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18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
18590980 telecom-sector-in-india
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  • 1. Telecom IndustryBusiness Environment Domain Study By Anjana (36), Prachi (16), Puneet (51), Sandeep (50) PGPM 508 Under the guidance of Dr. Pallavi Mody S. P. Jain Institute of Management & Research
  • 2. Telecom Industry Executive SummaryThe rapid growth in Indian telecom industry has been contributing to India’s GDP at large. Telecomindustry in India started to set up in a phased approach. Privatisation was gradually introduced, first invalue-added services, followed by cellular and basic services. Telecom Regulatory Authority of India(TRAI), was established to regulate and deal with competition (the service providers). This gradual andthoughtful reform process in India has favoured industry growth. Upcoming services such as 3G andWiMax will help to further augment the growth rate. The Indian telecommunications industry is one ofthe fastest growing in the world and India is projected to become the second largest telecom marketglobally by 2010.This is evident from the facts of Telecom Industry for example, India added 113.26 million newcustomers in 2008, the largest globally. The country’s cellular base witnessed close to 50 per centgrowth in 2008, with an average 9.5 million customers added every month. This would translate into612 million mobile subscribers, accounting for a tele-density of around 51 per cent by 2012. It isprojected that the industry will generate revenues worth US$ 43 billion in 2009-10.In this report we have tried to capture most of the areas of Telecom Industry. Major highlights of thereport are History of Telecom Industry, Current Industry Analysis, Role of TRAI, Spectrum allocation, FDIRegulation, Competitive advantages, Outsourcing in Telecom, Emerging Technologies, Latest Innovation,and Growth Trends, Mergers and Acquisitions.Anjana, Prachi, Puneet, Sandeep 2
  • 3. Telecom IndustryTable of ContentsExecutive Summary....................................................................................................................................... 21 Indian Telecom Industry ....................................................................................................................... 6 1.1 History ........................................................................................................................................... 6 1.2 Quick Facts .................................................................................................................................... 6 1.3 Telecom services ........................................................................................................................... 6 1.4 Industry Sectors ............................................................................................................................ 7 1.5 Growth Avenues ........................................................................................................................... 8 1.6 Industry Revenue (2002-2010) ................................................................................................... 10 1.7 Subscriber Growth ...................................................................................................................... 11 1.8 Major Players .............................................................................................................................. 11 1.8.1 Wireless Service Providers (Market share) ......................................................................... 12 1.8.2 Handset Manufacturers (Market share) ............................................................................. 12 1.9 Major Investments ...................................................................................................................... 13 1.10 Rural Telephony .......................................................................................................................... 13 1.11 Exploring the rural telecom opportunity .................................................................................... 13 1.12 Policy Initiatives .......................................................................................................................... 142 Telecom Regulatory Authority of India (TRAI) .................................................................................... 15 2.1 Mission ........................................................................................................................................ 15 2.2 Role of TRAI ................................................................................................................................. 15 2.3 Recommendatory Functions ....................................................................................................... 15 2.4 Mandatory Functions .................................................................................................................. 15 2.5 Other functions ........................................................................................................................... 163 Spectrum Auctions in India Vis-à-vis Worldwide ................................................................................ 17 3.1 Spectrum Auction Scenario in India ............................................................................................ 17 3.2 Gaps in Indian Spectrum Auction Licensing Scenario ................................................................. 18 3.3 3G Spectrum allocation policy in India in 2009........................................................................... 19 3.4 Comparison-Spectrum Allocation Policy in UK ........................................................................... 204 India’s Competitive Advantage ........................................................................................................... 21 4.1 Stable Economic Outlook ............................................................................................................ 21 4.2 Large Market Potential ............................................................................................................... 22 4.3 Large Talent Pool ........................................................................................................................ 22Anjana, Prachi, Puneet, Sandeep 3
  • 4. Telecom Industry 4.4 Low Labour Cost.......................................................................................................................... 235 The Road Ahead .................................................................................................................................. 25 5.1 Gradual Progression in Telecom Sector ...................................................................................... 25 5.2 Acquiring New Subscribers through expansion in Rural India .................................................... 26 5.3 Selling More to Existing Subscribers ........................................................................................... 26 5.4 Government Initiatives ............................................................................................................... 26 5.5 The reasons for the increasing importance of MVAS can be classified as:................................. 26 5.6 Defining VAS................................................................................................................................ 27 5.6.1 Basic definition of a VAS ..................................................................................................... 27 5.6.2 Definition as per TRAI ......................................................................................................... 28 5.7 Mobile VAS in rural market ......................................................................................................... 28 5.8 Access devices for MVAS ............................................................................................................ 29 5.8.1 GPRS Handsets .................................................................................................................... 29 5.8.2 3G Handsets ........................................................................................................................ 306 Key trends in telecom industry ........................................................................................................... 31 6.1 Mobile Number portability (MNP) .............................................................................................. 31 6.1.1 The Inhibitors ...................................................................................................................... 31 6.1.2 MNP Implementation globally ............................................................................................ 32 6.2 Wimax v/s 3G .............................................................................................................................. 33 6.3 Mobile Virtual Network Operator (MVNO) ................................................................................ 34 6.4 IPTV ............................................................................................................................................. 357 Industry Updates................................................................................................................................. 37 7.1 Consolidation in Industry. ........................................................................................................... 37 7.1.1 Idea Cellular’s Acquisition of Spice Telecom....................................................................... 37 7.1.2 Vodafone’s entry into India ................................................................................................ 37 7.1.3 Telenor-Unitech Deal .......................................................................................................... 38 7.1.4 TTSL – DoCoMo Deal. .......................................................................................................... 38 7.1.5 Bharti-MTN deal (in talks). .................................................................................................. 38 7.2 FDI Investments in the Telecom Sector in India: ........................................................................ 40 7.3 Outsourcing by Telecom Service Providers in India .................................................................... 41 7.3.1 Hutchitson Essar (now Vodafone) and Nokia Deal: ............................................................ 41 7.3.2 Bharti Airtel’s IT Outsourcing to IBM: ................................................................................. 41Anjana, Prachi, Puneet, Sandeep 4
  • 5. Telecom Industry 7.3.3 Bharti’s Outsourcing to Alcatel-Lucent: .............................................................................. 42 7.3.4 Bharti Outsourcing Deal with Nokia & Ericsson .................................................................. 428 Future Technology Trends .................................................................................................................. 43 8.1 IP Multimedia Subsystem (IMS) .................................................................................................. 43 8.2 High Speed Downlink Packet Access (HSDPA) ............................................................................ 44 8.3 4G or Fourth Generation Networks ............................................................................................ 449 Conclusion ........................................................................................................................................... 4610 References ...................................................................................................................................... 47Appendix A .................................................................................................................................................. 48Anjana, Prachi, Puneet, Sandeep 5
  • 6. Telecom Industry 1 Indian Telecom Industry1.1 History 1851  Introduction of Telegraph services 1947  Foreign Telecom Companies nationalized to form PTT 1980’s: The Beginning  Tele-density in 1980-81: 0.3%  Introduction of public pay phones  Private Sector allowed  DoT, MTNL and VSNL formed Early to Mid 90’s: A Messy  Telecom policy 1994 Affair - Basic telephony service to private operators - 49% FDI - 8 licensees began operations in Aug 1995 Late 90’s  Birth of a regulator: TRAI  NTP 1999  (New Telecom Policy) 2000+  CAGR of around 85% since 1999  FDI: 74% (2005) 2007-2009  having the worlds lowest call rates the fastest growth in the number of subscribers (45 million in 4 months),  the fastest sale of million mobile phones (in a week),  the worlds cheapest mobile handset  the worlds most affordable colour phone1.2 Quick Facts Total telecom subscribers : 429.72 million (March 2009) Wireless subscribers : 391.76 million Wire line subscribers : 37.94 million Tele density : 36.98 per cent India’s service providers revenue in Q1 (2009): $8.2 billion India’s Rural Mobile Phone Users : 100 Million1.3 Telecom servicesTelecommunication sector in India is primarily subdivided into two segments, which are Fixed ServiceProvider (FSPs) and Cellular Services. Telecom industry in India constitutes some essential telecomservices like telephone, radio, television and Internet. Telecom industry in India is specificallyemphasizing on latest technologies like GSM (Global System for Mobile Communications), CDMA (CodeDivision Multiple Access), PMRTS (Public Mobile Radio Trunking Services), Fixed Line and WLL(WirelessAnjana, Prachi, Puneet, Sandeep 6
  • 7. Telecom IndustryLocal Loop ). India has a prospering market specifically in GSM mobile service and the number ofsubscribers is growing very fast. Internet PMRTS VSATs Radio Paging GMPCS Basic Services Mobile Services1.4 Industry Sectors Network Infrastructure Companies: Telecom Service Providers: Bharati- Alcatel-Lucent, Cisco, Ericsson Airtel, Vodafone, Idea, Reliance. Telecom Telecom Solutions Providers: Tech- Telecom Equipment Manufacturers: Mahindra, Aricent, IBM Indi Nokia, Motorola, Samsung Wipro, SaskenFrom holistic point of view telecom industry can be divided to four sub-sets. The major forces in Indiantelecom industry are Service providers. All major telecom equipment suppliers have their R&D centers inIndia. In last 5 years, global giants in mobile devices have set up their manufacturing facitilities in India.The discussions in this document is mainly restricted to only Telecom Service Providers.Anjana, Prachi, Puneet, Sandeep 7
  • 8. Telecom Industry1.5 Growth Avenues Managed services is another segment that is attracting telecom companies. On account of the rapidly growing subscriber base, service providers find it difficult to manage their infrastructure and network management operations. In such cases, they completely or partially outsource their infrastructure or network management operations. To reduce their network deployment costs, many service providers are considering infrastructure sharing offers the following advantages:  Improved service quality  Increased affordability for customers  Faster roll out of services in rural and remote areas  Significant reduction in initial set up costs  Increased environmental aesthetics  Lower operating costs for service providers Enterprise Telecom Services includes key services, such as voice over Internet protocol (VoIP), dedicated telecom communication systems; IT infrastructure enabled unified communication services, etc. Telecom service providers are increasingly targeting enterprises by providing dedicated services and is expected to witness major developments in near future.Anjana, Prachi, Puneet, Sandeep 8
  • 9. Telecom Industry Virtual Private Network is a private data network that provides connectivity within closed user groups via public telecommunication infrastructure. Competition is likely to heat up in the VPN segment as DoT has relaxed the norms for private players. 3G The Indian government plans to auction the spectrum for 3G services by inviting bids from domestic as well as foreign players, and creating a competitive environment that offers better services to consumers. Therefore, the 3G spectrum is among the major investment opportunities and growth drivers of the telecom industry.  The immense potential for 3G is reflected by the 30–40 percent annual growth in Value- Added Services.  Cell phone manufacturers are striving to develop USD 100 priced 3G handsets for the Indian market. India expects to replicate its 2G growth in 3G services. WiMAX has been one of the most significant developments in wireless communication in the recent past. Since this mode of communication provides network access in inaccessible locations at a speed of more than 4 Mbps, it is expected to be a major factor in driving telecom services in India, especially wireless services. Thus, it will lead to the increased use of telecom services, Internet, value-added services and enterprise services. WiMAX is expected to accelerate economic growth and assist in providing better education, healthcare and entertainment services.  It is estimated that India will have 13 million WiMAX subscribers by 2012.  Aircel is the pioneer in WiMAX technology in India.  The state-owned player, BSNL, aims to connect 74,000 villages through WiMAX.  Bharti, Reliance and VSNL have acquired licenses in the 3.3GHz range to utilise the opportunities offered by this domain. Value Added Services:The VAS industry was worth USD 632 million in 2006–07. The industry is estimated to grow by 60 percent in 2007–08 and become an USD 1,011 million opportunity.The VAS industry is currently focussing on the entertainment sector, such as the Indian film industry andcricket; however, there is scope for growth in other avenues as utility-based services, such as locationinformation and mobile transactions. Rural Telephony: As the government targets to increase rural teledensity from the current 2 percent to 25 percent by 2012, rural telephony will require major investments. This segment will boost the demand for telecom services, equipment, Internet services and other value-added services; thereby, offering great market opportunities for telecom players.Anjana, Prachi, Puneet, Sandeep 9
  • 10. Telecom Industry1.6 Industry Revenue (2002-2010)According to a Frost & Sullivan industry analyst, by 2012, fixed line revenues are expected to touch US$12.2 billion while mobile revenues will reach US$ 39.8 billion in India. India has become the secondcountry in the world to have more than 100 million CDMA-based (code division multiple access) mobilephone subscribers after the US, which has 157 million CDMA users. The Indian telecommunicationsindustry is on a growth trajectory with the GSM operators adding nearly 9 million new subscribers inApril 2009, taking the total user base to 297 million, a growth of 3.11 per cent over the additions madethe previous month. The figures, however, do not include the GSM subscriber additions made byReliance Telecom. Year Revenue(US$ billion) 2002-03 9 2003-04 10 2004-05 11 2005-06 15 2006-07 20 2008-09 32 2009-10(forecasted) 43 Revenue(US$ billion) Revenue(US$ billion) 43 32 20 15 9 10 11Anjana, Prachi, Puneet, Sandeep 10
  • 11. Telecom Industry1.7 Subscriber GrowthIndia added 130 million new customers in 2008-09, the largest globally. The country’s cellular basewitnessed close to 50 per cent growth in 2008, with an average 9.5 million customers added everymonth.By April 2009, the total number of telephone connections reached 441.47 million. With this growth, theoverall tele-density reached 37.94 at the end of April 2009. According to Business MonitorInternational, India is currently adding 8-10 million mobile subscribers every month. It is estimated thatby mid 2012, around half the countrys population will own a mobile phone. This would translate into612 million mobile subscribers, accounting for a tele-density of around 51 per cent by 2012. Source: www.trai.gov.in1.8 Major PlayersBharti-Airtel leads the wirless market with 24% market share. The company recently achieved the magicfigure of 100 million subscribers. However, Bharti-Airtel expects a bloodbath in the Indian telecommarket in the near future, and is looking to spread its risks by entering new geographies (Bharti-MTNdeal is discussed in Industry Update Section). With 12-13 players present in the market there would be asevere pressure on margins. Be it an Aircel or Etisalat, the new operators would not remain fringeplayers in the Indian market, but would try and rock the applecart of existing operators. The growth inIndian market could start tapering off very soon. According to an industry expert the subscriber base willnot expand beyond 800 million in coming years from current number 400 million. Also, ARPUs in Indiahave steadily falling($5-$6). There have been talks about 3G and IPTV pushing growth, but it all seemsfar-fetched. The third generation of mobile services (3G) will be used by telcos to gain more spectrum.Besides, the services will be used only in urban areas.Anjana, Prachi, Puneet, Sandeep 11
  • 12. Telecom Industry1.8.1 Wireless Service Providers (Market share) As on June 30th 2009 Bharti Airtel Vodafone Essar 18% 24% BSNL IDEA 8% Aircel 1% 1% Reliance GSM 3% 18% MTNL 5% 11% Loop Mobile 11% Tata Teleservices Source: www.coai.com1.8.2 Handset Manufacturers (Market share)Indias telecom equipment manufacturing sector is set to become one of the largest globally by 2010.Mobile phone production is estimated to grow at a CAGR of 28.3%, totaling 107 million handsets by2010. Nokia Leads the market with whopping 60% share. Korean giant Samsung currently at numberthere is looking forward increase its market share to 20% through aggressive marketing. Handset Market 5% 15% Nokia 6% Sony 7% Samsung 60% 8% Motorola LG OthersAnjana, Prachi, Puneet, Sandeep 12
  • 13. Telecom Industry1.9 Major InvestmentsThe booming domestic telecom market has been attracting huge amounts of investment which is likelyto accelerate with the entry of new players and launch of new services. Buoyed by the rapid surge in thesubscriber base, huge investments are being made into this industry.  The Russian government is likely to pick up equity amounting to US$ 670 million-US$ 700 million in Sistema Shyam TeleServices Ltd (SSTL), a joint venture between Russia-based telecom major Sistema and Shyam Group in India, by the end of this financial year. SSTL is also planning to invest US$ 5.5 billion over the next 5 years in India.  Norway-based telecom operator Telenor has bought a 60 per cent stake in Unitech Wireless for US$ 1.23 billion.  Japanese telecom major NTT DoCoMo acquired a 27.31 per cent equity capital of Tata Teleservices for about US$ 2.6 billion in November 2008.  Bahrains Batelco has signed a deal to buy 49 per cent in Chennai-based S-Tel, a GSM service provider, for US$ 225 million.  BSNL, Indias leading telecom company in revenue terms, will put in about US$ 1.16 billion in its WiMax project.  Vodafone Essar will invest US$ 6 billion over the next three years in a bid to increase its mobile subscriber base from 40 million at present to over 100 million.  Telecom operator Aircel, which launched GSM mobile services in Bangalore in February 2009, plans to invest US$ 220.58 million over the next year to set up base stations across the state. Some deals are discussed in detail in industry consolidation section.1.10 Rural TelephonyRural India had 76.65 million fixed and Wireless in Local Loop (WLL) connections and 551,064 VillagePublic Telephones (VPT) as on September 2008. Therefore, 92 per cent of the villages in India have beencovered by the VPTs. Universal Service Obligation (USO) subsidy support scheme is also being used forsharing wireless infrastructure in rural areas with around 18,000 towers by 2010.1.11 Exploring the rural telecom opportunityIt is believed that of the next 250 million people expected to go mobile; at least 100 million will comefrom rural areas. Though the rural mobile penetration is highest in Punjab (20.69 per cent), followed byHimachal Pradesh (17.09 per cent), Kerala (10.63 per cent) and Haryana (10.20 per cent), mostcompanies are now sweating it out by hard selling their products and services in the rural areas of theregion. As a result, the geographical coverage of mobile telephony in India has gone up from 13 percent,a couple of years ago, to 39 percent now.Anjana, Prachi, Puneet, Sandeep 13
  • 14. Telecom Industry1.12 Policy InitiativesThe government has taken many proactive initiatives to facilitate the rapid growth of the Indian telecomindustry.  100% foreign direct investment (FDI) is permitted through the automatic route in telecom equipment manufacturing  FDI ceiling in telecom services has been raised to 74%  Introduction of a unified access licensing regime for telecom services on a pan-India basis  Plan to introduce mobile number portability in a phased manner  The government is implementing a program of connecting 66,822 uncovered villages under the Bharat Nirman programme. The government will invest US$ 2 billion to set up 112,000 community service centres in rural India to provide broadband connectivity in 2008-09.  The Department of Telecommunications (DoT) has stated that foreign telecom companies can bid for 3G spectrum without partnering with Indian companies. Only after winning a bid, would they need to apply for unified access service licence (UASL) and partner with an Indian company in accordance with the FDI regulations.Anjana, Prachi, Puneet, Sandeep 14
  • 15. Telecom Industry 2 Telecom Regulatory Authority of India (TRAI)2.1 MissionTo ensure that the interests of consumers are protected and at the same time to nurture conditions forgrowth of telecommunications, broadcasting and cable services in a manner and at a pace which willenable India to play a leading role in the emerging global information society.2.2 Role of TRAI One of the main objectives of TRAI is to provide a fair and transparent policy environment which promotes a level playing field and facilitates fair competition. In pursuance of above objective TRAI has issued from time to time a large number of regulations, orders and directives to deal with issues coming before it and provided the required direction to the evolution of Indian telecom market from a Government owned monopoly to a multioperator multi service open competitive market. The directions, orders and regulations issued cover awide range of subjects including tariff, interconnection and quality of service as well as governance ofthe Authority. The functions of TRAI can be divided as : Recommendatory function and MandatoryFunction.2.3 Recommendatory Functions  Need and timing for introduction of new service provider  Terms and conditions of licence to a service provider  Revocation of license for non-compliance of terms and conditions of license  Measures to facilitate competition and promote efficiency in the operation to facilitate growth in industry  Technological improvement in services by service providers  Inspection of type of equipment used by service provider  Measures for Technological development  Efficient Management of available spectrum2.4 Mandatory Functions  Ensure compliance of terms and conditions of license  Fix the terms and conditions of their inter connectivity between service providers  Ensure Technical compatibility and effective inter-connection between different service providersAnjana, Prachi, Puneet, Sandeep 15
  • 16. Telecom Industry  Regulate arrangements for sharing of revenues amongst service providers  Lay-down the standards of QoS to be provided by service provider,ensure this by periodical survey  Lay-down and ensure time period for providing local and long-distance circuits of telecommunication between different service providers  Maintain inter-connect agreement register  Ensure compliance of USO(universal service obligation)2.5 Other functions  Levy fees and other charges as determined by regulations  Perform administrative functions as entrusted to it by Central government or as per TRAI act  Notify in Official Gazette the service rates and message rates within and outside India Snapshot of TRAI functionsAnjana, Prachi, Puneet, Sandeep 16
  • 17. Telecom Industry 3 Spectrum Auctions in India Vis-à-vis WorldwideSpectrum auctions have been used with significant success in many developed countries. From aregulatory and policy perspective, spectrum auctions ensure the efficient use of spectrum by allocatingit to those entities that value it most, while also generating revenues for governments. But auctions maylead to unexpected outcomes due to unanticipated problems with their design leading to unexpectedbidder behavior such as collusion and over-bidding. The key challenge before regulatory agencies is todesign auctions in such a way as to meet the objective of fostering competition while at the same timeensuring that bidders can effectively use the spectrum for their business. With private initiativesincreasing in telecom and broadcast service provision, demand for spectrum has increased. Digitaltechnology has increased the scope of applications and created new areas of service provision. Cellulartelephony and wireless Internet are examples of such services. Despite technological changes thatreduce the demand for spectrum, availability of spectrum continues to be a constraint. In order toallocate spectrum amongst competing service providers, regulatory agencies often use auctions. Fromthe regulatory and policy perspective, spectrum auctions ensure efficient usage by allocating it to thoseentities that value it most, while also generating revenues for governments. But auctions may lead tounexpected outcomes as, for example, when regulatory agencies have inadequate market information,there may be a mismatch between expected and actual bidder behavior, or auctions may be poorlydesigned. The key challenge before regulatory agencies is to design auctions in such a way as to meetthe objective of fostering competition while at the same time ensuring that bidders can effectively usethe spectrum for their business.3.1 Spectrum Auction Scenario in India While India was one of the early adopters of spectrum auctions, its success in service provision has been low. Despite this early start, services have been slow to roll out. In India, telecom licences were auctioned for basic and cellular services from 1991 by the Department of Telecom (DoT), the incumbent government policy maker, regulator and service provider. For service provision, the entire country was divided into roughly 20 circles, categorized as A, B, or C depending upon their revenue potential. The circles were mostly co-terminus with the DoT’s administrative boundaries and the states. Potential service providers were required to seek foreign partners, as it was felt that no Indian company had the requisite financial strength and technical know Source: www.telenor.com how. For all licenses, bidding was a two-stage process,the first being a pre-qualification based on the evaluation of financial net worth (linked to the categoryof circle and service bid for) and experience in service provision and the second stage involvedAnjana, Prachi, Puneet, Sandeep 17
  • 18. Telecom Industryevaluation of bids. The bids were single stage, with the award going to the highest bidder drawn fromthose that satisfied the pre-qualification conditions. For cellular licences, Global System for MobileCommunications (GSM) was the chosen technology and for basic services, a combination of fiber opticand wireless in the local loop (WLL) was selected.For cellular services, there were separate licenses for the four major metros of Kolkata (Calcutta),Chennai (Madras), Mumbai (Bombay) and New Delhi. The licenses for the circles containing the metrosexcluded these cities. For metro licenses, the financial bids were to be evaluated on the rental to becharged to the customer for the first 3 years.(The airtime tariffs were fixed by DoT.) The licensee fee wasa flat amount for the first 3 years and then was linked to the number of subscribers, subject to aminimum amount. Subsequent to the bid opening, the rentals were fixed at Rs. 1561 based on theamounts specified by the winners, even though some winning bids had zero out in metros, and bidderswere evaluated on an annual license fee for the duration of the license, converted to its net presentvalue at a specified discount rate. The second highest bidder had to match the highest bid in order toobtain the license.Despite these initiatives, service roll out continued to be slow. The government then set up a group ontelecom (GOT), that consisted of top-level bureaucrats, industrialists and professionals to evolve afuture policy framework for the sector. This was presumably effected outside the DoT as thegovernment felt that the DoT might not be able to conceive a radically different roadmap or mightthwart the involvement of the private sector or produce a regulatory framework crafted in the DoT’svested interest. The GOT drafted the National Telecom Policy in 1999,2 (NTP 99) which presented aroadmap for resolving the impasse. All existing license holders could ‘‘migrate’’ to a new regime thatinvolved a one time payment as entry fee and an annual revenue share with the government, providedthat all operators withdrew their court cases against the government on a variety of issues such asdelays in clearances. The entry fee was based on a percentage of the total amount of the original bid.This change greatly facilitated private sector participation and several operators subsequentlycommenced services. As a part of the package,the operators also agreed to allow the government toincrease the number of players in their service areas.3.2 Gaps in Indian Spectrum Auction Licensing ScenarioThe absence of clear separations in DoT’s responsibilities for policy, regulation and operations led toseveral delays and lowered the credibility of the government. Like all incumbents, it saw its positionthreatened by impending private participation and set impediments in the service roll out, whereas in itsrole as a policy maker, it was required to design the auctions to facilitate service provision. Confusion inDoT was also evident from the manner in which it handled the interconnect issues. Managing the capson the number of circles or delays in clearances after the bids were opened showed a lack of adequatepreparation in the auction design process. The establishment of TRAI and NTP 99 brought about majorchanges to the licensing process and converting the licence fee to a revenue sharing regime signaling thegovernments changing perspective and willingness to bear a part of the market risk. Subsequently, aninterconnect framework has been put in place (although problems persist) and service provision hasaccelerated.Anjana, Prachi, Puneet, Sandeep 18
  • 19. Telecom Industry3.3 3G Spectrum allocation policy in India in 2009In the conducive business environment, India Inc. awaits the rollout of 3G services. The Indiangovernment plans to auction the spectrum for 3G services by inviting bids from domestic, as well asforeign players and creating a competitive environment that offers better services to consumers.Therefore, the 3G spectrum is among the major investment opportunities and growth drivers of thetelecom industry.  The immense potential for 3G is reflected by the 30-40 per cent annual growth in value added services  The global revenue for 3G is 60 per cent higher than that of other services  Cellphone manufacturers are striving to develop US$ 100-priced 3G handsets for the Indian market  India expects to replicate its 2G growth in 3G services. The Indian market is well poised to leverage the 3G service offerings in content categories such as sports, games and music. In the present context, 3G technology is extremely relevant for India.  It offers voice capacity that is four to five times higher than that of 2G services. Therefore, it is an ideal platform for low-cost cellular services  It can fulfil the need of fast developing mobile penetration in rural areas  It can meet the demand for high-speed data and content rich services in the urban landscape  It can play a vital role in augmenting the competitiveness of the country’s large BPO segment  It can be a way forward to achieve the Government’s broadband objectives.In addition, it will be a good solution for education, telemedicine, etc. Even if 2 per cent of the 180million cellular subscribers adopt 3G technology as soon as it is launched, it is likely to create an initialsubscriber base of 3.6 million. The market is slated to capture more than 11.3 per cent of all mobilesubscribers by 2010, i.e., 21.3 million people. Therefore, it would not be incorrect to assume that 3G ispoised to create the next mobile revolution in India.In the race towards lowering the entry barrier for 3G services, companies plan to offer bundled servicepackages with subsidised handsets.With regard to its business potential, many national players havealready completed 3G trials. BSNL has charted out a plan for launching 3G services in 250 cities. Privateplayers, such as Bharti, Reliance and Idea, are also ready to offer this service in 10-20 major Indian cities.However,Airtel and MTNL are very keen on leveraging their first mover advantage in this field.In June 2009 the DoT (Department of Telecom) in India has announced the radio spectrum that will bemade available when 3G licenses are eventually auctioned off.It could be the case that just 4 Operatorsare given radio spectrum around Delhi - given that two incumbents (BSNL and MTNL) already have somelicenses in each zone, then that would be just the possibility of two new Operators coming to play. Inother areas, there is apparently going to be more provision for private players - meaning up to 11‘Operators’ could enter business. The greater availability of spectrum in these other zones is due to theDefence Ministry giving up some of its Spectrum.Anjana, Prachi, Puneet, Sandeep 19
  • 20. Telecom IndustryThere is still much to-ing and fro-ing to be done though over the 3G licenses themselves - currentlythere are disputes over how many Operators can exist per zone, and whether the relevant spectrum issold in tranches, or in one go. Hopefully something will be resolved soon, as India is beginning to reallylag behind in 3G technologies, particularly as many other countries are already at HSPA (3.5G) level, andgoing to HSPA+ (3.75G) soon.3.4 Comparison-Spectrum Allocation Policy in UKThe UK 3G auction took the necessary steps to design the auction appropriately,keeping in mind thepast discrepencies. In the UK, there were already four established mobile players that had 2G licensescovering nearly 97 percent of the area and 90 percent of the population. Incumbents who won a 3Glicense, could provide roaming services over the existing 2G network to new 3G customers. In contrast, anew entrant needed to establish a roaming arrangement with the incumbent 2G providers. Theincumbents could thwart competition by denying or delaying roaming facilities to the new entrants. Thegovernment felt that new entrants needed certainty regarding their ability to be able to provideroaming over the existing networks and, therefore, mandated that incumbents would have to provideroaming to the new entrants. Such a mandate necessitated a change in the existing licenses that wasundertaken for the dominant providers. The incumbents sought several changes to the originallyproposed roaming conditions which would be to their advantage. The FCC, the Radio CommunicationsAgency that conducted the 3G auctions in UK and Oftel (the UK regulator) went through a detailedpublic discussion involving industry, academia and other interested parties in designing the auctions.This allowed regulatory agencies in these countries to auction spectrum for all services rather thanhaving to choose allocation mechanisms separately for various services.Anjana, Prachi, Puneet, Sandeep 20
  • 21. Telecom Industry 4 India’s Competitive AdvantageAn analysis of the Indian telecom industry under the Porter’s Diamond Model reveals that India offers acompetitive advantage for firms operating in the country. India is the fastest growing free market democracy in the world. It has a mature and dynamic private sector, which accounts for 75 per cent of India’s GDP, and a market with enormous potential due to its large size and diversity. It is also expected to achieve the highest growth rate among the BRIC countries (Brazil, Russia, India and China). India offers significant business opportunities to the services, as well as the manufacturing sectors. This is because India offers benefits such as cost advantage in product development and back-office processing and the large-scale availability of skilled English-speaking professionals. The middle class population is also a significant market for any businessentity. AT Kearney ranked India as the second-most attractive democracy in its FDI confidence index.The success of MNCs is a proof that India is an attractive investment destination. India’s huge domesticmarket and buoyant economic growth have always attracted foreign investors.Some of the key advantages of investing in India are outlined below.4.1 Stable Economic OutlookA decade of reforms has opened the country to greater competition and spurred industries to becomemore efficient. India is currently the fourth-largest economy on PPP basis and is well positioned on acontinuously increasing growth curve. India’s emergence as a leading destination for foreign investmentis a result of positive indicators such as a stable 6 per cent annual growth, rising foreign exchangereserves of over US$ 266.18 billion(July 24th 2009) and Foreign Direct Investment (FDI) of US$ 15 billion.Goldman Sachs had earlier predicted that India will become the third-largest economy in the world.However, it has now revised its previous estimates and claims that by 2050, India will even surpass theUS and become the second-largest economy after China. The country’s economic growth has becomemore attractive due to the rising share of the services sector in the GDP.Anjana, Prachi, Puneet, Sandeep 21
  • 22. Telecom Industry4.2 Large Market PotentialAround 30-40 million people in India join the middle class every year. The country’s upper middle classspends 6 percent of its earnings on telecom services. India is one of the largest consumer markets in theworld. Due to rapid economic growth and rise in disposable income, the spending power of consumersis increasing rapidly. It has been forecasted that 15 years down the line, Indians will be approximatelyfour times richer than they are today. As per this forecast, Indians will purchase five times more cars andconsume three times more crude oil than they do today.According to the 2001 census, about 54 per cent of the country’s total population was below 25 years ofage. By 2013, another 200 million people will be joining the league, representing an exponential growthin the ‘consuming class’. India will become a large consumer of world resources - be it natural or man-made, thereby offering numerous opportunities to marketers around the globe. Approximately 33 percent of India’s population will be residing in urban areas by 2026, as against 28 per cent in 2001.4.3 Large Talent PoolThe working age population is expected to rise by 83 per cent by 2026. India has over 380 universitiesand about 1,500 research institutes, which churn out approximately 200,000 engineers, 300,000 postgraduates, 2,100,000 other graduates and around 9,000 PhDs. This large base of skilled manpoweroffers unparalleled advantages to the companies operating in India. As a result, many multinationalcompanies have either established operation hubs in India to leverage this sizeable talent pool, or theyhave outsourced their work to a third party in India. The numerous BPOs and KPOs flourishing in Indiaare a direct consequence of companies choosing the latter option.Anjana, Prachi, Puneet, Sandeep 22
  • 23. Telecom Industry4.4 Low Labour CostCII estimates that manufactured product outsourcing accounted for US$ 10 billion in 2007. The valuewill escalate to US$ 50 billion by 2015. India has one of the lowest labour costs among the developingcountries, which is the foremost factor for attracting multinational giants in every sector. The Ministry ofCommerce, Government of India, has estimated that off shoring operations to India can provide a costbenefit of up to 40 to 60 per cent, as compared to developed countries. The country has also emergedas a major R&D hub with more than hundred Fortune 500 companies based in India. An apt example isNokia, which has set up its manufacturing operations in India considering the long term sustainabledemand for mobile telephony. The company believes that this initiative will help the company inreducing time to market and respond better to customer requirements. It has pumped in US$ 150million into its Chennai facility.Anjana, Prachi, Puneet, Sandeep 23
  • 24. Telecom Industry - Intensive competition in the country has made it possible for service providers to offer the services with lowers fare in the - India has a large middle world, profitability, class of 300 million, - Many new handset have been - Growing affordability and launched. lifetime free schemes have care a market at the bottom of the pyramid. - Low teledensity (~18%) Firm strategy offers huge future structure and potential. Chance rivalry. Factor Conditions Demand conditions Government - Presence of skilled labour pool. - Rapidly developing robust telecom infrastructure. - Increasing disposable income of consumers. - Increasing demand due to changing lifestyles and growing Related and attraction for mobiles with new supporting features. industries - Competent handset manufacturers have produced the lowest priced handsets for the -The government extends full support Indian market. to industry through reform processes. - Handset players are setting up manufacturing bases in India for better operation - Policies are in place to safeguard the management. interests of service providers, as well - Many telecom and equipment and software as those of consumers. companies are based in India. Porter’s Diamond Model – Indian Telecom IndustryAnjana, Prachi, Puneet, Sandeep 24
  • 25. Telecom Industry 5 The Road AheadThe target for the 11th Plan period (2007-12) is 600 million phone connections with an investment ofUS$ 73 billion. Apart from the basic telephone service, there is an enormous potential for various value-added services. In fact, the real potential for telecom service growth is still lying untapped.According to the CII Ernst & Young report titled India 2012: Telecom growth continues, revenue fromIndias telecom services industry is projected to reach US$ 54 billion in 2012, as against US$ 31 billion in2008. India is the world’s largest untapped mobile market5.1 Gradual Progression in Telecom SectorThe progression chart below depicts the major regulations and events driving the extra ordinary growthof Telecom sector from year 1999 to 2008. In order to capitalize this opportunity of meeting theconsumer needs in highly competitive market the operators have reduced the tariffs to attractconsumers with low purchasing power primarily in semi urban and rural India. In fact lucrative offers likebeing paid for incoming calls have transformed the scenario completely. Through these changingregulations and events, the Industry players are aiming to achieve the following  Acquiring new subscribers by expanding in Semi Urban and Rural India  Selling more services to existing subscribersThe recent TRAI recommendation permitting PC-to-phone calls where ISPs can offer cheaper STD callsand even free local calls. This would result in further reduction of voice tariffs. This would lead toincreased focus on MVAS by mobile operators.Anjana, Prachi, Puneet, Sandeep 25
  • 26. Telecom Industry5.2 Acquiring New Subscribers through expansion in Rural IndiaAcquiring customers have always been a great challenge for companies. Given the current level ofsaturation in Metros and Urban Market and cut throat competition among operators , increasingsubscriber base in urban market would be all the more challenging. Therefore a lot of operators withadequate support from Government are eyeing the rural market for future growth. Big operators likeAirtel have claimed that soon mobile connections and recharge vouchers etc will be available at all suchplaces from where people buy match boxes. This certainly explains the future penetration of theseservices in remotest of villages.5.3 Selling More to Existing SubscribersThis is relatively easier as compared to acquiring new customers. Also since now the new subscriptionswill largely happen at the bottom of the pyramid therefore the new subscriptions will further lower theaverage revenue per user. In such a scenario mobile VAS sector is a potential long-term revenue streamas it will be easier to sell more to the existing customers.5.4 Government InitiativesGovernment also has supported the growth of this sector by coming out with a number of initiatives forthe low end subscribers of rural India, and Universal Service Obligation (USO) fund was one suchinitiatives. The USO fund was an initiative taken up by the government to increase rural teledensity. Inrecent developments, BSNL and two private operators will erect 427 towers in remote areas offeringover four lakh mobile connections. All the towers are expected to be erected and commissioned byDecember 2008. Under the second phase, DoT aims at erecting 11,000 towers throughout the countryto offer over 11 million mobile connections ADC was levied by Telecom Regulatory Authority of India(TRAI) in 2003 to provide support for BSNLs rural telephone obligation. Telecom Regulatory Authority ofIndia (TRAI) has recently given orders for the withdrawal of the ADC (Access Deficit Charge) and thesubsequent passing of the benefit to the consumers by the telecom operators.5.5 The reasons for the increasing importance of MVAS can be classified as:Decrease in ARPU despite increase in MOU: Though the subscriber base is growing at a rapid pace andhas positively impacted industry revenues, operator margins also have shrunk owing to competition andlower “Average Revenue per User” (ARPU) as the major growth is coming from bottom of the pyramid.As ARPU declines and voice gets commoditized, the challenge is to develop alternative revenue streamsand retain customers by creating a basis for differentiation in high-churn markets.Need for differentiation: There is a greater need among the telecom operators to differentiatethemselves from each other.  Number of Licensees: With increasing number of licensees (98 UASL, and 37 cellular licenses) in the telecom space the average numbers of operators in many circles have increased to 5-6 operators offering more choices to the consumer. Thus the competition among the operators has increased tremendously. Therefore it is very important for them to differentiate themselves from the others. Now that voice has got commoditized these operators are using MVAS for theirAnjana, Prachi, Puneet, Sandeep 26
  • 27. Telecom Industry  differentiation and marketing these services heavily for creating awareness among the consumers.  Decreasing Call Rates: In order to attract consumers with relatively low purchasing powers primarily from Semi Urban and Rural India the operators have drastically reduced the call rates making it affordable to even the lower segment of society. The tariff in India is one of the lowest at Rs.1 per minute as compared to the tariff in developed nations like USA and UK where the call rates are Rs.13 and Rs7-8 respectively.  3G bidders who are non operators: The arrival of new technologies will give rise to greater competition as many non operators are also bidding for the 3G licenses. Department of Telecom  has planned to allow five 3G operators in each circle depending on the availability of spectrum.Therefore there would be a greater need to differentiate one self in order to attract new customers and retain the existing ones.  Saturation in Metro and Urban Market: The metro/urban areas offer high level of penetration and have significant mobile subscribers. In such a highly saturated market with the entry of MVNO’s the competition will get fierce. Therefore capitalizing on value added services will give operators opportunity to increase ARPU by providing premium services.Increasing need and demand from consumers: In addition to the above supply side reasons the ‘pulleffect’ from consumers asking for more than just basic telephony is also a key driver for MVAS services.Today most of the consumers are seeking more from their communication device apart from justmobility and desire to stay connected. As we have seen, Telecommunication has moved beyondproviding just basic voice calls. The mobile phone has evolved from a mere communication device to anaccess mode with an ability to tap a plethora of information and services available in the ecosystem.This is the reason why it is now being referred to as the ‘fourth screen’, after Cinema halls, Televisionand PC.5.6 Defining VASBut the fundamental question that remains is how VAS is defined. A clear MVAS definition is not onlyrequired to clear the air among the MVAS providers but it will also have an impact on the dynamics ofthe Value chain. A detailed definition of VAS might have an impact on the licensing issues surroundingVAS. Let’s look at different VAS definitions floating in the market.5.6.1 Basic definition of a VASValue Added Service (VAS) in telecommunication industry refers to non-core services, the core or basicservices being standard voice calls and fax transmission including bearer services. The value addedservices are characterized as under:-  Not a form of core or basic service but adds value in total service offering.  Stands alone in terms of profitability and also stimulates incremental demand for core or basic services  Can sometimes be provided as stand alone.  Do not cannibalize core or basic service.Anjana, Prachi, Puneet, Sandeep 27
  • 28. Telecom Industry  Can be add-on to core or basic service and as such can be sold at premium price.  May provide operational synergy with core or basic services.A value added service may demonstrate one or more of these characteristics and not necessarily all ofthem. In some cases, the value added service becomes so closely integrated with the basic offering thatneither the user nor the provider acknowledge or realize the difference. A classic example is of P2P SMS.Some of the operators do not consider P2P SMS as part of their VAS revenue.5.6.2 Definition as per TRAIIn the Unified Access Service License (UASL), VAS is defined as follows-“Value Added Services are enhanced services which add value to the basic teleservices and bearerservicesfor which separate licence are issued”The Government of India issues licenses for the following Value Added Services:-  Public mobile trunking service  Voice mail service  Closed users group domestic 64 kbps data network via INSAT satellites system  Videotex service  GMPCS  Internet  Audiotex  Unified messaging service5.7 Mobile VAS in rural marketThe next wave of Telecom growth will come from the bottom of the pyramid. For majority of thepopulation in the rural segment, the mobile phone is the first communication device. Rural should notalways be interpreted as poor and therefore some categories of MVAS might apply directly to them.But whether the statement can be extended to MVAS depends on some key factors. One is to clearlyidentify the need of the rural segment, second is to communicate the services to them i.e. generateawareness and thirdly, to provide an easy and cheap access mode to the rural consumers. All these 3 arequite big challenges and therefore needs to be addressed adequately for MVAS to take off in Rural India.Apart from the identification of rural consumer needs and development of relevant content,communication of these services to the rural population would be a bigger challenge. One way to do thisis to communicate through regional SMS for which a separate SMS gateway needs to be installed.Literacy level of the geographical area will be another limitation. Therefore the better communicationoption is Voice in regional languages. The challenge with regional voice is not only investment but alsoblockage of the already scarce spectrum.Marketing the content in rural market is going to be all the more challenging. This would require rightpackaging and pricing of MVAS. Providing cheap access mode to end consumer would be another keybooster to rural MVAS. Current voice MVAS charges are expensive from a rural consumer perspectiveAnjana, Prachi, Puneet, Sandeep 28
  • 29. Telecom Industrytherefore that also would need to be addressed for e.g. the ‘sachet model’ could prove to be successfulhere.MVAS is going to address two main needs of rural consumers- connectivity and entertainment mode.Connectivity will provide Information VAS on Agriculture necessary for the farmer’s livelihood e.g. mandirates, weather, etc. Health, finance, job opportunities etc are potential areas. Mobile also has thepotential to evolve as a key entertainment mode considering lack of other entertainment options inrural areas. The industry has witnessed some type of content being downloaded more in small towns ofUP and Bihar rather than in metros like Delhi and Mumbai. Therefore by leveraging on these twoaspects MVAS can be a success in rural area.5.8 Access devices for MVAS5.8.1 GPRS HandsetsCurrently the penetration of GPRS enabled handsets are close to 26% in India as against 99% in SouthKorea and 76% in Japan. Of the total mobile subscribers in India 65 million possess GPRS-enabledhandsets. Of all those who posses GPRS enabled handsets only 20-25% of them have got the GPRSactivated and only about 15% use it. Even in case of developed nations like South Korea and Japan notmore than 50% of the subscribers owning GPRS enabled handsets use it.This clearly indicates that the consumer today engage more in text based services than the web basedapplications. Therefore for MVAS to grow to its full potential the handset manufacturers will have tolook at ways to manufacture GPRS enabled phones which are affordable and user friendly. Moreoverthey would also need to increase its awareness and educate the consumers on how to use GPRS.Anjana, Prachi, Puneet, Sandeep 29
  • 30. Telecom Industry5.8.2 3G HandsetsThe market for 3G in the country is expected to be huge with over 65 million wireless subscribers, whouse their handsets to access data services on the Web. These subscribers are currently using mobilehandsets which are internet-enabled and are potential broadband subscribers with the deployment ofadvanced wireless technologies such as 3G. According to Indian Cellular Association (ICA) about 5% ofmobile users already have handsets that can work on 3G spectrum. In addition, out of all thosepossessing the 3G enabled handsets the number of people who would use 3G services would bedetermined by the quality of content available. Unlike most other countries, we are looking at 3Gservices not only as premium services but also as an extension of 2G. Since our broadband penetration isabysmal, 3G would provide a much required boost to it. Given that mobile phones are much cheaper ascompared to PCs, the demand for broadband on mobile is expected to be much greater. Moreimportantly, 3G will solve problems more in rural India. Therefore the shift towards 3G would dependon affordability of handsets along with the quality of content available.Anjana, Prachi, Puneet, Sandeep 30
  • 31. Telecom Industry 6 Key trends in telecom industry6.1 Mobile Number portability (MNP)One of the most frequent definitions that prevail in the telecom circles for number portability is:"Number portability is a circuit-switch telecommunications network feature that enables end users toretain their telephone numbers when changing service providers, service types, and or locations."Why mobile number portability (MNP)? When fully implemented nationwide by both wireline andwireless providers, portability will remove one of the most significant deterrents to changing service,providing unprecedented convenience for consumers and encouraging unrestrained competition in thetelecommunications industry. In short, this is the best method to increase the efficiency of the serviceprovider by increasing the competition, thereby ensuring better services in all respects.From the subscribers’ perspective, this is a deceptively simple and very welcome change, because theycan change wireless service providers without worrying about notifying friends, family and businesscontacts that their wireless number is changing. In addition, being able to ‘port’ a number from oneprovider to another eliminates the hassle and expenses of changing business cards, stationery, invoicesand other materials for businesses.From the wireless carrier’s perspective the change is anything, but simple. Virtually all of wirelesscarriers’ systems are affected. Especially any system that relies on mobile identity numbers (MINs) ormobile directory numbers (MDNs) will be affected. Examples of critical systems and processes thatwould be affected are: billing, customer service, order activation, call delivery, roamer registration andsupport, short messages service center, directory assistance, caller ID, calling name presentation,switches, maintenance and CSC systems, home location registers (HLRs), and visiting location registers(VLRs).6.1.1 The InhibitorsHuge Costs: One of the most common barriers in MNP implementation, within any country, has beenthe implementation cost. Service Providers have been constantly bargaining for time, based on the costfactor, from their respective governments. Referring to the recent example of the US, where each of thelarge carriers would need to spend $50–60 million to institute the service and an equivalent sum tomaintain it. The FCC on this plea gave wireless carriers in the US another year, i.e., till November 2003,for resolving implementation issues. The experience of developed countries exhibits that local numberportability for fixed wireline was introduced within two to three years of introduction of competition toincumbent state telcos. The cost estimate for the implementation of WNP in developed nations like theUS can be very helpful for the other countries, who wish to think on the lines of number portability. Toadd on increased marketing costs are to be realized as the carriers look to lock up their current basebefore number portability is implemented, and then aggressively pursue the customers of other carriersthereafter.Anjana, Prachi, Puneet, Sandeep 31
  • 32. Telecom IndustryCustomer Retention/Increased Competition: Every subscriber in a race to retain its customer would liketo offer its customers best services so as to save them from porting. It’s like a blessing in disguise for thecustomers, as they would get better service irrespective of the carrier, albeit with the same number.Infrastructure Upgrade: To support WNP, a company has to upgrade both its hardware and softwarecapabilities, which will amount to some cost. Softwares need to be upgraded to provide proper routingof calls. The carriers need to upgrade their networks to handle portability requests. The provider, whichhas its portability compatible would be expected to attract maximum customers and will emerge thewinner.Cost Recovery and Bill Reconciliation/Query Processing: When a customer plans to shift, the old serviceprovider (OSP) has to perform a query to identify if there are any billing amounts pending, which theyneed to recover before the subscriber moves to the new service provider (NSP).6.1.2 MNP Implementation globallyGlobally, Singapore was the first country to implement MNP in 1997, followed by Hong Kong in 1999 andAustralia in 2001. Off late, many countries have adopted the MNP model to prevent market doldrumsand putting pressure on service providers to furnish more services at a competitive price level. However,it has not been able to produce any significant results in these markets.While it has worked in markets like Hong Kong and Australia, it failed to bear fruit in the UK, France,Germany, Pakistan, Ireland, Malta, among others. MNP worked in Hong Kong due to the speedy portingprocess and the availability of already implemented solution (for fixed-line services). In Australia, theregulator effectively promoted number portability and was able to maintain the maximum porting timeof just under three hours.Furthermore, in Finland, where initially the implementation was viewed as a success due to dearth ofminimal contract periods and high migration incentives, operators failed to sustain the momentum.The failure in most markets where MNP was implemented is attributed to factors like half-heartedimplementation, issues related to contract, lack of consumer awareness, overboard of paperwork,technical difficulties and poor customer service.Anjana, Prachi, Puneet, Sandeep 32
  • 33. Telecom IndustryThe neighboring country Pakistan, the first country in Southeast Asia to introduce MNP in March 2007,experienced less than 1% portability. One of the reasons for such poor response is the pitiable customerservice and time consuming process during porting the number. Pakistan has over 90 mn cellularsubscribers with approximately 95% of them pre-paid.According to experts, disaster recovery and business continuity are also critical elements for MNPproviders and hence, it is essential to have a backup center connected over secured redundant leasedlines. This center should also be located on a different seismic area.There is no doubt that if implemented successfully, MNP can be a big boon for Indian cellularsubscribers. However, considering the overall market dynamics and past experiences, the approach ofthe government and gaps in implemetation planning, its success can be strictly questioned in the longrun.The regulators therefore need to build their fundamentals. To make MNP utilitarian for consumers, thegovernment needs to have a clear roadmap, strategic policies and should define strict guidelines andtimelines for the service providers.6.2 Wimax v/s 3GThe WiMAX vs. 3G cellular showdown is poised to become one of the next great market battles in thetelecom industry. Fortunes will be made and lost in this battle, and the user experience of the Internetwill be irreversibly changed in the process. 3G scores for voice; Wimax may lead to increasedbroadband penetration. With the Department of Telecommunications gearing up for simultaneousrelease of 3G and WiMax spectrum, analysts expect the two emerging wireless technologies to battle itout for supremacy.WiMax or Worldwide Interoperability for Microwave Access is a telecom technology that enableswireless transmission of data. The technology is available as IEEE 802.16D (fixed) and IEEE 802.16E(mobile). It offers downloads of up to 70 Mbps as compared to the 15 Mbps that 3G provides. MobileWiMax offers download speeds of around 20 Mbps. In India, companies like Tata CommunicationsInternet Services, Intel, Bharat Sanchar Nigam Ltd, Bharti Airtel and Reliance Communications are theproponents of WiMax. Most of the companies have had beta-runs of the technology. According to a topofficial with a service provider, telecom service providers are in various stages of WiMaximplementation. Some companies have commercially launched fixed WiMax services in certain cities.While opponents of WiMax say currently it cannot be used for mobile applications, the first mobileWiMax network was introduced in Italy this July. Another reason for the industry pinning its hopes onWiMax is its ability to increase the broadband penetration. WiMax makes huge sense for companies asit enables them to provide cheaper mobile internet and broadband services, in turn, increasing theinternet penetration. However, this will adversely impact services like GPRS and e-mail on mobile asAnjana, Prachi, Puneet, Sandeep 33
  • 34. Telecom Industryusers might move over to WiMax-enabled devices for data, even though they might stick with 3G or 2Gspectrum for voice.The Telecom Regulatory Authority of India has set a target of 20 million broadband connections by 2010from the current 4.3 million. The industry expects WiMax to bridge the gap. According to a consultant ofErnst & Young service providers would mainly use the technology for gaining traction with thecustomers, as providing the last mile over the conventional digital subscriber lines would be time-consuming and costly. 3G WiMax Result Spectrum Price To be auctioned DoT has Advantage WiMax recommended 25% of reserve price of 3G spectrum Spectrum Allocation Simultaneous Simultaneous Neutral For Voice services Best technology Evolving Advantage 3G technology Equipment/Standard Evolved over the years New technology Advantage 3G Data download speeds 15 Mbps 70 Mbps Advantage WiMax (fixed) Data download speeds 15 Mbps 20 MBPS Advantage WiMax (mobile)Operators will have to use 3G spectrum to revive voice services that are being choked by a dearth of 2Gspectrum, Patel added. The WiMax customer premise equipment (CPE) is priced at Rs 5,000-10,000,while the CPEs for 3G would be cost Rs 10,000 and above. The industry will know the winner in the nextsix months, when the spectrum allocation is complete.6.3 Mobile Virtual Network Operator (MVNO)Mobile Virtual Network Operator (MVNO) is a GSM phenomenon where an operator or company whichdoes not own a licensed spectrum and generally with out own networking infrastructure. InsteadMVNOs resell wireless services under their brand name, using regular telecom operators network withwhich they have a business arrangements. Usually they they buy minutes of use from the licensedtelecom operator and then resell minutes of usage to their customers of MVNO. Currently MVNOs areemerging in fast pace in European markets and beginning in USA also. Slowly MVNO phenomenoncatching up in Asia and other parts of the world also.An example for MVNO is Virgin Mobile. Virgin Mobile plc is a mobile phone service provider operating inthe UK, Australia and Canada, and the US. The company was the worlds first Mobile Virtual NetworkAnjana, Prachi, Puneet, Sandeep 34
  • 35. Telecom IndustryOperator, launched in the UK in 1999. It does not maintain its own network, and instead has contractsto use the existing network(s) of other providers. In the UK, Virgin Mobile uses the T-Mobile network. Inthe US, the Sprint network is the carrier. In Australia, Virgin Mobile operates on the Optus network. InCanada, it uses the Bell Mobility network. These networks use different technology (GSM in the UK andAustralia and CDMA in the US and Canada).Usually MVNOs do not have their own infrastructure, some providers are actually deploying their ownMobile Switching Centers (MSC) and even Service Control Points (SCP) in some cases. Some MVNOsdeploy their own mobile Intelligent Network (IN) infrastructure in order to facilitate the means to offervalue-added services. In this way, MNVOs can treat incumbent infrastructure such as radio equipmentas a commodity, while the MVNO offers its own advanced and differentiated services based onexploitation of their own IN infrastructure. The goal of offering value-added services is to differentiateversus the incumbent mobile operator, allowing for customer acquisition and preventing the MVNOfrom needing to compete on the basis of price alone.MVNOs have full control over the SIM card, branding, marketing, billing, and customer care operations.While sometimes offering operational support systems (OSS) and business support systems (BSS) tosupport the MVNO, the incumbent mobile operators most keep their own OSS/BSS processes andprocedures separate and distinct from those of the MVNO.In the future a cell phone user may be able to subscribe to a network operator plus multiple MVNOs forspecific data services over the same phone. One MVNO could provide sports news, another weather andtraffic and still another could provide instant messaging capabilities. In this way, each MVNO and thenetwork operator could focus on their own niche markets and form customized detailed services thatwould expand their customer reach and brand.Regulation of MVNO’sSo far MVNOs have not been regulated in any country. The ITU has received several requests to studythe issue, specifically to provide input on whether government intervention is necessary to allowMVNOs to offer services and applications at a lower price to consumers. This would help to ensure amore efficient use of the spectrum but some incumbent providers argue that the market is alreadycompetitive and intervention is not necessary.6.4 IPTVIPTV (Internet Protocol Television) delivers television programming to households via a broadbandconnection using Internet protocols. It requires a subscription and IPTV set-top box, and offers keyadvantages over existing TV cable and satellite technologies. IPTV is typically bundled with otherservices like Video on Demand (VOD), voice over IP (VOIP) or digital phone, and Web access, collectivelyreferred to as Triple Play.Because IPTV arrives over telephone lines, telephone companies are in a prime position to offer IPTVservices initially, but it is expected that other carriers will offer the technology in the future. IPTVAnjana, Prachi, Puneet, Sandeep 35
  • 36. Telecom Industrypromises more efficient streaming than present technologies, and therefore theoretically reduced pricesto operators and subscribers alike. However, it also adds many advantages that may play into marketpricing.One of the advantages of IPTV is the ability for digital video recorders (DVRs) to record multiplebroadcasts at once. According to Alcatel, one leading provider, it will also be easier to find favoriteprograms by using "custom view guides." IPTV even allows for picture-in-picture viewing without theneed for multiple tuners. You can watch one show, while using picture-in-picture to channel surf!IPTV viewers will have full control over functionality such as rewind, fast-forward, pause, and so on.Using a cell phone or PDA, a subscriber might even utilize remote programming for IPTV. For example, ifa dinner function runs longer than expected, you dont have to miss your favorite program. Just callhome and remotely set the IPTV box to record it.However, the real advantage of IPTV is that it uses Internet protocols to provide two-waycommunication for interactive television. One application might be in game shows in which the studioaudience is asked to participate by helping a contestant choose between answers. IPTV opens the doorto real-time participation from people watching at home. Another application would be the ability toturn on multiple angles of an event, such as a touchdown, and watch it from dual angles simultaneouslyusing picture-in-picture viewing.One can also receive Web service notifications while watching IPTV for things such as incoming emailand instant messages. If you IPTV is packaged with digital phone, Caller ID might pop up on screen asyour telephone rings.IPTV is already growing in the international market, with providers in many countries including Japan,Hong Kong, Italy, France, Spain, Ireland, and the United Kingdom. In the United States SBC, reportedlypurchased a software delivery system for IPTV services from Microsoft in 2004 for $400 million dollars.Alcatel is working with Microsoft to develop a "global solution" for IPTV services, and Verizon has alsomade a deal with Microsoft for IPTV software.Anjana, Prachi, Puneet, Sandeep 36
  • 37. Telecom Industry 7 Industry Updates7.1 Consolidation in Industry.Telecom players are looking to tap into global funds to finance their aggressive growth plans. This willresult in partnerships joint ventures and equity sellout to foreign players. New license holders willcontinue to look to sell their stake at a premium. New policies will seek to curb this license arbitrage.Smaller players with operations in only a few circles will find in difficult to compete with the nationwideplayers. The industry may see consolidation with these smaller operators being acquired by the largerones. “Unbundling of the corporation” will continue as companies will seek f or economies of scale andlower startup cost by infrastructure sharing. 3G and WiMax license will spur M&A and partnershipactivity.7.1.1 Idea Cellular’s Acquisition of Spice TelecomThere were three transactions as part of this acquisition; acquisition of shares of Spice, a non-competefee and a capital infusion of about Rs 7300 crores received from TM International Bhd (TMI). Withrespect to shares, Idea acquired 40.8% stake of Spice Communications at Rs 77.30 a share for Rs 2,716crore. There was a share swap in which Spice shareholders got 49 Idea shares for every 100 Spice sharesheld. An additional Rs 544 crore was paid to the promoters of Spice group as non-compete fee.The deal was strategically important for Idea Cellular as it was looking forward to transfer itself into apan-India telecom service provider. The spectrum auctioned by GoI is a scarce resource nowadays andcost a premium. Also there’s restriction by TRAI with respect to number of operators per telecom circle.So it makes sense to acquire a small telecom operator. Small players like Spice Telecom operating atonly a few circles(Karnataka and Punjab) will find difficult to compete with the nationwide players in thelong run. So it was a win-win deal for both companies.7.1.2 Vodafone’s entry into India Vodafone paid a discounted price of $10.9 billion in cash for acquiring the 52% stake held by Hutchison Telecom International (HTIL) in Indian mobile firm Hutch-Essar. HTIL declared a special dividend of 6.75 HK dollars per share following the completion of the formalities. The final price was a reduction of $180 million from the originally agreed price of $11.08 billion.Vodafone is the largest mobile telecommunications network company in the world. The deal gave themaccess to one of the fastest growing mobile markets in the world.Anjana, Prachi, Puneet, Sandeep 37
  • 38. Telecom Industry7.1.3 Telenor-Unitech DealNorwegian Telecom major Telenor is in the process of acquiring controlling stake of67.25% in Unitech wireless via equity infusion. The enterprise valuation of UnitechWirelsss is about Rs 10,900 crore. As per the deal, Telenor will infuse cash in fourstages and at each phase, by increasing its stake in Unitech Wireless. In the firstphase, they got 33.5% ownership in Unitech Wireless. In the second phase theycompleted the acquisition for a 49 per cent stake in Unitech Wireless by paying Rs1,130 crore for a further 15.5 per cent stake in the company. The acquisition is expected to becompleted by end of this quarter.7.1.4 TTSL – DoCoMo Deal.Japanese carrier NTT DoCoMo acquired 26 per cent stake in Tata Teleservices (TTSL). The TataDoCoMo-branded GSM service has already started in Southern India and gradually will be expandednationwide. DoCoMo’s international expansion plans have not always proven successful, with the firm historically preferring to take small stakes in firms and then try to influence their strategy. It has been less prepared to take majority stakes and impose its will, as other leading carriers have chosen to do. The difficulties faced by the firm in spreading its domestically successful i-mode service internationallytypify the obstacles it has faced overseas. With Tata, DoCoMo had said “participating proactively inTTSL’s management by providing human resources and technical assistance to help realise improvednetwork quality and the possible introduction of leading-edge, value-added services.”7.1.5 Bharti-MTN deal (in talks).Recently Bharti Airtel has re-started its audacious merger bid with MTN that could create a $61-billiontransnational telecom goliath with combined revenues of $20 billion and over 200 million subscribersacross Africa, Asia and Middle East, will be among the worlds 10 biggest telecom companies. The dealcould be win-win for both parties. Bharti is under pressure in its home country due to severecompetition and looking forward to spread its risk across geographies. Meanwhile, the African telecomoperator is also encountering some of the problems that its counterpart in India is confronting. MTNmay have higher ARPUs (in the range of $12-20), but they are also falling fast.7.1.5.1 Strategic benefits to both playersSynergies would be sought from a number of areas, including procurement, operational best practice,R&D and international network sharing. The two companies will not overlap in each other’s businessoperations: Bharti Airtel will be the primary vehicle for Bharti and MTN to pursue further expansion inAfrica and the Middle East.Anjana, Prachi, Puneet, Sandeep 38
  • 39. Telecom IndustryWith both Bharti and MTN operating in high-growth geographies, itwould be imperative for them to incrementally expand into untappedareas. Collaborating with each other would seem the logical way ahead.The most important, and visible fallout of the deal, if it materializes, willbe the advantage of economies of scale for the new entity.In recent times, companies are more amenable to mergers andacquisitions. Of late, companies are finding it tough to obtain easy fundsfor expansion, which calls for more collaboration if corporate intend toexpand. Bharti would not be involved only in MTN’s day-to-day activities,but it would also have a say while making bigger strategic decisions, suchas those pertaining to investments in other geographies or sourcing ofequipment.The high subscriber base and financial muscle will give Bharti-MTN the desired edge while dealing withvendors. Once the merger happens, the economies of scale of the complete outfit (Bharti-MTN) wouldbe taken into account. For instance, even if the company places an order worth just $1 million, thevendor would not hesitate to lap it up, as there could be orders worth a billion dollars in other projects.This would offset whatever concerns there may be with respect to the small population size in countrieswhere MTN operates.7.1.5.2 Takeaways for Bharti  The biggest takeaway for Bharti is in the form of access to new geographies with high growth potential. Without a partner, Bharti would have to embark on a Greenfield project, which would be time-consuming and capital intensive.  Besides, without local knowledge (with respect to the market and government regulations), Bharti could be on a sticky wicket. The Indian telco does not have the expertise in running multi- country operations.  MTN has operations in 21 countries across Africa and the Middle East and is one of the largest emerging market mobile operators globally. While Africa has one-third of the world’s population, its telephonic density is just 30 per cent. This offers plenty of room for expansion. The fact that 95 percent of Africa is prepaid, which ensures all cash operations, fits perfectly into Bharti’s plans.  The options for Bharti were to go either the Greenfield way or with an experienced partner. MTN’s strong foothold in some growing markets such as South Africa, Botswana, Iran and Nigeria ensures that when the growth in India starts to slow down, Bharti would be ready to take off in other geographies. Besides, there is a lot of potential in Africa as three-fourths of the continent is still untapped.  Africa is quite like rural India and from that perspective; Bharti could learn how to roll out infrastructure in rural India.Anjana, Prachi, Puneet, Sandeep 39
  • 40. Telecom Industry  In addition, MTN is strong in the value-added services (VAS) and mobile commerce space. So, as and when mobile commerce picks up in India (after RBI’s approval), Bharti would be able to tap this market through MTN’s expertise.  MTN has a vast experience in running multi-country operations and overcoming regulatory hurdles. By working with MTN, life for Bharti will get a lot of easier.7.1.5.3 Major Challenges for the merger  One of the major challenges would be the integration of the company on the ground. It is tough for intercontinental companies to merge seamlessly because of cultural divide.  Alcatel-Lucent for instance is still trying to adjust to cultural divide. Although Nokia-Siemens has bridged this divide faster, it was because both the companies were European.  The Black Empowerment Act could pose a challenge, as it is meant to safeguard the rights of the black population. As per this Act, blacks are ensured a minimum shareholding management seats and voting rights.  The country’s strong trade union, Congress of South African Trade Unions (COSATU), which has influence over President Jacob Zuma, had almost wrecked the Vodafone-Vodacom deal.7.2 FDI Investments in the Telecom Sector in India:The Indian telecom industry has always allured foreign investors. In fact, the cumulative FDI inflow, fromAugust 1991 to March 2007, in the telecommunication sector amounted to US$ 7,513.22 million. Thismakes telecommunication the third-largest sector to attract FDI in India in the post liberalization era.The investment was majorly in handset manufacturing and telecom service provider. FDI in Telecommunication Sector (US$ million) 2008-09 2345.38 2007-08 1275.65 2006-07 521 2005-06 680 2004-05 129 2003-04 116Anjana, Prachi, Puneet, Sandeep 40
  • 41. Telecom IndustryWith stable macroeconomic impetus and numerous other advantages, India has the potential tobecome the electronics manufacturing hub of the world. Excited by the record-breaking industrygrowth, investors have outlaid US$ 1.5 billion in the past two and a half years in the Indian telecomsector. India will receive an additional US$ 2 billion investment in the next one year. With the world nowrecognising India’s manufacturing potential, the Indian telecom handset manufacturing market is likelytouch US$ 7 billion by 2010.An example is Nokia. The company has already produced 25 million handsets in its Chennai facility. Itwill pump in an additional US$ 150 million to this set up. The company exports around 20 per cent of itsvolume to South-east Asia, the Middle East and Africa. Local manufacturing allows companies to avoid 4per cent countervailing duties on imported handsets, thereby further reducing the cost.7.3 Outsourcing by Telecom Service Providers in IndiaManaged service is another segment that is attracting telecom companies. On account of the rapidlygrowing subscriber base, service providers find it difficult to manage their infrastructure and network. Insuch cases, they completely or partially outsource their infrastructure or network managementoperations.7.3.1 Hutchitson Essar (now Vodafone) and Nokia Deal:A case in point is Nokia which is managing the network for Hutchison Essar Limited in 19 circles in India.Having successfully capitalised on the business potential of managed service, Nokia is already earning 30per cent of its total revenue from this segment. The company has also shifted its first Global NetworkSolutions Centre (GNSC) to India. The company manages 39 cellular networks in 30 countries. Its Indiancentre will act as a global hub for other Nokia operation centres.Advantages of Managed Service• Smooth management of technological complexity• Opportunity to strengthen core competency• Reduction in financial outlay• Touching base with new processes and technologies7.3.2 Bharti Airtel’s IT Outsourcing to IBM:Another dimension of managed service is telecom, communication and network management solutionsfor enterprises. Bharti Televentures and IBM, together offer telecom and IT solutions in India. Thesolutions and services portfolio comprises of the remote monitoring of servers, security operations andnetwork operations,providing data centre services (including server hosting,server management andstorage management), IT help desk services and end-to-end connectivity and fulfilling all telecom andcommunication requirements.This information technology outsourcing deal with infotech major IBM isestimated to be in the range of $700-750 million for a ten-year period.Anjana, Prachi, Puneet, Sandeep 41
  • 42. Telecom IndustryThe deal involved outsourcing of BTVLs hardware, software and IT service requirements to IBM.Theagreement specifies that payments made to IBM India will be linked to the percentage of revenuegeneration by BTVL and pre-defined service level agreements. The percentage-linked revenue paymentis modelled to decrease with BTVLs increase in revenue.The deal includes all customer-facing ITapplications like billing, customer relationship management and data warehousing. In addition, Internet,e-mail and online collaborations are included in it.On the infrastructure front, IBM will consolidateBTVLs data centre, IT helpdesk and enhance its disaster recovery centre capabilities, he said.7.3.3 Bharti’s Outsourcing to Alcatel-Lucent:Telecom major Bharti Airtel has a $500-million deal to Alcatel-Lucent for outsourcing the managementand servicing of its broadband and fixed line network for five years.The deal involves the creation of ajoint venture with Alcatel-Lucent holding 76 per cent of the equity, and Bharti having the remainder 24percent.The joint venture will help accelerate performance as Bharti migrates to the next generationnetworks for the broadband and telephone customers.7.3.4 Bharti Outsourcing Deal with Nokia & Ericsson Bharti Airtel awarded a $400m contract to Nokia for expanding its managed GSM networks in eightcircles. This also marks Bharti’s third major deal with Nokia in the last two years. Bharti would have100% ownership of the networks supplied by Nokia, with the actual payment being linked to utilisationof capacity and fulfillment of agreed quality of service parameters.This comes close on the heels of Bharti’s recent signing of a $1bn three-year service contract withEricsson towards design, planning, supply, installation, commissioning and upgrading of its network in15 telecom circles.This emphasises Bharti’s policy towards outsourcing all operational activities, including customerservices to global majors. This has enabled Bharti to focus on its core areas: product innovation, valueadded services, marketing, branding and pricing. It has enabled Bharti to concentrate on customers,finances and regulation. As per the three-year contract, Nokia will provide managed services and expandAirtel’s GSM/GPRS/EDGE networks in eight circles of Mumbai, Maharashtra & Goa, Gujarat, Bihar,Orissa, Kolkata, West Bengal and Madhya Pradesh.The network monitoring operations will be carried out from Nokia’s state-of-the-art Global NetworkServices Center in Chennai. The deal also envisages Nokia to deploy its WAP solution across Bharti’snational network to enhance its mobile packet core network capabilities. This will make usage of dataservices easy, thereby increasing the consumption of content on the Bharti network.Anjana, Prachi, Puneet, Sandeep 42
  • 43. Telecom Industry 8 Future Technology TrendsIn this section we have listed down the future technologies which are in roadmap and are speculated tomake an impact on current business model of telcos.8.1 IP Multimedia Subsystem (IMS)IP Multimedia Subsystem (IMS) is a generic architecture for offering multimedia and voice over IPservices, defined by 3rd Generation Partnership Project (3GPP). IMS is access independant as it supportsmultiple access types including GSM, WCDMA, CDMA2000, WLAN, Wireline broadband and other packetdata applications. IMS will make Internet technologies, such as web browsing, e-mail, instant messagingand video conferencing available to everyone from any location. It is also intended to allow operators tointroduce new services, such as web browsing, WAP and MMS, at the top level of their packet-switchednetworks.IP Multimedia Subsystem is standardized reference architecture. IMS consists of session control,connection control and an applications services framework along with subscriber and services data. Itenables new converged voice and data services, while allowing for the interoperability of theseconverged services between internet and cellular subscribers. IMS uses open standard IP protocols,defined by the IETF. So users will be able to execute all their services when roaming as well as from theirhome networks. So, a multimedia session between two IMS users, between an IMS user and a user onthe Internet, and between two users on the Internet is established using exactly the same protocol.Moreover, the interfaces for service developers are also based on IP protocols.Some of the possible applications where IMS can be used are:  Presence services  Full Duplex Video Telephony  Instant messaging  Unified messaging  Multimedia advertising  Multiparty gaming  Video streaming  Web/Audio/Video Conferencing  Push-to services, such as push-to-talk, push-to-view, push-to-videoEffectively, IMS provides a unified architecture that supports a wide range of IP-based services overboth packet- and circuit-switched networks, employing a range of different wireless and fixed accessAnjana, Prachi, Puneet, Sandeep 43
  • 44. Telecom Industrytechnologies. A user could, for example, pay for and download a video clip to a chosen mobile or fixeddevice and subsequently use some of this material to create a multimedia message for delivery tofriends on many different networks. A single IMS presence-and-availability engine could track a userspresence and availability across mobile, fixed, and broadband networks, or a user could maintain asingle integrated contact list for all types of communications.A key point of IMS is that it is intended as an open-systems architecture: Services are created anddelivered by a wide range of highly distributed systems (real-time and non-real-time, possibly owned bydifferent parties) cooperating with each other. It is a different approach to the more traditional telcoarchitecture of a set of specific network elements implemented as a single telco-controlledinfrastructure.8.2 High Speed Downlink Packet Access (HSDPA)High Speed Downlink Packet Access (HSDPA) is a packet based technology for W-CDMA downlink withdata transmission rates of 4 to 5 times that of current generation 3G networks (UMTS) and 15 timesfaster than GPRS. The latest release boosts downlink speeds from the current end-user rate of 384 kbps(up to 2 Mbps according to standards) to a maximum value according to standards of 14.4 Mbps. Reallife end-user speeds will be in the range of 2 to 3 Mbps.HSDPA provides a smooth evolutionary path for Universal Mobile Telecommunications System (UMTS)networks to higher data rates and higher capacities, in the same way as Enhanced Data rates for GSMEvolution (EDGE) does in the Global System for Mobile communication (GSM) world. The introduction ofshared channels for different users will guarantee that channel resources are used efficiently in thepacket domain, and will be less expensive for users than dedicated channels.8.3 4G or Fourth Generation Networks4G or Fourth Generation is future technology for mobile and wireless comunications. It will be thesuccessor for the 3Rd Generation (3G) network technology. Currently 3G networks are underdeployement. Approximatly 4G deployments are expected to be seen around 2010 to 2015.The basic voice was the driver for second-generation mobile and has been a considerable success.Currently , video and TV services are driving forward third generation (3G) deployment. And in thefuture, low cost, high speed data will drive forward the fourth generation (4G) as short-rangecommunication emerges. Service and application ubiquity, with a high degree of personalization andsynchronization between various user appliances, will be another driver. At the same time, it is probablethat the radio access network will evolve from a centralized architecture to a distributed one.The evolution from 3G to 4G will be driven by services that offer better quality (e.g. multimedia, videoand sound) thanks to greater bandwidth, more sophistication in the association of a large quantity ofinformation, and improved personalization. Convergence with other network (enterprise, fixed) serviceswill come about through the high session data rate. It will require an always-on connection and arevenue model based on a fixed monthly fee. The impact on network capacity is expected to beAnjana, Prachi, Puneet, Sandeep 44
  • 45. Telecom Industrysignificant. Machine-to-machine transmission will involve two basic equipment types: sensors (whichmeasure parameters) and tags (which are generally read/write equipment).It is expected that users will require high data rates, similar to those on fixed networks, for data andstreaming applications. Mobile terminal usage (laptops, Personal digital assistants, handhelds) isexpected to grow rapidly as they become more user friendly. Fluid high quality video and networkreactivity are important user requirements. Key infrastructure design requirements include: fastresponse, high session rate, high capacity, low user charges, rapid return on investment for operators,investment that is in line with the growth in demand, and simple autonomous terminals. Theinfrastructure will be much more distributed than in current deployments, facilitating the introductionof a new source of local traffic: machine-to-machine.Anjana, Prachi, Puneet, Sandeep 45
  • 46. Telecom Industry 9 ConclusionThe Indian Telecom Service provider industry is gearing for a revolution. The customer is driving thisrevolution and will see more unique and sophisticated offerings coming his way. The 3G which will pavethe way for 3.5G, 3.75G and the next big thing-4G and the VAS services will keep the customer asking formore. The rural areas which have remained untapped will see an insurgence of services. Also the easingof the regulations by TRAI ,the ease of spectrum licensing, the FDI influx will make the telecom space inIndia a must watch in the coming years.Anjana, Prachi, Puneet, Sandeep 46
  • 47. Telecom Industry 10 References [1] IBEF report 2007-08 : Telecommunication - MARKET & OPPORTUNITIES. [2] Cellular Statistics – Cellular Operator Association of India [3] IAMAI & eTechnology Group@IMRB: MOBILE VALUE ADDED SERVICES IN INDIA- A Report. [4] Telenor Entering India: Investment Update [5] Voice and Data(May 2009): Mobile Number Portability - Poaching with Portability. [6] Business India : Telecom Takeover, Bharti-MTN deal [7] Moneycontrol.com: Idea Spice deal [8] Business Standard: Vodafone Hutch deal [9] IntoMobile: India’s 3G License Plans Updated. [10]World Bank Report: Spectrum auctions in India: lessons from experienceAnjana, Prachi, Puneet, Sandeep 47
  • 48. Telecom Industry Appendix A SNAPSHOT (Data As on 31st March 2009) Telecom Subscribers (Wireless +Wireline) Total Subscribers 429.72 Million % Growth During Quarter 11.68% Urban Subscribers 309.43 Million (72%) Rural Subscribers 120.29 Millions (28%) Overall Teledensity 36.98 % Urban Teledensity 88.66 % Rural Teledensity 14.8 % Wireline Subscribers Total Wireline Subscribers 37.96 Million % Growth During Quarter 0.15% 27.38 Million Urban Wireline Subscriber (72.13%) 10.58 Millions Rural Wireline Subscribers (27.87%) Village Public Telephones (VPT) 5.61 Million Public Call Office (PCO) 6.20 Million Wireless Subscribers Total Wireless Subscribers 391.76 Million % Growth During Quarter 12.93% Urban Wireless Subscribers 282.05 Million(72%) Rural Wireless Subscribers 109.71 Million (28%) 297.26 Million GSM Subscribers (75.88%) 94.50 Million CDMA Subscribers (24.12%) Internet & Broadband Subscribers Total Internet Subscribers (including Broadband) 13.54 Million % Growth During Quarter 5.30% Broadband Subscribers 6.22 Million Wireless Data Subscriber 117.82 Million Source www.trai.gov.inAnjana, Prachi, Puneet, Sandeep 48

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