CHAPTER- 1 1.1 Executive Summary

CHAPTER- 1

1.1 Executive Summary:-

India‟s economic development was greatly influenced by a series of negotiations and compromises between the followers of Nehruvian thought of state-led industrialization and Gandhian critics of technological modernization & urbanization. Gandhi was a firm supporter of Indian ethics of austerity based on the moral economy of the village, as a corrective to Western theories of modernization. In contrast, Nehru believed in a state-led development agenda that combined science and community in opposition to the inequalities inherent in Western industrialism. While the path to modernization was completely opposite for both, they were both fierce critics of Western modernity and instead envisioned a nation that could be „modern without coming under the Western influence‟ (Prakash, 1999: 231). The discourse of technology in postcolonial India revolved around Gandhi‟s vision of swaraj (self rule/self-dependency) and Nehru‟s vision of collective interests before individual profit. In contrast to Nehru‟s version of Fabian socialism, this saw in the Russian Revolution a model of technology-led development and progress, Gandhi emphasized manual work and a moral economy of Indian village life (Khilnani, 1997; Pantham, 1995). Like many other postcolonial nations, India followed an import substitution industrialization model of state-led capitalism. Throughout the 1950s & 1970s public sector investment were massive in large dam projects, steel mills and other „temples of the future‟. For a sector like telecom, the outcome of the competing Nehruvian and Gandhian visions was a combination of centralized state ownership coupled with long-term political neglect of everyday operations, thus it remained in the back burner of development for decades. The Indian telecom network came to birth in 1850‟s when India was still communicating through the post. It is one of the oldest in the world and played an integral role, along with the railroads, in reinforcing colonial control over a vast territory. For almost four long decades telecom services remained below the 1% mark in terms of tele-density; primary reason being political & social. For a nation where the vast majority of citizens live in poverty in rural areas, social policy dictated that public expenditure prioritize other infrastructure areas – such as roads and power, as well as social services like sanitation, education and health – over expanding telecom, which received only 2–3 percent of the total national budget allocation. One of the prime objectives of state-led development was that public industry should balance economic development with social equity. Since telecom services were interpreted as a luxury, balanced development did not lead to expansion of telephony. Instead, the government focused on the production end through attempts at technological self-reliance, encouraging regional development by setting up manufacturing plants of telecom in economically backward areas. With the rise of Nehru‟s daughter to power in the late 1960‟s, Indira Gandhi brought in new limitations on foreign equity of firms & restrictions on imported technology & investments. While certain measures were taken to boost the telecom industry from time to time, (for example, in 1953, the introduction of the telex services in Mumbai and in 1960 the commissioning of the first Subscriber trunk dialing route between Delhi and Kanpur and

1 between Lucknow and Kanpur), the first waves of change were set going by Sam Pitroda in the eighties. Chakravartty in his article said that the Indian government then was composed of many fragments (parties) which had different viewpoints. The centrists wanted the telecom market to be open to competition ground of foreign as well as Indian companies while others wished for a government-regulated sector without any role of foreign competitors. Owing to the conflicts it was a tough task to liberalize Indian telecommunications early. In the words of Greene & William, by the late 1980‟s India‟s recurring fiscal deficits & negative balance of payments encouraging the Indian government to bring in Liberalization Privatization & Globalization (LPG) into the country. Liberalization finally entered in 1991 in the nation with P. V. Narasimha Rao as the Prime Minister & Dr. Manmohan Singh as the finance minister. Post 1990‟s saw the government of India discarding the highly regulated old monopoly-market concept & shifting to a moderately competitive fairly deregulated open-market policy regime. Prior to LPG certain measures like allowing Alcatel CIT of France to partner with the state owned Telecom Company (ITI), so as to encourage 5,000,000 lines per year. Due to political opposition the policy failed. Bringing in Sam Pitroda, a US based Non-resident Indian NRI to set up a Center for Development of Telematics (C-DOT), were taken previously but this measure too drastically failed due to political opposition. Later many public sector organizations were set up like the Department of Telecommunications (DoT), VSNL and MTNL & numerous technological developments took place in this regime but still foreign players were not allowed to participate in the telecommunications business. The real transformation in scenario came with the announcement of the National Telecom Policy in 1994. Telecom services with the Department of Post and Telecom (P&T), responsible to the Ministry of Communications was a hierarchical structure. Within the constraints of a limited budget, a centralized bureaucratic board determined policy guidelines, technology standards and implemented expansion of the network at a modest pace. From the viewpoint of these bureaucrats, the state served the public interest by keeping local service and rental rates well below world standards and by using profits from telecom services to compensate the operations of the labour-intensive postal sector, which was seen as a more basic development priority. With the overall telecom network expanding slowly, barely doubling the telephone density from the colonial era in 40 years, the bureaucracy grew extensively. The expansion – which accounted for one of the highest worker-per-telephone-line rates in the world – can be explained by another important feature of the social equity policy: the provision of employment opportunities for marginalized castes or socially backward castes, religious minorities and tribal groups. It was a dark time in 2009 when the world was going through a recession. Amidst the contagious economic meltdown across the globe & in India, our telecommunications industry proved to be a silver lining in the darkness. With a total subscriber base of 846.32 million the Indian teledensity now stands at 77.6%. The tele-density saw a huge rise from 51% in 2007. In the first quarter of 2011 the additions to the mobile subscriber was about 17-18 million but in March 2011 the figure crossed 20.2 million.

1.2 Introduction

Try to imagine a day when your cell phone has been sent on repair or a landline dead at home or a massive disruption in the internet facility in office. Spending 24 hours would be like spending a long year in dark. It would remind me of the 1840‟s when India was still using the slow postal service as a means of communications. It all started with one experimental electric telegraph line from Kolkata to Diamond Harbour that was first open to use for the British East India Company. One & a half centuries from then, today our world has become much faster with mails reaching in less than a minute, mobile phone turning into a gadget of necessity with message rates cheaper than never before with the introduction of the one paisa per second plan for customers who wanted to make the most out of every paisa spent on communication.

With all the ups & downs of political neglect & social evils that this sector faced over decades, today it has become one of the fastest growing industries after China & undoubtedly a hot spot for foreign players in an emerging market like India. The Indian telecommunication sector is more than 165 years old. For decades this sector was highly government regulated sector & had monopoly form of competition. Its subscriber base of 846.32 million by March 2011 & an overall tele density of approximately 77% the Indian Telecommunication Sector is the second largest network in the world. Once regarded as a luxury, today it is seen as a necessity in the modern world of trade, economics, banking, hospitality, manufacturing & also agriculture. The success of almost all other industries is heavily dependent upon the successful working of our telecommunications. As per Cellular Operations Association of India the telecom sector is the life & bread for one crore people & it is said that by 2012 additional 28 lakh direct jobs & 70 indirect jobs will be created. The rising telecom industry directly accounts for 1.5% of India‟s GDP as of 2009 data & India has earned a name of charging the least for calls in the world as per a study by Cybermedia India Online Limited (CIOL).

Linking Line:

Chapter 1 containing the abstract & introduction to the case reveals a brief journey of the Indian telecommunications sector from its birth in 1850‟s up till now. Following chapter will give an insight into the literatures we have gone through for further analysis in this case.

CHAPTER 2

2.1 Literature on Telecom, national development and the Indian state: a postcolonial critique. University of Massachusetts, Amherst USA: Paula Chakravartty

2.2 Literature on Telecom Policy Reform in India: Harsha Vardhana Singh, Anita Soni and Rajat Kathuria

2.3 Business Monitor International. (2011). India Telecommunications Report Q1 2012. London. United Kingdom

2.4 Business Monitor International. (2010). India Telecommunications Report Q3 2010. London. United Kingdom

2.5 Corporate Catalyst Report. (2007). A Report on Indian Telecom Industry. New Delhi. India

2.6 Literature by Vodafone Public Policy Series. (2009). India: The Impact of Mobile Phones. (Pub. No.978-0-9552578-5-8). India

2.7 Xavier P. and Ypsilanti D. Geographically segmented regulation for telecommunications: lessons from experience (Vol. 13). Emerald Group Publishing Limited

2.8 Gupta S. (2010, December). Competition Policy in Telecommunications in India: Paper presented at Indian Institute of Management Bangalore. India

Linking Line: Chapter 2 gives a detailed list of the literatures reviewed for information for the case while chapter 3 will talk about the Indian telecommunications sector & a complete analysis of this sector.

CHAPTER 3 Industry Analysis

3.1 Objectives of the Study:-

1. To examine the market competition type & market share (on subscriber-base & technology base) of the telecom industry

2. To study the customer & market segmentation of the Indian telecom industry

3. To analyze the categorization of the products as per the market segmentation

4. To analyze the PESTL factors of the Indian telecom sector

5. To find the share of the Indian telecom sector’s contribution towards India’s GDP

6. To analyze the depth of Research & Development & intensity of technological import initiatives taken by the government of India to develop the telecom sector

7. To identify the marketing strategies used to promote the products of the industry

8. To analyze & forecast the future scenario of the telecom industry in India & abroad

9. To conduct a detailed comparison between India’s telecom sector & that of United States

3.2 Methodology

The methodology that I have relied on is Secondary nature of data gathered from the internet & various research papers & articles of authors & private institutions.

1. To examine the market competition type & market share on the basis of subscriber base & revenue

Competition

Reports of Corporate Catalyst India say that the telecom service is ruled by three types of players:

 State owned companies (BSNL & MTNL)  Private Indian owned companies (Reliance Infocomm, Tata Teleservices)  Foreign invested companies (Hutchison-Essar, Bharti Tele-ventures, Escotel, Idea Cellular, BPL Mobile, Spice Communications)

The Indian wireless market is one of the world‟s most competitive markets after China with 12 operators across 23 wireless cellular zones or circles and 6 to 8 competing competitors competing in each circle.

According to Gupta (2007), the Telecom Regulatory Authority of India (TRAI) established in 1997 is accountable for the regulation of telecommunications in the country. Even though the TRAI Act (1997) clearly states that competition should be facilitated this particular industry, signs of state operator dominance was still seen due to historical reasons as it is the largest fixed line operator, the second largest mobile operator, the largest National long distance operator & again the largest internet service provider. Though the mission statement of TRAI is to protect consumer interests allowing healthy growth in the telecommunications sector, BSNL always forms its priority & TRAI has had an instrumental role in getting BSNL rebalance tariffs, making local calls dearer & long-distance calls cheaper. The mobile operators were allowed to raise rentals to Rs. 600 from a meager level of Rs. 156 as stipulated by the Department of Telecommunications (DOT), the government regulator before the formation of TRAI. The benefits such as not having to pay license fees for laying lines & building towers; that it enjoys as a government operator are inaccessible to the private operators. It refuses to provide interconnections at areas where private operators enjoy greater benefits over the public sector & have a larger hold. Such dominance of BSNL & MTNL has tried to freeze the development for private operators by exercising their clout they enjoy with the regulator, the Department of Telecommunications, the major body that forms policies with the ministry.

BMI reports indicate that several operators provide healthy competition to the telecommunications industry, including Reliance Communications, Bharti Airtel and Tata Communications. Further, BSNL is facing problems due to its weak performances in the mobile sector, which has prompted the Indian government to evaluate the feasibility of merging the two operators and the country's network vendor ITI to boost their competitiveness.

Source: Cellular Operators Association of India o Herfindahl Index: This index is an industry concentration to detect the nature of market competition existing in a particular industry. It is used to find the market control of the largest firms of any industry related to four firm & eight firm concentration ratios. It is the sum of the squared market shares of the first four or eight competitors in a sector. It was first used by Albert O. Hirshman & later by another economist Orris C. Herfindahl due to which this measure got its name as Herfindahl-Hirshman Index. The Herfindahl Index of the first eight players as of 2011 of the telecommunications sector is calculated as follows: (28.26)2 + (23.63)2 + (15.88)2 + (14.77)2 + (9.68)2 + (4.40)2 + (1.19)2 + (0.87)2 = 1942.57

A Herfindahl Index of summing up to 0 indicates perfect competition while 10,000 means a perfect monopoly. 1,000 to 1,800 measures indicate medium concentration. In the telecom industry it is 1942.57 which interprets high concentration

o Concentration Ratio (CR8): Market shares of the largest „m‟ number of firms are aggregated to compute the Concentration Ratio. A near 0 Concentration Ratio indicates highly competitive market with the „m‟ number of players having negligible hold over the market. A Concentration Ratio within 90 to 100 range says the „m‟ number of firms have complete market control & the industry competition is tending towars a monopoly. The Concentration Ratio of the eight largest firms in this sector has been computed as follows: 28.26% + 23.63% + 15.88% + 14.77% + 9.68% + 4.40% + 1.19% + 0.87% = 98.68%

The eight players have major hold over the market & the sector has oligopolistic competition. If the firms come to a mutual understanding of fixing outputs, prices & profits among them the industry would become a monopoly.

As per Corporate Catalyst India, the Indian Telecommunications Industry has seen a gargantuan change in terms of mobile versus fixed phones (or land-line connections in lay man‟s words) and public versus private participation. The number of telephones saw an increase from 44.97 million on March 2002 to 203 million by February 2007. The tele-density rose from 51% in 2007 to a huge 78% in 2011. The preference for use of wireless phones has also been predominant in the sector. The wireless subscriber-base saw an increase from 6.68 million on March 2002 to 162.53 million on February 2007. This is evident from the rising share of wireless phones, which increased from 14.85 per cent (6.68 million telephones) in March 2002 to 78.8 per cent (149.59 million telephones) in December 2006. Presently, the mobile subscriber addition in India is more than the 6 million mark, the highest in the world. The private sector‟s share in the number of

telephones has increased from 15.12 per cent (6.80 million telephones) in March 2002 to 65.0 per cent (123.44 million telephones) in December 2006. CDMA technology was introduced in India as a limited mobility solution. The introduction of CDMA services has created competition, lowered tariffs and offered many citizens access to communication services for the first time. The subscriber base that was merely 1.1 million by the end of 2002 has grown to 44.79 million in the quarter ending December 2006.

Reliance Communication (former Reliance Infocomm) has the highest subscriber base with 60 per cent market share followed by Tata Tele Services Limited with 33 per cent market share, while other players in CDMA Technology have the remaining 7 per cent.

Ericsson‟s GSM Radio Base Station Manufacturing facility is set up in Jaipur while Elcoteq has set up handset manufacturing facilities in Bangalore. Nokia set up its manufacturing plant in Chennai. LG Electronics set up plant of manufacturing GSM mobile phones near Pune. The R&D Centre of Ericsson was recently launched in Chennai. Flextronics has set up an SEZ in Chennai. Other major companies like Foxconn, Aspcom, Solectron etc have decided to set up their manufacturing bases in India. In terms of the Global System for Mobile Communication (GSM) subscriber base this now places India third after China and Russia. China had 401.7 million GSM subscribers

(Source: Corporate Catalyst India)

From the rising share of wireless phones, this shot from a mere 14.85 per cent (6.68 million telephones) in March 2002 to a high 78.8 per cent (149.59 million telephones) in December 2006. At present, the mobile subscriber additions in India is more than 6 million mark, the highest in the world. The share of private sector in the number of telephones has increased from 15.12 per cent (6.80 million telephones) in March 2002 to 65.0 per cent (123.44 million telephones) in December 2006. The total GSM subscriber base in India crossed the 100 million mark to touch 105.43 billion in December 2006. Private operators have 75 per cent subscribers whereas Public sector Operators (BSNL & MTNL) have 25 per cent subscribers in the GSM segment.

Market Share based on Revenue

As you can see the units of fixed lines has been constant from March 2002 to February 2007. Gartner‟s data shows that the total units of handsets sold in India already touched 2.45 crore in the quarter ended September 2007 about 74% higher than 1.41 crore units sold in the same quarter in the previous year. India‟s contribution to the 15% rise in the global mobile sales was 8.5%. India‟s high performance was pushed by the CDMA phones & aggressive competition among GSM operators which stimulated sales of replacement phones & made rapid penetration by operators to rural areas.

Over the years the CDMA (code division multiple access) & GSM (Global System for Mobile communication) users have shown an upward trend making it obvious that users are fast moving on from fixed lines to mobile or wireless networks as per TRAI. Business Standard specify that over half a million fixed line users have moved to wireless connections in about a quarter‟s time in 2011 due to mobile handsets becoming less costly & aggressive marketing strategies of cellular companies. With increased growth & developmental improvements in almost all sectors in India, the fixed-line subscriber base has drastically gone down from 40.09 million users in June 2010 to 39.41 million users in October in the same year as per TRAI reports.

Economic Times articles reveal Aircel's revenues from mobile services for the 12-month ended March 2011 surged 36% to 5,620 crore, while Tata Teleservices recorded a 22.2% jump to 10,006 crore. Idea Cellular's sales were up by 19.4% and Vodafone by 15%, as per data released by Trai. Bharti Airtel, albeit on a higher base, recorded a 7.2% increase in mobile services revenues in FY11 to 37,534 crore. But the market grew at a faster rate at 12%, as per the telecom regulator.

In the words of Bhavesh Gandhi, research analyst at India Infoline, "This is an indicator that mid-cap mobile companies are gaining at the expense of some of the larger players. But the big picture in the telecom sector has not changed. In terms of Bharti Airtel, they may be at a premium in certain circles and have to lower tariffs," Bharti Airtel still commands 31.3% of mobile revenues for the year-ended March 2011, but its revenue market share in down by 1.4% when compared to corresponding period last year. Similarly, RCOM, the country's second-largest telco in terms of customers, ranks behind Vodafone Essar as well as Idea Cellular in terms of revenue market share. In fact, Vodafone Essar's revenues from mobile services are nearly double that of RCOM, as per data released by Trai. Besides, Bharti and Vodafone jointly account for close to 53% of mobile revenues in the 14-player market. "The revenue mix of the customers does matter - Bharti and Vodafone have the cream of the customers, when compared to other operators. Mobile number portability has not had much of an impact so far," said Gandhi of India Infoline.

Overall, the telecom sector has recorded a 12% jump in sales to 119,845 crore for the year-ended March 2011, compared to a 7% increase in revenues the previous year, underlying trends in the sector are still positive, and analysts say the growth in revenues will increase further as 3G services reach more town and cities this fiscal. All companies except BSNL have shown an increase in sales in the last fiscal. The growth is also a pointer of stability returning to the sector, where the revenues and profits of all operators had been decimated by a savage price war in 2009-10.

In a conversation with Economic Times, Idea Cellular managing director Himanshu Kapania recently said that TRAI data was proof that Telco was the rapidly growing service provider in the country. The Aditya Birla Group company, which was the only listed telecom company to post a rise in fiscal fourth-quarter net profit, attributed the growth to rising minutes on its network, larger number of active subscribers and positive impact of mobile number portability that propelled a large number of new customers to take up its mobile services.

Demography of Buyers

Market segmentation in terms of the consumer‟s budget plays a very crucial role in a service sector like telecom. Telecommunications today has become a necessity rather than a luxury as it was seen decades ago during the age of Gandhi & Nehru. Players forming a part of the industry have to by any means meet the customer‟s requirements to stay in competition at par with other players. This has brought in a lot of customization from companies to suite the end consumer‟s budget to maximize satisfaction. The one paisa per second plan introduced by the Japanese player Tata Docomo was another turning point for this sector & other players in it. It gave customers to select from a wider range of services. To stay in competition Idea Cellular & Vodafone too revised their plans & customized it to the customer‟s requirements.

The Mobile Number Portability (MNP) made competition even tougher for telecom service providers in terms of quality as shifting from one operator to another became easy, & hassle-free at only Rs. 20. In the year 2009, a new plan popularly coined as “Diet SMS” was introduced; this charged 1 paisa for every character typed in the message without charging for spaces between words. The price war in the telecom sector is immense but its end benefit is going to the customers as companies are unable to exploit the end users. Revenues are still high due to the increased growth in the number of users.

PESTL ANALYSIS

PESTL analysis in any sector (industry) investigates and shows the important factors that affect the industry and helps in influencing the companies operating in that sector. PESTL is acronym for Political, Economic, Social, Technological and Legal analysis. Political factor includes government policies related to the industry, laws and regulations, tax policies, trade restrictions and tariffs etc. The economic factors relate to changes in the economy such as economic growth, exchange rates, interest rates and inflation rates etc. Social factors mainly concern with the cultural aspects and include population growth rate, health consciousness, age distribution, changes in tastes and buying patterns, etc. The technological factors deals or focuses on the application of new inventions and ideas such as R&D activity, technology incentives, automation and the rate of technological change. Legal deals with the policies and guidelines set for the conduct of the operations.

The PESTL Analysis is a perfect tool for managers and policy makers which help them in analyzing the forces that are driving their industry and how these factors will influence or affect their businesses or the whole industry in general

POLITICAL FACTOR- The government has taken initiatives to help in the rapid growth in the telecom sector. The Department of Telecommunications (DOT) under the Ministry of Communications and Information Technology are the mainly concerned authority for everything related to telecom. The department is entirely responsible for formulating the developmental policies; granting licenses for various telecom services, research and development; promoting standardization as well as private investment in the sector. An independent regulatory body called Telecom Regulatory Authority of India (TRAI) was established in 1997, under the Telecom Regulatory Authority of India Act, 1997.The Telecom Regulatory Authority of India Act, 1997 was amended by the “Telecom Regulatory Authority of India (Amendment) Act, 2000”. By the Amendment Act, an Appellate Tribunal known as the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) was set up to protect the interests of consumers and service provider in the telecom sector. 74% to 100% FDI permitted for various telecom services. FIPB1 approval required for foreign investment exceeding 49% in all the telecom services. 100% FDI2 is permitted in telecom equipment manufacturing on automatic approval basis. Provision of telecom services in the rural areas in India has been recognized as another very important thrust area by the government which will also help for the enormous opportunities in this sector.

SOCIAL ANALYSIS- The telecom services have been recognized as the world-over an important tool for socioeconomic development . It is one of the prime support services needed for modernization and rapid growth of various sectors of the economy. Driven by various policy initiatives, the Indian telecom sector witnessed a complete transformation in the past decade. It has achieved a good growth during the last few years and is poised to take a big leap in the future also. With telecom sector booming and occupying a great place, career in the industry is becoming very lucrative. The career paths to the leading companies go via telecom engineering. The telecommunication sector offers a variety of career options. With the coming of more and more projects, the telecom industry is going for high number of recruitments. There is a huge demand for software mobile analysts, engineers, and hardware engineers for mobile handsets. Besides, there are ample opportunities for marketing area people whose services are required to capture more and more customer base. The new projects, setting up of new service expansion of coverage areas, bases, network installations, maintenance, etc are providing more and more employment opportunities in the telecommunication sector. With the boom of e-business & voice data convergence for IP, the demand for telecom service is growing rapidly.

1 Foreign investment promotion board 2 Foreign direct investment

Telecom offers unlimited opportunities and possibilities in the present as well as future. The Telecom sector is fast advancing globally by introducing advanced technologies and solutions to every problem to the world markets. The sector will need up to one lakh fifty thousand additional hands in 2009. While new players are launching or about to launch operations, existing ones are beginning to scale up. Now that the government has issued 120 new licences, in the telecommunication industry officials fear a talent crunch that could push salaries in core operations by up to 30% in the next few quarter.

Conservative estimate put the demand from new players at one lakh people in the first phase. With rolling out of 3G and Wi-max3, existing players will need another 50,000 people. Most of the new players are looking for experienced hands, so getting people in such large numbers will be a great challenge. Currently, the sector directly employs about 1, 50,000 people, while providing jobs to another 1.5 million with retail outlets, tower constructors and prepaid card sellers. And now with most telecom players expanding in the rural markets, the demand for manpower is expected to go up further in the coming periods. “The new players will have to attract talent by offering 15-20% hike in salaries.

TECHNOLOGICAL ANALYSIS-For telecom industry the technology is really advanced and more and more investment is done on technology to get a world class infrastructure and know how to put in this field. Recently the telecom sector has added 3G spectrum as its latest up gradation. India has proved its dominance as a technology solution provider. Efforts are being continuously made to develop affordable technology for masses, as also comprehensive security infrastructure for telecom network. Research is on for the preparation of tested infrastructure for enabling interoperability in Next Generation of Network. It is expected that the telecom equipment and R & D shall be doubled by 2013 from present level of15%. Modern technologies inductions are being promoted. Pilot projects on the existing and emerging technologies have been undertaken including Wi-Max, 3G etc.

Emphasis is being given to technologies having potential to improve rural connectivity. 3G and Broadband Wireless Access (BWA) policies have since been issued. Also to improve the R&D infrastructure in the telecom sector and bridge the digital divide, cellular operators, top academic institutes and the Government of India together set up the Telecommunication Centres of Excellence (COEs).

The foundation of digital democracy has been laid to improve in an era of e-governance, transparency and e-accountability. A recent study shows that the number of Indians using Internet for accessing government services and products as a proportion to total number of

3 Worldwide interoperability for microwave access

Internet users has increased from 22 percent last RFID enabling retailers to deliver personalized shopping experience.

Automobile manufacturers are enhancing GPS, multimedia services on dashboard year to year to 31 percent this year. A lot of new technologies are coming which have the potential of changing the entire industry dynamics or even create substitute of the telecom services existing. Eg 4G, Satellite phones etc.

LEGAL ANALYSIS- Until October 2000, the Department of Telecommunication (DOT) has the authority in granting licences and service provision. It even operated domestic basic telephone services throughout India. The policy making functions and the service providing function were divided into two different parts during 2000.The two service providing department of telecom sector were corporatized-the department of telecom service and the department of telecom. Operation Guidelines for entry in telecom sector, issued by TRAI, restrict entry to those, with a minimum paid-up capital at Rs. 2.5 billion and combined net worth of Rs. 25 billion. Any of the disputes among the service providers are settled by Telecom Disputes Settlement and Appellate Tribunal. (TDSAT).

According to Unified access licensing regime (UALR) players are offer both mobile and fixed line services under a single license after paying an additional entry fee. This does not take international or national long distance service or internet access services.

The Universal Service obligation (USO) was implemented along with the National Telephone policy (NTP) in 1999to increase the reach in the rural area. All the operators (Telephone) are bound to contribute 5% of their revenue to this fund. It helps in building telecom infrastructure in rural areas.

National telecom policy, 1994- The new economic policy adopted by the Government aims at improving India's competitiveness in the global market and rapid growth of exports. Another element of the new economic policy is attracting foreign direct investment and increasing domestic investment. Telecom services of world class quality are necessary for the success of this policy. So it is necessary to give the highest priority to the development of telecom services in the country.

1. Access to telecommunications is of great importance for achievement of the country's social and economic goals. Availability of affordable and effective communications for the citizens is at the core and goal of the telecom policy.

2. Try to provide a balance between the provision of universal service to all uncovered areas, including the rural areas, and the provision of high-level services capable of meeting the needs of the country's economy

3. Encourage development of telecommunication facilities in hilly, remote, and tribal areas of the country.

4. Create a modern and efficient telecommunications infrastructure taking into account the convergence of IT, media, telecom and consumer electronics and thereby leading India into becoming an IT superpower.

5. Convert PCO's, wherever justified, into Public Tele-info centers with Multimedia capability like ISDN4 services, remote database access, government and community information systems.

6. Transform in a time bound manner, the telecommunications sector to a greater competitive environment in both urban and rural areas providing equal opportunities and equal playing field for all players.

7. Strengthening research and development efforts in the country and provide an impetus to build world-class manufacturing capabilities

8. Achieve efficiency and transparency in spectrum management system

9. Protect defence and security and the interests of the country

10. Enabling Indian Telecom Companies to become truly global players.

BROADBAND POLICY, 2004- Demand for Broadband is primarily conditioned and led by Internet and PC penetration. It is recognized that the current level of Internet and Broadband access in the country is low as compared to many other Asian countries. Penetration of Broadband, Internet and Personal Computer (PC) in the country was 0.02%, 0.4% and 0.8% respectively at the end of December, 2003. Currently, high speed Internet access is available at various speeds from 64 kilobits per second (kbps) onwards and now an always-on high speed Internet access at 128 kbps is considered as „Broadband'. There is no uniformity for Broadband connectivity and various countries follow various standards.

REGULATORY CONTROL- The entry of private service providers in 1992 brought with it the urgent need for independent regulation. The Telecom Regulatory Authority of India (TRAI) was established with effect from 20 February 1997 by an Act of Parliament, called the Telecom Regulatory Authority of India Act, 1997, to regulate telecom services, including fixation or revision of tariffs for telecom services, which were earlier vested in the Central Government. The TRAI Act was amended by an ordinance, effective from 24 January 2000, for establishing a Telecommunications Dispute Settlement and Appellate Tribunal (TDSAT) to

4 integrated services digital network

19 take over the adjudicatory and disputes functions from TRAI. TDSAT was set up to adjudicate any dispute between a licensor and a licensee ,or between two or more service providers, between a service provider and a group of consumers, and to hear and dispose of appeals against any direction, decision or order of TRAI.

ECONOMIC ANALYSIS- The telecom industry is one of the prime contributors to India's GDP it contributes nearly 1.5% towards the GDP. Earlier it was a monopolistic market but now it has become highly competitive market which has led to the growth of Indian Telecom Infrastructure and providing better services to the people. The highly competitive environment has led to low pricing of goods and services which caters to the weaker sections of the society. Moreover the development of Indian telecom infrastructure has also widened the scope of the telecom sector to other allied ventures like mobile services, Internet, cable TV services, E- Commerce, and other forms of Information Technology (IT). The Indian Telecommunications network with 353 million connections (as on September2009) is the third largest in the world. The sector is growing at a speed of 46-50% during the recent years. This rapid growth is possible due to various positive and proactive decisions taken by the Government and contribution of both by the public and the private sectors. The rapid increase in the telecom sector have been facilitated by liberal policies of the Government that provides easy market access for telecom equipment and a fair regulatory framework for offering telecom services to the Indian consumers at affordable prices.

India will continue its robust growth telecom story with the sector‟s revenue to be more than $30 billion by 2013, according to a global information technology research and advisory firm.

“Total mobile services revenue in India is projected to grow at a compound annual growth rate of 12.5 percent during 2009-2013 to exceed $30 billion,” the US-based Gartner Inc said.

According to Gartner, the telecom subscriber base is expected to cross 770 million connections by 2013, growing at a CAGR of 14.3 percent from 452 million in 2009.

The Indian mobile industry has now moved out of its hyper growth mode, but it will continue to grow at double-digit rates for next three years as operators focus on rural parts of the country, said Madhusudan Gupta, senior research analyst at Gartner. “Growth will also be triggered by increased adoption of value-added services, which are relevant to both rural and urban markets,” Gupta added.

Mobile market penetration is projected to increase from 38.7 percent in 2009 to 63.5 percent in 2013, Gartner said, and this is due to three factors: increased focus on the rural market, entry of consumer durable and electronic companies into the mobile handset segment, and cheaper handsets.

The number of people with prepaid connections, who accounted for 93 percent of the subscriber base in 2008, will continue to increase to exceed 96 percent by 2013, surpassing 740 million.

The post paid subscriber base will exceed 29 million subscribers by 2013, growing 2.5 percent from 2009, Gartner said.

MERGER & ACQUISITIONS:

In today‟s market, mainly there are two objectives of the firm. First objective is to make profits and second objective is to create the shareholder wealth. Growth of the firm can be achieved by introducing new products & services or by expanding with the present operations on its existing products. The Internal growth can be achieved by introducing new products. But external growth can be achieved by entering into mergers & acquisition. India is one the biggest hotbed of telecom mergers and acquisitions in the last decade. Foreign investors and major telecom company wants to enter in India because it is one of the fastest growing telecom markets in the world. The mobile sector has achieved a teledensity of 14% by July 2006 which has been aided by a bouquet of factors like aggressive foreign investment, regulatory support, lower tariffs and falling network cost and handset prices.

M&A have also been driven by the development of new telecommunication technologies. The deregulation of the industry tempts telecom firms (telcos) to provide bundled products and services, especially with the ongoing convergence of the telecom and cable industries. The acquisition of additional products and services has thus become a profitable move for telecom providers.

CONSOLIDATION IN INDUSTRY: Consolidation has been formed in terms of mergers & acquisitions around the world in almost all the industries ranging from automobile, banking, aviation, oil & gas telecom. Telecom players are looking for global funds to finance their aggressive growth plans. Due to this, the partnerships joint ventures and equity sell out to foreign players. New license holders will continue to look to sell their stake at a premium. New policies will seek to curb this license arbitrage. Smaller players with operations in only a few circles will find in difficult to compete with the nationwide players. The industry may see consolidation with these smaller operators being acquired by the larger ones. “Unbundling of the corporation” will continue as companies will seek for economies of scale and lower start up cost by infrastructure sharing. 3G and WiMax license will spur M&A and partnership activity.

REGULATORY FRAMEWORK:

M&A in telecom Industry are subject to various statutory guidelines and Industry specific provisions e.g. Companies Act, 1956, Income Tax Act, 1961, Competition Act, 2002, telecom commission, DOT, TRAI Act, SEBI Takeover regulation etc. There are some of these regulations which are unique to the telecom industry.

TELECOM COMMISSION:

The Telecom Commission is an inter-ministerial high level government body. The Commission consists of a Chairman, four full time members, who are ex-officio, Secretary to the Government of India in the Department of Telecommunications and four part time members who are the Secretaries to the Government of India of the concerned Departments. The essential functions of the Telecom Commission are as under:

 policy formulation, licensing and coordination matters relating to telegraphs, telephones, wireless, data, facsimile services and other similar forms of communications.  International cooperation in matters connected with telecommunications.  Promotion of standardization, research and development in telecommunications.  Promotion of private investment in telecommunication.  Preparing the DOT budget & supervising its operations.

DEPARTMENT OF TELECOMMUNICATIONS (“DOT”): As per the Indian Telegraph Act, 1885 and the Indian Wireless Telegraphy Act, 1933 the Central Government has the exclusive privilege of establishing, maintaining and working telegraph and wireless telegraphy equipment and is the authority to grant licenses for such activities. The Central Government acts through the DoT. Some of the important functions of the DoT are as follows:  Licensing and Regulation  International cooperation in matters connected with telecommunications (such as International Telecommunication Union (ITU), International Telecommunication Satellite Organization (INTELSAT), etc.  Promotion of private investment in the Indian telecommunications sector.  Promotion of research, standardization & development in telecommunications.

TELECOM REGULATORY AUTHORITY OF INDIA (“TRAI”):

TRAI is an autonomous statutory body established on 20 Feb. 1997 by an act of parliament under Telecom Regulatory Authority of India Act, 1997 (“TRAI Act”) to regulate the telecom services including fixation of tariffs from telecom services. Liberalization made it necessary for the Government to ensure that there is an independent communications regulator. TRAI acts as an independent regulator of the telecommunications industry in the country. One of the main objectives of TRAI is to provide a fair and transparent policy environment which promotes a level playing field and facilitates fair competition amongst various telecom players. TRAI‟s powers are recommendatory, mandatory, regulatory and judicial.

The important recommendatory powers of TRAI are as follows:

 Recommendations regarding the need and timing for introduction of new service providers.  Recommendations pertaining to the grant of telecom licenses including their terms and conditions.  Recommend revocation of license for non-compliance of terms and conditions of license.

The DoT is the sole authority for licensing of all telecommunications services in India. The DoT has the discretion to either accept or reject the recommendations of TRAI. TRAI has over the years come out with a number of recommendations. DoT has accepted some such recommendations either wholly or partially or has rejected such recommendations. Below is the status of some of the recommendations made by TRAI to the DoT:

TRAI Recommendation/s Status Recommendations on Next Generation Networks (2006) Not accepted by the DoT Recommendations on Allocation and Pricing of Some of the recommendations were accepted Spectrum by the for 3G and Broadband Wireless Access Services (2006) DoT Recommendations on issues related to Internet Not accepted by the DoT Telephony Most of the recommendations were accepted by Recommendations on Infrastructure Sharing the DoT Recommendation on Growth of Value Added Services Decision of DoT is awaited and Regulatory Issues (2009) Recommendations on amendment to Unified Currently under consideration by the DoT Access Service Licensees regarding Lock-in

period for promoter‟s equity for (2009)

The DoT had sought a legal opinion from the law ministry which stated that the DoT can change the terms and conditions of existing licences and that TRAI's recommendations were not binding on the government. So TRAI also obtained an independent legal opinion on the same subject from a former Supreme Court judge as well as from a noted Supreme Court lawyer. It‟s stating that the DoT cannot make any modifications to telecom licences without consulting TRAI. The DoT has now referred both sets of opinions back to the law ministry to take a final call on this issue. The final outcome will define the scope of regulators in the country.

TELECOM DISPUTES SETTLEMENT AND APPELLATE TRIBUNAL (“TDSAT”): The TDSAT was established in 24 Jan 2000 under an amendment to the Telecom Regulatory Authority of India Act, 1997. The TDSAT has been vested with exclusive powers to adjudicate any dispute between:  The licensor (DoT).  Licensee, service providers.  Service providers and groups of customers.

SEBI TAKEOVER GUIDELINES: SEBI takeover guidelines called Securities and Exchange Board of India (Substantial acquisition of shares and takeover) Regulations, 1997 are applicable to listed Public companies and hence would be applicable in case of M&A in listed telecom companies like Bharti, Reliance Communication, Shyam Telecom, VSNL, Tata Teleservices (Maharashtra) Limited, etc. These guidelines have been recently amended by SEBI and notified vide SO No. 807(E) dated 26.05.2006.  No acquirer who together with persons acting in concert with him, who holds 55% or more but less than 75% of the shares or voting rights of the target company shall acquire by himself or through persons acting in concert unless he makes a public announcement as per the regulations. Further, if a target company was unlisted, but has obtained listing of 10% of issue size, then the limit of 75% will be increased to 90%.  If an acquirer holds 55% or more but less than 75% of the shares or voting rights of the target company is desirous of consolidating his holding while ensuring that Public Holding in the target company does not fall below the permitted level of listing agreement he may do so only by making a public announcement as per the regulations. Further, if a target company was unlisted, but has obtained listing of 10% of issue size, then the limit of 75% will be increased to 90%.

 The minimum size of public offer to be made under Regulation 11(2A) shall be lesser of: a) 20% of the voting capital of the company. b) Other lesser percentage of voting capital as would enable the acquirer to increase his holding to the maximum possible level, while ensuring the requirement of minimum public shareholding as per listing agreement.

THE CONTOURS OF M&A IN TELECOM: M&A are also referred as Corporate Marriages and Alliances. Mergers can be across same or similar product lines. In many cases mergers are initiated to acquire a competing or complementary product.

REVERSE MERGER: A reverse merger is another scenario in taxation parlance where a profit making company merges with a loss incurring company to take advantage of tax shelter.

HORIZONTAL MERGER: A horizontal merger (mergers across same product profile) adds to size but the chances for attainment of profit efficiency are not very high. These Merger leads to elimination of a competitor, leading to an increase in the market share of the acquirer & degree of concentration of the industry. It also improves the efficiency & economies of scale of the acquiring firm.

VERTICAL MERGER: A Vertical Merger is the entities with different product profiles which may help in optimal achievement of profit efficiency. In Vertical Merger, Manufacturer & Distributer form a Partnership.

IDEA CELLULAR’S ACQUISITION OF SPICE TELECOM: There are three transactions as part of this acquisition. Acquisition of shares of Spice, a non- compete fee and a capital infusion of about Rs 7300 crores received from TM International Bhd (TMI). With respect to shares, Idea acquired 40.8% stake of Spice Communications at Rs 77.30 a share for Rs 2,716 crores. There is a share swap in which Spice shareholders got 49 Idea shares for every 100 Spice shares held. An additional Rs 544 crores was paid to the promoters of Spice group as 'non-compete fee'.

The deal was strategically important for Idea Cellular as it was looking forward to transfer itself into a pan-India telecom service provider. The spectrum auctioned by GoI is a scarce resource nowadays and cost a premium. Also there‟s restriction by TRAI with respect to number of operators per telecom circle. So it makes sense to acquire a small telecom operator. Small players like Spice Telecom operating at only a few circles(Karnataka and Punjab) will

25 find difficult to compete with the nationwide players in the long run. So it was a win-win deal for both companies.

VODAFONE ENTRY INTO INDIA: Vodafone is the largest mobile telecommunications network company in the world. The deal gave them access to one of the fastest growing mobile markets in the world. Vodafone paid a discounted price of $10.9 billion in cash for acquiring the 52% stake held by Hutchison Telecom International (HTIL) in Indian mobile firm Hutch-Essar. HTIL declared a special dividend of 6.75 HK dollars per share. The final price was a reduction of $180 million from the originally agreed price of $11.08 billion.

TELENOR-UNITECH DEAL: Norwegian Telecom major Telenor was in the process of acquiring controlling stake of 67.25% in Unitech wireless through the equity infusion. The enterprise valuation of Unitech Wirelsss was about Rs 10,900 crore. As per the deal, Telenor infused cash in four stages and at each phase, by increasing its stake in Unitech Wireless. In the first phase, they got 33.5% ownership in Unitech Wireless. In the second phase they completed the acquisition for a 49 per cent stake in Unitech Wireless by paying Rs1,130 crore for a further 15.5 per cent stake in the company.

BHARTI-MTN DEAL (IN TALKS): Bharti Airtel has merged with MTN that create a $61-billion transnational telecom goliath with combined revenues of $20 billion and over 200 million subscribers across Africa, Asia and Middle East. This is the one of the biggest mergers of all times in talks from the Telecommunication Sector. This merger creates waves in global Telecommunication Market.

Bharti is under pressure in its home country due to severe competition and looking forward to spread its risk across geographies. Meanwhile, the African telecom operator is also encountering some of the problems that its counterpart in India is confronting. MTN may have higher ARPUs (in the range of $12-20), but they are also falling fast.

Takeaways for Bharti:

 The biggest takeaway for Bharti is in the form of access to new geographies with high growth potential. Without a partner, Bharti is embarking on a Greenfield project, which is time- consuming and capital intensive.  MTN has operations in 21 countries across Africa and the Middle East. It is one of the largest emerging market mobile operators globally. Africa has one-third of the world‟s population, its telephonic density is just 30 per cent. This offers plenty of room for expansion. The fact that 95 percent of Africa is prepaid, which ensures all cash operations, fits perfectly into Bharti‟s plans.  The Bharti will choose the option either of the Greenfield way or with an experienced partner. MTN‟s strong foothold in some growing markets such as South Africa, Botswana, Iran and Nigeria ensures that when the growth in India starts to slow down, Bharti is ready to take off in other geographies. Besides, there is a lot of potential in Africa as three-fourths of the continent is still untapped.  Africa is quite like rural India and from that perspective. Bharti could learn how to roll out infrastructure in rural India.  MTN is strong in the value-added services (VAS) and mobile commerce space. So, when mobile commerce picks up in India (after RBI‟s approval), Bharti should be able to tap this market through MTN‟s expertise.  MTN has a vast experience in running multi-country operations and overcoming regulatory hurdles. By working with MTN, life for Bharti will get a lot of easier.

MAHANAGAR TELEPHONE NIGAM LIMITED (MTNL): MTNL has formed a joint venture company in Nepal by the name of United Telecom Ltd. UTL in collaboration with telecom consultants India Ltd in 2001 for providing WLL based basic services in Nepal. MTNL has set up its 100% subsidiary Mahanagar Telephone Mauritius Limited.

VIDESH SANCHAR NIGAM LIMITED (VSNL): VSNL acquired Nasdaq-listed Teleglobe International Holdings Ltd for $239 million in 2005 Videsh Sanchar Nigam Ltd acquired Tyco Global Network, submarine cable system, for USD

130 million in 2005.

TTSL – DOCOMO DEAL:

Japanese carrier NTT Do Como acquired 26% stake in Tata Teleservices (TTSL). The Tata DoCoMo-branded GSM service has already started in Southern India and gradually expanded nationwide. It has been less prepared to take majority stakes and impose. The d ifficulties faced by the firm in spreading its domestically successful i-mode ser vice internationally typify the obstacles it has faced overseas. With Tata, DoCoMo had said “participating proactively in TTSL‟s management by providing human resources and technical assistance to help realise improved network quality and the possible introduction of leading-edge, value-added services.”

MAJOR CHALLENGES FOR THE MERGER:  The major challenge of merger & acquisition is the integration of the company on the ground. It is tough for intercontinental companies to merge seamlessly due to cultural divide.  Alcatel-Lucent is still trying to adjust to cultural divide through the country. Although Nokia- Siemens has bridged this divide faster because both the companies are European.  The Black Empowerment Act poses a challenge that means to safeguard the rights of the black population. According to Act, blacks are sured a minimum shareholding management seats and voting rights.  The country‟s strong trade union, Congress of South African Trade Unions (COSATU), which has influence over President Jacob Zuma, had almost wrecked the Vodafone-Vodacom deal.

Major M&A deals in Indian telecom sector Company/Service % Buyer Seller Year Deal Indicative Per sub Name Stake size Enterprise value sold (US$) value (US$) (US$) Orange, Mumbai 41% Hutchison Group, Hong Max Group, Delhi 1998 560 Mn 1.36 Bln NA Kong

Hutch, India 8.33% Max India Kotak Mahindra, India 2006 225 Mn - NA Hutch Essar, India 5.1% Hutchison Group, Hong Hinduja 2006 450 Mn 9 Bln NA Kong Hutch Essar 3.17% Essar Group Max India 2005 146 Mln - 570 Command Cellular, 100% Hutchison & Indian Usha Martin & Others 2000 - 138 Mln Kolkata Group, Idea Cellular 48.14% Aditya Birla Group Tata Group 2005 NA 2 Bln 400 Modi Telestra, 100% Bharti Group, India B.K.Modi and Telestra 2000 NA 160 Mln Calcutta Bharti 9.3% Private Investors Warburg Pincus NA 873 Mn NA 1000 Bharti Airtel 10% Vodaphone Bharti Group 2005 1.5 bln 16 Bln 1000 Aircel, Chennai 79.24% Sterling Group, Chennai RPG Group 2003 210 Cr Aircel, TN, Chennai 74% Maxis, Malaysia Sterling Group 2006 750 Mn 1.07 Bln 496 and NE Spice, (Punjab and 49% Telekom Malaysia, NA 2006 178 Mn 363 Mln - Bangalore) Malaysia Reliance CDMA - Qualcomm, San Diego, Reliance Infocomm 2002 - 10 Bln - US BPL Mobile and BPL - Promoters 2005 1.15 Bln NA - Cellular

WHETHER M&A IN INDIAN TELECOM WERE SUCCESSFUL:

A successful merge should create new capabilities, offer better value proposition to the combined entity‟s customers and enhance shareholders‟ value. M&A brings the advantage of synergies to the operators and in majority of cases results in immense increase of shareholders value. M&A in Indian telecom industry has also benefited other stakeholder‟s means customers, Indian economy and society at large.

M&A is just like as a catalyst to stupendous growth in teledensity to 14% in 10 years (1995 - 2006), as against 2% in 48 years (1947-1994) of independence. According to a study conducted by the reputed international agency, OVUM on “The economic benefits of mobile services in India” on behalf of Cellular Operators‟ Association of India, it was found that mobile sector has generated 3.6 million jobs directly or indirectly and it raised by at least 30%. Similarly the Mobile industry contributes over Rs. 145 billion per annum by license fees, spectrum fees, import duties, taxes, etc. Taking the OVUM findings on the base of 48 million subscribers in January 2005, COAI has estimated that at a mobile subscriber‟s base of 200 million in 2007, the industry will contribute over 10 million jobs and over Rs.500 billion annual revenue to the Government. From foreign investors‟ perspective, they got immensely gain from investing in India. Out of Hutchison‟s total global revenue of Rs. 13440 crores, over 45% comes from India which is no mean achievement. Indian promoters who commenced their telecom operation on a small scale

29 in few circles, gained immensely on sale of their stake to foreign investors. In fact, some of the world‟s largest telecom companies, who have left India with a bitter experience a few years ago like British Telecom, Vodaphone, France Telecom, Telekom Malaysia, Telestra Australia are all set to return even as minority shareholders on witnessing telecom success story.

MARKETING INITIATIVES

The telecom sector is the most significant and visible success story of economic liberalisation in the country. But, its sustainability and continued growth can only be ensured with firm soft-touch regulatory measures and better market initiatives. According to Peter Drucker –“Because the purpose of business is to create a customer, the business enterprise has two--and only two--basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business”.

According to Gartner, Inc we found that worldwide mobile advertising revenue is forecast to reach $3.3 billion in 2011, more than double the $1.6 billion generated in 2010. Worldwide revenue will reach $20.6 billion by 2015, but not all types of mobile advertising will generate the same opportunity. Among some type Search and maps will deliver the highest revenue, while video/audio ads will see the fastest growth through 2015.

Table 1.7: Mobile Advertising Revenue by Region, Worldwide, 2010-2015 (Millions of Dollars), according to Gartner Region 2010 2011 2015 North America 304.3 701.7 5,791.4 Western Europe 257.1 569.3 5,131.9 Asia/Pacific and Japan 868.8 1,628.5 6,925.0 Rest of the World 196.9 410.4 2,761.7 Total 1,627.1 3,309.9 20,610.0 Source: Gartner (June 2011)

From the chat, it is clear that overall Mobile advertising revenue will have huge increment globally by 1166.7% during the period of 2010 to 2015. Among these Western Europe will show the highest growth of 1896 % and Asia/Pacific and Japan will shows the lowest with 697.08%.

From Indian prospective if we see after liberalization of telecom sector in 1995 there has been a boom in the cellular service with presence of so much competition in the sector it has become very important for all the players to develop new and innovative marketing strategies. So marketing strategies adopted by major market players in India have been analysed.

AIRTEL:

Airtel is a leader in cellular services has spent lot money on advertising of their mobile service. Along print media advertising Airtel has also try to cover home advertising option. Airtel has associated its brand with trust in order to emotionally connect the product with their consumer and portrayed well by associating it with brand ambassadors like Shahrukh Khan, Sachin Tendulkar and A.R Rehman.

They replaced there old logo with the letter 'a', which seems like a symbol, so that the consumer can easily connect to their brand globally which is in 19 countries. It also changed its positioning to 'HER EK FRIEND JARURI HOTA HAI' which meant –everyone in your life is important and Airtel try to bring them closer. In order to capture attention of the mass population Airtel has adopted different strategies. They have used electronic media to cover urban market whereas for rural market the walls of dhabas, hotels and mobile vans went through makeover and are rebranded with new Airtel logo. They also launched print ads staring Kareena Kapoor and Saif Ali Khan are being liked by the masses as they have roped in the strong celebrity couple who can change the perception of the product in the consumer‟s mind, the special 5 ad campaign that was launched in 2009.

VODAFONE:

Vodafone India which is formerly Vodafone Essar and Hutchison Essar, is the second largest mobile network operator in India after Airtel. It has approximately 141,519,840 customers as of Dec 2011. Vodafone name is derived from the voice and data services over cellular telecom

networks. So VO represents voice and DA represents data. In India HUTCH entered in December 2005 and rebranded them as Vodafone.

In order to tell consumers about transition of brand Hutch to Vodafone they used their five year old mascot pug and leveraged on the idea by showing pug inside a garden, moving out of a pink coloured kennel and making his way into a red one (the Vodafone colour). A new version of the „You and I‟ the trademark tune of Hutch, plays towards the end, as it concludes with tag line, „Change is good. Hutch is now Vodafone‟.

The campaign introduced with new characters called Zoo-zoos. In order to advertise variety VAS offered by the company for e.g. stock alert, phone back-up, beauty tips etc, each ad used a different story which was enacted by the Zoo-zoos. Vodafone Essar chose the Indian Premier League 2 (IPL-2) to launch their campaign and it continued in IPL3 also. In the second phase, after the release of these ads, Vodafone promoted these characters on social media sites by introducing Zoo-zoo fan clubs are there on social networking sites like Facebook , YouTube, Orkut, Twitter, and many more, where they have a huge followings. Now Vodafone has launched Zoo-zoo goodies like zoo-zoo toys, zoo-zoo mugs, zoo-zoo key chains, zoo-zoo t- shirts, etc

This campaign is an example of breakthrough marketing. Under this campaign billboards are being displayed in every city showing the Zoozoo ads Vodafone. Vodafone along with shoppers Stop has launched Zoozoo merchandise consisting of t-shirts for men and women, mugs, kidswear, etc. Vodafone customers can avail 10 % discount on that merchandise in shopper stop.

Vodafone Essar‟s advertisement campaign and marks a new era in the Indian context of character based marketing. Vodafone‟s strategy is customer focused and product led; the company is continually developing new products and services which utilize the latest technological advances. Vodafone continues to use a customer measurement system called “customer delight” to monitor and drive customer satisfaction.

IDEA:

Idea cellular was awarded by Economic Times‟ as a Emerging Company in the year 2009. It was a joint venture between AV Birla Group, AT&T and TATA. The company was known as AT&T in Maharashtra and Goa, TATA Cellular in Andhra Pradesh, RPG cellular in Madhya Pradesh

and Chhattisgarh till 2002. In May 2002 it consolidated its brand under a single umbrella called Idea Cellular. Initially they positioned themselves with the tagline of “AN IDEA CAN CHANGE YOUR LIFE”. Now it changed as a „WHAT AN IDEA SIRJI‟.

After that Idea started promoting its services through several innovative ads through 360 degree advertising. Idea did not hire any celebrity to promote its services till late 2007, but when Idea expanded its geographical presence to cover vast telecom circles in India after taking over spice communication, it hired film star Abhishek Bachchan to endorse its brand in October 2007. Idea's also changed its focus from tariff plans to using mobile telephony to solve social issues for e.g. they made ad campaign like „‟ EDUCATION FOR ALL AND USE MOBILE SAVE PAPER‟‟ The company‟s focus on its ads also shifted from highlighting it‟s tariff plans and network coverage to use of mobile telephony to resolve social issues.

Idea also tied up with Indian Premier League (IPL) cricket team, Mumbai Indians, and popular players like Sachin Tendulkar and Zaheer Khan were used to promote the brand. In order to guide subscribers towards their network Idea has launched „‟switch to Idea‟‟ campaign.

AIRCEL:

Aircel is a joint venture between Maxis Communication, Berhad of Malaysia and Apollo Hospital Enterprise of India. Aircel commenced its operation in 1999 and has presence in 23 circles. Aircel is India‟s seventh largest service provider with customer base of almost 61 million and has market share of 6.84%.According to Mr. Tarun Nigam ED-India North and Pakistan Aircel wants its communication to have shock value and be differentiated and disruptive. Aircel has focused mainly on innovation as there branding strategy. Some of them are:

Voicemail on Facebook: Aircel has launched voicemail application on facebook which allows users to upload voice messages in facebook rather than same old plain text status messages

Broadcasting Launch: They have started integration with Star Plus in order to reach maximum consumers, in daily sops of Star Plus lead character of five top sops will talk about the launch of aircel on prime time and this was aired at a high frequency during launch week.

Aircel also brought innovation while advertising on news channels like logo bug, score bug and animated as ton bands and in print medium also they deviated from regular format by changing masthead of Times of India to „‟MOVE ON INDIA‟‟ with brand tagline.

Gateway of India : In Mumbai aircel projected its logo on Gateway of India in order to project historic structure as gateway of new consumers of aircel. The “Save our Tigers” campaign was launched to save the 1411 remaining tigers in partnership with the WWF. The “Aircel Donate Phone Program” which requires one to donate their working / non working old phones to Aircel who would give it to people in old age homes with free talk time for a year.

Aircel is literally the 12th man in the market. If the 12th man has to get into the team, he has to do things differently which would get others talking. In an industry which is reaching saturation level with everyone going for low prices, Aircel is leading a revolution in the world of innovation. Aircel has also set up an innovations bank for the generation of new ideas. One of their biggest and most successful initiatives was putting up a rubber dinghy on billboards in various places across Mumbai where there were chances of flooding. When the flooding did happen, people in Aircel branded shirts were present to help everyone be safe. This year the boat campaign “Sail through our network this monsoon” has been expanded to include newer locations such as Andheri, Bhandup, Wadala Bridge among 10 locations. It includes newer subways and also bus shelters.

FUTURE OUTLOOK

Development is a continuous process; the choice of the year 2020 is just an arbitrary division of time, a pre-defined time horizon likely to be achieved in the near future.

REFORMS AND PERFORMANCE: India opted an approach which is advanced to telecom sector changes through selective privatization and somehow it managed to compete in different segments of the telecom market like many other countries did in the world,. Firstly India introduced private competition in value- added services in 1992 which followed by opening up of cellular and basic services for local area to private competition. The Telecom Regulatory Authority of India (TRAI) was constituted in 1997 as an independent regulator in this sector. In the same year competition was also introduced in national long distance (NLD) and international long distance (ILD) telephony.

Two state-owned public sector incumbents with a large existing subscriber base dominate the fixed line service. As on December 31, 2001, the two Public Sector Enterprises (PSEs), BSNL and MTNL5 owned 34.73 million Direct Exchange Lines (DELs) against 0.45 million privately owned DELs. In the beginning of the present decade these PSEs were allowed belated entry into the cellular segment. Consequently, their cellular subscriber base is tiny compared to the private operators. They had only 0.2 million subscribers Out of 7.3 million cellular subscribers in the country in June 2002, Till 1986 telecommunication was a public utility owned by the Government of India. Mahanagar Telephone Nigam Limited (MTNL) was created in 1986 as a PSE to take out telecommunication services from the Government entirely in the cities of Delhi and Mumbai. In the same year that VSNL was created in the ILD segment. Bharat Sanchar Nigam Limted (BSNL) was formed as a PSE on October 1, 2000 as a telecom service provider in all other places. Both these incumbents inherited the entire pre-existing subscriber base with the Government.

Despite asymmetry in initial market endowments between public sector incumbents and private operators, the act of opening up of the market unleashed dynamism that was hitherto latent in the sector. It is evident from a number of performance indicators. In 1995 India ranked 14th in the world and later onThe rank improved to 7th position in 2001 (Table 1).

Table 1: Top 14 countries in the world in terms of number of main telephone lines in operation

Country No. of lines in Ranks (1995) No. of lines in Ranks (2001) 1995 2001 („000) („000) USA 159,735.2 1 190,000.0 1 Japan 62,292.0 2 76,000.0 3 Germany 42,000.0 3 52,280.0 4 China 40,705.7 4 179,034.0 2

France 32,400 5 34,032.9 9 UK 29,411.4 6 34,710.0 8 Russia 25,018.9 7 35,700.0 6 Italy 24,845.0 8 27,303.0 10 Korea, Rep. 18,600.0 9 22,724.7 11 Canada 17,567.0 10 20,319.3 12 Spain 15,095.4 11 17,427.0 14 Brazil 13,263.0 12 37,430.8 5 Turkey 13,215.7 13 18,900.9 13 India 11,978.0 14 34,732.1 7 Source: World Telecommunication Development Report 2002, ITU

In India Network expansion was accompanied by an increase in productivity of telecom staff measured in terms of ratio of number of main telephone lines in operation to total number of full time telecom staff (Table 2).

One way of looking at the welfare gains to subscribers is to watch the trend in prices for telecom services, to check whether such prices came down in the competitive regime. Rental as well as telecom tariffs are what consumer ultimately pays includes. Because of complications involved in summarizing differential rates applicable to peak and non- peak hours, a convenient proxy for the change in telecom prices could be constructed in terms of observed trend in revenue earned from telephone services at constant prices expressed as a ratio of number of main telephone lines in operation. Table 2 shows a significant decline in this ratio since 1995 in Indian fixed line segment. National Telecom Policy was announced in May 1994. The steps were intensified to introduce private competition in the basic and cellular services thereafter. The emergence of competitive pressure in the sector was witnessed in the beginning of the declining trend in per line revenue at constant prices coincided with the period.

Table 2: Trend in productivity and price

Year Number of main telephone Telephone service revenue lines in operation per full- at constant prices (CPI: time telecom staff 1995=100) per main telephone line in operation (Rs. „000) 1991 15.58 9.13 1992 17.65 10.25 1993 20.32 11.04 1994 23.38 10.17

1995 28.45 9.23 1996 33.90 6.12 1997 41.89 5.62 1998 50.93 4.92 1999 62.97 4.24 Source: Computed from the data published in the Year book of Statistics: Telecommunication Services, 1991-2000, ITU

Table 3 in the figure shows the long run trend in demand and supply of DELs. The main line in operation is shown. It has been taken as supply whereas demand has been obtained by adding the number of subscribers in the waiting list to the number of DELs in operation. In few cases the number in the waiting list, is unlikely to reflect potential demand for telecom services in the economy. The market potential is huge and is more than what is shown to us through waiting list . The number in the waiting list shows demand registered in those areas where telecommunication facilities are being made available and reasonable expectations exist for demand to be fulfilled. In the areas where telecom infrastructure is not sufficient, demand may not get registered at all and remain closed.

Table 3: DEL: Supply and demand (millions)

Year ending Direct Exchange Waiting List Demand March 31 Lines (DELs) 1981 2.15 0.45 2.6 1983 2.47 0.66 3.13 1985 2.90 0.84 3.74 1987 3.49 1.12 4.61 1989 4.17 1.42 5.59 1991 5.07 1.96 7.03 1993 6.80 2.85 9.65 1995 9.80 2.15 11.95 1997 14.54 2.89 17.43 1999 21.59 1.98 23.57 2001 32.44 2.92 35.36 Source: Indian Telecommunication Statistics 2002, Ministry of Communications, Government of India.

Table 4 shows the tele-density for the countries which are included in Table 1 as measured in terms of number of main lines per 100 inhabitants.

Table 4: Number of main telephone lines per 100 inhabitants

Country 1995 2001 USA 60.73 66.45 Japan 49.61 59.69 Germany 51.33 63.48 China 3.30 13.81 France 56.01 57.35 UK 50.18 57.78 Russia 16.91 24.33 Italy 43.33 47.06 Korea, Rep. 41.24 47.60 Canada 59.85 65.51 Spain 38.50 43.11 Brazil 8.51 21.69 Turkey 21.44 28.52 India 1.29 3.38 Source: World Telecommunication Development Report 2002, ITU

Above table shows that apart phenomenal achievement in terms of network expansion, the size of the population in our country is responsible for low tele-density. By comparing the two tables; table1 and table 4 we can say that countries with smaller network sizes than our country are having much higher tele-densities. However, in terms of overall tele-density, which is the total sum of fixed-lines and mobile subscribers per 100 inhabitants, India‟s comparative ranking in the world has been improved from 160 in 1990 to 145 in 2000; there is an increase by 15 positions. Closing the digital divide in terms of tele-density remains a discouraged task.

This report estimates that in order to attain the required network size of USA in 2001 India has to expand the number of operational telephone lines at a compound annual growth rate (CAGR) of 23.44 per cent from 2002 and 2020. The suiting growth rates to reach China and Japan‟s levels are 23.06 per cent and 17.63 per cent respectively. Even then india is not going to mean much in terms of tele-densities when compared with most of the countries cited in Table 4. By assuming that there is no change in India‟s size of population (considering population size to remain at 2001 level of 1.03 billion), India‟s tele-density will be 18.48 lines per 100 people even if India‟s network size reaches the required level of united states. By considering that India‟s DEL grew at

38 a CAGR of 19.4 per cent during 1995-2000, a significant effort will be required to increase the growth rate to more than 23 per cent.

To understand telecom growth prospect would need understanding the sources of growth. Countries are different among themselves in respect of their economic structure, sectoral policies and technological developments. All these three key drivers of growth can be said that „Vision 2020‟ of Indian telecom sector will be shaped in a very important way by the evolving economic structure, sectoral reforms which include competition policy and technology changes.

ECONOMIC STRUCTURE:

It is being observed that „growth in the number of new telephone subscribers has so far increased and has exceeded the growth in the global economy‟ in the last twenty years. This shows that aggregate growth alone will not determine telecom expansion and it might require a need to look at composition of growth also.However, influence of economic structure on telecom expansion does not find precise consideration in today‟s literature on telecom economics as much as the other two factors, which are technology and competition. One possible reason will be because of the importance that has been attached to income gap which is factor that explains digital divide. Moreover, income gap, by itself includes a rule of differences in certain structural characteristics and therefore diverts the focus of attention from structural gap to income gap. Exponents of „income determinism‟ may stop short of addressing structural factors because of their primary concern regarding income transfer from the developed to the developing countries as the only way to address the problems of digital divide. On the other hand, structural issues are more pertinent to those who believe in „leapfrogging‟ capabilities of the countries who are on the wrong side of the divide. It is for these that the present paper will prove that the effectiveness of direct promotion of telecommunications as a complementary policy to overall macroeconomic reforms will be determined in an important way by how the structural issues in the economy are being addressed.

Primarily, it shows that there are countries with per capita income less than India but with higher or more tele-density. For example Bolivia had per capita income of Rs. 119000 in 2000 compared to Rs.119500 for India. Bolivia‟s tele-density was 6.05 in that year against 3.20 for India. Moldova had a tele-density of about 13.33 with a per capita income of Rs.112000. Georgia, with a per capita income of 123500rs had a much higher tele-density of 13.86. Even though Ecuador had a very little higher per capita income of 146000rs when compared to India, tele-density was significantly higher at 10.00. These countries had either more equally distributed income than India and had a higher weightage of value added by the service sector in the Gross Domestic product (GDP) or both in few cases.

A comparative picture of India vis-à-vis these countries in respect of the two aforesaid characteristics are presented in Table 5.

Table 5: Structural characteristics and tele-density, 2000

Country Tele-density Per capita Percentage of Value added by (per 100 income population the service inhabitants) ($ PPP) living on less sector in the than $2 a day Gross Domestic product (GDP) (%) Moldova 13.33 2240 38.4 53 Bolivia 6.05 2380 51.4 48 India 3.20 2390 41.4 46 Georgia 13.86 2470 Less than 2 52 Ecuador 10.00 2920 52.3 64 Source: (i) Year book of statistics, 1991-2000, ITU; (ii) World Development Report 2002.

In order to test the generality with which such relationships manifest in a larger sample of countries, the regression of tele-density was on percentage of population living on less than 100rs a day and per capita income over a cross-section of 77 countries for the year 2000 to arrive at the following results:

Tele-density = 9.63 – 0.1563** (Percentage of population living on less than 100rs a day) + 0.0019** (Per capita income)

R2 = 0.82; **: Significant at 1%.

The above result shows that income distribution has a much larger coefficient than per capita income and hence highlights the fact that telecom development strategy should have substantial equity component built into it.

To assess the significance of service sector in telecom development, the regression of tele- density has been regressed on percentage contribution of value added by the service sector in GDP over a cross-section of 115 countries for the year 2000. The following result was obtained:

Tele-density = - 31.54 + 0.9267** (Percentage contribution of value added by the service sector in GDP)

R2 = 0.48; **: Significance at 1%.

The above result indicates a strong association between service sector growth and telecom development implies that the telecom expansion will depend significantly on the multiplication of services in the economy.

As a matter of strategy, it can be said that targeted intervention through access promotion can be potentially instrumental in delivering growth with equity. Access promotion means expansion of telecommunication and therefore will cause growth to occur. Consequently, a broad based access promotion strategy would lead to more equitable growth.

The first step towards broad based access promotion in India was initiated in the 1980‟s when Public Call Offices (PCOs) were given private franchises for both domestic and long distance services. The total number of PCOs grew from 0.2 million in the year 1993 to 0.9 million in the year 2001. The Eighth Plan (1992-97) targeted completely on the provision of Panchayat phones in villages of about360,000 . Pressure on Universal Service Obligation (USO) as a part of broad based telecommunication development strategy begun with the National Telecom Policy of 1994 and strengthening the new force as one of the objectives of the New Telecom Policy 1999 (NTP- 99). The licenses for the basic services, for which open tenders were invited in January 1995, contained a not optional provision in the agreement for the private operators to provide 10 per cent of the DELs as Village Public Telephone (VPT). NTP-99 targeted completely on the rural coverage by the end of 2002 providing Village Public Telephones in all the 0.6 million villages with focus on „availability, accessibility and affordability‟. By the end of January 2001, 0.4 million villages have been covered. Share of rural areas in total number of DELs in the country stood at about 22.6 per cent in January 2002, increasing from 21.4 per cent in March 2001. The trend is suggestive of potential scope of expansion of telecommunication in the rural sector.

Though USO is compulsory for the basic service operators, other service providers are also allowed to participate in it subject to technical possibility. The subsidy element of the USO will be financed from a fund that is generated through Universal Service Levy (USL), which levy of certain percentage of license fees charged from various service providers. As a follow up of the NTP 99 and the recommendations of the TRAI, The Universal Service Support Policy (USSP) came into effect from April 1, 2002 and the Department of Telecommunications (DOT) issued detailed guidelines for the implementation. Apart from expansion of VPTs, the guidelines also looked into the fact of upgradation of VPTs to Public Telecom and Information Centers (PTICs) to provide data transfer facility and installing the high speed PTICs (HPTICs) in the Short Distance Charging Areas (SDCAs) with broadband access. Subsidy Allocation will be to the bidder quoting the least amount of subsidy, chosen through a multi-layered bidding process

41 subject to a ceiling of the benchmark cost estimated by the DOT on the basis of the efficiency criteria.

So far, the public sector holders of benefits have expanded the rural telephony with very little contribution by the private sector. By the end of December 31, 2001, out of 0.4 million villages, the private operators covered only 718 villages and the rest was covered by the public sector.

Private sector presence is abundant in Public Call Offices (PCOs) and Internet Kiosks in the cities and towns. However, there are certain pilot projects in the rural sector working to attain cost effective wireless technological solutions in partnership with local service providers. Many projects have developed applications based on local content and software in Indian languages and user-friendly icons for illiterate people.

Telecommunications have prevailed as a springboard of ICT applications with economy-wide ramifications. There are plenty of short narrative evidences to show that telecom is improving life chances across the strata of the society tiding over the „divide‟. A whole range of information based industry and applications have come up with new sources of employment and earning with welfare enhancing consequences for the wealthy and the poor in the country. As a meta-technology, ICT has caused rapid innovations and changes to occur in all other areas of material sciences. As an information society, ICT has improved access in the fields of education, healthcare, governance and all aspects of business services. It has also improved the abilities of the poor to manage risks and mitigate vulnerabilities through provision of timely information.

Vision 2020 is a vision of information society and knowledge economy built on the edifice of ICT. In India, the aggressive expansion of public sector telecommunications infrastructure in hitherto uncharted territories of geographically remote locations would unleash latent economic energies and market forces, which will erode the very foundation of perceived lack of profitability of rural investment among the private investors. Once this is achieved, Vision 2020 will be a vision of wealthier and more equal society full of creativity, innovation and competition.

TELECOM AND IT:

The vision of telecommunications in 2020 is a vision of information society built on an edifice where IT and telecommunications merger takes place. Rapid technological convergence has already shown a symbiotic overlap between the development strategies of IT and

42 telecommunications. A part of today‟s IT is „telecom writ large‟, it flourishes on the telecom- network and in turn allows modern day telecommunications to use sophisticated IT-software. It is a common platform for both IT and telecom Hardware.

There is a vision derived from export-success of India‟s software that has given rise to optimism with regard to India‟s growing pre-eminence in global IT canvas. Such a vision builds on a huge vision of all round development of IT that spreads wide cross-section of Indian economy and society. deeper analysis shows that there is need for a comprehensive IT development strategy to make sure that India‟s durable presence in the global software market. As discussion in the later paragraphs will show, „enclave‟ type development of software with exclusive focus on export cannot bring about desired advantages if such a strategy ignores the linkages between export and the domestic market. Vision 2020, therefore, is a much larger vision.

Primarily it is to be appreciated that foreign exchange contribution of software export net of import of hardware is roughly fifty per cent. Net foreign exchange contribution will rise if India is able to develop a strong base for hardware.

Secondly scrutiny of the structure of India‟s software export vis-à-vis the emerging dynamics of the global market shows that India has marginal presence in the fastest growing segment of the global IT market consisting of software packages and software products. India‟s very close competitors, on the other hand, have achieved a greater success through diversification of exports with software packages. India will climb the value chain with more innovative software products in the international market. This is possible when India is able to base the development of IT with a strong and huge domestic market supporting innovation and its diffusion along with the growth of component manufacturing base. Appropriate synergy between the domestic and export market will be a key to success of the Indian IT sector in overseas market and development of state-of-the art telecom infrastructure.

Lastly, development of human resources through IT education, training and skill development is fundamental to the whole process.

The two indicators of IT penetration in Indian market are Internet use and availability of Personal Computers . There has been significant expansion in both during the last decade (Table 6).

Table 6: Growth in availability of Personal Computers and estimated number of Internet users

Year Estimated number of Internet users Availability of Personal Computers 1992 1,000 410,000

1993 2,000 560,000 1994 10,000 800,000 1995 250,000 1,200,000 1996 450,000 1,500,000 1997 700,000 2,000,000 1998 1,400,000 2,700,000 1999 2,800,000 3,300,000 2000 5,00,0000 4,600,000 Note: Data for 1991 on Internet users is not available. The series start from 1992 because data on both is available from this year. Source: Yearbook of statistics, 1991-2000, ITU

Apart from the impressive increasing growth in the number of Internet users and availability of PCs, India is on the wrong side of the divide (Table 7). The number of users of Internet is still a negligible fraction of India‟s total population. The Per capita availability of PC is also very less.

Table 7: Internet penetration and PC availability, 2001

Countries falling in Internet users per 10,000 PCs per 100 inhabitants different income categories inhabitants Low income countries 62.21 0.59 Of which India 68.16 0.58 Lower middle income 264.94 2.45 countries Upper middle income 992.66 8.24 countries High income countries 3992.87 37.31 Source: ITU, World Telecommunication Development Report 2002

Internet kiosks, telekiosks, telecottages and cybercafes have emerged in important roles in expanding community access to ICT popularizing IT among the masses and promoting domestic market. However, their expansion crucially effects on the growth of telecommunications infrastructure. In India, a spectrum of technologies has been opened up to connect remote villages, which includes Wireless in Local Loop (WLL), wireless cum wired technology developed by C-DOT, radio systems, switching systems of various capacities integrated with underground cables, CorDect and medium capacity satellite systems. Apart from a number of small-scale ICT initiatives is already at work in different parts of the country . It is envisaged that

44 with the growth of telecom infrastructure such examples would multiply and create an information society in near future.

There has been substantial exhaustion in the stock of IT personnel in India through migration into USA and Europe. There is need to replete this stock and plan for increased availability of skilled manpower to meet the future demand. Education, training and skill development will meet the demand for skilled manpower in the industry and keeping the cost of IT education, servicing and maintenance within reasonable limit. Trained manpower will also be an important source of demand for IT products and services. The Government has taken steps to increase the teaching facilities to increase the number of technology students and sponsored training institutes like Indian Institute of Information Technology and Management at Allahabad, Bangalore, Kolkata and Hyderabad in addition to Indian Institute of Technology and Management at Gwaliar.

A society has been formed to extend accreditation to institutions at non-formal sector for certain courses and network services have been launched to create a link between academic and research communities.

Software in local languages is also been increasingly available. Computers have also been specially designed for use in the mass market.

Vision 2020 is a vision of IT for the masses. All round development of digital literacy would put Indian society in a complete command over the ICT tools. The available indications suggest that IT education is gaining popularity. Perceived utility of ICT as enabler of business processes would continue to influence market for IT education. Education will create innovation, productivity and entrepreneurship. A knowledge society will be formed with participation from the rich and the poor, men and women, young and old, organized and unorganized, government and the governed.

COMPETITION POLICY:

Countries often are different in pattern of sequencing and the speed of liberalization. Competition has been controlled within limit by state policy through licensing of limited number of market players in certain segments granting thereby a period of exclusivity to the operators. Heterogeneity of routes to sectoral reforms, as shown from the examples of few of the Asian countries, classified into different combination of policies and approaches to telecom reform, are presented below:

In most countries, restricting the number of licensees or imposing geographic limitations has limited or suppressed competition. Competition in cellular telephony was allowed in a duopoly mode in India. This gradually increased to licensing of four operators in each of the four metros and thirteen circles. Basic service in India is still limited to one private operator competing with state owned incumbents in the circles. Even though the private sector has been licensed and they are laying infrastructure, metros are still under the public sector monopoly and it will take time before private competition takes place. In few other countries differences in modes of privatization have been observed. In Thailand, private entry is allowed through Build Operate and Transfer (BOT) mode while the network was controlled by the state. In Vietnam, network was publicly managed with foreign operators participating in provision of training, equipment and supervision through Business Cooperation Contracts (BCCs). Private entry in the telecom sector and limited competition between state-owned entities of the ministries was not allowed in china. Foreign equity participation was in Asia were restricted in many countries. For example, China, India, Indonesia, Korea, Malaysia, the Philippines and Thailand limited foreign equity below fifty per cent.

It is interesting to note that competing technological standards have also limited competitions. In technical options for mobile networks Countries are divided. Europe opted for Global System for Mobile communications (GSM) technology and USA for Code Division Multiple Access (CDMA), within Asia, China, India, Indonesia and Malaysia have opted for GSM in cellular mobile network, but Hong Kong, Korea, the Philippines, Singapore and Thailand have opted for CDMA.

However, several countries are now opting for more than one standard. For example, in USA, „Companies like AT&T and Cingular are increasingly moving towards GSM‟. „China is going with some CDMA as well.‟ India is using CDMA in Wireless in Local Loop (WLL). Multiple technological standards fragment market rendering base stations purchased from one company not workable with switches bought from another company potentially which limits the scope of exploitation of economies of scale that could accrue in a multi-vendor environment.

The way multiple technological standards may confuse regulatory stance which leads to market failures can be seen from the recent experiences of several vendors while trying to launch 3G in Europe. European Union has authorised a single technological standard called „Wideband CDMA‟ (W-CDMA) for 3G coverage. Some of the companies that sought to launch 3G services in September 2002 faced the difficulties that networks and handsets of different vendors could not work with each other. As European operators did not have freedom to use „CDMA2000‟ as per their licensing restrictions another standard for 3G, which is working successfully in Asia and USA could not be adopted in Europe.

World over, there is an observable trend of growing number of state owned telecom incumbents which were being privatized. In 2000, from among the member countries of the ITU, those with fully or partly privatized incumbents outnumbered countries with fully state-owned operators. It has been observed that „countries with a privately owned incumbent operator account to about 85 per cent of the world market by revenue. Those with fully state-owned operators, in mobile as well as fixed lines, account for just 2%.

INVESTMENT POLICY FRAMEWORK:

1. Foreign Direct Investment of up to 100 percent permitted for the following:

- Telecom equipment Manufacturing - Not providing any international gateways - Generating Infrastructure providers (Category I) - Providing E-mail service - Availability of Voice mail service - Ensuring Call Centers and IT enabled services

2. Permission Foreign Direct Investment of up to 74 percent:

- Internet servicing - Infrastructure providers - Developing Radio paging services

3. Foreign Direct Investment of up to 49 percent permitted for the following:

- In the area of National long distance service - Allowing basic telephone service - In the Cellular mobile service - And also Other value added service

4. Additional foreign investment through holding/investment company.

5. Up to US$ 2 million Automatic approval for technology fee, royalty up to 5% for domestic sales and 8 percent for exports in telecom manufacturing

6. Full reparability of dividend income and capital invested in the telecom sector

7. Fiscal incentives and concessions for the telecom sector:

- Amortization of the license fee - Allowing Tax holiday - Implimenting Rebate on subscription to shares/debentures - Provide Scope for tax exemption on financing through venture capital - Import duty rates which can be reduced for various telecom equipment

References

http://www.slideshare.net

http://en.wikipedia.org

http://www.bizterms.net

http://www.pluggd.in

http://www.watblog.com