SUBMITED TO:-     HOMESHIKHA OJHA  ASSIGNMENT          OF   ECONOMICSSUBMITED BY:-  ON TELECOMBHARTI SAWLANIEnrl INDUSTRY ...
INDEX1. INTRODUCTION2. EVOLUTION OF INDUSTRY –3. IMPORTANT MILESTONES4. PRE AND POST LIBERALISATION5. LIBERALISATION6. NEE...
ABSTRACTTelecom industry has been revolutionized after the new national policy of1991. The factor of the new national poli...
INTRODUCTION From an age old world view of being the land of snake charmers and tigersto the present day happening investm...
EVOLUTION OF INDUSTRY –IMPORTANT MILESTONESIt took nearly 60 years in India to make telephone services available to thecom...
Life Cycle Stage of Indian Telecom                                                                                        ...
PRE AND POST LIBERALISATION                              7
LIBERALISATIONThe liberal economic policies of the Indian government and the financialrestructuring have also raised the l...
Critical Issues for Successful Liberalization  • Open and Transparent Regulation (WTO agreement requires that    regulator...
HOW TELECOM TURNED FREE INDIA’SECONOMIC DREAM INTO REALITY(POST LIBERALISATION)During the first war of independence in 185...
His third achievement was in bringing PCO policy that was responsible forproviding access to telephone to all even in far ...
Policy Advantage FDI limit increased from 49% to 74%. Virtually complete deregulation Unified Access Service License Inter...
MAJOR PLAYERSThere are three types of players in telecom services:  ·    State owned companies (BSNL AND MTNL).  ·    Priv...
cellular limited in jan06 it now provides mobile services in 16 of the 23   defined license areas across the country.     ...
InvestmentThe booming domestic telecom market has been attracting acceleratingamount of investment during april2000 to mar...
MAJOR MARKET TRENDSThe telecoms trends in India will have a great impact on everything from thehumble PC, internet, broadb...
Economic Analysis - FactorsDemand  • GDP growth (+)  • Population growth – especially growth in middle class of developing...
• High costs of services provision   • Low income country like India cannot afford to replicate expensive     telecom infr...
From the economic perspective the true key challenges for equipmentproviders are quick and cost effective roll out of netw...
access licensing” regime, which would in the future provide a single,technology-neutral license for fixed and cellular ope...
towards converged regulation. In early 2004, for example, the governmentgranted TRAI (whose purview was hitherto restricte...
be increased further to 13.3 million. According to the TEC, in a network, forexample, New Delhi, where the demand for mobi...
•   The termination of VSNL’s monopoly over international traffic in       2002.    • The partial privatization of the com...
represent a sizeable share of initial investments. While the criteria are       important, it tends to support the existin...
ROAD AHEADThe year 2008 saw their Indian telecom industry touchingthe much anticipated 250mn wireless subscribers mark.How...
REFERENCES •   Google.com •   Search engines •   Voice and data magazine •   Industry trends •   Indian telecom industry-t...
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  1. 1. SUBMITED TO:- HOMESHIKHA OJHA ASSIGNMENT OF ECONOMICSSUBMITED BY:- ON TELECOMBHARTI SAWLANIEnrl INDUSTRY no. 0729NAMITABHAIRAVIYAEnrl no. 1823Section- D
  2. 2. INDEX1. INTRODUCTION2. EVOLUTION OF INDUSTRY –3. IMPORTANT MILESTONES4. PRE AND POST LIBERALISATION5. LIBERALISATION6. NEED FOR LIBERALISATION7. PRELIBERALISATION8. HOW TELECOM TURNED FREE INDIA’S ECONOMIC DREAM INTO REALITY (POST LIBERALISATION)9. MAJOR PLAYERS • BSNL • BHARTI • MTNL • HUTCH • RELIANCE INFOCOMM10. MAJOR MARKET TRENDS11. SWOT ANALYSIS12. UNIFIED LICENCING13. SPECTRUM CONTROVERSY 2
  3. 3. ABSTRACTTelecom industry has been revolutionized after the new national policy of1991. The factor of the new national policy of 1991 that is LPGliberalization, privatization and globalization has change the face of theIndian economy as a whole. After the introduction of this policy, manymodifications were made to the same policy in the following years.Over the years, with the invention of telephone, the telecom industry hasevolved and taken a whole new shape.There is whole vast difference between what Indian economy as well asIndian telecom industry was before and after the introduction of the newindustrial policy.Private participation encouraged competition, and further led to efficient aswell as cheap services with innovative offers, which were earlier unavailablewhen only public sector had the monopoly.Still looking at the future prospect there’s a long road to travel yet fortelecom players. 3
  4. 4. INTRODUCTION From an age old world view of being the land of snake charmers and tigersto the present day happening investment destination India now offers theworld and image worth paying attention to.The Indian mobile success story is quite dramatic. When the first mobilecame to India the industry accused itself of being a late starter but analyzingclosely it was a boon in disguise. India embraced cellular technology when2G systems were already in place in most foreign countries and thusbypassed 1G technology thereby gaining access to a superior technology like2G and India did not have to try this technology as most of the lesson learntby the European deployments could be transferred to India. India embracedGSM nearly 8 years after it was taken up in Europe. Most of the equipmentshad already become very cheap by then. This allowed for mass deploymentin the country.Telecommunication forms and important base infrastructure for moderneconomies and has become an integral part of various activities of sucheconomies. It plays and important role in developing a modern economicorder by eliminating distances and the associated time constraints. Moderneconomic activities, whether associated with business activities or consumerlifestyle require transfer of large amount of data and are made possible onlyby the tremendous growth of telecommunication in recent times.The advent of modern telecommunication began with telegraph. Theinaugration of commercial telegraph service was the first major technicalundertaking using electricity thus began the telecommunications era thatrevolutionized the way in which people communicated and continued toinfluence there personal and economic lives around the world. This wasfollowed by the invention of telephone by Alexander bell and Elisha gray in1876. 4
  5. 5. EVOLUTION OF INDUSTRY –IMPORTANT MILESTONESIt took nearly 60 years in India to make telephone services available to thecommon man.Year1851- First operational landlines were laid by the government near Calcutta1855 the govt of India granted license to the oriental telephone company toestablish its exchanges at Bombay, Calcutta Karachi madras and Rangoon1881- Telephone services introduced in India.1882- India’s first undivided telephone exchange was incorporated inBombay.1883- Merger with the postal system.1923- Formation of Indian radio Telegraph Company.1932- Merger of ETC and IRT into the Indian radio and cablecommunication company IRCC.1947- Nationalization of all foreign telecommunication companies to formthe post, telephone and telegraph (PTT) a monopoly run by government’sministry of communication1985- Department of telecommunication DoT established and exclusiveprovider of domestic and long distance service that would be its ownregulator separate from the postal system.1986- Conversion of DoT into two wholly government owned companies:the Videsh Sanchar Nigam Limited (VSNL) for internationalcommunication and Mahanagar Telephone Nigam Limited (MTNL) forservices in metropolitan areas.1989-india was aspiring to have a telecom policy and to fulfill this a telecomcommission was formed in this year and based on the commissionsrecommendations government created history by allowing privateparticipation in telecom services from the year 1992.1994-The govt decided to provide licences to 6 basic service operators, 8cellular operators in the metros.1995 DoT issues 33 licenses to 13 companies for GSM mobile services1997- Telecom regulatory authority of India (TRAI) was created.1999- Cellular services are launched in India. New national telecom policywas adopted.2000- DoT becomes a corporation, Bharat Sanchar Nigam Limited) BSNL 5
  6. 6. Life Cycle Stage of Indian Telecom Dynamic Equilibrium Rumblings Identity crisis Refocus competition Traditional Competitors find Fully adjustedState regulated Technological niche or die assumptions marketplace firms advances lead out challenged No distinctionStrategy heavily to substitutes Industry settles Marketing and between influenced by Niche players evolve / Greater sales focus incumbents & Government Call-back emphasis Increasing challengers and operators on competition Wide range of Regulators provide service shareholde Losing key customerLimited customer Regulators formed r value competencie choice choice Competition begins Focus on s Normal marketThreats of customer privatisation forces apply satisfaction National Telecom Unified Licensing Policy, 1994 Regime Upto 1995- 2001 2003 1994 1997 1998 1999 2000 2002 2004 1994 1996 New Telecom Policy, 1999 6
  7. 7. PRE AND POST LIBERALISATION 7
  8. 8. LIBERALISATIONThe liberal economic policies of the Indian government and the financialrestructuring have also raised the level do average disposable income.Competition driven by regulatory initiatives and tech advancements andpolicy initiatives continues to push the growth to new levels. This trend wasmore viable in mobile and long distance services. The competitive pressurehas also made service providers more innovative in their tariff offerings.Indian consumers have benefited immensely from low tariffs, which havealso been a major factor for explosive growth in the sector.Today India is operating in a liberalized economy where information andcommunication tech are the key drivers of globalization. For a country atthis stage of development has a surprisingly vibrant telecom industry.Research survey show that every 8 out of 10 citizens hold a telephone andstarting from the ranks of businessman, who have crores of business to a 10thclass student own a telephone. Isn’t it amazing?Is this the same old India? Where are we? what lies ahead?NEED FOR LIBERALISATIONPRELIBERALISATIONThe factors responsible for liberalization were as follows: • Generally Poor Performance of Incumbent Operators • Technological Innovation • Role of ICT Sector in Economic Competitiveness • Business Demand for Advanced Services at Lower Rates (Expansion of international business communications requirements, particularly • Internet-based services have dramatically increased. • Consumer Demand for Internet Services (Increasing Internet penetration/usage by consumers creates pressure for low-cost, high- speed Internet access over IP networks.) • WTO Pressures – “Join in or be left behind” (The combined effects of WTO agreements on basic telecom services and information technologies have set a global benchmark favoring liberalization; nations now risk falling behind economically if this benchmark is not met.) 8
  9. 9. Critical Issues for Successful Liberalization • Open and Transparent Regulation (WTO agreement requires that regulator be independent of state operator. In privatized environments, open and transparent regulatory processes may be most important requirement.) • Economically Efficient Interconnection (Interconnection between operators, primarily with incumbent, must be transparent and cost- oriented; any subsidies must be explicit.) • Pricing Flexibility for New Entrants; • Protection against Cross-subsidization by Incumbent (If some services are not competitive, then regulator must be able to prevent cross subsidization of competitive services from monopoly service revenues.) • Efficient Equipment Certification (Rapid technological innovation has created pressure for rapid sale and deployment of new ICT equipment. Process for testing and certification of ICT equipment must be flexible and streamlined to meet this market demand.) • Effective Control over Abuse of Market Power (Regulator must have authority to police market behavior of industry; most often required relative to abuse of market power by incumbent operator.) • Before lib the govt owned DoT enjoyed a monopoly and that resulted in its sluggish expansion and poor services. Tech upgradation was limited. The adoption of lib policy in India opened the door for expansion for telecom sector. 9
  10. 10. HOW TELECOM TURNED FREE INDIA’SECONOMIC DREAM INTO REALITY(POST LIBERALISATION)During the first war of independence in 1857, the biggest advantage theimperialists had over the revolutionaries was the telecom network, whichhelped them communicate revolutionaries’ moves and pre-plan strategyagainst them.By the last leg of freedom struggle, the nationalists had access to the samecommunication system. When India finally got its political freedom, it camewith around 86,000 telephone connections.Today, the country is adding more than twice that number every day to its250 million strong network, with 7 million new subscribers joining in July2007. This connectivity has brought with it jobs and knowledge basedexports of services that are driving the 9 per cent plus growth.When we celebrate the IT and software revolution, remember, it stands on astrong telecom backbone — in 1991, knowledge based exports stood at $40million; today, the figure is around $40 billion.Take that further and you see how Tele-density of any country is directlyrelated to its economic development.Until 15 years ago, it raised no eyebrows to see a 15-20 year wait for a newtelephone connection in cities, with almost zero connectivity in large parts ofrural areas. Department of telecommunications (DoT) under ministry of Post& Telegraph (P&T) was the sole telecom service provider.It’s a different landscape today and with six service providers in metros andcategory A circles, operators are chasing subscribers, turning scarcity intoabundance, luxury into necessity.History of telecommunications in India can be broadly divided into twoperiods — before Liberalisation and post Liberalisation.Contrary to popular belief, Liberalisation in telecom equipment took placefirst and then followed Liberalisation in services. In the 1980s, Sam Pitrodaplayed an important role in the development of telecom network.His first achievement was to convince the government about the significanceof communications for socio-economic development of the country.His second major contribution was in developing indigenous switches andpassing on the low cost (and no air-conditioners required) technology tolocal manufacturers, which helped bring down prices of switches and allowDoT to provide more connections within the same budget. 10
  11. 11. His third achievement was in bringing PCO policy that was responsible forproviding access to telephone to all even in far flung areas.With the formulation of New Telecom Policy in 1994 (NTP 94), a majorstep was taken in liberalization of telecom services.The policy permitted DoT to award licenses to private operators to offertelecom services. Thus, competition began in a field that was hitherto agovernment monopoly.NTP 94 also envisaged setting up Telecom Regulatory Authority of India,essential to ensure competition.NTP 94 was revised five years later and was replaced by NTP 99. Thisfurther liberalized telecom services and made licenses technology-neutral.As a result, India has became one of the most competitive markets in theworld, with one of the lowest telephone tariffs in the world and with twotelecom companies -Airtel and Reliance — among the top five most valuedcompanies of India. That’s freedom.Government initiativesThe government has taken many proactive initiatives which has provided aframework for the rapid growth of the telecom industry. • Opening the industry for private sector participation. • 100 percent FDI is permitted in telecom equipment manufacturing through the automated route. • FDI ceiling in telecom services has been raised to 74 percent. • Establishment of an independent regulator-the telecom regulatory of India (TRAI)-for the telecom sector. • Introduction of a unified access licensing regime for telecom services on a pan-India basis. • Implementation of new telecom policy (NTP99). • Introduction of calling party pay (CPP) regime and lowering of access deficit coupled with introduction of revenue share regime in ADC. • Introduction of mobile number portability in a passed manner ,starting with the fourth quarter of 2008. • Allowing service providers to share active infrastructure. 11
  12. 12. Policy Advantage FDI limit increased from 49% to 74%. Virtually complete deregulation Unified Access Service License Interconnection Usage Charge (IUC) Broadband Policy announced. Targets 20 million broadband subscribers by 2010. Exemption from customs duty for import of MSCs (Mobile Switching Centre) 12
  13. 13. MAJOR PLAYERSThere are three types of players in telecom services: · State owned companies (BSNL AND MTNL). · Private Indian owned companies (RELIANCE INFOCOMM, TATA_TELESERVICES) · Foreign invested companies (HUTCHISON-ESSAR,BPL, SPICE) 1. BSNL On oct.1, 2000, the department of telecom operations, GOI became a corporation and was named BSNL. It is now India’s leading telecommunication company and the largest public sector undertaking. It has a network of over 45 million lines covering 5000 towns with over 35 million telephone connections. 2. BHARTI Established in 1985, first Indian company to provide comprehensive telecom service provider in the country. Bharti televentures strategic objective is to capitalize on the growth opportunities the company believes are available in the telecommunications market and consolidate its position to be the leading integrated communications services providers in key markets in India, with a focus on providing mobile services. 3. MTNL MTNL was set up on 1st April, 1986 by the government of India to upgrade the quality of telecom services, expand the telecom network, introduce new services and to raise revenue for telecom development needs of India’s key metros. It has over 5 million subscribers and 329372 mobile subscribers. 4. HUTCH It presents in India dates back to late 1992 when they worked with local partners to establish a company licensed to provide mobile telecommunication services in Mumbai. Commercial operations began in November 1995. With the completion of acquisition of BPL mobile 13
  14. 14. cellular limited in jan06 it now provides mobile services in 16 of the 23 defined license areas across the country. 5. RELIANCE INFOCOMMReliance offers a complete range of telecom services covering mobile andfixed line telephone. National and international long distance services dataservices and wide range of value added services. It was first launched inDecember 28, 2002.Market Share of Major Players 14
  15. 15. InvestmentThe booming domestic telecom market has been attracting acceleratingamount of investment during april2000 to march 2008, cumulative FDIinflows into the Indian telecommunications sector amounted to US$3.84billion, accounting for 6.81 percent of the total FDI inflows into the country.In fact, the surge in mobile services market is likely to see investment worthabout US$24 billion by 2010, going by industry estimates. 15
  16. 16. MAJOR MARKET TRENDSThe telecoms trends in India will have a great impact on everything from thehumble PC, internet, broadband (both wireless and fixed), cable, handsetfeatures, talking SMS, IPTV, soft switches, and managed services to thelocal manufacturing and supply chain.This report discusses key trends in the Indian telecom industry, their driversand the major impacts of such trends affecting mobile operators,infrastructure and handset vendors.Higher acceptance for wireless servicesIndian customers are embracing mobile technology in a big way (an averageof four million subscribers added every month for the past six months itself).They prefer wireless services compared to wire-line services, which isevident from the fact that while the wireless subscriber base has increased at75 percent CAGR from 2001 to 2006, the wire-line subscriber base growthrate is negligible during the same period. In fact, many customers arereturning their wire-line phones to their service providers as mobile providesa more attractive and competitive solution. The main drivers for this trendare quick service delivery for mobile connections, affordable pricing plans inthe form of pre-paid cards and increased purchasing power among the 18 to40 years age group as well as sizeable middle class – a prime market for thisservice. Some of the positive impacts of this trend are as follows. Accordingto a study, 18 percent of mobile users are willing to change their handsetsevery year to newer models with more features, which is good news for thehandset vendors. The other impact is that while the operators have onlylimited options to generate additional revenues through value-added servicesfrom wire-line services, the mobile operators have numerous options togenerate non-voice revenues from their customers. Some examples of value-added services are ring tones download, coloured ring back tones, talkingSMS, mobisodes (a brief video programme episode designed for mobilephone viewing) etc. Moreover, there exists great opportunity for contentdevelopers to develop applications suitable for mobile users like mobilegaming, location based services etc. On the negative side, there is anincreased threat of virus – spread through mobile data connections andBluetooth technology – in mobile phones, making them unusable at times.This is good news for anti-virus solution providers, who will gain from thistrend. 16
  17. 17. Economic Analysis - FactorsDemand • GDP growth (+) • Population growth – especially growth in middle class of developing nations (+) • Unemployment rate (-) • Personal Income (+)Supply • Energy Prices – increase cost of operations (-) • Commodity Prices – increase price of inputs (-) • Foreign Exchange Rates – reduces profits from international operation (+/-) • Inflation – increase input costs (commodities, labor, raw materials) (-)SWOT ANALYSISStrengths • Huge wireless subscriber potential • Fastest growing mobile market in the world • Consumers are ready to pay for cutting edge services. • India possesses cheap labor to attract foreign investment • Telecom software, telecom professionals, telecom infrastructure and telecom services are the key players in shaping today’s economy. • Revenue sharing strategies are leading to mergers and acquisitions, helping companies to enter new business opportunities and generate employment boosting the country’s economy. • Govt has started rules for relaxing rules for foreign participants. • Lowest tariff rates in the world.Weaknesses • Market strongly regulated by govt body- the telecom authority of India. • Existence of entry barriers for private companies 17
  18. 18. • High costs of services provision • Low income country like India cannot afford to replicate expensive telecom infrastructure.Opportunities • India as Asia’s third largest economy is adding at least 1mn new mobile phone users every month. • Mobile phone user’s rate hitting a saturation point in big cities. • Income levels in the rural areas rising due to robust agricultural output • Share of the rural market in the country’s mobile population is however less than 15%. • Timely policy and regulatory initiatives taken by the govt to encourage foreign players • Increased availability of bandwidth has opened to new schemes making efficient usage providing value added services and generating profits. • Foreign investment in the form of equity or techThreats • High level of risk, uncertainty and cost associated with cellular sector • Weak intellectual property rights (IPR) protection • Software and digital content piracy. • Political instability • Cost of handset also deters a lot of bias from opting for the service • China’s early liberalization and the fast growing economy may prove to be a hindrance for India.As expected the average revenue [per user in the rural region (ARPU) in therural region will be less than rs.200 pricing will be a key for all operators.Another issue that need some thought is that India still has about 80000villages without electricity over 25000 of which have little chance of beingconnected to the power grid in conventional way. Lack of three phase powersupply and inaccessibility to these remote villages has become a majorobstacle in setting up telecom infrastructure sites. The country would requireabout 3.3lakh towers as against present 1lakh tower by the proposed time. 18
  19. 19. From the economic perspective the true key challenges for equipmentproviders are quick and cost effective roll out of networks in rural area , inthe context of declining equipment prices and simultaneously investing increating products/situations that enable viable business models.UNIFIED LICENCINGBut perhaps the biggest – and, until recently, most intractable – regulatoryproblem has been the drawn-out battle over “limited mobility” telephony.This imbroglio began in 1999, when MTNL sought permission from TRAIto provide CDMA-based WLL services with “limited mobility.” GSMcellular operators were soon up in arms, arguing that “limited mobility” wassimply a backdoor entry into their business. Moreover, fixed operators hadpaid lower license and spectrum fees than cellular ones; were not required topay access charges for cell-to-fixed calls (unlike their cellular counterparts);and, amidst accusations of cross-subsidization, were charging considerablylower rates than the cellular operators.The resulting conflict dragged on in the courts and in the political arena foryears. Fixed operators including new entrants Reliance and TataTeleservices claimed that they were being prevented from providing a cheapservice that would drive penetration and be of benefit to the “common man”;cellular players bitterly opposed what they perceived as unequal regulatorytreatment for two kinds of operators who were in fact offering the sameservice. The real victim, of course, was the Indian telecommunicationsmarket, which suffered from investor perceptions of regulatory confusionand operator in-fighting. In late 2002, for example, thousands of mobileusers in New Delhi were for a time cut off from the fixed-line network whenMTNL shut down interconnection for cellular companies. (MTNL laterattributed the incident to a “technical snag.”)It was not until late 2003 that the issue was finally resolved, underconsiderable government pressure, when cellular operators agreed towithdraw their many cases against the fixed-line operators. Fixed operatorswould in effect be allowed to enter the mobile business; in return, thegovernment granted cellular players several concessions, including lowerrevenue-share arrangements estimated to total over $210 million. Perhapsmost notably, the government announced its intention to adopt a “unified 19
  20. 20. access licensing” regime, which would in the future provide a single,technology-neutral license for fixed and cellular operators. The hope is thatthis new license category will prevent a repeat of the recent controversy, andallow new technologies to enter the Indian market without requiring awholesale rewrite of licensing laws.Policy HorizonWith the apparent resolution of the “limited mobility” controversy, one ofthe darkest clouds over India’s telecom market has apparently lifted.Although some questions remain regarding the details of the new “unifiedlicenses,” the hard-won peace between cellular and fixed players is aconsiderable achievement, and should set the stage for rapid growth in theindustry.Several other impending developments also justify a measure of optimism.Although in early 2004 the government failed at the last minute (againstexpectations) to hike FDI limits in telecom, indications are that the ceilingon foreign investment could be lifted to 74% sometime after the elections,due in April/May. A divestment of MTNL is also possible. There is also thelikelihood of continued tariff rebalancing, with international and long-distance rates expected to fall further; local rates are unlikely to be increasedby much, given the political sensitivities of doing so.Finally, TRAI continues to work on a new universal service policy -- adevelopment that many feel is urgently needed given low rural penetrationrates (approximately 1.41 per hundred), and the failure of private operatorsto fulfill the rural telephony requirements included in their originallicenses.Probably the single most important development on the horizon is a movetowards converged regulation. In 2001, the government announced itsintention to pass a Communications Convergence Bill, which would bringtelecommunications, broadcasting, cable and Internet under a singleregulator, the Communications Commission of India (CCI). Inspired by theemergence of “super-regulators” in several countries (e.g., UK andMalaysia), the bill has undergone several drafts, but at this point appearsstalled in the legislative process. While its passage still seems possible, it isalso possible that the government will take a more incremental approach 20
  21. 21. towards converged regulation. In early 2004, for example, the governmentgranted TRAI (whose purview was hitherto restricted totelecommunications) limited authority in the cable TV industry, asking it toresolve the confusion over a new payment system. Likewise, the decision toimplement the “unified” licensing can also be seen as a gradual step in thedirection of converged licensing.SPECTRUM CONTROVERSYThe technical offshoot of the Department of Telecom (DoT), TelecomEngineering Centre (TEC), has recently recommended that telecos (telecomcompanies) must increase their subscriber base between 4 and 15 times, ifthey want it increase their spectrum. Earlier, the telecom regulator TRAI hadsuggested that the subscriber- based spectrum allocation norms be tightenedby two to six times.Spectrum is the radio frequencies that enable wireless communications, andon which all mobile services operate. The enhanced subscriber-linkedcriterion for spectrum allocation is going to bar telecom operators like BhartiAirtel, Vodafone, Idea Cellular, Bharat Sanchar Nigam and RelianceCommunications from getting additional spectrum in their existing circlesfor a considerable period. DoT has also decided to continue with the first-come-first-served policy for allocation of licence.The new applicants include DLF, AT&T, Videocon, Hindujas, SterliteGroup, Ispat and Unitech. Further, DoT has accepted the TRAI’srecommendation that operators who get beyond 10 MHz of spectrum forGSM and 5 MHz for CDMA must pay an additional ‘spectrum enhancementcharge’. DoT has also upheld the policy that mobile licences are technology-neutral, implying that any operator can use either GSM or CDMAequipment to run networks.RecommendationsThe DoT’s decision implies that the existing operators will get additionalspectrum if they increase their minimum number of subscribers. Under theearlier policy, a GSM operator in Delhi and Mumbai who had 10 MHz ofspectrum was required to have 1.6 million customers to be eligible to get12.4 MHz of radio frequency. It means that TRAI had recommended thecustomer base to be increased to 3 million, and now, TEC has proposed it to 21
  22. 22. be increased further to 13.3 million. According to the TEC, in a network, forexample, New Delhi, where the demand for mobile services is huge, atelecom operator has to have 600,000 subscribers to get a hand of 4.4 MHzof spectrum, while for the next band of 6.2 MHz it should have 1.9 millionsubscribers.What does it mean for telecom players?The excessive hike in subscriber numbers is supposed to deprive the existingGSM operators of spectrum and to facilitate a priority entry of select playersinto GSM.The capex ( capital expenditure) of all GSM operators will also increaseimmensely, as each would be required to increase its base stations andnetworks to fulfill the condition of more users under the existing spectrum.GSM operators account for 75 percent of mobile services in India, and dueto DOT’s move, their payouts to the governments will increase significantly.The revised subscriber-based spectrum allocation will make it difficult forBharti as well as other GSM operators such as Vodafone and Idea to getadditional spectrum in their existing circles.At the same time, DoT’s decision not to auction spectrum and follow thefirst-come-first-served norm will result in the other existing operators gettingspectrum in circles where they are not present.DoT has also announced that it would permit existing players to expand theirnetworks by using alternate wireless technologies. This means that telcoswhich currently use GSM technologies for providing cellular services cannow use CDMA technology also and vice versa. But, GSM players have noplans of offering CDMA services.On oct.1,2000 , the department of telecom operations, GOI became acorporation and was named BSNL. It is now india’s leadingtelecommunication company and the largest public sector undertaking. it hasa network of over 45 million • The opening up of India’s internal long-distance market in 2000, and the subsequent drop in long-distance rates as part of TRAI’s tariff rebalancing exercise; 22
  23. 23. • The termination of VSNL’s monopoly over international traffic in 2002. • The partial privatization of the company that same year, with the Tata group assuming a 25% stake and management control; • The gradual easing of the original duopoly licensing policy, allowing a greater number of operators in each circle; • • The introduction in 2003 of a Calling Party Pays (CPP) system for cell phones, despite considerable opposition (including litigation) by fixed operators;All of these events have created an impressive forward-momentum in Indiantelecommunications, resulting in a vigorously competitive and fast-growingsector. India has also suffered from its fair share of regulatory hiccups.MERGERSDemand for new spectrum as the industry grows and the fact the spectrumallocation in done on the basis of number of subscribers will forcecompanies to merge so as to claim large number of subscribers to gain morespectrum as a precursor to the launch of larger and expanded services.However it must also be noted that this may very well never happen onaccount of low telecom penetration.NEW CIRCLESAs mentioned earlier there is a significant number of tier-2 and tier 3 citiesthat can accommodate more players we expect aggressive response by thecompanies to such opportunities as and when they are created.CONSTRAINTS • Slow pace of the reform process. • It would be difficult to make in-roads into the semi-rural and rural areas because of the lack of infrastructure. The service providers have to incur a huge initial fixed cost to make inroads into this market. Achieving break-even under these circumstances may prove to be difficult. • The sector requires players with huge financial resources due to the above mentioned constraint. Upfront entry fees and bank guarantees 23
  24. 24. represent a sizeable share of initial investments. While the criteria are important, it tends to support the existing big and older players. • Financing these requirements require a little more liberal approach from the policy side. Problem of limited spectrum availability and the issue of interconnection charges between the private and state operators.road aheadThe year 2008 saw their Indian telecom industry touching the muchanticipated 250mn wireless subscribers mark. However the next challengesto achieve 500mn mobile customers by 2010. Service providers have alreadypulled out their socks and have committed not to leave any stone unturned.The present day rural India, with a substantial improvement in purchasingpower, presents a growing potential for telecom operators.India is likely to be the second largest mobile market in the BRIC nationswith 560 mn mobile users representing the nxt great growth curve for bothmobile and interactive market industries also private ector has become thedominant player in industry while public sector companies added 53.6mnsubscribers during 1998-2007, while Private companies have added upwhopping 133.58mn subscribers. 24
  25. 25. ROAD AHEADThe year 2008 saw their Indian telecom industry touchingthe much anticipated 250mn wireless subscribers mark.However the next challenges to achieve 500mn mobilecustomers by 2010. Service providers have already pulledout their socks and have committed not to leave any stoneunturned. The present day rural India, with a substantialimprovement in purchasing power, presents a growingpotential for telecom operators.Howver with the telecom tariff coming down to the lowestlevel there is ample scope for the expansion of telecomnetworks in these network. 25
  26. 26. REFERENCES • Google.com • Search engines • Voice and data magazine • Industry trends • Indian telecom industry-trends and cases by Nasreen Taher. • Telecommunication in India – emerging scenario by Dhandapani Alagiri. 26
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