Indian Telecom Industry

Telecommunication is the transmission of information over significant distances to communicate. Telecommunication sector in India is primarily subdivided into two segments, which are Fixed Service Provider (FSPs) and Cellular Services. Telecom industry in India constitutes some essential telecom services like telephone, radio, television and Internet. Telecom industry in India is specifically emphasizing on latest technologies like GSM (Global System for Mobile Communications), CDMA (Code Division Multiple Access), PMRTS (Public Mobile Radio Trunking Services), Fixed Line and WLL(Wireless Local Loop ). India has a prospering market specifically in GSM mobile service and the number of subscribers is growing very fast. Telephony introduced in India in 1882. The total number of telephone subscribers in the country waThe total number of telephones in the country stands at 885.99 million, while the overall teledensity has increased to 73.97% as of June 30, 2011 and the total numbers of mobile phone subscribers have reached 851.70 million as of June 2011. The mobile tele-density has increased to 71.11 % in June 2011. In the wireless segment, 11.41 million subscribers were added in June 2011. The wire line segment subscriber base stood at 34.29 million. Indian telecom operators added a staggering 227.27 million wireless subscribers in the 12 months between Mar 2010 and Mar 2011 averaging at 18.94 million subscribers every month. To put this into perspective, China which currently possesses the world's largest telecommunications network added 119.2 million wireless subscribers during the same period (March 2010 - March 2011) - averaging 9.93 million subscribers every month (a little over half the number India was adding every month). So, while India might currently be second to China in the TOTAL number of mobile subscribers, India has been adding nearly twice as many subscribers EVERY month. Mobile teledensity increased by almost 18.4 percentage points from Mar 2010 and Mar 2011 (49.60% to 67.98%) while wireline subcriber numbers fell by a modest 2.2 million. This frenetic pace of monthly subscriber additions means that the Indian mobile subscriber base has shown a year on year growth of 43.23%. As the fastest growing telecommunications industry in the world, it is projected that India will have 1.159 billion mobile subscribers by 2013. Furthermore, projections by several leading global consultancies indicate that the total number of subscribers in India will exceed the total subscriber count in the China by 2013. The industry is expected to reach a size of 344,921 crore (US$76.92 billion) by 2012 at a growth rate of over 26 per cent, and generate employment opportunities for about 10 million people during the same period. According to analysts, the sector would create direct employment for 2.8 million people and for 7 million indirectly There are three types of players in telecom services: State owned companies (BSNL and MTNL) Private Indian owned companies (Reliance Infocomm, Tata Teleservices,) Foreign invested companies (Hutchison-Essar, Bharti Tele-Ventures, Escotel, Idea Cellular, BPL Mobile, Spice Communications)

Idea Cellular
Idea Cellular is now owned by Aditya Birla Group. Idea Cellular started off as a joint venture with the group, AT&T and the Tata Group. However the stakes of the remaining partners was eventually acquired by the group. IDEA Cellular is a publicly listed company, having listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) in March 2007. It was incorporated as Birla Communications Limited on March 14, 1995 and granted a certificate of commencement of business on August 11, 1995. The name was changed to Birla AT&T Communications Limited on May 30, 1996 following the execution of a joint venture agreement dated December 5, 1995 between AT&T Corporation and Grasim Industries Limited pursuant to which the Aditya Birla Group held 51% of our Equity Share capital and AWS Group held 49% of our Equity Share capital. Agreement dated December 15, 2000 entered into between Grasim Industries Limited on behalf of the Aditya Birla Group, Tata Industries Limited on behalf of the Tata Group and AT&T Wireless Services Inc. on behalf of the AWS Group following which our name was changed to Birla Tata AT&T Limited on November 6, 2001. Consequent to the introduction of the Idea brand, our name was changed to Idea Cellular Limited on May 1, 2002. The AWS Group exited from the Company on September 28, 2005 by selling 371,780,740 Equity Shares of the Company, which constituted 50% of the holding of AT&T Cellular Private Limited in our equity share capital, to ABNL and by transferring the remaining 371,780,750 Equity Shares to Tata Industries Limited. The Tata Group ceased to be a shareholder of the Company on June 20, 2006 when Tata Industries Limited and Apex Investments (Mauritius) Holding Private Limited (formerly known as AT&T Cellular Private Limited) sold all their shares in the Company to the Aditya Birla Group. Idea is the 3rd largest mobile services operator in India, in revenue terms, and recorded a subscriber base of over 93.75 mn as of 31st May 2011. It became a pan-India integrated GSM operator covering the entire telephony landscape of the country, and expanded its NLD and ILD operations in FY 2010. During the year, Idea increased its revenue market share by over 1%, despite stiff tariff war in the market. The company has won license to offer 3G services in 11 service areas, which generate over 81% of the companys total revenue. Ideas 3G services will be launched in the year 2011. Ideas strong growth in the Indian telephony market comes from its deep penetration in the nonurban and rural markets. Idea has the highest share of rural subscribers as a percentage of total subscribers, amongst other GSM players. In fact, two out of every three new subscribers now come from non-urban market. Ideas innovative and revolutionary VAS offering has been a major growth driver. Be it Mobile TV, which was launched for the first time in India on the Idea network; exhaustive Music library in multiple languages; DTs/ RBTs; and other content download from the world of Cinema, Music, Cricket etc. Idea has consistently grown its VAS revenue. Its revenue share of VAS is now higher than the industry average.

Idea offers seamless coverage to roaming customers traveling to any part of the country, as well as to international traveling customers across over 200 countries. Ideas partnership with over 400 operators ensures that customers are always connected while on the move, within the country or other parts of the world. IDEA is the winner of The Emerging Company of the Year Award at The Economic Times Corporate Excellence Awards 2009. IDEA Cellular also received the prestigious Avaya GlobalConnect Award for being the Most Customer Responsive Company in the Telecom sector in the year 2010. The company has received several other national and international recognitions for its path-breaking innovations in mobile telephony products & services. It won the GSM Association Award for Best Billing and Customer Care Solution for 2 consecutive years. It was awarded Mobile Operator of the Year Award India for 2007 and 2008 at the Annual Asian Mobile News Awards. IDEA Cellular, an Aditya Birla Group Company, Indias first truly multinational corporation. The group operates in 26 countries, and is anchored by over 130,600 employees belonging to 40 nationalities. The Group has been adjudged the 6th Top Company for Leaders in Asia Pacific Region in 2009, in a survey conducted by Hewitt Associates, in partnership with The RBL Group, and Fortune. The Group has also been rated The Best Employer in India and among the Top 20 in Asia by the Hewitt-Economic Times and Wall Street Journal Study 2007.
Group Company wise % market share may'2011 June' 2011
Sl. No. 1 2 3 4 5 6 7 8 9 10 11 12 Name of Company Bharti Airtel Vodafone Essar IDEA BSNL Aircel Uninor Videocon MTNL Loop Mobile Stel Etisalat All India Total Sub Figures 167,065,289 139,426,769 93,754,764 87,618,769 57,061,824 25,386,287 7,054,198 5,234,574 3,130,643 3,165,944 1,299,298 590,198,359 % Market Share 28.31% 23.62% 15.89% 14.85% 9.67% 4.30% 1.20% 0.89% 0.53% 0.54% 0.22% 100.00% Total Sub Figures 169,186,247 141,519,840 95,108,818 88,461,492 57,980,752 26,330,211 7,129,886 5,236,171 3,150,308 3,317,414 1,358,535 598,779,674 % Market Share 28.26% 23.63% 15.88% 14.77% 9.68% 4.40% 1.19% 0.87% 0.53% 0.55% 0.23% 100.00%

Source: Cellular Operators Association of India (COAI)

Total number of mobile user has been increased from 590.19million to 598.78 million in the period of one month. In the same period idea has added about 2 million new customers. There is negligible decrease in the % of market share of the idea in this period i.e. 0.01%. but it is clear from the above table that telecom industry in India is growing at a significance pace. Idea is also growing at a rapid pace taking the advantage of the boom in this sector. According to the results published by the TRAI, the new system of

MNP has worked in the favor of the idea. It has gained the maximum number of user through the use of MNP.

Consolidated Profit & Loss Account (Rupees in Million) For the Year ended 31-Mar-10 31-Mar-09 INCOME Service Revenue Sale of Trading Goods Other Income TOTAL 123,650.40 101,169.13 67,199.83 43,500.16 29,496.07 328.43 1,011.39 143.72 230.94 0.07 174.56 163.84 209.29 165.75 207.42 31-Mar08 31-Mar07 31-Mar06

124,990.22 101,543.79 67,374.46 43,873.29 29,869.24

OPERATING EXPENDITURE Cost of Trading Goods Sold Personnel Expenditure Network Operating Expenditure Licence and WPC Charges Roaming & Access Charges Subscriber Acquisition & Servicing Expenditure Advertisement and Business Promotion Expenditure 304.79 6,450.71 31,269.73 13,468.13 18,001.30 11,572.75 4,244.78 147.90 5,245.00 21,078.31 11,239.32 18,442.09 8,270.69 4,572.77 4,183.26 73,179.34 0.06 3,463.57 51.73 2,608.71 72.32 1,781.19 3,197.31 3,020.18 4,994.20 3,465.59 1,252.74 1,221.34

10,470.11 5,335.72 6,851.03 4,487.01

11,334.41 7,320.96 6,424.23 3,224.86 2,913.58 5,643.27 2,006.20 1,557.84

Administration & other Expenses 5,087.14 Total 90,399.33

44,681.85 29,011.44 19,004.87

EBITDA* Finance and Treasury Charges (Net) Depreciation

34,590.89 4,005.22 18,123.31

28,364.45 4,945.22 12,472.70

22,692.61 14,861.85 10,864.37 2,776.20 7,569.01 3,051.18 5,636.77 3,171.12 4,451.45

Amortisation of Intangible Assets 2,025.79 Surplus from Prepayment of Loan (316.94) PBT# FROM OPERATING ACTIVITIES Impairment in license value Less : Amount Withdrawn from Securities Premium 10,753.51 3,585.80

1,555.23 9,391.30

1,199.10 -

1,081.39 -

1,043.67 2,198.13

11,148.30 5,092.51

(3,585.80) -

Loss on impairment and expenses relating to spice amalgamation 831.33 scheme Less : Amount withdrawn from Business restructuring reserve Non Compete Fee Less : Amount Withdrawn from Securities Premium PBT Provision for taxation - Current - Deferred - Fringe Benefit tax - MAT Credit PROFIT AFTER TAX (831.33) 10,753.51 2,167.22 1,183.83 5,439.75 (5,439.75) 9,391.30 1,273.29 468.97 102.24 11,148.30 5,092.51 425.93 650.47 74.13 0.42 P 10.55 59.36 2,198.13 33.78 46.70 2,117.65

(2,136.93) (1,268.99) (425.33) 9,539.39 8,815.79

10,423.10 5,022.18

* EARNING (PROFIT) BEFORE FINANCE CHARGES, DEPRECIATION, AMORTISATION & TAX # PROFIT BEFORE TAX

Above given is the Profit and loss account of the company for the last 5 years. It is evident from the given statement that the company is earning the considerable amount of profit over the years. The only time there is fall in the profit is in the fiscal year of 2009, which was the year when there was global slowdown. But even at the time of the slowdown the company is able to generate the considerable amount of profit. The sales revenue of the company is constantly increasing. Its shows number of user of its product is constantly increasing as the industry overall is also doing well during these periods.

Macro Environment
An organization's macroenvironment consists of nonspecific aspects in the organization's surroundings that have the potential to affect the organization's strategies. When compared to a firm's task environment, the impact of macroenvironmental variables is less direct and the organization has a more limited impact on these elements of the environment. The macroenvironment consists of forces that originate outside of an organization and generally cannot be altered by actions of the organization
1. Socio-cultural Factors: life style of the people in India is changing. People are educated

now; they require the instant access to information. Moreover the use of mobile is no longer a luxury but is considered as the necessity. Now the each and every and every member of the family needs the cell phone. This is the opportunity for the mobile industry as a whole. Most of the people still live in the rural areas and this market is still to be explored. Idea has the advantage as it has most coverage in the rural area and still it has lot of opportunities to grow there. 2. Technological factors: Technology is another aspect of the environment a firm should consider in developing strategic plans. Changing technology may affect the demand for a firm's products and services, its production processes, and raw materials. Technological changes may create new opportunities for the firm, or threaten the survival of a product, firm, or industry. Technological innovation continues to move at an increasingly rapid rate. In the mobile industry new technology is coming up every now and then. In the era of globalization it is easy to transfer or get access to the latest technology. So the telecom industry need to keep themselves updated with the changes taking place in the field of technology. It not the long time back when we were using the 2G technology and we are running for the 3G. all the mobile operators are providing this service and those who are not able to keep themselves up and running with the change are fading. 3. Political and legal factors: The political-legal dimension of the general environment also affects business activity. The philosophy of the political parties in power influences business practices. The legal environment serves to define what organizations can and cannot do at a particular point in time. Telecom industry is dominated by the private sector in india. But there is direct control of the government in the telecom sector. The government bodies like DoT, TRAI etc which directly influence the telecom industry. For example the recent implementation of the rule of Mobile Number Portability (MNP) , now the user can switch the network without changing the number, has increased the competition in the market. Now the service providers are competing to attract the user of the competitors. Government has

introduced varies rules and laws to boost telecom sector and so far it has been successful in doing so. 4. Economic factors: it refers to the character and direction of the economic system within which the firm operates. Economic factors include the balance of payments, the state of the business cycle, the distribution of income within the population, and governmental monetary and fiscal policies. The impact of economic factors may also differ between industries. Telecom sector is also facing the heat of slow down in global economy and the high rate of inflation. The price war step price war is also taking its toll on telecom industry. Last fiscal year almost all the companies posted decrease in the profit. All the sell and number of customer is increasing but the profit is decaling. So we can see that all the companies are now increasing the tariff. Indian economy is in the growth stage , which is beneficial for the telecom industry.

The micro-environment
This environment influences the organization directly. It includes suppliers that deal directly or indirectly, consumers and customers, and other local stakeholders. Micro tends to suggest small, but this can be misleading. In this context, micro describes the relationship between firms and the driving forces that control this relationship. It is a more local relationship, and the firm may exercise a degree of influence. These are internal factors close to the company that have a direct impact on the organizations strategy. These factors include customers, employees, suppliers, shareholders, media, and competitors.
1. Customers: Organization operates in order satisfy the need and desire of its customers. In

the telecom industry the customers are not satisfies they can easily switch the operator (MNP , made it easy to change operator without changing the number). The customers can be kept loyal by providing them efficient services and value added services. Idea is ranked number one in providing VAS to its customers. 2. Employees: employing the correct staff and keeping these staff motivated is an essential part of the strategic planning process of an organization. Training and development plays an essential role particular in service sector marketing in-order to gain a competitive edge. With the increased number of graduates it is not much difficult for the telecom industry to find the appropriate workforce. 3. Shareholders: As organization requires greater inward investment for growth they face increasing pressure to move from private ownership to public. However this movement unleashes the forces of shareholder pressure on the strategy of organizations. Satisfying shareholder needs may result in a change in tactics employed by an organization.