22223421 Report on Telecom Sector 2009

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Report onTelecomSector

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PROTON business

school

Submitted to:Prof. Megha Soneja

Submitted by:Group-5Drucker Hall

October 29, 2009

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Table of Content

Executive Summary...5

Problem

Statement

.5

1. Introduction..

...6

2. Indian Telecom Industry

2.1. History....

..6

2.2. Facts....

7

2.3. Telecom services....

7

2.4. Industry revenue....

7

2.5. Major players....

...8

3. Telecom Regulatory Authority of India (TRAI)3.1. Mission....

..9

3.2. Role of TRAI..

.....93.3. Functions of

TRAI......94. The Road Ahead

4.1. Expansion in rural areas...

...10

4.2. Government initiatives.....10

4.3. VAS

4.3.1.Basic definition of VAS....

..10

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4.3.2.Definition as per TRAI....

.11

.4. GPRS Handsets....

.115. Key Trends in Telecom Industry

5.1. Mobile Number Portability....

.12

5.2. 3G..

...12

5.3. MVNO..

..12

5.4. IPTV

5.4.1.What is IPTV? ..

..13

5.4.2.Market Position....13

6. Industry Updates

6.1. Idea Cellulars Acquisition..

....14

6.2. Vodafone Entry..

....14

6.3. TATA DOCOMO....

..14

6.4. FDI Investment....

157. Conclusion....

.16

8. References....

.17

List of Tables & Figures

Facts of Indian Telecom Industry..

7

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Telecom Industry

Revenue7

Major Players

in services..

...8 in handset.

.8

TRAI Report on GPRS Handset..

.11

FDI Investment in Telecom.

.15

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Executive Summary

The rapid growth in Indian telecom industry has been contributing to Indias GDP

at large. Telecom Regulatory Authority of India was established to regulate and

deal with competition among the service providers. Upcoming services like 3G and

Portability will help to further increase the growth rate. The Indian

telecommunication industry is one of the fastest growing in the world and India is

expected to become the second largest telecom market in the world by 2010.

India added 113.26 million new customers in 2008, the largest globally. The

countrys cellular base witnessed close to 50% growth in 2008, with an average

9.5 million customers added every month. It is estimated that telecom industry will

generate revenues worth US$ 43 billion in 2009-10.IN this we have tried to capture the most of areas of telecom industry. Like, History

of Telecom Industry, TRAI role and functions, new trends in industry and latest

updates.

Problem Statement- To find the reason of tremendous growth in Indian Telecom Industry To study the role of TRAI To study upcoming trends in telecom industry

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1. Introduction

India growth story has already got the world to sit up and take a note of thechanging economic scenario. The Indian government is doing everything that ispossible to ensure that this story remains intact. Factors, like the liberalization inthe government stance and the daring entrepreneurs of the Indian soils, havehelped the sectors achieve the highs like never before. And currently, the flavor ofthe month seems to be the telecom industry.

2. Indian Telecom Industry

2.1. History

History of Indian Telecommunications started in 1851 when the first operational

land lines were laid by the government near Calcutta (seat of British power). In

1883 telephone services were merged with the postal system. Indian Radio

Telegraph Company (IRT) was formed in 1923. After independence in 1947, all the

foreign telecommunication companies were nationalized to form the Posts,

Telephone and Telegraph (PTT), a monopoly run by the government's Ministry of

Communications. Telecom sector was considered as a strategic service and the

government considered it best to bring under state's control.

The first wind of reforms in telecommunications sector began to flow in 1980swhen the private sector was allowed in telecommunications equipment

manufacturing. In 1985, Department of Telecommunications (DOT) was

established. It was an exclusive provider of domestic and long-distance service

that would be its own regulator (separate from the postal system). In 1986, two

wholly government-owned companies were created: Videsh Sanchar Nigam

Limited (VSNL) for international telecommunications & Mahanagar Telephone

Nigam Limited (MTNL) for service in metropolitan areas.

In 1990s, telecommunications sector benefited from the general opening up of the

economy. National Telecom Policy (NTP) 1994 was the first attempt to give acomprehensive roadmap for the Indian telecommunications sector. In 1997,

Telecom Regulatory Authority of India (TRAI) was created. TRAI was formed to act

as a regulator to facilitate the growth of the telecom sector. New National Telecom

Policy was adopted in 1999 and cellular services were also launched in the same

year.

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Indian telecom industry has the highest growth rate in the world. A record 5.9

Million new mobile phone subscribers were drawn by the Telecom sector in India in

the month of August 2006, according to the COAI (Cellular Operators Association of

India). India, which is seeing over 8 million wireless subscribers being added every

month (8.62 million in May 2008), is the fastest growing telephone market in the

world. The government has reiterated the target of 500 million telecomsubscribers and 20 million broadband connections by 2010.

2.2Facts

Total Telecom Subscriber 429.72(March 2009)

Wireless Subscriber 391.76

Wire line Subscriber 37.94

Indias service provider revenue Q1 2009 $8.2billion

Indias rural mobile users 100 million

2.3Telecom Services

Telecommunication sector in India is subdivided into 2two segments, which are

Fixed Service Provider (FPS) and Cellular Services. Telecom Industry in India isspecifically emphasizing on latest technologies like GSM, CDMA, PMRTS, and WLL.India has a prospering market specifically in GSM mobile service and the numberof subscriber is growing very fast.

2.4Industry Revenue

Year Revenue(US$billion)

2002-03 9

2003-04 10

2004-05 11

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2005-06 15

2006-07 20

2008-09 322009-

10(forecasted)

43

2.5 Major Players

2.4.1In Services

2.4.2In Handset Market

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3.Telecom Regulatory Authority of

India (TRAI)

3.1 Mission

To ensure that the interest of consumer is protected and at the same time

encourage the development of telecommunications, broadcasting and cableservices in a manner and at a pace which will enable India to play a leading role in

the emerging global information society.

3.2 Role of TRAI

One of the main objectives of TRAI is to provide a fair and transparent policy

environment which promotes a level playing field and facilities fair competition.

TRAI has issued from time to time a large number of regulations, orders and

directives to deal with the issues coming before. These regulations cover a wide

range of subjects including tariff, interconnection and quality of services etc.

3.3Functions of TRAI Need and timing for introduction of new service provider

Terms and condition of license to a service provider

Technological improvement in services by service provider

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http://www.trai.gov.in/Default.asp


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Maintain inter-connect agreement register

Levy fees and other charges as determined by regulations

Measures for technological development

Measures to facilitate competition and promote efficiency in the

operation to facilitate growth in industry

4. The Road Ahead

4.1 Expansion in rural areas

Acquiring customers have always been a great challenge for companies. The

current level of saturation in Metros and Urban Market and Cut Throat Competition

among operators, increasing subscriber base in urban market would be all the

more challenging. Therefore a lot of operators with support from government are

eyeing the rural market for future growth. Big operators like Airtel have claimedthat soon mobile connections and recharge vouchers will be available at all such

places from where people buy match boxes. In order to attract consumers with

relatively low purchasing powers primarily from semi urban and rural India the

operators have reduced the call rates making it affordable to even the lower

segment of society.

4.2 Government initiatives

Government also has supported the growth of this sector by coming out with a

number of initiatives for the low end subscribers of rural India and UniversalService Obligation (USO) fund was one such initiatives. The USD fund was an

initiative taken by government to increase rural telecommunication density. In

recent developments BSNL and other two operators will erect 427 towers in

remote areas offering over four lakh mobile connections. Telecom Regulatory

Authority of India (TRAI) has given orders for the withdrawal of the ADC (Access

Deficit Charges) and the subsequent passing of the benefits to the consumers by

the telecom operators.

4.3 VAS (Value Added Services)

4.3.1 Basic definition of VAS

Value Added Services (VAS) in telecommunication industry refers to non-core

services, the core or basic services being standard voice calls and fax transmission

including bearer services. The value added services are characterized as under-

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Not a form of core or basic services but adds value in total services offering

Do not cannibalize core or basic services

Can be add-on to core services and as such can be sold at premium price

Provide operational synergy with core or basic services

A Value added service may demonstrate one or more of these characteristics andnot necessarily all of them.

4.3.2 Definition as per TRAI

Value Added Services are services which add value to the basic teleservices and

bearer services. The government of India issues licenses for the following services-

Public mobile trunking services

Voice mail services

Videotext services

GMPCS

Internet

Audio text

Unified messaging services

4.4 GPRS Handset

TRAI Report

5. Key Trends in Telecom Industry5.1 Mobile Number Portability (MNP)

The Telecom Regulatory Authority (TRAI) of India has decided to set up a steeringcommittee to work out the modalities for implementing mobile number portability.The move comes after the Communications Ministrys decision to introduce the

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facility in the four metros. To implement this, it requires a database managementhaving information of the networks and associated ported number. Majority of thecountries opt for a centralized database service managed by a neutral third party.The cost of the database will be borne by each operator depending on the strengthof subscribers. The challenge for the service providers lies in maintaining separate

data bases for GSM and CDMA operators.Number portability is a circuit-switch telecommunication network feature thatenables end users to retain their telephone numbers when changing serviceproviders, service types and or locations. When fully implemented nationwide byboth wire line and wireless providers, portability will bring convenience forconsumers and encouraging competition in telecommunication industry. NumberPortability is best method to increase the efficiency of the services provider byincreasing the competition.

5.2 3G (Third Generation)

3G Technology was implemented in Japan for the first time in the world. Today thetechnology is serving 25 countries over more than 60 networks having itsexistence in Asia, Europe and USA. Video conferencing has been a major factor inthe success of the technology.

3G or Third Generation technology is a convergence of various Second Generationtelecommunication systems. The technology is intended for SMARTPHONES -multimedia cell phones. Video broadcasting and other e-commerce services suchas, stock transactions and e-learning will now are made possible much faster. Itoffers 3 Mbps speed for downloading, which is very high as compared to that of the2G technology. The 3G technology provides for internet surfing, downloading, e-

mail attachment downloading, audio-video conferencing, fax services and manyother broadband applications.

5.3 MVNO

A mobile virtual network operator (MVNO) are a companies that providesmobile phone service but does not have its own licensed frequency allocation ofradio spectrum, nor does it necessarily have the entire infrastructure required toprovide mobile telephone service. MVNO's have full control over the SIM card,branding, marketing, billing, and customer care operations. While sometimesoffering operational support systems (OSS) and business support systems (BSS) to

support the MVNO, the incumbent mobile operators most keep their own OSS/BSSprocesses and procedures separate and distinct from those of the MVNO.

5.4 IPTV

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5.4.1 What is IPTV?

IPTV (Internet Protocol Television) delivers television programming tohouseholds via a broadband connection using Internet protocols. It requires asubscription and IPTV set-top box, and offers key advantages over existing TVcable and satellite technologies. Because IPTV arrives over telephone lines,

telephone companies are in a prime position to offer IPTV services initially, but it isexpected that other carriers will offer the technology in the future. One of theadvantages of IPTV is the ability for digital video recorders (DVRs) to recordmultiple broadcasts at once. IPTV viewers will have full control over functionalitysuch as rewind, fast-forward, pause, and so on.

5.4.2 Market Position

Presently, the low number of broadband connections in India is a limiting factor.MTNL and BSNL together have around 2 million broadband connections and aretrying to raise this number by making fresh investments in fiber deployments andnew exchanges. AKSH OPTIFIBRE launched the service in June 2008 in Delhi and

Mumbai. In August 2008, it also signed with BSNL to provide IPTV services in 20cities of Rajasthan, Punjab, Haryana, Western UP, and Himachal Pradesh. Aksh hasmade a huge investment for IPTV services and expects that2009 would see rapidgrowth in the subscriber base.

Although IPTV is in its early stages, its future in India is promising. This is a servicethat provides an opportunity to offer interactive value-added services such asticketing, education, Internet on TV, and targeted advertising. IPTV will enablehigher revenues per customer.

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6. Industry Updates

6.1 Idea Cellulars Acquisition

Idea cellulars acquisition of Spice Telecom, there were three

transactions as part of this acquisition of shares of Spice, a non-

compete fee and a capital infusion of about Rs. 7300 crores

received from TM International Bhd (TMI). With respect to shares,

Idea acquired 40.8% stake of Spice Telecom at Rs. 77.30 a share for Rs. 2716

crores. The deal was strategically important for Idea Cellular as it was looking

forward to transfer itself into a pan-India telecom service provider.

6.2 Vodafone Entry

Vodafone paid a discounted price of $10.9 billion in cash for

acquiring the 52% stake held by Hutchison International (HTIL) in

Indian mobile firm Hutch-Essar. Vodafone is the largest mobile

telecommunication network company in the world. The deal gave

them access to one of the fastest growing mobile markets in the world.

6.3 TATA DOCOMO

Japanese carrier NTT DoCoMo acquired 26% stake in Tata Teleservices

(TTSL). The Tata DoCoMo GSM service has firstly started in Southern

India and then gradually expanded nationwide. The launch of the TATADOCOMO brand marks a significant milestone in the Indian telecom landscape, as it stands

to redefine the very face of telecoms in India. Tokyo-based NTT DOCOMO is one of the

world's leading mobile operators-in the Japanese market, the company is clearly the

preferred mobile phone service provider in Japan with a 50 per cent market share.

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6.4 FDI Investment

The Indian telecom industry has always attracted foreign investors. FDI inflow,

from August 1991 to March 2009, in the telecommunication sector amounted toUS$ 7513.22 million. This makes telecommunication the third largest sector to

attract FDI in India in the post liberalization era. The investment was majorly in

handset and telecom service provider.

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7. Conclusion

The Indian Telecon Services provider industry is gearing for a revolutionary.

The customer is driving this revolution and will see more unique offerings

coming his way. The 3G which will pave the way for 4G and the VAS services

will keep the customer asking for more. The rural areas which have

remained unstapped will see revolutionary services. Also the easing of the

regulation by TRAI, the FDI investment will make the telecom space in India

a must watch in coming years.

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8. References

IBEF report 2007-08

www.trai.gov.in

PROTON SRC

Cellular Statistics

Moneycontrol.com

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Documents

22223421 Report on Telecom Sector 2009