A PROJECT REPORT ON

TELECOM INDUSTRY IN INDIA (INDUSTRY ANALYSIS)

BY

ANKIT SAMOTA
TELECOM+IT (2009-2011) 1999/09010009

SURYADATTA INSTITUTE OF BUSINESS MANAGEMENT AND TECHNOLOGY

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CONTENTS

S.No

CHAPTER

PAGE No.

1. 2. 3. 4. 5. 6. 7.

INTRODUCTION SEGMENT ANALYSIS TELECOM INDUSTRY GOVERNMENT 3RD GENERATION TECHNOLOGY PORTER ANALYSIS SWOT ANALYSIS FUTURE OF INDIAN TELECOM INDUSTRY BIBLIOGRAPHY

4 6 13 15 18 26 29 31

INTRODUCTION
Low-cost, High-Quality networks & Innovative Marketing

Telecom Industry in India is the fastest growing markets in the World and become the second largest mobile market in the world just after China. India has added around 13 million new mobile subscribers to the network each month for the year 2008. 3G has been launched. Upcoming services such as 4G and WiMax (Worldwide Interoperability for Microwave Access) will help for further growth rate. The service providers are offering services at cheap call rates, low-cost handsets and network expansion is fuelling the boom for the industry. The sector ranks second in the world, with over 509.03 million telephone subscriptions by Sep 2008 end. The fast track growth of the Indian telecom industry has made it a key contributor to Indias progress. India adopted a phased approach for reforming the telecom sector right from the beginning. Privatization was gradually introduced, first in value-added services, followed by cellular and basic services. An independent regulatory body, Telecom Regulatory Authority of India (TRAI), was established to deal with competition in a balanced manner. This gradual and thoughtful reform process in India has favored industry growth. Today, there are more than 509 million telecom subscribers in India. Every month, 10-14 million new subscribers are added. Upcoming services such as 3G and WiMax will help to further augment the growth rate. Furthermore, the Indian economy is slated to sustain its 7-9 per cent growth rate in the near future. This is supported by the political stability that the country is experiencing currently. Indias demographic outlook makes it one of the largest markets in the world. A conducive business environment is also created by a favorable regulatory regime. There exists enormous business potential for telecom companies on account of the countrys low tele-density, which is close to 19 per cent presently. Indian Telecom sector, like any other sector in the country, has gone through many phases of growth and diversification. Starting from telegraphic and telephonic systems in the 19th century, the field of telephonic communication has now expanded to advanced technologies like GSM, CDMA, and WLL to the much awaited great 3G (Third Generation) Technology in mobile phones.

There exists enormous business potential for telecom companies on account of the countrys low teledensity, which stand at 40.31 for September 2009. Every day there is an addition in Value added Services (VAS), technology advancement and reduction in traffic charges. Increase in private and public players in the sector has enhanced the telecommunication technology to give the maximum benefits to their customers. Year 1851 1881 1883 1923 First operational land lines were laid by the government near Calcutta (seat of British power) Telephone service introduced in India Merger with the postal system Formation of Indian Radio Telegraph Company (IRT) Merger of ETC and IRT into the Indian Radio and Cable Communication Company (IRCC)

1932

1947

Nationalization of all foreign telecommunication companies to form the Posts, Telephone and Telegraph (PTT), a monopoly run by the government's Ministry of Communications Department of Telecommunications (DOT) established, an exclusive provider of domestic and long-distance service that would be its own regulator (separate from the postal system)

1985

1986 1997 1999 2000

Conversion of DOT into two wholly government-owned companies: the Videsh Sanchar Nigam Limited (VSNL) for international telecommunications and Mahanagar Telephone Nigam Limited (MTNL) for service in metropolitan areas Telecom Regulatory Authority of India created. Cellular Services are launched in India. New National Telecom Policy is adopted. DoT becomes a corporation, BSNL

SEGMENT ANALYSIS
India's growth story in the telecom space shows no signs of slowdown. The country added 113.26 million new customers in 2008, the largest globally. To put this growth into perspective, the countrys cellular base witnessed around 48.50 per cent growth in 2008, with an average 9.5 million customers added every month. The country had 471.7 million mobile phone users as of September 2009 compared to 346.89 million in the corresponding period a year ago and the total number of telephone connections (wireless and wireline) is 509.03 million as of September end, taking the telecom penetration to over 36 per cent. It implies that one out of every three Indian has a telephone connection. The Indian telecom industry has been growing rapidly at a CAGR of 40.63 per cent from 2003 to 2008. Telecom sector contributed 3.4 per cent to Indias gross domestic product in for the year 2008 and is expected to contribute 5.4 per cent by 2010. There is still a big room for further growth. The growth will primarily driven by the rise in communications demand from semi urban and rural India. The teledensity in rural areas being a little more than 10 per cent against the national average of 33.23 per cent, there is huge untapped potential for mobile phone penetration in rural India. The total Broadband subscriber base has reached 7.21 million by the end of September 2009 as compared to 6.98 million by the end of August 2009. Even there is a huge potential in broadband segment. The growth in 2008 was led by Bharti Airtel, the countrys largest communications provider. Bharti had 110.51 million customers as of September end, Vodafone had 82.84 million and BSNL of about 53.35 million. In fact, Bharti has more customers than the state-owned BSNLs mobile and landline users combined.

India's telecom services industry revenues is projected to reach $54 billion in 2012, as compared with $31 billion in 2008 according to the CII Ernst & Young report titled 'India 2012: Telecom growth continues.' According to Capitaline Data-base, total revenue for Tele-com industry for current year is around 100,000 Crores.
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As on sep 30, 2010 Recent updates in Telecom Industry

Around 15 million mobile subscribers added in the month September According to telecom regulator TRAI, 14.98 million mobile subscribers were added in the month September, the highest monthly addition, against 14.12 mobile subscribers in the month August. 3G Auction With the announcement of a 3G policy on 1 August 2008, India joined a select list of countries to have a policy on the much-hyped 3G revolution. Third generation mobile services which would offer voice, video, data and downloading services on mobile phones has at last been launched in the earlier days of September 2009. The launch of 3G and WiMax (Worldwide Interoperability for Microwave Access) services is expected to drive the data revolution. Mobile entertainment and mobile banking are likely to be the biggest drivers for data services. 3G and WiMax services are expected to gain popularity initially in the top 20 cities in India and then gradually penetrate to the rest of the country. By 2012, India could have around 25-30
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million 3G subscribers and around $4-5 billion 3G revenues. WiMax, on the other hand, could attract about 8-10 million subscribers and could account for about $1-1.5 billion by 2012. The average revenue per user per month is likely to drop further since most of the growth in subscriber additions is coming due to expansion in non-metro regions. Mobile number portability gets nod and bid invited for mobile number portability Department of Telecommunications (DoT) has invited bids for mobile number portability. Mobile Number Portability (MNP) will provide the customer the facility to retain the same number while switching over from one operator (service provider) to another within the same service area. A recent study pointed out that having to give up their mobile numbers was the single most reason that subscribers did not want to change their operator despite poor quality of services. This will be an advantage for the customer. 99 per cent of new mobile connections in India are pre-paid Call it the death of post-paid mobile user in the worlds fastest-growing mobile market. Out of new mobile user additions in the country, pre-paid connections accounts for around 99 per cent. Telecom Industry on robust expansion plans The total outstanding investment in the telecom industry at the end of December 2008 quarter stood at $3.27 Billion spread over 140 projects. Of these, close to 70 projects entailing an investment of $1.68 Billion are under implementation and seven projects encompassing an investment of $0.015 Billion are stalled. Most of the existing telecom companies have robust expansion plans out of which majority have not witnessed any delay in execution.

According to Gartner Inc., India's mobile subscriber base is projected to exceed 737 million connections by 2012 growing at a CAGR of 21 per cent. The Government has plans to raise teledensity to 40-45 per cent by 2010, thereby offering greater growth opportunities for service providers.

Facts & Figures of Telecom Industry

Total mobile phone subscribers: 509.03 million (Aug 2010)
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Teledensity: 43.5 % (Aug 2010) Average Addition of new mobile subscribers per month: 12.43 Million (Year 2010) Fastest growing cellular telephony markets in the world Average Revenue per User (ARPU) for GSM: INR 304 per month (September 2010) Average Revenue per User (ARPU) for CDMA: INR 194 per month (September 2010) More Wireless subscribers than Wireline subscribers Minute of Usage (MoU) for GSM: 546 Minute per month (September 2010) Minute of Usage (MoU) for CDMA: 425 Minute per month (September 2010)

Of the wireless operators GSM continues to dominate with a healthy 76% lead. CDMA users have crossed 110 million after March 2010.

The Telecom sector in India has witnessed unparalleled growth by global standards. In a little over a decade of wireless telephony, India has moved from a subscriber base of zero to becoming the second-largest market in the world after China. Rural telephony, 3G, WiMax and
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data services will drive sector growth in 2012. The industry will witness sustained growth in mobile services and data revenues. Network expansion will continue in order to support the rural growth. It is imperative for the government to revisit high levies on the telecom sector and lay down a clear roadmap for future spectrum allocation.

Subscriber base to grow

Further growth will be primarily driven by a rise in communications demand from semi urban and rural India. Over past few years, Circle B and Circle C have witnessed the highest growth rate as compare to Metros and Circle A. The availability of adequate spectrum could remain a hurdle for wireless growth. The telecom sector could witness another round of Mergers & Acquisitions. As new operators roll-out networks, there could be 10-12 operators in each circle. However, by end of 2012, industry consolidation will result in about five to seven large operators.

According to Springboard Research, India will become the leading market for WiMAX in the Asia pacific region and is expected to have 15.8 million WiMAX subscribers by 2012, accounting for 46.7 per cent of total subscribers in Asia-Pacific and 35.7 per cent of revenues from the region. According to Gartner, the value-added services (VAS) market in India is expected to grow to about US$ 5.6 billion by 2011.

Segment
Mobile Services
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India's telecom growth pattern continues with mobile operators adding 509.03 million subscribers in the year 2010 to the world's second largest wireless market. GSM The GSM subscriber base has reached to 297.26 million in March 2009. Bharti with 110.51 million subscriber base remains the largest GSM mobile operator followed by Vodafone, BSNL and Idea with subscribers base of 82.84 million, 53.35 million, and 51.45 million respectively. CDMA The CDMA subscriber base has reached 94.50 million in March 2009. Reliance remains the largest CDMA mobile operator followed by Tata Teleservices and BSNL with subscriber base of 55.52 millions, 34.28 million and 4.70 million respectively. Wire line Wire line services subscriber base stood at 37.96 million for the financial year ended March 2009 compared to 39.42 million last year. The Wire line has registered a decline of 3.63 per cent. The market leader in wire line is BSNL and market follower is MTNL. The fixed (Wire line) subscriber base registered a decline of 1.52 million in the year 2009. Reduction in the subscriber base of wire line is mainly due to switching to wireless which is more convenient and cheaper. Other Telephone Services Public Call Offices Number of Public Call Offices (PCOs) has reported a positive number over past few years. In Public Call Offices, BSNL is market leader with a share of little more than 30 per cent. MTNL market share is a little less than 4 per cent and the rest of market is capture by other private operators. Village Public Telephones Number of Village Public Telephones (VPT) has decreased from 5.63 lakh in quarter ending June 2009 to 5.61 lakh in quarter ending March 2010. There are around 6 lakh villages in India. More than 85 per cent of the villages have VPTs. 100 per cent of Villages in Haryana and Punjab have access to Village Public Telephone.
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Wire line internet subscriber Broadband Growth: Total Broadband subscribers base has reached to 7.22 million by the end of September 2009 as compared to 6.98 million last month August 2009 to register a growth of 3.03 per cent. Non Voice Services Value added service has registered a robust growth rate. It contributes more than 10 per cent of the total revenue.

According to Gartner, India's mobile subscriber base is projected to exceed 737 mil-lion connections by 2012 growing at a compound an-nual growth rate (CAGR) of 21 per cent and India is likely to remain the world's second largest wireless market after China in terms of mobile connections. The overall cellular services revenue in India is projected to grow at a CAGR of 18 per cent from 2008-2012 to exceed US$ 37 billion.

TELECOM INDUSTRY GOVERNMENT

Government Policy Initiatives

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The Government has taken many proactive initiatives to facilitate the rapid growth of the Indian telecom industry. The Indian telecom industry has a 74 percent FDI limit in the telecom services segment. The Government of India (GOI) has permitted 100 percent FDI in manufacturing of telecom equipment in India through the automatic route. Foreign investors are rushing to India, which is coming out of the economic slowdown very fast, and giving a strong signal of recovery. Foreign direct investment (FDI) inflow in August has gone up by 40.4% to $3.27 billion as against $2.3 billion in the same period last year.

FDI inflow got a push since July 2009, when it rose 55% to $3.5 billion over $2.25 billion in July 2008, according to RBI data. Because of the global financial crisis and economic slowdown, FDI fell sharply in the first two months of the current financial year by over 37% to $2.3 billion in April 2009, from $3.8 billion in the same month last year.

In May, 2009, the dip was even steeper by 46% to $2.1 billion from $3.9 billion in May 2008. However, the inflow picked up after that. In June, it increased by around 7%. A senior investment banker said as Indian economy is not very badly affected due to global recession, foreign investors have started coming back to invest. Even in the present slowdown scenario, India is providing them a good opportunity for growth, he added.

The double digit growth in the industrial production would further improve the sentiments. HDFC Bank economist Jyotinder Kaur said as the recovery becomes stronger, FDI inflows are likely to rise in the coming months. According to RBI data, in 2009-10, the country received an FDI of $35.2 billion including the reinvested earnings and inter-company debt transactions that qualify for FDI. The net pure FDI, however, was around $27.3 billion, which fell short of governments projections of $35 billion. For 2010-11, investment bankers felt that the total FDI inflow may cross $35 billion. In the first five months (April-August) so far, India's total FDI touched $16.2 billion including the reinvested earnings and intercompany debt transactions.

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However, the pure inflows, without taking into account these two factors, contracted by about 6% to $13.8 billion, from $14.7 billion in same period of 2008-09. In 2009-10, India may attract a pure FDI of $35 billion, bankers added. Since 2000, FDI witnessed a huge jump. According to data, while in 2000 India attracted FDI of $4 billion only, in 2008-09, it went up to over $27 billion. Portfolio investment in August also increased by 56.2% to $926 million compared to $593 million in the corresponding period of the last year. During the first five months of the current financial year, portfolio investment increased to $11.23 billion from $4 billion in the same period last year.

According to an IMRB paper for the Internet and Mobile Association of India, VAS, or the sale of ring tones, caller tunes, wallpapers, SMSes (for contests and communica-tion), among other non-voice services, generated Rs 7,500 Crores in revenues in 2008

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3RD GENERATION TECHNOLOGY

What is 3rd Generation Technology (3G)???? The 3rd generation technology (3G) represents a shift from voice centric services to mul-timedia oriented services like video, voice, data and fax services. 3G networks have po-tential transfer speeds of up to 3 Mbps (about 15 seconds to download a 3-minute MP3 song). For comparison, the fastest 2G phones can achieve up to 144Kbps (about 8 min-utes to download a 3-minute song). The high speed of data transfer can accommodate broadband applications like video conferencing, receiving streaming video from the internet, sending and receiving faxes, instantly downloading e-mail messages with at-tachments and international roaming. What will be the impact on Revenue???? We have seen a decline in Average Revenue per User (ARPU) and the decline is due to continuous fall in the tariff charges as competition in the industry increases. There is substantial rise in subscriber base from Circle B and Circle C compare to Metros and Circle A. The usage is less in Circle B and Circle C as compare to other circle. Around 129.79 million GSM subscribers are from Metros or Circle A. It accounts for more that 50 per cent of the total GMS subscriber base. We expect atleast 5 per cent of the customer to opt for 3G within 2 years. This could result for 3G subscriber base of more than 10 million. This would leads to sharp rise in ARPU from this Circle. Recently Mahanagar Telephone Nigam Limited (MTNL) has become the first telecom operator in the country to launch 3G mobile services. Although the service is on the higher side as mobile users will have to pay a one-time fee of INR 500 as activation charges and a monthly rental of INR 599, but the company has receive good response from the customer. Apart from the rental charges, there will be an increase in revenue from usage of the service. Although we expect a decrease in the tariff charges, there would be an increase in Aver-age Revenue per User. There is a constant rise in subscriber base of wireless where as there has been a con-stant decrease in wireline subscriber.

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Wireless Vs Wireline

Figures are in millions

Wireless subscribers saw an impressive growth while the wire line subscribers were stagnant and contribute to only 9% of the total telephone subscribers as in march 2010.

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According to a report by industry body FICCI and telecom consulting firm BDA, "3G subscriber base will reach 90 million by 2013 and the revenue from 3G is expected to reach $ 15.8 billion by the same year." Even introduction of 3G would also in-crease the Average revenue per users (ARPU). Value-added Services (VAS) brings in 9 per cent of telecom industry revenues. As average revenues per user (ARPU) fall, the pressure on making more money from VAS will keep going up.

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PORTER ANALYSIS OF INDUSTRY

It uses concepts developed in Industrial Organization economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market. Porter referred to these forces as the micro- environment, to contrast it with the more general term macroenvironment. They consist of those forces close to a company that affect its ability to serve its customers and make a profit. A change in any of the forces normally requires a company to reassess the marketplace.

1. Rivalry among Competing Firms

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Competition in Indian Telecom Industry Major Players There are three types of players in telecom services: State owned companies (BSNL and MTNL). Private Indian owned companies (Reliance Infocomm, TataTeleservices. Foreign invested companies (Vodafone, Bharti Tele-Ventures, Idea Cellular, Spice Communications). BSNL: On October 1, 2000 the Department of Telecom Operations, Government of India became a corporation and was renamed Bharat Sanchar Nigam Limited (BSNL). BSNL is now Indias leading Telecommunications Company and the largest public sector undertaking. It has a network of over 45 million lines covering 5000 towns with over 35 million telephone connections. The state-controlled BSNL operates basic, cellular (GSM and CDMA) mobile, Internet and long distance services throughout India (except Delhi and Mumbai). BSNL will be expanding the network in line with the Tenth Five-Year Plan (1992-97). The aim is to provide a telephone density of 13.6 per hundred by March 2008. BSNL, which became the third operator of GSM mobile services in most circles, is now planning to overtake Bharti to become the largest GSM operator in the country. BSNL is also the largest operator in the Internet market, with a share of 21 per cent of the entire subscriber base BHARTI: Established in 1985, Bharti has been a pioneering force in the telecom sector with many firsts and innovations to its credit, ranging from being the first mobile service in Delhi, first private basic telephone service provider in the country, first Indian company to provide comprehensive telecom services outside India in Seychelles and first private sector service provider to launch National Long Distance Services in India. Bharti Tele-Ventures Limited was incorporated on July 7, 1995 for promoting investments in telecommunications services. Its subsidiaries operate telecom services across India. Bhartis operations are broadly handled by two companies: the Mobility group, which handles the mobile services in 16 circles out of a total 23 circles across the country; and the Infotel group, which handles the NLD, ILD, fixed line, broadband, data, and satellitebased services.

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Together they have so far deployed around 23,000 km of optical fiber cables across the country, coupled with approximately 1,500 nodes, and presence in around 200 locations. The group has a total customer base of 110.51 million, of which 95.86 million are mobile and 14.65 fixed line customers, as of September 30, 2009. In mobile, Bhartis footprint extends across 15 circles. Bharti Tele-Ventures' strategic objective is to capitalize on the growth opportunities the company believes are available in the Indian telecommunications market and consolidate its position to be the leading integrated telecommunications services provider in key markets in India, with a focus on providing mobile services. MTNL : MTNL was set up on 1st April 1986 by the Government of India to upgrade the quality of telecom services, expand the telecom network, and introduce new services and to raise revenue for telecom development needs of Indias key metros Delhi, the political capital, and Mumbai, the business capital. In the past 17 years, the company has taken rapid strides to emerge as Indias leading and one of Asias largest telecom operating companies. The company has also been in the forefront of technology induction by converting 100% of its telephone exchange network into the state-of-theart digital mode. The Govt. of India currently holds 56.25% stake in the company. In the year 2003-04, the company's focus would be not only consolidating the gains but also to focus on new areas of enterprise such as joint ventures for projects outside India, entering into national long distance operation, widening the cellular and CDMA-based WLL customer base, setting up internet and allied services on an all India basis. MTNL has over 5 million subscribers and 329,374 mobile subscribers. While the market for fixed wireline phones is stagnating, MTNL faces intense competition from the private playersBharti, Hutchison and Idea Cellular, Reliance Infocommin mobile services. MTNL recorded sales of Rs. 60.2 billion ($1.38 billion) in the year 2002-03, a decline of 5.8 per cent over the previous years annual turnover of Rs. 63.92 billion.

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RELIANCE INFOCOMM : Reliance is a $16 billion integrated oil exploration to refinery to power and textiles conglomerate. It is also an integrated telecom service provider withlicenses for mobile, fixed, domestic long distance and international services. Reliance Infocomm offers a complete range of telecom services, covering mobile and fixed line telephony including broadband, national and international long distance services, data services and a wide range of value added services and applications. Reliance IndiaMobile, the first of Infocomm's initiatives was launched on December 28, 2002. This marked the beginning of Reliance's vision of ushering in a digital revolution in India by becoming a major catalyst in improving quality of life and changing the face of India. Reliance Infocomm plans to extend its efforts beyond the traditional value chain to develop and deploy telecom solutions for India's farmers, businesses, hospitals, government and public sector organizations. Until recently, Reliance was permitted to provide only limited mobility services through its basic services license. However, it has now acquired a unified access license for 18 circles that permits it to provide the full range of mobile services. It has rolled out its CDMA mobile network and enrolled more than 6 million subscribers in one year to become the countrys largest mobile operator. It now wants to increase its market share and has recentlylaunched prepaid services. Having captured the voice market, it intends to attack the broadband market. TATA TELESERVICES: Tata Teleservices is a part of the $12 billion Tata Group, which has 93 companies, over 200,000 employees and more than 2.3 million shareholders. Tata Teleservices provides basic (fixed line services), using CDMA technology in six circles: Maharashtra (including Mumbai), New Delhi, Andhra Pradesh, Tamil Nadu, Gujarat, and Karnataka. It has over 800,000 subscribers. It has now migrated to unified access licenses, by paying a Rs. 5.45 billion ($120 million) fee, which enables it to provide fully mobile services as well. The company is also expanding its footprint, and has paid Rs. 4.17 billion ($90 million) to DoT for 11 new licenses under the IUC (interconnect usage charges) regime. The new licenses, coupled with the six circles in which it already operates, virtually gives the CDMA mobile operator a national footprint that is almost on par with BSNL and Reliance Infocomm.. The circles include Bihar, Haryana, Himachal Pradesh, Kerala, Kolkata, Orissa, Punjab, Rajasthan, Uttar Pradesh (East) & West and West Bengal.

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VSNL: On April 1, 1986, the Videsh Sanchar Nigam Limited (VSNL) - a wholly Government owned corporation - was born as successor to OCS. The company operates a network of earth stations, switches, submarine cable systems, and value added service nodes to provide a range of basic and value added services and has a dedicated work force of about 2000 employees. VSNL's main gateway centers are located at Mumbai, New Delhi, Kolkata and Chennai. The international telecommunication circuits are derived via Intelsat and Inmarsat satellites and wide band submarine cable systems e.g. FLAG, SEA-ME-WE-2 and SEA-ME-WE-3. The company's ADRs are listed on the New York Stock Exchange and its shares are listed on major Stock Exchanges in India. The Indian Government owns approximately 26 per cent equity, M/s Pantone Finvest Limited as investing vehicle of Tata Group owns 45 per cent equity and the overseas holding (inclusive of FIIs, ADRs, Foreign Banks) is approximately 13 per cent and the rest is owned by Indian institutions and the public. The company provides international and Internet services as well as a host of value-added services. Its revenues have declined from Rs. 70.89 billion ($1.62 billion) in 2001-02 to Rs. 48.12 billion ($1.1 billion) in 2002-03, with voice revenues being the mainstay. To reverse the falling revenue trend, VSNL has also started offering domestic long distance services and is launching broadband services. For this, the company is investing in Tata Teleservices and is likely to acquire Tata Broadband. HUTCH (Vodafone) : Hutchs presence in India dates back to late 1992, when they worked with local partners to establish a company licensed to provide mobile telecommunications services in Mumbai. Commercial operations began in November 1995. Between 2000 and March 2004, Hutch acquired further operator equity interests or operating licenses. With the completion of the acquisition of BPL Mobile Cellular Limited in January 2006, it now provides mobile services in 16 of the 23 defined license areas across the country. Hutch India has benefited from rapid and profitable growth in recent years. It had over 27.8 million customers by the end of June 2008.

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IDEA :
Indian regional operator IDEA Cellular Ltd. has a new ownership structure and grand designs to become a national player, but in doing so is likely to become a thorn in the side of Reliance Communications Ltd. IDEA operates in eight telecom circles, or regions, in Western India, and has received additional GSM licenses to expand its network into three circles in Eastern India -- the first phase of a major expansion plan that it intends to fund through an IPO, according to parent company Aditya Birla Group Potential

2. Entry of New Competitors Indian telecom sector offers unprecedented opportunities for foreign companies in various areas, such as 3G, virtual private network, international long distance calls, value added services, etc. The market is witnessing M&A activities that are leading to consolidations in the industry. This trend has assisted companies in expanding their reach in the Indian telecom market to offer better services to customers.The Indian telecom industry has always allured foreign investors. In fact, the cumulative FDI inflow, from August 1991 to March 2007, in the telecommunication sector amounted to US$ 3,892.19 million. This makes telecommunication the third-largest sector to attract FDI in India in the post liberalization eraIn India large numbers of players are emerging in the market on the national level from its state level existence such as: Aircel Virgin Spice Idea Unitech etc.. 3. Potential Development of Substitute Products PRODUCT Telecom sectors offers a wide range of services in India, such as wireline, CDMA mobile, GSM mobile, internet, broadband, carrier, MPLS-VPN, VSAT, VoIP, IN, etc. Internet telephone It is emerging as a best option in place of because it is cheaper and video as an added advantage.
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Internet service providers

BSNL MTNL SIFY BHARTI AIRTEL RELIANCE 45.2 19 8.9 6.8 6.1

Market share (%)

As we can see that use of internet in our country is on growing rate. As there are many tools which can be accessed through internet like video conferencing other important tool is talking through internet for eg. Google talk, rediff bol, yahoo messenger. Important thing is that internet is cheaper medium of communication and one can have many facilities if he/she is connected to the world through the internet. 4. Bargaining Power of Suppliers As far as telecom industry is concerned, it is service based industry which is intangible, so in this case there are less suppliers or we can say the role of suppliers are almost negligible in the case of telecom industry. We are trying to analyze that minor role 1. Mobile hand set suppliers: - There can be many suppliers for handset, some of them are Nokia, Sony Ericsson, Motorola, and Siemens etc. Many big telecom giants have their own handset manufacturing (back ward integration) like Reliance Classic, Tata Indicom or they have collaboration with some known companies like Reliance communication have tie ups with Samsung and LG for their CDMA services 2. Some other suppliers for this industry can be the Optical fiber suppliers, Aluminum suppliers (aluminum is required for the tower) but their bargaining power is limited. 3. Other important parameters can be the software assistance where suppliers can have the edge some of the main software solution provider are TCS, Infosys, Wipro, Satyam etc. Again one thing is noticeable that big giants like Reliance and Tata have their own units for software solution and companies like Vodafone, Spice are taking services from above stated companies. So here software providers have bargaining power because suppose Vodafone cant go to Reliance info for their software solution so here suppliers can have edge over the companies

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5. Bargaining Power of Consumers

Recent Status: Indian Telecom industry is one of the fastest growing telecom markets in the world. In telecom industry, service providers are the main drivers; whereas equipment manufacturers are witnessing growth and decline in successive quarters as sales is dependent on order undertaken by the companies. Airtel, Reliance, Tata and Sterlite are some of the companies that are expected to spur the growth in 2008, as compared to AMJ07. According to Cygnus estimates, telecom industry was expected to grow by 25% in 2008 as compared to AMJ07, in terms of sales. EBDITA and PAT are expected to grow by 32% and 34% respectively in 2008 as cost expenses are being control by major companies like Airtel and Reliance. The major booster is the wireless mobile subscriber base; crossing over 261m in March 2008. Other services like Internet subscriber base has also provided significant impetus with its subscriber base reaching over 11m in March 2008. The total subscriber base of Wireline services stood at 39.42 million as on 31st March 2008. The incumbents BSNL and MTNL have 80.05% and 9.33% market share respectively in the subscriber base, while all the five private operators together have 10.62% share. Wireline subscriber base has been declining in the last few years. Subscriber base for some of the companies like Bharti, Tata (Tele & Communications), MTNL and Reliance increased marginally. On the other hand, BSNL, Shyam and Telelinks have lost marginal subscriber base in 3rd QUARTER OF 2008, as compared to the previous quarter. Porter's Five Forces model outlines the primary forces about competitiveness within the industry. . The intensity of rivalry among competitors is very high . Potential Entry of New Competitors is very low . Product development and enhancement is serviced by the market player . Medium to low bargaining power of suppliers . Bargaining Power of Consumers is little high

SWOT ANALYSIS
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Strengths: Technology Advancement has offered enhanced services Widening of network coverage to rural areas also Low Operational Costs Demand of Mobile Commerce Weaknesses: High start-up cost Reducing ARPU Reducing MoU Opportunities: Large domestic market over a billion populations Low Teledensity as compare to other developed countries Potential in rural market 3G and WiMax to be launched Threats: Higher bidding cost for 3G Government control companies get regulatory benefits over private player Net-phone

Key Take Away for Investors Rapid CAGR of more than 40 per cent over last from few years
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 Low Teledensity as compare to other developed countries leave place for future growth Upcoming 3G and WiMax Technology to result in high ARPU

Telecom Industry Whats Road Ahead

Growth Potential The Indian rural market is going to be the next big thing for wireless telecom providers. With the teledensity in rural areas being a little more than 10 per cent against the national average of 33.23 per cent, there seems to be huge untapped potential for mobile phone penetration in rural India.

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The much awaited Third Generation (3G) Auction has been delayed. As per Depart-ment of Telecom (DoT), set a base price of INR 2,020 crore for a pan-India 3G spectrum where as the Union Finance Ministry stepped in with a recommendation to double this price to INR 4,040 Crore. The Cabinet Committee on Economic Affairs (CCEA) is likely to consider the proposal to set INR 3540 crore by the means of doubling the reserve price for Delhi, Mumbai and category A circles and increasing it by 1.5 times for Kolkata and category B circles and retaining the current base

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price for category C circles. This could again put off the much-awaited roll-out of advanced mobile services. WiMax, Broadband Wireless Access (BWA), which was been proposed at INR 1,010 Crore could be doubled to INR 2,020 Crores as recommend by ministry of finance. Mahanagar Telephone Nigam (MTNL) becomes the first telecom company to launch thirdgeneration (3G) mobile services in India on 5th February 2009. MTNL competes with private firms, including Bharti Airtel, Vodafone, Reliance Communications, Idea Cel-lular and Tata Teleservices, in India. State-owned telcos MTNL and BSNL were given 3G spectrum last year before the private players, giving them the first mover's advan-tage.

According to a report by in-dustry body FICCI and tele-com consulting firm BDA, "3G subscriber base will reach 90 million by 2013 and the reve-nue from 3G is expected to reach $ 15.8 billion by the same year." Even introduc-tion of 3G would also in-crease the Average revenue per users (ARPU).

FUTURE OF INDIAN TELECOM INDUSTRY

Industry on High Growth Track The telecom industry has been growing at a CAGR of 40 per cent during 2003-2008, with total subscriber growing at an average of 9.5 million subscribers per month over the last year. The
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subscriber base totaled to 346.89 million in December 2008, and is ex-pected to be 500 million and 800 million by 2010 and 2012 respectively as per TRAI. The ARPU for the industry is INR 240, which is among the lowest in the world. Rural Expansion & Services Abroad The number of mobile users per 100 persons is described by teledensity. Currently, the teledensity of the Indian telecom sector is 33.23 per cent, whereas the TRAI expected it to reach around 60 per cent by 2012. Falling Handset Prices and Youth Population Falling handset prices along with added features, makes the market more attractive. Today, the handsets are available in just three-digit figures with all necessary facilities. Young generation and living standard is also one of the factors for the increase in sub-scriber base. Alarming Competition The rising competition from new entrants in the industry, both domestic and foreign play-ers along with new technologies and their core competencies, will heat up the competition in the industry. Availability of Spectrum The Government has allowed and framed the policies for introduction of new technologies in the Indian telecom sector in the form of 3G and Wimax. The Department of Tele-com and TRAI are about to auction the required 3G spectrum to various service providers. The scarcity of spectrum and the price to be charged at the auction will purely be a matter of time. Passive Infrastructure Sharing The infrastructure sharing will encourage more efficient operations, thereby resulting in significant cost savings. The company is also willing to explore and share active infra-structure, based on guideline issued by TRAI. Mobile Commerce to Become the Next Big Thing

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Mobile commerce is the upcoming and growing trend. The increased use of mobile phones for the purpose of banking, tele-booking, inquiries, and other commercial ser-vices will lead to further increase in the revenues of the companies. The increased use of such services is welcomed by the users as it offers high utility and value for money. Mobile Number Portability to Become a Reality Soon Indian mobile users will soon have the option to switch their service providers without changing their mobile numbers. Implementation of mobile number will motivate and stimulate the service providers to constantly endeavor to further improve their quality of service in order to retain existing customers and attain new subscribers. Falling ARPUs Margins under Pressure The revenues are showing a fall because of declining call tariff. However, the profit mar-gins are stable because of rising subscriber base in the industry. Every month, more than 9.5 million subscribers are added in the last year.

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BIBLIOGRAPHY
www.coai.com www.trai.gov.in www.google.com
www.wikipedia.org

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