The document provides an overview of the business environment and telecom sector in India. It discusses key aspects like the number of players in the industry, market shares, growth rates, regulations, taxation, and timeline of communication technologies. The telecom sector is growing rapidly in India, with increasing mobile and internet penetration. The government regulates the sector through policies around foreign investment, licensing, and spectrum auctions.

1. BUSINESS ENVIRONMENT Submitted By : Anubha Mathur(10810008) Anurag Mathur (10810013) Bidyut Saikia (10810016) Saryu Kamra (10810056) Vineet Chama (10810072)

2. FLOW OF THE PRESENTATION The Telecom Sector has been studied and analyzed under the following Heads : Rationale for selecting Number of players in the industry Respective market share Level of competition Growth rate of industry Import and export situation Effect of foreign investment Government Regulations Legal aspects Taxation situation Age of the industry

4. Teledensity for India is 67.67%. Lowest mobile tariffs across the globe. Average monthly mobile subscriber growth over FY11 is 15-17 million customers. Successful auctions of the 3G and BWA spectrum. Establishment of Indian players on the global level through cross border mergers and acquisitions. Well-defined regulatory provisions designed by the government. Wirelessly connect villages and remote areas through broadband and provide access to basic facilities. Source: KPMG Report on Indian Telecom Industry 2010 Significance of Telecom Sector

5. Services Sector growth in India

7. Major players in Indian Telecom

9. Indian Telecom Sector Scenario Source: Cellular Operators Association of India

10. Average Revenue per User Source: Department of Telecom India

12. Classification The telecom sector can be broadly classified on the basis of : Public or Private Sector (2) Service Providers and Ancillary Support Providers ( Providing Hardware)

13. Classification

14. Public Sector Players Name Additional Information Bharat Sanchar Nigam Ltd. 55,140,282 2G cellular customers and 88,493 3Gcustomers as on November 2009. It has 35.1 million Basic Phone subscribers Mahanagar Telephone Nigam Ltd The company was a monopoly until 1992, when the telecom sector was opened to other service providers. MTNL provides fixed line telephones, cellular connection of both GSM & CDMA and internet

15. Private Players In Telecom Name States Where they have Reached Additional Information Reliance Communications Ltd Andhra Pradesh, Bihar, Chennai, Delhi, Gujarat, Haryana, Himachal Pradesh, Jammu & Kashmir, Karnataka, Kerala, Kolkata, Madhya Pradesh, Maharashtra, Mumbai, Orissa, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh (E), Uttar Pradesh (W), West Bengal.(AUSPI) Second private sector telecom company (Fourth overall) to launch 3G services in India TATA Teleservices Ltd Andhra Pradesh, Bihar, Chennai, Delhi, Gujarat, Haryana, Himachal Pradesh, J & K, Karnataka, Kerala, Kolkata, Madhya Pradesh, Maharashtra, Mumbai, North East, Orissa, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh First private company to launch 3G services

16. Private Players In Telecom Bharti Airtel Ltd Delhi (Metro), Mumbai (Metro), Kolkata (Metro), Chennai (Metro), Andhra Pradesh, Assam, Bihar, Gujarat, Haryana, Himachal Pradesh, Jammu & Kashmir, Kerala, Orissa, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh (E), Uttar Pradesh (W), West Bengal (COAI). 5 th largest Company

17. Telecom Market in Indian States Source :http://www.dot.gov.in/annualreport/annualreport.htm State Subscriber base Population (01/03/2011) Mobile phones per 1000 population Uttar Pradesh 106,192,054 199,581,477 532 Maharashtra 94,841,692 112,372,972 844 Tamil Nadu 68,168,580 72,138,958 945 Andhra Pradesh 59,364,339 84,665,533 701 West Bengal 60,928,561 91,347,736 667 Gujarat 45,881,267 60,383,628 760 Rajasthan 42,380,958 68,621,012 618 Madhya Pradesh 44,256,394 72,597,565 610 Delhi 16,753,235 37,539,635 2,241 Kerala 30,954,858 33,387,677 927 Punjab 27,817,459 27,704,236 1,004 India 791,381,574 1,210,193,422 654

19. 1994 National Telecom Policy – 1994 announced Aug 1995 Kolkata became the first metro to have a cellular network 1997 Telecom Regulatory Authority of India was setup 1999 Tariff rebalancing exercises gets initiated March 1999 National Telecom Policy – 99 announced Evolution of Telecom Sector

20. Aug 1999 License fee (revenue share) reduced from provisional 15% to 12%, 10% & 8% on Circle wise basis (A type, B type & C type circles) 2000 TRAI Act amended & separate tribunal proposed Jan 2001 TDSAT started functioning Jan 2001 Policy announced for additional licenses in Basic and Mobile Services Jan 2001 Limited mobility allowed to Basic Services (CDMA spectrum allotted to Basic Service Operators) Evolution of Telecom Sector

21. Oct-2002 BSNL entered in to GSM cellular operation w.e.f 19th October, 2002. Made incoming call free & initiated tariff equalization process Tariff for GSM cellular mobiles reduced Nov 2003 Unified Access (Basic & Cellular) Service License (USAL) introduced as a first step towards Unified License Regime Technology neutral and allow provisioning any kind of service Apr 2004 License fee reduced by 2% across the board for all the access licenses. 2009-2010 3 G auction for public and private players Evolution of Telecom Sector

22. Number of Subscribers in last 10 years Source :http://www.dot.gov.in/annualreport/annualreport.htm Year Fixed line including WLL(F) Mobile (GSM+WLL(M) Total Tele density 2001 14.54 0.34 14.8 1.57 2002 26.65 1.9 28.55 2.81 2003 32.71 3.58 36.29 3.52 2004 38.33 6.54 44.87 4.28 2005 41.48 13 54.48 5.1 2006 42.84 33.69 76.53 7.04 2007 46.19 52.22 98.41 9.11 2008 50.18 90.14 140.32 12.8 2009 48.87 157.96 206.83 18.46 2010 43.3 226 269.3 24.04

23. Increase in Mobile Subscribers Source :http://www.dot.gov.in/annualreport/annualreport.htm Year Monthly Mobile Subscribers ( in million) 2002 0.28 2003 0.64 2004 1.58 2005 1.76 2006 4.69 2007 6.81 2008 8.77 2009 15.41 2010 19.90 2011 18.99

24. Comparison of Production and Export There is a significant telecom equipment-manufacturing base in the country and there has been steady growth of the manufacturing sector during the past few years. The figures for production and export of telecom equipment are shown in table Source :http://www.dot.gov.in/annualreport/annualreport.htm Year Production Export 2002-03 14400 402 2003-04 14000 250 2004-05 16090 400 2005-06 17833 1500 2006-07 23656 1898 2007-08 41270 8131 2008-09 48800 11000 2009-10 50000 13500

26. Import Situation The department of Telecommunications (DoT) has approved imports of Chinese telecom equipment by Indian mobile operators Reliance Communications and Tata Teleservices, bringing to an end a period of eight months in which none of India’s 15 mobile operators could import foreign equipment even as the industry was getting ready to offer next-generation services. Chinese telecom equipment majors Huawei and ZTE had earlier agreed in-principle to give Indian security agencies access to their network source codes.

27. Import Situation This is one of the primary conditions for importing telecom equipment into the country as per the latest telecom security policy prepared by the DoT in association with the home ministry and security agencies. The government had earlier, informally barred the local mobile phone operators from placing orders with Huawei and ZTE on security concerns, resulting from the suspicion of security agencies that the Chinese equipment might have spying technology embedded in it to intercept sensitive conversations in times of a conflict between the two countries.

28. Export Situation Telecom Equipment Manufacturing in India Source : Telecom Regulatory Authority of India Year Indian Demand (Rs Crore) Total Production in India (Rs Crore) Exports (Rs Crore) Imports (Rs Crore) 2007-08 58,781 41,270 8,131 41,600 2008-09 60,294 48,800 11,000 44,800 2009-10 54,765 51,000 13,500 48,384

30. FDI Policy for the Telecom Sector In Basic, Cellular Mobile, National Long Distance, International Long Distance, Value Added Services and Global Mobile Personal Communications by Satellite, FDI is limited to 49 per cent subject to grant of licence from the DoT and adherence by the companies to the licence conditions for foreign equity cap and lock-in period for transfer and addition of equity and other license provisions. Foreign Direct Investment up to 74 per cent permitted, subject to licensing and security requirements for the following: Internet Service (with gateways) Infrastructure Providers (Category II) Radio Paging Service

31. FDI Policy for the Telecom Sector FDI up to 100 per cent permitted in respect to the following telecom services: ISPs not providing gateways (Both for satellite and submarine cables) Infrastructure Providers providing dark fibre (IP Category I) Electronic Mail Voice Mail FDI up to 100 per cent is allowed subject to the conditions that such companies would divest 26 per cent of their equity in favour of Indian public in 5 years, if these companies are listed in other parts of the world.

32. Effects of FDI on Telecom Industry Telecom service at subsidized prices. FDI inflows will allow multiple benefits such as technology transfer, market access and organizational skills. In India where 70% of population still resides in rural areas, there is a dire need of infrastructure in telecom, which FDI can provide. Foreign currency flowing in the country. Harmonious relationship with country from which foreign investment is being made. There will be increase in competition with local players, which will benefit consumers.

33. Effects of FDI on Telecom Industry Telecommunication facility at reasonable price, affordable to many It will have a multiplier effect. More technological inflow, will improve voice & data quality. Free flow of capital is good for Indian consumers.

34. Examples of Foreign Investors Ownership of Indian Telecom Companies Source : Wikipedia Bharti Airtel Limited Tata Docomo Uninor Aircel Group Bharti Enterprises (63.45%) Tata Teleservices (74%) Telenor Group (67.25%) Maxis Communications (74%) Singtel (32.15%) NTT Docomo (26%) Unitech Group (32.75%) Apollo Hospital (26%) Vodafone (4.4%)

36. Evolution of Regulatory Authorities Source: Press Search, KPMG Analysis

37. Telecom Regulatory Authority of India was established as an independent body under the TRAI Act of 1997. The act was later amended in 2000. The entry of private players into the industry prompted the establishment of the act to effectively regulate the telecom players. Role of TRAI : 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 Key Regulatory Authorities

38. Functions of TRAI The functions of TRAI can be divided as: 1.Recommendatory function 2. Mandatory Function Recommendatory Functions Need and timing for introduction of new service provider Terms and conditions of license 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.

39. Functions of TRAI 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 Providers of Telecom Industry Regulate arrangements for sharing of revenues amongst service providers.

41. The Indian Telecommunication sector has seen remarkable growth and is designated as one of the fastest growing markets in the world. It is also the second largest wireless network across the globe, after China. The aggressive growth has resulted in saturation of the urban markets and the Indian telecommunication authorities are looking to introduce new technologies to sustain the market growth rate Legal Aspects

42. The government recently concluded the 3G and BWA auctions in June, 2010. The auctions were initially estimated to raise INR 350 billion and help the government contain the fiscal deficit. However, the government received approximately INR 1,060 billion as spectrum fees for 3G and BWA, cumulatively. 3G technology has been highly anticipated over the past few years and is expected to drive the next round of sustainable growth for the Indian telecom market through convergence of entertainment, infotainment and voice communications into one single device. 3G Spectrum Laws

43. Mobile Virtual Network Operators The Indian Government is in the process of reviewing the draft guidelines for the introduction of MVNO. TRAI had issued a draft proposal for MVNO in August, 2008 and the DoT had accepted the proposal in February, 2009. The present landscape is considered to be ripe for MVNOs to be introduced in India since it will allow the Telco's, who did not manage to win any 3G spectrum, to offer these data services via the MVNO route.

44. Voice Over Internet Protocol VoIP has received significant regulatory attention over the past decade. In 2002,TRAI had recommended to DoT to open up this sector in a restricted manner. In 2005, DoT permitted unlimited internet telephony to all access providers in India. In 2006, limited access was also given to internet service providers, who were asked for 6 percent of their revenues as license fee and were restricted from termination and carriage in India.

46. Domestic Tax Rates For Domestic Telecomm operators the effective tax rate is 30% and the tax rate with surcharge is 30% Attention must be given on the factor that if the taxable income is more than 1 million then a surcharge of 10% of the tax on income is levied Attention must also be given on the fact that all of the companies formed in India are regarded as Indian domestic companies, even in the case of ancillary units with mother companies in foreign countries

47. Foreign players income tax rates: For dividends 20% in case of non-treaty foreign companies and 15% for companies under the treaty based in United States For interest gains 20% in case of non-treaty foreign companies and 15% for companies under the treaty based in United States For royalties 30% in case of non-treaty foreign companies and 20% for companies under the treaty based in United States

48. Foreign players income tax rates For technology based services in case of non-treaty foreign companies and 20% for companies under the treaty based in United States For other kinds of income and gains 55% in case of non-treaty foreign companies and 55% for companies under the treaty based in United States Attention must be given on levying inter corporate rates in case the holding is minimum

49. Foreign players income tax rates: Attention must be given on the fact that the sanctions of the tax authorities on tax withholding Attention must be given on the several of the tax treaties India signed with the other countries and also the various encouraging tax rates

51. Timeline of Communication tools

52. History of telecommunication The history of telecommunication began with the use of smoke signals and drums in Africa, the Americas and parts of Asia. In the 1790s, the first fixed semaphore systems emerged in Europe. A very early experiment in electrical telegraphy was an 'electrochemical' telegraph created by the German physician, anatomist and inventor Samuel Thomas von Sömmering in 1809.

53. Telephone The conventional telephone was invented by Alexander Graham Bell in 1876, based on his earlier work with harmonic (multi-signal) telegraphs. The first commercial telephone services were set up in 1878 and 1879 on both sides of the Atlantic in the cities of New Haven and London. Transatlantic voice communication remained impossible for customers until January 7, 1927 when a connection was established using radio. However no cable connection existed until TAT-1 was inaugurated on September 25, 1956 providing 36 telephone circuits. [

54. Thank You