TELECOM INDUSTRY PRIVATE SECTOR by JERRY DAS D L

INDUSTRY ANALYSIS
Telecom Industry(Private Sector)





Assignment submitted to: Prof. Jay Mohan Nair





Prepared and submitted by: Jerry Das.D.L




Institute of Co-operative Management,
IMK Extension centre, Pujappura




Introduction

The telecom industry is one of the fastest growing industries in India. India has nearly 200 million telephone lines making it the third largest network in the world after China and USA. With a growth rate of 45%, Indian telecom industry has the highest growth rate in the world.

History of Indian Telecommunications started in 1851 when the first operational land lines were laid by the government near Calcutta (seat of British power). Telephone services were introduced in India in 1881. In 1883 telephone services were merged with the postal system. Indian Radio Telegraph Company (IRT) was formed in 1923. After independence in 1947, all the foreign telecommunication companies were nationalized to form the Posts, Telephone and Telegraph (PTT), a monopoly run by the government's Ministry of Communications. Telecom sector was considered as a strategic service and the government considered it best to bring under state's control.

The first wind of reforms in telecommunications sector began to flow in 1980s when the private sector was allowed in telecommunications equipment manufacturing. In 1985, Department of Telecommunications (DOT) was established. It was an exclusive provider of domestic and long-distance service that would be its own regulator (separate from the postal system). In 1986, two wholly government-owned companies were created: the Videsh Sanchar Nigam Limited (VSNL) for international telecommunications and Mahanagar Telephone Nigam Limited (MTNL) for service in metropolitan areas.

In 1990s, telecommunications sector benefited from the general opening up of the economy. Also, examples of telecom revolution in many other countries, which resulted in better quality of service and lower tariffs, led Indian policy makers to initiate a change process finally resulting in opening up of telecom services sector for the private sector. National Telecom Policy (NTP) 1994 was the first attempt to give a comprehensive roadmap for the Indian telecommunications sector. In 1997, Telecom Regulatory Authority of India (TRAI) was created. TRAI was formed to act as a regulator to facilitate the growth of the telecom sector. New National Telecom Policy was adopted in 1999 and cellular services were also launched in the same year.

Telecommunication sector in India can be divided into two segments: Fixed Service Provider (FSPs), and Cellular Services. Fixed line services consist of basic services, national or domestic long distance and international long distance services. The state operators (BSNL and MTNL), account for almost 90 per cent of revenues from basic services. Private sector services are presently available in selective urban areas, and collectively account for less than 5 per cent of subscriptions. However, private services focus on the business/corporate sector, and offer reliable, high- end services, such as leased lines, ISDN, closed user group and videoconferencing.

Cellular services can be further divided into two categories: Global System for Mobile Communications (GSM) and Code Division Multiple Access (CDMA). The GSM sector is dominated by Airtel, Vodfone-Hutch, and Idea Cellular, while the CDMA sector is dominated by Reliance and Tata Indicom. Opening up of international and domestic long distance telephony services are the major growth drivers for cellular industry. Cellular operators get substantial revenue from these services, and compensate them for reduction in tariffs on airtime, which along with rental was the main source of revenue. The reduction in tariffs for airtime, national long distance, international long distance, and handset prices has driven demand.



Some Facts behind the Indian Telecom Industry

India’s total telecom subscriber base touched 429.72 million for the quarter ending March taking the teledensity up to 36.98 the Trai said on Monday.
This is against 384.79 million for the quarter ending December 2008, a 11.68% increase. Wireless subscribers increased to 391.76 million (346.89 million) while wireline subscribers increased to 37.96 million (37.90 million).
India’s service providers generated 404.4 billion Indian Rupees ($8.24 billion) in revenues during the first three months of 2009, an increase of 2.6 percent from a year earlier, according to a new report from the Telecom Regulatory Authority of India (TRAI) .
India ended March this year with 391.76 million mobile lines and nearly 38 million fixed lines in service, giving a total of nearly 430 million, and an overall teledensity of almost 37 percent.
India had 109.7 million rural mobile subscribers at the end of the first quarter, up by 18 percent from 93.2 million users in the fourth quarter of last year, the country’s telecom regulator said on Monday.
The country’s 282 million urban wireless subscribers accounted for 72 percent of all mobile users at the end of the first quarter, the Telecom Regulatory Authority of India (TRAI) said.
India is likely to be among the top three markets with highest number of mobile Internet users in less than two years, according to the thinking in Internet search giant Google Inc.
Affordable smartphones, cheaper telecom data plans and applications customised for Indian users have helped India’s mobile Internet users to double to 2 crore over the past year, aided by handsets as cheap as Rs. 6,000, said Vinay Goel, country head, products at Google India.
Big figures in the Private Sector

1) Reliance Communications Limited

Established in 2002, Reliance communication is the wholly owned subsidiary of Anil Dhirubhai Ambani Group of Companies providing the telecommunication services. Reliance offers prepaid and postpaid mobile services with R-world and fixed line services with broadband services. During the financial year 2005-06, Reliance's subscriber base had crossed the mark of 25 millions. Having its operations in 673 cities, Reliance Communications offers a wide range of telephony services. The company's business line varies from providing Fixed Line Telephonyservices to wireless mobile telephony services. Reliance is the only telecom company that is providing mobile services over both- CDMA and GSM networks. With an optical fiber network of 80,000 kms, the company aims at providing best services to its customers. It also has 15,000 Base Transceiver Stations across the country providing reliable wireless network.

2) Bharti Airtel Limited

Established in 1995 by Sunil Mittal as a Public Limited Company, Airtel is the largest telecom service provider in Indian telecom sector. With market capitalization of over Rs. 1,360 billion, Airtel has 31% of total market share of GSM service providers. Providing GSM services in all the 23 circles, Airtel was the first private player in telecom sector to connect all states of India. Also, Airtel is the first mobile service provider to introduce the lifetime prepaid services and electronic recharge systems.
After establishing itself in the domestic market, Airtel is now spreading its wings in US by providing its mobile service under the name 'CALLHOME' to the NRIs. Having achieved huge success in mobile services- postpaid and prepaid- Airtel has now entered fixed-line telephony providing broadband services in 92 cities across India. The company has an optical fiber network of 35,016 km and a customer base of 35,440,406 GSM mobile and 1,819,083 broadband subscribers.

3) Hutchison Essar

Established in 1994 in Indian market, Hutchison Essar, an Essar group and Hutchison Whampoa undertaking, is one of the leading cellular service providers. Having its services in five continents, Hutch was among the companies that started cellular services in India. Hutch has now spread its wings all over the country, with its punch line "wherever you go, our network follows".

Hutch provides both postpaid and prepaid cellular services with lots of value added services to its customer base. With a total market share of 22%, Hutch's customer base amounts to 2.44 crore subscribers. Essar Group has a turnover of over US$ 2.2 billion and the enterprise value of US$ 15 billion. Since 1983, Hutchison Whampoa Limited is into mobile business in Hong Kong and now has more than 40 million customers. Vodafone is acquiring Hutchison Telecomm International Limited, a subsidiary of Hutchison Whampoa Limited, with 33% stake in the company, changing Hutchison Essar to Vodafone Essar.

4) Ericsson

Having established itself in the international market, Ericsson is now penetrating Indian telecom market with its telecom equipments. Ericsson has a wide network of more than 140 countries and more than 30% market share. Ericsson's parent company Teleonsktiebolaget L M Ericsson was established in 1876.

Ericsson has come a long way offering operators and service providers end-to-end solutions in mobile and broadband Internet. Ericsson serves telecom sector by providing fixed line and cellular equipments. It has its service centers all over the country. The company is also a member of Open Source Community, providing open source software products. With working capital of Rs. 86,980 million, Ericsson has dominated the USA markets.

5) Idea Cellular Limited

Established by AT&T, Aditya Birla Group and Tata Group as joint venture, Idea Cellular, is a part of Aditya Birla Nuvo, a flagship company of the Aditya Birla Group, Idea is growing its network in 11 circles. Idea offers both prepaid and post paid services in the GSM network. Having 13% market share, Idea has a base of 2.3 crores subscribers all over the country. A three-year contract was signed between Idea cellular and Ericsson for GSM expansion. The network will now cover Maharashtra, Gujarat, Rajasthan, Madhya Pradesh and Himachal Pradesh telecom circles (operator-licensed areas). Idea is also in the process of setting up new networks to provide wider coverage area to its subscribers. It also keeps on announcing attractive discount schemes for the value added services. Idea was the first cellular service provider to launch GPRS and EDGE in the country. For the very first time in India, 'Background Tones', 'Group Talk', 'Super Power', 'Women's Card', etc. were launched by Idea. Idea has remained popular among the customers because of tariff plans such as free I -I calls, '2 Minutes Outgoing Free', and other discount schemes and GPRS enabled services.

10) Tata Teleservices

Established in 1996, Tata Teleservices, one of the 96 companies of Tata Group, has its network in 20 circles. With investment of Rs.36, 000 crores during financial year 2005-06, Tata Teleservices has reached the mark of 1.07 crore subscribers. The company covers a wide range of services like Mobile services, Wireless Desktop Phones, Public Booth Telephony and Wireline services. It also offers some value added services like voice portal, roaming, post-paid Internet Services, 3-way conferencing, group calling, Wi-Fi Internet, USB Modem, data cards, calling card services and enterprise services.
Latest services in Telecom

1)3G(3rd generation) telecom
3G allows simultaneous use of speech and data services and higher data rates (up to 14.4 Mbit/s on the downlink and 5.8 Mbit/s on the uplink with HSPA+). Thus, 3G networks enable network operators to offer users a wider range of more advanced services while achieving greater network capacity through improved spectral efficiency.
2)Live TV
3)Internet facility
4)Ticket reservation facilities
5)Online multimedia packages
Telecom towers
It is the integral part of the telecom network infrastructure. In fact they are the most expensive to build and the valuations are heavy. The business has outgrown itself that most of the companies have hived off the tower business as its own entity.
Tower business is making news lately for the explosive growth and exponential investments involved. It requires a lot of investment to survive and the smaller companies are finding it difficult. There has been some consolidation which has happened already.
Indus Towers a joint venture of Vodafone, Bharti Airtel and IDEA is formed.
Indus Towers = Ortus Infratel Holding (Vodafone - 42%) + Bhart Airtel (42%) + IDEA (16%)
American Tower Corp has acquired Xcel Telecom towers for 700 crores.
Quippo Telecom has acquired Spice Telecom’s tower business and Tata Teleservices WITIL is merged into it.
BSNL has planned to lease its towers for better revenues. Because of the intense competition each tower needs more than 2 tenants to stay profitable. The current rates are a bit low and hence the sharing and consolidation.
Here is the list of 13 telecom tower companies India based on the number of towers :

Company Approximate number of towers
Indus 80000
Reliance Infratel 31000
Bharti Infratel 20000
Quippo Telecom Infrastructure (QTIL) 23000
GTL 9000
Essar Telecom 6000
American Tower Corp 4000
Tower Vision 3000
Aster Infrastructure 1000
India Telecom Infra Limited 1000
KEC International 400
Independent Mobile Infrastructure 400
As new players come along, the tower business will be intense as it would be difficult for a new player to build its own infrastructure. The independent mobile tower companies will gain a lot. If the established player too share their towers then the new telecom players can roll out their networks quickly and the tower companies can increase their revenues. (source for the table above)
Latest technologies Introduced and going to Introduce
• Switch Technology
• Access Technologies
• V5.1 and V5.2 Access Protocols
• Digital Loop Carrier (DLC) System
• Fibre Access Network (FAN)
• Wireless Access Network
Some of the India-specific solutions showcased by Huawei were IMS (Integrated Management Platform), which enable operators to offer new services and ICT (Integrated Communication Platform), which helps enterprises unify communications to improve productivity. On the 'green IT' front, Huawei has further reduced the size of their routers and reduced the power requirements too. Huawei unveiled Multi-Service Transport Platform (MSTP) -- an optical, microwave and electrical communication platform that can transmit, aggregate and group data on TDM and IP. This platform allows the operators to select the medium of transmission they prefer
For instance, places where there are a substantial number of subscribers, using Optical Fibre Cables (OFC) would be an ideal choice. Microwave, on the other hand, is best suited for remote places.


One of the key issues of communication in India is reliability, especially during network breakdown due to cable damage or failure. In such a scenario, Huawei s MSTP, which works in a 'mesh' network, is intelligent enough to figure out which path is broken and can automatically switch data traffic on to a different path. The system is able to do this in just under 50 milliseconds. According to Huawei, a user watching a streaming video or on a voice call, will not see a lag or experience call drop.

At the event Huawei also showcased their 40G network services. As bandwidth usage in a network increases, operators have two choices -- either add more links or provide more capacity on each link. Adding more links entails additional investments and providing more capacity involves intelligent engineering. Huawei s 40G technology subscribes to the latter option. It does so by increasing the wavelength of signals passing through each fiber to 40G, effectively increasing the data carrying capacity of each fibre by four times.

Another benefit of using the 40G technology is that data can be transmitted over a distance of 1,500 km without any signal regenerators. Telecom operators using Huawei s 40G network will be able to upgrade to the 100G network with a little modification to their existing equipment
The Future
Electronic hardware market by 2015 USD 320 billion including production USD 150 billion and exports USD 21 billion.
Telephone subscribers: 500 million by 2010
PC sales: 25 million; installed base 65 million by 2010
ITES & Software exports: USD 60 billion by 2010
40 million new internet connection; at least 50% broadband by 2010
Nationwide TV broadcast to be digital by 2015 beginning 2010: significant opportunity for STB consumption & manufacturing
Over USD10 bn investment in E-Governance and National ID Card by 2010
2015: Total expected Market USD 320 bn; production USD 155 bn Domestic
GOVERNMENT ACTS FOR REGULATION OF TELECOM INDUSTRY

The various telecom India related acts by the Department of Telecommunications India are:
 Indian Telegraph Act 1885: This act empowered the government of India to take control of the existing telegraph lines and lay down the necessary infrastructure for further expansion of telecommunications in India.
 Indian Telegraph (amendment) Rules 2004: This act set the guidelines for the set up and development of public telecom services in India.
 Indian Wireless Act 1993: According to this act wireless telecom services could be set up only after due licensing from the telegraphy authority of India.
 Information Technology Act 2000: The act defines the information technology based communications in India. Telecom Industry of India was shown e-commerce way through this act in a legal manner.
 Communication Convergence Bill 2001: This bill declared the establishment of Communications Commission of India to regulate the transfer of all form of communication including broadcasting, telecommunications and multimedia.
Telecom Regulatory Authority of India (TRAI)
Act 1997: The act established TRAI for the regulation of telecom business in India. Further amendments were made in the act as per the needs of the Indian telecom market that surfaced in the telecom market analysis and research conducted.
SWOT ANALYSIS
Strengths
1) Huge network of Customers
2) Second populated country in the world. So it provide hopeful time for this competitive business
3) Differentiation of services by the providers.
4) Stability of the profit at the time of recession
5) Availability of customers at any corner of the country with out regarding education or culture
6) Healthy competition between the firms
Weaknesses
India's biggest weakness would be in the area of telecommunication infrastructure. India's telecommunication infrastructure is poor compared even to developing countries. The reason behind this has been the state monopoly over telecommunication in India.
Most public sector agencies have become white elephants. Until recently, Indian politicians were hesitant to antagonize the powerful labor unions of the state run telecommunication agencies. In 1994, there were half hearted attempts to sell some of the shares in these firms. The employees promptly went on strike.
The government has taken a bold step in allowing private competition to the Department of Telecommunication(DoT). In order for India to become a strong player in the IT market, the government has to dismantle bureaucratic controls which discourage foreign firms from investing in India.
The lack of infrastructure forces companies to invest on high cost items like satellite links and high speed lines. Not all firms would be able to afford such capital costs both in terms of money and time. This cost could be a major restraint for the IT industry.
The government has to become a major customer for the IT industry to encourage the growth of the domestic software and hardware industry. At present, there is a great deal of resistance in government circles against investing in computers

Opportunities
India adds close to 11 million cellular lines a year. This huge surge in mobile traffic along with the generic surge in data networking implies a sea-change attitude towards telecom development in India. The focus of this panel is to fathom this development from an India-centric perspective as well as to understand how India as a country with its huge outsourcing capabilities stands to deliver to worldwide growth and development of telecommunications. Our goal is to narrow down on a set of opportunities that exist in India both for global telecom players as well as for local (Indian) vendors.
Company Services Promoter
Cellular Basic NLD1 ILD2
Bharti Airtel



Bharti Group
Reliance Infocomm



Reliance ADA Group
Tata Teleservices



Tata Group
BSNL


Government of India
Vodafone Essar
* Essar Group
IDEA Cellular
* Aditya Birla Group
Favourable demographics and socio-economic factors leading to high growth:Growth of disposable income combined with changes in lifestyle
Increasing affordability - low tariffs, easy payment plans and low-cost handset
Increased coverage and availability of mobile services
Investment opportunity of over US$76 billion across many areas:
Network infrastructure to increase service coverage
Roll-out of additional network for 2G, 3G, WIMAX etc.
Applications/software for voice, data and broadcasting services
Devices like the mobile handset, set top box, modem, gaming console, consumer premise equipments etc.
Nokia, Siemens, Alcatel, Lucent, Elcoteq, LG, Ericsson are all
investing in India
Threats
1) stability of Financial crisis in global Market
2) Political Issues
3) Labour problems from the trade unions
4) Influence of different traditions and culture in different areas
5) Regular divertion of business environment
Indian Telecom news

With the rapid increase in the telecom and IT industry in India, the major cities in india including New Delhi, Mumbai, Kolkata, Chennai, Ahmedabad, Bangalore, Hyderabad, Pune, Gurgaon, Noida have registered new records in the sale of various telecom products and solutions. The telecom directory of India is increasing in size day by day. The leading directories include telecom directory of Bangalore, Karnataka, Kerala and other South India areas as that is the main telecom business centre of India.

A new industry upcoming in the telecom sector of India is the telecom outsourcing or business process outsourcing (BPO). The BPO industry in India is based in the IT hubs mainly Gurgaon, Noida, Bangalore, Hyderabad, Pune, Chennai, New Delhi, Mumbai and other cities.

The Indian telecom news shows newer telecom business plans everyday, the telecom companies employ newer marketing techniques to lure as many customers as possible. The telecom management india now is a separate study form in itself that covers telecom engineering courses teaching telecom engineering solutions, telecom market analysis about the new trends of the market, development of telecom network infrastructure, formulating telecom technologies and their updates by doing proper research in the field, and taking up major telecom projects for providing telecom network solutions to all.

The latest telecom new from India is that India with a mere 2.2 telecom services per 100 persons is a huge market for telecom business solutions. More and more international telecom companies are diverting their telecom technologies towards Indian Telecom sector, in order to confirm their telecom market share in India. This has also created mass telecom jobs in India; the Indian telecommunications industry provides many job opportunities especially with the BPO sector job openings.
Conclusions
As a huge profitable business the telecom sector in India especially the private sector is doing well even in this recession time. If a hundred million or more telephones are to be installed in India, and the service is to be economically viable, the investment per line has to be less than half of what it has been until recently. A key service that will be sought, and that will add to the viability, is inexpensive Internet access. Recent technological advances in wireless and fibre-based access technology, open interface standards, high-speed digital transmission on the copper loop, and Internet remote access switches, have made this cost reduction feasible. A new network with significant rural penetration can be installed today at under $450 per line. Many of the systems required to make this a reality have been developed in India.