An Introduction to the Wireless Telecom Sector

Indian Telecom industry is one of the fastest growing telecom markets in the world. In
telecom industry, service providers are the main drivers; whereas equipment manufacturers
are witnessing growth and decline in successive quarters as sales is dependent on order
undertaken by the companies.
Today the Indian telecommunications network with over 452.91 million(as on May 09)
subscribers is second largest network in the world after China. India is also the fastest
growing telecom market in the world with an addition of 10- 12 million monthly subscribers.
The tele-density of the Country has increased from 18% in March 2006 to 38.88% in May
2009, showing a stupendous annual growth of about 50%, one of the highest in any sector of
the Indian Economy. The Department of Telecommunications has been able to provide state
of the art world-class infrastructure at globally competitive tariffs and reduce the digital
divide by extending connectivity to the unconnected areas. India has emerged as a major base
for the telecom industry worldwide. Thus Indian telecom sector has come a long way in
achieving its dream of providing affordable and effective communication facilities to Indian
citizens. As a result common man today has access to this most needed facility. The reform
measures coupled with the proactive policies of the Department of Telecommunications have
resulted in an unprecedented growth of the telecom sector.
It is important to know that Mobile Tariff’s in India are one of the lowest in the world with
local calls at 50p/min and STD calls at 1Re/min and no incoming call charge(Calling Party
Pays).

Recent things to watch in Indian telecom sector are:

• 3G spectrum auctions
• Mobile Number Portability(MNP) Implementation
• New Policy for Value Added Service
• Due to technological advancement and increase in traffic.
• Abolition of Access Deficit Charge (ADC).

Review of Wireless (GSM and CDMA) Services

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The Wireless Industry crossed 452.91 million-subscribers mark as by end of May 2009. This
total subscribers base of 452.91 million comprise of 298.15 million GSM and 105.51 million
CDMA subscribers. During the financial year 2008-09 around 130.67million subscribers
were added with a growth rate of 50.00% as compared to 58.12% growth during the year
2007-08.
The Department of Telecommunication (DoT) is has very aggressive plans to increase the
pace of growth, targeting 500 million by 2010. Most of the expansion in subscribers is set to
occur in Rural India. India’s rural telephone density has been languishing at around 16.54.
The subscriber addition rate has been strong in the last 12 months but the regulatory
developments will increase competition and thus curtail the long-term growth rates of
individual companies. The savings through the setting of tower companies will partly go
towards the higher capex and opex costs from more stringent spectrum allocation norms for
the incumbents. The Telecommunications sector has been consistently adding more than 10
million subscribers every month. All the private operators GSM as well as the CDMA
operators have been very consistent in their performance.
However the recent regulatory developments have been negative for the telecom companies
as it has increased the number operators per circle which intensified the competition. The
addition of players like Aircel, Loop Telecom (formerly BPL), Tata Docomo, Virgin Mobile
and a few more yet to roll out their services like Swan Telecom, and Unitech Telecom the
pressure on established players is set to increase. So also with the implementation of MNP
and 3G spectrum allocation the Service providers have to be the best service caterers to hold
on to their market shares.

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

below:

The Market leader in GSM sector being Bharti Airtel with 32% of Market share followed by
Vodafone at 24%. The state owned BSNL is third in the competition with 16% of the share in
the GSM market.
CDMA market majors Reliance has got licence to operate(in 14 circles and 4 metro
cities) in the GSM band and they have launched their services in the market. The existing
players face a tough competition as Reliance and Tata (with Docomo) have existing
distribution channels and brand name, and can be a potential threat to Airtel and Vodafone.
So is the case for Tata Indicom which recently launched its GSM services by the name Tata
Docomo in 18 circles in India.

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Tata Docomo: Tata Docomo, the latest entrantinto the GSM market had to get some
innovative and low priced packs to attract customers to switch to Tata Docomo even before
the actual implementation of MNP. As a part of this they are offering 1paise calling per
second for local( and STD calls as a limited period offer). The success for Tata Docomo lies
in winning third generation(3G) airwaves in as many circles as possible and bringing their
internationally famed expertise into the domain.
The innovativeness here is they are branding their service on the basis of “value for each
second”, and “pay for only what you have used”. Thus they are trying to attract customers
even before the implementation of MNP. As Toshinari Kuneida- M.D.of Docomo their target
is to achieve 100million customers in the next three years.

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

displayed below:

Coming to the CDMA market, Reliance Communication is a tough market player to

challenge with around 59.82% of the total CDMA market, followed by Tata Teleservices(Tata
Indicom and Virgin together) which has a share of 33.67%.

Virgin Mobile : Virgin Mobile as it says is “India’s ‘first’ national youth-focused mobile
service”. Virgin Mobile branded services are being offered to the Indian consumers by Tata
Teleservices through a brand franchise with Virgin Mobile. Virgin Mobile India will provide
Tata Teleservices with experience and expertise in designing, marketing and servicing of
“Virgin Mobile” branded products for the youth segment.

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

Government Policies–Facilitating Industry Growth

The Indian Telecommunication system is governed by the Indian Telegraph Act,1885 (ITA
1885) and the Indian Wireless Act, 1933. The Department of Telecommunications (DoT)
governs the Indian telecom industry. DoT, in coordination with its arm, Telecom
Commission, looks after licensing, policy making, and frequency management. A prime
ministerial council, the Group on Telecom and IT (GoT-IT), handles important ad-hoc issues
if any. To streamline policy reforms and safeguard consumer interests, DoT established the
Telecom Regulatory Authority of India (TRAI) in 1997. The Telecom Disputes Settlement
and Appellate Tribunal (TDSAT) was also established at the same time. Another regulatory
body is the Wireless Planning Commission (WPC) under the aegis of the Ministry of
Communications.
Issues that will affect the Telecommunication Sector in the Immediate Future
Mobile Number Portability(MNP): Mobile Number Portability is a technique with which a
customer can retain the same number, but change the service provider. This technique has
been implemented in USA,UK, Japan etc. and is to be implemented in India.
In most of the circles all over India there are more than 5 service providers (GSM and
CDMA) thus leading to a fierce competition. In a few circles the number of service providers
are 10 which is leading to a very tight situation and thus they are forced to offer attractive
plans to attract new customers.
Syniverse has been given the mandate to implement MNP services in the Northern and
Western regions, classified as Zone-1 and MITS has been given the mandate to implement
MNP services in the Southern and Eastern regions, classified as Zone-2. MNP expected to be
a negative for the Indian Telecom Sector, but positive for Subscribers.
Given the fact that India is a price-sensitive market, the likelihood of MNP succeeding is
quite high. Further, as mentioned earlier, given the significant dissatisfaction with QoS,
particularly in the Metro service areas, the likelihood of churn rates increasing in these areas
is higher. Another factor that is likely to play out in favour of a successful experience with
MNP implementation in India is the absence of long-term service contracts.

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3G Spectrum Allocation: Analysts estimate that by 2010, the two dominant 3G
technologies, CDMA2000 and Wideband CDMA (WCDMA), will account for 1.2 billion
subscribers, representing 41 per cent of the global subscriber base.
In urban India, there is a spectrum crunch and 3G can treble voice capacity and can solve the
spectrum issue. With over 15 million 3G handsets, and 30 per cent of all future handsets sale
expected to be 3G enabled, India is set to roll out 3G to provide an effective communication
environment.

It will bridge the difference between urban and rural and enable the rural Indian to avail of
facilities such as tele-medicine, e-education and e-governance will substantially improve their
quality of life. 3G policy will help the customers most, because many telecom companies are
going to bid for the spectrum, each one will try to entice the customers in their own style. At
last the customers would be get benefitted.
If a foreign bidder wins the bid, he will have to set up a joint venture with an Indian partner
to start operations, the country's Department of Telecommunications (DOT). The foreign
bidder can hold up to 74 percent of the equity in the company providing the 3G (third-
generation) service. If the foreign equity in the joint venture is more than 49 percent, the joint
venture will also require clearance from the country's Foreign Investment Promotion Board
(FIPB).
However one block of spectrum in each of the service areas has already been reserved for use
by two government controlled telecommunications companies - Bharat Sanchar Nigam
(BSNL) and Mahanagar Telephone Nigam (MTNL). They would however have to pay a
license fee for the spectrum at the highest bid in each service area.

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 Conclusion

Telecom industry is seeing a rise as the trend goes and has potential for growth. Taking into
account the tele-density of 38.88% there is still unexplored market. The competition is fierce
with around 10 Service providers in most of the 18 circles and also the implementation of
MNP. The service providers have to be different and have to stick to strict service norms and
provide excellent customer service in order to hold on to the market share. Thus there is
intense competition in the market but at the same time scope for development in rural areas.
Airtel,Idia and Vodafone have taken up initiatives to provide customized connections to Rural
customers like Motor pumps control system,loud speaker phone for illiterates and so on.
In a few words Telecom sector has a lot of scope for growth and the customers at the same
time have the benefit to choose from a wide range of service providers offering various plans
targeted to specific customers

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 Bibliography

• www.trai.gov.in
• www.dot.gov.in
• www.wikipedia.org/wiki/Telecommunications_in_India
• www.telecomindiaonline.com

DoT
Licensor and Frequency
Management for Telecomelecom Commission
http://v12.lscache5.c.youtube.com/videoplayback?ip=0.0.0.0&sparams=id%2Cexpire%2Cip%2Cipbits%2Citag%2Cb

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