INDUSTRY ANALYSIS REPORT

WITH

SPECIAL REFERENCE OF

“RETAIL INDUSTRY”

BY

M.SRIDHAR

(08K81E0036)

2009-2010

DEPARTMENT OF MBA

ST.MARTIN’S ENGINEERING COLLEGE

(AFFILIATED TO JNTU, HYDERBAD)

DHULLAPALLY, SECUNDERBAD-500014.

1
 CERTIFICATE

This is to certify that this Industry Analysis Report

titled INDUSTRY ANALYSIS REPORT with special reference of

“TELECOM INDUSTRY” is the bonafied work of M.SRIDHAR

(08K81E0036) submitted in partial fulfillment of the MASTER

OF BUSINESS ADMINISTRATION, 2008-10 requirement for the

academic year 2009-2010 at ST.Martin’s Engineering

College.

PROJECT GUIDE H.O.D

of MBA

(R.LAL SINGHNAIK)
(N.LAXMAIAH)

2
 ACKNOWLEDGEMENT

It is my privilege to express my deep sense of gratitude to

all those people who have given their valuable time and efforts
which made me to complete my project successfully.

I deem it as a great pleasure to have an opportunity to

take up this project work on TELECOM INDUSTRY.

I express deep sense of gratitude to HOD of MBA DEPARTMENT,

N. LAXMAIAH. I wish you to acknowledge the fact that this
project would not have been possible without assistant and
encouragement of Mr.R.LAL SINGNAIK, who guided me.

Extend my sincere thanks to all those who have been

of immensely helped me either directly or indirectly.

3
 Signat
ure of the Student

DECLARATION

I here by declare that this industry analysis report project

work titled with special reference of TELECOM INDUSTRY is my

original and bonafied work done by me. It has been carried out

by me as a student of ST.MARTIN’S ENGINEERING COLLEGE

during the academic year 2009-10, partial fulfillment of the for

the award of the of MASTER OF BUSINESS ADMINISTRATION

and not been submitted else where for the award of any degree

either in partially or fully to any other university.

Signature of Student

4
 (M.SRIDHAR)

Executive Summary
The Indian telecom sector is characterized by stiff competition among 10
national level players and two government owned firms, falling APRU,
innovative tariff plans and shrinking profits. This month two more firms
(Russian and Norway based firms) entered in Indian market which will
further drive down the tariffs and consequently corporate profits as well. In
spite of a difficult pricing environment, we believe Indian telecom sector is
attractive. The key reason is vast population of India of over 1 Billion
which makes it as one of the biggest telecom market in the world. After
USA and China, India is third biggest telecom market in the world.

Indian mobile subscriber base grew by 9.07% in second quarter of

2009 reaching to total 427.29M subscribers. Bharthi Airtel is a clear
market leader with 23% of market share, Reliance and Vodafone are
gaining market share on a continuous basis and has 19% and 18% market
share respectively. TATA has recently launched new service in GSM space
and lower tariff plan (per second plan) in a bid to win additional market
share but still it is lagging behind with 8% market share.

INDAIN TELECOM INDUSTRY PROVIDING SERVICES

A. Wireline Services

A.1 Wireline services subscriber base stood at 37.96 million in quarter

ending March 2009 as compared to 37.90 million in quarter
ending December 2008.
A.2 Rural Wireline Subscriber base stood at 10.58 million in
quarter ending March 2009 as compared to 10.68 million in
quarter ending December 2008.
A.3 Number of Village Public Telephones (VPTs) have increased from
5.39 lakhs in quarter ending December 2008 to 5.61 lakhs in
quarterly ending march 2009
A.4 Number of Public Call Offices (PCOs) have increased from
5.98 million in quarter ending December 2008 to 6.20 million in
quarter ending March 2009.

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 B. Wireless Services

B.1 The Wireless subscribers have reached 391.76 million as on

31st March 2009 as against 346.89 million subscribers in the
previous quarter. During this quarter 44.87 million wireless
subscribers were added.
B.2 Technology-wise Wireless Market Share
There are 297.26 million GSM subscribers (75.88%) and 94.50
million
CDMA subscribers (24.12%) at the end of March 2009.

B.2.1 GSM

The GSM subscriber base has reached 297.26 million in the quarter
ending March 2009 as against 258.23 million at the end of the
previous quarter.
B.2.2 CDMA

The CDMA subscriber base has reached 94.50 million in the quarter
ending March 2009 as against 88.66 million at the end of the
previous quarter

C. Internet Services (Including Broadband)

C.1 There are 13.54 million Internet subscribers at the end of March
2009 as compared to 12.85 million Internet subscribers at the end
of December 2008 registering a growth of 5.30%. This growth
rate is higher as compared to the growth rate of 5.01% at the end
of December
2008.

C.2 Besides above, there are 117.82 million wireless data subscribers
at the end of March 2009 (capable of accessing data services
including internet through mobile handsets (GSM/ CDMA)).
C.3 Broadband Subscriber Growth - The number of Broadband
subscribers (with a download speed of 256 Kbps or more) was
6.22 million at the end of March 2009 as compared to 5.52
million at the end of December 2008. The growth rate of
broadband subscribers in this quarter is 12.68%.
C.4 Broadband Subscribers Share (Technology wise) – Out of total
6.22
million broadband subscribers, 5.364 million are DSL based;
0.474 million Cable Modem; 0.244 million Ethernet LAN; 0.042
million Fiber;

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 0.072 million Wireless, 0.020 million Leased Line and 0.002
million use other technologies.

D. Quality of Service Performance

D.1 Wireline Services

This report covers 84 licencees providing basic services. In this

quarter all the Basic Service Providers met the benchmark in
respect of parameters like Customer Care Service (Closures) and
Response time to the customer for assistance i.e. %age of calls
answered (electronically) within 20 sec and have improved as
compared to the previous quarter in respect of parameters like
Provision of Telephones, Faults incidences, Faults repaired by
next working day, Mean Time to Repair, Call Completion Rate,
Customer Care Services (Shifts, Closures and Additional Facilities).

CONTENTS

1. INTRODUSTION OF INDUSTRY ANALYSIS

2. PROFILE OF RETAIL INDUSTRY

• Growth of Industry

• Structure of Industry

• Nature of the Product

• Nature of Competition

• Government Policies

3. SOWT ANALYSIS

• Strengths

• Weaknesses

• Opportunities

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 • Threats

4. CONCLUSIONS

BIBLIOGRAPHYS

INDUSTRY ANALYSIS

INTRODUCTION

All industry is a group of firms that have similar technological structure of

production and produce similar products or services. Companies are
distinctly classified to give a clear picture about their manufacturing
process and products or services.

Industries can be classified on the basis of the business cycle ,that means,
according to their reactions to the different phases of the business cycle.
They are classified into growth, cycle, and defensive cyclical growth
industry.

GROWTH INDUSTRY

The growth industries have special features of high rate of earnings and
growth in expansion, independent of the business cycle. The expansion of
the industry mainly depends on the technological change.

CYCLICAL INDUSTRY

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The growth and the profitability of the industry move along with the
business cycle. During the boom period they enjoy growth and during
depression they suffer a set back

DEFENSIVE INDUSTRY

Defensive industry defies the movement of the business cycle

CYCLICAL GROWTH INDUSTRY

This is a new type of industry that is cyclical and at the same time
growing.

INDUSTRY LIFE CYCLE

The industry life cycle theory is generally attributed to Julius Grodensky.

The life cycle of the industry is separated into four well defined stages
such as

-Pioneering Stage

-Rapid Growth Stage

-Maturity and Stabilization Stage

-Decline Stage

POINNEING STAGE

The prospective demand for the product is promising in this stage and the
technology of the product is low. The demand for the product attracts
many producers to produce the particular product .There would be severe
competition and only fittest companies survive this stage. The producers
try to develop brand name, differentiate the product and create a product
image. This would lead to non-price competition too. The severe
competition often leads to the change of position of the firms in terms of
market shares and profit. In this situation, it is difficult to select companies
for investments because the survival rate is unknown.

RAPID GROWTH STAGE

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This stage starts with the appearance of surviving firms from the
pioneering stage. The companies that have withstood the competition
grow strongly in market share and financial performance. The technology
of the production would have improved resulting in low cost of production
and good quality products. The companies have stable growth rate in this
stage and they declare dividend to the shareholders. It is advisable to
invest in the shares of other companies. In this stage growth rate is more
than the industry’s average growth rate.

MATURITY AND STABLISATION STAGE

In the stablisation stage, the growth rate tends to moderate and the rate
of growth would be more or less equal to the industrial growth rate of the
gross domestic product growth rate. Symptoms of obsolescence may
appear in the technology. To keep going technological innovations in the
production in process and products should be introduced. The investors
have to closely monitor the events that take place in the maturity stage of
industry.

DECLINING STAGE

In this stage, demand for the particular product and the earnings of the
companies in the industry7 decline. The specific feature of the declining
stage is that even in the boom period, the growth of the industry would be
low and decline at a higher rate during the investment in the shares of
these types of companies leads to erosion of capital.

CONSIDERABLE FACTORS OF INDUSTRY ANALYSIS

GROWTH OF THE INDUSTRY

The historical performance of the industry in terns if growth and

profitability should be analysed. Industry wise growth is published

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periodically by the Center for Monitoring Indian Economy. The past
variability in return and growth in reaction to macro economic factors
provide an insight into the future. Even though history may not repeat in
the exact manner, looking into the past growth of the industry, the analyst
can predict the future.

COST STRUCTURE AND PROFITABILITY

The cost structure, that is the fixed and variable cost, affects the cost of
production and profitability of the firm. Higher the fixed cost component,
greater sales volume is required to reach the firm’s breakeven point. Once
the breakeven point is reached and the production is on the track, the
profitability can be increased by utilizing the capacity to full. Once the
maximum capacity is reached, again capital has to be invested in the fixed
equipments. Hence, lower the fixed cost, adjustability to the changing
demand and reaching the break even points are comparatively easier.

NATURE OF THE PRODUCT

The products produced by the industries are demanded by the consumers

and other industries. The investor has to analyse the conditions of related
goods producing industry and the end user industry to find out the
demand for industrial goods.

In the case of consumer goods industry, the change in the consumers’

preference, technological innovations and substitute products affect the
demand.

NATURE OF THE COMPETITION

Nature of the competition is an essential factor that determines the

demand for the particular product, its profitability and the price of the
concerned company scrip. The supply may arise from indigenous
producers and multinationals. If too many firms are present in the
organized sector, the competition would be severe. The competition would
lead to a decline in the price of the product. The investor before investing
in the scrip of a company should analyse the market shares of the
particular company’s product and should compare is with the top five
companies.

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GOVERNMENT POLICY

The government policies affects the very, never of the industry and the
effects differ from industry to industry. Tax subsidies and tax holidays for
export oriented products. Government regulates the size of the production
and the pricing of certain products. When selecting an industry, the
government policy regarding the particular industry should be carefully
evaluated. Liberalisation and delicensing have brought immense threat to
the existing domestic industries in the sectors.

RESEARCH AND DEVELOPMENT

For any industry to survive the competition in the national and

international markets, products and production process have to be
technically competitive. This dependent on the research and development
in the particular industry. Economies of scale and new market can be
obtained only through research and development. The percentage of
expenditure made on research and development should be studied
diligently before making an investment.

SOWT ANALYSIS

The above mentioned factors themselves would become strengths,

Weakness, opportunity and threat (swot) for the industry. Increase in the
demand for the industry’s product becomes its strength; presence of
numerous players in the market, that competitor becomes the threat to a
particular company in the respective industry. The progress in the
research and development in the particular industry is an opportunity and
entry of multinationals in the industry and cheap imports of the particular
products are threat to that industry. In this way the factors have to be
arranged and analysed in sowt analysis.

TELECOM INDUSTRY
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13
TELECOM IN INDIA

The Indian telecommunications market has been displaying sustained high

growth rates. Riding on expectations of overall high economic growth and
consequent rising income levels, it offers an unprecedented opportunity
for foreign investment. A combination of factors is driving growth in the
telecom market, promising rich returns on investments.

Over the past 10 years, India has registered the fastest growth among
major democracies, having grown at over 7 per cent in four years during
the 1990s. It represents the fourth largest economy in terms of Purchasing
Power Parity. According to a recent Goldman Sachs report, over the next
fifty years, Brazil, Russia, India and China - the BRIC economies- could
become a much larger force in the world economy. It reports, “India could
emerge as the world’s third largest economy and of these four countries;
India has the potential to show the fastest growth over the next 30 to 50
years”. The report also states that, “Rising incomes may also see these
economies move through the ‘sweet spot’ of growth for different kinds of
products, as local spending patterns change. This could be an important
determinant of demand and pricing patterns for a range of commodities”.
The share of the services sector as a percentage of total GDP is also
predicted to rise from the current 46 per cent to about 60 per cent by
2020. The boom in the services sector is slated to come from India,
emerging as a chosen destination for software and other IT enabled
services, tourism etc. According to a Nasscom- McKinsey & Co. Study, by
2008, the Indian IT software and services sector will account for US$ 70-80
billion in revenues; it’ll employ 4 million people, and account for 7 per cent
of India’s GDP and 30 per cent of India’s foreign exchange inflows.

Population projections from the Planning Commission of India suggest that

the share of the working age population (15-64 years) in total population
will grow from the current 59 per cent to about 65 per cent, translating
into 882 million by year 2020.According to the Vision 2020 document for
the Planning Commission of India, the country will witness continued

14
urbanisation. The urban population is expected to rise from 28 per cent to
40 per cent of total population by 2020.Future growth is likely to be
concentrated in and around 60 to 70 large cities, each having a population
of one million or more. This profile of concentrated urban population will
facilitate customised telecom offerings from operators. Over the years,
spending power has steadily increased in India. Between 1995 and 2002,
nearly 100 million people became part of the consuming and rich classes.
Over the next five years, 180 million people are expected to move into the
consuming and very rich classes. On an average, 30-40 million people are
joining the middle class every year, representing huge consumption
spending in terms of the demand for mobile phones, televisions, scooters,
cars, credit goods and a consumption pattern associated with rising
incomes.

GROWTH OF THE INDIAN TELECOM INDUSTRY

Until the 1980s, the Department of Posts and Telegraphs (under the
Ministry of the same name) had the mandate of regulating and offering
telecommunications services. It was governed by the Indian Telegraph
Act 1885 and the Wireless Act of 1933. In 1985, the Department of
Posts and Telegraph was split up into the Department of
Telecommunications (DoT) and the Department of Posts. The DoT was
established as the state operator, regulator and licensor. It was only in
October 1999 that the activities of the operator and licensor were
somewhat separated, by the creation of the Department of
Telecommunications Services (DTS). This separation, however, was a
largely artificial one.

Although the DoT had been charged with operating telecommunications

services, its efforts were seen as insufficient. Initial steps towards
corporatisation saw the creation of Mahanagar Telephone Nigam
Limited (MTNL), which started offering basic fixed services in Mumbai

15
and Delhi in 1987. MTNL still holds a monopoly in those cities, where
DoT/DTS is not present at the local level. MTNL is wholly owned by the
Government of India and the DoT. Videsh Sanchar Nigam Limited
(VSNL) was set up in 1986 as the monopoly operator for international
gateway services.

On May 13, 1994, the government opened local basic and value-added
telecommunications services to competition. Mobile services were
introduced on a commercial basis in November 1994. India was thus
divided into 21 "Telecom Circles". Circles correspond approximately to
states and are categorized as either "A", "B" or "C" according to size
and importance. Category A includes the heaviest volume areas such
as Delhi, Uttar Pradesh, Maharashtra, Gujarat, Andhra, Karnataka and
Tamil Nadu. Licenses for mobile services were also issued for the four
metros (Delhi, Mumbai, Chennai, Calcutta). As part of the license
conditions, traffic could be routed to VSNL's international gateway only
by passing through DoT/DTS's network. In 1986, the Telecom
Commission was set up with the mandate to accelerate the deployment
of telecommunications services and to implement new
telecommunication policy.

A bill passed in 1995 envisaged the creation of an independent and

autonomous agency for the regulation of telecommunications, the
Telecommunications Regulatory Authority of India (TRAI). Set up in
1997, the TRAI is responsible facilitating interconnection and technical
interconnectivity between operators, regulating revenue sharing,
ensuring compliance with license conditions, facilitating competition
and settling disputes between service providers. The TRAI cannot grant
or renew licenses and this remains the DoT's responsibility. The TRAI
may also set the rates for telecommunications services. Its decisions
can only be challenged by the High Courts or Supreme Courts of India.

TIMELINE:

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Mid 1980s Department of Telecommunications set up

Mar 1986 VSNL incorporated to provide international telecom services

Apr 1986 MTNL incorporated to provide fixed-line telephone services

in Mumbai and New Delhi

Dec 1991 DoT invites bids from Indian companies for cellular licenses in
the four metropolitan circles

May 1994 Government announces the National Telecom Policy, opening

up the basic service sector to private players

Sep 1994 Entry guidelines for basic services announced

Nov 1994 Licenses were issued to cellular operators in the four metros

Mar 1995 Paging services by private operators commence

Oct 1996 Licenses for 20 cellular circles issued

Jan 1997 Telecom Regulatory Authority of India established by

government

Nov 1998 ISP business opened up to operators other than DoT and VSNL

Mar 1999 Government announces NTP 1999

Jul 1999 DoT announces Migration Package for existing operators'

licensing costs, subject to compliance with certain conditions

Aug 2000 Government announces guidelines for opening up domestic

long distance telephony for carrying both inter-circle and intra-
circle traffic, with no restriction on the number of players TRAI
issues the first tariff order and cuts domestic and international
long distance telephony charges.

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Jan 2001 The Department of Telecom opens up basic services to
unlimited competition and allows basic operators to provide
WLL services on a restricted basis.

Aug 2001 Opening of National Long Distance Service to competition

Jan 2002 Bharti starts cellular to cellular long distance services with
sharp cuts in tariffs

Apr 2002 ILD sector opened to competition. End of VSNL monopoly.

May 2002 Bharti offers ILD services with sharp cuts in tariffs

Sep 2002 TRAI decides to 'forbear' from regulating cellular tariffs

Mar 2006 WPC set subscriber thresholds for GSM and CDMA operators
for spectrum allocation

Mar 2007 9 distinct operators had been allocated GSM spectrum. Out of
these, only Bharti has a pan-India presence.

Aug 2007 Subscriber thresholds were revised by TRAI as operators could

support more subscribers with lower spectrum as compared to
WPC allocation

Jan 2008 Govt of India allocated start-up spectrum to all prior licensees
awaiting spectrum (does not include LOIs issued in January
2008). These include Aircel (14 circles), Idea (2 circles),
RComm (14 circles) and Vodafone (6 circles).

Jun 2009 TRAI plans to introduce MNP (Mobile Number Portability) on a

pan-India basis

STRUCTURE OF INDUSTRY

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India boasts of 300 million telephone subscribers today and has become
the second largest telecom network in the world, after China. Also, the
number of new mobile subscribers is growing by 8.5 to 10 million every
month, making it one of the fastest growing telecom markets of the world.

In 2006-07, the telecom industry also saw an estimated $8.5 bn in

investment flow, out of which 6% or $550 million was in the form of
foreign direct investment (FDI). According to a report by RNCOS, a market
research consulting Services Company, mobile phones account for 80.2%
of the subscriber base in India, at the end of March 2007.

The growth of telecom in India can be attributed to liberalization, reforms

and competition. The telecom policy of 1999 envisaged a tele-density of
15 percent by the year 2010. The overall tele-density of the country is
already over 26 percent now. Out of 300 million telephone subscribers
today, 13% are wire-line subscribers. These developments in telecom
sector have resulted in massive investments and explosion in supply,
which are signs of a vigorous, competitive and fast-growing sector.

The major players in the Indian telecom industry, excluding Reliance and
Tata Teleservices, are operating in the GSM market. After the release of
TRAI recommendations in September 2007, there was a flood of
applications for UASL (Unified Access License Seekers). This was probably
because of the hope of pan-India start-up GSM allocation at a very
economical price (US$240m). The armed forces are expected to vacate
20MHz of GSM spectrum. This would be around 70% of average GSM
allocation currently.

TELE-DENSITY IN INDIA:

While the tele-density in the urban areas is over 50 percent, in rural areas
it is around eight percent only. Clearly, the future lies in the rural areas.
Telecommunication access to rural India is going to be the most important

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development since the Green Revolution. Research analysts feel that
mobile voice is overwhelmingly the engine of growth followed by Next
Generation Network (NGN), broadband and data.

NATURE OF PRODUCT

Based on Technology, In India, whole telecom sector can be sliced in four

key components. These four components are Wire line, Wireless (CDMA,
GSM), Internet and 3G.Out of twelve players; TATA, Reliance and SSTL
offer CDMA and rest is operating in GSM space. GSM market share stands
at total 75% and thus clearly emerged as a preferred way of
communication in India. TATA has recently entered in GSM space through
TATA Docomo brand. Reliance is also expected follow it soon by launching
its own GSM services.

Wireless Market
There are total 12 operators operating in wireless (CDMA and GSM) space
across India. Total subscriber base grew from 287M in June 2008 to 427M
in June 2009, representing 47.7% increase in market. Teledensity also
improved positively, it was 24.95 in June 2008 and now stands at 36.6 in
June 2009. At present GSM market is growing at 9.53% whereas CDMA

20
market is growing at 7.79%. WM services forecast that Indian telecom
market would grow at 9.59% and would cross 900M subscriber by 2011.

The growth forecasted in Table 2 would be driven by several factors

including low penetration rate, lower tariff plan, increased competition and
higher investments in network infrastructure by telecom firms.
Considering volume and growth, Vodafone and Airecel grew fastest in
wireless space at 11.2% and 18% respectively. Bharthi has highest
number of subscriber at 102.37M followed by Vodafone and BSNL at
76.45M and 49.10M.In CDMA space, Reliance is clear market leader with
55% market share. (Table 3)

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Wire line Services
Indian wire line market and its potential revenue opportunity are not
attractive in comparison to wireless segment. Total wire line subscriber
base declined from 37.96M in March 08 to 37.53M at the end of June 09.

The growth in fixed line remains stable and is expected to remain that
way. Over the time, Indian consumer has shown strong preference
towards wireless services over wire line services. BSNL is leader in this
segment with 77% market share followed by MTNL with 9.41% market
share. We forecast a very modest decline in fixed line usage going
forward. The total number of fixed line per thousands will decline from
37.5M in Jun 09 to 36.27M in 2012.

Internet Services
By June 2009, there were total 14M subscriber for data services which
includes both Broadband (speed> 256K) and internet (speed < 256K)
growing at rate of 3.8%. The number of broadband services stands at
6.62M and internet stands at 7.4M. We forecast a gradual improvement in
subscriber numbers and increased preference for Broadband over internet
by 2012, total subscriber base would be 15.75M, 51% would be of
Broadband and 49% of Internet services.

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At present we have 34 ISP are offering their services all over India , out of
34, top ten commands over 95% of market share. BSNL is clear leader in
this segment with 54.09% market share followed by MTNL and Airtel with
15.53% and 8.15% of market share respectively. In June 2009 quarter,
Reliance has increased its subscriber base at fastest level and its growth
rate is highest at 10.94% among all ISP.

3G Network
Due to uncertainty over available spectrum for 3G, Indian government has
again missed the deadline for 3G auction invitation. The auction process is
expected to happen by second week of January 2010. State has already
allotted spectrum to state owned player BSNL and MTNL. BSNL and MTNL

23
have launched 3G services in Mumbai and Delhi by about nine month back
but exorbitant tariff plan is hurting subscriber growth. Lack of spectrum is
an old issue and now government is trying to get required spectrum from
Defense Ministry. The real picture of 3G situation will emerge only by
second week of January 2010.

NATURE OF THE COMPETETION

MARKET PLAYERS:

24
No. Service Total Market Trends
Providers sub share
figures (%)
1. BHARTI 580379 25.40 Integrated Telco, with presence in
AIRTEL 20 all sectors - Cellular, Basic, National
Long Distance (NLD) &
International Long Distance (ILD).
Currently offering only GSM based
cellular services. No CDMA based
cellular services being offered.
2. RELIANCE 525400 22.99 Operating GSM wireless services in
COMMUNICATI 00 7 circles and subsequently
ONS acquired Madhya Pradesh circle
from RPG. Reliance is currently
focusing on rollout of CDMA based
wireless services.
3. VODAFONE 441262 19.31 Pure play GSM mobility player
ESSAR 43 offering cellular services in 16
circles. Has been working on a
model of being associated with the
high ARPU subscribers
4. BSNL 342513 14.99 Incumbent operator, virtual
34 monopoly in the basic services.
Very strong NLD operator; and, has
been able to quickly ramp up GSM
subscribers due to nationwide
network reach. Pan country
presence in both basic (except
Mumbai and Delhi) and cellular
services.

5. IDEA 240015 10.50 A 3 way GSM mobility joint venture

25
 73 between Tatas, Birlas and AT&T
Wireless offering cellular services

in 11 circles.
6. AIRCEL 680506 2.98 Operates only in Metro(Chennai)
6 and Circle A(Tamil Nadu)
7. SPICE 421066 1.84 Pure play GSM based mobility
9 player offering services in 2 circles
– Punjab and Karnataka.
8. MTNL 324185 1.42 Integrated incumbent operator also
1 offering GSM based mobility in
Delhi and Mumbai.
9. BPL 129476 0.57 Pure play cellular operator along
2 with Spice and Aircel.

the demand in the telecom industry in year 2007 is around 230 million
now we will see does the main players in the industry has the capacity to
fulfil the appetite of the demand side.

Here we are considering only the top 4 companies which almost consist
80% of the market shares.

• Bharti Airtel
• Reliance communications
• TATA

The key highlights for the Indian telecoms sector in 2006 were the
emergence of India as the fastest growing region in the world - overtaking
China - plus increased interest from the overseas telecom majors, together
with a drop in tariffs across the various segments.

The near 8% growth rate expected to be achieved by the Indian Economy

for FY07 augurs well for the telecom sector. The wireless segment
performed well again, with the subscriber base reaching 228.5 million
(GSM, CDMA and WLL-F) as of December 2007. Given the outlook for the

26
Economy, another year of high growth is expected, led by a greater focus
in the 'B' and 'C' circles. Even the overall tele-density reached 22.5% in
December 2007, from 16.6% in November 2006.

BHARTI AIRTEL

Established in 1985, Bharti has been a pioneering force in the telecom

sector with

many firsts and innovations to its credit, ranging from being the first
mobile service

in Delhi, first private basic telephone service provider in the country, first
Indian

company to provide comprehensive telecom services outside India in

Seychelles and

first private sector service provider to launch National Long Distance

Services in

India. Bharti Tele-Ventures Limited was incorporated on July 7, 1995 for

promoting

investments in telecommunications services. Its subsidiaries operate

telecom

27
services across India. Bharti’s operations are broadly handled by two
companies: the

Mobility group, which handles the mobile services in 16 circles out of a

total 23

circles across the country; and the Infotel group, which handles the NLD,
ILD, fixed

line, broadband, data, and satellite-based services. Together they have so

far

deployed around 23,000 km of optical fiber cables across the country,

coupled with

approximately 1,500 nodes, and presence in around 200 locations. The

group has a

total customer base of 6.45 million, of which 5.86 million are mobile and
588,000

fixed line customers, as of January 31, 2004. In mobile, Bharti’s footprint

extends

across 15 circles.

Bharti Tele-Ventures' strategic objective is “to capitalize on the growth

opportunities

the company believes are available in the Indian telecommunications

market and

consolidate its position to be the leading integrated telecommunications

services

provider in key markets in India, with a focus on providing mobile

services”.

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BOARD OF DIRECTORS

Name Designation
Sunil Bharti Mittal Chairman and Managing director
Ajay Lal Director
Arun Bharat Ram Director
Chua Sock Koong Director
Nikesh Arora Director
N Kumar Director
Pulak Chandan Prasad Director
Rajan Bharti Mittal Director

Name Designation
Manoj Kohli Joint Managing Director & CEO
Akhil Gupta Director
Bashir Abdulla Currimjee Director
Craig Ehrlich Director
Mauro Sentinelli Director
Paul OSullivan Director
Quah Kung Yang Director
Rakesh Bharti Mittal Director

29
RELIANCE INFOCOMM

Reliance is a $16 billion integrated oil exploration to refinery to power and

textiles

conglomerate (Source: http://www.ril.com/newsitem2.html). It is also an

integrated

telecom service provider with licenses for mobile, fixed, domestic long
distance and

international services. Reliance Infocomm offers a complete range of

telecom

services, covering mobile and fixed line telephony including broadband,

national and

30
international long distance services, data services and a wide range of
value added

services and applications. Reliance IndiaMobile, the first of Infocomm's

initiatives

was launched on December 28, 2002. This marked the beginning of

Reliance's vision

of ushering in a digital revolution in India by becoming a major catalyst in

improving

quality of life and changing the face of India. Reliance Infocomm plans to
extend its

efforts beyond the traditional value chain to develop and deploy telecom
solutions for

India's farmers, businesses, hospitals, government and public sector

organizations.

Until recently, Reliance was permitted to provide only “limited mobility”

services

through its basic services license. However, it has now acquired a unified
access

license for 18 circles that permits it to provide the full range of mobile
services. It

has rolled out its CDMA mobile network and enrolled more than 6 million
subscribers

in one year to become the country’s largest mobile operator. It now wants
to

31
increase its market share and has recently launched pre-paid services.
Having

captured the voice market, it intends to attack the broadband market.

BOARD OF DIRECTORS

Name Designation
Anil D Ambani Chairman / Chair Person
S P Talwar Director
A K Purwar Director

Name Designation
J Ramachandran Director
Deepak Shourie Director

TATA TELESERVICES

Tata Teleservices is a part of the $12 billion Tata Group, which has 93
companies,

over 200,000 employees and more than 2.3 million shareholders. Tata
Teleservices

provides basic (fixed line services), using CDMA technology in six circles:

Maharashtra (including Mumbai), New Delhi, Andhra Pradesh, Tamil Nadu,

Gujarat,

and Karnataka. It has over 800,000 subscribers. It has now migrated to

unified

access licenses, by paying a Rs. 5.45 billion ($120 million) fee, which
enables it to

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provide fully mobile services as well.

The company is also expanding its footprint, and has paid Rs. 4.17 billion
($90

million) to DoT for 11 new licenses under the IUC (interconnect usage
charges)

regime. The new licenses, coupled with the six circles in which it already
operates,

virtually gives the CDMA mobile operator a national footprint that is almost
on par

with BSNL and Reliance Infocomm. The company hopes to start off
services in these

11 new circles by August 2004. These circles include Bihar, Haryana,

Himachal

Pradesh, Kerala, Kolkata, Orissa, Punjab, Rajasthan, Uttar Pradesh (East) &
West

and West Bengal.

BOARD OF DIRECTORS

Name Designation
Kishor A Chaukar Chairman / Chair Person
Nadir Godrej Director
D T Joseph Independent Director
S Ramadorai Director
Koichi Takahara Non Executive Director

Name Designation
Amal Ganguli Director
Ashok Jhunjhunwala Director
N S Ramachandran Director
Anil Sardana Director
Mukund Rajan Managing Director

33
SWOT Analysis
Strengths
• Strong mobile growth(around 10%) , with latest technology being
offered at faster pace
• An attractive business environment witnessed by number of foreign
players entering Indian market
• A vast untapped rural population which needs telecom services at
their fingertips
Weaknesses
• Wireless business segment is growing faster than wire line and more
demand is coming for pre-paid services
• The falling SIM card, lower tariff plan led to lower APRU
• Delayed implementation of key policies because of dispute among
TRAI, telecom ministry
Opportunities
• All of the providers are keen to provide more content which provides
great opportunity for content providers
• Regulator has recommended that foreign player can participate
without any local partner
• The government will cut the license fee by 33% for those operators
which has over 95% residential coverage

Threats
• 3 G spectrum charges are more and which will have negative impact
on demand for licenses
• Due to price war , APRU is falling and further deterioration will lead
to significant decline
in top line growth
• Capacity constraint may hamper the expected growth in Mobile
segment

34
 • MNP will become reality in 2010, it will add further pressure to
operator to retain the
existing customer

CONCLUSION

In our opinion, instead of taking a short-term view of paying capacity, the

telecom companies should focus on a long-term game. There is one word
that telecom companies are hearing a lot these days-“Volumes”. They
need volumes to sustain the network and the large employee base they
have enrolled. In this regard, companies like Reliance and Tata’s have
been aggressive over the final rollout of connections to PCO owners.
Reliance is giving upto 30% commission on each call. How they market
and distribute these connections is a tough battle indeed. If and when the
carrier access codes are introduced, there could be a tough fight among
these outlets, as far as prices are concerned. Yet, prices can go down
further by almost 40% of the present structure. Part of the price cuts could
be because of tax exemptions, if and when these companies can lobby for
the same. The other part could be earning through volumes.

New players like Virgin Mobile, which already has an international

presence in close to 17 countries are entering India. It is doing so in
collaboration with Tata Teleservices. The target market for Virgin Mobile is
the youth, which in India is around 54% of its population.

Mobile Number Portability (MNP) is to be introduced by June 2009. A

neutral third-party operator is likely to be licensed to provide an end-to-
end MNP solution. MNP could well be a catalyst in the realignment of
subscriber market share in favour of strong players with better service
quality. There are challenges like porting time, allocation of capital and
operational porting costs among participants, and other interconnect
issues. Yet, the atmosphere around the MNP issue looks positive and will
be set once the committee submits its final report on the same.

35
The telecom sector is attracting significant domestic and global
investment. The capital investment made by the telecom service industry
during 2006-07 was around $8.5 billion, out of which $550 million was
foreign direct investment. The margins and profits of almost all the
telecom companies have been increasing. In fact there are cases where a
significant portion of profit of international telecom companies have been
from their operations in India.
India is well prepared for the introduction of NGN (Next-Generation
Networking). Being a late starter in the telecom scenario, India has the
advantage of using the latest technology and so it is in a better position
when compared to many other countries as far as introduction of NGN is
concerned. Besides, the TRAI has identified introduction of NGN as a
priority area.

As of today, the trend seems favourable toward the continued growth of

the telecom industry. The target of 500 million telephone connections by
the year 2010 is very much achievable. Even with 300 million telephone
connections, the tele-density of the country is only about 26 percent. It
has been noted that mobile telephony is growing at an annual rate of over
90 percent. Also, on an average over eight million subscribers are being
added every month. Besides the basic telephone service, there is a huge
potential for different Value Added Services (VAS). In fact, the real
potential for telecom service growth is still laying untapped.

36
BIBLIOGRAPHY

• www.trai.gov.in

• www.scribd.com

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• www.dot.gov.in

• Google search engine

• PriceWaterHOuse Coopers

• Motilal Oswal Securities Ltd.

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