global information society.

Role of TRAI
One of the main objectives of TRAI is to provide a fair and
transparent policy environment which promotes a level
playing field and facilities fair competition. TRAI has issued
from time to time a large number of regulations, orders and
directives to deal with the issues coming before. These
regulations cover a wide range of subjects including tariff,
interconnection and quality of services etc.
Telecom Regulatory Authority of India (TRAI)
(Contd.)
Functions of TRAI
 Need and timing for introduction of new service provider
 Terms and condition of license to a service provider
 Technological improvement in services by service
provider
 Maintain inter-connect agreement register
 Levy fees and other charges as determined by
regulations
 Measures for technological development
 Measures to facilitate competition and promote
efficiency in the operation to facilitate growth in industry
Latest Trends and Happenings
in the Telecom Sector
KEY POINTS
Supply Intense competition has resulted in prompt service to
the subscribers.
Demand Given the low penetration levels in the country and
continuously falling tariffs, demand will continue to
remain higher in the foreseeable future across all the
segments.
Barriers to entry High capital investments, well-established players who
have a nationwide network, license fee, continuously
evolving technology and falling tariffs.
Bargaining power of suppliers Improved competitive scenario and commoditisation of
telecom services has led to reduced bargaining power
for services providers.
Bargaining power of customers A wide variety of choices available to customers both in
fixed as well as mobile telephony has resulted in
increased bargaining power for the customers.
Competition Competition has intensified with the entry of new
cellular players in select circles. Reducing tariffs will
hurt the new entrants as they will be unable to recover
their high capital investments.
Value Added Services

Value Added Services (VAS) in telecommunication

industry refers to non-core services, the core or basic
services being standard voice calls and fax transmission
including bearer services.

The government of India issues licenses for the following

services-
• Public mobile trunking services
• Voice mail services
• Videotext services
• GMPCS
• Internet
• Audio text
• Unified messaging services
Value Added Services (Contd.)

• Mobile value-added services hold a tremendous

revenue-generating potential in India which could rake in
around Rs 18,000 crore by 2012. It will contribute about
INR 6,000 crore to total revenue from telecom
operations by end of 2009. This is likely to go up to Rs
18,000 crore by 2012.

• Presently Mobile VAS accounts for 10% of the

operator’s revenue, which is expected to reach 18% by
2010. VAS can greatly be improved with forthcoming 3G
launch. The revenue from mobile value added services
has already touched 4600 crore.
3G Technology

• 3G or Third Generation technology is a convergence of

various Second Generation telecommunication systems.
The technology is intended for SMARTPHONES -
multimedia cell phones.
• Video broadcasting and other e-commerce services such
as, stock transactions and e-learning will now be made
possible much faster. It offers 3 Mbps speed for
downloading, which is very high as compared to that of
the 2G technology.
• The 3G technology provides for internet surfing,
downloading, e-mail attachment downloading, audio-
video conferencing, fax services and many other
broadband applications.
3G Technology (Contd.)

• It was first implemented in Japan on October 1, 2001 and

is now, serving over 40 countries in Asia, Europe and
USA.

• In 2008, India entered into 3G Mobile arena with the

launch of 3G enabled Mobile services by Mahanagar
Telephone Nigam Limited (MTNL). MTNL is the first
Mobile operator in India to launch 3G services.
3G Technology (Contd.)

3G offers a wide range of applications. These

applications are mainly made possible due to the
enhanced data rates as a result of the 2Mbps bandwidth
availabilities. Some of the applications are.
• 1. Mobile TV - Due to the high data transfer rate being
offered due to 3G, TV can be viewed on Mobile Phones.
For this have to tie up with a service provider, through
which the content can be accessed. Eg.Apalya for
BSNL(India).
• 2. Video Conferencing - It is possible to conduct a video
conferencing using the available network, due to the 2
Mbps bandwidth.
• 3. Tele-medicine - This is an extended feature of video
conferencing where a remote person can be given
attention by a doctor located at a distant place.
3G Technology (Contd.)

• 4. Location Based Services - These are some services

which can be accessed on the dependence of the service
provider. These include weather updates, live road traffic
view, and vehicle tracking.
• 5. Video on Demand - Videos can be viewed on demand
from a service provider. For providing this service, the
service provider should have collaborations with content
providers such as Perceptknorigin (in India). This is again
possible due to high buffering speed possible due to the
3G network.
Mobile Number Portability (MNP)

• After years of waiting, Mobile Number Portability has

arrived in India. The Telecom Regulatory Authority of India
(TRAI) has issued a draft of regulations for introduction of
mobile number portability (MNP) in the country.

• Mobile Number Portability allows subscribers to retain their

existing telephone number when they switch from one
access service provider to another access service provider
irrespective of mobile technology or from one technology to
another technology on the same or any other access
service provider.

• India will introduce mobile number portability on December

31,2009, a move that could further intensify the stiff
competition in the world's fastest-growing wireless market
and push call charges lower.
Mobile Number Portability (MNP)
(Contd.)
• This will be introduced in two phases-first in the metro
cities and the so-called Category A telecom zones and in
other areas by March 20.

• TRAI notified certain charges associated with MNP and

said switching charges for users must not exceed 19
rupees (US 40 cents).

• Four new firms including ventures of international telecom

operators Telenor, Etisalat and Batelco are set to start
services in India this year and MNP would make it easy for
them to lure existing subscribers.

• Additional Reading:
http://www.medianama.com/2009/09/223-rules-criteria-for-
applying-for-mobile-number-portability/
Mobile Price War

• India's rapidly expanding telecommunication sector has

been hit by a raging price war. India is the world's
second largest wireless communications market after
China. But the competition among domestic and
international companies for new phone subscribers is
digging into profit margins.

• India adds more than 10 million new mobile phone

connections every month. The lucrative business has
attracted domestic and international companies to the
Indian market.

• But at the same time as more companies have entered

the market, the booming sector has been hit by a tariff
war. Call rates, already among the lowest in the world,
have been driven down further by companies wanting to
attract new phone subscribers.
Mobile Price War(Contd.)

• The intense tariff war was triggered when

telecommunications company, Tata DoCoMo, introduced
an innovative offer to lower rate charges by billing
customers on a per second basis for calls instead of on a
per minute basis. Since then, several other operators have
offered price cuts, offering rates as low as a fraction of a
U.S. cent per second.

• But the lower call charges have resulted in falling revenues

and lower profits in the sector.

• Reliance Communications (RCom) in November

announced a new price for sending SMS which is 1 paisa.
• Further intensifying the price war, Vodafone Essar
introduced new roaming tariff on Dec 4, under which the
subscribers can chose roaming charges of either 70 paisa
per minute or 1.5 paisa per second.
Mobile Price War(Contd.)

• State-run mobile operator BSNL on Monday cut charges

on calls made outside a user's local coverage area,
saying it was joining an ongoing tariff war in the world's
fastest-growing wireless market.

• State-run BSNL, which is India's No. 2 telecoms firm

including fixed-line subscribers, will let users choose
roaming charges of either 49 paisa (1 U.S. cent) per
minute or 1 paisa per second.
Prospects

• As far as the fixed line business goes, the low

penetration levels in the country and the increasing
demand for data based services such as the Internet will
act as major catalysts in the growth of this segment,
which had a subscriber base of over 39 m at the end of
FY09. The huge market share of public sector
behemoths, MTNL and BSNL is likely to get reduced
further as the penetration by private players spreads. In
spite of this, the PSUs will continue to retain their
dominant position. This is on account of high capital
investments required in setting up a nationwide network.
As a result, the private sector players will have to rely on
key business centers and pockets of high urbanisation
for their growth.
Prospects (Contd.)
• Increasing choice and one of the lowest tariffs in the
world have made the cellular services in India an
attractive proposition for the average consumer. The
segment’s subscriber base has grown by over 50% YoY
in FY09. Policy measures like lowering of taxes on the
cellular industry and benefits of enhanced FDI limits
shall further the prospects of the cellular industry.

• The industry has set out a target to cross the total

subscriber base of 500 m by 2010 and 600 m the year
after. Going by the current pace of subscriber additions,
the target does not seem too farfetched. Cellular
subscribers will continue to propel the subscriber growth.
Prospects (Contd.)
• During the current fiscal, a lot of focus will be given to
new policy initiatives in the industry. The predominant
one is the allocation of spectrum for the 3G and
broadband wireless access (BWA) services. In addition,
the telecom regulator TRAI recently unveiled a draft to
allow mobile number portability (MNP) which allows
subscribers to switch networks without changing the
number.
THANK YOU