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1998-99:
FDI up to 49 per cent of total equity, subject to license, permitted in companie
s providing Global Mobile Personal Communication (GMPC) by satellite services.
1999-00
1. National Telecom Policy 1999 was announced which allowed multiple fixed Servi
ces operators and opened long distance services to private operators.
2. TRAI reconstituted: clear distinction was made between the recommendatory and
regulatory functions of the Authority.
3. DOT/MTNL was permitted to start cellular mobile telephone service.
4. To separate service providing functions from policy and licensing functions,
Department of Telecom Services was set up.
5. A package for migration from fixed license fee to revenue sharing offered to
existing cellular and basic service providers.
6. First phase of re-balancing of tariff structure started. STD and ISD charges
were reduced by 23 per cent on an average.
7. Voice and data segment was opened to full competition and foreign ownership i
ncreased to 100 per cent from 49 per cent previously.
2000-01:
1. TRAI Act was amended. The Amendment clarified and strengthened the recommenda
tory power of TRAI, especially with respect to the need and timing of introducti
on of new services provider, and in terms of licenses to a services provider.
2. Department of Telecom Services and Department of Telecom operations corporati
zed by creating Bharat Sanchar Nigam Limited.
3. Domestic long distance services opened up without any restriction on the numb
er of operators.
4. Second phase of tariff rationalization started with further reductions in the
long distance STD rates by an average of 13 per cent for different distance sla
bs and ISD rates by 17 per cent.
5. Internet Service Providers were given approval for setting up of Internationa
l Gateways for Internet using satellite as a medium in March 2000.
6. In August 2000, private players were allowed to set up international gateways
via the submarine cable route.
7. The termination of monopoly of VSNL in International Long Distance services w
as antedated to March 31, 2002 from March 31, 2004.
2001-02:
1. Communication Convergence Bill, 2001 was introduced in August 2001.
2. Competition was introduced in all services segments. TRAI recommended opening
up of market to full competition and introduction of new services in the teleco
m sector. The licensing terms and conditions for Cellular Mobile were simplified
to encourage entry for operators in areas without effective competition.
3. Usage of Voice over Internet Protocol permitted for international telephony s
ervice.
4. The five-year tax holiday and 30 per cent deduction for the next five years a
vailable to the telecommunication sector till 31st March 2000 was reintroduced f
or the units commencing their operations on or before 31st March 2003. These co
ncessions were also extended to internet services providers and broadband networ
ks.
5. Thirteen ISP's were given clearance for commissioning of international gatewa
ys for Internet using satellite medium for 29 gateways.
6. License conditions for Global Mobile Personal Communications by Satellite fin
alized in November 2001.
7. National Long Distance Service was opened up for unrestricted entry with the
announcement of guidelines for licensing NLD operators. Four companies were issu
ed Letter of Intent (LOI) for National Long Distance Service of which three lice
nses have been signed.
8. The basic services were also opened up for competition. 33 Basic Service lice
nses (31 private and one each to MTNL and BSNL) were issued up to 31stDecember 2
001.
9. Four cellular operators, one each in four metros and thirteen were permitted
with 17 fresh licenses issued to private companies in September/October 2001. Th
e cell phone providers were given freedom to provide, within their area of opera
tion, all types of mobile services equipment, including circuit and/or package s
witches that meet the relevant International Telecommunication Union (ITU)/ Tele
com Engineering Centre (TEC) standards.
10. Wireless in Local Loop (WLL) was introduced for providing telephone connect
ion in urban, semi-urban and rural areas.
11. Disinvestment of PSU's in the telecom sector was also undertaken during the
year. In February 2002, the disinvestment of VSNL was completed by bringing down
the government equity to 26 per cent and the management of the company was tran
sferred to Tata Group, a strategic partner. During the year, HTL was also disinv
ested.
12. Government allowed CDMA technology to enter the Indian market.
13. Reliance, MTNL and Tata were issued licenses to provide the CDMA based servi
ces in the country.
14. TRAI recommended deregulating regulatory intervention in cellular tariffs, w
hich meant that operators need no longer have prior approval of the regulator fo
r implementing tariff plans except under certain conditions.
2002-03
1. International long distance business opened for unrestricted entry.
2. Telephony on internet permitted in April 2002.
3. TRAI finalized the System of Accounting Separation (SAS) providing detailed
accounting and financial system to be maintained by telecom service providers.
2003-04
1. Unified Access Service Licenses regime for basic and cellular services was in
troduced in October 2003. This regime enabled services providers to offer fixed
and mobile services under one license. Consequently 27 licenses out of 31 licens
es converted to Unified Access Service Licenses.
2. Interconnection Usage Charge regime was introduced with the view of providing
termination charge for cellular services and enable introduction of Calling Par
ty Pays regime in voice telephony segment.
3. The Telecommunication Interconnection Usage Charges Regulation 2003 was intro
duced on 29th October 2003 which covered arrangements among service providers fo
r payment of Interconnection Usage Charges for Telecommunication Services and co
vered Basic Service that includes WLL (M) services, Cellular Mobile Services, an
d Long Distance Services (STD/ISD) throughout the territory of India
4. The Universal Service Obligation fund was introduced as a mechanism for trans
parent cross subsidization of universal access in telecom sector. The fund was t
o be collected through a 5 per cent levy on the adjusted gross revenue of all te
lecom operators.
5. Broadcasting notified as Telecommunication services under Section 2(i)(k) of
TRAI Act.
2004-05:
1. Budget 2004-05 proposed to lift the ceiling from the existing 49 per cent to
74 per cent as an incentive to the cellular operators to fall in line with the n
ew unified licensing norm.
2. 'Last Mile' linkages permitted in April 2004 within the local area for ISP's
for establishing their own last mile to their customers.
3. Indoor use of low power equipments in 2.4 GHz band de-licensed from August 2
004.
4. Broadband Policy announced on 14th October 2004. In this policy, broadband ha
d been defined as an "always-on" data connection supporting interactive services
including internet access with minimum download speed of 256 kbps per subscribe
r.
5. The Telecommunications (Broadcasting and Cable Services) Interconnection Regu
lation 2004 was introduced on 10th December 2004.
6. BSNL and MTNL launched broadband services on 14th January 2005.
7. TRAI announced the reduction of Access Deficit Charge (ADC) by 41 per cent on
ISD calls and by 61 per cent on STD calls which were applicable from 1st Februa
ry 2005.
2005-2006
1. Budget 2005-2006 cleared a hike in FDI ceiling to 74 per cent from the earlie
r limit of 49 per cent. 100 per cent FDI was permitted in the area of telecom eq
uipment manufacturing and provision of IT enabled services.
2. Annual license fee for National Long Distance (NLD) as well as International
Long Distance (ILD) licenses reduced to 6 per cent of Adjusted Gross Revenue (A
GR) with effect from 1st January 2006.
3. BSNL and MTNL launched the 'One-India Plan' with effect from 1st March 2006 w
hich enable the customers of BSNL and MTNL to call from one end of India to othe
r at the cost of Rs. 1 per minute, any time of the day to phone.
4. TRAI fixed Ceiling Tariff for International Bandwidth, Ceiling Tariff for hig
her capacities reduced by about 70 per cent and for lower capacity by 35 per cen
t.
5. Regulation on Quality of Service of Basic and Cellular Mobile Telephone Serv
ices 2005 introduced on 1st July 2005.
6. BSNL announced 33 per cent reduction in call charges for all the countries f
or international calls.
7. Quality of Service (Code of Practice for Metering and Billing Accuracy) Regul
ation 2006 introduced on 21st March 2006.
11th plan (2007-20012)
FDI in Telecom sector has increased in recent years with value of 81.62 billion
with share of 10% in total inflow during January 2000 to June 2005. This is main
ly in telecom services and not in telecom manufacturing sector. Therefore, it is
essential to enhance the prospect for inflow of increased funds. The NTP 1999 s
ought to promote exports of telecom equipments and services. But till date expor
t of telecom equipment remains minimal. Most of the state-of-the-art telecom equ
ipments including mobile phones are imported from abroad. There is thus immense
potential for indigenous manufacturing in India. Certain measures like financial
packages, formation of a telecom export promotion council, creation of integrat
ed facilities for telecom equipment through SEZ and encouraging overseas vendors
to set up facilities in India, are required for making India a hub for telecom
equipment manufacturing and attract FDI. The telecom sector has shown robust gro
wth during the past few years. It has also undergone a substantial change in ter
ms of mobile versus fixed phones and public versus private participation.
Chapter 2: Introduction of the Project:
Title of the Project: “Scope for Foreign Direct Investments in Telecom Sector in
India”.
Statement of the Project: To analyse the scope for growth of Telecom Industry an
d to figure out the potential for Foreign Direct Investments.
Introduction: Project is a research work to elucidate the attractiveness of Indi
an market for the foreign players. Indian market is one of the most attractive d
estinations for the FDI in telecom sector, so, this report is an effort to find
out the real gold for the foreign investors. The report provides with a detailed
description of where to invest and to what extent. The report also presents the
avenues where the host country would be beneficial from these investors.
Purpose of Project:
1.) Checking the potential of the market primarily from secondary data.
2.) Analysis of regulations in the Industry.
3.) Preparation of report based on the analysis and presents a fair idea for
investments in the sector from the foreign players.
Objective of the Project:
1.) To explore the opportunities for FDI’s in the market.
2.) To analyse the potential for the growth in the market.
Importance of the Project:
1.) This project enables to check the potential in the telecom sector and sc
ope for innovation.
2.) The project elucidates over the entry barriers in the sector.
3.) Provides with remedies and recommendations for entry in the sector espec
ially for the global players.
4.) Gives an insight of the current scenario and the future predictions.
Hypothesis:
1.) With the liberalisation and globalisation the rules are formulated to e
ncourage the foreign investments.
2.) Indian market is an appealing avenue for the Foreign Players.
The fiscal ended March 31, 2009 has been the high revenue growth period for the
telecom sector. The telecom services industry registered a growth of 20.7 percen
t clocking revenues of Rs.1, 57,542 crore in 2008-09 compared to Rs.1,30,561 cro
re in the previous year.
Sajjan Jindal, President of ASSOCHAM said that during the year 2009, government
had raised the FDI limit in telecom sector from 49 percent to 74 percent, which
has contributed to the robust growth of FDI in the sector.
The telecom sector registered a growth of 103 percent during fiscal 2008-09 as c
ompared to previous fiscal according to the latest Annual FDI Report by ASSOCH
AM. Another interesting find of the study is that the greater chunk of foreign i
nvestments has flown into states that are doing well industrially and commercial
ly and which have an investor-friendly business environment.
Listed telecom operators like Bharti Airtel, Reliance Communication, Idea Cellul
ar and Tata Communication which have emerged as favourites among foreign institu
tional investors on Dalal Street.
Airtel s revenues grew from Rs.1500 crore in FY02 to over Rs.37,000 crore in 200
9, representing a compounded annual growth rate of 58 percent in last seven year
s. If the ongoing $23 billion deal between Bharti Airtel and South African Compa
ny, MTN is successful, it will mark an entry as the biggest overseas deal to dat
e, surpassing Tata s acquisition of Corus for $12.2 billion.
In a similar move last year, Japanese mobile operator NTT Docomo acquired a 26 p
ercent stake in Tata Teleservices (TTL). Other strides in the sector during the
year included policy initiatives pertaining to the allocation of spectrum for th
e 3G and broadband wireless access (BWA) services and mobile number portability.
This has led several players to take advantage and get ahead of their pack.
There are political problems in India that are protecting the FDI flows in India
to the rate they should have been by this time Left Parties demanding that the
government must put a stop to any FDI hike in the telecom sector, announced that
they would organise an all-India protest action against the government’s decisi
on. They also strongly condemned reports in some sections of the media that the
1% hike in EPF interest rates was a quid pro quo for the Left’s acquiescence to
the hike in FDI telecom sector.
Stating that the EPF interest rate hike was announced much after the FDI hike in
the telecom sector was announced, CPI-M politbureau member Sitaram Yechury said
this kind of reportage was mischievous and unethical.
Stating that increasing FDI limits in the telecom sector was detrimental to Indi
a’s economic sovereignty, as were amendments to the Patents Act, some banking re
form proposals and disinvestment in profit-making PSUs, Mr Yechury said the purp
ose of the protest was to send this message to the people, adding that it was wr
ong of the government to make announcements on the telecom and electricity secto
rs when discussions were ongoing with the Left parties.
When asked what form the protest would take, CPI leader AB Bardhan said that if
the government continues to take such decisions despite the Left’s opposition, t
hey may even consider calling for nation-wide strikes,adding that it was becomin
g a “habit of the government to talk to the Left and then make these announcemen
ts without their concurrence.
With regard to the announcement of a new Electricity Bill, the Left leaders said
that this was based on the 2003 Electricity Act, which the CMP had promised to
review. Therefore, until such a review was undertaken, no new policy measures sh
ould be taken.
Mr Bardhan told FE that the Left wanted a total review of the 2003 Electricity A
ct, which paves the way for privatisation. They also wanted cross-subsidation to
continue and more protection for the rural power sector.
Mr Yechury said that they would bring up all these issues at the next UPA-Left c
oordination committee meeting and would also appraise UPA chairperson Sonia Gand
hi of their concerns.
On Goa, Mr Yechury said that the Left was in favour of fresh elections in the st
ate to know the mandate of the people. He, however, said that the Speaker’s acti
on in delegitimising a MLA just before the trial of strenghth was wrong.
5.6: Role of TRAI: One of the main objectives of TRAI is to provide a fair and t
ransparent policy environment which promotes a level playing field and facilitat
es fair competition. In pursuance of above objective TRAI has issued from time t
o 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 multi operator multi servic
e open competitive market. The directions, orders and regulations issued cover a
wide range of subjects including tariff, interconnection and quality of service
as well as governance of the Authority. The functions of TRAI can be divided as
Recommendatory functions and Mandatory Functions.
5.6.1: 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 spectrum
5.6.2: Mandatory Functions:
• Fix the terms and conditions of their inter connectivity between service provi
ders
• Ensure Technical compatibility and effective inter-connection between differen
t service providers
• Regulate arrangements for sharing of revenues amongst service providers
• Lay-down the standards of quality of services to be provided by service provid
er, 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)
fig: 7.1
• Rivalry among Competitors: In the telecom industry, rivalry among compet
itors is very fierce. There are scarce customers because the industry is highly
saturated and the competitors try to snatch their share of market. They use all
sorts of tactics from intensive advertisement campaigns to promotional stuff and
price wars etc. so overall the intensity of rivalry is very high. This rivalry
takes customers on a profitable situation wherein they have more room for bargai
ning.
Competition is "cut throat". The wave of industry deregulation together with the
receptive capital markets of the late 1990s paved the way for a rush of new ent
rants. New technology is prompting a raft of substitute services. Nearly everybo
dy already pays for phone services, so all competitors now must lure customers w
ith lower prices and more exciting services. This tends to drive industry profit
ability down. In addition to low profits, the telecom industry suffers from high
exit barriers, mainly due to its specialized equipment. Networks and billing sy
stems cannot really be used for much else, and their swift obsolescence makes li
quidation pretty difficult.
• Threat of New Entrants: The entry barriers in the industry are high as c
ompanies need to invest loads of money on setting infrastructure for the operati
ons. But industry as such does not have any measures with which it can control t
he entry of new firms. The resistance is very low and the structure of the indus
try is not so complex that new firms can easily enter and also offer tough compe
tition to the established players. Thus, potential entry of new firms is Low. Th
e players entering in the industry should have strong backup. Then only they can
make a significant entry in the sector.
It comes as no surprise that in the capital-intensive telecom industry the bigge
st barrier to entry is access to finance. To cover high fixed costs, serious con
tenders typically require a lot of cash. When capital markets are generous, the
threat of competitive entrants escalates. When financing opportunities are less
readily available, the pace of entry slows. Meanwhile, ownership of a telecom li
cense can represent a huge barrier to entry. In the U.S., for instance, fledglin
g telecom operators must still apply to the Federal Communications Commission (F
CC) to receive regulatory approval and licensing. There is also a finite amount
of "good" radio spectrum that lends itself to mobile voice and data applications
. In addition, it is important to remember that solid operating skills and manag
ement experience is fairly scarce, making entry even more difficult.
• Threat of Substitute products: Though there are complex and never ending
consumer needs and no firm can satisfy all sorts of needs alone. But substitute
s are very rare for this service. Especially in a country like India, majority o
f population lives in the rural areas and are not exposed to the Internet etc. S
o companies enjoy a very less threat of substitutes. Moreover with the advent of
technology and introduction of innovations this service is becoming unique of i
ts own.
Products and services from non-traditional telecom industries pose serious subst
itution threats. Cable TV and satellite operators now compete for buyers. The ca
ble guys, with their own direct lines into homes, offer broadband internet servi
ces, and satellite links can substitute for high-speed business networking needs
. Railways and energy utility companies are laying miles of high-capacity teleco
m network alongside their own track and pipeline assets. Just as worrying for te
lecom operators is the internet: it is becoming a viable vehicle for cut-rate vo
ice calls. Delivered by ISPs - not telecom operators - "internet telephony" coul
d take a big bite out of telecom companies core voice revenues.
• Bargaining power of suppliers: The bargaining power of suppliers of raw
materials and intermediaries is not very high. There is ample number of substitu
te suppliers available and the raw materials are also readily available. There i
s no monopoly situation in the supplier side because the suppliers are also comp
eting among themselves.
At first glance, it might look like telecom equipment suppliers have considerabl
e bargaining power over telecom operators. Indeed, without high-tech broadband s
witching equipment, fibre-optic cables, mobile handsets and billing software, te
lecom operators would not be able to do the job of transmitting voice and data f
rom place to place. But there are actually a number of large equipment makers ar
ound. There are enough vendors, arguably, to dilute bargaining power. The limite
d pool of talented managers and engineers, especially those well versed in the l
atest technologies, places companies in a weak position in terms of hiring and s
alaries.
FORCE
GRADE
Rivalry among competitors.
Very High
Threat of new Entrants.
Low
Presence of substitute products.
Very Low
Bargaining power of suppliers.
Low
Bargaining power of Buyers.
Very High
Table: 7.1
Thus the following analysis makes it clear that the Industry is fairly attractiv
e. It has a huge potential for growth aswell.
7.2: What does the future holds for FDIs:
1. Managed services: Completely or partially outsource infrastructure or network
management operations.
2. Infrastructure sharing: Reduce their network deployment costs
3. Enterprise Telecom Services:
a. Voice over Internet protocol (VoIP)
b. Dedicated telecom communication systems
c. IT infrastructure enabled unified communication services
d. Virtual Private Network: Private data network that provides connectivity
within closed user groups via public telecommunication infrastructure
4. WiMAX: Worldwide Interoperability for Microwave Access. It provides network a
ccess in inaccessible locations at a speed of more than 4 Mbps. It is estimated
that India will have 13 m WiMAX subscribers by 2012.
5. Value Added Services:
a. Entertainment news (movies, cricket)
b. Location information
c. Mobile transactions
d. 3G: Offers better services to consumers
6. 4G or Fourth Generation Networks (deployment expected : 2010 – 2015)
7. Rural Telephony: Government targeting to increase rural teledensity to 25 per
cent by 2012.
7.3: Position of current players:
The Telecom Subscriber base in India is 494 million (August 2009) and the Major
players can be segmented into the below three categories:
o State owned companies - BSNL and MTNL
o Private Indian owned companies - Reliance, Tata Teleservices
o Foreign invested companies - Vodafone-Essar, Bharti Tele-Ventures, Idea
Cellular, Loop Mobile, Spice Communications
These players can be ranked based on the subscriber base, growth rate and profit
ability as:
1) Reliance Communications Limited
2) Bharti Airtel Limited
3) BSNL
4) MTNL
5) Hutchison Essar(Vodafone)
6) Ericsson
7) Nokia
8) Siemens Communications
9) Idea Cellular Limited
10) Tata Teleservices
BSNL:
On October 1, 2000 the Department of Telecom Operations, Government of India bec
ame a corporation and was renamed Bharat Sanchar Nigam Limited (BSNL). BSNL is n
ow India’s leading telecommunications company and the largest public sector unde
rtaking. It has a network of over 45 million lines covering 5000 towns with over
35 million telephone connections.
The state-controlled BSNL operates basic, cellular (GSM and CDMA) mobile, Intern
et and long distance services throughout India (except Delhi and Mumbai). BSNL w
ill be expanding the network in line with the Tenth Five-Year Plan (1992-97). Th
e aim is to provide a telephone density of 9.9 per hundred by March 2007. BSNL,
which became the third operator of GSM mobile services in most circles, is now p
lanning to overtake Bharti to become the largest GSM operator in the country. BS
NL is also the largest operator in the Internet market, with a share of 21 per c
ent of the entire subscriber base.
BHARTI:
Established in 1985, Bharti has been a pioneering force in the telecom sector wi
th many firsts and innovations to its credit, ranging from being the first mobil
e service in Delhi, first private basic telephone service provider in the countr
y, 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 Jul
y 7, 1995 for promoting investments in telecommunications services. Its subsidia
ries operate telecom services across India. Bharti’s operations are broadly hand
led by two companies: the Mobility group, which handles the mobile services in 1
6 circles out of a total 23 circles across the country; and the Infotel group, w
hich handles the NLD, ILD, fixed line, broadband, data, and satellite-based serv
ices. Together they have so far deployed around 23,000 km of optical fiber cable
s across the country, coupled with approximately 1,500 nodes, and presence in ar
ound 200 locations. The group has a total customer base of 6.45 million, of whic
h 5.86 million are mobile and 588,000 fixed line customers, as of January 31, 20
04. In mobile, Bharti’s footprint extends across 15 circles.
Bharti Tele-Ventures strategic objective is “to capitalize on the growth opport
unities the company believes are available in the Indian telecommunications mark
et and consolidate its position to be the leading integrated telecommunications
services provider in key markets in India, with a focus on providing mobile serv
ices”.
MTNL:
MTNL was set up on 1st April 1986 by the Government of India to upgrade the qual
ity of telecom services, expand the telecom network, introduce new services and
to raise revenue for telecom development needs of India’s key metros – Delhi, th
e political capital, and Mumbai, the business capital. In the past 17 years, the
company has taken rapid strides to emerge as India’s leading and one of Asia’s
largest telecom operating companies. The company has also been in the forefront
of 5 technology induction by converting 100% of its telephone exchange network i
nto the state-of-the-art digital mode. The Govt. of India currently holds 56.25%
stake in the company. In the year 2003-04, the company s focus would be not onl
y consolidating the gains but also to focus on new areas of enterprise such as j
oint ventures for projects outside India, entering into national long distance o
peration, widening the cellular and CDMA-based WLL customer base, setting up in
ternet and allied services on an all India basis.
MTNL has over 5 million subscribers and 329,374 mobile subscribers. While the ma
rket for fixed wireline phones is stagnating, MTNL faces intense competition fro
m the private players—Bharti, Hutchison and Idea Cellular, Reliance Infocomm—in
mobile services. MTNL recorded sales of Rs. 60.2 billion ($1.38 billion) in the
year 2002-03, a decline of 5.8 per cent over the previous year’s annual turnover
of Rs. 63.92 billion.
RELIANCE INFOCOM:
Reliance is a $16 billion integrated oil exploration to refinery to power and te
xtiles conglomerate (Source: http://www.ril.com/newsitem2.html). It is also an i
ntegrated telecom service provider with licenses for mobile, fixed, domestic lon
g distance and international services. Reliance Infocomm offers a complete range
of telecom services, covering mobile and fixed line telephony including broadba
nd, national and 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 be
ginning of Reliance s vision of ushering in a digital revolution in India by bec
oming a major catalyst in improving quality of life and changing the face of Ind
ia. Reliance Infocomm plans to extend its efforts beyond the traditional value c
hain to develop and deploy telecom solutions for India s farmers, businesses, ho
spitals, government and public sector organizations.
Until recently, Reliance was permitted to provide only “limited mobility” servic
es through its basic services license. However, it has now acquired a unified ac
cess 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 mil
lion subscribers in one year to become the country’s largest mobile operator. It
now wants to increase its market share and has recently launched pre-paid servi
ces. Having captured the voice market, it intends to attack the broadband market
.
TATA TELE SERVICES:
Tata Teleservices is a part of the $12 billion Tata Group, which has 93 companie
s, over 200,000 employees and more than 2.3 million shareholders. Tata Teleservi
ces 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 a
ccess licenses, by paying a Rs. 5.45 billion ($120 million) fee, which enables i
t to 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) r
egime. The new licenses, coupled with the six circles in which it already operat
es, 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 Pr
adesh, Kerala, Kolkata, Orissa, Punjab, Rajasthan, Uttar Pradesh (East) & West a
nd West Bengal.
VSNL:
On April 1, 1986, the Videsh Sanchar Nigam Limited (VSNL) - a wholly Government
owned corporation - was born as successor to OCS. The company operates a network
of earth stations, switches, submarine cable systems, and value added service n
odes to provide a range of basic and value added services and has a dedicated wo
rk force of about 2000 employees. VSNL s main gateway centers are located at Mum
bai, New Delhi, Kolkata and Chennai. The international telecommunication circuit
s are derived via Intelsat and Inmarsat satellites and wide band submarine cable
systems e.g. FLAG, SEA-ME-WE-2 and SEA-ME-WE-3.
The company s ADRs are listed on the New York Stock Exchange and its shares are
listed on major Stock Exchanges in India. The Indian Government owns approximate
ly 26 per cent equity, M/s Panatone Finvest Limited as investing vehicle of Tata
Group owns 45 per cent equity and the overseas holding (inclusive of FIIs, ADRs
, Foreign Banks) is approximately 13 per cent and the rest is owned by Indian in
stitutions and the public. The company provides international and Internet servi
ces as well as a host of value-added services. Its revenues have declined from R
s. 70.89 billion ($1.62 billion) in 2001-02 to Rs. 48.12 billion ($1.1 billion)
in 2002-03, with voice revenues being the mainstay. To reverse the falling reven
ue trend, VSNL has also started offering domestic long distance services and is
launching broadband services. For this, the company is investing in Tata Telserv
ices and is likely to acquire Tata Broadband.
HUTCH(VODAFONE):
Hutch’s presence in India dates back to late 1992, when they worked with local p
artners to establish a company licensed to provide mobile telecommunications ser
vices in Mumbai. Commercial operations began in November 1995. Between 2000 and
March 2004, Hutch acquired further operator equity interests or operating licen
ces. With the completion of the acquisition of BPL Mobile Cellular Limited in Ja
nuary 2006, it now provides mobile services in 16 of the 23 defined licence area
s across the country.
Hutch India has benefited from rapid and profitable growth in recent years. it h
ad over 17.5 million customers by the end of June 2006.
IDEA:
Indian regional operator IDEA Cellular Ltd. has a new ownership structure and gr
and designs to become a national player, but in doing so is likely to become a t
horn in the side of Reliance Communications Ltd. IDEA operates in eight telecom
“circles,” or regions, in Western India, and has received additional GSM license
s to expand its network into three circles in Eastern India -- the first phase o
f a major expansion plan that it intends to fund through an IPO, according to pa
rent company Aditya Birla Group .
All these players are using different strategies for gaining profitability and
enhancing customer base. These strategies used by the players can be seen by the
Porter’s Generic strategies (fig 7.2) which are:
Target scope
Adv
Low Cost
Product Uniqueness
Broad
(industry wide)
MTNL
BSNL
Vodafone
AIRTEL
Reliance
Nokia
Tata DOCOMO
Narrow
(Market Segment)
Siemens Communications
Idea cellular services
Ericson
fig: 7.2
Chapter 8: Conclusion and Recommendations:
8.1: Conclusion:
8.2: Recommendations:
1. Increase FDI cap in the telecommunication sector.
2. Acquiring new subscribers by expanding in Semi Urban and Rural India.
3. Selling more value added services to existing subscribers at cheaper pri
ces.
4. Tap volume and revenue potential of next generation services.
5. Technological improvement in services by service providers.
6. Technical compatibility and effective inter-connection between different
service providers.
7. Efficient Management of available spectrum.
Bibliography