Measure the Market Size of Non-Branded Mobile

8/2/2019 Measure the Market Size of Non-Branded Mobile

1/118

Page 1

CHAPTER -1

INDUSTRY

PROFILE


2/118

Page 2

CHAPTER 1INDUSTRY PROFILE

1.1 INDUSTRYOVERVIEW1.1.1 History

Information technology dates back to 5000BC, when people started using alphabets as a medium

of communication. However, its actual emergence started with the first ever use of the computer.

The real modern mechanical computer was conceived in 1822 by Charles Babbage. Then came

the electromechanical age in 1840s with the discovery of different ways to harness electricity and

the information was converted into electric impulses. This led to the beginning of

telecommunication and telegraphy in late 1800s. As the loading coil and vacuum tube made

possible the early telephone network, the wireless revolution began only after low cost

microprocessors and digital switching became available.

Since then, four generations of computers have evolved. Each generation represented a step that

was characterized by hardware of decreased size and increased capabilities. The first generation

used vacuum tubes, the second transistors, and the third integrated circuits. The fourth (and

current) generation uses more complex systems such as very large-scale integration or System -

on- a - chip.

Mobile rigs were the beginning of mobile phones for use in vehicles such as taxicab radios, two

way radios in police cruisers, and the like. A large community of mobile radio users, known as

the mobileers, popularized the technology that would eventually give way to the mobile phone.

The concept of using hexagonal cells for mobile phone base stations was invented in 1947 by

Bell Labs engineers at AT&T and was further developed by Bell Labs during the 1960s.

One of the first truly successful public commercial mobile phone networks was the ARP network

in Finland, launched in 1971. The first hand held mobile phone to become commercially

available was the Motorola DynaTAC 8000X, which received approval in 1983. Until the late

1980s, most mobile phones were too large to be carried in a jacket pocket, so they were usually

permanently installed in vehicles as car phones. With the advance of miniaturization and smaller

digital components, mobile phones got smaller and lighter.


3/118

Page 3

1.1.2 Current scenario

Mobile phones have gained a lot of popularity and are the considered to be great multimedia

tools. Mobile phones are being used for entertainment purposes due to the introduction of new

features every day. They have become more than just call making and receiving devices. Mobilephone handsets now have more business-friendly applications that can enhance anybodys

business. With emerging technology, mobile phones have become more than communication

devices; they are the tools to stay ahead of competitors and peers in the present times. Soon

mobile phones will evolve from communication tools to integrated communication devices,

media terminals, credit cards, and remote controls.

1.1.3 Growth

This rapid growth has been possible due to various proactive and positive decisions of the

Government and contribution of both by the public and the private sector. The rapid strides in the

telecom sector have been facilitated by liberal policies of the Government that provide easy

market access for telecom equipment and a fair regulatory framework for offering telecom

services to the Indian consumers at affordable prices.

1.1.4 Wire line vs. Wireless

It has also undergone a substantial change in terms of mobile versus fixed phones and public

versus private participation. The preference for use of wireless phones has also been predominant

in the sector.

Participation of the private entities in the telecom sector is rapidly increasing rate there by

presenting the enormous growth opportunities. There is a clear distinction between the Global

Satellite Mobile Communication (GSM) and Code Division Multiple Access (CDMA)

technologies used and the graph below shows the divide between the two.


4/118

Page 4

1.2GLOBAL MOBILE HANDSET MARKETThe phenomenal rise of the mobile phone has seen its image change from a yuppie status symbol

to a daily essential. Along the way, it has created thousands of jobs, changed the way we do

business, and made an awful lot of money for investors. Today Key Handset technologiesinclude GSM, CDMA, and, Wi-Fi VoIP, TDMA, 3G, 4G and Bluetooth. Worldwide mobile

phone sales cruise to 990.8 million units in 2006, up a hefty 21.3% from 2005s 816.6 million

units. The estimated growth figures are6.4% in 2007, 4.8% in 2008 and 2.6% in 2009.

Notwithstanding the gradual decline in the growth figures, the annual handset sales are predicted

to reach more than US $ 3 Billion by 2009.The total number of mobile phone subscribers in the

world was estimated at 2.14 billion in 2005.

Around 80% of world's populations have mobile phone coverage as of 2006. This figure isexpected to increase to 90% by the year 2010. With the periodic introduction of new features and

multimedia tools in the mobile handsets due to technological advances, more and more people in

the Asian continent fancy buys them. There are many diversities and complexities in the Asian

mobile handset market due to types of customers, government regulations, regional/geographical

wireless infrastructure, and the purchasing power. Basically, the Asian market looks at the

mobile handsets as status symbols. The market is seen best for the low-end phones, but there is a

huge rise in the demand for flashier and costlier phones. India, China, Korea, and Malaysia are

fast evolving as the biggest markets for mobile handsets and in coming years they will mainly

carry on the global handset sales.


5/118

Page 5

1.3SEGMENT WISE STATUS1.3.1 Wire line Services

With increasing penetration of the wireless services, the wire line services in the country are

becoming stagnant.

On the other hand, Broadband demand has picked up and promises to stabilize fixed line growth.

1.3.2 GSM Sector

In terms of the Global System for Mobile Communication (GSM) subscriber base this now

places India third after China and Russia. China had 401.7 million GSM subscribers

GSMServiceProvider

Reliance

Bharti

Dokomo

MTNL

Airtel

Spice

Vodafone

Idea

Aircel

BSNL


6/118

Page 6

1.3.3 CDMA Services

CDMA technology was introduced in India as a limited mobility solution. The introduction of

CDMA services has created competition, lowered tariffs and offered many citizens access to

communication services for the first time.

1.3.4 Internet Services

Internet services were launched in India on August 15, 1995. In November 1998 the government

opened up the sector to private operators. A liberal licensing regime was put in place to increase

Internet penetration across the country.

The growth of IP telephony or grey market is also a serious concern. Government loses revenue,while unlicensed operation by certain operators violates the law and depletes licensed operators

market share.

New services like IP-TV and IP-Telephony are becoming popular with the demand likely to

increase in coming years. The scopes of services under existing ISP license conditions are

unclear.

1.4MANUFACTURE OF TELECOM EQUIPMENTSEGMENTRising demand for a wide range of telecom equipment, particularly in the area of mobile

telecommunication, has provided excellent opportunities to domestic and foreign investors in the

manufacturing sector. The last two years saw many renowned telecom companies setting up their

manufacturing base in India. Ericsson has set up GSM Radio Base Station Manufacturing facility

in Jaipur. Elcoteq has set up handset manufacturing facilities in Bangalore. Nokia set up its

manufacturing plant in Chennai. LG Electronics set up plant of manufacturing GSM mobile

phones near Pune.

The Government has already set up Telecom Equipment and Services Export Promotion Forum

and Telecom Testing and Security Certification Centre (TETC). A large number of companies

like Alcatel, Cisco have also shown interest in setting up their R&D centers in India. With above

initiatives India is expected to be a manufacturing hub for the telecom equipment.


7/118

Page 7

1.5MAJOR GLOBAL PLAYERSCompany 2010 Market Share (%)

Nokia 42

Samsung 16.2

Sony Ericson 13.8LG 7.9

Motorola 3.1

Other 17

Total 100

Nokia Corporation is currently the world's largest manufacturer of mobile telephones. It

produces mobile phones for every major market and protocol, including GSM, CDMA, and W-

CDMA (UMTS). The corporation also produces telecommunications network equipment for

applications such as mobile and fixed-line voice telephony, ISDN, broadband access, voice over

IP, and wireless LAN.Nokia's Mobile Phones division provides the general public with mobile

voice and data products across a wide range of mobile devices. The division aims to target

primarily high-volume category sales of mobile phones and devices, with consumers being the

most important customer segment. Nokia believes that design, brand, ease of use and price are

mainstream mobile phones' most important considerations to customers. Nokia's product

portfolio includes camera phones with features such as megapixel cameras which appeal to the

mass market.

Motorola is an American multinational communications company based in Schaumburg, Illinois,

a Chicago suburb. Most of Motorola's products have been radio-related, starting with a battery

eliminator for radios, through the first walkie-talkie in the world, defense electronics, cellular

infrastructure equipment, and mobile phone manufacturing. Motorola has recently been

regaining market share in the cellular-phone business from Nokia, Samsung, and others due to

stylish new cellular phone designs.

Samsung Electronics is one of the world's largest IT companies by revenue. The company also

claims to be having the highest brand value among consumer electronics companies.

Headquartered in Seoul, South Korea, it is part of the Korean Samsung Group, operating in

approximately over 100 countries. It is the number 1 mobile phone manufacturer in Asia.

Sony Ericsson is a joint venture established in 2001 by the Japanese consumer electronics

company Sony Corporation and the Swedish telecommunications company Ericsson to make


8/118

Page 8

mobile phones. Both companies have stopped making their own mobile phones. The reason for

this merger is to combine Sony's consumer electronics expertise with Ericsson's technological

leadership in the communications sector. The company's global management is based in

Hammersmith, London. It also has research & development teams in Sweden, Japan, China,

Canada, the Netherlands, the United States, India and the United Kingdom.

LG Electronics is one of the world's leading electronics companies. It is part of the Korean LG

Group, operating in approximately 80 countries. Its mobile phones division provides CDMA,

GSM, 3G Handsets.

BenQ-Siemens is the mobile communications subsidiary of Taiwanese BenQ Corp... The

division was formed out of BenQ's acquisition of the struggling Siemens mobile group in 2005.

The stated goal of the company is to pull together BenQ's lifestyle experience, their renowned

design team and Siemens' engineering capabilities to create a new leader in the mobile

communications arena. The newly-formed company won the most of design awards in 2006, and

also won many design awards in Germany's reddot competition.

1.6MAJOR PLAYERS IN INDIAThe major players in the handsets segment in India include Nokia, Motorola, Sony Ericsson,

Samsung, LG, Philips, Panasonic, Bird, Sagem and BenQ. Nokia has retained the top slot in

Indian market with 70 % share, while US giant Motorola has 15 % share and Sony Ericsson has

gained around 8% share this year. Samsung has 5% share and LG has 1.8% share.


9/118

Page 9

1.7MOBILE HANDSET MARKET IN INDIAThe cell phones industry has shown a remarkable growth in the last decade. In 1989 the number

of its subscribers was zero in India. Indias love affair with cell phones started in the mid -1990s,

as the mobile revolution took hold and India had just 10 million mobile and landline connections.Delhi was the first state to launch cell phones in India. Growth then soared in the last four years

due to regulatory change and falling costs of calls and handsets. Indias wireless market is a test

bed for alternative infrastructure, handsets, billing systems, business models and marketing

strategies that will likely prove applicable to other developing countries.

On a numerical basis, India is the biggest growth market adding about 6 million cell phones

every month. CAGR for mobile phones is 86% in India. It is one of the fastest growing mobile

markets in the world; in April 2006 mobile subscriber base crossed 100 million marks. This hasbeen accomplished by rethinking handsets, network infrastructure, enhanced services and

content. More than two-third of mobile subscriptions are with GSM operators and rest with

CDMA. India has one of the lowest mobile phone tariffs in the world resulting in low Average

Revenue per User (ARPU) of 9.04 USD per year (CDMA 5.74 USD and GSM 8.89 USD).

Indian land area covered by mobile networks is approx. 30%. CAGR of Mobile Market Value

for 2004- 2009 is 36.9%.With 156.31 million cell phones; teledensity in the country is still low at

17.45%. Fewer than eight in every 100 Indians use mobiles, compared with China's 30 per cent.

In India, about 13 percent of people have cell phones which have increased from 8% in 2005 and

are expected to reach 40 percent within a few years. A lack of investment in the infrastructure

needed to support landline services means there are only 50 million fixed-lines users in the

country, leaving the stage set for mobile operators. India is expected to have the third largest

mobile user base, behind China and the US, by the year end and will become the second largest

market of mobile handsets by 2010. Indian cellular market would account for 11% of the overall

Asia Pacific and Japan market by 2009 and is expected to reach 500 million subscribers by end

of 2010 with CAGR of 33.7% for 2004- 2010.


10/118

Page 10

1.7.1 Indias mobile subscriber base

1.8POLICY AND INITIATIVES1.8.1 Regulatory Framework

The Telecom Regulatory Authority of India (TRAI) was set up in March 1997 as a regulator for

Telecom sector. The TRAIs functions are recommendatory, regulatory and tariff setting in

telecom sector.

Telecom Disputes Settlement and Appellate Tribunal (TDSAT) came into existence in May,

2000. TDSAT has been empowered to adjudicate any dispute

Between a licensor and a licensee Between two or more service providers Between a service provider and a group of consumers Hear and dispose of appeal against any direction, decision or order of TRAI


11/118

Page 11

Tariffs for telecommunication services have evolved from a regime where tariffs were

determined by Telecom Regulatory Authority of India to a regime where tariffs are largely under

forbearance. TRAI intervenes by regulating the tariffs for only those services, the markets of

which are not competitive.

Universal Service Obligation Fund (USOF) exclusively for meeting the Universal Service

Obligation was established in April, 2002. The Universal Service Levy is presently 5 per cent of

the Adjusted Gross Revenue (AGR) of all telecom service providers except the pure value added

service providers like Internet, Voice Mail, E-Mail service providers etc. Indian Telegraph Act

has been amended in October2006 to provide support for all telegraph services including mobile

and broadband to bridge the digital divide.

With the introduction of the Unified Access Licensing Regime, operators can offer telecom

access services to consumers in a technology neutral manner, subject to fulfilling certain

conditions. Introduction of this regime has also broken the legal/regulatory impasse between the

cellular and basic service providers. Issuance of Intra-Circle Merger and Acquisition Guidelines

provide investors an opportunity to take stakes in existing telecom operations.

1.8.2 Government Initiatives

The Government has taken the following main initiatives for the growth of the Telecom Sector:

All telecom services have been opened up for free competition for unprecedented growth. 217 (Information Technology Agreement) ITA-I items are at zero Customs Duty. Specified

capital goods and all inputs required to manufacture ITA-I, items are at zero Customs Duty.

Availability of low cost mobile handsets. The international Long Distance Services (ILDS) opened with effect from April 2002.

Calling Party Pays (CPP) regime was implemented with effect from 1st May.

Guidelines for Unified Access Service License regime were issued in November 2003, 27licenses out of 31 Basic Service Licenses were converted to Unified Access Service

Licenses.

In April 2004, license fee for Unified Access Service Providers (UAS) was reduced by 2 percent.


12/118

Page 12

License fee for infrastructure Provider-II reduced from 15 per cent to 6 per cent of theAdjusted Gross Revenue and spectrum charges between 2 to 4 per cent in June 2004.

Entry fee for NLD licenses was reduced to Rs. 2.5 Crore from Rs. 100 Crore. Entry fee forILD reduced to Rs. 2.5 Crore from Rs. 25 Crore.

Lease line charges have been reduced to make the bandwidth available at competitive pricesto facilitate growth in IT enabled services.

One India plan i.e. single tariff of Re. 1/-per minute to anywhere in India was introducedfrom 1st March 2006 by the Public Sector Undertakings. This tariff was emulated by most of

the private service providers also. This scheme has led to death of distance in

telecommunication and is going to be instrumental in promoting National Integration further.

The robust telecom network has also facilitated the expansion of BPO industry that is having500,000 employees now and adding 400 employees per day.

Annual license fee for National Long Distance (NLD), International Long Distance (ILD),Infrastructure Provider-II, VSAT commercial and Internet Service Provider (ISP) with

internet telephony (restricted) licenses was reduced to 6 per cent of Adjusted Gross Revenue

(AGR) with effort from Jan 2006.

The Governments policy is neutral on use of technology by telecom service providerssubject to availability of scarce resources such as spectrum etc.

License Fees 6-10 per cent of Adjusted Gross Revenue (AGR).

1.8.3 Foreign Direct Investment Policy

Foreign Direct Investment (FDI) was permitted in the telecom sector beginning with the telecom

manufacturing segment in 1991 - when India embarked on economic liberalization. FDI is

defined as investment made by non-residents in the equity capital of a company. For the telecom

sector, FDI includes investment made by Non-Resident Indians (NRIs), Overseas Corporate

Bodies (OCBs), foreign entities, Foreign Institutional Investors (FIIs), American Depository

Receipts (ADRs)/Global Depository Receipts (GDRs) etc.

Present FDI Policy for the Telecom sector:


13/118

Page 13

In Basic, Cellular Mobile, National Long Distance, International Long Distance, Value Added

Services and Global Mobile Personal Communications by Satellite, FDI is limited to 49 per cent

(under automatic route) subject to grant of license from the Department of Telecommunications

and adherence by the companies (who are investing and the companies in which investment is

being made) to the license conditions for foreign equity cap and lock-in period for transfer and

addition of equity and other license provisions.

Foreign Direct Investment up to 74 per cent permitted, subject to licensing and security

requirements for the following:

o Internet Service (with gateways)o Infrastructure Providers (Category II)o Radio Paging Service

FDI up to 100 per cent permitted in respect to the following telecom services: - ISPs not

providing gateways (Both for satellite and submarine cables)

o Infrastructure Providers providing dark fiber (IP Category I)o Electronic Mailo Voice Mail

The above is subject to the following conditions:

FDI up to 100 per cent is allowed subject to the condition that such companies would divest 26

per cent of their equity in favor of Indian public within 5 years, if these companies are listed in

other parts of the world.

The above services would be subject to licensing and security requirements, wherever required.

Proposals for FDI beyond 49 per cent shall be considered by Foreign Investment Promotion

Board (FIPB) on a case-to-case basis.

In the manufacturing sector 100 per cent FDI is permitted under the automatic route.

In Basic, Cellular Mobile, paging and Value Added service, and Global Mobile Personal

Communications by Satellite, FDI is permitted up to 49 per cent (under automatic route) subject

to grant of license from Department of Telecommunications


14/118

Page 14

Foreign direct investment up to 74 per cent permitted, subject to licensing and security

requirements for the Internet Service (with gateways), Infrastructure Providers (category-II), and

Radio Paging Service

FDI up to 100 per cent permitted in respect of

o ISPs not providing gateways (both for satellite and submarine cables),o Infrastructure Providers providing dark fiber (IP Category I);o Electronic Mail; ando Voice Mail

FDI up to 49 per cent is also permitted in an investment company, set up for making investment

in the telecom companies licensed to operate telecom services. Investment by these investment

companies in a telecom service company is treated as part of domestic equity and is not set of

against the foreign equity cap.

Manufacturing - 100 per cent FDI is permitted under automatic route.

FDI is subject to the following conditions

FDI up to 100 per cent is allowed subject to the conditions that such companies would divest 26

per cent of their equity in favor of Indian public in 5 years, if these companies are listed in other

parts of the world.

The above services would be subject to licensing and security requirements, wherever required.

Proposals for FDI beyond 49 per cent shall be considered by FIPB on case to case basis.


15/118

Page 15

1.9COMPETITION OVERVIEW1.9.1 Major Players

There are three types of players in telecom services:

1) State owned companies (BSNL and MTNL)2) Private Indian owned companies (Reliance Infocomm, Tata Teleservices,)3) Foreign invested companies (Hutchison-Essar, Bharti Tele-Ventures, Escotel, Idea

Cellular, BPL Mobile, Spice Communications)

1.9.1.1 Bharat Sanchar Nigam Limited (BSNL)

Name Bharat Sanchar Nigam Limited (BSNL)

Year ofEstablishment

2000

Company

Profile

Bharat Sanchar Nigam Ltd. is World's 7th largest Telecommunications

Company providing comprehensive range of telecom services in India: Wire

line, CDMA mobile, GSM Mobile, Internet, Broadband, Carrier service,

MPLS-VPN, VSAT, VoIP services, IN Services etc. Within a span of five

years it has become one of the largest public sector units in India.

Global

Presence/

Marketing

Network

It has a network of over 45 million lines covering 5000

Network towns with over 35 million telephone connections.

Future Prospect BSNL plans to expand its customer base from present 47 million lines to 125

million lines and infrastructure investment plan to the tune of Rs. 733 crores

(US$ 16.67 million) in the next three years.


16/118

Page 16

1.9.1.2 Mahanagar Telephone Nigam Limited (MTNL)

Name Mahanagar Telephone Nigam Limited (MTNL)

Year of

Establishment

1986

Company

Profile

MTNL was set up by the Government of India to upgrade the quality of

telecom services, expand the telecom network, and introduce new services and

to raise revenue for telecom development needs of Indias key metros. MTNL

with a market share of about 13% of the National telecom Network has a

customer base of 5.92 million. The Govt. of India currently holds 56.25%

stake in the company.

Acquisitions /

Strategic

Alliances

MTNL has formed a Joint Venture company in Nepal by the name of United

Telecom Ltd. (UTL) in collaboration with Telecom Consultants India Limited

(TCIL) in 2001 for providing WLL based basic services in Nepal. MTNL has

set up its 100% subsidiary .Mahanagar Telephone Mauritius Limited.

(MTML) in Mauritius, for providing basic, mobile and international long

distance

1.9.1.3 Videsh Sanchar Nigam Limited (VSNL)

Name Videsh Sanchar Nigam Limited (VSNL)

Year of

Establishment

1986

Company

Profile

The Videsh Sanchar Nigam Limited (VSNL) a wholly Government owned

corporation. The company operates a network of earth stations, switches,

submarine cable systems, and value added service nodes to provide a range of

basic and value added services and has a dedicated work force of about 2000employees. VSNL's main gateway centers are located at Mumbai, New Delhi,

Kolkata and Chennai.

Global

Presence/

The company has 52 subsidiaries in 21 countries as well as operations across

four continents.


17/118

Page 17

Marketing

Network

Acquisitions /

Strategic

Alliances

VSNL acquired Nasdaq-listed Teleglobe International Holdings Ltd for $239

million in 2005 Videsh Sanchar Nigam Ltd acquired Tyco Global Network,

submarine cable system, for USD 130 million in 2005

Future Prospect The company plans to expand its wholesale voices services across the EU, to

effectively enable enterprise customers and retail voice carriers to connect to

India. VSNL is adding its capacity to meet the overwhelming demand for

connectivity to India in the wholesale voice services domain. The company is

also offering flexible agreements and charging methods to meet the growing

demands of the wholesale voice market

1.9.1.4 Bharti

Name Bharti

Year of

Establishment

1985

Company

Profile

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

investments in telecommunications services. Its subsidiaries operate telecomservices across India. Bhartis operations are broadly handled by two

companies: the Mobility group and the Infotel group.

Global Presence/

Marketing

Network

The company has 52 subsidiaries in 21 countries as well as operations across

four continents. The mobile business provides mobile & fixed wireless

services using GSM technology across 23 telecom circles while the Airtel

Telemedia Services business offers broadband & telephone services in 94

cities.

Acquisitions /

Strategic

Alliances

Bharti Telecom and British Telecom formed a 51%:49% joint venture, Bharti

BT Internet for providing Internet services, in 1998 Bharti Tele-Ventures

acquired an effective 32.36% equity interest in Bharti Mobile (formerly JT

Mobiles), the cellular services provider in Karnataka and Andhra Pradesh

circles in 1999 Bharti Telesonic entered into a joint venture, Bharti Aquanet,


18/118

Page 18

With SingTel for establishing a submarine cable landing station at Chennai in

2001 A 50:50 joint venture between Bharti and SingTel, to undertake the

largest infrastructure project between Singapore and Indian companies in

2001

Future Prospect Bharti Airtel company is planning to set up 3000 more towers as part of

enhancing their rural coverage and will now focus on rural and semi-urban

areas.

1.9.1.5 Reliance Communication

Name Reliance Communications

Year of

Establishment

1999

Company

Profile

Reliance Telecom's cellular services are available in 340 towns within its

eight-circle footprint. Reliance Infocomm also offered for the first time in

India, mobile data services through its R World mobile portal. This portal

leverages the data capability of the CDMA 1X network. Reliance Infocomm

offers a complete range of telecom services covering mobile and fixed line

telephony including broadband, national and international long distanceservices, data services and a wide range of value added services and

applications aimed at enhancing productivity of enterprises and individuals.

Global

Presence/

Marketing

Network

Reliance Communications has IP-enabled connectivity infrastructure

comprising over 150,000 kilometers of fiber-optic cable systems in India, the

US, Europe, Middle East, and the Asia Pacific region.

Acquisitions /

Strategic

Alliances

International wholesale telecommunications service provider, FLAG Telecom

amalgamates with Reliance Gateway, a wholly owned subsidiary of Reliance

Infocomm in 2004

1.9.1.5 Tata Teleservices


19/118

Page 19

Name Tata Teleservices

Year of

Establishment

1996

Company

Profile

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 bouquet of telephony services includes Mobile services,

Wireless Desktop Phones, Public Booth Telephony and Wire line services.

Other services include value added services like voice portal, roaming, post-

paid Internet services, 3-way conferencing, group calling, Wi-Fi Internet,

USB Modem, data cards, calling card services and enterprise services.

Global

Presence/

Marketing

Network

Tata Teleservices has presence in across 19 circles that includes Andhra

Pradesh, Chennai, Gujarat, Karnataka, Delhi, Maharashtra, Mumbai, Tamil

Nadu, Orissa, Bihar, Rajasthan, Punjab, Haryana, Himachal Pradesh, Uttar

Pradesh (E), Uttar Pradesh (W), Kerala, Kolkata, Madhya Pradesh and West

Bengal.

Acquisitions /

Strategic

Alliances

Tata Teleservices has acquired Hughes Tele.com (India) Limited [now

renamed Tata Teleservices (Maharashtra) Limited] in 2002

Future Prospect 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.

1.9.1.5 Vodafone

Name Vodafone

Year of

Establishment

Acquired majority stake in Hutch Essar in India, by buying

out complete stake of Hutch in 2007, Essar is still minority

stakeholder in company

Company

Profile

Vodafone Essar in India is a subsidiary of Vodafone Group Plc. and

commenced operations in 1994 when its predecessor Hutchison Telecom


20/118

Page 20

acquired the cellular license for Mumbai. Vodafone Essar now has operations

in 16 circles covering 86% of India's mobile customer base, with over 45.78

million customers. Vodafone Essar, under the Hutch brand, has been named

the 'Most Respected Telecom Company', the 'Best Mobile Service in the

country' and the 'Most Creative and Most Effective Advertiser of the Year'.

Global Presence/

Marketing

Network

It has operations in 25 countries across 5 continents and 40 partner networks

with over 200 million customers worldwide.

Future Prospect Vodafone Essar is expecting to touch over 35 million customers across

400,000 shops and thousands of hutchs own employees along with

employees of its business associates.

1.9.1.5 Idea

Name Idea

Year of

Establishment

1995

Company

Profile

Idea Cellular is part of the Aditya Birla Group, which is India's first truly

multinational corporation. Aditya Birla Nuvo Ltd. holds 35.7 per cent, Birla

TMT Holdings Ltd. 44.9 per cent, Grasim 7.5 per cent, and Hindalco 10.1 per

cent in Idea.

Global

Presence/

Marketing

Network

Has a customer base of over 17 million, IDEA Cellular has operations in

Delhi, Maharashtra, Goa, Gujarat, Andhra Pradesh, Madhya Pradesh,

Chattisgarh, Uttaranchal, Haryana, UPWest, Himachal Pradesh and Kerala.

Acquisitions /

Strategic

Alliances

Merged with Tata Cellular Limited in 2001, thereby acquiring original license

for the Andhra Pradesh Circle Acquired RPG Cellular Limited and

consequently the license for the Madhya Pradesh (including Chattisgarh)

Circlein 2001 In 2004 acquired Escotel, incumbent cellular service provider

in Haryana, UP(W) & Kerala and new licensee in HP Acquired Escorts


21/118

Page 21

Telecommunications Limited (subsequently renamed as Idea

Telecommunications Limited) in 2006 Merger of seven subsidiaries with Idea

Cellular Limited in 2007

Future Prospect Idea also plans to enter rural and neglected circles as a strategy to gain

subscribers. Other advancements in the telecom industry will help it cut costs

- use of e-mail to send bills to customers; sharing cell sites; smaller base

transmission stations that will mean lesser infrastructure requirements and

expenses and independent tower operators. Along with its plan to go for a

national long distance license, it will also look at international long distance

in the near future.

1.10CHALLENGES AND OPPORTUNITIES1.10.1 Opportunities

The telecom sector has been one of the fastest growing sectors in the Indian economy in the past

4 years. This has been witnessed due to strong competition that has brought down tariffs as well

as simplification of policy environment that has promoted healthy competition among various

players...

The mobile sector alone has been growing rapidly and has emerged as the fastest growing market

in the whole worlds. Currently of a size nearing 70 million (GSM and CDMA), this sector is

expected to reach a size of nearly 200 million subscribers by financial year 2008.

The government has eased the rules regarding inter circle and intra circle mergers. This has led

to a slew of mergers and acquisitions in the recent past. Also as the sector is moving closer to

maturity, further consolidation is a reality and this will lead to the survival of more profitable

players in this segment

In order to further promote the use of Internet in the country the government is taking proactive

steps to develop this sector with the help of the various players in this segment. For this purpose,

the use of broadband technology is being mooted and this will go a long way in improving the

productivity of the Indian economy as well as turn out to be the next big opportunity for telecom

companies after the mobile communications segment


22/118

Page 22

Non-voice services and VAS are the gold mines. The big takeoff is expected with the rollout of

3G services in early 2007, once the spectrum issues are sorted out.

Internet users base fast reaching near the English speaking population base. Local language and

content required for further growth

Infrastructure equipment cost is down to a fraction of what prevailed just a few years ago.

Operators can plan better expansion plan now

Increased viability for the operators to expand to semi-urban and rural markets, hence, accelerate

growth further

Its not without reason that India is tipped to be the worlds third-largest economy by 2050! No

wonder if it happens much earlier Investors can look to capture the gains of the Indian telecom

boom and diversify their operations outside developed economies that are marked by saturated

telecom markets and lower GDP growth rates.

I. At a time when global telecom majors are struggling to cope with their losses and therollout of 3G networks, which has been a non-starter for close to a year now; India, with

its telecom success story, represents an attractive and lucrative destination for invest men.


23/118

Page 23

CHAPTER -2

COMPANY

PROFILE


24/118

Page 24

CHAPTER 2COMPANY PROFILE

2.1 MICROMAX MOBILES

2.1.1 Corporate Profile

Micromax Mobiles is one of the leading mobile companies in the World today. According to

Strategy Analytics Global Handset vendor market share report, it is the 12th largest mobile

brand in the World with a global market share of 1% and close to 8% market share in India. With

an in-depth understanding of rapidly changing consumer preferences coupled with the use of

advanced technologies, Micromax has been able to differentiate itself from the competitors

through innovation and design. The brand took on the leaders in the category with specificproducts that addressed different customer needs. The company has focused their efforts towards

creating life-enhancing mobile phone solutions and wireless technologies that cater to the

increasingly evolving needs of mobile users in India. Micromax aims to be a billion dollar

company with a significant double digit market share by 2014. Driving the next phase of growth,

the company is expanding aggressively in India and globally.

2.1.2 Journey of a Homegrown Brand

Micromax started as an IT software company in the year 2000 working on embedded platforms.

By 2008, it entered mobile handset business and by 2010 became the largest Indian domestic

mobile handsets company. This transformation was steered by four friends who divided

responsibilities on functional lines, which havent changed since: Rajesh Agarwa l, 47, Managing

Director, Rahul Sharma, 37, Executive Director, Vikas Jain, 37, Business Director, and Sumeet

Arora, 37, Chief Technology Officer. Through its emphasis on adapting to the changing market

dynamics, introducing feature-rich phones and smartphones that are innovative and unique,

Micromax has today become a brand to reckon with.

Today, Micromax has presence across India and global presence in Bangladesh, Nepal, Sri-

Lanka, Maldives, UAE, Kingdom of Saudi Arabia, Kuwait, Qatar, Oman, Afghanistan and


25/118

Page 25

Brazil. Micromax sells around 1.3 million mobiles handsets every month, with a presence in

more than 500 districts through 100,000 retail outlets in India.

2.1.3 Market Overview

We believe a number of factors have contributed to and will continue to drive growth in the

Indian telecom and handset market, including the following:

Macroeconomic growth, rising incomes and increasing consumer spending Indias real GDPis expected to grow at a combined annual growth rate (CAGR) of 7.3% from 2005 to 2025.

During the same period, income levels will almost triple and Indias middle class is expected

to increase over ten times to 583 million people in 2025. This is expected to lead to changing

consumer preferences in both urban and rural markets with consumer spending on

communications expected to be one of the fastest expanding categories of spending with

growth of over 13.4% per year taking the market size to ` 4,2888 billion by 2025 (Source:

The McKinsey Report).

Favorable demographics, While Indias economic growth unfolds, the population of India isexpected to continue to consist mostly of working age people between the ages of 15-59 with

urbanization levels reaching approximately 31% by 2015 and 38% by 2026 (Source: Report

of the National Commission on Population (May 2006)).

Wireless penetration, Low overall mobile penetration indicates a latent potential for growthin India. TRAI estimates that urban mobile teledensity will reach 125% by March 2014, with

urban mobile subscribers reaching 572 million, and that rural mobile teledensity will reach

60% by March 2014, with rural mobile subscribers reaching 468 million.

Replacement cycle, The growth in the Indian mobile handset market is likely to be driven bythe replacement handset market rather than new user additions. The replacement market is

expected to grow from 118 million handsets for the twelve month period ended December31, 2010, constituting 62.77% of overall Indian mobile handset market, to 359 million

handsets for the twelve month period ended December 31, 2014, constituting 89.30% of

overall Indian mobile handset market. Furthermore, within the replacement handset market,

the medium ASP device market is likely to grow the fastest (Source: Analysis Mason).


26/118

Page 26

3G businesses, 3G service is an emerging technology in India and certain other marketswhere we distribute our products. 3G technology provides growth opportunities through

multiple avenues including up gradation to 3G compatible mobile handsets and mobile data

cards.

Value added services (VAS). Going forward, the demand for more sophisticated andinnovative e-mail and multimedia based services, as well as gaming, music and video related

offerings is likely to fuel growth in VAS. We believe the advent of 3G will also add impetus

to the growth of the VAS market due to 3G's faster network capabilities. These trends are

likely to increase the demand for more sophisticated mobile devices.

2.1.4 Product Overview

We believe that consumers in India have unique preferences with respect to mobile handsets

such as long battery life, dual GSM capability, low-cost QWERTY phones, universal remote

control and gaming phones. Our strategy focuses on innovating, designing and using the latest

technologies to develop products at affordable prices. In addition, we also focus on developing

higher value premium products targeted at urban populations.

We believe that we differentiate ourselves from our competitors through innovation and design,

use of advanced technologies and in-depth understanding of rapidly changing consumer

preferences in India, which have enabled us to develop several new product categories that

address unique customer needs. We believe that our product development capabilities have

enabled us to establish ourselves as an innovative Indian mobile handset company. Our

marketing strategy focuses on the unique functionalities of our products to further develop our

reputation for innovation. Since our entry into the Indian mobile handset market in India in

January 2008, we have introduced more than 40 distinct mobile handset models, and as of

August 31, 2010, we sell more than 30 distinct mobile handset models. Our key mobile handset

product categories include:

Long life battery mobile phones, we offer marathon battery mobile phones that have a 30-daybattery life in standby mode;


27/118

Page 27

Dual reception mode handsets, we currently offer GC400 and GC275 handset models that areGSM-CDMA combination phones and can function using either technology;

QWERTY keypad mobile phones, we currently offer eight handset models in this category; Utility phones. Our handsets in this product category have an LED flashlight, FM radio and

color screen. We currently offer six models in this category;

Multimedia mobile phones, our multimedia mobile phones provide superior sound qualitywith powerful speakers and also have an in-built motion sensor, camera and wireless FM

antenna. We currently offer six handset models in this category;

Universal remote control mobile phone, our X235 phone is programmable as a universalremote control for televisions, air conditioners, and DVD and VCD players;

Gaming mobile phone, our Gameolution phone also functions as a wireless, motion-sensingcontroller for computer games and is capable of converting a computer into a gaming device;

Smart phones, Our W900 phone is a Microsoft Windows compatible mobile phone, withvoice assisted GPS navigation capability and maps provided by "Map my India";

3G mobile phones, We were the first mobile handset company to provide operator branded3G mobile handsets in India (Source: MTNL);

Gravity phones, our handsets in this product category are gravity sensor enabled and enablethe user to change mobile networks by rotating the handset. We offer two models in this

category.


28/118

Page 28

2.1.5 Product Innovation

Micromax product portfolio embraces more than 60 models today, ranging from feature rich,

dual-SIM phones to QWERTY, touch-enabled smart-feature phones and 3G Android

smartphones designed for younger consumers in suburban and urban markets.

Some of the industry firsts devices launched by Micromax since inception are:

1) First Long Battery Life Phone with 30 days battery back upo X1i Marathon Battery phone with 30 days standby time & 17 days Talk time

2) First Dual SIM Dual mode active Phone (GSM+CDMA)o Micromax GC400 is the first GSM + CDMA Mobile phone

3) First Gaming Deviceo G4 Gamolution phone with motion sensor gaming like Wi-fi


29/118

Page 29

4) First Womens Line of Deviceso Q55 Bling phone- First womens phone with a swivel form and Swarovski

navigation keys

5) First Universal Remote Control Phoneo X235 With Universal Remote Control for TV, DVD, AC in your phone

6) First phone with built-in blue tootho Micromax X450 Van Gogh A stylish phone that integrates a detachable

Bluetooth headset in its sleek design

7) First Superfone with Gesture Controlo Created a new category called Superfone with Gesture Control, powered with

1GHz dual core NVIDIA Tegra 2 Processor


30/118

Page 30

2.1.6 Marketing

Driven by growing aspirations of the Indian mobile users, Micromax has geared up to bring

about a paradigm shift in the way cell phones are used by introducing groundbreaking mobile

solutions technology. When Micromax entered the segment, it followed a simple strategy of

bringing innovative products for the consumers and coupled it with smart marketing. The

companys success could be attributed to the Out of the Box thinking and thus providing

Innovative & insightful products to the masses. At Micromax, the target audience is youth who

want innovative, stylish phones that are affordable. Today the mobile phone category is driven

by youth, with about 60% of the users under the age group of 20-40 yrs. and Micromax utilizes

every opportunity to connect with the youth. Micromax understands that building connect is all

about being involved with the customers and also giving them the value for money. Through

their products and innovative campaigns, they aim to provide value additions to the Micromax

users and have him or her involved by creating unique brand proposition.

2.1.7 Distribution Network

Micromax has a 3 tier distribution network in India, which extends across 65 super distributers,

500 micro distributors and over 100,000 retailers. To enhance brand cognizance and retail

strength, Micromax has a chain of exclusive retail outlets, owned by third party.


31/118

Page 31

2.2 BEETEL MOBILES

2.2.1 History

Beetel Teletech Limited comes from the Bharti Enterprises Group, founded in 1976, by Sunil

Bharti Mittal. Beetel is a leading technology brand offering contemporary solutions for modern

Indias connectivity and IT needs. It offers innovative and relevant products in Mobile phone, IT

peripherals and Wire-line telephone segments under the Beetel brand and has leading share in

retail and telecom service provider segments in the Landline category.

Beetel is a fast growing and dynamic brand with a focus on new and growing categories. Having

been a pioneer in Landline phones, Beetel has entered into the fast expanding mobile phone

category in 2010-2011. The other strategic growth area for Beetel is that of IT products where

Beetel is present in both Memory and Storage products and IT peripherals. Beetel is also a

distributor of Memory and Storage devices (HDD) for Transcend.

Beetel has recently stepped into the area of convergence devices, specifically Mobile broadband

devices being Airtels exclusive pan-India distributor for Mobile Broadband Devices starting

with 3G Data Cards.

Beetel's manufacturing unit for its Landline business is in Ludhiana with high-speed SMT lines,

Automatic Robotic Plastic Molding Injection line (ISO90012000 Certified).

Beetel is also into distribution & marketing of a wide range of brands that include Blackberry,

Apple, Avaya, Polycom, Samsung, Sanyo, Panasonic, Transcend, Iomega, Aastra Telecom, RAD

Data Comm, Actelis. Beetel is amongst the leading telecommunication equipment provider

across the globe with products and solutions deployed in over 35 countries across 5 continents.

2.2.2 Vision & Mission

Vision

Enabling technology to reach masses


32/118

Page 32

Mission

To become Indias finest Sales & Distribution Company by 2015: building a boundary-less

distribution scale across India delivering profitable growth and success to our partners making

Beetel a loved, trusted & aspirational brand of Indian consumer ensuring a performance drivenand satisfied ecosystem of our people, partners and consumers.

2.2.3 Milestones

o Push Button Phone in 1985o Answering Phone/Machines in 1989o Cordless Phones & Fax Machines in 1990o Manufacture of Radio Pagers in 1993o CLI Phones in 2000o Phones with SMS facility in 2003o Integrated player to launch Free to AirSet Top Boxes in 2004o Phones with FM Radio in 2007o Beetel branded Mobile Phones in 2010 - 2011 with Dual SIM, Big Sound and Camera as

base features.

o IT Peripherals range of products in 2010 - 2011 with 10 product categories.

2.2.4 Global Portfolio

Beetel, one of the largest manufacturers of landline phones in India, is amongst the leading

telecommunication equipment providers across the globe. Our products and solutions have been

deployed in over 35 countries and across 5 continents. We share the pride of being associated

with the leading telecom operators and biggest brands in the OEM space. We have our strength

as customization of products with a quick turnaround time which is well established by the

telecom operator approval as well as regional approvals like CE-Europe, NOM-Mexico, ICASA-


33/118

Page 33

South Africa, CNC-Argentina, MIC-Korea, SONCAP - Nigeria and SIRIM-Malaysia etc. With a

strong R&D set-up and stringent Quality Controls, we have been able to lead the technology

curve in the Telecom industry and have provided great value to our customers / channel partners.

2.2.5 Chairman's Profile

Mr. Rakesh Bharti Mittal

Rakesh Bharti Mittal is the Chairman of Beetel Teletech Ltd and the Vice-Chairman &

Managing Director of Bharti Enterprises.

Rakesh is the Chairman of Comviva Technologies, Field Fresh Foods, Bharti AXA Life

Insurance, Bharti AXA General Insurance, and Centum Learning and on the Board of Bharti

Airtel, Bharti Ventures. Rakesh is also a Life Trustee and the Co- Chairman of Bharti

Foundation, the Philanthropic arm of Bharti Group.

He has been a member of the National Council of the Confederation of Indian Industry (CII)

since 1999 and has served as a Chairman of its Northern Region Council. He is also on the Board

of Industrial Finance Corporation of India (IFCI).

A passionate advocate of the right to good education, Rakesh serves on Boards of several

educational institutions. He is a member of the Executive Board of Indian School of Business

(ISB) and the Campus Advisory Board [CAB] of ISB, Mohali. He is a member of the Advisory

Board of the Indian Institute of Technology (IIT) - Delhi, Executive Council of the YMCA

University of Science and Technology and the Round Table on School Education of the

Ministry of Human Resources Development, Government of India. He is the Co-Chairman of the

Advisory board of Bharti School of Telecommunication Technology & Management and

Chairman of Governing Council of Sat Paul Mittal School. He was a member of the International

Advisory Council of Southern Methodist University (SMU), Dallas, USA.


34/118

Page 34

2.2.5 Ombuds Office

2.2.5.1 Corporate GovernanceBharti Enterprises Limited (including its group and Joint Venture companies) firmly believes in

the principles of Corporate Governance and is committed to ensure sustainable, capital-efficient

and long-term growth thereby maximizing shareholder value. The companys commitment

towards compliance to the highest governance standard is backed by an independent and fully

informed board, comprehensive processes, policies and communication. The Company ensures

that various disclosure requirements are compiled in letter and spirit for effective Corporate

Governance.

We adhere to the highest levels of ethical business practices as articulated by our Code of

Conduct so as to achieve our performance with integrity.

OFFICE OF THE OMBUDSPERSON

The Office of the Ombudsperson is an independent forum for employees and external

stakeholders of the company to raise concerns and complaints about improper practices which

are in breach of the Bharti Code of Conduct.

Any stakeholder (employee, associate, strategic partner, vendor) who observes unprofessional

behavior can approach the Ombudsperson to voice his or her concerns. The complainant may be

either an observer who is not directly impacted, or a victim who is directly or indirectly affected

by such practices.

The Office aims to provide a fair and equitable redressed mechanism. The process is designed to

offer protection to the complainant provided the disclosure is made in good faith and the alleged

action constitutes a genuine and serious breach of Bharti Code of Conduct. The Ombudsperson

will treat all disclosures in a confidential and sensitive manner.

A person can raise a concern, either verbally or in writing by giving background of theunprofessional conduct, reasons for raising the concern, the identity of the individuals who may

be involved and documentary evidence, wherever available.

Complaints may be sent in either of these forms:

1) In writing (through hard copy mail) to:


35/118

Page 35

The Ombuds person Bharti Enterprises Ltd. Bharti Crescent 1,Nelson Mandela Road, Vasant

Kunj, Phase II, New Delhi110 070 India

2) In writing (through email) to a secure email id, [email protected]

2.2.6 Awards & Recognition

1) CMAI AwardsCMAI Association of India is a professional registered association for promotion of Indian IT

and Telecom Sector. CMAI is the only Integrated Association in India for IT and Telecom Sector

having all stakeholders as its members. It is an apex premier body with MOU partners and

representatives all over the world.

Beetel has been announced as the "Emerging Mobile Handset Company" in the 5th National

Telecom Awards 2011.

2) FIEO AwardsThe Federation of India Export Organizations represents the Indian entrepreneurs' spirit in the

global market. Known popularly as "FIEO", this apex body of Indian export promotion

organizations was set up jointly by the Ministry of Commerce, Government of India and trade

and industry in the year 1965.

Beetel is the recipient of Largest Landline Telecom Handset Manufacturer and Exporter for the

year 2010 - 2011.

3) VAR India AwardsVAR India has a long and proud tradition of honoring leading companies in business, technology

leadership and innovations in the Annual Award Nite.The Star Nite Awards honors companies

that are create new business value by innovating with technology.

Beetel was the recipient of the Best Value Added Distributor for the year 2009 and 2010.


36/118

Page 36

4) Voice & Data AwardsThe Voice & Data Annual awards are seen as the hallmark of the Indian Telecom & IT Industry.

The awards are decided after an extensive in-house research and analysis by Voice & Data and

the research findings are published in the annual V&D 100 survey conducted by the publication.

Beetel was the recipient of the Voice & Data Award for "Top Telephone Manufacturer" in 2002-

03, 2003-04, 2005-06 and 2006-07 and "Top Fixed Line Phones Company-2006 by Voice and

Data.

5) Golden Peacock AwardsGolden Peacock Awards have been instituted since 1991 and have given tremendous boost to the

Industry. The Awards are bestowed annually and are designed to encourage total improvement in

each sector of our business. The Golden Peacock Awards are now recognised worldwide as the

hallmark of corporate excellence.

Beetel has been awarded with Golden Peacock for Innovative Products/Services Award in the

Telecommunication Sector in the year 2004, 2005, 2006 and 2007.

6) ESC AwardESC is an autonomous organization under the Ministry of Information Technology, Government

of India. The ESC awards recognize a companys excellence in the exports of electronics andcomputer software.

Beetel Teletech was the recipient of the ESC Award for Excellence in Exports in

Telecommunication Equipment in 2001-02, 2002-03, 2003-04, 2004-05 and 2005-06 in the Non

SSI category.

7) Niryat Shiromani PuraskarBeetel was the recipient of the Niryat Shiromani Purashkar organized by the Indian Council of

Small and Medium Exporters (ICSME) for the year 2007-08.

8) Polycom Asia Pacific PVT. Ltd. AwardsBeetel has been awarded as Best Services Partner India 2008 and Largest Growth

DistributorAsia Pacific 2008 by Polycom Asia Pacific Pvt Ltd.


37/118

Page 37

2.3 MEDIA VIDEO LIMITED (MVL) MOBILES

2.3.1 MVL Industries Limited

Media Video Limited is listed on Bombay Stock Exchange and National Stock Exchange and

engaged in the manufacturing and marketing of consumer electronics. It has two state-of-the-art

manufacturing facilities and a nationally spread distribution network with over 25 years of

experience in delivering value to its customers. Product portfolio comprises of audio video

products and display devices, home entertainment electronics, DVDs, VCDs, home theatre

systems, mini compo systems, color televisions and TV video games etc. The companys

achievements include pioneering the TV games revolution in India in 1985 with the gaming

consoles under the brand Media owing to its high standard of quality, design & innovation as

well as prudent pricing.

2.3.2 MVL Telecom Limited

MVL Telecom Ltd. was established in 1994 with an objective to deliver OEM solutions to

consumer electronics brands and now the company has launched mobile handsets under the

brand name MVL Mobiles.

2.3.3 MVL Limited

MVL Limited was established in 2006 and today its one of the fastest growing real estate

companies in India with a market capitalization of approximately Rs. 1600 crores. MVL is

operating in Residential, Township, Commercial, Retail and Hospitality verticals with

approximately 9.62 million sq. of sales area. Today, the company has projects worth Rs. 3450

crores.

2.3.4 Vision

To provide value for money innovations and to be among the top 5 mobile handset brands in

India.


38/118

Page 38

2.3.5 Innovations find a face

MVL G 81 - It is the first Indian handset brand to introduce Dual Sim Push Mail Phone with

Push Mail technology free. It allows automatic notifications for emails. Besides, it is stated as

one of the most innovative products of 2010 in its category by NDTV Cell Guru. MVL G 25 -This model is a Mobile Music Station. It's a first of its kind innovation. It's a mobile handset with

dual external powered speakers.

2.3.6 Innovations meet excellence

A pool of best international tie-ups to bring world class technology.

MVL Connect is the first push mail service to be enabled on a java based operating system. It isdesigned to provide an advanced and secure emailing experience. MVL has tied up with one of

the worlds leading companies to provide their customized award winning push mail solution.

It has the best development and production facilities like Foxconn, Lobofone, CK Telecom and

Konka.

It has strategic tie ups with worlds best semiconductor chipset manufacturers like Mediatek,

Mstar, Spreadtrum, Infineon.

2.3.6 after sales service

MVL Telecom Ltd. has set up an extensive pan-India service network of over 200 service centers

centrally linked through a specially developed ERP solution to provide fast and reliable after

sales service to its customers every time.

Further, a major internal L4 service center has been set up which eventually be a profit center for

the company when the full range of its services are rolled. The service includes chip level repairsas well.


39/118

Page 39

2.3.7 Marketing

MVL Telecom Ltd. has set out to create a brand which offers value for money innovations. The

endeavor is to create a positive brand impact while consistently delivering products which reflect

the brand persona.

2.3.8 Distribution

To deliver maximum value and efficiency to business associates, MVL follows a single layer

distribution model, thereby eliminating the middlemen and reducing the lead time to the retailer.

The accruing efficiencies in product delivery help it strengthen business relationships and boost

retail efforts which are well supported by its pan-India network.

2.3.9 Innovations for tomorrow

The group is in the process of evaluation to set an advanced manufacturing facility in India,

thereby giving it the first mover advantage amongst Indian brands. The facility is proposed to

come up in Gujarat, the state well known for its proactive approach towards potential investors.

The facility envisages setting up a 20 million handsets manufacturing capability and a competent

design and R&D ecosystem, which will cater to both domestic and international market. The

facility will cater to 10% of the market demand for mobile handsets.

In order to deliver world class experience, investment has been made in developing a web based

channel management portal for business partners. The endeavor is to enable real time operational

efficiencies.


40/118

Page 40

2.4 LAVA MOBILES

2.4.1 Profile

With this motto as its guiding principle, LAVA has embarked on an ambitious journey of

empowering every human with quality innovative products at an affordable price.

With a distinguished management having an excellent industry track record and a highly

motivated team, Lava plans to enter the mobile handset ecosystem. The company aspires to be a

leading player in the mobile handsets ecosystem by offering customers with a unique value

proposition and in turn create immense value for its stakeholders

The company aims to carve a unique niche for itself by focusing on Innovation in every field

namely Product, After-Sales Service and Distribution. The company aspires to become one of

the strongest brands in the Telecom sector by offering the customer with a unique proposition

unmatched by any other player in the industry.

Lava debuts Indian mobile handset industry in June 2009. A telecom venture of 3 renowned

entrepreneurs, Mr S N Rai, Mr Hari Om Rai and Mr Sunil Bhalla, Lava mobiles started with just

3 handsets. Within one year of operations Lava, today is among the top 5 players with 6%

market share.

2.4.2 Challenges

Being a Public Relation Agency of Lava International Limited, the mandate was to create a

strong recall value for Lava brand and its handsets by using editorial media support.

We observed the mobile handset industry was largely dominated by 3 multinational brands and

media (journalist) was not even ready to touch homegrown brands.

The perception was an another Chinese brand


41/118

Page 41

2.4.3 Management

The management at Lava comprises of highly qualified professionals with years of experience in

the telecom sector. The driving force of the group is TQM and innovation in every aspect of this

trade, products, after sales service and sales.The management is ably supported by a highly motivated and passionate team that shares Lava's

Vision of empowering people to do more and be more.

1) HARI OM RAICo-founder and Director

Hari Om Rai is the driving force behind the operations and business development activities of

Lava. His vast knowledge emanating from decades of experience in the industry is unparalleled.

He enjoys an enviable position because of his strong industry relationships.

He has also co-promoted Pacetel Communications, a company which is recognized as an

epitome of success in Service of GSM/CDMA Handsets, Terminals & Other Electronics

Products. He has also co-founded Amexpress Worldwide Logistics, a premier logistics based

firm.

2) SUNIL BHALLACo-founder and Director

Sunil Bhalla has over two decades of industry experience in varied fields such as Marketing &

Sales, Strategic Planning, HR, After-Sales Service, MIS, ERP and Vendor Development. He has

earlier been associated with companies like Metal Box, Maruti Udyog (a SUZUKI venture in

India). He has a B.E. Degree in Mechanical Engineering and is an MBA.

He is a director on the board of Luminous Power Technologies, the No. 1 Inverter brand name in

the country and has been an instrumental force behind the success of the company.


42/118

Page 42

3) SHAILENDRA NATH RAICo-founder and Director

A business professional with over 24 years of varied business experience, Shailendra Nath Rai,

or 'SNR' as he is popularly known, is a Mechanical Engineer, Six Sigma Green Belt, and is

considered one of the leading professionals in Supply Chain Management in India today. SNR

has been a part of a sponsored research project of "Perpetual Supply-Demand Balancing" with

the Indian School of Business (ISB) which is a partner of the Kellogg Institute of Management.

SNR is recipient of various awards which include "Best Supply Chain Manager" by IIM

Bangalore and Price Waterhouse Cooper UK, in 2003. And "Top 6 Supply Chain Process

Company in India" by SP Jain institute of management and IIM.

SNR has also co-promoted Pacetel, a leading OEM supplier to Bharti, Reliance, Tata, Hutch,

ZTE and other telecom majors.

4) VISHAL SEHGALCo-founder and Director

Vishal Sehgal has more than 18yrs of business management experience in the Telecom & FMCG

space. A Mechanical Engineer from PEC Chandigarh & an MBA - Marketing/ Finance from

FMS Delhi, he has earlier been associated with leading Indian and multinational business houses

like Marico, Coca-Cola, Pepsi and Bharti Airtel. In his last role, he was a CEO in Bharti Airtel,

heading their Rajasthan circle which is among of Airtel's largest business in terms of share,

revenue and profits.

Vishal has also been part of Strategic Leadership Programs at Pepsico Franchise University at

Purchase (New York, USA), INSEAD (Singapore) & Singtel's International Game for GlobalGrowth (Singapore).

2.4.4 Vision

To empower people to do more, to be more


43/118

Page 43

2.4.5 Core Values

Integrity:

Steadfast adherence to high moral and professional standards

Passion for Excellence:

Intense keenness to stretch the limits of great in everything we do

Adaptability:

The ability to quickly evolve in response to changing

circumstances


44/118

Page 44

2.5 SPICE MOBILES

2.5.1 Overview

We commenced operations in 1997 as a cellular services provider in the states of Punjab and

Karnataka in India. As of December 31, 2006, we were the second largest cellular services

provider in Punjab and sixth largest cellular services provider in Karnataka, measured by the

total number of subscribers (based on data compiled by the COAI). On a combined basis, we

have a market share of 14.26% in these states, measured by the total number of subscribers. Our

customer base consisted of approximately 2.45 million subscribers as of December 31, 2006,

comprising approximately 1.92 million pre-paid subscribers and approximately 0.53 million

post-paid subscribers. Our total billable subscribers as on December 31, 2006 were 1.86 million

comprising approximately 1.41 million pre-paid subscribers and approximately 0.45 millionpost-paid subscribers. According to data compiled by COAI, the Punjab and Karnataka circles in

which we operate accounted for 12.09% of Indias telecommunications market share as of

December 31, 2006, measured by total number of subscribers. Both of these states are

recognized as major economic hubs of India, with Punjab enjoying the highest per capita income

in the country, and Karnataka (whose major city is Bangalore) known as the Silicon Valley of

India. To complement our existing markets, we have recently embarked on a pan-India

expansion strategy by applying for licenses for an additional 20 circles throughout India to

provide GSM cellular services, in addition to licenses for providing NLD and ILD services. In

the three years ended June 30, 2004, 2005 and 2006, our total income was Rs. 5,544 million, Rs.

6,430.59 million and Rs. 6,804.53 million, respectively, and our earnings before income, tax,

depreciation and amortization (EBITDA) was Rs. 1,681 million, Rs. 2,026.41 million and Rs.

1,647 million, respectively. For the quarter ended September 30, 2006 our total income was Rs.

1,844.33 million and our EBITDA was Rs. 422.41 million.

We are an incumbent cellular operator in the states of Punjab and Karnataka with an allocation in

the 900 MHz spectrum in both these states. As of December 31, 2006, we had installed 1,189

sites throughout Punjab and 838 sites throughout Karnataka. We own/lease optical fibre

backbone and micro transmission links with back-up and redundancy support in the markets in

which we operate. As of December 31, 2006, we distributed our services through 223 exclusive

distributors, which tapped into a network of 90 corporate dealers and various retailers and over


45/118

Page 45

23,973 independent retailers. We believe that our network coverage and large number of

distribution outlets have enabled us to compete effectively in the cellular services market in these

states.

We have a strong and vibrant brand, which we currently promote in a targeted manner in each ofour markets, usinglocal languages and cultural norms. As we expand our business outside of

Punjab and Karnataka, we expect to supplement this local brand strategy with a national brand

strategy which focuses on Indias relatively youthful population by providing marketing,

customer retention and loyalty programs and lifestyle features, including valueadded services

that appeal to younger subscribers. Currently, we also offer various value-added services and

international roaming services.

One of the challenges faced by the Indian cellular industry is high churn rate. We have

implemented a comprehensive churn prediction module which helps us to estimate potential loss

of subscribers on the basis of certain parameters such as usage, calls to competitor help lines, the

payment pattern and history of subscribers network. This module helps us in reaching out to

customers proactively instead of reacting when the customer has decided to churn.

Our Promoters are Mr. Dilip Modi and Modi Wellvest Private Limited.

TM, through TMI India, a wholly-owned subsidiary of TM International, is an investor in our

Company. We expect to benefit from TMs operational and management experience both inMalaysia and key Asian regional markets, through the creation of new products and services, the

sharing of technological experience and implementing and leveraging group synergies.

2.5.2 Our Competitive Strengths

Strong Player in our footprint. As of December 31, 2006, we were the second largest operator in

Punjab, with approximately 1.75 million subscribers and the sixth largest operator in Karnataka,

with approximately 0.70 million subscribers. We believe our size, presence and relatively long

history in these markets help provide us with strong brand recognition in these markets, as well

as substantial experience in providing services that appeal to diverse markets.

Strong Investor in TM, TMs investment in our Company in March 2006 provided us with an

opportunity to leverage the operational and strategic expertise of a major regional


46/118

Page 46

telecommunications player. TM is a leading telecommunications company based in Malaysia,

with a strong presence in the Asia-Pacific region, including strategic investments in Sri Lanka,

Bangladesh, Indonesia, Cambodia, Singapore and Pakistan. We believe that TMs experience

and track record in expanding its business throughout the region will be helpful in the

implementation of our pan-India expansion strategy and that our relationship with TM may also

give us access to additional technical and marketing expertise and economies of scale.

Vibrant and well-recognized brand name, we believe we were the first cellular services company

to commence commercial operations in the Punjab markets and we believe our history in these

markets, and ongoing targeted marketing strategy, has contributed to the development of our

brand. The Spice brand which we have obtained from MCorp Global Private Limited through

a deed of assignment is well recognized in our target markets. We position our brand as

innovative, youthful and high-performing to appeal to the savvy and technologically advanced

youth in these affluent states. Furthermore, we believe our brand positioning can be applied in

the national market as we seek to expand our presence in all the telecom circles in India. We

believe the recognition of the Spice brand is enhanced through sale of mobile handsets by one

of our Promoter Group Companies, Spice Limited, under the same brand name.

Experienced Management Team, our management team includes senior executives who have

experience working in the Indian wireless communications market since the first

commercialization of wireless services in 1995. As a result, our management has extensive

experience with planning and implementing strategies in the fast-changing Indian cellular

market. We believe our management strength will be crucial in the implementation of our future

growth plans.

2.5.3 Our Strategy

Consolidate and strengthen our position in our existing markets. We intend to consolidate andgrow our presence in Punjab and Karnataka markets. We intend to achieve this by expanding our

geographic network coverage in these states to enhance our market share. We believe that one of

the most significant factors that subscribers consider when making decisions on cellular services

is network quality. To that end, a key component of our overall strategy is to continually improve

and expand our network. We intend to accelerate the build-out of the network to improve


47/118

Page 47

coverage in small towns and rural areas and strengthen the penetration in urban areas. We will

also work with our roaming partners to improve and expand coverage outside of our footprint

and assist them in providing consistent products and services to our subscribers who roam onto

their networks.

Expand our operations nationally to eventually cover all 22 circles in India. We have applied to

the appropriate regulatory authorities to obtain licenses to provide cellular services in an

additional 20 circles throughout India. We have also applied to obtain NLD and ILD licenses,

because providing these services could provide additional revenue streams at a relatively low

marginal cost. We believe that a national presence will not only provide us with marketing and

branding benefits, but will also permit us to offer simplified national pricing plans that appeal to

corporate subscribers and allow us to increase our penetration of national accounts. Our pan-

India expansion strategy involves a gradual build-out of a nationwide cellular network and

related brand positioning. We believe our experience in developing our business in local markets

in Punjab and Karnataka will be valuable in expanding our business throughout the diverse

markets of India.

Focus on operational efficiencies to improve profit margin and cash flow. We intend to use a

variety of financial, management and operational tools to help improve our profit margins and

cash flows. For example, to assist in a cost-efficient build-out of our network, we plan to

continue to share towers with other cellular services providers and outsource infrastructure build-

up in order to reduce cost of infrastructure development and quicken the roll-out of our

infrastructure. We are also in the process of structuring certain financing solutions to our

acquisition of network equipment to manage our cash flow. For more details, please see

Management Discussion and AnalysisLiquidity and Capital ResourcesCash Flow Data on

page 268 of this Draft Red Herring Prospectus. Finally, we anticipate significant cost savings in

outgoing calls if we are awarded NLD and ILD licenses. Additionally, we would expect to earn

revenue from incoming traffic once we start operating our own NLD and ILD services.

Enhance recognition of the Spice brand through both a local and national brand strategy. In

line with our strategy to become a national player, we will focus on horizontal and vertical

branding to make Spice more prominent in our existing markets as well as creating a greater

national presence. We will continue our strategy of undertaking region-focused, local language


48/118

Page 48

advertising and marketing programs to consolidate our position in Punjab and Karnataka. At the

same time, we plan to begin promotion and advertising nationally through newspapers, radio and

television networks in order to increase recognition of Spice throughout the country. We will

continue to position our brand as youthful, innovative, high performing, savvy and

technologically advanced, targeting the growing below- 35 years old demographic in India.

Continue to expand our comprehensive distribution network to grow our customer base. We

intend to leverage our relationship with our existing exclusive independent distributors to

increase the network of retailers who sell our pre-paid and post-paid services, thereby attracting

new subscribers. As of December 31, 2006, we distributed our services through 223 exclusive

distributors, which tapped into a network of 90 corporate dealers and various retailers and over

23,973 independent retailers. Our exclusive distributors provide us with ongoing support in

customer acquisition and retention. We intend to expand our network of dealers and distributors

in order to increase our brand awareness, provide better logistical support to our customer base

and create a strong channel of communication between us and our subscribers. As part of our

pan-India strategy, we intend to develop relationships with distributors in the new markets we

enter, leveraging their local expertise and relationships with retailers to provide our services in

those markets.

Focused emphasis on value-added services, We believe that it is increasingly important to create

value-added services that are attractive to subscribers across a broad spectrum of market

segments. We will seek to improve and expand the information, ring tones, games and other

content and value-added services that our subscribers can access via their handsets. We also

intend to leverage our relationship with Cellebrum.com Private Limited, an affiliate company,

which creates value-added services for wireless operators, to introduce value-added services that

put us ahead of our competitors. Additionally, we will work with TM, to develop innovative

value-added services designed to appeal specifically to different market segments.

Leverage our relationship with TM. We believe we will benefit from TMs operational and

management experience both in Malaysia and key Asian regional markets, through creating new

products and services, sharing technological experience and implementing and leveraging group

synergies such as in global procurement. TM is a consortium member of all submarine cable

systems that land in Malaysia and has access to capacity in other submarine cable systems


49/118

Page 49

globally. Also, TM has co-location facilities at major data centers and tele-houses. Due to our

relationship with TM, we can access these cable systems and facilities. Also, up on receiving the

ILD license, we expect to be able to benefit through high volume Commitments TM has in the

Asia-Pacific region.

2.5.4 Marketing, Sales and Distribution

2.5.4.1 Marketing

We adopted a single brand, Spice, for both ourpre-paid and post-paid services. Our marketing

policy is centered on four key parameters acquisition, retention, enhancement and brand. We

spent Rs. 290 million, Rs. 412 million and Rs. 327 million and Rs. 77 million in fiscal 2004,

fiscal 2005, fiscal 2006 and the quarter ended September 30, 2006, respectively, on advertising

and promotional activities in Punjab. Some of the key initiatives taken by us recently include:

Targeted Marketing, Loyalty and Retention Programs to Reduce Average Monthly Churn, Inorder to promote loyalty among post-paid subscribers, we launched a retention program in

which high-value subscribers are identified and rewarded. The program is designed to reward

the loyalty of these subscribers by offering personalized services, offers and discounts,

invitations to exclusive events and reward points from their monthly bills.

Aggressive Brand Management, We have adopted an aggressive approach to themanagement of our Spice brand in order to maintain a strong overall company brand image

and provide a better marketing platform. We intend to develop and implement targeted

advertising and promotional activities to support this objective. Our brand was recently re-

positioned to be more vibrant and innovative in order to appeal to the younger generation.

Also, we signed up a leading Indian actress and former Miss World, Priyanka Chopra, as our

brand ambassa

Documents

Measure the Market Size of Non-Branded Mobile