Telecom market research

NEWGATE INDIA

Hyderbad, Andhra Pradesh
Pin- 500038

PROJECT REPORT ON

A Study on Telecom Sector in India

SUBMITTED TO
Prof. Samik Shome

PREPARED BY
In partial fulfillment of the Course- SUNAM PAL
[10PG(J)45]
Industry Analytics in Term – III
IRFAN HABIB
(Batch: Jan. 2010 – 2012)
[10PG(J)14]

ACKNOWELEDGEMENT

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TABLE OF CONTENTS

EXECUTIVE SUMMARY ................................................................................................................................... 9

CHAPTER-1 ......................................................................................................................................................10

INTRODUCTION ..............................................................................................................................................10

1.1 Overview of Telecom Sector ................................................................................................... 10

1.2 Beginning of Telecommunication in India ................................................................................ 11

1.3 Regulatory framework ............................................................................................................ 11

1.4 Scope of Telecom Sector in India............................................................................................. 12

1.5 Evolution of Telecom Sector in India ....................................................................................... 12
1.5.1 Phase:1 (1980-89) ......................................................................................................................... 13
1.5.2 Phase 2 ( 1990-99) ........................................................................................................................ 13
1.5.3 Phase 3 (2000-2006) ..................................................................................................................... 13

1.6 Role of Telecom Sector in Indian Economy .............................................................................. 13
1.6.1 Direct Benefits............................................................................................................................... 14
1.6.2 Indirect Benefits ............................................................................................................................ 14

1.7 Objectives .............................................................................................................................. 14

CHAPTER-2 ......................................................................................................................................................15

REVIEW OF LITERATURE ............................................................................................................................15

CHAPTER-3 ......................................................................................................................................................18

GLOABAL SCENARIO .....................................................................................................................................18

3.1 World Telecom Sector ............................................................................................................ 18

3.2 Growth of Telecom Sector world wide .................................................................................... 18

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3.3 Major Players in world market ............................................................................................... 19
3.3.1 AM Stereo ..................................................................................................................................... 19
3.3.2 Digital Wireless Phone .................................................................................................................. 19
3.3.3 Rockewell Lucent .......................................................................................................................... 20
3.3.4 AT&T.............................................................................................................................................. 20

CHAPTER-4 ......................................................................................................................................................21

CURRENT INDIAN SCENARIO ...................................................................................................................21

4.1 Overview of Indian Telecom sector ......................................................................................... 21

4.2 Wire Line ................................................................................................................................ 22

4.3 Wireless Subscriber ................................................................................................................ 22

4.4 Internet Subscriber ................................................................................................................. 23

4.5 Broadband subscriber ............................................................................................................. 23

4.6 Teledensity at India ................................................................................................................ 24

4.7 National Long Distance Service ............................................................................................... 24

4.8 Wireless (GSM and CDMA) Services ........................................................................................ 25

4.9 Growth in subscriber of PSU operators ................................................................................... 25

4.10 Growth in subscriber of private operators ............................................................................. 26

CHAPTER-5 ......................................................................................................................................................27

ANALYTICAL FRAMEWORK ........................................................................................................................27

5.1 GSM and CDMA technique...................................................................................................... 27
5.1.1 GSM (Global System for Mobile Communications) .................................................................... 27
5.1.2 Benefits of GSM over CDMA ...................................................................................................... 27
5.1.3 Code division multiple access (CDMA ........................................................................................ 27
5.1.4 Benefits of CDMA over GFSM .................................................................................................... 27
5.1.5 Major players of CDMA and GSM in Indian Market................................................................... 27

5.2 Indian Telecom Industry Statistics (Mar09-Feb10) ................................................................... 28

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5.3 Global Telecomtrend Analysis (2005 – 2020) ........................................................................... 31
5.3.1 Regression Analysis ....................................................................................................................... 32
5.3.2 Equation of Trend ......................................................................................................................... 33

5.4 Indian Telecom Trend Analysis ( 2005 – 2020) ......................................................................... 35

5.5 Percentage Increase/Decrease Trendof Sales .......................................................................... 38

5.6 Trend Of Teledensity Growth .................................................................................................. 40

5.7 Market Share On Regional Basis ............................................................................................. 42

5.8 Growth In Subscriber Base ...................................................................................................... 44

5.8.1 Public Sector versus Private Sector............................................................................................... 44

5.9 Share of Telecom Sector to India GDP ..................................................................................... 45

5.10 Employment In Public & private telecom sector .................................................................... 46

5.11 SWOT Analysis ...................................................................................................................... 47
5.11.1 Strengths ..................................................................................................................................... 47
5.11.2 Weakness ................................................................................................................................... 47
5.11.3 Opportunity................................................................................................................................ 48
5.11.4 Threats ........................................................................................................................................ 48

5.12 4 P’S of Marketing ................................................................................................................ 49
5.12.1 Product/Service: ......................................................................................................................... 49
5.12.2 Price: ........................................................................................................................................... 49
5.12.3 Place: ........................................................................................................................................... 49
5.12.4 Promotion: .................................................................................................................................. 50

5.13 SEGMENTATION, TARGETING, POSITIONING ......................................................................... 51
5.13.1 Segmentation: ............................................................................................................................. 51
5.13.2 Targeting ..................................................................................................................................... 51
5.13.3 Positioning .................................................................................................................................. 51

5.14 Market Share Analysis And Trend Based On Private And Public Sector .................................. 52
5.14.1 Market share of wireless operator ............................................................................................. 52
5.14.2 Market share of GSM operators ................................................................................................. 53
5.14.3 Market share of CDMA operators .............................................................................................. 54

5.15 Hierarchy of effects model .................................................................................................... 55
5.15.1 Awareness ................................................................................................................................... 55
5.15.2 Knowledge .................................................................................................................................. 55
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5.15.3 Liking ........................................................................................................................................... 55
5.15.4 Preference................................................................................................................................... 55
5.15.5 Conviction: .................................................................................................................................. 56
5.15.6 Purchase:..................................................................................................................................... 56

CHAPTER-6 ......................................................................................................................................................57

COMPANY ANALYSIS .....................................................................................................................................57

6.1 Airtel ...................................................................................................................................... 57
6.1.1 Ratio Analysis ( Prefer Appendix:1) .............................................................................................. 57
6.1.1 Financial Analysis .......................................................................................................................... 58
6.1.3 Pricing Stratigy .............................................................................................................................. 58

6.2 Vodafone ............................................................................................................................... 59

6.3 BSNL....................................................................................................................................... 61

6.4 MTNL ..................................................................................................................................... 66
6.4.1 Ratio Analysis ( Prefer Apeendix:4) .............................................................................................. 66

6.5 HFCL ....................................................................................................................................... 69

6.6 AIDTYA BIRLA TELECOM.......................................................................................................... 71

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CHAPTER-7 ......................................................................................................................................................73

FUTURE OUTLOOK ........................................................................................................................................73

7.1 Revenue ................................................................................................................................. 73

7.2 Market Share.......................................................................................................................... 73

7.3 GDP and Employment ............................................................................................................. 73

7.4 Prices..................................................................................................................................... 73

7.5 Technology ............................................................................................................................. 73

7.6 Upcoming Technology In telecom Sector ................................................................................. 74

7.7 Conclusion .............................................................................................................................. 74

APPENDIX-1 .....................................................................................................................................................76

APPENDIX-2 .....................................................................................................................................................77

APPENDIX-3 .....................................................................................................................................................78

APPENDIX-4 .....................................................................................................................................................79

APPENDIX-5 .....................................................................................................................................................80

APPENDIX-6 .....................................................................................................................................................81

BIBLIOGRAPHY...............................................................................................................................................82

List of Figures

Figure-1.1 Evolution of telecom sector………………………………………………………… 13

Figure-1.2 Evolution of telecom sector…………………………………………………………14

Figure:5.1 Promotional strategies………………………………………………………………..51

Figure:5.2 Hierarchy of effect model…………………………………………………………....56

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List of Tables

Table 5.1: Global Telecom sector revenue 2005- 2011…………………………………………………33

Table 5.2: Future World wide Telecom Industry Revenue in billions ( 2012-2020)…………………35

Table 5.3: Global telecom sector revenue 2005-20 09………………………………………………….36

Table 5.4:FutureIndian Telecom Industry Revenue in billions ( 2010-2020)………………………..38

Table 5.5 : Tele density 1989-2007 ( % of population)………………………………………………..41

Table 5.6 : Contribution to GDP 2004-2009…………………………………………………………..46

Table 5.7 : Direct Employment 2005-2007…………………………………………………………….47

Table 5.8 :% change in Direct Employment 2005-2007………………………………………………48

Table 6.1 : Ratio Analysis of Bharti Airtel…………………………………………………………….58

Table 6.2 : Ratio Analysis of Vodafone………………………………………………………………..60

Table 6.2 : Ratio Analysis of BSNL……………………………………………………………………63

Table 6.4 : Ratio Analysis of MTNL…………………………………………………………………..67

Table 6.5 : Ratio Analysis of HFCL…………………………………………………………………...70

Table 6.6 : Ratio Analysis of Aditya Birla telecom…………………………………………………..72

List of charts

Chart 3.1: World wide Telecom Industry Revenue in billions ………………………………………..20

Chart 4.1: Growth of subscriber base from 1991-2009 (millions)…………………………………..…22

Chart 4.2: Growth of wire line subscriber base from 2004-2009 (millions)………………………….23

Chart 4.3: Growth of wireless subscriber base from 2004-2009 (millions)………………………..…23
Chart 4.4 Growth of internet subscriber base from 2004-2009 (millions)……………………………….…..…24
Chart 4.5: Growth of broadband subscriber base from 2004-2009 (millions)……………………..…….….24

Chart 4.6: Growth of Tele density in India 2004-2009………………………………………………...25

Chart 4.7: Decline in Tariffs………………………………………….……………….……………...25

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Chart 4.8: Wireless (GSM and CDMA) Services 2004-2009………………………………………………26

Chart 4.9: Subscriber base of PSU Operators 1998-2009 (millions)…………………………………..…..27

Chart 4.10: Subscriber base of Private Operator 1998-2009 (millions)……………………………….….27

Chart: 5.1: Top seven operators GSM & CDMA services monthly net Addition Mar-09 –Feb10……29

Chart: 5.2: Top seven operators GSM & CDMA services monthly net Addition in %Mar-09 –Feb10..30

Chart: 5.3: Top seven operators Market share in % Mar-09 –Feb10…………………………………...31

Chart 5.4: All India subscriber base ………………………………………….……………….…….…….32

Chart 5.5 World wide Telecom Industry Revenue in billions(2005-2011) …………………………..….32

Chart:5.6 Future World wide Telecom Industry Revenue in billions ( 2012-2020)……….…………....35

Chart:5.7 Indian Telecom Industry Revenue in billion(2005-2009)…………………………………..…36

Chart:5.8 Future Indian Telecom Industry Revenue in billions (2010-2020)………………………..….38

Chart :5.9 % increase in sales in Global Scenario …………………………………………………….…..39

Chart :5.10 % increase in sales in Indian Scenario……………………………………………………..…40

Chart :5.11 Growth in tele density 1989-2007………………………………………………………….….41

Chart: 5.12: Trend analysis of tele density 1988-2008……………………………………………………….42

Chart 5.13 Market share region wise in world…………….……………………………………………..…..43

Chart 5.14 Market share region wise in India…………….…………………………………………………..44

Chart 5.15 Growth in subscriber base 1998-2009…………………………………………………………….45

Chart 5.16 Market share of public sector versus private sector 1998 & 2009…………………………………45

Chart:5.17 Contribution to GDP 2004-2009 …………………………………………………………………..46

Chart:5.18 Direct Employment 2005-2007…………………………………………………………………….47

Chart:5.19 Market share of wireless operators……………………………………………………………….53

Chart:5.20 Market share of GSM operators……………………………………………………………………54

Chart:5.21 Market share ofCDMA operators………………………………………………………………..55

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EXECUTIVE SUMMARY

The Indian telecommunication industry is one of the fastest growing telecommunication industries in
the world. Day by day the technology is becoming more advanced. The competition is also
increasing as many companies have entered in the telecom sector. Now the companies are trying to
retain their customers by providing various offers. They are trying to make their customer loyal.
Now fixed line and mobile has become essential necessity for Indian people. The fixed line
telephony is categorized as fixed wire line and fixed wireless telephony. GSM (Global System for
Mobile Communication) and CDMA (Code Division Multiple Access) technologies are used in the
Indian mobile sector.

BSNL is the leading public sector undertakings players and Bharti, Vodafone, Tata, Reliance, Idea
are the leading private sector players. Indian telecom sector is the second largest mobile network in
the world after China.

There is the chance to grow for the telecom equipment manufacturer with the growth of Indian
telecom sector. Today the industry offers services such as fixed landlines, WLL, GSM, CDMA, IP
services etc. to the customers. BSNL, Bharti Airtel, Reliance Communication, Vodafone, Idea, Tata
are some of the companies those are expected to grow in this sector. The Indian consumers are
enjoying wide range of services at the lowest tariffs in the world. The Indian telecom sector is
growing by adding around 15 million connections per month. It has achieved 429.72 million
subscribers in India as on 31st March 2009. The teledensity was 36.98 percent at the end of March,
2009. The growth in the telecom sector has come in the backdrop of increased competition in the
market leading to cheap call rates which are the lowest in the world. Despite enjoying the lowest
tariffs in the world, call rates are set to fall further as operators are set to ignite several rounds of
price wars as they expand their offerings. The idea of the government of India is to help modern
telecommunication technologies to serve all segments of India‟s culturally diverse society, and to
transform it technologically aware people and with TRAI, DoT and NTP‟s.

The Indian telecom sector is playing an important role in social relationships. In recent years, the
popularity of SMS and social networking sites has been increased dramatically. It has increased the
public ability to access to music and film and also transform the way people receive their news. The
role is to gain more important in the coming years with the Vision India 2020.

The vision of telecommunication in 2020 is a vision of information society built on an edifice where
IT and telecommunication merge. There will be striving to spread the benefits to rural sector. More
emphasis will be put on developing the human capital, infrastructure and building capabilities and
capacity for growth. The future is visible with the advent of Web 2.0 and MVNO and strategies like
developing strong partnership skills, focusing on customer user groups, embracing internet services
will only be enable the players to thrive well into the future.

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CHAPTER-1

INTRODUCTION

1.1 Overview of Telecom sector

The history of telecommunication industry started with the first public demonstration of Morse‟s
electric telegraph, Bealtimore to Washington in 1844. In 1876 Alexander Graham Bell filed his
patent application and the first telephone patent was issues to him on 7th of March.

In the mid 1890s several key Bell patents expired and the country emerged from a depression which
caused independent (non- Bell) companies to proliferate. Bell companies controlled less than half of
the phones in America by 1903. More than half of incorporated towns and cities had more than one
service.

There was no exact reason why these independent companies could not struggle. There might be
high competition with high fixed costs and low marginal costs associated with telephone network.

In 1900, merely 3 percent of all calls were long distance. Many phone companies did not even offer
long distance services. They made their money on short distance toll services. Local phone
companies found that it was very profitable to combine adjacent towns and extend their reach.
Some businesses were willing to pay more for long distance services in urban areas. At first Bell
allowed only its affiliates to have access to its long distance network. But later it opened up to non-
affiliated companies.

In 1913, telegraph was popular way of communication. AT&T commits to dispose its telegraph
stocks and agreed to provide long distance connection to independence telephone system.

Bell System grew more under the name of AT&T. Many of today‟s companies face such issues as
faced AT&T hundred years ago.

In 1956 the final judgment limited the BELL system to common carrier communications and
government projects but preserving the long-standing relationship between the manufacturing,
researches and operating arms of the Bell system. In this judgment AT&T retained bell laboratories
and western Electric Company. This final judgment brought to a close the justice department seven
year old antitrust suit against AT&T and western Electric which sought separation of the bell
system manufacturing from its operating and research functions. AT&T was still controlling the
telecommunication industry.

It was telecommunication act of 1996 that true competition was allowed. The act of 1996 opened
the market to all competitors. AT&T being the first telecommunication company paved the road for
the telecommunication industry as well as set the policy and standards for others to follow.

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1.2 Beginning of Telecommunication in India

 1851 First operational land lines were laid by the government near Calcutta

 1881 Telephone services introduced in India

 1883 Merger with postal system

 1923 Formation of Indian Radio Telegraph Company

 1932 Merger of ETC and IRT into India Radio and Cable Communication Company

 1947 Nationalization of all foreign telecommunication companies to form the posts,
telephone and telegraph.

 1985 Department of telecommunication was established to provide domestic and long
distance services

 1986 Conversion of DoT into two wholly government – owned companies the VSNL
for international telecommunication and MTNL for services in metropolitan areas.

 1997 Telecom regulatory authority of India (TRAI) created

1.3 Regulatory framework

The Telecom Regulatory Authority of India (TRAI) was set up in March 1997 as a regulator for
telecom sector. The TRAI’s functions are recommendatory, regulatory and tariff setting in telecom
sector. Telecom Disputes settlement and Appellate Tribunal (TDSAT) came into existence in May
2000.TDSAT has been empowered to adjudicate any dispute.

 Between a licensor and a licensee
 Between two or more service providers
 Between a service provider and a group consumers
 Hear and dispose of appeal against and direction, decision or order of TRAI.

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1.4 Scope of Telecom sector in India

Telecommunication is important not only because of its role in bringing the benefits of
communication to every corner of India but also in serving the new policy objectives of improving
the global competitiveness of the Indian Economy and stimulating and attracting Foreign direct
investment.

Indian telecom is one of the fastest growing telecom markets in the world. In telecom industry,
service provider are the main drivers, whereas equipment manufacturers are witnessing growth and
decline in successive quarters as sale is dependent on order undertaken by the companies.

World telecom industry is going to be a booming industry.

1.5 Evolution of Telecom sector in India

PHASES OF EVOLUTION OF TELECOM SECTOR IN INDIA

Figure 1.1
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1.5.1 Phase:1 (1980-89)
Private sector companies penetrated the telecommunication market in 1984.Various kind of
equipment related to telecom sector started being manufactured.MTNL was formed to promote
communication in the metro city Delhi and Videsh Sanchar Nigam Limited (VSNL) got started in
1986 to enable communicate abroad. In 1989 telecom commission was set up to regulate the
telecom sector

1.5.2 Phase 2 ( 1990-99)
Liberalization of Indian economy and open competition was allowed. TRAI that‟s is Telecom
Regulatory Authority was established in 1997.New Telecom Policy (NTP) was announced in 1999
to regulate various companies and have control on Tariffs to meet Indian customer needs.

1.5.3 Phase 3 (2000-2006)
BSNL was established in 2000 to have STD connection all over India. It was great initiative to
connect whole India. National and International long distance services came into competition.
License fees were reduced. Internet telephony and CDMA technology was initiated in 2000. In
2002 VSNL was privatized and BSNL launched mobile services. Calling party pays was initiated
in 2003 and broad band policy was formulated in 2004. In 2005 FDI increased from 49% to
72%.Concept of number portability was introduced in 2006.

1.6 Role of Telecom sector in Indian Economy

Figure 1.2
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India telecom sector basically benefited in two broader perspectives

1.6.1 Direct Benefits

 It contributes to Indian GDP
 It generates revenue for nation thus increasing the national income
 It provides employment

1.6.2 Indirect Benefits

 It improves the existing flow of information system
 Access of information in a simplified manner
 Increase the speed of services
 Increases [productivity of business through voice and data services

1.7 Objectives of study

 To study telecommunication sector and its growth in depth, and analyze where we would
be in a position to define the future trend of telecomm sectors, future outlook and how it is
going to impact both Indian and world economy.

 To compare Private sector and public sector in regards to telecom sector to understand
who would be the market leader in future. Will private company eat away the market
shares of public sector?

 To analyze top 3 and bottom 3 companies in details in concern to financial, market share,
opportunities, threats and other statistical analysis.

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CHAPTER-2

REVIEW OF LITERATURE

Anderson (2008) in his interview titled “Developing a route to market strategy for mobile
communication in rural India An interview with Gurdeep Singh, Operations Director,
Uttar Pradesh Hutch India” suggests that managers should help the poor people other than
traditional approach. He also suggested that innovation should be taking in consideration to
develop the market. He said that Hutchison Essar in India had provided good lessons for
mobile network operators and for other firms also to serve the rural people in a better way. The
company had built good relationships with individual entrepreneurs. The company had seen
the opportunity to capture the rural market.

http://www.emeraldinsight.com/journals.htm?articleid=1747159&show=abstract

Mani (2008) addresses many issues those are arising in the mid 1990s. He discusses about
spillover effect for the rest of the economy. There is another important effect to develop
major manufacturing hub in India for telecom equipment and semiconductor devices. Slowly
telecommunication services will be the reason for the growth of the manufacturing sector. The
formation of a Telecom Equipment Expert Forum and the announcement of the Indian
semiconductor policy 2007 show the steps towards this direction.

www.imdb.com/title/tt1308183/

Shah (February, 2009)analyzed Indian telecom sector basically for the three companies
named Bharti, Reliance Communication, idea in the basis of global meltdown. It showed
there is no sign of meltdown in this sector but there is turmoil. In the near future the wireless
technology will penetrate in the market and it will help to grow for the market. The growth
will be sustained by the adoption of 3G technology in the market. It also showed the
competition the industry will face in the future. The article also described how it will be safe to
be in this industry. Therefore the growth can be restricted.

www.scribd.com/doc/28299597/telecommunication-sector

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Chowdhury&Datta in their article “Indian Telecom: Regulation, Spectrum, Allocation and
Dispute Management” suggests that dispute settlement is very important area of focus for the
growing telecommunication industry. The standard practice of dispute regulation in this sector is
regulatory adjudication. Policy makers should improve this mechanism by focusing on the partitioning
of judicial functioning for the area of regulation, antitrust measures and consumers‟ disputes. Dispute
can be resolved by the involvement with private bodies in arbitration and negotiation. It is alleged that
the regulation mechanism in India is politically driven bias. Since the regulatory body is appointed by
the Government, political influence cannot be avoided. It can be reduced by the participation of non-
official bodies. Many countries such as USA, Australia, Jordan, Hungary etc. have an attribution
system in place. Many countries dispute settlement is considered it as a separate area of regulation.
Indian telecom sector is growing and attracting huge investment as mobile set has become an essential
part of human life. The news of 3G auction has made interested big foreign firms. There should be
well-designed dispute settlement machinery so that the growth of Indian telecom industry would not
be affected because of legal conflicts.

Indian Telecom: Regulation, Spectrum, Allocation and Dispute Management

IIMB Management Review Vol. 21 No 4 December 2009.

Datta, Chatterjee and Goswami in their “Introduction of 3G Technology in India – Probable
Scenario” says that though 3G technology has come in India with BSNL but the future path is still
uncertain. The strong side of it is the large telephony market and the population of youth. The majority
of the India population is youth and youths are more receptive to new technology compared to the old
generation. The flip side is they will not adopt 3G technology if it is charged more because the per
capita income level of India is low. It is found from international experience that the revenue of NTT
DoCoMofor for 3G services was low as compared to 2G services because they charged for 3G
services less than 2G services. The revenue of the services of 3G technology is not well because of
high license fee, infrastructural cost, and hand over between 2G and 3G. As BSNL and MTNL are the
first mover in 3G technology this is terrain for them. But the second mover will have much more
advantage as they will have all the related information.

Introduction of 3G Technology in India – Probable Scenario

Survey – A Management Research Journal of IISWBM – India’s First B – School

Volume 49, No. 3 & 4, July – December, 2009

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Narayana in his article “Telecommunication services and Economic Growth: Evidence from
India” calculates approximately that the aggregate economic growth of India will be contributed by
the telecommunication services. A sample survey had been done in Karnataka state in India. Here the
price and income are the determinants for the demand for telecom services. Gross earning of telecom
provider is an important determinant of value added by telecom services in Indian GDP. It is found
that negative price elasticity of demand and positive income elasticity of demand for telecom services.
It showed that non-economic factors influence demand including non-awareness of the usage and cost
of VAS (Value Added Services). Indian telecom is focused on privatization, deregulation, and
competition since 1991. Private Service operators are growing in the market of mobile telephony.
International and domestic long distance calls have been fallen. India‟s public sector of
telecommunication is growing by providing Value Added Services.

http://www.e.u-tokyo.ac.jp/cirje/research/dp/2008/2008cf545.pdf

Report of the working group on the telecom sector (for the tenth five year plan 2002-2007) says
that as the telecom sector is increasing fast. The telecom densities will be achieved by the end of
March 31, 2007 11.5 percent of the population at the national level, 3 percent for the rural area, and
30.74 percent for the urban areas. Universal service is not going to pay for the planning of phones in
the rural areas. The new technologies are very expensive as loading is less expensive than
economically optimal in the rural areas. The capital cost of fixed telephony is also high because of
operational and maintenance costs but the revenue is not good enough. Due to this, many operators are
not willing to provide their service in the rural areas.

http://planningcommission.gov.in/aboutus/committee/wrkgrp/wg_telecom.pdf

Melling in his study “PRICE CAP REGULATION IN THE NEW TELECOM SECTOR” says
that the effects of price cap regulation on fixed line telecom during 1996-2005, and on mobile telecom
during 2001-2005. The fixed line price cap regulation impacts industry productivity growth
significantly. Price caps on telephone reduce penetration rates. There are two reasons for these
findings. First, countries which have mobile price caps regulation policies demonstrate a 53.93 percent
lower number of subscribers per 100 inhabitants, at the 1 percent significant level. Second, it is very
difficult to penetrate mobile in developing economies. There will be a negative effect on economy
growth by mobile telecom price caps if mobile telecom industry will slow down. When many
governments felt it is ineffective due to lack of competition within the industry, price caps were
developed and used. The telecom competition has changed when mobile telecom usage came in the
market. As competition rises there need policy makers to regulate the telecom industry. It is essential
to allow the market to determine the price in the developing countries.

http://www.ryerson.ca/economics/seminars/MRP-Mark.pdf

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CHAPTER-3

GLOABAL SCENARIO

3.1 World Telecom Sector

The telecom sector plays a vital role in the economic growth. In the beginning the U.S. telephone
services was provided by American Telecom and Telegraph (AT&T).

Later AT&T was proving long distance connections to the other companies. During the same
period Great Britain‟s national telephone company was sold to private investors as was Japan‟s
NTT telephone monopoly. In the recent year the world‟s policy makers have recognized that
telecom provides key inputs for:

 Economic Development
 Contributes to global integration
 Enhances public sector effectiveness
 Efficiency and transparency

3.2 Growth of Telecom sector world wide

The telecom industry has become a global combination industry. An industry is called combination
industry when it combines the other industry‟s product to serve its customers.

The telecom industry is serving their customers by transporting electronic communications which
is combining with computers, media and publishing products before being sold to its customers.
There are many examples of telecommunication combinations. EDS offers combinations
networking with its data center management and re-engineering services. AOL Time Warner
provides networking, news, online shopping and entertainment.

Nippon Telegraph and Telephone (NTT) provides multimedia services as part of its global telecom
business. Over the last decades the fixed line operators are affected as the customers are using
email, online chat, and mobile text messaging instead of traditional phone calls.

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Chart 3.1: World wide Telecom Industry Revenue in billions

Source:: http://www.3g.co.uk/PR/Dec2005/2388.htm

Next Generation Telecommunications has become very important for the emerging digital
economy. Some important services depend on NGT such as tele-health, e-education, e-business,
digital media, e-government, environmental applications like smart utility meters. NGT will take
the form of wireless NGNs i.e. LTE/WiMAX.

3.3 Major Players in world market

3.3.1 AM Stereo
In 1959 Petition was filled with FCC to adopt AM stereo standards. In 1970
Magnavox,Motorala,Harris,Belar & Kaln started competing In 1980 Magnavox was allowed In
1982FCC declared “let the market decide” .Later General Motors Electronic division picked the
Motorola AM stereo system.
It was not cost effective.30% percent of radio station cited market confusion to use AM stereo.
Moreover there were insufficient Audience. As a result AM stereo got extinct.

3.3.2 Digital Wireless Phone
Europe with a standard war in US. Europe adopted widely GSM (Global system mobile
communication.US adopted GSM, TDMA, CDMA Now some say that US is 5 years behind Europe
in wireless technology but some say CDMA technology was superior. Ericson: champion
TDMA.Qualcomm: Created CDMA.Motorala had disappeared: created FDMA .Switching to other
technology needed to but new handsets that was expensive Users of one system could make call to
other system they could come up with handset where they could use both GSM & CDMA
technology. Consumers need not care that which systems they are using. So GSM & CDMA system
had to go hand in hand, wherever one goes.

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3.3.3 Rockewell Lucent

The battle lines were drawn between Rockwell/Lucent & U.S. Robotics over the advent of the
path breaking 56k modem.56k modems was an epoch making innovation. The existing 28.8 kbps
modem had been in place for long & observers believed that there can be no advancement in the
near future. Integrated service digital network(ISDN) was not the savior everyone expected it to
be. The concept of asymmetric flow of information (downloading) lead to the advent of
56k.Consumers were unhappy about the limited speed offer by 28.8k The market was a growing
one ($5 billion) & 56k had the advantage of compatibility

U.S. Robotics controlled 25% of modems & had strong brand name. Rockwell the main
advantage was the manufacturing of chips the components of modem.U.S. Robotics introduced
X2, it signed up with big time ISP.3COM‟S acquisition of U.S. Robotics strengthen U.S.
Robotics' position

Rockwell & Lucent launched “K56flex” brand.it also entered into a merger alliance with topnotch
modem manufacturers. Both U.S. Robotics & Rockwell tried influences to gullible customer with
an open advertisement welfare. False information regarding so called supremacy furnished in
their respective websites was busted by pc world‟s provides were in favor of U.S. Robotics' X2
while households reposted their faith in Rockwell technology.

No one take advantage of the high speed that was offer. Compatibility issues were sorted out &
both rivals promised to make their modems compatible with ITU standard. Thus in December
1997 the ITU come up with v90 standards & both 3com & Rockwell reached on agreement over
the nitty-gritty of standards.3COM‟S stock jumped dramatically while modest gains were
reported in Rockwell's stocks. The sale of modem reached a zenith with sales of modems rising
from 10.8 million in 1997 to 33 million in 1998.

3.3.4 AT&T

In 1913, telegraph was popular way of communication. AT&T commits to dispose its telegraph
stocks and agreed to provide long distance connection to independence telephone system.

Bell System grew more under the name of AT&T. Many of today‟s companies face such issues
as faced AT&T hundred years ago.

In 1956 the final judgment limited the BELL system to common carrier communications and
government projects but preserving the long-standing relationship between the manufacturing,
researches and operating arms of the Bell system. In this judgment AT&T retained bell
laboratories and western Electric Company. This final judgment brought to a close the justice
department seven year old antitrust suit against AT&T and western Electric which sought
separation of the bell system manufacturing from its operating and research functions. AT&T
was still controlling the telecommunication industry.

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CHAPTER-4

CURRENT INDIAN SCENARIO

4.1 Overview of Indian Telecom sector

Chart 4.1: Growth of subscriber base from 1999 to 2009 (in million)

Growth of subscriber base from 1999 to 2009
(in million)

429.72

300.49
206.83
140.32
75.54 98.41
36.29 44.97 54.62
22.81 28.53
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: TRAI

The telecom sector is growing very fast in India. It has become the second largest telecom network
in the world after China. TRAI has introduced significant policies. It let the telecom sector from
monopolistic to open market for competition. The Indian consumers are enjoying wide range of
services at the lowest tariffs in the world. The Indian telecom sector is growing by adding around
15 million connections per month. It has achieved its target of 500 million before the targeted date.
There were 6.22 million broadband subscribers and 11.09 million internet subscribers as on 31st
2009.

The total subscriber base (both wireless and wire line) of telecom sector has achieved 429.72
million subscribers in India as on 31st March 2009.

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4.2 Wire Line
Chart 4.2: Wire line Subscriber in million

Wireline subscriber in million
41.43 41.54
40.75
40.09
39.42

37.96

Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09

Source: TRAI

The subscriber base was 37.96 million subscribers as on 31st March 2009. It was decreased by 1.46
million subscribers from the last year. The urban wire line subscribers are 27.38 million out of
37.96 million and the rest are the rural subscribers.

4.3 Wireless Subscriber
Chart 4.3: Wireless Subscriber in million

Wireless subscriber in million
391.76

261.07

165.11

90.14
52.22
33.69


Source: TRAI

The wireless subscriber base was 391.76 million at the end of March, 2008. 130.69 million
Subscribers are added over the last year. It shows 50 percent growth rate.

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4.4 Internet Subscriber

Chart 4.4: Internet Subscriber in million

Internet subscriber in million

13.54

11.09
9.27
6.94
5.55
4.55


Source: TRAI

The internet subscriber base was 13.54 million as on 31st March 2009. The annual growth rate is
around 22.09 percent over the last year.

4.5 Broadband subscriber
Chart 4.5: Broadband Subscriber in million

Broadband subscribers
6.22

3.87

2.34
1.35

0.18

Mar-05 Mar-06 Mar-07 Mar-08 Mar-09

Source: TRAI

The total broadband subscriber was 6.22 million as on 31st March, 2009. It was 3.87 million in the
previous year. So the growth rate is 60.72 percent over the last year.

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4.6 Teledensity at India

Chart 4.6: Growth of Teledensity

Growth of Teledensity
40
36.98
35
30
25 26.22

20
18.23
15
12.86
10 9.08
7.04
5
0

Source: TRAI

The teledensity was 36.98 percent at the end of March, 2009. In the last year it was 26.22 percent.
It has been increased by 10.76 percent.

4.7 National Long Distance Service

Chart 4.7: National Long Distance Service % Decline in Tariffs

National Long Distance Service
% decline in tariffs
0%
-10%
-20%
Distance slabs

-30%
-40%
-50%
-60%
-70%
-80%
-90%
-100%
51-100 101-200 201-500 501- Above
Kms Kms Kms 1000Kms 1000Kms
Series1 -62% -75% -87% -90% -94%

Source: TRAI
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The percentage decline shown above takes into account current STD rate of Rs. 1.20 for 2 minutes
in BSNL‟s General Plan. The decline would be more if the comparison is made with India One
Plan where STD rate is Re. 1 for 2 minutes irrespective of distance slab.

4.8 Wireless (GSM and CDMA) Services

. Chart 4.8: Subscriber Growth of Wireless Services in million

Subscriber growth of wireless services
297.26

192.7

120.4
94.5
69.19 68.37
41.07 44.64
26.15 20.95
7.54 11.15


GSM CDMA

Source: TRAI

There were 297.26 (75.88%) million GSM and 94.50 (24.12%) millions of CDMA subscribers at
the end of the financial year 2008-2009. Around 130.69 million subscribers were added during the
financial year 2008-2009 and it shows the growth rate of 50.06 percent over the last year.

4.9 Growth in subscriber of PSU operators

The policies and regulatory regime are established by the Government and it regulated to grow the
Public Sector Undertakings and private sector operators. The growth in subscriber of PSU
operators are 71.73 million where 17.18 million are fixed subscribers and 54.51 million are mobile
subscribers. The below figure shows the growth in subscriber of PSU operators

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Chart 4.9: Subscriber Base of PUS Operators

Subscriber base of PSU Operators
89.54
79.55
71.4
61.08
52.08
46.98
43.17
38.16
32.44
26.51
21.59
17.8

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: TRAI

4.10 Growth in subscriber of private operators

Chart 4.10: Subscriber Base of Private Operator

Subscriber base of Private Operator

340.18

220.94

134.46

79.24
46.33
30.66
0.88 1.22 2.02 3.85 6.81 11.45

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: TRAI

The growth in subscriber of private operators is 340.18 million where 10.67 million are fixed
subscribers and 329.51 million are mobile subscribers. The above figure shows the growth in
subscriber base of Private operators

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CHAPTER-5

ANALYTICAL FRAMEWORK

5.1 GSM and CDMA technique

5.1.1 GSM (Global System for Mobile Communications)

 80% of the global market uses this standard.
 It is used over 1.5 billion people across globe
 Across 212 countries and territories
 It differs from its predecessor technologies in both signaling and speech channels. It is a
part of 2G second generation mobile system

5.1.2 Benefits of GSM over CDMA

 Low cost in short message service (SMS)
 Wider coverage
 Ability to roam and switch carriers without replacing phones.

5.1.3 Code division multiple access (CDMA)

 Allows several users to access within same frequency.
 Mainly used in radio communication & other telematics communication.

5.1.4 Benefits of CDMA over GFSM
 Efficient usage of frequency band
 Flexible allocation of bandwidth to subscribers
 Broad range of spectrum

5.1.5 Major players of CDMA and GSM in Indian Market

 Idea
 Vodafone
 TATA
 Reliance
 BSNL
 Airtel
 Aircel

Airtel and Aircel had a major market share in the GSM and CDMA market in the year 2010 with
less in case of Reliance & Idea.
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Chart 5.1: Top Seven Operators – GSM + CDMA – Monthly Net Additions

Source:: http://telecomblogs.in/?p=776

The chart shows the monthly net income addition of Top 7 operators in regards to aggregate of
GSM and CDMA services in India. The maximum addition has been done by AIRTEL followed
by AIRCEL. Where as RELIANCE,TATA & IDEA had lesser monthly income compared to
Vodafone and BSNL.

5.2 Indian Telecom Industry Statistics (Mar09-Feb10)

 MARCH 09-FEB 10, top 7 GSM + CDMA telecom have added more than 100 million
sub baseswhich near about 20% of total wireless sub-bases in India.

 IDEA,TATA & AIRCEL were stable but all other like AIRTEl,VODAFONE,BSNL &
RELIANCE were making loss of market share in last financial year(2009).

 The growth of TATA Teleservices was quite high in terms of subscribers addition per
month which was taken over by Vodafone in February 2010.

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Chart 5.2: Top Seven Operators – GSM + CDMA – Monthly Net Additions in %age


1. TATA & AIRCEL showed a stable monthly addition over last year

2. Whereas Vodafone RELIANCE & IDEA were fluctuating a lot in the fiscal year.

3. The % addition of BSNL and AIRTEL was quite stable

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Chart 5.3: Top Seven Operators – GSM + CDMA Mobile & FWT – Market Share in %age


1. In GSM + CDMA technology Vodafone, Airtel & RELIANCE occupied the major market
share in the last fiscal year 2009.

2. Vodafone around 23%, Airtel around 18% and Reliance around 19%.

3. Followed by BSNl around 13% ,Idea around 10%/Least was the market share occupied by
AIRCEL among top 7 players.

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Chart 5.4: All India Wire line Subscriber Base

Source:: http://telecomblogs.in/wp-content/uploads/2010/04/6.jpg

 If we look at the charts below, you can find out how Tata (GSM+CDMA) has clearly
dominated the sub addition scene in later half of year 2009.

 In Broadband category, India has 80 lacks BB subscriber at the end of Feb-10, as
compared to 58 lacks in Mar-09. In implies only 2 million BB subscriber additions during
one year period.

5.3 Global Telecom trend Analysis (2005 – 2020)

Chart 5.5: World wide Telecom Industry Revenue in billions


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 The revenue has significantly increased by 42% over last 5 years.
 In 2011 the revenue of world wide telecom go about 3156 billion US $.

5.3.1 Regression Analysis

STEP:1 Getting the scattered diagram from chart:5.4

Table 5.1 World Telecom Revenue in US $

Revenue in
YEAR
billion US $
2005 1851
2006 2085
2007 2320
2008 2547.4
2009 2764.5
2010 2968.8
2011 3156

Chart 5.5.1: Scatter Diagram of table 5.1

1400

1200

1000

800

600

400

200

0
2004.5 2005 2005.5 2006 2006.5 2007 2007.5 2008 2008.5

STEP:2 Joining the lines in the scatter diagram ( Revenue in Billions)

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Chart 5.5.2: Straight line of scatter diagram

1400

1200

1000

800

600 y = 187.41x - 375057
R² = 0.991
400

200

0
2004.5 2005 2005.5 2006 2006.5 2007 2007.5 2008 2008.5

5.3.2 Equation of Trend

Through regression analysis equation of above trend from 2005 to 2011 was found

TREND TYPE: Straight line ( Increasing function)

y = 218.83x – 436873 R² = 0.9985

 Y : Is the total sales revenue generated
 X : The year
 R² : Correlation coefficient
 R² > 0.8 indicates that the relation is strong enough to justify the trend.

STEP:3 Substituting the future values in the same equation.

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Table 5.2 World Telecom expected Revenue in US $

Revenue in
YEAR
billion in US $
2012 3412.96
2013 3631.79
2014 3850.62
2015 4069.45
2016 4288.28
2017 4507.11
2018 4725.94
2019 4944.77
2020 5163.6

Chart 5.6: Future World wide Telecom Industry Revenue in billions ( 2012-2020)

4944.77 5163.6
4725.94
4507.11
4288.28
3631.79 4069.45
3850.62
3412.96

2012 2013 2014 2015 2016 2017 2018 2019 2020

 The revenue will significantly increased by 37% over last 5 years.
 In 2011 the revenue of world wide telecom go about 5163 billions US $.

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5.4 Indian Telecom Trend Analysis ( 2005 – 2020)

Chart 5.7: Indian Telecom Industry Revenue in billions


 The revenue has significantly increased by 48% over last 4 years.
 In 2009 the revenue of Indian telecom go about 1524 billions US $.

STEP:1 Getting the scattered diagram from chart:5.7

Table 5.3 Indian Telecom Revenue in US $

Revenue in
YEAR
billion US $
2005 716
2006 867
2007 1053
2008 1291
2009 1524

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Chart 5.7.1: Scatter Diagram of table 5.3

1400

1200

1000

800

600

400

200

0
2004.5 2005 2005.5 2006 2006.5 2007 2007.5 2008 2008.5

STEP:2 Joining the lines in the scatter diagram

Chart 5.7.2: Straight line of scatter diagram

1400

1200

1000

800
y = 187.41x - 375057
600
R² = 0.991
400

200

0
2004.5 2005 2005.5 2006 2006.5 2007 2007.5 2008 2008.5

5.4.2 Equation Of Trend


TREND TYPE: Straight line ( Increasing function)

y = 204x – 408338 R² = 0.9915

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 Y : Is the total sales revenue generated
 X : The year
 R² > 0.8 indicates that the relation is strong enough to justify the trend.

STEP:3 Substituting the future values in the same equation.

Table 5.4: Indian Telecom expected Revenue in US $

Revenue in
YEAR
billion in US $
2010 1702
2011 1906
2012 2110
2013 2314
2014 2518
2015 2722
2016 2926
2017 3130
2018 3334
2019 3538
2020 3742

Chart 5.8: Indian Telecom Revenue generated in US $

Indian Telecom Revenue generated in US $

3538 3742 3742
3130 3334
2722 2926
2314 2518
1906 2110

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2020

 The revenue will significantly increased by 34% over last 5 years.
 In 2011 the revenue of world wide telecom go about 3742 billions US $.

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5.5 Percentage Increase/Decrease Trend of Sales

% increase = 100 X ( Current Year sales - Previous Year sales ) / Previous year sales

Chart 5.9: % increase in sales in Global Scenario (calculated from chart: 5.5 & 5.6)

( Y:axix-> % increase/decrease)

12

10

8
Axis Title

6

4

2

0
2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Axis Title

1. There has been substantial decline in the rate of increased sales.

2. However there is spike in between 2010 to 2014 indicating that that the revenue will
increase by 2012 and then it would come down to a normal rate by 2014.

3. The trend that it is following is a linearly decreasing function with rate of decrease as
0.444 part of revenue.

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Chart 5.10: % increase in sales in Global Scenario (calculated from chart: 5.7 & 5.8)

( Y:axix-> % increase/decrease)

20
18
16
14
12
10
8
6
4
2
0
2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

1. There has been substantial decline in the rate of increased sales.

2. However there was spike in between 2006 to 2010 indicating that that the revenue will
increase by 208 and than it would come down to normal rate by 2010

3. The trend that it is following is a linearly decreasing function with rate of decrease as
0.965 part of revenue.

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5.6 Trend Of Teledensity Growth

Chart 5.11: India’s Growing Teledensity

Source:http://www.trai.com/2288.htm

 The teledensity increase over time
 However it started accelerating at a higher rate after 2001 taking a exponential curve
from linear line.
 In 2007 the teledensity was 11.4%
 It has increased by 22 times compared to that in 1989

Table 5.5 Teldensity in India

TELEDENSITY
(percentage of
YEAR population)
1989 0.5
1991 0.6
1993 0.8
1995 1.1
1997 1.6
1999 2.3
2001 3.6
2003 5.1
2005 11.4
2007 22

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Chart 5.12: Telendensity trend in India

25

20

15 y = 9E-179e0.2056x
R² = 0.9674

10

5

0
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

TREND TYPE: Exponential


y = 9E-179e0.2056x

R² = 0.9674

 Y : Is the teledensity
 X : The year

R² > 0.8 indicates that the relation is strong enough to justify the trend.

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5.7 Market Share On Regional Basis

World telecom Industry is an uprising industry, proceeding towards a goal of achieving two third of
worlds telecom connections. Over the past few years‟ information and communications technology
has changed in dramatic manners and as a result of that world telecom industry is going to be a
booming industry. Substantial economic growth and mounting population enable the rapid growth of
this industry.

 The world telecom industry is expected to grow by 11%
 The total revenue earned from this industry is 3% of the gross world economy
 16.9% of the world population has access to internet.

Chart 5.13: Market Share Region Wise in World

Source:: http://www.trai.com

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Today the industry offers services such as fixed landlines, WLL, GSM mobiles, CDMA and IP
services to customers. AIRTEL, RELIANCE, TATA, Vodafone, IDEA, SPICE are some of the
companies that are expected to grow in this sector. The robust countries teledensity is 35.62%.

 About there are 36 phone connections for every 100 people in India
 India has over 375.74 million mobile connections.

Chart 5.14: Market Share Region Wise in India


The Indian telecom services with 203 million connection is the 3rd largest Telecom network in the
world & 2nd largest among the emerging economies of Asia. Today, it is one of the fastest growing
markets in the world. The Telecommunication sector continued to register significant success during
the year and has emerged as one of the key sectors responsible for India‟s economic growth

 Telecom sector in India comprises 3% of India‟s GDP alone. Likely to be double by
2012.
 Telecom services contribute 30% of India‟s Total Tax revenue.
 Indian Telecom sector gives direct employment to more than 4, 00,000 people compared
to 6, 00,000 people in china.

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5.8 Growth In Subscriber Base

Chart 5.15: Growth in Subscriber Base in million


This rapid growth has been possible due to various proactive and positive decisions of the
Government and contribution of both the public and private sector. The rapid strides 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.

5.8.1 Public Sector versus Private Sector

Chart 5.16: Market Share of Public & Private Sector

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 Initially in the introduction stage public sectors company like BSNL, MTNL held the major
share in the market. It accounted for 95% of total telecom market.
 But with time governments act of allowing competition in telecom sector & allowing other
telecom sectors over the globe to enter India has changed the trend in India. Most of the
telecom subscriber in Indian Metro cities are private companies like Airtel, Reliance,
Vodafone, Idea etc. 20.8% of total market share is captured by private company.
 Still the rural areas are dominated by public sector landlines & BSNL/MTNL services.

5.9 Share of Telecom Sector to India GDP

Table 5.6: Contribution to GDP

Gross
Contribution
Domestic
of telecom
YEAR Product at
sector to
factor cost (Rs
GDP (%)
bn)

2004-2005 2.52 28439
2005-2006 2.71 32006
2006-2007 2.83 37175
2007-2008 2.97 39345
2008-2009 3.08 400231

Source::http://www.dnb.co.in/IndianTelecomIndustry/OverviewTI.asp

Chart 5.17: Contribution to GDP

2008-2009

2007-2008

2006-2007

2005-2006

2004-2005

0 0.5 1 1.5 2 2.5 3 3.5

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1. Telecom sector is playing a major role in Indian GDP.In 2004 around 2.5 % came from this sector.
2. However now it constitutes 3.5% in 2009.
3. It expected that by 2015 it will constitute 3.5% of Indian GDP alone.

5.10 Employment In Public & private telecom sector

Table 5.7 Direct Employment

YEAR 2005 2006 2007
Government 394334 382,105 369035
Private 42,557 47,295 63736
Total 436,891 429,400 432771

Source:: http://www.dnb.co.in/IndianTelecomIndustry/OverviewTI.asp

Chart 5.18 : Employment in Government & Private

450000
400000
350000
Employment

300000
250000 Governement
200000 Private
150000
100000 Total
50000
0
2005 2006 2007
Year

So we can see that around 4, 00,000 plus employees are employed in telecom sector

 The number of direct employees for government sector has decreased by 3.2%
 The number of direct employees for private sector is increased by 22%
 The net employment has decreased by 0.46%

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Table 5.8 :% change in employment (calculated from Table 5.7)

% change 2005-2006 2006-2007 NET
Government -3.10117819 -3.42052577 -3.26085
Private 11.13330357 34.7626599 22.94798
Total -1.71461532 0.785048905 -0.46478

5.11 SWOT Analysis

5.11.1 Strengths

 There are many telecom vendors and operators who are providing their services to the
customers. So the customers have the option to choose any telecom operator.
 The industry is gathering many wireless subscriber bases.
 The consumers are willing to pay extra for cutting edge services
 As the FDI limit has been increased from 49% to 74%, the Indian telecom marketing
attracting foreign markets to invest.
 The telecom service providers have an equal level of platform throughout the country
because of the unified license regime
 The telecom industry is more advanced by its technology and easy to implement.
Recently the telecom industry has implemented 3G technology.

5.11.2 Weakness

 The lowest call tariffs in the world
 Every private operator depends on BSNL for providing them power grids and switching
station.
 They do not have enough reach to the rural areas
 The problem of limited spectrum availability and the interconnection charges between the
private and the state operators
 ARPU in India is very low comparative to the other developing nations.
 The congestion level is still high
 The portability of mobile number is another weakness
 Telecom sector is regulated by the government bodies, also there are many regulatory
authorities in India under whose regulation the mobile operators work.
 The infrastructure cost of telecom industry is very high.
 The customer retention power is very low. The customers change their service provider
very soon.
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5.11.3 Opportunity

 The rural market is very large. So the scope is very high in the rural market. BSNL wants
to provide their service to the rural market at affordable prices.
 The number of population without telecom service is very high in India.
 The population psyche is changing. Previously telecom services were thought as an
emergency but now it has become an essential part of life in India.
 The disposable income of Indian people is increasing even in rural areas. So the telecom
sector can get more customers by providing better value to the customers.
 The majority of Indian population is youth. As youths are more receptive to the new
technologies, the telecom sector can come up with the latest technologies.
 Broadband push – In order to further promote the use of internet in the country, the
government is taking proactive steps to develop this sector
 As there are less than 5 million internet connections, the telecom industry can come up
with better strategies in the coming years.
 There is huge scope to offer more Value added services.
 Foreign investment in form of equity or technology

5.11.4 Threats

 The telecom infrastructure is not good enough at a globally competitive tariffs
 The government policies are not simple.
 The service providers have to incur a huge initial fixed cost to make a mark in the rural
market. Achieving break even under these circumstances may prove to be difficult
 The political instability in a country hinders the growth of the sector.
 Due to the regular government and regulatory interference, the private service providers
are at a huge risk.
 The low cost service providers pose a threat to the other big players. For example Virgin
mobile to Airtel and Vodafone.
 The new technology can be substitute for the existing telecom services.
For example: E-mail, Voice Chat

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5.12 4 P’S of Marketing

5.12.1 Product/Service:

 Wire line
 CDMA mobile
 GSM Mobile
 Internet
 Broadband
 Carrier service
 MPLS-VPN
 VSAT
 VoIP services
 IN Services

5.12.2 Price:

For STD charges in mobile

 Same price all over India
 Also coming with no roaming charges

For local Call Charge

 1 paisa/sec ( is the most common scenario now)
 50 paisa/min

SMS

 Free sms packages both local and national
 Free offers with new sim cards

5.12.3 Place:

 Metros ( like MTNL)
 Urban &Cities ( like Vodafone, Airtel, Idea, Spice, Reliance)
 A part of Rural areas ( like BSNL)

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5.12.4 Promotion:

 TV advertisement
 telemarketing
 Newspaper
 Magazine
 Journals
 Bill Board
 Rebates & package offers

PROMOTIONAL STRATIGIES

Print
Public media
Relations/ Sales
publicity Promotion

Broadcast Product
media placements

Target
Audience
Internet/ Events and
interactive sponsorship

Direct Word-of-
marketing mouth
Out-of-
Point-of-
home
purchase
media

Figure:5.1

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5.13 SEGMENTATION, TARGETING, POSITIONING

5.13.1 Segmentation:

Market Segmentation

Some Telecom service operators operate in Indian market and some operators operate in the
global market. They are mass market players.

Geographic Segmentation

The market has 429.72 million subscribers who are from cities, urban, and a part of rural areas. If
the disposable income will increase then the growth of the market will increase. A major part of
rural areas is still uncovered.

Demographic Segmentation

 Sex: For all sexes
 Age: For every age
 Income: Medium to high
 Occupation: Any sector
 Religion: For every religion

5.13.2 Targeting

When telecom industry came into India, BSNL targeted the high income people. All the telecom
operators have targeted the metros, cities, and urban areas. BSNL is targeting to capture the rural
market with their vast coverage. Majority of the Indian population is youth. All the telecom
service operators are targeting the youths as they are more receptive to the new technologies.

5.13.3 Positioning

The Indian telecom industry positioned themselves with their better service by adding VAS and
the lowest tariffs in the world.

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5.14 Market Share Analysis And Trend Based On Private And Public Sector

5.14.1 Market share of wireless operator
The market share of different mobile operators as on 31st March 2009 is shown in below fig.

Chart 5.19: Market share of wireless Operators (%) as on 31st March 2009

Market share of wireless Operators (%)
as on 31st March 2009

Aircel MTNL
4.72% 1.14%

Tata Bharti
8.96% 23.97%
Idea
9.93% Sistema
Spice 0.15%
1.05%
BSNL Reliance
13.31% 18.55%

Vodafone
17.55%

Loop
0.55% HFCL
0.10%

Source: TRAI

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5.14.2 Market share of GSM operators

There were 297.26 million GSM subscribers in the wireless segment at the end of financial year
2008-2009. It added around 104.56 million subscribers during this year. The below figure shows
the market share of GSM operators as on 31st March 2009

Chart 5.20: Market share (%) of GSM operators as on 31st March 2009

Market share (%) of GSM operators

BSNL
Vodafone 15.71%
23.13%
Idea
13.08%

Bharti
31.60%
Reliance
6.73%
Aircel
6.22%
Loop Spice MTNL
0.73% 1.39% 1.41%

Source: TRAI

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5.14.3 Market share of CDMA operators

There were 94.5 million CDMA subscribers in the wireless segment at the end of financial year
2008-2009. The below figure shows the market share of different CDMA operators as on 31st
March 2009

Chart 5.21: Market share (%) of different CDMA Operators as on 31st March 2009

Market share (%) of different CDMA Operators

37.16% Tata
BSNL
55.72% Sistema
HFCL
5.76% MTNL
Reliance

0.41% 0.63%
0.32%

Source: TRAI

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