Telecom Industry The Indian telecom industry has undergone significant structural transformation since its liberalisation in the

1990s. During the last decade, the Indian telecom industry has evolved into a multi-segment, competitive market from a small supplier-dominated market having public sector monopoly. Coherent Government policies have played a crucial role in shaping the structure of the Indian telecom sector. Telecom Sector in the Pre-liberalisation Era (1980-1990): Before liberalisation, the public sector held a monopoly in provision of telecom services. The entire telecom services operation in the country was carried out by the Department of Telecommunication (DoT), a public sector entity established in 1985. Two new public sector corporations viz. MTNL and VSNL were set up under the DoT in 1986. Thus, before the entry of the private players, the telecom services were provided by three public entities viz. DoT, MTNL and VSNL. While MTNL primarily looked after the operation of basic telephony services in Delhi and Mumbai, VSNL provided international telecom services in India. DoT looked after basic telephony operations in regions other than Delhi and Mumbai. Prior to liberalisation the telecom services were broadly classified as domestic basic (which included basic telephony, telex and fax), domestic value-added services (VAS) which covered all other services such as paging, cellular, data services, VSAT and international basic and VAS. Telecom Sector in the Post-liberalisation Era: Private sector participation in the Indian telecom sector has been a gradual process, wherein the government initially permitted players from the private sector to provide Value Added Services (VAS) such as Paging Services and Cellular Mobile Telephone Services (CMTS), followed by the Fixed Telephony Services (FTS) or Basic services. Eventually the private sector has been allowed to provide almost all telecom services. Liberalisation process in the telecom services market began in 1992, with the unbundling of the domestic basic services and the domestic VAS and entry of private players for providing the VAS such as cellular and paging services. During this period, the government provided licenses to private players according to the services that were to be provided in the specified areas of service provision. The country was divided into circles (or categories) on the basis of economic potential. Thus, primarily these divisions were mostly adjoining the states of India. Such demarcations were primarily responsible for existence of various regional players in provision of telecom services. During 1994, through a competitive bidding process, licenses for basic services were granted to private players which endeavoured to build world-class telephone services in India. Given the need for resources in addition to government sources, private investments and involvement of the private sector was considered inevitable to bridge the resource gap. Thus, the private operators were allowed to render basic services in the local loop. The need for independent regulation had risen with the entry of private players. Also, to fulfil the commitments made when India joined the World Trade Organisation (WTO) in 1995, the Telecom Regulatory Authority of India (TRAI) was established in 1997 to regulate telecom

services including fixation/revision of tariffs. The establishment of TRAI was a positive step in terms of separation of regulations from policy making and operations, which continued to be under the purview of the DoT2. Further, in 1998, the Government also declared the policy for Internet Service Provision (ISP) by private operators and had even begun licensing of the same around that time. Subsequently the Global Mobile Personal Communications by Satellite (GMPCS) was also opened up for the private players. The entry of private operators in the cellular sector helped to reduce the operational cost of the industry. It also reduced the mobile tariffs and provided a much needed boost to the industry. As a predecessor to corporatisation, two new departments viz. Department of Telecom Services (DTS) and the Department of Telecom Operations, were carved out of DoT, to separate the service provision and operational functions of DoT. Later in 2000, DTS was corporatised and renamed as Bharat Sanchar Nigam Ltd (BSNL), and thus the functions of the incumbent service provider were separated from that of the policy maker. DoT is now responsible for policymaking, licensing and promoting private investments in both telecom equipment manufacturing and in telecom services. Subsequently in 2002, even VSNL was privatised and its monopoly in ILD services was terminated (from March 31, 2002). Current Structure of the Indian Telecom Industry:

Public Sector: After the privatisation of VSNL in 2002, only two premier PSUs, MTNL and BSNL operate in India and provide various telecom services. As noted earlier, MTNL operates in Delhi and Mumbai and BSNL provides services to the remaining country. In the post-liberalisation era, these PSUs not only have made significant progress but also have provided stiff competition to their private counterparts. Private Sector: Private operators have played a very crucial role in the growth of the telecommunication industry, primarily in the mobile services. With the liberalisation of the telecom industry, the private sector has been increasing its foothold in the telecom services space. After the introduction of NTP-99, the contribution of private players towards telecom services has witnessed rapid strides. While the private sector is instrumental in providing both fixed line as well as wireless services, it is mainly active in the wireless segment. The fixed lines account for only about 2% of private sector's total subscriber base. While some private players have a panIndia presence, there are many regional players that cater to only certain service areas. Segments in the Telecommunication Industry: Broadly the Indian telecommunication industry can be classified into the following segments: Wireline services Wireless service: GSM and CDMA Internet services

Public Mobile Radio Trunked Services Global Mobile Personal Communication by Satellite (GMPCS) Very Small Aperture Terminals (VSAT) Mobile Value Added Services

CDMA vs GSM GSM (Global System for Mobile Communication) and CDMA (Code Division Multiple Access) are two dominant technologies for mobile communication. These two technologies differ in the way calls and data travel over the mobile phone networks take place. On comparing both the technologies GSM has some limitation when the call quality is concerned but still has more flexibility and an easy implementation relative to the CDMA technology. The major difference between the two lies in terms of the technology they use, security factors, their global reach and the data transfer speeds. 1. Technology The CDMA is based on spread spectrum technology which makes the optimal use of available bandwidth. It allows each user to transmit over the entire frequency spectrum all the time. On the other hand GSM operates on the wedge spectrum called a carrier. This carrier is divided into a number of time slots and each user is assigned a different time slot so that until the ongoing call is finished, no other subscriber can have access to this. GSM uses both Time Division Multiple Access (TDMA) and Frequency Division Multiple Access (FDMA) for user and cell separation. TDMA provides multiuser access by chopping up the channel into different time slices and FDMA provides multiuser access by separating the used frequencies. 2. Security More security is provided in CDMA technology as compared with the GSM technology as encryption is inbuilt in the CDMA. A unique code is provided to every user and all the conversation between two users are encoded ensuring a greater level of security for CDMA users. The signal cannot be detected easily in CDMA as compared to the signals of GSM, which are concentrated in the narrow bandwidth. Therefore, the CDMA phone calls are more secure than the GSM calls. In terms of encryption the GSM technology has to be upgraded so as to make it operate more securely. 3. Spectrum Frequencies The CDMA network operates in the frequency spectrum of CDMA 850 MHz and 1900 MHz while the GSM network operates in the frequency spectrum of GSM 850 MHz and 1900 MHz. 4. Global Reach GSM is in use over 80% of the worlds mobile networks in over 210 countries as compared to CDMA. CDMA is almost exclusively used in United States and some parts of Canada and Japan. As the European Union permissions GSM use, so CDMA is not supported in Europe. In North America, especially in rural areas, more coverage is offered by CDMA as compared to GSM. As GSM is an international standard, so its better to use GSM in international roaming. 5. Data Transfer Rate CDMA has faster data rate as compared to GSM as EVDO data transfer technology is used in CDMA which offers a maximum download speed of 2 mbps. EVDO ready mobile phones are required to use this technology. GSM uses EDGEdata transfer technology that has a maximum download speed of 384 kbps which is slower as compared to CDMA. For browsing the web, to

watch videos and to download music, CDMA is better choice as compared to GSM. So CDMA is known to cover more area with fewer towers. 6. Radiation Exposure GSM phones emit continuous wave pulses, so there is a large need to reduce the exposures to electromagnetic fields focused on cell phones with continuous wave pulses. On the other hand CDMA cell phones do not produce these pulses. GSM phones emit about 28 times more radiation on average as compared to CDMA phones. Moreover, GSM phones are more biologically reactive as compared to CDMA. History of CDMA in India Year December 2002 January 2005 January 2006 October 2007 February 2008 October 2008 November 2008 March 2009 June 2009 Feb 2010 January 2011 November 2012 January 2013 Problems with CDMA 1. Handset Issue CDMA is a patented technology and every manufacturer make cdma phones have to pay Qualcomm. As a result a cdma phone is priced more than a GSM phone with similar features. Also cdma handset market is small and options are limited. CDMA got a blow when leading phone makers Nokia and Sony Ericsson stopped making cdma phones. CDMA handset market is led by Samsung, LG, ZTE, Huawei. Also mediocre battery backup (because of continuous nature of transmission) makes these handsets not a good choice for most consumers. Event Reliance Infocomm started its CDMA mobile services with brand name of Reliance India Mobile with the tagline of Karlo duniya Mutthi Mein Tata Teleservices started its CDMA services with brand name of Tata Indicom. One Nation-One Rupee tariff plan introduced by Reliance Infocomm. DOT allows CDMA players to enter GSM mobile service using Dual Technology platform. Licenses issued to New Telecom Service Providers, only Sistema-Shyam choose CDMA. Reliance rolls out GSM services with pan India approach. Tata DOCOMO arises out of the Tata Groups strategic alliance with Japanese telecom major NTT DOCOMO. Sistema Shyam started pan India rollout with brand name of MTS. Tata Tele starts GSM operation under brand name of Tata Docomo Launch of OMH(Open Market Handset) initiative, providing access to wide range of handsets for subscribers. Introduction of Mobile Number Portability Videocon Telecommunications, TTSL exits CDMA Auctions Failing to attract bidders, EGoM cut 50% CDMA Spectrum base price

2. SIM-Advantage of GSM The success of Reliance was based on bundled handset offer. Both Reliance and Tata Indicom sold thousands of Motorola C131, an early cdma b/w handset. Till date most cdma phones are sold with network locked, even if it is RUIM enabled. With worldwide availability of GSM networks (virtually everywhere), global roaming is easier if you are on GSM. 3. Internet on Mobile Broadband penetration in India is poor, most Indians get into internet for 1st time via mobile. GPRS/EDGE enabled GSM networks and wide range of GPRS/EDGE supported handsets favors the situation to GSM. With limited handsets, most of which do not support connectivity, CDMA could not be a mass adaptation. Also like GSM operators have GPRS pack, CDMA operators do not offer Data packs. Interestingly CDMA players, who are never keen to capture data market on mobile, launched high speed internet via USB dongle for using with computers to capture wireless internet market first. 4. No Long SMS and USSD Network does not support any SMS longer than 160 characters SMS is delivered in parts, it is really painful to forward the long SMS to others. USSD code which offers real time connection on GSM is not supported on CDMA, it is done by SMS if operators really like to do it. Advantages of CDMA in the context of Indian scenario: Though technically CDMA has more benefits than GSM, the points which are very relevant in the context of Indian scenario are given below: It can accommodate more users per MHz of bandwidth efficient use of spectrum. It is ideal for a spectrum-starved country like India. CDMA has no built-in limit to the number of concurrent users as with GSM. It is able to produce a reasonable call with lower signal (cell phone reception) levels beneficial to rural users situated far from network towers. CDMA also offers better coverage area better for rural penetration. CDMA offers superior voice quality compared to GSM. CDMA has a well-defined path to higher data rates and increased cellular communications security. Both CDMA and GSM have their merits and limitations, but as India is a predominant market of GSM operators, users base of CDMA is decaying.

CDMA vs GSM- Facts and Figures GSM Service Providers 2008 2009 2010 Bharti Bharti Bharti Vodafone Vodafone Vodafone Idea Idea Idea Reliance Reliance Reliance BSNL BSNL BSNL Aircel Aircel Aircel/Dishnet MTNL MTNL Tata Spice Spice Unitech BPL BPL Videocon MTNL STel Loop Etisalat Quadrant(HFCL)

2011 Bharti Vodafone Idea Reliance BSNL Aircel/Dishnet Tata Unitech Videocon MTNL STel Loop Etisalat Quadrant(HFCL )

2012 Bharti Vodafone Idea Reliance BSNL Aircel/Dishnet Tata Unitech Videocon MTNL STel Loop Etisalat Quadrant(HFCL)

CDMA Service Providers 2008 2009 2010 2011 2012 Service Subscri Market Subscri Market Subscri Providers ber(in Share ber(in Share ber(in Millions Millions Millions ) ) ) Reliance 38.78 56.72% 38.78 56.72% 38.78 Infocomm 24.33 35.58% 24.33 35.58% 24.33 Tata

Market Share 56.72% 35.58%

Subscri ber(in Millions ) 38.78 24.33

Market Share 56.72% 35.58%

Subscri ber(in Millions ) 38.78 24.33

Market Share 56.72% 35.58%

Teleservice s BSNL MTNL

HFCL Shyam Telelink Total

4.58 0.28 0.30 0.11

6.70% 0.41% 0.44% 0.16%

4.58 0.28 0.30 0.11

6.70% 0.41% 0.44% 0.16%

4.58 0.28 0.30 0.11

6.70% 0.41% 0.44% 0.16%

4.58 0.28 0.30 0.11

6.70% 0.41% 0.44% 0.16%

4.58 0.28 0.30 0.11

6.70% 0.41% 0.44% 0.16%

Performance Indicators 1. Subscriber base:(in Year March 2008 GSM 192.70 CDMA 68.37 Millions) March 2009 297.26 94.50 March 2010 478.68 105.64 March 2011 698.37 113.22 March 2012 814.06 105.11

Subscribers (in Millions)

2. Traffic(MOU) (minutes of use/ sub/ month) Year GSM CDMA March 2008 493 364 March 2009 484 357 March 2010 410 307 March 2011 349 263 March 2012 346 229

Minutes of Usage(per subscriber/month)

3. ARPU(Rs./sub/month) Year GSM CDMA March 2008 264 159 March 2009 205 99 March 2010 131 76 March 2011 100 66 March 2012 97 75

Average Revenue Per User(Rs. per month)

Scope of Study: Though CDMA has many advantages over GSM, the subsciber base in India is decreasing. The scope of the study is to understand the preference of consumer towards GSM against CDMA.Inspite, the fact that CDMA have more advantages than GSM. Sample size -approx. 25. Target Group Previous users of CDMA in Mumbai Region Objective of Study : 1. To understand the consumer behviour towards CDMA 2. To determine the problems faced by consumers from CDMA 3. To determine the factors that led to switching to GSM 4. To determine the variuos industry factors that led to decrease in subscriber growth(Secondary Research) Limitations of the Study: The study is restricted towards the Consumers in Mumbai Region only. The Study is based on consumer perceptions towards CDMA and Secondary Data.