An Introduction to the Wireless Telecom Sector

8/14/2019 An Introduction to the Wireless Telecom Sector

1/7

An Introduction to the Wireless Telecom S ector

Indian Telecom industry is one of the fastest growing telecom markets in the world. In

telecom industry, service providers are the main drivers; whereas equipment manufacturers

are witnessing growth and decline in successive quarters as sales is dependent on order

undertaken by the companies.

Today the Indian telecommunications network with over 452.91 million(as on May 09)

subscribers is second largest network in the world after China. India is also the fastest

growing telecom market in the world with an addition of 10- 12 million monthly subscribers.

The tele-density of the Country has increased from 18% in March 2006 to 38.88% in May

2009, showing a stupendous annual growth of about 50%, one of the highest in any sector of

the Indian Economy. The Department of Telecommunications has been able to provide state

of the art world-class infrastructure at globally competitive tariffs and reduce the digital

divide by extending connectivity to the unconnected areas. India has emerged as a major base

for the telecom industry worldwide. Thus Indian telecom sector has come a long way in

achieving its dream of providing affordable and effective communication facilities to Indian

citizens. As a result common man today has access to this most needed facility. The reform

measures coupled with the proactive policies of the Department of Telecommunications have

resulted in an unprecedented growth of the telecom sector.

It is important to know that Mobile Tariffs in India are one of the lowest in the world with

local calls at 50p/min and STD calls at 1Re/min and no incoming call charge(Calling Party

Pays).

Recent things to watch in Indian telecom sector are:

3G spectrum auctions

Mobile Number Portability(MNP) Implementation

New Policy for Value Added Service

Due to technological advancement and increase in traffic.

Abolition of Access Deficit Charge (ADC).

Review of Wireless (GSM and CDMA) Services

1 | P a g e


2/7

The Wireless Industry crossed 452.91 million-subscribers mark as by end of May 2009. This

total subscribers base of 452.91 million comprise of298.15 million GSM and 105.51 million

CDMA subscribers. During the financial year 2008-09 around 130.67million subscribers

were added with a growth rate of 50.00% as compared to 58.12% growth during the year

2007-08.

The Department of Telecommunication (DoT) is has very aggressive plans to increase the

pace of growth, targeting 500 million by 2010. Most of the expansion in subscribers is set to

occur in Rural India. Indias rural telephone density has been languishing at around 16.54.

The subscriber addition rate has been strong in the last 12 months but the regulatory

developments will increase competition and thus curtail the long-term growth rates of

individual companies. The savings through the setting of tower companies will partly go

towards the higher capex and opex costs from more stringent spectrum allocation norms for

the incumbents. The Telecommunications sector has been consistently adding more than 10

million subscribers every month. All the private operators GSM as well as the CDMA

operators have been very consistent in their performance.

However the recent regulatory developments have been negative for the telecom companies

as it has increased the number operators per circle which intensified the competition. The

addition of players like Aircel, Loop Telecom (formerly BPL), Tata Docomo, Virgin Mobile

and a few more yet to roll out their services like Swan Telecom, and Unitech Telecom the

pressure on established players is set to increase. So also with the implementation of MNP

and 3G spectrum allocation the Service providers have to be the best service caterers to hold

on to their market shares.

The market share of different GSM operators as on May 2009 is displayed

below:

The Market leader in GSM sector being Bharti Airtel with 32% of Market share followed by

Vodafone at 24%. The state owned BSNL is third in the competition with 16% of the share in

the GSM market.

CDMA market majors Reliance has got licence to operate(in 14 circles and 4 metro

cities) in the GSM band and they have launched their services in the market. The existing

players face a tough competition as Reliance and Tata (with Docomo) have existing

distribution channels and brand name, and can be a potential threat to Airtel and Vodafone.

So is the case for Tata Indicom which recently launched its GSM services by the name Tata

Docomo in 18 circles in India.

2 | P a g e


3/7

Tata Docomo : Tata Docomo, the latest entrantinto the GSM market had to get some

innovative and low priced packs to attract customers to switch to Tata Docomo even before

the actual implementation of MNP. As a part of this they are offering 1paise calling per

second for local( and STD calls as a limited period offer). The success for Tata Docomo lies

in winning third generation(3G) airwaves in as many circles as possible and bringing their

internationally famed expertise into the domain.

The innovativeness here is they are branding their service on the basis of value for each

second, and pay for only what you have used. Thus they are trying to attract customers

even before the implementation of MNP. As Toshinari Kuneida- M.D.of Docomo their target

is to achieve 100million customers in the next three years.

The market share of different CDMA operators as on May 2009 is

displayed below:

Coming to the CDMA market, Reliance Communication is a tough market player tochallenge with around 59.82% of the total CDMA market, followed by Tata Teleservices(TataIndicom and Virgin together) which has a share of 33.67%.

Virgin Mobile : Virgin Mobile as it says is Indias first national youth-focused mobileservice. Virgin Mobile branded services are being offered to the Indian consumers by TataTeleservices through a brand franchise with Virgin Mobile. Virgin Mobile India will provideTata Teleservices with experience and expertise in designing, marketing and servicing ofVirgin Mobile branded products for the youth segment.

3 | P a g e


4/7

They are targeting the Youth segment by offering schemes like get paid for incoming calls,pay for the first message and get 100 messages free for that day.

Government PoliciesFacilitating Industry Growth

The Indian Telecommunication system is governed by the Indian Telegraph Act,1885 (ITA1885) and the Indian Wireless Act, 1933. The Department of Telecommunications (DoT)

governs the Indian telecom industry. DoT, in coordination with its arm, Telecom

Commission, looks after licensing, policy making, and frequency management. A prime

ministerial council, the Group on Telecom and IT (GoT-IT), handles important ad-hoc issues

if any. To streamline policy reforms and safeguard consumer interests, DoT established the

Telecom Regulatory Authority of India (TRAI) in 1997. The Telecom Disputes Settlement

and Appellate Tribunal (TDSAT) was also established at the same time. Another regulatory

body is the Wireless Planning Commission (WPC) under the aegis of the Ministry of

Communications.

Issues that will affect the Telecommunication Sector in the Immediate Future

Mobile Number Portability(MNP): Mobile Number Portability is a technique with which a

customer can retain the same number, but change the service provider. This technique has

been implemented in USA,UK, Japan etc. and is to be implemented in India.

In most of the circles all over India there are more than 5 service providers (GSM and

CDMA) thus leading to a fierce competition. In a few circles the number of service providers

are 10 which is leading to a very tight situation and thus they are forced to offer attractive

plans to attract new customers.

Syniverse has been given the mandate to implement MNP services in the Northern and

Western regions, classified as Zone-1 and MITS has been given the mandate to implement

MNP services in the Southern and Eastern regions, classified as Zone-2. MNP expected to be

a negative for the Indian Telecom Sector, but positive for Subscribers.

Given the fact that India is a price-sensitive market, the likelihood of MNP succeeding is

quite high. Further, as mentioned earlier, given the significant dissatisfaction with QoS,

particularly in the Metro service areas, the likelihood of churn rates increasing in these areas

is higher. Another factor that is likely to play out in favour of a successful experience with

MNP implementation in India is the absence of long-term service contracts.

4 | P a g e


5/7

3G Spectrum Allocation: Analysts estimate that by 2010, the two dominant 3G

technologies, CDMA2000 and Wideband CDMA (WCDMA), will account for 1.2 billion

subscribers, representing 41 per cent of the global subscriber base.

In urban India, there is a spectrum crunch and 3G can treble voice capacity and can solve the

spectrum issue. With over 15 million 3G handsets, and 30 per cent of all future handsets saleexpected to be 3G enabled, India is set to roll out 3G to provide an effective communication

environment.

It will bridge the difference between urban and rural and enable the rural Indian to avail of

facilities such as tele-medicine, e-education and e-governance will substantially improve their

quality of life. 3G policy will help the customers most, because many telecom companies are

going to bid for the spectrum, each one will try to entice the customers in their own style. At

last the customers would be get benefitted.

If a foreign bidder wins the bid, he will have to set up a joint venture with an Indian partner

to start operations, the country's Department of Telecommunications (DOT). The foreign

bidder can hold up to 74 percent of the equity in the company providing the 3G (third-

generation) service. If the foreign equity in the joint venture is more than 49 percent, the joint

venture will also require clearance from the country's Foreign Investment Promotion Board

(FIPB).

However one block of spectrum in each of the service areas has already been reserved for use

by two government controlled telecommunications companies - Bharat Sanchar Nigam

(BSNL) and Mahanagar Telephone Nigam (MTNL). They would however have to pay alicense fee for the spectrum at the highest bid in each service area.

5 | P a g e


6/7

Conclusion

Telecom industry is seeing a rise as the trend goes and has potential for growth. Taking into

account the tele-density of 38.88% there is still unexplored market. The competition is fierce

with around 10 Service providers in most of the 18 circles and also the implementation of

MNP. The service providers have to be different and have to stick to strict service norms andprovide excellent customer service in order to hold on to the market share. Thus there is

intense competition in the market but at the same time scope for development in rural areas.

Airtel,Idia and Vodafone have taken up initiatives to provide customized connections to Rural

customers like Motor pumps control system,loud speaker phone for illiterates and so on.

In a few words Telecom sector has a lot of scope for growth and the customers at the same

time have the benefit to choose from a wide range of service providers offering various plans

targeted to specific customers

6 | P a g e


7/7

Bibliography

www.trai.gov.in

www.dot.gov.in

www.wikipedia.org/wiki/Telecommunications_in_India

www.telecomindiaonline.com

DoTLicensor and FrequencyManagement for Telecomelecom Commissionhttp://v12.lscache5.c.youtube.com/videoplayback?ip=0.0.0.0&sparams=id%2Cexpire%2Cip%2Cipbits%2Citag%2Cb

7 | P a g e
http://www.trai.gov.in/http://www.dot.gov.in/http://www.wikipedia.org/wiki/Telecommunications_in_Indiahttp://www.dot.gov.in/http://www.wikipedia.org/wiki/Telecommunications_in_Indiahttp://www.trai.gov.in/

Documents

An Introduction to the Wireless Telecom Sector