CHAPTER-1 INTRODUCTIONOF INDUSTRY 1. History of Telecommunications Industry

It began with the use of smoke signals and invention of telegraph in 1844 made possible wired communication, telephone enabled voice transmission. Follow this advancement from smoke signals to modern day internet and mobile technology, understanding the events that have shaped the world of telecommunications.

The history of telecommunication began with the use of smoke signals and drums in Africa, the Americas and parts of Asia. In the 1790s, the first fixed semaphore systems emerged in Europe; however it was not until the 1830s that electrical telecommunication systems started to appear. This article details the history of telecommunication and the individuals who helped make telecommunication systems what they are today. The history of telecommunication is an important part of the larger history of communication.  Early Era:

Early telecommunications included smoke signals and drums. Talking drums were used by natives in Africa, New Guinea and South America, and smoke signals in North America and China. Contrary to what one might think, these systems were often used to do more than merely announce the presence of a camp.

In 1792, a French engineer, Claude Chappe built the first visual telegraphy (or semaphore) system between Lille and Paris. This was followed by a line from Strasbourg to Paris. In 1794, a Swedish engineer, Abraham Edelcrantz built a quite different system from Stockholm to Drottningholm. As opposed to Chappe's system which involved pulleys rotating beams of wood, Edelcrantz's system relied only upon shutters and was therefore faster. However semaphore as a communication system suffered from the need for skilled operators and expensive towers often at intervals of only ten to thirty kilometers (six to nineteen miles). As a result, the last commercial line was abandoned in 1880.  Telegraph System:

Telecommunications began with the successful innovation of Samuel Morse's telegraph system in 1844. For three years, the U.S. Post Office ran the pioneering Washington to Baltimore line. By that time other private telegraph companies had developed (the first connected New York and Philadelphia) and were rapidly growing. Telegraph expansion paralleled and aided the growth of the America’s network of railroads. The latter provided a prepared right of way, while the former offered vital communication links for the often single-track networks that moved people and goods. The first coast-to-coast telegraph line was opened in 1862 (seven years before rail links extended that far) and immediately made money, demonstrating the value of telecommunications over great distances.  Early Corporate Alliances:

Western Union, the first telecommunications monopoly, was formed as a regional alliance of several smaller firms in 1856 and rapidly expanded, often following railway lines. Just a year later the six largest telegraph companies developed a cartel, dividing up the country and business among themselves. The Civil War demonstrated the value of telegraph links (the Union was far better equipped than the Confederacy) and drove up rates and company profits. Western Union took over some 15,000 miles of government-built lines at the end of the war and became by far the largest company in the field.  International Telegraph Systems:

Telegraph systems initially served only land routes, as it was presumed impossible to lay lines underwater. After experiments running insulated telegraph lines under lakes and across rivers, in 1858 an American-led consortium laid the first cable connecting Britain and the United States, which eventually failed in few months. After a failed attempt to lay a cable in 1865, success came in 1866; soon others were added. The Pacific was not crossed until 1902 because of the great distances involved. Availability of global telegraphy rapidly changed the face of business and government affairs. The ability to "instantly" communicate had great positive impact on business and other human aspects of daily life.  Birth of Telephone:

Success of telegraph industry and rising electrical manufacturing businesses formed the context for the telephone. The electric telephone was invented in the 1870s, based on earlier work with harmonic (multi- signal) telegraphs. The first commercial telephone services were set up in 1878 and 1879 on both sides of the Atlantic in the cities of New Haven and London. The first telephone switchboard was placed in service in New Haven, Connecticut, in early 1878, and demonstrated its greater efficiency over individual lines between each customer. The first use of telephone numbers and directories of telephone users appeared about the same time. Telephone exchanges (using many switchboards) appeared about two decades later.

Telephone was largely the creation of Alexander Graham Bell, who received his first patent in March 1876. Early development of the telephone was fraught with technical and financial problems. Alexander Graham Bell held the master patent for the telephone that was needed for such services in both countries. The technology grew quickly from this point, with inter-city lines being built and telephone exchanges in every major city of the United States by the mid-1880s.

Restricted by crude technology to providing local service (initial iron wires rarely extended 100 miles), telephone service developed slowly before the Bell patents expired in 1893. Initial Bell business strategy focused on licensing use of its patents and selling equipment to companies building systems in cities and towns, largely to serve business and the wealthy.  Mechanically Automated Telephone:

A Kansas City undertaker, concerned that telephone operators were sending business to his competitors, developed the first mechanically automated telephone switch in 1891. The first automated switches began to appear around the turn of the century in major cities—and would be used in smaller communities for decades. Copper telephone lines were placed in use between Boston and New York, extending telephone service to 300 miles. Around 1893, the country leading the world in telephones per 100 persons (teledensity) was Sweden with 0.55 in the whole country but 4 in Stockholm (10,000 out of a total of 27,658 subscribers). This compares with 0.4 in USA for that year. Telephone service in Sweden developed through a variety of institutional forms: the International Bell Telephone Company (a U.S. multinational), town and village co-operatives, the General Telephone Company of Stockholm (a Swedish private company), and the Swedish Telegraph Department (part of the Swedish government). Since Stockholm consists of islands, telephone service offered relatively large advantages, but had to use submarine cables extensively. Competition between Bell Telephone and General Telephone, and later between General Telephone and the Swedish Telegraph Dept., was intense.

In 1893, the U.S. was considerably behind Sweden, New Zealand, Switzerland, and Norway in teledensity. The U.S. rose to world leadership in teledensity with the rise of many independent telephone companies after the Bell patents expired in 1893 and 1894.  20th Century Developments:

By 1904 there were over three million phones in the US, still connected by manual switchboard exchanges. By 1914, the U.S. was the world leader in teledensity and had more than twice the teledensity of Sweden, New Zealand, Switzerland, and Norway. The relative good performance of the U.S. occurred despite competing telephone networks not interconnecting.

For the next half century, the network behind the telephone grew progressively larger and much more efficient, and after the rotary dial was added the instrument itself changed little until touch-tone signaling started replacing the rotary dial in the 1960s.  Transatlantic Voice Communications:

Despite all these developments, transatlantic voice communication remained impossible for customers until January 7, 1927, when a connection was established using radio. However no cable connection existed until TAT-1 was inaugurated on September 25, 1956 providing 36 telephone circuits. Transcontinental telephone service became possible only around 1915 by use of amplifiers based on Lee De Forest's "Audion" vacuum tube.  Coaxial Cable and Microwave Links:

Improved technology would begin to change the face of telecommunications after 1945. Paced by wartime needs and spending, Bell Labs and other researchers produced coaxial cable and microwave links that were first used commercially in the years after the war. No longer was it necessary to build an expensive telecommunication network using copper wires. Microwave links required the use of many antenna towers— and a license to use the high- frequency spectrum—but this was less expensive than a traditional wired network. Coaxial cable offered the broadband capacity needed to transmit thousands of telephone calls or full- motion video.  Satellite Communications:

Development of satellite communication was first hinted at in a 1945 article by Arthur C. Clarke in which he postulated a geostationary orbit 22,300 miles high that would keep a satellite above the same part of Earth. Pushed by the cold war missile race, the world's first artificial satellite came just 12 years later as the Soviet Union launched Sputnik into a low Earth orbit in October 1957. Early military satellite communications followed the same low- orbit path until the first commercial geostationary satellites appeared in the 1970s.  Mobile Phones:

The history of mobile phones can be traced back to two-way radios permanently installed in vehicles such as taxicabs, police cruisers, railroad trains, and the like. Later versions such as the so-called transportable or "bag phones" were equipped with a cigarette lighter plug so that they could also be carried, and thus could be used as either mobile two-way radios or as portable phones by being patched into the telephone network.

Bell Labs developed the notion of "cellular" systems allowing for frequency reuse (and thus far greater capacity) and developed it through the 1970s. On April 3, 1973 Motorola manager Martin Cooper placed a cellular phone call (in front of reporters) to Dr. Joel S. Engel, head of research at AT&T's Bell Labs. This began the era of the handheld cellular mobile phone. Meanwhile the 1956 inauguration of the TAT-1 cable and later international direct dialing were important steps in knitting together the various continental telephone networks into a global network. The FCC approved operation of an analog cellular mobile telephone system in 1982, sparking a new growth sector.  Cable Television Companies:

Cable television companies began to use their fast-developing cable networks, with ducting under the streets of the United Kingdom, in the late 1980s, to provide telephony services in association with major telephone companies. One of the early cable operators in the UK, Cable London, connected its first cable telephone customer in about 1990.  Digital Technology:

Digital technology first appeared in American telecommunications with AT&T's introduction of its T1 Carrier System in 1962. A T1 line offered far more capacity and a cleaner (less noisy) signal. Soon digital telephone switches appeared, allowing for more flexible network design and operation. But the most sweeping change came with the installation of fiber-optic cables to carry voice, data, and video signals. The huge carrying capacity of fiber—constantly rose with further technical improvements— finally placed telecommunication networks well ahead of projected growth (and planted the seeds for disaster in the early 2000s).  The Internet:

On September 11, 1940, George Stibitz was able to transmit problems using teletype to his Complex Number Calculator in New York and receive the computed results back at Dartmouth College in New Hampshire. This configuration of a centralized computer or mainframe with remote dumb terminals remained popular throughout the 1950s. However it was not until the 1960s that researchers started to investigate packet switching — a technology that would allow chunks of data to be sent to different computers without first passing through a centralized mainframe. A four-node network emerged on December 5, 1969 between the University of California, Los Angeles, the Stanford Research Institute, the University of Utah and the University of California, Santa Barbara. This network would become ARPANET, which by 1981 would consist of 213 nodes. In June 1973, the first non- US node was added to the network belonging to Norway's NORSAR project. This was shortly followed by a node in London.

Two popular link protocols for local area networks (LANs) also appeared in the 1970s. Internet access became widespread late in the century, using the old telephone and television networks. The Internet, based on government networks dating back to 1969, became a widely used public network in 1995. Development of the World Wide Web and the graphic user interface making it possible opened up a wealth of expanding information resources and growing public acceptance. By the early 2000s, more than half of American households were connected to the Internet, a slowly growing number of them linked by broadband connections. Projections of Internet growth sparked bullish plans for the underlying telecommunication services and manufacturing that made the Web possible. Many of those projections were wide of the reality.  Internet Protocol (IP) Telephony:

Internet Protocol (IP) telephony (also known as 'Internet telephony') is a service based on the Voice over IP communication protocol (VoIP), a disruptive technology that is rapidly gaining ground against traditional telephone network technologies. In Japan and South Korea up to 10% of subscribers switched to this type of telephone service as of January 2005.

IP telephony uses a broadband Internet connection to transmit conversations as data packets. In addition to replacing the traditional Plain Old Telephone Service POTS system, IP telephony is also competing with mobile phone networks by offering free or lower cost connections via WiFi hotspots. VoIP is also used on private wireless networks which may or may not have a connection to the outside telephone network. 2. OVERVIEW OF INDUSTRY

The telecom industry has been divided into two major segments, that is, fixed and wireless cellular services for this report. Besides, internet services, VAS, PMRTS and VSAT also have been discussed in brief in the report.

In today’s information age, the telecommunication industry has a vital role to play. Considered as the backbone of industrial and economic development, the industry has been aiding delivery of voice and data services at rapidly increasing speeds, and thus, has been revolutionising human communication.

Although the Indian telecom industry is one of the fastest-growing industries in the world, the current teledensity or telecom penetration is extremely low when compared with global standards. India’s teledensity of 36.98% in FY09 is amongst the lowest in the world. Further, the urban teledensity is over 80%, while rural teledensity is less than 20%, and this gap is increasing. As majority of the population resides in rural areas, it is important that the government takes steps to improve rural teledensity. No doubt the government has taken certain policy initiatives, which include the creation of the Universal Service Obligation Fund, for improving rural telephony. These measures are expected to improve the rural tele- density and bridge the rural-urban gap in tele-density.  Introduction - Evolution

Indian telecom sector is more than 165 years old. Telecommunications was first introduced in India in 1851 when the first operational land lines were laid by the government near Kolkata (then Calcutta), although telephone services were formally introduced in India much later in 1881. Further, in 1883, telephone services were merged with the postal system. In 1947, after India attained independence, all foreign telecommunication companies were nationalised to form the Posts, Telephone and Telegraph (PTT), a body that was governed by the Ministry of Communication. The Indian telecom sector was entirely under government ownership until 1984, when the private sector was allowed in telecommunication equipment manufacturing only. 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. 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).

The entire evolution of the telecom industry can be classified into three distinct phases.

Phase I- Pre-Libralisation Era (1980-89)

Phase II- Post Libralisation Era (1990-99)

Phase III- Post 2000 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. As mentioned earlier in the chapter, until the industry was liberalised in the early nineties, it was a heavily government-controlled and small-sized market, Government policies have played a key role in shaping the structure and size of the Telecom industry in India. As a result, the Indian telecom market is one of the most liberalised market in the world with private participation in almost all of its segments. 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.  Current Status

Globalisation has made telecommunication an integral part of the infrastructure of the Indian economy. The telecom sector in India has developed as a result of progressive regulatory regime.

According to the TRAI, the total gross revenue of the Indian telecom services industry was Rs 1,524 bn in FY09 up from Rs 1,291 bn in FY08 registering a growth of 18.03% over FY08 and its subscriber base grew by 43% over FY08 to touch 429.70 mn subscribers in FY09.

The telecom sector in India experienced a rapid growth over the past decade on account of regulatory libralisation, structural reforms and competition, making telecom one of the major catalysts in India’s growth story. However, 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. Besides, the growth in the service and IT and ITeS sector also increased the prominence of the telecom industry in India. 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. The contribution of the sector to GDP has been increasing gradually (its contribution in GDP has more than doubled to 2.83% in FY07 from 1.0% in FY92).

Telecom is one of the fastest-growing industries in India; on an average the industry added 8 million wireless subscribers every month in FY08. The government had set a target of 500 million telecom connections by 2010. However, according to the TRAI, the total subscriber base (wireless and wireline) in the industry crossed the 500-mn-mark and reached 509.03 mn by the end of September 2009, which took India to the second position in terms of wireless network in the world next only to China. Prior to liberalisation, the telecom sector was monopolised by the public sector and recorded marginal growth; in fact, during 1948-1998, the incremental teledensity in the country was just 1.92%. However, the introduction of NTP’99 accelerated the growth of the sector and the teledensity increased from 2.33 in 1999 to 36.98 in 2009; however, 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. From 2003 onwards the government has taken certain initiatives such as unified access licensing regime, reduced access deficit, introduction of calling party pays (CPP) and revenue sharing regime in ADC that has provided further impetus to the sector. The Indian telecom industry is characterised with intense competition, and continuous price wars. Currently, there are around a dozen telecom service providers who operate in the wired and wireless segment. The government has been periodically implementing suitable fiscal and promotional policies to boost domestic demand and to create volumes for the industry.

The Indian telecom industry has immense growth potential as the teledensity in the country is just 36 as compared with 60 in the US, 102 in the UK and 58 in Canada. The wireless segment growth has played a dominant role in taking the teledensity to the current levels. In the next few years, the industry is poised to grow further, in fact, it has already entered a consolidation phase as foreign players are struggling to acquire a pie in this dynamic industry.  Role in India’s Development

 Contribution to GDP

According to the UNCTAD, there is a direct correlation between the growth in mobile teledensity and the growth in GDP per capita in developing countries, which tend to have a high percentage of rural population. The share of the telecom services industry in the total GDP has been rising over the past few years (the telecom sector contribution in GDP went up from 2.52% in FY05 to 2.83% in FY07).

 Employment

The Indian telecommunication industry employs over 400,000 direct employees and about 85% of these employees are from government-owned companies. The ratio of number of subscribers to employees, an indication of efficiency and profitability, is much higher for private companies than for government companies.

 Foreign Direct Investment (FDI)

Foreign direct investment has been one of the major contributors in the growth of the Indian economy, and therefore, the need for higher FDI is felt across sectors in the Indian economy. The telecom sector has played a crucial role in attracting FDI in India. The share of telecom sector in the total FDI inflows in India has gone up to 10% in FY09 as compared with just 3% in FY05.

The telecom sector requires huge investments for its expansion as it is capital-intensive and FDI plays a vital role in meeting the fund requirements for expansion of the telecom sector. Telecom accounts for almost 10% of the total FDI inflows in the country and has been the third-largest sector to attract FDI in India in the post-liberalisation era

The Indian telecom industry has been an attractive avenue for foreign investors over the years. As per DIPP figures, the cumulative FDI inflow during August 1991 to June 2009 period, in the telecommunication sector amounted to US$ 113 bn. FDI calculation takes into account radio paging, cellular mobile and basic telephone services in the telecommunication sector. In the 2004-05 Budget, the government raised the FDI limit from 49% to 74% in the telecom services segment subject to retention of local management control. According to the new norms, 26% share out of the 74% should be held by an Indian company or an Indian citizen with Indian management. Further, 100% FDI is permitted in telecom manufacturing, category I infrastructure providers, ISPs without gateway, call centres and IT-enabled services. Further, direct or indirect FDI up to 74% is permitted subject to licensing and security requirements for ISPs with gateways, radio paging operators and category II infrastructure providers.

The relaxation in FDI norms has attracted many foreign telecom majors to the sector. The presence of foreign players has not only encouraged faster infrastructure development and upgradation but also has opened up the domestic industry to foreign competition. Since 2004, there has been a large inflow of FDI in the sector. During 2004-05 and 2005-06, a period during which the FDI norms were relaxed, the FDI inflow grew by an astounding 300% to US$ 624 mn in 2005-06 from merely US$ 125 mn in 2004-05. The inflow of FDI has provided tremendous impetus to the sector in the past few years and the attractiveness of the sector has kept the FDI inflows growing steadily. During FY09 the FDI in the telecom sector at US$ 2,558 mn was 103% higher than that seen in FY08 at US$ 1,261 mn. Further, the FDI in the sector has already reached US$ 2010 mn for a six month period of FY10 (Apr-Sep 09) and is expected to surpass the total FDI for FY09.

The government’s liberalised FDI policies have resulted in several foreign companies entering into the Indian markets. The influx of foreign players in the Indian telecom industry has led to capacity creation, and better infrastructure, which in turn has bettered the network quality. The rise in FDI has also enabled technology transfer, market access and has improved organisational skills; going forward, FDI could be used for providing telecom services to rural areas, where teledensity is still very low.

The change in FDI policy that has raised the FDI limit from 49% to 74% for the sector has made it more attractive for foreign players. In the long run the growth prospects of telecom players that have foreign partners will improve and other players will get new avenues to raise capital.

 Growth of IT-ITeS and Financial Sector

India has entered the league of countries with the most-advanced telecommunication infrastructure after the industry was deregulated. Furthermore, deregulation has stimulated India’s economic growth through industry growth and through rise in investments. It is evident that a well-developed communication sector improves access to social networks, lowers transaction costs, increases economic opportunities, widens markets, and provides better access to information, healthcare and educational services. The growth in Indian telecom sector has been concomitant with overall growth in GDP, government revenue, employment et al. Besides, telecommunication has increased efficiency, reduced transaction costs, attracted investments and has created new opportunities for business and employment. The NTP-99 was particularly helpful for the ITeS-BPO industry as it ended the government monopoly in international calling by introducing IP telephony. After the introduction of IP telephony, there was rapid growth in the number of data processing centres and inbound/outbound call centres, which ultimately led to the outsourcing revolution in India.

The telecom sector has been instrumental in creating jobs for a vast pool of talented and knowledge professionals in the IT and ITeS-BPO industry, which thrives on reliable telecommunication infrastructure. India has become an important outsourcing destination for the world and the boom in this sector also has transformed India’s economic dynamics. The evolution of telecom sector has brought about a revolutionary change in the way some businesses operate.

Another beneficiary of the telecom revolution is the financial services industry, which has been on a growth trajectory. The progress and quality of the financial sector has been a key factor that has driven the pace and diversity of the real economy. India has an extensive and well-developed financial sector with wide and sophisticated banking network. Banking in India has become service-oriented, and has matured greatly from the days of walk-in customers to the present situation when banks have migrated to a 24-hour banking platform to attract customers; however, this disintermediation in the business has led banks to be extremely prudent in terms of their internal operations and has led them to adopt newer products and delivery channels. Further, with introduction of internet & mobile banking the long ques at the banks are slowly becoming a thing of the past.

Both the financial and the IT-ITeS segments rely on good domestic as well as international network connectivity; therefore, there is a need for a sound telecommunication network.

 Factors Facilitating Growth of the Sector

The phenomenal growth in the Indian telecom industry was brought about by the wireless revolution that began in the nineties. Besides this, the following factors also aided the growth of the industry.

 Libralisation

The relaxation of telecom regulations has played a major role in the development of the Indian telecom industry. The liberalisation policies of 1991 and the consequent influx of private players have led the industry on a high growth trajectory and have increased the level of competition. Post-liberalisation, the telecom industry has received more investments and has implemented higher technology.  Increasing Affordability of Handsets

The phenomenal growth in the Indian telecom industry was predominantly aided by the meteoric rise in wireless subscribers, which encouraged mobile handset manufacturers to enter the market and to cater to the growing demand. Further, the manufacturers introduced lower-priced handsets with add-on facilities to cater to the increasing number of subscribers from different strata of the society. Now even entry-level handsets come with features like coloured display and FM radio. Thus, the falling handset prices and the add-on features have triggered growth of the Indian telecom industry.

 Prepaid Cards Bring in More Subscribers

In the late nineties, India was introduced to prepaid cards, which was yet another milestone for the wireless sector. Prepaid cards lured more subscribers into the industry besides lowering the credit risk of service providers due to its upfront payment concept. Prepaid cards were quite a phenomenon among first-time users who wanted to control their bills and students who had limited resources but greater need to be connected. Pre-paid cards greatly helped the cellular market to grow rapidly and cater to the untapped market. Further, the introduction of innovative schemes like recharge coupons of smaller denominations and life time incoming free cards has led to an exponential growth in the subscriber base.

 Introduction of Calling Party Pays (CPP)

The CPP regime was introduced in India in 2003 and under this regime, the calling party who initiated the call was to bear the entire cost of the call. This regime came to be applicable for mobile to mobile calls as well as fixed line to mobile calls. So far India had followed the Receiving Party Pays (RPP) system where the subscriber used to pay for incoming calls from both mobile as well as fixedline networks. Shifting to the CPP system has greatly fuelled the subscriber growth in the sector.

 Changing Demographic Profile

The changing demographic profile of India has also played an important role in subscriber growth. The changed profile is characterised by a large young population, a burgeoning middle class with growing disposable income, urbanisation, increasing literacy levels and higher adaptability to technology. These new features have multiplied the need to be connected always and to own a wireless phone and therefore, in present times mobiles are perceived as a utility rather than a luxury.  Increased Competition & Declining Tariffs

Liberalisation of the telecom industry has fuelled intense competition, especially in the cellular segment. The ever-increasing competition has led to high growth of subscribers and has put pressure on tariffs, which have seen a sharp drop over the years. When the cellular phones were introduced, call rates were at a peak of Rs 16 per minute and there were charges for incoming calls too. Today, however, incoming calls are no longer charged and outgoing calls are charged at less than a rupee per minute. Thus, the tariff war has come a long way indeed. Increased competition and the subsequent tariff war has acted as a major catalyst for attracting more subscribers. Apart from these major growth drivers, an improved network coverage, entry of CDMA players, growth of value-added services (VAS), advancement in technology, and growing data services have also driven the growth of the industry.  Outlook

The telecom industry in India has experienced exponential growth over the past few years and has been an important contributor to economic growth; however, the cut-throat competition and intense tariff wars have had a negative impact on the revenue of players. Despite the challenges, the Indian telecom industry will thrive because of the immense potential in terms of new users. India is one of the most-attractive telecom markets because it is still one of the lowest penetrated markets. The government is keen on developing rural telecom infrastructure and is also set to roll out next generation or 3G services in the country. Operators are on an expansion mode and are investing heavily on telecom infrastructure. Foreign telecom companies are acquiring considerable stakes in Indian companies. Burgeoning middle class and increasing spending power, the government’s thrust on increasing rural telecom coverage, favourable investment climate and positive reforms will ensure that India’s high potential is indeed realised. 3. Major Telecom Companies in India

 In 1975, the Department of Telecom (DoT) was given separate authority for running the telephone services in the country.  The Mahanagar Telephone Nigam Limited (MTNL)initiated its services in the year 1985 for carrying out the telephone operations in the metros of India, viz. Delhi and Mumbai.  In October 2000, the Bharat Sanchar Nigam Limited (BSNL) was set up by the Department of Telecom.  Thereafter several private companies as Reliance Communications, Tata Indicom, Airtel etc in the sector came up.

Major Mobile Phone Service Provider Companies in India BSNL

The Bharat Sanchar Nigam Limited, country’s largest cellular service operator was set up in the year 2000. It is a state owned telecom company with its headquarters located in New Delhi. BSNL is also the largest land line telephone establishment in India. As of April, 2011 87.1 million users have been reported to be BSNL users.

MTNL

Mahanagar Telephone Nigam Limited (MTNL) was set up in the year 1985, to run telecom operations in the major metro cities of India, Mumbai and Delhi. Its headquarters are based in Mumbai. MTNL was the first company in India to initiate 3G services in India, having the brand name of “MTNL 3G Jadoo Services” which provided options as Video call, Mobile TV, Mobile Broadband etc to the customers.

Airtel

Also known as Bharti Airtel Limited was started in July 1995, with its head office based in New Delhi. Airtel runs its operations in as many as 19 countries across the world and is also ranked fifth as telecom service provider globally. As of April 2011, figures show that Airtel has over 164.61 million users which make it the biggest mobile service operator in India. Its service includes both 2G and 3G facilities.

Reliance Communications

Also known as RCOM was set up in 2004, with its head office in Navi Mumbai. Reliance Communications as of now has more than 128 million users all across the world.

Aircel Aircel was founded in 1999, with its head office in New Delhi. It is a joint enterprise between Maxis Communications and the Apollo Hospitals. Vodafone Essar Vodafone Essar was founded in 1994 with its head office at Mumbai. Vodafone provides services to 23 telecom circles across India.

Tata Indicom The Tata Teleservices was founded in 1996, with its headquarters in Navi Mumbai.

Idea Cellular Idea Cellular was started in 1995, with its head office in Mumbai. It also provides 3G services to its subscribers.

Virgin Mobile Virgin Mobile started its services in India in 2008, March. It is a U.K. based company.

Uninor This Company is a joint venture between Telenor Group and Unitech Group and was started in 2009.Now it’s become only Telenor. INDUSTRY STRUCTURE

The Indian telecom industry has undergone significant structural transformation since its liberalisation in the 1990’s. During the last decade, the Indian telecom industry has evolved into a multi-segment, competitive market from a small supplier-dominated market having public sector monopoly. Coherent Government policies have played a crucial role in shaping the structure of the Indian telecom sector.

Structural Evolution of the Indian Telecom Industry:

Telecom Sector in the Pre-liberalisation Era (1980-1990):

Before liberalisation, the public sector held a monopoly in provision of telecom services. The entire telecom services operation in the country was carried out by the Department of Telecommunication (DoT), a public sector entity established in 1985. It managed the planning, engineering, installation, maintenance, management, and operations of telecom services for the whole of India. In order to ease out its operations, two new public sector corporations viz. MTNL and VSNL were set up under the DoT in 1986. Thus, before the entry of the private players, the telecom services were provided by three public entities viz. DoT, MTNL and VSNL. While MTNL primarily looked after the operation of basic telephony services in Delhi and Mumbai, VSNL provided international telecom services in India. DoT looked after basic telephony operations in regions other than Delhi and Mumbai. Prior to liberalisation the telecom services were broadly classified as domestic basic (which included basic telephony, telex and fax), domestic value-added services (VAS) which covered all other services such as paging, cellular, data services, VSAT and international basic and VAS.

Telecom Sector in the Post-liberalisation Era:

Private sector participation in the Indian telecom sector has been a gradual process, wherein the government initially permitted players from the private sector to provide Value Added Services (VAS) such as Paging Services and Cellular Mobile Telephone Services (CMTS), followed by the Fixed Telephony Services (FTS) or Basic services. Eventually the private sector has been allowed to provide almost all telecom services. Liberalisation process in the telecom services market began in 1992, with the unbundling of the domestic basic services and the domestic VAS and entry of private players for providing the VAS such as cellular and paging services. During this period, the government provided licenses to private players according to the services that were to be provided in the specified areas of service provision. The country was divided into circles (or categories) on the basis of economic potential. Thus, primarily these divisions were mostly adjoining the states of India. Such demarcations were primarily responsible for existence of various regional players in provision of telecom services. During 1994, through a competitive bidding process, licenses were granted to 8 CMTS operators in four metros, 14 CMTS operators in 18 state circles, paging operators in 27 cities and 18 state circles.

After the domestic VAS, the basic services were opened up to private players. The National Telecom Policy (NTP) 1994, which endeavoured to build world-class telephone services in India and aimed at providing telephones on demand, enabled the entry of private players in the provision of basic services. Given the need for resources in addition to government sources for achieving the targets of NTP-94, private investments and involvement of the private sector was considered inevitable to bridge the resource gap. Thus, the private operators were allowed to render basic services in the local loop. Initially, the provision of basic services had been deliberated as a duopoly between a selected service provider and the DoT. In line with this, policy licences were awarded to 6 BTS operators in 6 state circles.

The need for independent regulation had risen with the entry of private players. Also, to fulfil the commitments made when India joined the World Trade Organisation (WTO) in 1995, the Telecom Regulatory Authority of India (TRAI) was established in 19971 to regulate telecom services including fixation/revision of tariffs. The establishment of TRAI was a positive step in terms of separation of regulations from policy making and operations, which continued to be under the purview of the DoT2.

Further, in 1998, the Government also declared the policy for Internet Service Provision (ISP) by private operators and had even begun licensing of the same around that time. Subsequently the Global Mobile Personal Communications by Satellite (GMPCS) was also opened up for the private players.

Although the private players had been allowed to participate in many telecom services segments, the results of privatisation had not been satisfactory entirely. Thus, a New Telecom Policy (NTP-99) was announced on March 26, 1999, which came into effect from April 1, 1999. The NTP 1999 not only provided a major fillip to private sector participation in this industry but also laid down the path for significant development of the Indian telecom industry. The NTP 1999 allowed private operators providing cellular and basic service to migrate from a fixed licence fee regime to a revenuesharing regime to make the operations of the private players financially viable. This policy change provided the muchneeded relief to private players who were earlier burdened with huge debts that they had to service owing to their licence fee commitments. Another notable provision of the Act had been the entry of multiple private sector operators in the sector in contrast to the policy of duopoly practiced earlier. This not only increased competition in the industry but also assisted the private players to attract new investment and augment their subscriber base. The entry of private operators in the cellular sector helped to reduce the operational cost of the industry. It also reduced the mobile tariffs and provided a much needed boost to the industry. The Act also made the following provisions: it permitted interconnectivity and sharing of infrastructure among various service providers within same areas of operations; it allowed both voice and data traffic by service providers; it opened up national long distance (NLD) and international long distance (ILD) services to competition et al. Thus, the NTP 1999 can be viewed as the genesis of the cellular revolution being witnessed in India.

The NTP 99 had also enunciated to separate the policy and licensing functions of the DoT from the service providing functions to ensure a level-playing-field among private operators and incumbents. Accordingly, as a predecessor to corporatisation, two new departments viz. Department of Telecom Services (DTS) and the Department of Telecom Operations, were carved out of DoT, to separate the service provision and operational functions of DoT. Later in 2000, DTS was corporatised and renamed as Bharat Sanchar Nigam Ltd (BSNL), and thus the functions of the incumbent service provider were separated from that of the policy maker. DoT is now responsible for policy-making, licensing and promoting private investments in both telecom equipment manufacturing and in telecom services. Subsequently in 2002, even VSNL was privatised and its monopoly in ILD services was terminated (from March 31, 2002).

Current Structure of the Indian Telecom Industry:

Currently, both public sector players as well as the private sector players are actively catering to the rapidly growing telecommunication needs in India. Private participation is permitted in all segments of the telecom industry, including ILD, DLD, basic cellular, internet, radio paging, et al. The broad structure of the telecom industry (in terms of service providers) is depicted in the diagram below:

Public Sector:

After the privatisation of VSNL in 2002, only two premier PSUs, MTNL and BSNL operate in India and provide various telecom services. As noted earlier, MTNL operates in Delhi and Mumbai and BSNL provides services to the remaining country. In the post-liberalisation era, these PSUs not only have made significant progress but also have provided stiff competition to their private counterparts.

Private Sector:

Private operators have played a very crucial role in the growth of the telecommunication industry, primarily in the mobile services. With the liberalisation of the telecom industry, the private sector has been increasing its foothold in the telecom services space. After the introduction of NTP-99, the contribution of private players towards telecom services has witnessed rapid strides. While the private sector is instrumental in providing both fixed line as well as wireless services, it is mainly active in the wireless segment. The fixed lines account for only about 2% of private sector's total subscriber base. While some private players have a pan-India presence, there are many regional players that cater to only certain service areas. Telecom Industry & Technological Innovations

The second factor influencing the telecommunication industry greatly is technological advances. Technological advances in the recent times have dramatically changed the dynamics of players involved in the telecommunications infrastructure, equipment and services sectors. This article will discuss impact of technological advances and the risks and opportunities it present to the industry.

Advancements and innovations are being made in all sectors of telecommunications industry, wireless technology, internet, and satellite communications being the forerunners. So are changing the needs, demands and expectations of global consumers and industry need to keep pace by creating products and services meeting these demands.

Satellites and optical fibers, among other technologies, contribute significantly to the globalization of telecommunications services. Standardization and interoperability of systems have become global issues, as have compatibility of regulatory measures that ensure free trade in telecommunication products and services.

Telecommunications being an integral part of global communications network and critical for organizations as well as individuals has now become indispensable to socioeconomic activities. There is an increased focus on reliability and security of telecommunications and this has emerged as central and global issue. In current information age, information retrieval is gaining importance, while we still face challenges in terms of integrity and authenticity of the information to be provided, as well as the protection of privacy. These diverse issues are important to the future of telecommunications industries.

Telecom industry is investing heavily in technological innovation, and in the development of technology and innovation. The growth rate is continuing at a fast pace and new value added products and services are driving the consumer spending behavior. At the same time, technological advance has dramatically changed the cast of players involved in the telecommunications infrastructure. It has grown from the original private and publicly owned telephone monopolies to include a host of new entrants such as competitive access providers, resellers, value-added carriers, new interexchange carriers, new local exchange carriers, cable companies, wireless carriers, direct broadcast satellites, media conglomerates, and specialized brokers.

Many cellular providers are investing heavily to upgrade their infrastructure to 3G and 4G. Infrastructure demand in telecom sector is growing at a fast pace along with the volume of the traffic. Worldwide telecommunication revenues are predicted to grow to over $3.7 trillion within the next few years at a combined annual CAGR, of 13.8%. Remarkable progress in telecommunications technology has had, and will continue to have, an enormous impact on telecommunications manufacturing and service industries. Digital technology that integrates transmission, switching, processing, and retrieval of information provides opportunities to merge various service modes into an integrated whole. This digitalization, merging the communications and computation functions, has been made possible by dramatic advances in device and material technology, including integrated circuits and optical fibers. As the role of digital processing increases, systems and services become more intelligent and labor-saving on the one hand, and more software-intensive on the other.

In developed countries, future growth in the communications industry will depend on industrial and political capacity for institutional change, and consumer reaction to new value based services. Finland, Japan, Korea, and Sweden are leading developments in different areas of broadband wireline services, wireless applications, and interactive TV.

Players in telecommunication industry that want to emerge successful need to influence cutting-edge technological developments and should be operating where leading industry and technology developments are taking place.

Bibliography https://www.dnb.co.in/IndianTelecomIndustry/industrystructure.aspDate: 6/Nov/2015 Time 2:47 pm http://www.technofunc.com/index.php/domain-knowledge-2/telecom-industry Date:6/Nov/2015. 02:42 pm https://www.dnb.co.in/IndianTelecomIndustry/OverviewTI.aspDate: 6/Nov/2015 Time:- 2:45 pm https://business.mapsofindia.com/communications- industry/companies.Date:6/Nov/2015

Time:- 2:50 pm Chapter:- 2 Indian scenario

No Particular Pg, no. 1 Introduction of Indian scenario 2 Demand and supply scenario 3 Marketing dynamics 4 Investments related aspects 5 Growth key 6 Drivers of industry strategies adopted by various players 7 Key performance indicators INDIAN TELECOM SECTOR: AN OVERVIEW

Communication has grown to be an essential infrastructure for socio-economic developmentin an increasingly knowledge intensive world. The reach of telecom services to all parts ofthe country is integral to development of an innovative and technologically driven society.Studies have shown that there is a positive correlation between the penetration of Internetand Mobile Services on the growth of GDP of a country. As a result of the measures takenby the Government over the years, the Indian Telecom Sector has grown exponentially andhas become the second largest network in the world, next only to China.

Present Status The number of telephones increased from 898.02 million in the beginning of the financial year to 933.02 million at the end of March 2014.

Present Status of the Telecommunication Sector (as on March 31, 2014) ● Indian telecom network is the second largest in the world after China. ● The country has 933.02 million telephone connections, including 904.52 million wireless telephone connections. ● Overall tele-density in the country is 75.23%. ● Urban tele-density is 145.46%, whereas rural tele-density is 44.01%. ● The share of wireless telephones in total telephones is 96.95%. ● The share of private sector in total telephones is 87.13%. ● Number of Broadband connections is 60.87 million.

During the financial year 2013-14, telephone connections increased every month except in the month of September, 2013. The Chart below indicates the number of connections at the end of each month during the year 2013-14. Wire Line vs Wireless While the wireless telephones continued to grow, the landline telephones kept declining. The number of landline telephones, which was 30.21 million in the beginning of the year 2013- 14 declined to 28.50 million at the end of March 2014. On the other hand the number of wireless telephones increased from 867.81 million to 904.52 million during this period. As a result, the share of wireless telephones increased from 96.64 per cent as on 01.04.2013 to 96.95 per cent as on 31.03.2014.

Public vs Private Another noteworthy feature of the Indian Telecom Sector is the continuous rise in the number of telephones of the private sector operators. The total number of telephones of the private sector increased from 767.91 million as on 01.04.2013 to 812.96 million at the end of the March 2014. On the other hand, the number of telephones of the public sector declined from 130.11 million to 120.05 million during this period. As a result, the share of private sector increased from 85.51 percent in the beginning of the financial year to 87.13 per cent at the end of March, 2014, whereas the share of public sector declined from 14.49 per cent to 12.87 percent during the same period. The private sector, now, dominates the Indian Telecom Sector (Table).

Table: Telecom Development Indicators Tele-density Tele-density, which denotes the number of telephones per 100 population, is an indicator of telecom penetration in the country. Tele-density in the country, which was 73.32% as on 1stApril, 2013, increased to 75.23 per cent at the end of March 2014. The rural tele- densityincreased from 41.05 per cent to 44.01 per cent during this period Urban tele- density,however, registered a decline from 146.64% to 145.46% during this period. Among the Serviceareas, Tamil Nadu (111.14 per cent) had the highest tele-density followed by Punjab (107.23per cent), Himachal Pradesh (105.59 per cent), Kerala (96.19 per cent) and Karnataka (92.45per cent). On the other hand, the service areas such as Bihar (46.10 per cent), Assam (48.74per cent), Madhya Pradesh (56.04 per cent), Uttar Pradesh (57.27 per cent), Jammu andKashmir (66.80 per cent) and West Bengal (55.13 per cent) have comparatively low teledensity.Among the three metros, Delhi Service Area tops in tele- density with 226.85 per centtele-density, followed by Mumbai (151.90 per cent) and Kolkata (142.67 per cent). The chartbelow indicates the trend in tele-density over the years. National Telecom Policy-2012 (NTP-2012)

The Government announced National Telecom Policy-2012 (NTP-2012) in 2012. The main objectives of the policy, inter-alia, include increase in rural tele-density to 70 per cent by the year 2017 and 100 per cent by the year 2020, 175 million broadband connections by 2017 and 600 million by the year 2020 at minimum 2 Mbps download speed and making available higher speeds of at least 100 Mbps on demand. Pursuant to NTP-2012, unified licence,

4 DEPARTMENT OF TELECOMMUNICATIONS merger and acquisition guidelines, clarity on spectrum pricing and auction are major initiatives taken by the Government to boost investment and employment opportunities in the telecom sector.

Unified License

With a view to achieve the objective of NTP-2012 to create one nation - one license across services and service areas, the Department of Telecom (DoT) has issued guidelines on Unified License. As per these guidelines, the allocation of spectrum is de-linked from the license and has to be obtained separately as per prescribed procedure i.e. bidding process. Only one Unified License is required for all telecom services in entire country. In addition, authorization for various services [like access services, National Long Distance Services, International Long Distance Services, Internet Service Provider (ISP) services] will be required separately. Single authorization for Unified License (All services) category would cover all telecom services except ISP (B) and ISP (C) services. The tenure of such authorization will run concurrently with the Unified License. Also, the entry fee for various telecom services has been reduced substantially. Merger and Amalgamation Policy

A revised policy for merger and amalgamation of companies holding various licenses for telecom services has been issued on 20.02.2014. This will facilitate transfer of license consequent to merger, amalgamation and acquisition of various companies for different services in different service areas. The market share limit for transfer and merger of licenses has been increased to 50% from existing 35% i.e. merger will be allowed where the market share of the combined entity in the respective service area is up to 50%.

Spectrum Auction

NTP-2012 envisages adequate availability of spectrum and its allocation in a transparent manner through market related process. Auction of spectrum in 900 MHz band and 1800 MHz band was conducted during February, 2014. In the category of spectrum 1800 MHz band, 307.2 MHz out of 385.2 MHz was sold. In 900 MHz band, 46 MHz spectrum was put for auction in Delhi, Mumbai and Kolkata service areas and all spectrum was sold out. The total amount of $ 61162 crore obtained through auction of spectrum, was 27.6 per cent more than the value of the spectrum on offer at reserve price.

Foreign Direct investment (FDI) Policy

To attract FDI inflow and make the sector more attractive and investor friendly, Government raised FDI limit for the telecom services from 74 per cent to 100 per cent on 22.08.2013. This measure will facilitate telecom licensees to consolidate equity and raise domestic as well as foreign debt from the market. Telecommunication and telecom services have been included under Harmonized Master list of infrastructure sub-sector and qualify for infrastructure lending.

Reserve Bank of India has also expanded the existing definition for infrastructure sector for the purpose of availing External Commercial Borrowing (ECB).

Universal Service Obligation Fund (USOF)

To give impetus to the rural telephony, the Government in June, 2002 established a Universal Service Obligation Fund (USOF) by an Act of Parliament. Subsequently the scope of USOF was widened to provide subsidy support for enabling access to all types of telegraph services including mobile services, broadband connectivity and creation of infrastructure like optical fiber in rural and remote areas. Therefore, various schemes have been launched by USOF for provision of telecom services in rural and remote areas of the country. The Universal Access Levy (UAL) collection in 2013-2014 was $ 7,885 crore and subsidy disbursed during the said period was $ 2163.45 crore. The closing balance of the UAL amount, available as potential fund for USOF accrual as on 31.03.2014, was $ 33,671.69 crore. National Optical Fiber Network (NOFN)

The optical fiber has predominantly reached state capitals, districts and blocks. To connect all 2.5 lakh Gram panchayats in the country, Government approved a project called 'National Optical Fiber Network'. Non-discriminatory access to the network will be provided to all the telecom service providers like mobile, Internet and cable TV in rural areas. The project is being executed by a Special Purpose Vehicle (SPV), namely, Bharat Broadband Networks Limited (BBNL). Three pilot projects have been completed to cover all 59 gram panchayats of Araian Block in Ajmer District (Rajasthan), Panisagar Block in North Tripura and Paravada Block in Vishakapatnam (Andhra Pradesh). The amount disbursed under the project till the end of March 2014 is $ 919.00 crore. The NOFN project is likely to be completed by December, 2016.

Mobile Communication Services in Left Wing Extremism affected areas

Government approved on 4th June, 2013 a proposal at the cost of $ 3046 crore to install mobile towers at 2199 identified locations in 9 Left Wing Extremism affected States (Andhra Pradesh, Bihar, Chhattisgarh, Jharkhand, Maharashtra, Madhya Pradesh, Odisha, Uttar Pradesh and West Bengal). The work has been awarded to Bharat Sanchar Nigam Limited (BSNL) and the project would be funded by USOF for five years.

Shared Mobile Infrastructure Scheme

Shared Mobile Infrastructure Scheme was launched by USOF to provide subsidy support for setting up and managing 7,353 infrastructure sites/towers in 500 districts spread over 27 states for provision of mobile services in the specified rural and remote areas, where there was no existing fixed wireless or mobile coverage. Till the closure of the scheme (as on 30.11.2013), 7317 towers were set up. The infrastructure so created is being shared by three service providers for provision of mobile services. 16,254 Base Transceiver Stations (BTSs)

6 DEPARTMENT OF TELECOMMUNICATIONS have been commissioned by service providers at these towers for provisioning of mobile services.

Rural Wire-line Broadband Scheme

For providing wire-line broadband connectivity upto village level in rural and remote areas, USOF signed an agreement with BSNL under the Rural Wire-line Broadband Scheme to provide wire-line broadband connectivity to rural & remote areas by leveraging the existing rural exchanges infrastructure and copper wire-line network. The speed of each of the broadband connections shall be at least 512 Kbps. Under this scheme, BSNL is to provide 8,88,832 wire-line Broadband connections to individual users and Government Institutions and set up 28,672 kiosks by the year 2015. The estimated subsidy outflow is $ 1,500 crore. As on 31.03.14, a total of 5,89,783 broadband connections have been provided and 14186 kiosks set up in rural and remote areas. The subsidy disbursed till 31.03.2014 under wire-line broadband scheme is $ 329.55 crore.

Regulatory Framework

The Telecom Regulatory Authority of India (TRAI) has always endeavored to encourage greater competition in the telecom sector together with better quality and affordable prices in order to meet the objectives of New Telecom Policy, 1999. A number of recommendations on various telecom issues were made by TRAI during 2013-14. TRAI has also taken steps to ensure the quality of service provided by the service providers by way of monitoring the performance of Basic and Cellular Mobile Telephone Service on quarterly basis and also Point of Interconnection(POI) congestion through monthly reports. The regulatory measures taken by TRAI facilitate orderly growth of telecom sector by promoting healthy competition and enhancing investment efficiency besides protecting interests of consumers. Research & Development (R&D)

C-DoT, an autonomous body, is DoT's R&D arm. The organisation which was set-up 26 years back is committed to providing a wide range of cost-effective, indigenously developed and state-of-the-art total telecom solutions. C-DoT has grown to the level of a national centre for R&D in communication technology in many areas -Satellite communications, IN, ATM, DWDM, NMS, Wireless Broadband, GPON, NGN and Mobile Cellular systems. C-DoT is also entrusted with the projects of national importance, like Central Monitoring System for telecom security and Secure Network for strategic applications.

Public Sector Undertakings (PSUs)

DoT has the following PSUs under its administrative control: i) Mahanagar Telephone Nigam Limited (MTNL) ii) Bharat Sanchar Nigam Limtied (BSNL) iii) ITI Limited iv) Telecommunications Consultants India Limited (TCIL) v) Bharat Broadband Network Limited (BBNL)

MTNL, set up in 1986, is a Navratna PSU and provides telecommunication facilities in India's key metros - Delhi and Mumbai. MTNL is the principal provider of fixed-line telecommunication service in these two Metropolitan Cities, and for GSM Mobile services four peripheral towns of Noida, Gurgaon, Faridabad & Ghaziabad along with Delhi city and the areas falling under the Mumbai Municipal Corporation, New Mumbai Corporation and Thane Municipal Corporation along with Mumbai city, also come under the jurisdiction of the company.

MTNL is providing triple play services i.e. voice, high speed internet and IPTV on its Broadband network. At present, 56.25% equity shares are held by Government of India and remaining 43.75% shares are held by FIIs, Financial Institutions, Banks, Mutual Funds and others including individual investors. MTNL's financial turnover was $ 3872.15 crore during the year 2013-14, as compared to the previous year's turnover of $ 3783.12 crore. MTNL posted a Profit of $ 7820.72 crore during the year 2013-14.

BSNL, fully owned by Government of India, formed in October 2000, provides telecom services across the length and breadth of the country excluding Delhi and Mumbai. BSNL is providing all types of telecom services namely telephone services on landline, WLL and GSM mobile, Broadband, Internet, leased circuits and long distance telecom service. Rural telephony is one of its focus areas. BSNL also pays special emphasis on development of telecommunication facilities in North-Eastern region and in tribal areas. BSNL had a turnover of $ 28325 crore and incurred a loss of $ 7084 crore during the year 2013-14.

ITI Limited was established in 1948, to supply telecom equipments to the then telecom service provider, DoT. ITI started its operations in Bangalore in 1948, which were further extended to other areas by setting up manufacturing plants at Srinagar in Jammu and Kashmir, Naini, Rae Bareli and Mankapur, all in Uttar Pradesh and Palakkad in Kerala. The establishment of these plants at various locations was not only aimed at augmentation of manufacturing capacity but also development of social infrastructure. The Company achieved a gross turnover of $ 810 crore and incurred a loss of $ 344 crore during the year2013-14. TCIL, fully owned by Government of India, was set up in 1978 with the main objective of providing world class technology in all fields of telecommunications and information technology, to excel in its operations in overseas and in domestic markets by developing proper marketing strategies and to acquire state-of-the-art technology on a continuous basis. TCIL is a profit making PSU. The company earned a profit (before tax) of $ 19.50 crore on a turnover of $ 815.00 crore during the year 2013-14.

8 DEPARTMENT OF TELECOMMUNICATIONS

BBNL A Special Purpose Vehicle (SPV), namely, Bharat Broadband Network Limited (BBNL) has been incorporated on 25.02.2012 under the Indian Companies Act, 1956 for execution of the NOFN project approved by the Government for connecting 2.50 lakh approx Gram Panchayats (GPs).

VISION Vision of the DoT is to provide secure, reliable, affordable and high quality converged telecommunication services anytime, anywhere for an accelerated inclusive socio-economic development. The department is working towards the objective of maximizing public good by making available affordable, reliable and secure telecommunication and broadband services across the entire country. To serve the nation in its vastness and diversity, modern telecommunication facilities to all the remote corners of this country will be facilitated with special focus on underserved areas in North-Eastern region and backward states. Just as construction of National Highways brought the nation together, provision of high speed Digital Highway to connect the nation and deliver Government services to every citizen will be made. The communications sector needs to be unshackled to ensure rapid growth of the economy and to overcome developmental challenges in Education, Health and Employment Generation. The legislative framework and licensing principles should have the capability to adjust to rapid technological changes and spur innovation. A comprehensive legislation is required to stimulate competition, simplify processes and procedures, encourage innovation and build linkages with other sector with the aid of facilitating rapid growth of the economy using communication technology. 1. Introduction of Indian scenario:

The Indian telecom industry is the fastest growing industry in the world. India is a world second largest telecom market after the china. Telecom means is transfer information between two people or two distance points in a space. Telecom regulatory authority of India (TRAI) have provided an environment for service providers and implemented an all types of government policy and regulatory framework. This sector is a very competitive. Because telecom sector is a affordable tariffs to the consumer. Telecom sector are 898 million subscribers as on March 2013. Telecom infrastructures are expected to increase a compound annual growth rate of 20% during 2008-15 to reach a 571000 tower in 2015. India has a opportunities for telecom operator and is one of the best market for a telecom business. Telecom sector growths are also attracting a new player in the telecom industry with the result that intensity of competitions is also increased. Cellular services are divided into a two categories GSM (Global System for Mobile Communication) and CDMA (Code Division Multiple Access). GSM company are basically in India are Airtel, Idea, Vodafone, and a CDMA are provided by a Reliance, Tata Indicom.

www.trai.com (as on 4/10/2013)

Types of Indian Telecom Market

Indian telecom markets are basically divided into a two parts, the Fixed Service provider and the Cellular Service. Fixed Service network comprise a land lines basic service. BSNL and MTNL are two major players in a fixed line service. BSNL and MTNL are covered a 90% of customer in India.

Second types of service are available in India is a cellular Service and it’s basically divided into a two category GSM (Global System for Mobile Communication) and CDMA (Code Division Multiple Access). GSM sector, the major players are Vodafone, Airtel, Idea, Aircel and so on. The national company BSNL are also provided a GSM service named “Cellone”. BSNL has a large number of shares in semi urban and rural areas. The major companies are provided a CDMA services in India are Reliance communication, Tata Indicom and so on.

www.cci.in (as on 4/10/2013) Government Role & Policy in Telecom Sector

Government Initiative

The central government cabinet give an approval to national telecom policy 2012. This policy are includes a free roaming, unrestricted net telephony, and a new unified licensing regime for operators. The National science and technology entrepreneurship development board, the Department of science and technology, government of India, Techno Park and Mob ME wireless have joined a hands to setup a village. Kerala is an innovation hub of Indian telecom industry. TRAI is also work for a Green telephony. TRAI is achieving the aim of carbon emission reduction under which operator are directed by to achieve a carbon reduction extent of 5 per cent by 2012-13.

FDI Policy in telecom

As per the Department of Industrial Policy & Promotion (DIPP) data FDI in telecom sector during April 2011-12 are US$ 1,997 million. FDI limit in telecom sector are 74% in during April 2011-12. Indian government are approved a 100% FDI in telecom sector in India. 100% FDI are also effect a Indian telecom sector and increased a competitions.

Regulatory Charges

The regulatory charges a very complicated because multiple impede the smooth implementation of telecom project. The current growth rates of the industry require a attention to rationalizing the convoluted tax structure in the sector.

www.dot.gov.in (as on 4/10/2013)

Structure of Regulatory Charges

Regulatory Charges Service Tax License Fee Spectrum Charges USO %age of revenue 12.36% 6% to 10% 2% to 6% 5% included in fees Source: Department of telecommunication (DoT) (as on 4/10/2013)

Perfect competitive market

Perfect competition is a theoretical market structure. In economic theory, perfect competition is markets such as no large number of participants are enough to have to have the market power to set the price of homogenous product. Because perfect competitions conditions are very strict. Seller and buyer are available in some auction types markets, say for commodities or some financial assets. The industry is a most closely in a perfect competitions in real life is a agriculture. Perfect competitive market is all firms sell an identical product. All firms are related to a small market share. The perfect competitive market industry is characterized by a freedom to entry and exit. Characteristics of Perfect Competitions

Large number of buyer and seller

Perfect competitive market is a very large number of buyer and seller. In this market each buyer and seller has no ability to change a price and ruling price by their independent action. Perfect competitive market is each seller adjusts its sale to earn maximum profits.

Homogeneous Product

The second characteristics are a perfect competitive is that the product sold by the suppliers it’s a fully homogeneous. In this market are commodities available everywhere is the same. The cross elasticity in this market between the product is infinite. The all type of the commodities is perfectly similar in quality, quantity, size and shape. The buyers are always indifferent to the entire commodity sold in the market.

2.1.3- Uniform Price

Perfect competitive market is the ruling market price is the same. Price is the uniform as the products in the market are identical. Perfect competitive market prices are fixed by all the buyer and seller in the market.

2.1.4- Free entry and free exit

Perfect competitive markets are buyer and sellers are always free to enter and leave the market. Perfect competitive markets all firms are get only a normal profit. This profit is not a tendency on the part of the existing firm to leave the market.

2.1.5- Perfect knowledge about the market

It’s one of the most requisites of the perfect competitions is that buyer and seller must have a full knowledge of the market and its condition. Seller are also know the ruling price of the market price must charged by the other sellers.

2.1.6- Perfect mobility

Perfect competitive markets are understood that a various factor of a production are perfectly mobility within the industry. In this market are factor of production can freely move from on to another occupation and one to another place. Because in this market are not an any barriers on the movement.

2.1.7- Absence of transport cost Perfect competitive market is single unit price. Price is charged by the free of transportation cost. In this market price are not affected by the transportation of goods. Perfect competitive market is a myth. Markets are always found in the real world.

2.3 Perfect Competition in Telecom Sector

Generally people use the term competition with a compete strongly doe sales. Each company are trying to gain a customer expect to other company. And through their competition are also affect the market price and quantity. There is very extreme case called a perfect competitions. In which the situations are no individual suppliers in the market can individually affect the market price. Telecom industry are almost perfectly competitive market paradigm, it’s possible for a telecom sector to effective, competition, which is defined a situation here. Buyers are always access to alternative sellers for the product. The market price of the product is determined by interaction of the customer and company. In this type of competitions are no single customer or firm can determine, or the level of the price, and difference of the price charged by the company.

www.trai.com (as on 4/10/2013)

Types of Market Number of Sellers Entry Barriers to Nature of Product Sellers Perfect Many, Small, None Homogeneous Independent In perfect competitive market are suppliers are free to enter and exit a market in any time. There are a large number of firms and market price are also affected a marginal costs and the service quality. The main goal of a perfect competitive market is to promote a economics efficiency. When a any firm are exercise in a market power so there are economy lose a efficiency. The misallocation are comes in the firm are market power restricting its output to increase a profit. For example are supposing that a any country are allowed its mobile service to be provide by a monopoly. The company are wanted to increase profits. Indian telecom market is a very competitive market in a world. Because there are 12 operators in a 23 circles and a every circle are minimum a 6 to 8 company are provided a services. 3G service and mobile number portability are also increased a competition in a Indian telecom sector. Spectrum is a major sources to provide a mobile service. The price war are also put a pressure in a telecom operator. Pricing strategy of per second billing are taken a price war in a Indian telecom sector.

www.trai.com (as on 4/10/2013) Competitive Scenario of Telecom Sector

The Indian telecom sector is a very fastest growing sector. Telecom sector owing a very huge competition among the players, price war etc. 15 year ago mobile consumer were made to pay for an incoming call. And the today time mobile consumer pay for a per second of their usage. Indian telecom market are basically divided into a two parts between GSM and CDMA. Currently there are 11 players are fighting in a Indian telecom market. Airtel are leading in a Indian telecom sector but Vodafone and Tata Teleservices give a very tough competitions to airtel. The total number of telephone subscribers as on 31st April 2013 was 897.02 Millions. Telecom sector growth are also attract a new players to this industry. Internet subscribers in India as on 31st April were 160 Millions. According to a TRAI out of 160 million Indian internet user , 86 million user go online on their mobile phone. 40% searches on Google originate from a mobile device. 30% of Facebook users in India are use a mobile internet.

www.dot.gov.in (as on 4/10/2013)

Total Subscribers (in Millions)

548.8 544.55 600

500 349.22 352.47 Urban 400 Rural 300

200

100

0 41334 41365 www.cci.in (as on 4/10/2013)

Market Players

There are many players in the telecom sector and many new players comes in the telecom sector. When new players are coming in the market so competitions are also increased. The market share of the telecom company are also effected a industry. There are a 15 players in the market at the end of 31st April 2013. Bharti telecom lead a market with a 19.94% share, second is a Reliance with a 16.58 % share, Vodafone (16.41%), Idea (12.4%), BSNL (10.51%), Tata (8.77%), Aircel (6.93%), and other remaining share held by other smaller operators.Airtel are leading company with a 20% share, Reliance (16.58%) and Vodafone (16.41) are both has a close competitions. Reliance has a 154 millions customer and Vodafone have a 152.5 million customers. Uninor one of the company who enter a late in Indian telecom market now uninor has a 45 million customer and 5% of market share in Indian market.

www.trai.com (as on 5/10/2013)

Table: List of Cellular Mobile Service Providers and Currently Area of Operation

S.N. Service Provider Area of Operation 1 Bharti Airtel All India 2 Aircel Group All India 3 Reliance Communication All India 4 Reliance Telecom Kolkata, MP, WB,HP, Bihar, Assam & NE 5 Vodafone All India 6 Tata Teleservices All India 7 IDEA All India 8 Sistema Shayam Telelink Delhi, Kolkata, Gujrat, Karnataka, Tamilnadu, Kerala, Maharashtra, Mumbai, UP(E), UP (W), Rajasthan & WB 9 BSNL All India 10 MTNL Delhi & Mumbai 11 Loop Mobile Ltd. Mumbai 12 Quadrant (HFCL) Punjab 13 Telenor Group Maharashtra, Gujrat, Andhrapradesh, UP, Bihar 14 Videocon Telecommunication Ltd. Gujrat, Haryana, UP, MP, Bihar Source: www.trai.com (as on 6/10/2013) Telecom Operator wise market share

Market Share

Uninor; 5% Tata; 9% sistema; 2% BSNL; 11% aircel; 7% Videocon; 1% Idea; 12% MTNL; 1% LOOP; 0% Vodafone; 16% HFCL; 0% Airtel; 20% Reliance; 17% Source : www.trai.in (as on 8/10/2013)

Trends in Demand Supply

1 Demand Analysis

 Indian population in a age group of 14-70 years are a major group of mobile users. Most of the use are belong a this category. Indian telecom market is a very potential market for telecom operators. Because young generation of India also attracted for a mobile phones. This assures a high growth in telecom sector.  Today time most of the users are provided a services in a urban areas. But many of the village in India are not connected through a mobile phone. The demand in rural areas is also increased in a day by day. Because 72 % of population are lives in a rural areas.  Indian telecom sector are continue growth in every year. This has been make a impact on economics and government policy.  FDI is a one of the a major sources to meet a funds that required for a network expansion. The FDI policy provide a foreign company to invest in a India. Ina present time 74% to 100% FDI permitted by a Indian government in a various telecom services.

www.kpmg.com (as on 10/10/2013)

2 Supply Analysis

 Indian telecom industry is a very vast because there are very large number of players in a market. Many of the players are down the cost to a attract a consumers. Indian market are a very successful and aggressive players in a market like Airtel, Reliance and Tata. Competition has just heating every day.  Indian telecom market entry is a easy for a new players. The Indian telecom sector today is not a small market. There are a many of the players in telecom sector. The Indian government in today recognized to provide a world class infrastructure in a country.  Indian telecom market is supply a landline phone is more but the demand are reduced in a landline phone.

www.kpmg.com (as on 10/10/2013)

3Demand and Supply Graph Y X

Qo D C

OUTPUT C D

www.assocham.org (downloaded on 12/10/2013)

In this graph we make a supply constant because we conclude in all the firm enter a equally in a perfect competitive market and buyers buy a equal quantity so the supply is constant.

3 Cost and Price Elasticity

The spectrum price are increased in a India so telecom operator are required to invest a huge capital. Subscribers are increasing in India year by year , but due to heavy competitions the traffic rates are lowest in the world. The call rate in 1995 are INR 16.80 and 2013 are INR 0.30. telecom operators are launch a new scheme including reduction in tariffs for voice call. Due to price war the profit margin and return of capital is reduced over the year. customer A due to the price war easily switch to the service provider the service at a lower price.

www.dot.gov.in (as on 14/10/2013) 3. Marketing dynamics

CHANGING DYNAMICS OF TELECOM INDUSTRY

The pace of change has not been so fast in the mobile industry. The success of smartphones and associated platforms has increased the value chain overlaps between a handset vendor and an operator. Traditionally, the operators have had an upper hand in the relationship with the handset vendors especially in the western markets as the operators distribute the handsets themselves and provide subsidy. In return, handset vendors have shied away from antagonizing the operators by doing anything that can make the operators a dumb pipe. However, Apple’s entry changed everything and now there is a tussle between the operators and the handset vendors on who controls the most valuable parts of the value chain.

In the past, the operators had almost exclusive access to the subscribers (refer to the image below). Operators used to procure and sell the handsets and provided the voice & data services to the subscribers. This meant that the handset vendors did not have any regular contact with the subscriber. However, now the handset are moving very fast to exploit one of their few unique strengths which is service distribution and discovery on-device and therefore monetise from retailing and managing services at point-of-purchase and during in-life use. WHAT HAS CHANGED?

The question is everybody’s mind is what has changed that is leading to huge disruptions in the telecom industry. For any value added services provider, the most important part is the distribution, delivery and billing of its service (refer to the VAS value chain in the figure below).

Earlier, carriers were the only Go-To-Market medium for the VAS providers. However, handset vendors (Apple, Nokia, Samsung, etc.), operating system providers (Windows and Android) and independent players (GetJar) now have application stores which can not only market and distribute services but can also do direct billing. Mobile payments are likely to further reduce the dependence of the application stores on carriers for billing. With players apart from the carriers becoming service inventory brokers, the new Telecom Industry value chain looks something like the figure below:

It is interesting to note the difference in the above value chain from pre 2007 value chain (figure 1) which was nearly linear. The value chain now is structured in a way that all the different players in the ecosystem have direct access to the user. WHY THE CHANGE?

The increasing connection between physical devices and online services is driving new applications that take personal data and turn it into useful, personal, social, visual and manipulable representations. For long the mobile carriers had best opportunity to define the services landscape but they squandered the opportunity, e.g. the carriers always had the location data and could have started the location based services long time back but they could not do it as they were too busy in day to day operations. The operators did not create an ecosystem that could have created huge services business with their support. The other problem with the operators was fragmentation and hence no operator had scale. The handset vendors and internet players have now taken upon themselves to change the telecom industry.

Convergence is driving the change as it is leading to increasing services revenues that has attracted many internet players to mobility. Apple and Google are already trying to capture the living room of consumers by extending their presence to all the screens in a house including television. It is very clear now that mobile internet is going to far exceed the fixed internet so all the players from the internet space are entering the mobile industry. The internet players are trying to replicate the fixed line internet where the service provider is just a dumb pipe. The entry of internet players has acted as a catalyst for change. FIVE RECENT EVENTS WITH FAR REACHING REPERCUSSIONS FOR TELECOM INDUSTRY

Operators fear that they would be reduced to a dumb pipe just like the PC industry and hence they are unwilling to cede any space to the other players in the ecosystem. The other ecosystem players are moving very fast to take control over most of the components of the value chain. The following examples illustrate the uneasy relationship between the operators and handset vendors:

1. Direct Handset Sales: Last year, Google tried to sell Nexus One online in a bid to directly sell it to the end user instead of the carriers in a bid to shakeup the carrier dominated distribution model.Google wants the carriers to offer just the voice and data so that it can offer its services freely and reduce the carriers to a dumb pipe. Though the Nexus One experiment did not succeed, it does point towards the tussle between carriers and handset vendors for direct access to users. There are rumors that even Apple is attempting to do the same by selling phone through its iTune store. There are no indications that suggest that Google has given up the idea of selling handsets directly to the consumers.

2. Embedded Software SIM – There are reports of Apple working on embedded software SIM that would allow the users to buy the phone on the web and then select the carrier of their choice. Embedded SIM can potentially increase churn and the carriers may need to bid to be on iPhone’s SIM that could lead to a price war in competitive markets. Many analysts believe that with handset vendor controlled embedded SIMs, the dis-intermediation of carriers from retail distribution would just become a question of timing and degree. So concerned are the operators with this development that they have started to work on embedded SIM standards under GSMA so that they can influence the standards and make it compulsory for all the players to adhere to them.

AppleInsider has discovered a patent awarded to Apple that could further shake up the way carriers do business. The patent, entitled “Dynamic carrier selection,” describes a method for providing wireless communication services. According to the invention, a mobile device would store a network address and communicate with network operator servers. After receiving data from available network operators, the device or user would select a carrier. The invention would allow Apple to run a MVNO system that could collect rate information from participating wireless networks within a region and automatically select or allow users to select the best option.

3. Ecosystem wars – Leading operators across the global have announced partnership to launch their own application development effort under the name of Wholesale Application Community (WAC). The group, an allegiance of telecommunications firms and others working together to create a common mobile platform, has a goal to simplify the mobile application process for developers, allowing them to deploy mobile apps across all member networks simultaneously. Essentially, it’s an effort to build a global mobile application store in response to the hugely popular OEM stores. WAC apps are designed to be used across all platforms, so conceivably the same WAC application could work on an Android phone and an iPhone. This is interesting as the battle is now about ecosystem and not about device features. The handset vendors are trying to create the ecosystem around their operating system which the operators are trying to break via WAC.

4. Duopoly fears – Carriers fear that Google and Apple would control most of the parts of the ecosystem and hence are keen that the vendors do not select Android as an operating system. According to IntoMobile, a group of European mobile operators have concluded that iOS, Android and other such operating system are “trojan horse” that are stealing away the operator’s direct relationship with their customers, and therefore vast revenues. The carriers fear that in case the operating systems get reduced to two, they would lose the bargaining power and could soon find themselves in the same situation as service providers for fixed line internet. There reports that they are willing to back other operating systems and are even contemplating their own operating system. Nokia’s selection of Windows as primary smartphone operating system must be a relief for the carriers.

5. Near Field Communications– Near Field Communications (NFC) is a technology that has the potential to make the mobile payments easier by just tapping the phone at the Point of Sale (POS). Though the technology has been in existence for many years now, the recent push by Google and Apple seems to have changed the equation. Google and Apple want to drive billing through a device to challenge the operator billing alternative and this move would bring them right in the center of the mobile payments.

4.Investments related aspects FOREIGN INVESTMENTS FLOWING IN

CumulativeFDIinflowsintothetelecomsectoroverApril2000– May2015amountedtoUSD17.42billion

Duringthisperiod,FDIintothesectoraccountedfor7percentshareoftotalFDIinflowsintothecountryt illMay2015 In2014,totalinboundandoutbounddealvalueintelecommunicationwasUSD2.71billionandUSD1 18million,respectively

In2013,totalvalueofPEdealsintelecommunicationwasUSD1.26billion 5. Growth key

RISING INCOME FUELS DEMAND FOR TELECOM SERVICES

 IncomeshaverisenatabriskpaceinIndiaandwillcontinuerisinggiventhecountry’sstrongec onomicgrowthprospects.NominalpercapitaincomehaverecordedaCAGRof8.87percent over2000–15

 Increasingincomehasbeenakeydeterminantofdemandgrowthinthetelecommunications ectorinIndia

 TheIMFestimatesnominalpercapitaincometoexpandataCAGRof5.43percentover2010 –19

 PercapitaincomeisexpectedtoexpandataCAGRof8.6percentfortheperiod2015-19 INCREASING INCOME AND GROWING RURAL MARKET – DEMAND DRIVERS

 The emergence of an affluent middle class is triggering demand for the mobile and internet segments.

 A young, growing population is aiding this trend (especially demand for smart phones) INCREASING INTERNET REVENUES AND SUBSCRIPTIONS

 The Mobile Value Added Services (MVAS) industry is forecasted to expanded CAGR of 30.93 percent to USD9.5 Billion by 2015 from USD1.1 Billion in 2007

 These are of non-voice revenues, which currently stands at around 10percent of telecom operators’ revenues, is estimated to reset or more than 30 percent in the next five to seven years

 A decline in he prices of smartphones and data subscription rates is likely to rive demand for MVAS MOBILE APPLICATION MARKET: FAST GROWING SEGMENT

 Themobileapplication(app)marketisexpectedtoexpandataCAGRof104.32percenttoUS D626.23millionduring2014–16

 ThemobileappmarketwasestimatedaroundUSD150millionin2014

 Thesegment’sgrowthisexpectedtobedrivenbyincreasingmobileconnectionsandavailabi lityoflow-rangesmartphones

 Over100millionappsaredownloadedeverymonthacrossdifferentplatformssuchasiOS,Bl ackberry,Nokia,andAndroid STRONG POLICY SUPPORT CRUCIAL TO THE SECTOR’S DEVELOPMENT 6. STRATEGIES ADOPTED BHARTI AIRTEL: AN INSPIRING SUCCESS STORY

 Setupin1995,BhartiAirtelisIndia’slargestmobileoperatorwithpresenceinallofIndia’s22cir cles

 Itisthecountry’sleadingmobileoperator,withacustomerbaseofmorethan226millionasofM arch2015,andtheworld’sfourth-largesttelecomoperator

 RevenuesincreasedataCAGRof18.8percentfromUSD4billioninFY07toUSD15.1billioni nFY15

 BhartiAirtelhadover232.8millionsubscribersasofMay2015  ThetotalsubscriberbaseexpandedataCAGRof22.69percentto233millionfrom37.1millio noverFY07–16

 BhartiAirtelhasamobilesubscriberbaseof200millioninIndia

 BhartiAirtelplanstobuyopticalnetworkgearfromCienaCommunicationsInctoexpandcap acityofitsi2iunderseacablenetworkthatconnectsIndiaoSingapore

 ThecompanyhadexpansionplansinAfricatotapthehugegrowthpotential

 ItbecamethefirstIndiantelcotooffer4Gserviceonmobilephones VODAFONE: INDIA’S THIRD-LARGEST MOBILE OPERATOR

 Establishedin1994,VodafoneisoneofIndia’sleadingmobileoperators,withmorethan183 millioncustomersasofMarch2015

 Vodafone'srevenuesfromIndiaincreasedataCAGRof15.61percenttoUSD6.7billionover FY07–15

 Vodafone’scustomersubscriptionincreasedataCAGRof18.55percentto185milliondurin g2007–16

 InMay2015,Vodafone’ssubscriberbasestoodat185million

 Gujarat,UttarPradesh,Maharashtra,andWestBengaltogetheraccountforover45percent ofthetotalcustomerbase

 VodafoneGroupplanstoinvestheavilyintheestablishmentofafibre-opticnetworkinIndia

 VodafoneplanstoinvestUSD400–500millionby2015topurchase3Gequipment MOBILE NUMBER PORTABILITY: A PARADIGM SHIFT IN INDIAN TELECOM

 MobileNumberPortability(MNP)inIndiawasintroducedinNovember2010

 MNPallowssubscriberstochangetheirmobileserviceproviderwhileretainingtheiroldmobil enumber

 Theportabilityservicewasmadeavailableforbothpostpaidandprepaidcustomersaswellas onbothGSMandCDMAplatforms

 TheimplementationofMNPhasbroughtaslewofbenefitsforcustomersintermsofbetterpla nsandoffers

 MNPrequestsincreasedto160.25millionattheendofMay,2015 EXPANSION AND GROWTH STRATEGIES OF LEADING PLAYERS Telecom Industry: Supply & Value Chain

Telecommunications industry has a complex set of suppliers, including vendors for equipment, infrastructure and service providers. What is the revenue metric for telecom and who are the major stakeholders in this industry? Read to find out!

Supply Chain:

Telecommunications industry has a complex set of suppliers, including vendors for equipment, infrastructure and service providers. Many service providers own their own transmission networks and infrastructure but there are many who might lease from other players. Business and household telecommunication services make up the largest source of revenue for the industry, followed by sales of products, equipment, and infrastructure services.

Revenue Metric:

The telecommunications industry uses a key revenue metric, average revenue per user or average revenue per unit (also known as ARPU) to keep track of the revenue generated by a typical subscriber or device in a given time frame. To calculate the ARPU, a standard time period must be defined. Most telecommunications carriers operate by the month. The total revenue generated by all units (paying subscribers or communications devices) during that period is determined. Then that figure is divided by the number of units. Because the number of units can vary from day to day, the average number of units must be calculated or estimated for a given month to obtain the most accurate possible ARPU figure for that month.

Also related is ARPPU (Average Revenue Per Paying User) which is calculated by dividing up the revenue amongst the users who paid anything at all. This yields a figure that is significantly larger than ARPU. For example in the case of a subscription game (that has a free play version), the ARPPU, measured by accounts, is the subscription price, diluted slightly by free trials. ARPU is widely used by Internet Protocol television (IPTV) service providers.

ARPU can be a good indicator of how effectively the network is exploiting its revenue-generating potential but a high ARPU does not guarantee high profitability. ARPU does not take the cost of providing the services into account. Because of this, some service providers are relying more on key revenue metric, the average (profit) margin per user or AMPU, which does take the cost of providing services to a user or device into account.

Cost Model:

The telecommunications industry requires heavy capital investments to create wired, wireless, or broadband infrastructure and networks. It is a capital-intensive business with high fixed costs and lower variable or incremental costs. Customers pay for a share of the fixed costs apart from the variable costs in their fees. Companies in the industry are continuously looking for new customers so they can distribute these fixed costs among many payers. This helps companies remain competitive under price pressures and profitable in a fiercely competitive market.

Telecommunications Industry Value Chain:

The telecommunications industry is made up of a complex set of suppliers, service providers, regulators, and customers. The key stakeholders in the telecommunication value chain include

 Telecommunication product and equipment manufacturers

 Telecommunication service providers

 Customers

 Regulators- Learn more at www.technofunc.com. Your online source for free professional tutorials. Bibliography http://www.technofunc.com/index.php/domain-knowledge-2/telecom- industry Date:6/Nov/2015. 02:42 pm

1-http://www.iloveIndia.com/economy-of-India/telecom-industry.html (as on 4/10/2013)

2-http://India.mapsofIndia.com/transportation/telecom-backbone-of-India.html(as on 4/10/2013)

3-http://www.dot.gov.in/osp/Brochure/Brochure.html (as on 8/10/2013)

4-http://ffymag.com/admin/issuepdf/Telecom-Dec09.pdf (as on 8/10/2013)

5-http://toostep.com/topic/telecom-sector (as on 8/10/2013)

6-http://www.iimcal.ac.in/community/consclub/reports/telecom.pdf(as on 4/10/2013)

7-http://www.assocham.org/arb/aep/AEP_telecom-article_Dec2008.pdf(as on 8/10/2013)

8-http://www.ficci-b2b.com/site/TELECOMMUNICATIONS.pdf (as on 5/10/2013)

9-http://finance.mapsofworld.com/merger-acquisition/telecommunication industry.html (as on 5/10/2013)

10-http://www.India-server.com/news/government-tightens-telecom-ma-norms-500.html (as on 5/10/2013) 11-http://www.preservearticles.com/201106178089/7-most-essential-features-of-a-perfectly- competitive-market.html(as on 4/10/2013)

12- www.trai.com (as on 5/10/2013)

13- www.kpmg.com(as on 4/10/2013)

14- www.assocham.org (as on 5/10/2013)

15- www.dot.gov.in(as on 4/10/2013)

16- www.cci.in(as on 4/10/2013)

No particular Pg, no. Industry at international level Demand supply scenario Market player Important factors for internationalization Growth etc

3 INTERNATIONAL SCENARIO Telecom Industry & Globalization

The first factor shaping the telecommunication industry to what it is today is globalization. The telecommunications industry transports information at such incredible speeds that concept of virtual world has become true. This article will discuss impact of globalization and the risks and opportunities it present to the industry.

The first factor shaping the telecommunication industry to what it is today is globalization. The telecommunications industry transports information at such incredible speeds that concept of virtual world has become true. Users can stay connected on a global scale without travelling and can collaborate in virtual world enabled by telecommunication industry. Telecommunications has become tremendously important to successful operation of almost every organization around the world, large or small, in both the public and private sector and for most of the trans-border organizations it is the backbone of their business. Discussions of globalization, the Internet, and e-commerce typically emphasize the increasing pace of change happening today.

The traditional distinction between local and long-distance telephone service, as well as the demarcation between voice, record, data, and video services, is fast disappearing. Internet has reached to one third of the world population. There exists 5 billion wireless subscribers still growing at a fast pace. Comparable changes are taking place on the international scene as the conventional separation between local, national, and global communications is being eroded and as integrated telecommunications usage readily transcends national boundaries.

International communications is the fastest growing segment of the total communications industry. It is estimated that global traffic would appear to reflect the same type of usage concentration that exists in domestic long-distance traffic, in which 20 percent of business customer’s account for 80 percent of business revenues. Global telecommunications will have a significant impact on the growth rates of both industrialized and developing nations.

Many telecommunications providers have strong incentives to expand operations across nations. By expanding internationally they can exploit core competencies across a larger set of opportunities because emergence of global network equipment markets and a trend toward deregulation, technical competencies in network operations and services are now having increased global applicability. Global customers will demand services that are well integrated across national borders in both technical and customer-service dimensions.

Globalization also provides an opportunity to diversify the risk. In addition to general macroeconomic and political risks, communications industry growth rates are likely to vary significantly across countries. Still there exists opportunity to explore telephony service as telephone penetration rates worldwide are still low compared to some of the countries. Telephony is a well-established service that brings value to customers from many different backgrounds and cultures; there is huge potential for telephony service growth around the globe. To lessen the risks of any particular country achieving its growth potential, businesses linked to telephony service growth can position themselves to exploit growth that might occur in other countries. Companies who are participating in international commerce have to deal with important cultural differences and also the absence of a common internationally applicable legal framework. Such differences are particularly significant in telecommunications markets because the services exchanged are complex and the regulatory framework is crucial. Globalizing a company is also a means to lessen transaction costs and to facilitate quicker reactions to new business opportunities.

During the last decade "globalization" was more of a slogan than a reality, since it referred mainly to alliances between major operators to provide end-to-end services to multinational enterprises. Public networks and residential customers were relatively unaffected by this kind of globalization. In the current decade globalization has already become much more of a reality and in future it is going to be possible for foreign operators to have direct access through interconnection and interoperability to public networks in most of the world's major telecommunication markets, as well as to make direct investments in the development of those networks.- Learn more at www.technofunc.com. Your online source for free professional tutorials.

International Telecommunications

Until the 1980s, the governance and regulation of international telecommunications regulation was relatively straightforward where state-owned telecom companies provided services within discrete national boundaries. International traffic was carried at rates mutually agreed upon by governments and their respective national carriers. A brief discussion on how industry is shifting to multilateral trade framework.

International telecommunications were based on bilateral relations between countries. The monopoly operators in those countries collaborated in the joint provision of international services. This model is now breaking down, and a new pattern based on global competition is emerging. Now, it is not nations that trade with other nations, but companies and individuals that conduct trade with each other.

Until the 1980s, the governance and regulation of international telecommunications regulation was relatively straightforward. Telephone companies were state-owned monopolies that provided services within discrete national boundaries. International traffic was carried at rates mutually agreed upon by governments and their respective national carriers.

Many observers consider 1998 to be a watershed year in the evolution of the global telecommunications industry. This view is based on the fact that two major changes in the international policy landscape have begun to clear away many longstanding barriers to competition in global networks and services. The first of these changes is the expansion and consolidation of the international trade regime for telecommunications to liberalize basic telecommunications services sectors in accordance with international trade disciplines in the participating countries. It also brings the onset of full liberalization within the European Union (EU). As part of a broader program to create a “single market” for goods and services, whereby EU’s 15 member countries are obliged to remove barriers to competition with each other in telecommunications infrastructure and services under the guidance of the European Commission (EC).

The second major change involves the international accounting and settlements system, the restructuring of global traffic precipitated by the demise of the accounting rate system, and the governance of global electronic commerce.

Multilateral Trade Framework:

Trade in telecommunication equipment and services now takes place in a multilateral environment in which the majority of trade relationships include multiple intermediaries between buyer and seller. We are moving from a world of one-to-one relations to a world of many-to- many.

For many telecommunication users, the transition to a multilateral trading system will bring benefits in terms of greater choice and lower prices. For the majority of carriers, there will be significant benefits in terms of creating new market opportunities and a more level playing field.

The goal is to extend the multilateral solution, in which all countries move forward together and in which all benefit, not just those carriers with market power. Only then will the benefits of global competition be extended to all the world's inhabitants.

The nature of international telecommunications trade is evolving from a bilateral, nation-to-nation framework to a multinational, multilateral company-to-company paradigm. Major international telecommunications alliances have taken many forms and have the potential to dominate parts of international telecommunications as they hope to realize significant market and cost advantages. Nevertheless, the demand will continue to increase for smaller firms able to provide local presence and technological expertise. - Learn more at www.technofunc.com. Your online source for free professional tutorials. Top 25 Telecom companies in the world

(based on brand value)

Brand Rank Brand Parent Company Value ($bn)

1 Vodafone Vodafone Group 26.59

2 AT&T AT&T 24.6

3 Verizon Verizon Comm 24.38

4 Orange France Telecom 18.35

5 China Mobile China Mobile 13.87

6 Telecom Italia Telecom Italia 9.43

7 T-Mobile Deutsche Telekom 8.96

8 Movistar Telefonica 7.95

9 NTT DoCoMo NTTC 7.54 10 BT BT Group 7.29

11 Sprint Sprint Nextel Corp. 7.07

12 Telefonica Telefonica 6.33

13 Alcatel-Lucent Alcatel-Lucent 5.16

14 America Movil America Movil 5.08

15 Telstra Telstra Corp. 4.64

16 O2 Telefonica 4.62

17 China Unicom China Unicom 3.45

18 Qwest Qwest Comm Intl 3.06

19 SoftBank Softbank Corp. 3.02

20 KDDI KDDI Corp. 3.01

21 Telenor Telenor 2.97

22 Swisscom Swisscom 2.96

23 MTS Mobil TeleSystems 2.79

24 CNC China Netcom Group 2.55

25 Airtel Bharti Airtel Ltd 2.48

5. GROWTH KEY

More change in the last 10 years than the previous 100 The way in which the world communicates has changed more in the last decade than in all previous history. In this section, we explore the following critical changes and challenges: • The mobile migration • The changing face of communication • The challenge to monetize content • The decoupling of traffic and revenue • The flight from the network.

The mobile migration

In 1999, more than a century after its invention, less than one in six people in the world had access to a telephone of any kind. By 2009, mobile telephony was accessible for seven out of ten people worldwide (see Figure 1).2 During the same period, fixed telephony (PSTN) lines and voice revenues continued their long-term decline in advanced markets where the volume of mobile telephony voice minutes increased at the expense of fixed telephony. In 2008, for example, outgoing fixed voice traffic in the EU-5 markets – France, Germany, Italy, Spain and the United Kingdom – amounted to 560 billion minutes or 53 percent of total minutes of use (MOU), down from 645 billion minutes and 72 percent MOU in 2003.3 In 2010, mobile is expected for the first time to carry more outgoing voice traffic than fixed telephony.4

After a decade of meteoric increases, global mobile growth has begun to stall. In 2008, revenue growth fell below double-digits for the first time.5 In some advanced countries, overall mobile revenues are expected to decline for the first time during 2009-2010.6 Average revenue per user (ARPU) has actually been declining for some time. For example, ARPU for Italian telecommuniations companies declined from almost €30 per month in 2004 to just over €20 per month in 2008.7

Over the decade, emerging markets demonstrated their ability to make profits from low ARPU users, as telephony was for the first time extended to many new consumers. In 2008, average EBITDA (earnings before interest tax, depreciation and amortization) levels for the mobile telecom industry in South Asia ranged from 45-65 percent, with ARPU levels below US$5.8 This was driven, in part, by significant increases in MOU and innovative cost- management models. From Q2 2008 to Q4 2009, for example, Bharti Airtel roughly doubled the total volume of traffic on its network, from over 64 billion minutes per quarter to 130 billion minutes.9

Emerging market expansion has also begun to falter. From 2005-2009, revenue growth from telecom services declined 14 percent in the Middle East and Africa, 11 percent in Latin America, 8 percent in Brazil, Russia, India and China (BRIC), 4 percent in North America and 1 percent in Europe (excluding Russia).10

The changing face of communication Over the past decade, Internet access and connectivity shifted from dial-up to broadband. Higher data speeds through Digital Subscriber Line (DSL), cable modem and fiber access technologiesenable users to communicate in more innovative ways.Today, communications are fragmented across online services (VoIP, peer-to-peer, social networking, e-mail, instant messaging, blogs, forums, wikis and more) and telecom services (fixed and mobile voice, SMS, MMS). While non-traditional communication services in advanced markets have grown overall, outgoing call minutes from traditional telecoms have remained relatively flat. In France, for example, the volume of call minutes across fixed and mobile will increase by only 9 percent from 2005 to 2010 – from nearly 190 billion minutes to 207 billion. However, OTT communications over the same period, including VoIP, peer-to-peer and instant messaging, will increase by 211 percent, from 303 billion to 942 billion minutes.11 A challenge for the industry is to devise a way to better monetize this massive growth in over- the top services. The challenge to monetize content Revenues from digital content services, such as Internet Protocol TV (IPTV) and mobile content (mobile video, mobile music, wireless games and mobile advertising) have not yet Compensated for the decline in traditional services. Our analysis shows that IPTV generated close to US$4 billion in 2008 revenues, representing only 0.5 percent of total mobilerevenues, 1 percent of fixed telecom revenues and 1.5 percent of broadband revenues. Our most optimistic view forecasts IPTV revenues at US$17 billion and 6 percent of the paytelevision market in 2012.

In emerging markets, adoption of mobile messaging-based applications that leverage two- way/premium SMS is growing, as well as Unstructured Supplementary Service Data (USSD), to deliver public information and advisory services to rural communities. These applications also allow mobile payments and money transfer services. They can also provide basic banking services in countries where such services are relatively under-developed or unavailable

The decoupling of traffic and revenue

One of the brightest spots in the industry toward the end of the decade was the phenomenal growth of mobile broadband, facilitated by the rollout of High Speed Packet Access (HSPA) networks. This growth helped mitigate declines in overall revenues in 2009, particularly in Europe and North America. Driven in part by the increased penetration of smartphone devices like the 3G Apple iPhone, High Speed Downlink Packet Access (HSDPA)-enabled USB keys or dongles for laptops/Netbooks, and other mobile Internet devices (MIDs), mobile broadband growth is paving the way for a second wave of fixed-mobile substitution, but this time in data connectivity services.

Aggressive pricing and attractive packages, including “all-youcan-eat” bundles and simple pre-pay (or pay-as-you-go) options – generally unavailable with fixed broadband – have helped accelerate consumer adoption and increase mobile broadband traffic. The dramatic increase in application stores, following the success of Apple’s App Store, has reinvigorated the market for mobile applications. Just 18 months after its launch in July 2008, the number of App Store applications had surpassed 100,000 – with more than 3 billion downloads.12 At an average price per application of around US$2.50, the App Store model is far from a significant source of revenue. But it is a powerful complement to drive Apple’s hardware revenues.13 Overall, global mobile data traffic has more than doubled since 2008.14 With future growth forecast at 130 percent year-toyear,capacity on current 3G networks is likely to be exhausted by 2013, increasing pressure on providers for additional investment in radio access and backhaul networks. Furthermore, with flat tariffs, costs no longer match revenues for delivering an ever- increasing amount of data over a network designed to support narrowband voice and lightweight download, Web browsing and e-mail. Essentially, revenue and traffic volumes are disconnected as telecom becomes more data/connectivity-centric. While the boom in demand for mobile broadband is welcome for an industry looking for new sources of growth, based on the current revenue model of “all-you-can-eat” data plans, it is unsustainable long-term. Historically, traffic and revenue tracked along the same path. In the past ten years, however, they have diverged. The disassociation of these two is at the heart of the Telco revenue model challenge (see Figure 2). The flight from the network

As part of the effort to reduce capital costs, many telecom providers are turning to network outsourcing and infrastructure sharing, which are becoming mainstream even among Tier-1 providers such as Vodafone. In early 2009, Vodafone UK signed a seven-year agreement for Ericsson to take over the maintenance and operational support of its second- and third- generation radio access networks.15 France Telecom Orange has outsourced the management of its networks in the United Kingdom and Spain to Nokia Siemens Networks.16 Indeed the number of outsourcing deals in the industry rose from six in 2004 to nearly 90 in 2008.17

After the unprecedented change that has swept through and across the telecommunications industry in recent years, what evolution will transpire over the next five years?  Scenario envisioning for telecommunications Traditional approaches to predicting the future based on prefabricated world visions of economic and geopolitical trends are unsuitable for an industry changing as quickly as telecommunications, the evolution of which has taken many unprecedented turns over the past decade. Given the ongoing uncertainties, a scenario-envisioning approach – one that enables industry executives to assess alternative contrasting futures for the industry that are distinctly different from the present – is more appropriate. Our scenario envisioning consists of an analysis of the following:

• Forces driving telecommunications through 2015 • Critical (uncertain) variables – nascent technology, possible consumer responses to offerings not yet invented, potential regulatory structure and possible competitive initiatives • Scenario realization triggers – economic, technology, regulatory, market • Scenario revenue and profitability outlooks.

Forces driving telecommunications through 2015

There are a number of forces and underlying trends in the evolution of the communications industry for which there is a high degree of consensus about their certainty (see Figure 3).

These provide a common backdrop for future scenario envisioning. We’ve grouped these forces and trends into five categories:

1. Usage – changes to user consumption patterns 2. Services – changes in services composition 3. Access – device and network access technology evolution 4. Business model – future revenue structure and sources 5. Industry structure and regulation – future of industry structure and regulation. Usage – Mobile and broadband have emerged as key staples, and consumers are unwilling to make drastic changes in their use of communication and connectivity services, even in a time of economic uncertainty. Asked what they are least likely to give up if the economy worsened, after their homes, respondents listed their mobile phones and broadband Internet access. The items ranked considerably ahead of family holidays, PayTV and going out (see Figure 4).

Furthermore, while many consumers will make adjustments in their use of communication services to control costs, only 23 percent of consumers expected an economic downturn to significantly impact their use of such services.

Over the next five years, driven in large part by younger consumers, communications will be fragmented across a number of tools, from fixed and mobile voice and text messaging, to online alternatives, including e-mail, VoIP, instant messaging and social networking (see Figure 5). Between 2008 and 2013, Internet data traffic is expected to quintuple, largely as a result of significant increases in the consumption of Internet video.18 While in 2008 file sharing accounted for the majority of Internet traffic at 56 percent, this will decline to 31 percent by 2013, with Internet video replacing it as the largest contributor to online traffic at 46 percent.19

However, the largest growth area by far will be mobile broadband, with a forecast CAGR of 130 percent from 2008 to 2013 as the penetration and use of Smartphones, MIDs, Netbooks and tablet devices increase (see Figure 6).

Services – Overall, PSTN circuit-switched lines will continue to decline, although some emerging countries may notice short-term growth in fixed lines as they “catch up” with the rest of the world. Increasingly, VoIP will replace fixed-voice access lines in mature economies. Further, as penetration of mobile VoIP accelerates, the proportion of provider- managed mobile VoIP will also increase. A previously skeptical industry will overcome fears of cannibalization and will begin to transition from outright prohibition, through models imposing surcharges and, finally, on to formal partnerships with overthe-top providers like Skype. Mass migration to mobile VoIP, however, is unlikely until HSPA and Long-Term Evolution (LTE) networks are deployed more widely to address known limitations around usability, availability and quality of service.

Shared capability services that enable interoperability across fragmented communication tools will become standard as several industry initiatives become a reality, like GSMA’s Rich Communications Suite (RCS) and GoogleVoice, which enables users to link all their phones together into one central communications network.

Access – With forecasts of nearly 800 million fixed broadband subscribers and over one billion mobile broadband subscribers by 2015, basic broadband will be available to most households around the world, and levels of penetration will be similar to television in advanced markets.20

The race for mobile broadband appears to have been decided in favor of LTE – one of two broadband access technologies telecom providers identified as critical to invest in over the next five to ten years (see Figure 7).

In December 2009, Nordic carrier TeliaSonera deployed what it claims are the world’s first two commercial LTE networks, offering maximum throughput speeds of 20-80 Mbps.21 A number of major providers, including Verizon, KPN, NTT Docomo, AT&T, France Telecom/Orange, Telstra, Vodafone, Telus and Rogers, have announced early commercial deployment plans for LTE. Global subscribers are expected to reach nearly 400 million by 2015.22 Business model – Over the forecast period, fixed voice communications will increasingly be monetized largely as features of broader connectivity packages, rather than as standalone services. Providers will seek new revenues by providing open wholesale interfaces to drive innovation on their networks. As environmental sensitivities progress, the “green” practices of telecom providers will become sources of revenues as they help companies in other industries reduce their CO2 emissions through new services such as mobile virtual private networks, video and teleconferencing capabilities and machine-tomachine communications.

Industry structure and regulation – Increasingly, the source of new infrastructure competition will be external: from government, municipality, local housing associations and utility companies. In France, a law passed in 2004 allows local authorities to act as telecom providers, and around half of the €2.1 billion invested in backhaul networks in sparsely populated areas since then has come from public financing.23 All across Europe, municipalities – and even housing associations – are investing in local access networks. By December 2009, nearly 60 percent of FTTH/B projects across Europe were being led by municipalities, utilities or housing associations, with incumbent and alternative telecom providers accounting for the rest.24 For example, the city of Amsterdam, in partnership with two private investors and five housing associations, has invested €18 million in building a fiber-tothe- home broadband access network to initially connect nearly 40,000 households.25

In developed markets, both mobile and fixed termination rates will continue to decrease. The EU’s long-term vision is to reduce mobile termination rates (MTR) in member states to levels comparable to fixed termination. At the same time, the boundaries defined by access (i.e., fixed, mobile, cable, Internet) will fade as an increasing number of players offer a combination of products. Existing remedies for enforcing local access competition will be replaced with the deployment of next generation access

 Scenario revenue and profitability outlooks

The 2015 scenarios each have different revenue profiles and include varying levels of contributions to the overall mix from communications (voice and basic data), connectivity (broadband, legacy and enterprise) and digital media/content. We have designed a revenue and profitability model for each scenario based on assumptions of penetration and ARPU growth for fixed voice, mobile voice and data (SMS), VoIP/VoBB, fixed broadband (including dial-up), mobile Internet and broadband, machine–to-machine connectivity, IPTV and mobile content services.

In a Survivor Consolidation scenario, fixed-mobile substitution accelerates, mobile penetration slows and ARPU declines as consumers move to control spending on telecom services and/ or turn to VoIP/VoBB alternatives. Despite the downturn, fixed and mobile broadband penetration increases modestly as providers offer competitive “all-you-can-eat” bundles and users opt for free OTT services. Paid content services, however,decline.

As governments and municipalities participate more actively in extending ultra-fast broadband capabilities and fixed connectivity penetration, this potentially triggers a Market Shakeout scenario. Overall ARPU declines sharply, but premium connectivity services enable OEMs and content providers to bundle content or device-centric applications with connectivity. In Clash of Giants, while fixed voice penetration continues to decline, overall voice revenue erosion is contained as consumers increasingly adopt and pay for end-to-end packaged services and enhanced rich communication capabilities. Consumers come to accept network- optimized vertical industry applications and digital lifestyle services from telecom providers. Providers in emerging markets are successful in extending communications to many more people as ultra-lowcost handset penetration increases. (NGA).

PSTN line losses accelerate sharply, along with significant decreases in ARPU as providers migrate consumers to managed VoIP offerings in a Generative Bazaar scenario. VoIP/VoBB use is widespread as connectivity becomes part of the fabric of society and is bundled with all broadband/connectivity packages. Users pay only for communications aggregation and shared capability services across multiple tools. Phenomenal growth in mobile broadband continues, and nearly all mobile users in advanced markets have data connectivity plans across multiple devices. In emerging markets, mobile broadband is the de facto Internet platform as mobile devices become the users’ portable digital identity. OTT video, applications, services and digital content services boom as a result of open access infrastructure. There is also a significant ramp-up in the penetration of M2M services as low tariff packages enable profitable network connectivity of objects and sensors.

Regardless of which scenario dominates, PSTN revenues decline. Likewise, fixed and mobile connectivity/broadband revenues increase in all scenarios. Overall, the financial model suggests Generative Bazaar is potentially the most profitable, with the highest revenue and growth prospects. However, it is also the most challenging scenario because of the dramatic degree of change it will demand from the industry. Clash of Giants may, indeed, be more a plausible and natural evolution in a recovering/slower-growing economy, even if revenue and profitability potential is less than in Generative Bazaar (see Figure 10). A critical potential industry shift is the overall composition of the telecom revenue mix as the once-dominant PSTN voice business disappears and mobile revenue growth stalls. In 2008, the proportion of total industry revenue in advanced markets attributed to communications (PSTN Voice, VoIP/VoBB, Mobile Voice and SMS) was approximately 75 percent, versus 24 percent for connectivity (fixed broadband, dial-up Internet, legacy corporate data services, mobile broadband and machineto- machine revenues) and 1 percent for content.31 With the growth in broadband and the slowdown of communications revenues, this split is likely to shift, with a greater share going to connectivity.

The four scenarios show contrasting revenue composition outcomes (see Figure 11). Survivor Consolidation and Clash of Giants retain the current revenue mix structure, even as their share of connectivity increases. In Market Shakeout, parity exists between communications and connectivity in the overall revenue composition. However, Generative Bazaar reflects a model that is opposite the dominant model of today. Connectivity revenue becomes most prevalent in the mix. PSTN voice declines, and fixed voice communication is offered virtually for free as a standard service in mobile and fixed broadband packages. The demand for access grows, fueled by the proliferation of smart devices, including machine-to-machine connectivity supporting growth in sensing and automated response capabilities. STRATEGIC ANALYSIS OF TELECOMUNICAION SERVICE PROVIDER INDUSTRY 1. Porter's 5 Forces Analysis

The model originated from Michael E. Porter's 1980 book "Competitive Strategy: Techniques for Analyzing Industries and Competitors." Since then, it has become a frequently used tool for analyzing a company's industry structure and its corporate strategy.

In his book, Porter identified five competitive forces that shape every single industry and market. These forces help us to analyze everything from the intensity of competition to the profitability and attractiveness of an industry.

Figure shows the relationship between the different competitive forces. 1. BAGAINING POWER OF SUPLIERS (MEDIUM) Telecom sector suppliers include companies providing broadband switching equipment. Fiber-optic cables, mobile handsets and billing software. There are companies like Elcoteq. Flextronics, Perlos, ZTE, Huawei, Alcatel lucent, cisco. Senimes and Ericsson in equipment making.

Cisco is the market leader in switching equipment. Due to investment in IT and BPO, government e-governance initiatives these equipment are in demand.

Tyco and D-Link are market leader in cabling and major demand is from ITES, BPO, KPO and BFSI sector. Transmission equipment, wlan, fixed phones and mobile handset are other equipment having presence as suppliers. In mobile handset Nokia (Microsoft), Samsung, LG, Sony and Blackberry are major players.

With the convergence of data and voice services companies are focusing more on IT infrastructure to enable and sustain their growth. With the huge cost of equipments and servicing agreement service providers usually sing long term agreement with equipment manufacture. These suppliers always get affected with policy changes and TRAI rulings regarding 2G, 3G and other services which lead to surge or dip in demand. In 2011-12 this industry has revenue of 1,14,133 crore due to heavy demand from service operator for expansion of 3G network but in falls 2012 due to cancellation of 122 licences.

Equipment market has become price competitive with emergence of Chinese players like ZTE and Huawai. As equipments like switch, cable, handset and transmission devices are backbone of telecom sector but due to presence of large number of local and multinational manufacturers. Service providers have freedom to choose and bargain. For supplier main bargaining position is after sales service agreement and price. So first glance, it might look like telecom equipment suppliers have strong bargaining power over telecom operators. But they are in a weak position in reality. 2. THREAT OF NEW ENTRANTS (LOW) Due to capital intensive industry high finance requirement is major concern for companies who planned to enter in this industry. Also strict government regulation on frequency allocation, evident scams. Court and TRAI interference on schemes and tough rules for entry has made this sector difficult to enter. New player has to pay entry fee, license fee, equipment cost and expert managers to establishment in market where there are already so many players and prices are lowest in the world and average revenue per user (ARPU) is declining. Recently government has fixed floor price of spectrum at Rs 14000 crore which shows strong regulatory pressure on already bleeding telecom companies. Also most of the present telecom companies spent huge amount of marketing and have celebrity brand ambassador as sachintendulkar, Shahrukh khan, M S Dhoni, Kareeba kapoor, ete. So a new entrant has to face so many challenges in form of high starting cost, operating cost, marketing cost and government pressure and have to maintain competitive call rates to be in market which altogether make this sector difficult to enter.

Current telecom players in Indian market are Airtel, Vodafone, Aircel, Reliance, Idea, BSNL, MTS, TATA Docomo, Videocon, Telenor, and MTNL. There are already so many players with their profit plummeting in every subsequent quarter it is unattractive sector for new entrants. Although government has approved FDI up to 49% in personal mobile communication, 74% in internet and radio paging services but still it is not attracting much new companies due to socio-political environment of country.

3. BARGAINING POWER OF BUYERS (HIGH) Without much analysis one can understand the power of buyers in Indian market with the fact that telecom services rates are lowest in the world here. With government rules regarding roaming free network, number portability, lack of differentiation and increased choice in terms of products and services power of buyers is rising. With the presence of more than fifteen telecom companies in India everyone is competing for increasing customer share. Most of the companies in have schemes for data and voice services which are similar in offering and strong pressure of TRAI regarding service charge has also reduced their freedom to differentiate more. Now most of the service providers are present in the entire circles so consumers have lot of choices to switch in case of dissatisfaction with services. Also with the commencement of regulation on number portability has make market more competitive and buyers more strong. So overall, buyers have strong bargaining power in telecom sector. 4. THREAT OF SUBSTITUTES (LOW) The threat that substitute products pose to an industry’s profitability depends on the relative price-to-performance ratios of the different types of products or services to which customers can turn to satisfy the same basic need. The threat of substitution is also affected by switching costs- that is, the costs in areas such as retraining, retooling and redesigning that are incurred when a customer switches to a different type of product or services.

The potential major substitution for telecom industry are as follows:

 VOIP (Skype, Messenger etc.)  Online Chat  Email  Satellite phones

All of these technologies have huge potential, though none of the above a major threat in current scenario.

5. COMPETITIVE RIVALRY (HIGH)

Service Provider-wise Rural Wireless Subscribers and Market Share

SI Wireless Subscrib Subscrib Rural Rural Market Market , Group ers as on ers as on Subscriber Subscribers Share of Share of N March-14 March-13 s as on as on Rural Rural o (in (in Mar-14 Mar-13 Subscribe Subscriber millions) millions) (in (in millions) rs s millions) (as on (as on marr-14) marr-13) 1 Bharti 205.39 188.20 93.76 82.16 25.22 23.99 2 Vodafone 166.56 152.35 89.39 82.29 24.04 24.02 3 Idea/Spice 135.79 121.61 74.72 65.78 20.10 19.21 4 Reliance 110.89 122.97 27.32 29.34 7.35 8.57 5 BSNL 94.65 101.21 32.53 34.84 8.75 10.17 6 Aircel 70.15 60.07 25.51 22.33 6.86 6.52 7 Tata 63.00 66.42 15.19 13.78 4.09 4.02 8 Telenor 35.61 31.68 11.20 10.04 3.01 2.93 9 Sistema 9.04 11.91 2.11 1.93 0.57 0.56 1 Videocon 4.99 2.01 0.00 0.00 0.00 0.00 0 1 MTNL 3.37 5.00 0.00 0.00 0.00 0.00 1 1 Loop 2.90 3.01 0.00 0.00 0.00 0.00 2 1 Quadrant 2.17 1.37 0.05 0.04 0.02 0.01 3 Total 904.51 867.80 371.78 342.50 100.00 100.00 (Sources: TRAI Annual Report of 2015) Market Share of Service providers of Rural Wireless Subscriber base

The above figure shows the revenue market share of telecom providers as on 31st march 2015.

Due to high fixed cost, low average revenue per user and high exit barriers have created strong rivalry in telecom sector. There are more than 15 telecom companies in India and at least five to six are present in each circle. To increase customer share if one reduce its prices.

All do the same and innovations are no longer an advantage for particular company. All are endorsing their products by celebrities and are providing same value added services. Due to announcement of 3G- 4G auctioning and its lure for attracting customers many companies come into market but can’t sustain in the price sensitive market. 2. SWOT Analysis of the Telecom Industry

Telecommunications are ways to spread messages over long distances. While at one point in history fire signals might have been used to spread this information, today telephones, television, and computers are used. A SWOT analysis of the telecom industry will focus on the strengths, weaknesses, opportunities, and strengths of the organization. The industry would conduct a SWOT analysis to understand what its problems are so they can be fixed and the business can be improved.

Strengths

 The strengths in a SWOT analysis for the telecommunications industry focus around the things the business does best. The industry can focus on the types of assets it owns, the human capital is possesses, where the business makes its money from, and what experience exists.

 The industry might have a particularly good record with phone call quality, according to customers, or it could be the only provider of a particular successful product. Once the analysis is complete, the goal will be to maximize the strengths.

Weaknesses

 The telecom industry's weaknesses in a SWOT analysis center around what the business is not doing well. The business may be losing money in a particular area, or could be without resources to better the business model.

 Especially within the telecom industry, which can change quickly, it is essential to be honest and upfront about what the current weaknesses are, so they can be eliminated in the future. The analysis will be inaccurate if all weaknesses are not included. Opportunities

 The telecom industry's opportunities in a SWOT analysis include those variables that are out of the control of the industry, but could benefit the business. Perhaps new customers will enter the market or the government will supply subsidies to supply the newest piece of technology. Since technologies that the telecom industry supplies change so frequently, it is essential that the businesses know what types of products are soon-to-be-supplied, so they can have the proper marketing prepared.

Threats

 The threats in a SWOT analysis for the telecom industry focus on the issues that are coming from the outside that might negatively impact business. These could include new competitors opening their doors, or a failing economy. The telecom industry sells products that are key for communication, but are not essential if someone is trying to cut their budget. Free use of computers and extremely cheap phones are available for use in public facilities. Poor economic conditions could keep people from buying a new phone or computer, and could hurt business.

Analysis

 Once the strengths, weaknesses, opportunities and threats have been listed, a two-by- two grid should be created with the opportunities and threats on the left side and the strengths and weaknesses on the top. The industry should brainstorm about ways to take advantage of strengths and opportunities while also minimizing the weaknesses and threats. PESTEL ANALYSIS

 PESTEL analysis of any industry sector investigates the important factors that are affecting the industry and influencing the companies operating in that sector.

 PESTEL is an acronym for political, economic, social, technological, legal and environmental analysis.

 Political factors include government policies relating to the industry, tax policies, laws and regulations, trade restrictions and tariffs etc.

 The economic factors relate to changes in the wider economy such as economic growth, interest rates, exchange rates and inflation rate, etc.

 Social factors often look at the cultural aspects and include health consciousness, population growth rate, age distribution, changes in tastes and buying patterns, etc.

 The technological factors relate to the application of new inventions and ideas such as R&D activity, automation, technology incentives and the rate of technological change.

 The industry's major service is the practice of law, which is providing legal services to individuals, businesses, government, and non profits which is Legal analysis.

 Environmental analysis of an industry studies whether the industry is working environmental friendly and following the ethics or not.

Political Analysis

 Telecom reforms in India began in the 1980s with the launch of a “Mission Better Communication” program.

 Private manufacturing of customer premise equipment was allowed in 1984 and the Center for Development of Telematics (C-DOT) was established for the development of indigenous technologies.

 Private franchises were freely given for public call offices (PCOs) that offered local, domestic and international calling services.

 Two large corporate entities were spun off from the Department of Telecommunications, e.g. Mahanagar Telephone Nigam Limited (MTNL) for Delhi and Mumbai and Videsh Sanchar Nigam Limited (VSNL) for all international services.

 The Government of India plans to cut license fees by up to 33 per cent for operators.  The Government has been proactive in its efforts to transform India into a global telecommunication hub.

 Relaxed FDI (Foreign Direct Investment) Norms.

 The Government recently revised the M&A ( Mergers & Acquisition) guidelines for the telecom sector; it raised the limit on the market share of a merged entity in a circle to 50 per cent from 35 per cent earlier.

 To boost local research and manufacturing of telecom products, the government has proposed an investment of USD32.2 billion in three phases:

(i) USD9.2 billion to the Telecom Research and Development Fund,

(ii) USD4.6 billion for the Telecom Entrepreneurship Promotion Fund, and

(iii) USD18.4 billion to the Telecom Manufacturing Promotion Fund during the 12th Five-Year Plan

Liberalisation Phase  The second phase of reform commenced with the general liberalization of the economy in the early 1990s and announcement of a New Economic Policy (NEP)- 1991.

 1991 telecom equipment manufacturing was de-licensed and value-added services were declared open to private sector.

 1992 radio paging, cellular mobile and other value added services were opened to private sector.

 1994 National Telecom Policy was announced and enhanced growth of private sector.

Late 90s-Current Scenario  The most important landmark in telecom reforms came with the New Telecom Policy 1999 (NTP-99).

 There were major developments on the policy front post year 2000. Establishment of Bharat Sanchar Nigam Ltd (BSNL) (2000), privatisation of VSNL (2002).

 Increase in FDI limits from 49% to 74% (2005) and proposal for mobile number portability (2006) which paved way for the remarkable growth in the sector. Economic analysis  The Indian Telecom industry has been playing an important role in the world economy and global revenues in 2008 were USD 4 trillion, expected to grow at a steep 11% p.a. CAGR over the next 2 years.

 India's telecom service revenue was ~USD 30 billion in 2008, and Ernst and Young analysts believe it is projected to almost double to ~USD 55 billion by 2012.

 Output per annum - ₹ 136,833 crores per annum & Increasing 20% for every month.

 India’s telecom service revenue was USD$ 55 billion in 2012, and believed that it is projected to almost double to USD$ 90 billion by 2015.

 GDP contribution – 6%.

 Output per annum - ₹ 136,833 crores per annum & Increasing 20% for every month.

 Increase in disposable incomes.

 Falling mobile phone prices.

 Falling call charges rates with more utility. Drivers  Increase in disposable incomes.

 Greater network coverage.

 Greater affordability.

 Falling mobile phone prices.

 Falling call charges. Domestic and Export Share

 The Indian Telecom Industry manufacturing contributes about two-thirds of the total exports of the country.

 It has been estimated that manufacturing exports would increase from US$ 40 billion in 2002 to US$ 300 billion in 2015, simultaneously increasing its share in world manufacturing trade from 0.8 % to 3.5 %. Social Analysis  Change in lifestyle

 Fast-changing lifestyles are forcing telecom companies to enlarge the breadth and depth of their services.

 Joint ventures in the entertainment sector to add more services. For instance, Verizon now offers Verizon FiOS, a basic fiber-optic service which includes digital television, voice and high-speed internet services.

Regional shift in population  The rural Indian consumer managed to remain an attractive proposition, especially in the demand for consumer goods and telecom services

 3 lakh PCOs are providing community access in the rural areas. Further, Mobile Gramin Sanchar Sewak Scheme (GSS) � a mobile Public Call Office (PCO) service is provided at the doorstep of villagers.

 Growing young population.

 Increment in services which includes digital television, voice and high-speed internet services and various social application.

 Chain of information flow.

 Building awareness and connecting people.

 Exploitation of young minds, too compulsive, and sometimes too much information.

 Irritating and annoying due to excess amount of calls and messages.

Technology analysis • Total spending on Research & Development

• Focus of technological efforts

• Productivity improvement

TECHNOLOGY USED IN TELECOM INDUSTRY • Global system for mobile communication (Gsm)

• Code division multiple access (Cdma)

• Wireless local loop (WLL)

• Driven by 3G and 4G services, it is expected that there will be huge machine-to- machine (M2M) growth in India in 2016-17. There’s a lot of scope for growth of M2M services in the government's ambitious Rs. 7,000 crore (US$ 1.1 billion) 'Smart City' program.

• Increasing MOU (Minutes Of Use) and Data usage.

• Liberalisation of spectrum and convergence of network, services and devices.

• New and upgraded devices and applications with massive features like GPS, WiFi, etc.

• SIM cards, Nano SIM cards, etc.

Environmental Analysis  The strong growth of the telecom industry, and increased equipment obsolescence have caused a dramatic rise in the amount of electronic waste worldwide.

 Today, environmental issues have become one of the most important factors to be considered in the telecom industry.

 Operators are paying increasing attention to their environmental performance, and are cooperating more closely with telecom equipment manufacturers.

 China Mobile is one example. In December 2007, they launched the "Green Initiative" program, which aims to save energy and reduce emissions for its outsourcing system and complementary equipment.

 International regulations on environmental protection, especially those for telecom operations and manufacturing, are widely recognized and followed.

 ISO 14004:2004 provides guidelines on the elements of an environmental management system and its implementation.

 The process includes choosing the proper products and networking solutions to reduce negative impact on the environment.

 Environmental Issues are increasing on daily basis.

 Excess use of Electricity.

 Causing air pollution, by emitting unnecessary radio waves, strangling cables all over the cities.

 No proper and systematic installation.

 Unnecessary Ads, Billboards and exploitation of papers. Legal analysis  “Telecommunications” falls under the legislative competence of the Union and not the States.

 Consequently the Legal framework governing Telecommunication Sector is within the control of the Union Government and the Parliament.

 In India Legal framework, covering telecom sector include various services like internet, radio paging, voice mail, V sat communications, E Commerce, broadcasting services etc.

 Indian Legal framework with respect to telecom infrastructure is made up of five main acts

The Legal Framework is provided by:  The Indian Telegraph Act 1885.

 The Wireless Telegraphy Act 1933.

 The Telegraph Wires (Unlawful Possession) Act 1950.

 The Cable Television Network (Regulation) Act 1996.

 The genesis of the Telecommunication Regulatory Authority of India (TRAI) lies in the bidding process for the grant of cellular licenses.

 First major dispute, entered into by TRAI, was between itself and The Central Government.

 The question of grant or amendment of a license by the Central Government acting in its capacity as the licensor falls outside the jurisdiction of the powers of TRAI.

 The TRAI Act which was amended and passed in 2000 and the framework relating to the TRAI currently in force have been analyzed subsequently

 According to the TRAI act amended in 2000, the functions of the original TRAI have now been divided between two separate bodies.

 The Telecom Regulatory Authority of India (TRAI).

 The Telecom Disputes Settlement and Appellate Tribunal.

 The Recommendatory and Regulatory functions are vested with the TRAI while dispute settlement functions are handled by the Appellate Tribunal

7 P’s OF TELECOMUNICATION INDUSTRY

1.PRODUCT

• Pre-paid

• Post-paid

• Blackberry Wireless Handheld

• Value Added Services (VAS)

The different value added services are-

. Instant Balance Enquiry

. 24Hr recharge Facility

. Caller line identification

. Call divert, Call wait & Call Hold

. Multimedia messaging service (MMS)

. Live Portal

. SMS based Information Service

 Features like chat, games, ringtones video clips etc.

 On-the-move information service.

 Black list callers.

 Social Products.

2. Price

 World’s cheapest price rates.

 Customer based pricing strategies.

 Flexible pricing mechanism

 Controlled by TRAI.

 Monthly price plans are available.

 Rewards on the usage. 3. Place

 Bharti Airtel is one of the leading alternative providers of telecommunications services in India, and among the top ten global carriers offering services in 17 other countries, particularly in Africa.

 Telecom service provider has wide and extensive presence even in the remotest areas.  Telecom service provider has Customer Care Touch Points.  Distributors like

E.g. Paan shops, grocery stores, chemists, outlet etc.

 Service providers now also have customer assistant stores like Vodafone store, idea showrooms etc.

 Customers are able to see and handle products they consider to buy.

 People are on hand to ensure customers needs are matched with the right product to explain the different options available.

4. Promotion

Vodafone- Zoozoo

 Start its Promotion during the IPL season 2.

 To communicate the value added services.

 ZooZoos had low cost costumes, real people.

 30 advertisements cost only Rs 3 Crores.

 20-30 sec long.

 No celebrity endorser - No associated risks and costs.

Airtel- My Airtel My Offer

 “Do not disturb” policy.

 It was also promoted to communicate the Value added service.

 To choose the best available product/service.

 Ambassadors are R. Madhavan and Vidya Balan.

IDEA- What an idea sirji

 Idea of ‘Participative Management’.

 Two-way communication is encouraged between government and public.  ‘Mobile is a life-transforming tool for millions. It changes lives!’

 Ambassador is Abhishek Bachchan.

5. People

 Total depend on employees.

 Employee delight focuses.

 Dedicate and passionate workforce.

 Reward and Recognition.

 Focused on health and safety performance.

 Employee engagement.

6. Process

 Process for services is very easy and customer can avail it very easily.

 Each service provider has a customer support no. which can be dialed from anywhere in India.

7. Physical Facilities

• SIM cards, Recharge Vouchers.

• Service outlets.

• Digital TV services.

Physical Environment &Social Settings

 Around 40 Vodafone Mini Stores in Mumbai Region

• 25 Airtel Relationship Centers in Mumbai Region Services BCG Matrix Study

BCG Matrix:-

Star ? SBU: Enterprise SBU: Passive Infra Services(Carriers & Reason:-(Very new Corporates) approach but quick Reason:-( Major grip of market/Good Contributor to Coloborations like- revenue in just 4 Indus years of coming 04- Towers/Untaaped 08) Market) Cash Cow Dog SBU: Mobile Services SBU: Telemedia Reason:-(Legacy of Services Bharti) Reason :-( Significant fall in ARPU/Other Big Players existing in Market ) Data for BCG Matrix in following Manner:-

Market Quadr Growth ant Relativ e Market in Market Relativ Share (%age which Strategic Market Share(Large e (in change the Business Share(S st Market BCG b/w FY SBU Unit BU) Competitor) Share Terms) 07-10) lies Reliance- Mobile CDMA/GSM-- Cash Services 70.56% >17.94% 24.79% 1.38 33.00% Cow

Telemedia Services 9.22% BSNL-->37% 23% 0.62 44.00% Dog Enterprise Services(Carr Atire iers & Technology-- 0.34 Corporates) 18.26% >42.6% 14.50% 30.00% Star NA(New 0.00 ly (SBU GTL Infra-- Induced Started Passive Infra 1.94% >28.33% SBU) in FY08) ? DESCRIPTION 2015 2014 2013 2012 2011 2010 No of Companies 8 9 10 12 10 12 10088.7 Share Capital 10683.87 10186.33 3 9987.84 9234.66 9365.74 Share Warrants & Outstandings 118.83 253.65 306.8 332.71 364.7 234.17 133891.2 115975.2 96019.4 109057. 109219. 107535. Total Reserves 5 4 9 26 45 44 144693.9 126415.2 106415. 119377. 118818. 117135. Shareholder's Funds 5 1 02 8 81 35 45164.1 25130.9 13031.0 Secured Loans 41708.97 41523.78 44824.2 2 8 6 42556.0 40527.2 27248.4 32055.2 Unsecured Loans 54436.44 42200.47 9 7 4 4 87380.2 85691.3 52379.4 45086.2 Total Debts 96145.42 83724.25 9 9 2 9 240839.3 210139.4 193795. 205069. 171198. 162221. Total Liabilities 7 6 31 2 23 64 262934.3 228939.8 223270. 205772. 177620. 149161. Gross Block 1 9 5 1 85 89 Less: Accumulated 124719.3 107054.7 92163.1 76944.9 62373.0 50077.8 Depreciation 5 4 5 4 7 7 Less: Impairment of Assets 17.19 138197.7 121885.1 131107. 128827. 115247. 99084.0 Net Block 7 6 34 16 77 2 Lease Adjustment A/c 21466.4 Capital Work in Progress 15350.73 14337.48 3964.78 7494.28 7 5642.5 Pre-operative Expenses pending Assets in transit 129058.4 111889.7 93220.1 88380.9 73630.5 55068.1 Investments 3 8 7 5 4 3 Inventories 441.15 450.65 801.92 1253.98 614.37 800.1 Sundry Debtors 7305.11 6897.82 7816.87 8201.6 5021.16 6294.6 Cash and Bank 2869.38 1668.7 1352.82 1761.09 5057.97 7594.26 Other Current Assets 4479.97 4038.15 3422.32 3513.2 3051.03 1527.49 2419133. 2925938. 14606.1 32152.8 19914.8 Loans and Advances 6 04 1 5 4 47343.5 2434229. 2938993. 28000.0 46882.7 33659.3 63559.9 Total Current Assets 21 36 4 2 6 5 54863.6 61399.9 43182.1 Current Liabilities 70819.64 59891.39 8 53058.8 2 6 2402874. 2916405. 12064.8 10477.4 17581.7 Provisions 21 45 5727.93 9 8 3 2473693. 2976296. 65123.6 60763.8 Total Current Liabilities 85 83 60591.6 9 71877.4 9 - - - - - 32591.5 18240.9 38218.0 Net Current Assets 39464.65 37303.47 6 8 4 2796.05 Miscellaneous Expenses not written off 198 228 256 9.78 12.22 14.68 Deferred Tax Assets / - - Liabilities -2500.91 -897.49 2161.42 1401.99 -940.74 -383.73 240839.3 210139.4 193795. 205069. 171198. 162221. Total Assets 7 6 31 2 23 64 40512.0 32606.8 67552.9 24119.8 Contingent Liabilities 59338.6 46146.48 9 4 5 4 Telecommunication - Service Provider Balance Sheet - Listed Companies - Standalone - Financial Year - Aggregated - Actual- [INR-Crore] Telecommunication - Service Provider Balance Sheet(New) - Listed Companies - Standalone - Financial Year - Aggregated - Actual- [INR-Crore] DESCRIPTION 2015 2014 2013 2012 2011 2010 No of Companies 8 9 10 12 10 12 10088.7 Share Capital 10683.87 10186.33 3 9987.84 9234.66 9365.74 Share Warrants & Outstandings 118.83 253.65 306.8 332.71 364.7 234.17 133891.2 115975.2 96019.4 109057. 109219. 107535. Total Reserves 5 4 9 26 45 44 144693.9 126415.2 106415. 119377. 118818. 117135. Shareholder's Funds 5 1 02 8 81 35 Long-Term Borrowings 2900.6 45164.1 25130.9 13031.0 Secured Loans 41708.97 41523.78 44824.2 2 8 6 14323.9 14287.5 32055.2 Unsecured Loans 37346.37 21589.55 2 6 9240.88 4 Deferred Tax Assets / Liabilities 2500.91 897.49 2161.42 1401.99 940.74 383.73 Other Long Term Liabilities 8204.14 8466.85 7301.6 6571.51 6001.89 Long Term Trade Payables 661.59 741.19 450.85 316.4 316.51 20479.7 11689.1 Long Term Provisions 8224.36 11402.87 2 19351.8 6 89541.7 87093.3 53320.1 45470.0 Total Non-Current Liabilities 98646.32 84621.74 1 9 6 2 11432.2 11941.0 11695.9 16973.0 Trade Payables 16843.22 13267.66 4 1 5 2 26041.8 25392.0 26209.1 Other Current Liabilities 42922.17 29382.53 7 8 27831.7 4 17389.5 15725.7 21872.2 Short Term Borrowings 11054.25 17241.2 6 1 7 2402874. 2916405. 12064.8 10477.4 17581.7 Short Term Provisions 21 45 5727.93 9 8 3 2473693. 2976296. 65123.6 60763.8 Total Current Liabilities 85 83 60591.6 9 71877.4 9 2717034. 3187333. 256548. 271594. 244016. 223369. Total Liabilities 13 78 34 88 37 27 Non-Current Assets 262934.3 228939.8 223270. 205772. 177620. 149161. Gross Block 1 9 5 1 85 89 Less: Accumulated 124719.3 107054.7 92163.1 76944.9 62373.0 50077.8 Depreciation 5 4 5 4 7 7 Less: Impairment of Assets 17.19 138197.7 121885.1 131107. 128827. 115247. 99084.0 Net Block 7 6 34 16 77 2 Lease Adjustment A/c 16419.2 Capital Work in Progress 8939.93 14337.48 3964.78 3950.78 7 5642.5 Intangible assets under development 6410.8 3543.5 5047.2 Pre-operative Expenses pending Assets in transit 54955.8 53213.7 48030.5 48512.1 Non Current Investments 69232.59 62964.25 8 6 7 9 29361.0 29132.0 20832.4 Long Term Loans & Advances 35130.84 39637.96 2 9 9 Other Non Current Assets 7182.01 7799.15 6360.91 5221.23 3497.44 0 265093.9 225749. 223888. 209074. 153238. Total Non-Current Assets 3 246624 94 52 75 7 Currents Investments 17512.99 1488.42 2542.36 813.87 1270.04 6555.94 Inventories 441.15 450.65 801.92 1253.98 614.37 800.1 Sundry Debtors 7305.11 6897.82 7816.87 8201.6 5021.16 6294.6 Cash and Bank 2869.38 1668.7 1352.82 1761.09 5057.97 7594.26 Other Current Assets 4479.97 4038.15 3422.32 3513.2 3051.03 1527.49 Short Term Loans and 2419133. 2925938. 14606.1 32152.8 19914.8 Advances 6 04 1 5 4 47343.5 2451742. 2940481. 47696.5 70115.8 Total Current Assets 2 78 30542.4 9 34929.4 9 Miscellaneous Expenses not written off 198 228 256 9.78 12.22 14.68 2717034. 3187333. 256548. 271594. 244016. 223369. Total Assets 13 78 34 88 37 27 40512.0 32606.8 67552.9 24119.8 Contingent Liabilities 59338.6 46146.48 9 4 5 4 Book Value 293.05 276.69 263.73 250.42 245.88 255.47 Adjusted Book Value 293.05 276.69 263.73 250.42 245.88 255.47 Total Current Assets Excluding Current 2434229. 2938993. 28000.0 46882.7 33659.3 63559.9 Investments 21 36 4 2 6 5 - - Net Current Assets (Including - - - 17427.1 36947.9 Current Investments) 21951.66 35815.05 30049.2 1 9 9351.99 82711.3 82319.1 68556.2 45086.2 Total Debt 107203.8 89310.54 6 5 4 9 Telecommunication - Service Provider Profit And Loss - Listed Companies - Standalone - Abridged - Financial Year - Aggregated - Actual - Reported- [INR- Crore] DESCRIPTION 2015 2014 2013 2012 2011 2010 No of Companies 8 9 10 12 10 12 112405. 102256. 93345. 88149. 76796. 72029. Gross Sales 35 14 51 01 85 38 Less: Inter divisional transfers Less: Sales Returns Less: Excise Duty 112405. 102256. 93345. 88149. 76796. 72029. Net Sales 35 14 51 01 85 38 - - Increase/Decrease in Stock -68.71 -21.38 -4.83 335.13 334.12 32.48 1842.7 3857.3 1044.2 Raw Material Consumed 1997.85 1947.97 9 5 420.72 9 6832.9 5898.9 5594.8 3926.3 Power & Fuel Cost 8435.35 8079.24 8 2 2 9 8700.3 7644.6 6757.8 Employee Cost 7093.55 6735.04 9 1 3 8379 44778.3 41119.3 38731. 34374. 32149. 29450. Other Manufacturing Expenses 2 4 22 32 24 46 General and Administration 10176.6 9245.7 8304.2 7772.2 7133.5 Expenses 5 9668.91 6 8 1 8 6672.7 6653.3 6486.2 5296.3 Selling and Distribution Expenses 6675.94 6432.75 5 8 5 8 1206.0 1203.6 1580.7 1316.7 Miscellaneous Expenses 1665.24 2346.28 4 4 9 1 Less: Expenses Capitalised 80754.1 76308.1 73227. 67601. 60427. 56579. Total Expenditure 9 5 1 36 73 3 31651.1 20118. 20547. 16369. 15450. Operating Profit (Excl OI) 7 25948 41 65 12 08 3911.2 2292.4 3557.5 3889.1 Other Income 7251.13 3530.84 4 4 8 3 38902.2 29478.8 24029. 22840. 19926. 19339. Operating Profit 9 4 65 1 7 22 6972.8 6210.9 2596.9 Interest 6726.6 6601.61 3 8 7 266.47 32175.6 22877.2 17056. 16629. 17329. 19072. PBDT 9 3 81 11 73 74 17192.2 16141.1 14686. 13267. 11131. 10077. Depreciation 7 6 02 18 81 44 Profit Before Taxation & 14983.4 3361.9 6197.9 8995.3 Exceptional Items 2 6736.07 2370.8 3 1 1 11484.5 Exceptional Income / Expenses 2869.08 6 149.01 -4.36 -35.5 183.6 18220.6 2519.8 3357.5 6162.4 9178.9 Profit Before Tax 17852.5 3 1 7 1 1 2010.7 1670.7 Provision for Tax 5806.7 1988.6 8 9 988.34 552.52 Profit After Tax 12045.8 16232.0 509.03 1686.7 5174.0 8626.3 1 3 8 7 9 Extra items Adjustments to PAT -92.45 0 12.41 0.41 40798.7 26052.2 27034. 27409. 23363. 17749. Profit Balance B/F 6 1 69 65 37 04 52752.1 42284.2 27543. 29108. 28537. 26375. Appropriations 2 4 72 84 44 85 Telecommunication - Service Provider Cash Flow - Listed Companies - Standalone - Abridged - Financial Year - Aggregated - Actual - - [INR-Crore]

DESCRIPTION 2015 2014 2013 2012 2011 2010 No of Companies 8 9 10 12 10 12 16314. 17520. 2068.5 3158.6 6124.7 8882.4 Profit Before Tax 25 16 6 3 3 9 16821. 21428. 19347. 17822. 11445. 8548.9 Adjustment 82 55 39 2 43 5 - - - 3164.0 11591. 4199.7 2118.0 7000.7 13293. Changes In working Capital 1 18 8 5 6 85 Cash Flow after changes in Working 36300. 27357. 25615. 18862. 10569. 30725. Capital 08 53 73 78 41 28 Interest Paid -0.09 -0.07 4.04 147.09 ------2374.4 1730.7 1695.1 1934.4 2360.4 Tax Paid 4288.7 1 2 6 2 9 Other Direct Expenses paid Extra & Other Item 58.18 1.4 32069. 24983. 23884. 17168. 8639.0 28511. Cash From Operating Activities 56 12 93 95 2 89 ------25133. 22395. 16331. 23162. 31122. 22690. Cash Flow from Investing Activities 66 42 01 21 55 24 - - - 5493.4 3216.2 6399.3 - 21663. 9106.4 Cash from Financing Activities 3 2 2 310.87 18 8 - - 12429. - 6304.1 - 3284.8 Net Cash Inflow / Outflow 32 628.52 1154.6 3 820.34 3 1570.7 1078.4 7928.4 Opening Cash & Cash Equivalents 8 2199.3 2 3 6870.4 9815.7 Cash & Cash Equivalent on Amalgamation / Take over / Merger 1.85 2.28 577.39 Cash & Cash Equivalent of Subsidiaries under liquidations Translation adj. on reserves / op cash balances frgn subsidiaries Effect of Foreign Exchange Fluctuations 1 1 -1 0.95 14000. 1570.7 2234.0 1627.1 6051.3 Closing Cash & Cash Equivalent 1 8 2 6 4 7109.2 Telecommunication - Service Provider Industry Ratios - Listed Companies - Financial Year - Aggregated - Actual 201 201 201 201 Description 5 2014 3 2 1 2010 Company count 8 9 10 11 10 12 Margin Ratios 34.6 25.7 25.9 25.9 26.8 EBITDA Margin(%) 1 28.83 4 6 5 5 21.8 10.1 10.4 11.4 13.1 EBIT Margin(%) 7 24.27 7 6 1 1 15.8 12.7 Pre Tax Margin(%) 8 17.82 2.7 3.7 8.02 4 Performance Ratios ROA(%) 0.41 0.94 0.2 0.61 2.21 3.99 ROE(%) 8.96 14.09 0.46 1.31 4.4 7.59 11.1 ROCE(%) 2 12.71 5.04 4.71 5.05 5.79 Asset Turnover(x) 0.04 0.06 0.36 0.33 0.33 0.33 Sales/Fixed Asset(x) 0.46 0.45 0.44 0.44 0.47 0.54 Working - - - - Capital/Sales(x) 5.12 -2.86 3.11 4.65 2.08 7.7 Efficiency Ratios Fixed Capital/Sales(x) 2.19 2.21 2.29 2.25 2.13 1.86 23.0 30.0 26.9 26.8 34.2 Receivable days 6 26.26 1 3 9 1 Inventory Days 1.45 2.24 3.37 3.29 3.36 4.13 63.7 51.8 58.9 83.5 106. Payable days 1 55.96 7 6 7 91 Growth Ratio Net Sales 10.7 Growth(%) 9.93 9.55 9.73 7 6.62 1.24 - Core EBITDA 31.9 10.8 20.7 Growth(%) 7 22.68 8.83 1 3.04 1 - - 161.4 - 52.2 EBIT Growth(%) 0.98 9 6.71 1.56 7.26 7 - - - - - 25.7 3088. 67.0 70.1 40.0 39.1 PAT Growth(%) 9 82 4 5 2 5 Financial Stability Ratios Total Debt/Equity(%) 0.74 0.71 0.78 0.67 0.58 0.39 Current Ratio(x) 0.99 0.99 0.5 0.71 0.49 1.15 Quick Ratio(x) 0.99 0.99 0.49 0.69 0.48 1.14 35.4 Interest Cover(x) 3.65 3.76 1.36 1.55 3.37 5

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Telecommunication - Service Provider Templates - Listed Companies - Financial Year - Aggregated - Actual- [INR-Crore]

201 201 201 201 Description 5 2014 3 2 1 2010 Company count 8 9 10 11 10 12 Margin Ratios 34. 25. 25. 25. 26.8 EBITDA Margin(%) 61 28.83 74 96 95 5 21. 10. 10. 11. 13.1 EBIT Margin(%) 87 24.27 17 46 41 1 15. 8.0 12.7 Pre Tax Margin(%) 88 17.82 2.7 3.7 2 4 Performance Ratios 0.4 0.6 2.2 ROA(%) 1 0.94 0.2 1 1 3.99 8.9 0.4 1.3 ROE(%) 6 14.09 6 1 4.4 7.59 11. 5.0 4.7 5.0 ROCE(%) 12 12.71 4 1 5 5.79 0.0 0.3 0.3 0.3 Asset Turnover(x) 4 0.06 6 3 3 0.33 Sales/Fixed 0.4 0.4 0.4 0.4 Asset(x) 6 0.45 4 4 7 0.54 - - - - Working 5.1 3.1 4.6 2.0 Capital/Sales(x) 2 -2.86 1 5 8 7.7 Efficiency Ratios Fixed 2.1 2.2 2.2 2.1 Capital/Sales(x) 9 2.21 9 5 3 1.86 23. 30. 26. 26. 34.2 Receivable days 06 26.26 01 93 89 1 1.4 3.3 3.2 3.3 Inventory Days 5 2.24 7 9 6 4.13 63. 51. 58. 83. 106. Payable days 71 55.96 87 96 57 91 Growth Ratio Net Sales 9.9 9.7 10. 6.6 Growth(%) 3 9.55 3 77 2 1.24 - Core EBITDA 31. 8.8 10. 3.0 20.7 Growth(%) 97 22.68 3 81 4 1 - - - 0.9 161.4 6.7 1.5 7.2 52.2 EBIT Growth(%) 8 9 1 6 6 7 - - - - - 25. 3088. 67. 70. 40. 39.1 PAT Growth(%) 79 82 04 15 02 5 Financial Stability Ratios Total 0.7 0.7 0.6 0.5 Debt/Equity(%) 4 0.71 8 7 8 0.39 0.9 0.7 0.4 Current Ratio(x) 9 0.99 0.5 1 9 1.15 0.9 0.4 0.6 0.4 Quick Ratio(x) 9 0.99 9 9 8 1.14 3.6 1.3 1.5 3.3 35.4 Interest Cover(x) 5 3.76 6 5 7 5 S ource: (Press Release No. 13/2014)TRAI.

Number of Telecom Subscribers

Source: (Press Release No. 13/2014)TRAI. Service Provider wise Market Share as on 31st January, 2014.

Source: (Press Release No. 13/2014)TRAI

Service Provider wise net subscriber addition during January, 2014

• All data's in Millions.

• Source: (Press Release No. 13/2014)TRAI Service Provider wise Market Share of wire line subscribers as on 31st January, 2014

Source: (Press Release No. 13/2014) TRAI