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Chapter1: Telecommunication Profile

1.1: Introduction of Telecommunication


The Telecom industry is one of the fastest growing industries in India. India has nearly 200 million telephone lines making it the third largest network in the world after China and USA. With a growth rate of 45%, Indian telecom industry has the highest growth rate in the world.

The first wind of reforms in telecommunications sector began to flow in 1980s when the private sector was allowed in telecommunications equipment manufacturing. In 1985, Department of Telecommunications (DOT) was established. It was an exclusive provider of domestic and longdistance service that would be its own regulator (separate from the postal system).

In 1990s, telecommunications sector benefited from the general opening up of the economy. Also, examples of telecom revolution in many other countries, which resulted in better quality of service and lower tariffs, led Indian policy makers to initiate a change process finally resulting in opening up of telecom services sector for the private sector. National Telecom Policy (NTP) 1994 was the first attempt to give a comprehensive roadmap for the Indian telecommunications sector. In 1997, Telecom Regulatory Authority of India (TRAI) was created. TRAI was formed to act as a regulator to facilitate the growth of the telecom sector. New National Telecom Policy was adopted in 1999 and cellular services were also launched in the same year.

Telecommunication sector in India can be divided into two segments: Fixed Service Provider (FSPs), and Cellular Services. Fixed line services consist of basic services, national or domestic long distance and international long distance services. The state operators (BSNL and MTNL), account for almost 90 per cent of revenues from basic services. Private sector services are presently available in selective urban areas, and collectively account for less than 5 per cent of subscriptions. However, private services focus on the business/corporate sector, and offer reliable, high- end services, such as leased lines, ISDN, closed user group and videoconferencing.

Cellular services can be further divided into two categories: Global System for Mobile Communications (GSM) and Code Division Multiple Access (CDMA). The GSM sector is dominated by Airtel, Vodfone-Hutch, and Idea Cellular, while the CDMA sector is dominated by Reliance and Tata Indicom. Opening up of international and domestic long distance telephony services are the major growth drivers for cellular industry. Cellular operators get substantial revenue from these services, and compensate them for reduction in tariffs on airtime, which along with rental was the main source of revenue. The reduction in tariffs for airtime, national long distance, international long distance, and handset prices has driven demand.

The telecom sector is also afflicted by a number of restraints. These include:

Sluggish pace of reform process. Lack of infrastructure in semi-rural and rural areas, which makes it difficult to make inroads into this market segment as service providers have to incur a huge initial fixed cost.

Limited spectrum availability.

The main binding objectives for all the telecommunication companies operating in India are as follows:

To facilitate telecommunication for all. Ensuring quick availability of telephone connectivity. Achieve universal service access at affordable price covering all Indian villages, as early as possible.

Providing world class telecommunication services. Solving consumer complaints, resolve disputes, and special attention to be given to public interface.

To provide widest possible range of services at reasonable prices. To emerges as a major manufacturing base and major exporter of telecommunication equipment.

To protect the defense and security interests of the country.

1.2: History
In this Chapter we include the History of Telecom industry in India. How it Start in India. Telecom in the real sense means transfer of information between two distant points in space. The popular meaning of telecom always involves electrical signals and nowadays people exclude postal or any other raw telecommunication methods from its meaning. Therefore, the history of Indian telecom can be started with the introduction of telegraph.

1.3: Introduction of Telegraph


The postal and telecom sectors had a slow and uneasy start in India. In 1850, the first experimental electric telegraph Line was started between Kolkata and Diamond Harbor. In 1851, it was opened for the British East India Company. The Posts and Telegraphs department occupied a small corner of the Public Works Department, at that time. Construction of 4,000 miles (6,400 km) of telegraph lines connecting Kolkata (Calcutta) and Peshawar in the north via Agra, Mumbai (Bombay) through Sindwa Ghats, and Chennai in the south, as well as Ootacamund and Bangalore was started in November 1853. Dr. William O'Shaughnessy, who pioneered telegraph and telephone in India, belonged to the Public Works Department. He tried his level best for the development of telecom through out this period. A separate department was opened in 1854 when telegraph facilities were opened to the public

1.4: Introduction of the Telephone


In 1880, two telephone companies namely The Oriental Telephone Company Ltd. and The Anglo-Indian Telephone Company Ltd. approached the Government of India to establish telephone exchanges in India. The permission was refused on the grounds that the establishment of telephones was a Government monopoly and that the Government itself would undertake the work. By 1881, the Government changed its earlier decision and a license was granted to the Oriental Telephone Company Limited of England for opening telephone exchanges at Kolkata, Mumbai, Chennai (Madras) and Ahmedabad. January 28, 1882, is a Red Letter Day in the history of telephone in India. On this day Major E. Baring, Member of the Governor General of India's Council declared open the Telephone Exchange in Kolkata, Chennai and Mumbai. The 3

exchange at Kolkata named "Central Exchange" was opened at third floor of the building at 7, Council House Street. The Central Telephone Exchange had 93 numbers of subscribers. Bombay also witnessed the opening of Telephone Exchange in 1882. 1.5: Telecommunication Reform process in Indian Indian telecommunications sector has always been like a Natural Monopoly. But this monopoly could not keep up with the technological changes taking place in the telecom sector. Dismantling of monopolies lead to emergence of keen competition and lowering of tariffs, leading to consumer satisfaction, better services and sound infrastructure.

The ISPs opened in 1998 and private sector started showing a lot of interest in the telecom growth. With New Telecom Policy 1999 (NTP-99), there was migration from fixed license fee regime to revenue sharing. Further opening up of the National Long Distance (NLD) market with unrestricted entry and preponement of International Long Distance (ILD) market opening from 2004 to 2002 made a landmark in the Indian telecommunications history.

The underlying theme of the reform process was to usher in full competition through unrestricted entry in almost all the service sectors. India is proud today because various telecom reforms committed under NTP-99 are almost complete, some ahead of schedule. The impact of these reforms have been overwhelming because national long distance charges dropped by more than 60%, cellular air time charges are down by 8 times with even cheaper handsets. Also there is an increased availability of bandwidth with efficient usage. All telecom services like basic, national long distance, cellular, VSAT etc were opened to the private sector with free competition except those limited by Spectrum (cellular). The Indian telecom sector is the eighth largest network, with annual growth rate of more than 22% for basic services and almost 100% for Internet and cellular services. The lines added to basic services in last 5 years are one-and-a half times more than that added in the last 5 decades

1.6: Further developments


1902 - First wireless telegraph station established between Saugor Islands and Sandheads. 1907 - First Central Battery of telephones introduced in Kanpur. 1913-1914 - First Automatic Exchange installed in Shimla. July 23, 1927 - Radiotelegraph system between the UK and India, with beam stations at Khadki and Daund, inaugurated by Lord Iwireless telegraph

win by exchanging greetings with the King of England. 1933 - Radiotelephone system inaugurated between the UK and India. 1953 - 12 channel carrier system introduced. 1960 - First subscriber trunk dialing route commissioned between Kanpur and Lucknow. 1975 - First PCM system commissioned between Mumbai City and Andheri telephone exchanges.

1976 - First digital microwave junction introduced. 1979 - First optical fibre system for local junction commissioned at Pune. 1980 - First satellite earth station for domestic communications established at Secunderabad, A.P..

1983 - First analog Stored Program Control exchange for trunk lines commissioned at Mumbai.

1984 - C-DOT established for indigenous development and production of digital exchanges.

1985 - First mobile telephone service started on non-commercial basis in Delhi.

While all the major cities and towns in the country were linked with telephones during the British period, the total number of telephones in 1948 was only around 80,000. Even after independence, growth was extremely slow. The telephone was a status symbol rather than being an instrument of utility. The number of telephones grew leisurely to 980,000 in 1971, 2.15 million in 1981 and 5.07 million in 1991, the year economic reforms were initiated in the country. While certain innovative steps were taken from time to time, as for example introduction of the telex service in Mumbai in 1953 and commissioning of the first [subscriber trunk dialing] route 5

between Delhi and Kanpur in 1960, the first waves of change were set going by Sam Pitroda in the eighties. He brought in a whiff of fresh air. The real transformation in scenario came with the announcement of the National Telecom Policy in 1994.

1.7: NUMBER OF PLAYERS:


Airtel Vodafone BSNL Idea Uninor TATA docomo Reliance Aircel BPL Spice

1.8: Future Scenario


The Indian telecommunications industry is one of the fastest growing in the world. According to the Telecom Regulatory Authority of India (TRAI), the number of telephone subscriber base in the country reached 653.92 million as on May 31, 2010, an increase of 2.49 per cent from 638.05 million in April 2010. With this the overall teledensity (telephones per 100 people) has touched 55.38. The wireless subscriber base has increased to 617.53 million at the end of May 2010 from 601.22 million in April 2010, registering a growth of 2.71 per cent. Value-Added Services (VAS) Market Mobile value added services (VAS) include text or SMS, menu-based services, downloading of music or ring tones, mobile TV, videos and sophisticated m-commerce applications. As per an industry report, VAS that accounts for 10-12 per cent of the telecom operator's revenue is expected to reach 20 per cent growth by 2013. The report 6

further predicted that after the introduction of 3G services in India, the segment may garner US$ 5.98 billion in turnover by 2013. Currently, the segment stands at US$ 2.07 billion. Major Investments The booming domestic telecom market has been attracting huge amounts of investment which is likely to accelerate with the entry of new players and launch of new services. According to the Department of Industrial Policy and Promotion (DIPP), the telecommunications sector which includes radio paging, mobile services and basic telephone services attracted foreign direct investment (FDI) worth US$ 2,554 million during 2009-10. The cumulative flow of FDI in the sector during April 2000 and March 2010 is US$ 8,930.61 million. Further, the Indian telecom sector is expected to witness investment of around US$ 40 billion during the current fiscal, as per the Telecom Equipment and Services Export Promotion Council. With the development of 3G, expansion of the current networks and widening of Broadband Wireless Access network, the investment in the sector is likely to increase from the US$ 20 billion witnessed last year. As per an industry report the telecom industry witnessed merger and acquisition (M&A) deals worth US$ 22.73 billion during April-June 2010, which represented 67.19 per cent of the total valuation of the deals across all the sectors during the period analysed. The sector had seen M&A deals of around US$ 439.4 million during April-June 2009. The biggest M&A deal in the sector was made by Anil Ambani's Reliance Communication Ltd that merged GTL infrastructure Ltd, its telecom tower business, for US$ 11 billion. Other major M&A deals included acquiring of Kuwait-based Zain telecom's African business for US$ 10.7 billion by Bharti Airtel and acquisition of Infotel broadband for US$ 1032.26 million by Reliance Industries. Norway-based telecom operator Telenor has bought a further 7 per cent in Unitech Wireless for a little over US$ 431.3 million. Telenor now has 67.25 per cent hold of the

company. Telenor has now completed its four-stage stake buy and has invested a total of US$ 1.32 billion in Unitech Wireless as agreed on with the latter last year. The government has approved the foreign direct investment (FDI) proposal of the Federal Agency for State Property Management of the Russian Federation to buy 20 per cent stake in telecom service provider Sistema-Shyam for US$ 660.1 million. Going Global In March 2010, Bharti Airtel bought the African operations of Kuwait-based Zain Telecom for US$ 10.7 billion, driving the Indian player into the league of top ten telecom players globally. The Reserve Bank has liberalised the investment norms for Indian telecom companies by allowing them to invest in international submarine cable consortia through the automatic route. In April 2010, RBI issued a notification stating "As a measure of further liberalisation, it has now been decided... to allow Indian companies to participate in a consortium with other international operators to construct and maintain submarine cable systems on co-ownership basis under the automatic route." The notification further added, "Accordingly, banks may allow remittances by Indian companies for overseas direct investment." Tele-medicine With increase in cellphone users to around 600 million and introduced of 3G services in the country, remote treatment and diagnosis of patients through mobile phones would become a reality in the near future. In fact, a few telecom operators and value-added service developers are planning to use mobile phones for diagnostic and treatment support, remote disease monitoring, health awareness and communication

1.9: Current Scenario


Telecommunication Sector Opportunities in India has grown phenomenally in the past 3 years as has been surveyed by Indian Ministry of Communications and Information Technology in New Delhi very recently. The telecom sector is one of the leading contributors to India's flourishing economy. According to the report presented by taking into account the statement of Indian Ministry of Communications and Information Technology, the telecom opportunities in India has been growing by 20 to 40 percent every year since past 3 years. The telecom services in India have been recognized as a world-class tool for the socio-economic development in India. India is known to rank fourth in the telecom industry in Asia after China, Japan, and South Korea and the telecom network in India is known to stand in the eighth position across the globe and second among the emerging economies. The tele-density has grown leaps and bounds in the past few years from 2.3 percent in 1999 to 4.8 percent in 2002. The world average percentage for the telecom industry as against the Indian average is 7.5 times while the Asian average against the same was 4.5 times. The current market range of the telecommunication industry in India has been estimated to USD 8 billion and this is expected to undergo an accretion by the end of 2012. The growth witnessed by the telecom market in India has increased the number of opportunities for the industry and this has been fueled by the growing mobile sector, which has attained the consumer level of 10 million by the end of December 2002 that was almost 100 percent in the year. This outstanding growth in the mobile sector explains the advent of digital cellular technology and reduced tariffs as a consequence of competitive pressures. The growth in the cellular subscribers has surpassed the benchmark of subscriber base. The telecom market has increased dramatically with the advent of Wireless in Local Loop Technology.

1.10: Telecom Regulatory Authority of India

Abbreviation TRAI Formation Legal status 1997 Created by Telecom Regulatory Authority of India Act, 1997 Mahanagar Doorsanchar Bhawan, Headquarters Jawaharlal Nehru Marg, New Delhi 110 002 Chairman Website DR. J.S. SHARMA http://www.trai.gov.in/

Telecom Regulatory Authority of India (TRAI)

The opening up of the Indian telecom sector for private enterprises resulted in the need for independent regulation. In 1997 The Telecom Regulatory Authority Of India (TRAI) was initiated by an act of Parliament. The purpose of this act was to regulate telecom services, fix/revise tariffs for telecom services which till then was under the control of the central government. The objective of TRAI was to create an environment which would enable Indian Telecomm to play an important role globally. Another important objective for TRAI was to provide equal opportunity for all and ensure fair competition. To ensure these objectives, TRAI has issued a large number of regulations, orders and directives and strategized the plan to direct the telecom industry from a government controlled monopoly to multi operator multi service competitive market. In January 2000, TRAI was modified by an act resulting in Telecommunications Dispute Settlement and Appellate Tribunal (TDSAT) to settle disputes between a licensor and a licensee, between two or more service providers, between a service provider and consumers and to settle appeals against any direction, decision or order of TRAI.

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National Long Distance

In 2000 the government created guidelines for the entry of private sector in National Long Distance without restricting the number of operators. Some of the salient features of NLD are:

Unlimited entry for both inter circle and intra circle calls. Total foreign equity must not exceed 74%.Promoters must have a net worth of Rs 25 million.

Private operators will have to enter into an arrangement with fixed service providers within a circle for traffic between long distance and short distance charging centers.

Private operators allowed to set up landing facilities that access submarine cables and use excess bandwidth available.

License period would be for 20 years and extendable by 10 years.

International Long Distance

India had accepted under the GATS to open up ILD in 2004.But India allowed competition in ILD in the year 2002 itself.

There can be any number of service providers. The license for ILD service is issued for a period of 20 years, with automatic extension of the license by a period of 5 years.

The private applicant would have to pay a onetime non refundable fee of Rs 25 million plus a bank guarantee of Rs 250 million, which will be given back on honoring of the commitment.

The annual license fee is at 6% of the Adjusted Gross Revenue and the fee for use of spectrum is to be paid separately. Internet service Providers (ISPs)

In 1998 the private sector was given permission to be internet service providers. In the interest of the customer, the government has set certain guidelines to grant license to prospective service

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providers. Any company in India with a maximum foreign equity of 74% is eligible for license. The segment has seen tremendous technological advancements

Notwithstanding anything contained in the Indian Telegraph Act, 1885, the functions of the Authority shall be to: 1. Make recommendations, either suo motu or on a request from the licensor, on the following matters, namely: Need and timing for introduction of new service provider. Terms and conditions of license to a service provider. Revocation of license for non-compliance for terms and conditions of license. Measures to facilitate competition and promote efficiency in the operation of telecommunication services so as to facilitate growth in such services. Technological improvements in the services provided by the service providers. Type of equipment to be used by the service providers after inspection of equipment used in the network. Measures for the development of telecommunication technology and any other matter relatable to telecommunication industry in general. Efficient management of available spectrum.

2. Discharge the following functions, namely: Ensure compliance of terms and conditions of license. Notwithstanding anything contained in the terms and conditions of the license granted before the commencement of the Telecom Regulatory Authority (Amendment) Ordinance, 2000, fix the terms and conditions of inter-connectivity between the service providers. Ensure technical compatibility and effective inter-connection between different service providers. 12

Regulate arrangement amongst service providers of sharing their revenue derived from providing telecommunication services. Lay down the standards of quality of service to be provided by the service providers and ensure the quality of service and conduct the periodical survey of such service provided by the service providers so as to protect interest of the consumers of telecommunication services.

Lay down and ensure the time period for providing local and long distance circuits of telecommunication between different service providers. Maintain register of interconnect agreements and of all such other matters as may be provided in the regulations. Keep register maintained under clause (viii) open for inspection to any member of public on payment of such fee and compliance of such other requirement as may be provided in the regulations.

Ensure effective compliance of universal service obligations.

3. Levy fees and other charges at such rates and in respect of such services as may be determined by regulations. 4. Perform such other functions including such administrative and financial functions as may be entrusted to it by the Central Government or as may be necessary to carry out the provisions of this Act: Provided that the recommendations of the Authority specified in the clause (a) of this sub-section shall not be binding upon the Central Government: Provided further that the Central Government shall seek the recommendations of the Authority in respect of matters specified in sub-clauses (i) and (ii) of clause (a) of this sub-section in respect of new license to be issued to a service provider and the Authority shall forward its recommendations within a period of sixty days from the date on which that Government sought the recommendations: Provided also that the Authority may request the Central Government to furnish such information or documents as may be necessary for the purpose of making

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recommendations under sub-clauses (i) and (ii) of clause (a) of this sub-section and that Government shall supply such information within a period of seven days from receipt of such request: Provided also that the Central Government may issue a license to a service provider if no recommendations are received from the Authority within the period of specified in the second provision or within such period as may be mutually agreed upon between the Central Government and the Authority. Provided also that if the Central Government having considered that recommendation of the Authority comes to a prima facie conclusion that such recommendation cannot be accepted or needs modifications, it shall, refer the recommendations back to the Authority for its reconsideration, and the Authority may within fifteen days from the date of receipt of such reference, forward to the Central Government its recommendation after considering the reference made by the Government. After receipt of further recommendation, if any, the Central Government shall take a final decision.

1.11: Growth Avenues


A managed service is another segment that is attracting telecom companies. On account of the rapidly growing subscriber base, service providers find it difficult to manage their infrastructure and network management operations. In such cases, they completely or partially outsource their infrastructure or network management operations. To reduce their network deployment costs, many service providers are considering infrastructure sharing offers the following advantages: Improved service quality Increased affordability for customers Faster roll out of services in rural and remote areas Significant reduction in initial set up costs Increased environmental aesthetics Lower operating costs for service providers

Enterprise Telecom Services includes key services, such as voice over Internet protocol (VoIP), dedicated telecom communication systems; IT infrastructure enabled unified communication 14

services, etc. Telecom service providers are increasingly targeting enterprises by providing dedicated services and are expected to witness major developments in near future.

Virtual Private Network is a private data network that provides connectivity within closed user groups via public telecommunication infrastructure. Competition is likely to heat up in the VPN segment as DoT has relaxed the norms for private players.

3G: The Indian government plans to auction the spectrum for 3G services by inviting bids from domestic as well as foreign players, and creating a competitive environment that offers better services to consumers. Therefore, the 3G spectrum is among the major investment opportunities and growth drivers of the telecom industry. The immense potential for 3G is reflected by the 30 40 percent annual growth in ValueAdded Services. Cell phone manufacturers are striving to develop USD 100 priced 3G handsets for the Indian market. India expects to replicate its 2G growth in 3G services.

WiMAX has been one of the most significant developments in wireless communication in the recent past. Since this mode of communication provides network access in inaccessible locations at a speed of more than 4 Mbps, it is expected to be a major factor in driving telecom services in India, especially wireless services. Thus, it will lead to the increased use of telecom services, Internet, Value-added services and enterprise services. WiMAX is expected to accelerate economic growth and assist in providing better education, healthcare and entertainment services.

It is estimated that India will have 13 million WiMAX subscribers by 2012. Aircel is the pioneer in WiMAX technology in India.

The state-owned player, BSNL, aims to connect 74,000 villages through WiMAX. Bharti, Reliance and VSNL have acquired licenses in the 3.3GHz range to utilise the Opportunities offered by this domain. Value Added Services: The VAS industry was worth USD 632 million in 200607. The industry is estimated to grow by 60 percent in 200708 and become an USD 1,011 million 15

opportunity. The VAS industry is currently focusing on the entertainment sector, such as the Indian film industry and cricket; however, there is scope for growth in other avenues as utilitybased services, such as location information and mobile transactions.

Rural Telephony: As the government targets to increase rural tele density from the current 2 percent to 25 percent by 2012, rural telephony will require major investments.

1.12: Growth rate


The following table gives details regarding the subscriber base of each Mobile Service Provider in India as of 30 Sep 2010 Table 1.1: Detail of subscriber base and market share of major players Operator Bharti Airtel MTNL BSNL Reliance Communications Aircel Sistema Loop Unitech Idea Etisalat Videocon Stel Tata Teleservices HFCL Infotel Vodafone All India Source: indianeconomics Subscriber base 143,292,272 5,311,254 78,321,735 117,337,370 46,515,378 6,638,470 2,983,299 11,267,660 74,213,507 56,583 4,482,272 1,642,272 79,071,716 1,022,944 115,553,042 687,710,364 Market Share 21.34% 0.81% 11.31% 17.37% 6.64% 0.86% 0.45% 1.05% 10.84% 0.005% 0.43% 0.22% 11.47% 0.13% 17.08% 100%

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The number of telephone subscribers in India increased to 509.03 Million at the end of September-09 from 494.07 Million in August-2009, thereby registering a growth rate of 3.03%. With this, the overall Tele-density in India reaches 43.50. The set target of 500 million telephones by the end of 2010 has been achieved by September 2009. Table: 1.2 Details of statistics of total telecommunication subscribers Indian Statistics Total subscriber base Over all Tele-density Fixed-line user base Wireless user base telephone Telecom (September 2009) 509.03 43.50% 37.3

(GSM+CDMA+WLL(F)) GSM Subscribers CDMA Subscribers Monthly additions

471.73 344.45 127.24 14.96

(Wire line + Wireless) Monthly additions (Wire line) Monthly (Wireless) Broadband subscribers Source: indianeconomics additions

-0.02

14.98 7.21

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Subscriber numbers is in million A list of ten states (including the metros Mumbai, Kolkata and Chennai in their respective states) with the largest subscriber base as of Sept 30th 2010 is given below Table 1.3 : Subscriber base Uttar Pradesh 90,453,481 Maharashtra 81,986,446 Tamil Nadu 62,216,471 Andhra Pradesh 52,736,516 West Bengal 50,199,257 Bihar 44,672,870 Karnataka 43,086,825 Gujarat 38,864,347 Rajasthan 37,626,621 Madhya 37,306,654 Pradesh India 687,710,364 State Source: indianeconomics Population (01/08/2010) 199,415,992 110,351,688 67,773,611 84,241,069 90,524,849 97,560,027 58,969,294 58,388,625 67,449,102 72,362,313 1,188,783,351 Mobile phones population 427 707 881 600 520 430 709 618 535 489 580 per 1000

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CHAPTER 2: COMPANY PROFILE


2.1: BHARAT SANCHAR NIGAM LIMITED:
Bharat Sanchar Nigam limited popularly also known as BSNL is an India-based telecommunication service providing company. BSNL operates under the guardianship of the Ministry of Communication, Government of India and Department of Telecommunication, Government of India. Bharat Sanchar Nigam Limited operates according to the telecommunication policy laid as per the Indian Telecommunication Acts and Rules. Bharat Sanchar Nigam Limited was established on 1.10.2000, as a result of the revamping of the erstwhile Department of Telecommunication, Government of India. Bharat Sanchar Nigam Limited is world's seventh largest telecommunications company, with a huge bouquet of telecommunications services. The services offered by BSNL includes wireline, CDMA mobile, GSM Mobile, Internet, broadband, carrier service, MPLS-VPN, VSAT, VoIP services, IN Services etc. It is one of the fast growing and most profitable organization of Government of India.

BSNL enjoys market leadership amongst all telecommunication operators in India and has grown in leaps and bounds. This gigantic Indian telecommunication company offers seamless service to its customers and it and enjoys market dominance in the area of basic telephony, rural telephony and Internet connection. Bharat Sanchar Nigam Limited is dedicatedly working towards bridging the gap between the rural and urban India digital divide in the ICT sector. This Indian telecommunication company is one of the market leaders in the Indian telecommunication industry. Further, it has gain tremendous popularity due to its competitive pricing of tariffs.

Further, to retain its market dominance as a market leader it has formulated aggressive plans for expansion of its cellular network as per the policy laid in the Tenth Telecommunication Plan of India. BSNL has one of the widest and deepest telecommunication networks in India. The governing body has ratified a huge budgetary allocation of Rs.733 crore in the next three years 19

for the development of telecommunication infrastructure in India. BSNL is market leader and is vastly experienced in planning, installation, network integration and maintenance of switching and transmission networks. Further the company is equipped with a state-of-the-art Telecommunication Training Institute, which holds ISO 9000 certification.

The present turnover of Bharat Sanchar Nigam Limited is of Rs.351, 820 million and the company has posted a net profit of Rs.99, 390 million in the financial year ended 31 March 2006-2007. Further, the infrastructure assets of telephone equipments, assessed during the last financial year are around Rs.630, 000 million. Mr Kuldeep Goyal, as the Chairman of the company, heads Bharat Sanchar Nigam Limited.

Some of the key notable points about BSNL are as follows Bharat Sanchar Nigam Limited has around 47.3 million line basic telephone capacity BSNL has around 4 million WLL capacity and 20.1 million Global System for Mobile Communications (GSM) capacity It is equipped with more than 37382 fixed telephone exchanges, 18000 BTS, 287 satellite stations, 480196 Rkm of OFC cable and 63730 Rkm of microwave network Its network serves 7330 cities and towns, 602 districts and 5.5 lakh villages across India Cell One cellular service has more than 17.8 million subscribers representing around 25% of all mobile users of India BSNL has 35.1 million of basic telephony subscribers representing 85% of the landline subscriber base of India It has more than 2.5 million WLL customers It has 2.5 million Internet subscribers, using access modes like Dial-up, leased line, DIAS, account less Internet Aiming to increase its present customer base from 47 millions to 125 million lines by the end of December 2007

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2.2: VODAFONE

Vodafone Group Plc is the world's leading mobile telecommunications company, with a significant presence in Europe, the Middle East, Africa, Asia Pacific and the United States through the Company's subsidiary undertakings, joint ventures, associated undertakings and investments.

The Group's mobile subsidiaries operate under the brand name 'Vodafone'. In the United States the Group's associated undertaking operates as Verizon Wireless. During the last few years, Vodafone Group has entered into arrangements with network operators in countries where the Group does not hold an equity stake. Under the terms of these Partner Market Agreements, the Group and its partner operators co-operate in the development and marketing of global products and services, with varying levels of brand association.

At 30 June 2009, based on the registered customers of mobile telecommunications ventures in which it had ownership interests at that date, the Group had 315 million customers, excluding paging customers, calculated on a proportionate basis in accordance with the Company's percentage interest in these ventures.

The Company's ordinary shares are listed on the London Stock Exchange and the Company's American Depositary Shares ('ADSs') are listed on the New York Stock Exchange. The Company had a total market capitalization of approximately 63.6 billion at 30 July 2009. Vodafone Group Plc is a public limited company incorporated in England under registered number 1833679. Its registered office is Vodafone House, The Connection, Newbury, Berkshire, RG14 2FN, England.

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History:
Vodafone was formed in 1984 as a subsidiary of Racal Electronics Plc. Then known as Racal Telecom Limited, approximately 20% of the company's capital was offered to the public in October 1988. It was fully demerged from Racal Electronics Plc and became an independent company in September 1991, at which time it changed its name to Vodafone Group Plc.

Following its merger with Air Touch Communications, Inc. (Air Touch), the company changed its name to Vodafone Air Touch Plc on 29 June 1999 and, following approval by the shareholders in General Meeting, reverted to its former name, Vodafone Group Plc, on 28 July 2000.

In 2005 Celtel was sold to Zain for USD 3.4 billion. Marten is member of the advisory board of AMREF Flying Doctors in The Netherlands and is board member of Social Investor Foundation for Africa and member of the Supervisory Board of the Investment Fund for Health in Africa. Until he joined Vodafone he was a non executive member of the Board of Millicom International (MIC).

2.3: BHARTI AIRTEL:

Bharti Enterprises is one of Indias leading business groups with interests in telecom, retail, manufacturing, agri business and financial services. Bharti Airtel is Asias leading integrated telecom services provider with operations in India and Sri Lanka. Bharti Airtel has been at the forefront of the telecom revolution and has transformed the sector with its world-class services built on leading edge technologies.

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In financial services, Bharti is partnering with AXA of France to offer life insurance, general insurance and asset management. Bharti Retail, the 100% subsidiary of Bharti Enterprises operates multiple format consumer friendly stores. Bharti Wal-Mart is a B2B JV with Wal-Mart for wholesale cash-and-carry and back-end supply chain management operations. The other businesses in the group are Beetel for communication and media devices and Bharti Del Monte India, a JV with Del Monte to offer fresh and processed fruits & vegetables in India as well as international markets. Bharti Airtel, India's leading private integrated telecom company has been at the forefront of the telecom revolution and has transformed the telecom sector with its world-class services built on leading edge technologies. Bharti has been a pioneering force in the telecom sector and today enjoys a strong nationwide presence. Bharti Airtel has grown successfully in partnership with various leading companies of the world - Singapore Telecom, Vodafone, Warburg Pincus, British Telecom to name a few.

Bharti Group has joint ventures with AXA for financial services, with Wal-Mart for retail, and with Del Monte for its agri-business. Beetel Teletech, another group company, is India's largest manufacturer and exporter of telephone terminals. Sunil started his career at a young age of 18 after graduating from Punjab University in India and founded Bharti, with a modest capital, in the year 1976. Today, at 51 he heads a successful enterprise, amongst the top 5 in India, with a market capitalization of over US$ 25 billion and employing over 30,000 people.

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2.4: AIRCEL

Aircel is a mobile phone service provider in India. It offers both prepaid and postpaid GSM cellular phone coverage throughout India. Aircel is a joint venture between Maxis Communications of Malaysia and Apollo Hospital Enterprise Ltd of India. UTSB has a 74% stake in Aircel and the remaining 26% is with Apollo Hospitals. It is Indias fifth largest GSM mobile service provider with a subscriber base of over 27.7 million, as of October 31, 2009. It has a market share of 12.8% among the GSM operators in the country. As on date, Aircel is present in 18 of the total 23 telecom circles (including Andhra Pradesh, Assam, Bihar & Jharkhand, Chennai, Delhi & NCR, Himachal Pradesh, Jammu & Kashmir, Karnataka, Kerala, Kolkata, Mumbai, North East, Orissa, Rest of Maharashtra & Goa, Rest of Tamil Nadu, Rest of West Bengal, Uttar Pradesh East, Uttar Pradesh West) and with licences secured for the remaining 5 telecom circles, the company plans to become a pan-India operator by 2010. Additionally, Aircel has also obtained permission from Department of Telecommunications (DoT) to provide International Long Distance (ILD) and National Long Distance (NLD) telephony services. It is also a category A ISP. It is also having the largest service in Tamil Nadu. Aircel Business Solutions (ABS), part of Aircel, is an ISO 9000 certified company. ABS is a registered member of WiMAX forum both in the Indian and International Chapters. ABS product range includes enterprise solutions such as Multiprotocol Label Switching Virtual Private Networks (MPLS VPNs),Voice over Internet Protocol (VoIP) and Managed Video Services on wireless platform including WiMAX. Aircel has won many awards for its services. Aircel was honored at the World Brand Congress 2009 with three awards, Brand Leadership in Telecom, Marketing Campaign & Marketing Professional of the Year. Aircel was honored by CMAI INFOCOM National Telecom Award 2009 for, Excellence in Marketing of New Telecom Service. Aircel had been selected as the best regional operator in 2008 by Tele.net. Aircel was rated as the top mid-size utility company

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in Business Worlds List of Best Mid-Size Companies in 2007. Aircel got the highest rating for overall customer satisfaction and network quality in 2006 by Voice and Data. Aircel is one of the sponsors of the Indian Premier League Cricket Team Chennai Super Kings, which is captained by Mahendra Singh Dhoni. It is also the major sponsors for Chennai Open (the onlyATP tennis tournament in India), and Professional Golf Tour of India. Maxis, Aircel's majority stake holder at that time, raised RM11.2 billions (USD 3.36 billions)for its shareholders(UTSB), making it the largest IPO in Malaysia and Southeast Asia.

2.5: SPICE TELECOM

Spice Telecom is the brand name of Spice Communications Limited, a mobile phone service provider in India. Spice Telecom is currently operating in the states of Punjab (India) and Karnataka i.e., in 2 circles of 23 Telecom Circles of India. Spice Communications Limited is now a subsidiary of Mumbai basedIdea Cellular Ltd. (an Aditya Birla group company). Idea Cellular owns more than 80% equity in Spice Communiations. Idea Cellular acquired the company from Modi Wellvest and Telekom Malaysia (TMI, now Axiata) in July 2008. (TMI). Launched over ten years ago, Spices cellular services have a customer base of over 4 million as on December 2008 in Punjab and Karnataka. Recently Aditya Birla Group owned Idea Cellular took over the ownership of Spice Telecom for over Rs.270 million. They plan to improve the coverage, customer friendliness and good service The market share of Spice had fallen down in Karnataka, after their competitors weaned away many of its customers with good service. In spite of lower tariffs Spice could not regain the market share. Another problem was that being restricted inonly two circles the prepaid users(which form majority of mobile phone users in India) had problems getting their phones recharged with prepaid balance when in roaming. The problem was significance in case of states 25

with small areas like Punjab. Now it is hoped that under Idea cellular things at least this problem is sorted. Spice Telecom now has a customer base of 4.46 Million subscribers in both circles.

2.6: IDEA CELLULAR

IDEA Cellular Limited was incorporated in 1995 and is one of the leading GSM mobile services operators. Headquartered in Mumbai, it has licenses to operate in all 22 service areas across the country, though commercial operations are currently in 16 services areas. With a customer base of over 47.1 million subscribers, the operations cover the states of Maharashtra, Goa, Gujarat, Rajasthan, Delhi, Haryana, Himachal Pradesh, Uttaranchal, Uttar Pradesh, Madhya Pradesh, Chhattisgarh, Andhra Pradesh, Kerala, and Bihar. Orissa, and Tamil Nadu will become operational during 2008-09, and Idea will then cover approximately 90 per cent of the countrys telephony potential. IDEA enjoys a market leadership position in many of its operational areas. It offers GPRS on all its operating networks for all categories of subscribers, and was the first company in India to commercially launch the next generation EDGE technology in Delhi in 2003. As a pioneer in technology deployment, it has been in the forefront through the adoption of bio fuels to power its base stations, and by employing satellite connectivity to reach inaccessible rural areas in Madhya Pradesh. IDEA has been a leader in the introduction of value added services, and there are several firsts to its credit, including a voice portal Say Idea, Idea TV, voice chat, instant messenger, and many more. Tariff plans have been customer friendly, catering to the unique needs of different customer segments, where Womens Card caters to the special needs of the woman on the move, and Youth Card covers the emerging youth segment.

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IDEA has won numerous awards and is the only Indian GSM operator to win the prestigious GSM Association Award consecutively in the best mobile technology category for the Best Billing and Customer Care Solution both in 2006 and in 2007 in the face of international competition. In 2007 IDEA was listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).

2.7: RELIANCE COMMUNICATION:

A dream come true


The late Dhirubhai Ambani dreamt of a digital India an India where the common man would have access to affordable means of information and communication. Dhirubhai, who singlehandedly built Indias largest private sector company virtually from scratch, had stated as early as 1999: Make the tools of information and communication available to people at an affordable cost. They will overcome the handicaps of illiteracy and lack of mobility.

Think big. Think different. Think ahead.


Dhirubhai preached and personally practised one mantra throughout his life: Dream with conviction. He built the Reliance empire from scratch and, in a short span of 25 years, it catapulted to become one of the top Fortune 500 corporations of the world an achievement unparalleled in history.

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2.8: TATA COMMUNICATION:

Tata Communications is a leading global provider of a new world of communications. With a leadership position in emerging markets, Tata Communications leverages its advanced solutions capabilities and domain expertise across its global and pan-India network to deliver managed solutions to multi-national enterprises, service providers and Indian consumers. The Tata Global Network includes one of the most advanced and largest submarine cable networks, a Tier-1 IP network, with connectivity to more than 200 countries across 400 PoPs, and nearly 1 million square feet of data center and collocation space worldwide. Tata Communications' depth and breadth of reach in emerging markets includes leadership in Indian enterprise data services, leadership in global international voice, and strategic investments in operators in South Africa (Neotel), Sri Lanka (Tata Communications Lanka Limited), Nepal (United Telecom Limited), and subject to approval by the Chinese government, China (China Enterprise Communications) Tata Communications Limited is listed on the Bombay Stock Exchange and the National Stock Exchange of India and its ADRs are listed on the New York Stock Exchange. (NYSE: TCL)

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CHAPTER 3: INDUSTRY ANALYSIS


3.1: PORTERS FIVE FORCES
There is continuing interest in the study of the forces that impact on an organisation or an industry, particularly those that can be harnessed to provide competitive advantage.

As Porter's 5 Forces analysis deals with factors outside an industry that influence the nature of competition within it, the forces inside the industry (microenvironment) that influence the way in which firms compete, and so the industrys likely profitability is conducted in Porters five forces model.

The nature of competition in an industry is strongly affected by suggested five forces. The stronger the power of buyers and suppliers, and the stronger the threats of entry and substitution, the more intense competition is likely to be within the industry. However, these five factors are not the only ones that determine how firms in an industry will compete the structure of the industry itself may play an important role. Figure: 3.1

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Main Aspects of Porters Five Forces Analysis

The original competitive forces model, as proposed by Porter, identified five forces which would impact on an organizations behaviors in a competitive market. These include the following:

The rivalry between existing sellers in the market The power exerted by the customers in the market The impact of the suppliers on the sellers The potential threat of new sellers entering the market The threat of substitute products becoming available in the market

Understanding the nature of each of these forces gives organizations the necessary insights to enable them to formulate the appropriate strategies to be successful in their market (Thurlby, 1998). We will examine these concepts as described by Porters 5 force model and as applied to Indian telecom industry simultaneously.

Force 1: The Degree of Rivalry


The intensity of rivalry, which is the most obvious of the five forces in an industry, helps determine the extent to which the value created by an industry will be dissipated through headto-head competition. The most valuable contribution of Porter's five forces framework in this issue may be its suggestion that rivalry, while important, is only one of several forces that determine industry attractiveness.

This force is located at the centre of the diagram Is most likely to be high in those industries where there is a threat of substitute products; and existing power of suppliers and buyers in the market

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Now let us understand the implication of degree of revelry in Indian telecom sector. The dimensions of this parameter are determined by: Market Growth rate: The Indian telecommunications industry is the world's fastest growing telecommunications industry, with 723.28 Million telephone (landlines and mobile) subscribers and 687.71 Million mobile phone connections as of Sep 30th 2010. The Indian Mobile subscriber base has increased in size by a factor of more than one hundred since 2001 when the number of subscribers in the country was approximately 5 million to 687.71 Million in Sep 2010. No. of players in the industry: There are many telecommunication players such as Airtel, Vodafone, BSNL, Idea, Uninor, TATA docomo, Reliance, Aircel, BPL, Spice.

Switching cost for buyers


In any industry, if the exit barrier is high it increases the difficulty of any organization to leave the industry sector. So it makes any difficult to any willing to leave company to leave the industry. The telecom industry suffers from high exit barriers, mainly due to its specialized equipment. Networks and billing systems cannot really be used for much else, and their swift obsolescence makes liquidation pretty difficult. High Fixed Cost: The industry also suffers from high fixed cost which makes the entry barrier also very high for the industry. It comes as no surprise that in the capital-intensive telecom industry the biggest barrier to entry is access to finance. To cover high fixed costs, serious contenders typically require a lot of cash. When capital markets are generous, the threat of competitive entrants escalates. When financing opportunities are less readily available, the pace of entry slows. Meanwhile, ownership of a telecom license can represent a huge barrier to entry.

6-7 players in each region

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3 out of 4 BIG-Four present in each region

Very less time to gain advantage by an innovation: Every company in this industrial sector in investing a huge amount in research and development and marketing strategy. That is why we see any offer launched by any company is counter attacked by other companies very soon. This makes the industry rivalry most prominent. Eg. Caller tunes, life time card

Force 2: The Threat of New Entrants


Both potential and existing competitors influence average industry profitability. The threat of new entrants is usually based on the market entry barriers. They can take diverse forms and are used to prevent an influx of firms into an industry whenever profits, adjusted for the cost of capital, rise above zero. In contrast, entry barriers exist whenever it is difficult or not economically feasible for an outsider to replicate the incumbents position. The most common forms of entry barriers, except intrinsic physical or legal obstacles, are as follows: Economies of scale: In telecom industry the economies of scale exists from the supplier side. That is why companies try to increase their subscriber base at drastic rate. Distribution channels: Distribution channels are also providing a major determining factor. These channels are not loyal to any company and competitors can easily access them and make out work for them. Brand preference and customer loyalty: Customer switching cost is very low, as cost of new connection is really low. And new connection offers more benefits to the customers. Government policy:

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the government came up with the National Telecom Policy which set certain important goals like availability of telephone on demand, providing International standard infrastructure and services at affordable prices, enhancing India's competitiveness in global market and encouraging exports, create environment conducive for both FDI and domestic investment, accelerate India's growth as a major manufacturer and exporter of telecom equipment and availability of telecom services to every village.

Force 3: The Threat of Substitutes


The threat that substitute products pose to an industry's profitability depends on the relative price-to-performance ratios of the different types of products or services to which customers can turn to satisfy the same basic need. The threat of substitution is also affected by switching costs that is, the costs in areas such as retraining, retooling and redesigning that are incurred when a customer switches to a different type of product or service. It also involves: Product-for-product substitution (email for mail, fax); is based on the substitution of need; Generic substitution (Video suppliers compete with travel companies); Substitution that relates to something that people can do without (cigarettes, alcohol).

Now let us discuss this concept for telecom industry. The potential major substitutes for telecom industry are as follows:

VOIP (Skype, Messenger etc.) Online Chat Email Satellite phones

All of these technologies have a huge potential, though none of the above a major threat in current scenario. So the telecom industry has to keep a close look on these substitutes.

Force 4: Buyer Power


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Buyer power is one of forces that influence the appropriation of the value created by an industry. The most important determinants of buyer power are the size and the concentration of customers. Other factors are the extent to which the buyers are informed and the concentration or differentiation of the competitors. Kippenberger (1998) states that it is often useful to distinguish potential buyer power from the buyer's willingness or incentive to use that power, willingness that derives mainly from the risk of failure associated with a product's use.

This force is relatively high where there a few, large players in the market, as it is the case with retailers a grocery stores;

Present where there is a large number of undifferentiated, small suppliers, such as small farming businesses supplying large grocery companies;

Low cost of switching between suppliers, such as from one fleet supplier of trucks to another.

In the context of Indian telecom industry we can say that the following points influence the buyer power: Lack of differentiation among the service provider Cut throat competition Customer is price sensitive Low switching costs Number portability to have negative impact

Force 5: Supplier Power


Supplier power is a mirror image of the buyer power. As a result, the analysis of supplier power typically focuses first on the relative size and concentration of suppliers relative to industry participants and second on the degree of differentiation in the inputs supplied.

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The ability to charge customers different prices in line with differences in the value created for each of those buyers usually indicates that the market is characterized by high supplier power and at the same time by low buyer power.

In the drawback of Indian telecom industry the following should be kept in mind: Large number of suppliers: The industry basically has a large number of suppliers, which helps them to choose from a lot of options. So they try to select the best option to deliver the value to the customers and to have a competitive advantage from their competitor. Shared tower infrastructure: Technology has helped them to share the tower infrastructure. This basically helps them to reduce the initial investment a lot. Limited pool of skilled managers and engineers especially those well versed in the latest. Medium cost of switching since changing their hardware would lead to additional cost in modifying the architecture. Overall influence on the industry medium.

3.2: PESTEL ANALYSIS


PEST analysis stands for "Political, Economic, Social, and Technological analysis" and describes a framework of macro-environmental factors used in the environmental scanning component of strategic management. Some analysts added Legal and rearranged the mnemonic to SLEPT; inserting Environmental factors expanded it to PESTEL or PESTLE, which is popular in the UK The model, has recently been further extended to STEEPLE and STEEPLED, adding education and demographic factors. It is a part of the external analysis when conducting a strategic analysis or doing market research, and gives an overview of the different macro environmental factors that the company has to take into consideration. It is a useful strategic tool for understanding market growth or decline, business position, potential and direction for operations. 35

The growing importance of environmental or ecological factors in the first decade of the 21st century have given rise to green business and encouraged widespread use of an updated version of the PEST framework. STEER analysis systematically considers Socio-cultural, Technological, Economic, Ecological, and Regulatory factors

Political factors:
Telecom industry in India has a big market potentiality and is a fast growing sector. Government of India is eager to reconstitute this telecom industry by enacting effective policies for more investments from foreign companies, which results in a very competitive and deregulated market in the world. Policies of telecom industry in India Government of India implemented the unified access licensing regime, which enables basic and cellular mobile service to use any modern technology. In 1997, Telecom Regulatory Authority of India (TRAI) was formed to facilitate the growth of the telecom sector in India. Major services and market potentiality of Telecom industry in India Telecommunication sector in India is primarily subdivided into two segments, which are Fixed Service Provider (FSPs) and Cellular Services. Telecom industry in India constitutes some essential telecom services like telephone, radio, television and Internet. Telecom industry in India is specifically emphasizing on latest technologies like GSM (Global System for Mobile Communications), CDMA (Code Division Multiple Access), PMRTS (Public Mobile Radio Trunking Services), Fixed Line and WLL (Wireless Local Loop). India has a prospering market specifically in GSM mobile service and the number of subscribers is growing very fast.

Economic perspective of telecom industry in India


Telecom industry in India has a major role in Indian economy. The Indian government is also enforcing some effective telecom policies and regulations for the infrastructural growth of this industry. Indian telecom market provides a tele-density of 8.5 percent as registered in the year 2004. A number of leading multinational telecommunication companies are approaching and showing their interest to invest for the telecom industry in India. Telecommunication industry of 36

India ranked sixth among all the telecommunication sectors in the world. In the year 2004, the total numbers of telephone subscriptions were US$93.2. Tax policy:Telecom is the exchange of information between two distant points in space. The telecom industry is very important for the socio economic development of a nation. It is one of the main architects for accelerated growth and progress of different segments of the economy. Post liberalization the telecommunication industry has grown by leaps and bounds. Liberalization: As part of the policy of liberalization, telecom equipment manufacturing was delicensed in 1991 and value added services were accessible to the private sector in 1992.As a result a number of manufacturing units were established across the country. The National Telecom Policy resolution of 1994 further liberalized the telecom sector for private initiative.

National Telecom Policy 1994: In 1994,the government came up with the National Telecom Policy which set certain important goals like availability of telephone on demand, providing International standard infrastructure and services at affordable prices, enhancing India's competitiveness in global market and encouraging exports, create environment conducive for both FDI and domestic investment, accelerate India's growth as a major manufacturer and exporter of telecom equipment and availability of telecom services to every village.

Broad band Policy 2004: Realizing the immense potential of Broadband service in the growth of economy and the improvement in quality of life due to various functions like tele education, tele medicine, e-governance, entertainment and in job creation, the government came up with the Broadband policy in 2004.The main aim was to create infrastructure to enhance the progress of broadband. Some of the technology applicable for broadband would be Optical Fibre, Asymmetric Digital Subscriber Lines (ADSL), Cable Network, DTH etc. Foreign Direct Investment

In Basic, Cellular, Paging and Value Added Service and Global Mobile Personal Communications by Satellite, FDI of 74% is allowed subject to license granted by Department Of Telecommunication.

FDI up to 74% is also permitted in Radio Paging Service and Internet Service Provider. 37

FDI up to 100% is allowed for Infrastructure Providers of dark fibre, electronic and voice mail. The condition set was that these companies would divest 26% of their equity in favor of Indian companies in five years, provided they were listed in other parts of the world.

FDI of 100% was allowed in telecom manufacturing.

The TRAI and the Service providers should have pragmatic approach about the Telecom tariff in India. Telecom is one of the basic needs to push social and economic development and growth in a developing country like ours. To enable this, the basic telecom facilities need to be available, accessible and affordable to every one across the country. The prospect of happening this depends on the business viability of various service providers. While govt. was the service provider, the cost of loss making rural telephony service was cross subsidized with urban revenue. Also there use to have a telescopic charging, means more the usage the higher was the call charge. And also, local call charge was subsidized with higher long distance call tariff based revenue. The basic lacuna with government run telecom was that in spite of being a highly revenue earning and profit making industry, growth of this service sector was given lower priority and the revenue earned was diverted elsewhere; strangling development of the sector. In opening out the of the industry, the new players could bring down the cost of service because they were not bound with the social commitments in terms of loss making rural service provision, obligatory service preference as well as various obligatory, employment and social compulsions. As the cost came down, volume picked up and lead the Industries to becoming more aggressive in the pricing decisions. Moreover, India has lost out the opportunity to develop local manufacturing capability of telecom H/W, S/W and infrastructure. The external vendors exploited the situation by dumping obsolete equipments and technology on one side and pushed high end products and services putting the cart before the horse. The net effect is that the country's overall interest is left out in the middle. Coming to the National Telecom service and the business part, it is my considered opinion that the telephone tariff should be related to the national growth. It means that there shall be a basic 38

tariff plan for the basic telecom facility, both wired and wireless, across the urban areas and a subsidized tariff plan in the rural area. It shall be made mandatory for every service provider to provide service in the rural areas also covered in their license. Sharing of Systems and Networks by different service providers will make the rural business viable. To enable the industry to sustain Telecom service business and grow, the tariff plan should be supportive for the telecom business in the urban areas as well as in the rural areas In view of the advance in technology which will defuse discrimination between Fixed N/W and Mobile N/W in the near future, there shall be a common Call charging policy that can support the business to sustain and grow and also not to have much adverse impact on the users. Given are my suggestions based on above considerations: There need be no discrimination in tariff and charging between fixed line N/w and Mobile N/W as the same phone could be used as fixed or mobile in future. There can be distinction in charging between post-paid and pre-paid service. However, it is ideal to move towards making entire telecom service as pre-paid. Example of Charging methods:1. Local calls within the region (Intra-Network) Unit Fee for Unit duration. e.g.; Re.1 for 3 minutes. This includes Answer fee of one unit which cover the cost of call for the first periodic duration. In the rural areas the charge shall have 50% subsidy, partly covered with incentives from the government out of its telecom related revenue. 2. INTER-NETWORK and long distance calls. Customers shall have freedom and ability to choose and use any service providers network.

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Tariff: Per Second etc., billing could be used for these calls. The tariff shall depend on the area to be reached i.e.; regional, national and international destinations. Also the tariff shall be different depending on the type of service, voice, data, multi-media etc. Same tariff shall be applicable for Fixed N/W as well as Mobile N/W. 3. CHARGING OF SMS: SMS facility shall be provided in both land lines phones as well as in Mobile phones. SMS Tariff shall be variable depends on the user/destination. Example:- 10 paisa per SMS for person to person local SMS. Free of charge SMS for utility services like emergency, Personal banking and financial services, medical service and car parking charges etc., Different tariff for SMS for business purposes, like SMS to lottery, Media programs, advertisements from and to different business units, where service charge is additional and shared between the Telecom Service Provider and the business unit which receive the SMS. The overall Telecom tariff decisions shall have provision for the tariff to grow along with national economic growth and shall reflect as a percentage of per capita income. Economic factors: It include economic growth, interest rates, exchange rates and the inflation rate. These factors have major impacts on how businesses operate and make decisions. For example, interest rates affect a firm's cost of capital and therefore to what extent a business grows and expands. Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy. India GDP Growth Rate

India Gross Domestic Product (GDP) expanded 6.10% over the last 4 quarters. The India Gross Domestic Product is worth 1217 billion dollars or 1.96% of the world economy, according to the 40

World Bank. India's diverse economy encompasses traditional village farming, modern agriculture, handicrafts, a wide range of modern industries, and a multitude of services. Services are the major source of economic growth, accounting for more than half of India's output with less than one third of its labor force. The economy has posted an average growth rate of more than 7% in the decade since 1997, reducing poverty by about 10 percentage points. This page includes: India GDP Growth Rate chart, historical data, forecast and news. Graph: 3.1

Source: tradingeconics.com The communication sector will emerge as the largest contributor to India's major growth-drivers of the country's economy. "The communication sector is predicted to emerge as the single largest sector of India's economy, with a 15.4 per cent share, equivalent to Rs 8,65,031 crore, of GDP by 2014-15," National Council of Applied Economic Research (NCAER) said in its recent study 'Economic Impact of the Communication Sector in India'. The communication sectors share of the total GDP has increased from 0.7 per cent in the 1980s and one per cent in the 1990s to 3.6 per cent during 2001-08. In 2007-08, the sector accounted for 5.7 per cent of GDP, the study said.
GDP

and one of the

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Social factors:
It includes the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. Trends in social factors affect the demand for a company's products and how that company operates. For example, an ageing population may imply a smaller and less-willing workforce (thus increasing the cost of labor). Furthermore, companies may change various management strategies to adapt to these social trends (such as recruiting older workers).

Technological factors:
It includes ecological and environmental aspects, such as R&D activity, automation, technology incentives and the rate of technological change. They can determine barriers to entry, minimum efficient production level and influence outsourcing decisions. Furthermore, technological shifts can affect costs, quality, and lead to innovation. Research & Development India has proven its dominance as a technology solution provider. Efforts are being continuously made to develop affordable technology for masses, as also comprehensive security infrastructure for telecom network. Research is on for the preparation of tested infrastructure for enabling interoperability in Next Generation Network. It is expected that the telecom equipment R & D shall be doubled by 2010 from present level of 15%. Modern technologies inductions are being promoted. Pilot projects on the existing and emerging technologies have been undertaken including WiMax, 3G etc. Emphasis is being given to technologies having potential to improve rural connectivity. Also to beef up R&D infrastructure in the telecom sector and bridge the digital divide, cellular operators, top academic institutes and the Government of India together set up the Telecom Centers of Excellence (COEs). The main objectives of the COEs are as follows: Achieve Telecom Vision 2010 that stipulates a definite growth model and take it beyond. Secure Information Infrastructure that is vital for countrys security. 42

Capacity Building through Knowledge for a sustained growth. Support Planned Predictive Growth for stability. Reduce Rural Urban Digital Divide to reach out to masses. Utilize available talent pool and create environment for innovation. Management of National Information Infrastructure (NII) during Disaster Cater the requirement of South East Asia as Regional Telecom Leader

The GSM arm of Tata Teleservices, Tata Docomo, has launched a new SMS service, Diet SMS, on Tuesday. The customers now will be charged according to the number of characters in a SMS they send. Each character is charges 1 paisa.

"The cost of any Diet-SMS will be only one paisa per character used, thereby providing complete value to customers," Tata Docomo said.

Tata Docomo, which initiated the pay-per-use services in the mobile telecom segment, has disclosed that the space between two words is not charged.

The Tata Docomo services are available in 8 circles. The company has plans to launch its services all over India by the end of 2009. Bharti Airtel, the Indian telecom operator with the largest subscriber base, has announced the rolling out of its 3G mobile telephony by Nov 2010.

"If everything goes well on time with regard to spectrum auction, by February or March we should receive spectrum allocation By next Diwali (2010), we will commercially launch 3G services in India," he added.

The base price for 3G radio waves had been brought down by the central government from Rs. 4,040 crore to Rs.3,500 crore last week.

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The central government had also revealed about 90 days will be required to complete the auctioning related to the distribution of the 3G and WiMax spectrum, from which it expects to earn Rs.25,000 crore. Indian telecom operator Tata Teleservices has launched a new scheme ton Tuesday which will provide its CDMA subscribers to talk endlessly for just Re.1.

This is a break from its normal service, where the CDMA subscribers are charged on a one minute-pulse basis. According to Tata Teleservices, the subscribers will be charged Re. 1 for all the local calls and Rs. 3 for distance calls, irrespective of the call duration.

The pay-per-call product has been launched on the prepaid platform, and subscribers opting for it will be charged a daily fee of Re.1.

The local as well as national short messages service (SMS) will be available for the users at Re.0.50. Two major players of Indian telecom sector, Reliance Communications (RCom) and Aircel, will be entering into an infrastructure-sharing agreement worth $300-million.

"The deal will offer RCom a revenue upside of over Rs.1, 500 crore. It will cover end-to-end telecom infrastructure agreement for towers, voice carriage and bulk bandwidth," said a person who has not disclosed his identity.

This deal will enable the sharing of infrastructure where Aircel already has launched its services as well as in the new circles, where the services will be rolled out in future.

This agreement will be executed by RCom via its tower subsidiary Reliance Infratel. In a cellular system, the geographical area is divided into adjacent, non-overlapping, hexagonal shaped cells. Each cell has its own transmitter and receiver (called base stations) to communicate with the Mobile units in that cell; a mobile switching station coordinates the handoff of mobile units crossing cell boundaries. Cellular systems are based on the concept of frequency reuse: the

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same frequency is used by several sites which are far enough from one another, resulting in a tremendous gain in system capacity. The counterpart is the increased complexity, both for the network and the mobile stations, which must be able to select a station among several possibilities, and the infrastructure cost because of the number of different sites. The system hands over calls from transmitter to transmitter as customers move around in their vehicles . This new technique would allow more customers access to the system simultaneously, and when more capacity was needed, the area served by each transmitter could be divided again which is popularly known as CELL SPLITTING. One of the most important concepts for any cellular telephone system is that of multiple access meaning that multiple, simultaneous users can be supported through frequency reuse. In other words, a large number of users share a common pool of radio channels and any user can gain access to any channel (each user is not always assigned to the same channel). A channel can be thought as merely a portion of the limited radio spectrum, which is temporarily allocated for a specific purpose, such as someone's phone call.

Environmental factors:
It includes weather, climate, and climate change, which may especially affect industries such as tourism, farming, and insurance. Furthermore, growing awareness to climate change is affecting how companies operate and the products they offer--it is both creating new markets and diminishing or destroying existing ones. Indian telecom sector has come a long way in achieving its dream of providing affordable and effective communication facilities to its citizens as envisaged in New Telecom Policy (NTP) 1999 The other thrust areas include, building a modern and efficient telecommunications infrastructure, transforming telecommunication sector to a greater competitive environment with equal opportunities and level playing field for all players, strengthening research and development efforts in the country, achieving efficiency and transparency in spectrum management and enabling Indian telecom companies to become global players. The reform measures coupled with the proactive policies of the Department of Telecommunications have resulted in an unprecedented growth of the telecom sector. Today, the Indian 45

telecommunications network with over 375 million connections is third largest network on overall basis and second largest wireless network in the world. India is also the fastest growing telecom market in the world with an average addition close to 10 million subscribers per month. 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. 3G Services and Broadband Wireless Services In a pioneering decision, the Government decided to auction 3G & BWA spectrum. The broad policy guidelines for 3G & BWA have already been issued and allotment of spectrum will be done through simultaneous ascending e-auction process by a specialized agency. The 3G is slated for auction at the end of January 09 and BWA auction will be after the two days from the day of close of the 3G auction. New players would also be able to bid thus leading to technology innovation, more competition, faster roll out and ultimately greater choice for customers at competitive tariffs. The 3G will allow telecom companies to offer additional value added services such as high resolution video and multi media services in addition to voice, fax and conventional data services with high data rate transmission capabilities. BWA will become a predominant platform for broadband roll out services. It is also an effective tool for undertaking social initiatives of the Government such as e-education, telemedicine, e-health and eGovernance. Providing affordable broadband, especially to the suburban and rural communities is the next focus area of the Department. Mobile Number Portability (MNP) Service Licence Mobile Number Portability (MNP) allows subscribers to retain their existing telephone number when they switch from one access service provider to another irrespective of mobile technology or from one technology to another of the same or any other access service provider. The Government has already announced the guidelines for Mobile Number Portability (MNP) Service Licence in the country and these services are likely to be available by Jan 2011 in four metros and thereafter will be extended in phases to the rest of the country.

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Mobile Virtual Network Operators (MVNOs) The guidelines for Mobile Virtual Network Operators (MVNOs) to launch operations in India are set to be unveiled soon. MVNOs offer mobile services without owning or airwaves (spectrum) on which telecom signals travel. Their business model involves buying airtime from existing operators that own telecom infrastructure and selling it to consumers under their own brand. At present, there are 360 MVNOs operating globally. The entry of MVNOs will increase competition in the worlds fastest growing mobile market and will further benefit the customer by way of reduced tariff.

Legal factors:
include discrimination law, consumer law, antitrust law, employment law, ansd health and safety law. These factors can affect how a company operates, its costs, and the demand for its products. Telecom Services and Consumer Law In a Recent Judgment in an appeal No.7687 of 2004 filed by the BSNL, the Honble Supreme Court of India while deciding/accepting the appeal of BSNL on 1-1-2009, has Has decided that when there is a special remedy provided in section 7-B of the Indiam Telegraph Act regarding disputes in respect of telephone bills, then the remedy under the Consumer Protection Act is by implication barred. The section 7-B of the India Telegraph Act provides for resolution of consumer disputes through arbitration. While circulating this Judgment by the BSNL head quarters, the Branch Offices have been directed to contest the cases on the basis of above said Judgment of the Honble Supreme Court of India.

The Consumer Forums have been given jurisdiction to adjudicate upon the matters relating to telecom consumer disputes under the said Act of 1997. While holding that the consumer Protection Act is a special legislation and not a general law, Shri Sanjay Garg, President of the Consumer Forum finding the B.S.N.L. deficient in services ordered it to pay a sum of Rs.10, 000/- to complainant Lakhbir Singh on account of mental agony, pain and harassment suffered

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by him and Rs.2000/- as litigation expenses and further ordered to restore the mobile connection of the complainant without charging any extra sum.

3.3: OT ANALYSIS
A scan of the internal and external environment is an important part of the strategic planning process. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T). Such an analysis of the strategic environment is referred to as a SWOT analysis. The SWOT analysis provides information that is helpful in matching the firm's resources and capabilities to the competitive environment in which it operates. As such, it is instrumental in strategy formulation and selection. The following diagram shows how a SWOT analysis fits into an environmental scan:

Opportunity
Population: The population of India is really an opportunity of telecom service providers, as the number of population without telecom service is also very high. The industry has to target Indias huge population to grow.

Changing Population psychograph: Population psychograph is also changing. Previously telecom service was thought as an emergency service, now it has become an essential part of life in our country.

Increased Penetration Level: All the organizations of the industry are trying to increase their penetration level, in other word to increase the tele-density of the country. The urban Indian population gives a real growth prospect to the industry.

FDI: The foreign direct investment in telecom has been hiked up from 49% to 74%. This move is positive for the sector, as it requires investments of Rs 700 900 million over the next 5 years. FDI inflow by 2004 was 9950.94 cores in telecom. Countries like Europe, 48

Korea, and Japan telecom are likely to enter India, as India is seen as fastest growing telecom market in world.

Threats
The treats to the industry are the following: Government Policies Government may provide licenses to many foreign operators, which may already have pose a threat for the existing players in the industry. New Technology can change the market dynamics: A lot of new technologies are coming. Then even have the potential of changing the entire industry dynamics or even create substitute of the telecom services existing. Some of the examples are follows: VOIP (Skype, Messenger etc.) Online Chat Email Satellite phones To summarize the SWOT analysis we can draw the following framework for telecom industry: Figure: 3.1

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3.4: The Porters Diamond Model


The Method developed by Porter analyzes four different dynamics of a nation. The four different determinants of the system are plotted as a diamond in Figure below: Figure: 3.2

Figure Porter Diamond Model An Analysis of the Indian Telecom industry under the porters Diamond model reveals that India offers a competitive advantage for firms operating in the country. Firm Strategy, Structure, and Rivalry: Intensive competition in the country has made it possible for service providers to offer the service with lowest fare in the world profitably. Many new handsets have been launched. 50

Factors Conditions: Presence of skilled Labour pool. Rapidly developing robust telecom infrastructure. Increasing disposable incomes of consumers. Increasing demand due to changing lifestyles and growing attraction for mobiles with new features. Related Supporting Industries: Competent handset manufacturer have produces the lowest priced handset for the Indian market. Handset players are setting up manufacturing bases in india for better operation management. Many telecom equipment & software companies are based in india. Various value added service providers and content developers are present in india.

Demand Conditions: India has a large middle class of 300 million. Growing affordability and lifetime free schemes have created a market at the bottom of the pyramid. Low teledensity (-18%) offers huge future potential.

Governments: The government extends full support to industry through reform processing. Policies are in place to safeguard the interests of service providers as well as those of consumers.

3.5: 7 ps Service Marketing


Following are the 7 Ps of Services Marketing 51

1. Product/Services 2. Price 3. Promotion 4. Place 5. People 6. Physical Evidence 7. Process Figure: 3.5

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1. Product/services
There is little difference between product and service, when a customer buys a physical product, he can feel it, see it as it has tangible aspect whereas services have intangible aspects, a customer can only benefit from the service only as it has performed by the services provider such as operating a patient consulting a lawyer, getting advise from tax advisor. Vodafone, the mobile service brand of Vodafone Essar, has emerged as the Most Admired Mobile Service Brand Online in India followed by Tata Indicom and Aircel in an pan-India survey conducted by Drizzlin Media. The survey shows that Reliance Mobile emerged as the least admired brand.

The term "DoCoMo" is usually accompanied by a barrage of wild, high-end mobile hardware, so we have a tendency to sit up and pay attention whenever the storied name appears on a carrier anywhere in the world. India's Tata Teleservices -- of which NTT DoCoMo holds a 26 percent share -- is set to launch a newly-branded GSM service as Tata DoCoMo in the southern part of the country this month, followed by a "gradual" expansion nationwide. The logo's pretty awesome, the name's pretty awesome -- now we just need some Japanese domestic market handsets to go along with it and we'll be in business.

2. Price
In determining the prices of services, the one characteristic, which has great impact is their perish ability and the fact that fluctuation in demand cannot be met through inventory. Hotels and Airlines and telecom sectors offer lower rates during off season and lower telephone charges for outstation calls after Peak Hours are the example of how pricing can be used. Price of the all companies are very affordable for the customer and it is as par customers demand A combination of a price war and a contentious proposal by the Telecom Regulatory Authority of India, or TRAI, sent telecom stocks reeling. By the end of the week, shares of Indias largest telecom firm Bharti Airtel Ltd, Reliance Communications Ltd and Idea Cellular Ltd had fallen fall by 21.4%, 22% and 15%, respectively. 53

The telecom regulator had recommended that per-second billing be made mandatory for mobile operators so users pay only by the second. Following the adverse market reaction, Trai chairman J.S. Sharma clarified that the regulator was considering making per-second billing one of the options that operators would have to offer, and not the only option. Its one of the ideas that is being worked upon. Its not as if any decision has been taken. Tata Teleservices Ltds Tata DoCoMo was the first operator to offer per-second billing nationally. Vodafone Essar Ltd launched a plan allowing users with a bonus card to call people in neighbouring states but not in the same regional circle at 50 paisa per minute. Idea, too, has also highlighted a 50-paisa option as a key price point. Reliance was the first service provider to offer a flat rate of 50 paisa for calls within India, national roaming and text messages across networks on a minutes worth of talk time. Reliances stated objective is to offer a simple package to customers, but the new offer could be a key card when number portability is launched.

3. Promotion
The fundamental difference, which must be kept in mind while designing the promotion strategy for services, is that customer relies more on subjective impassions rather than concrete evidence. This is because of the inherent intangible nature of services. Secondly, the customer is likely to judge the quality of services on the actual services. Thirdly since it is difficult to sample the services before paying for it, the customer finds it difficult to evaluate a product. Pamphlets, Hoardings. Newspapers, magazines

4. Place
The most important decision element in the distribution strategy relates to the issue of location of the services so as to attract the maximum number of customer such as those of Doctors, teachers, 54

consultants, machinist etc, poses distribution constraints since they are able to serve only limited and fractional markets.

5. People
People constitute an important dimension in the management of services in their role both as performers of services and as customer. They must, therefore, be well informed and provide the kinds of services that win customer approval. People as performance of services are important because A customer sees a company through its employees. The employee represents the first line of contact with the customer. The firm must recognize that each employee is a salesman for the company services. Daily telecom e-newsletter with telecom world information, serving you with daily top Indian & International news right there in your mailbox. updating people in just five minutes about the daily happenings of telecom sector. Stop searching just open your mail box and get what you want fresh news, daily update, share market information, latest in technology, articles and what you request you get, all free Telecom India Daily reaches out to Top professionals, decision makers, technocrats, engineers associated with leading technology vendors, communications companies, infrastructure providers, service providers, network integrators, telecom manufacturers and above all the upcoming professionals students, with a regular informative update on the latest developments in the rapidly changing interactive media environment. Highlights An immense source of information and latest updates. Keep employees up to date about the happenings in telecom. Helping organizations to understand the on going business and improves the decision power of people working within. Information & data provided can be utilized to explore new areas. 55

Stage for companies to showcase their press releases.

Sales staff, marketing staff, corporate, students etc.

6. Physical Evidence
Clearness in doctors clinic, exterior appearances and interior dcor of restaurant, the comfort of the seating arrangement in a cinema hall, adequate facility for personal needs at the airport, all contribute towards the image of the service and organization as perceived by the customer. The common elements in these are that they all are physical, tangible and controllable aspects of a service organization .They constitute physical evidence of the service Stores, logos

7. Process
In service organization, the system by which you receive delivery of service constitutes the process. In fast food outlets the press comprises buying coupons at one counter and picking up the food against that at another counter. Services can be described on the basis of types of process used in the delivery of the service. The three kinds of deliver process that are applicable in case of service products are Line Operation, Job Shop Operation and Intermittent Operation. Self service, restaurant and shop are example of line operation. When the consumer requires a combination of services using different sequences, the job shop type of operation is more use full. Hospital, restaurants and educational institutions usually have these types of delivery process. Intermittent operations are use full when the types of service is rarely repeated, Firms offering consultancy for projects use this kind of delivery system. Advertising agencies also use intermittent delivery system since each advertising campaign requires a unique set of input factors.

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Chapter 4: Financial Analysis


4.1,Bacground: Ratio analysis is a powerful tool of financial analysis. A ratio is defined as The Indicated Quotient of Two Mathematical Expressions and as The Relationship between Two or More Things. In financial analysis, a ratio is used as a benchmark for evaluating the financial position and performance of firm. The absolute accounting figures reported in the financial statement do not provide a meaningful understanding of the performance and financial position of a firm. The relationship between two accounting figures, expressed mathematically is known as a financial ratio. Ratios help to summaries large quantities of financial data and to make qualitative about the firms financial performance. The point to note is that a ratio reflecting a quantitative relationship helps to form a qualitative judgment. Such is the nature of all financial ratios. Tools used for financial analysis: (1)Ratio (2)Trend analysis 4.2 Objectives of Financial Analysis: To Know the financial position. To Analysis the past performance and to make future projections. To helpful in providing valuable insight into industrys financial picture. To study of risk operation.

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4.2). Ratios: 4.2.1. Debt to Equity Ratio This ratio indicates the extent to which debt is covered by shareholders funds. It reflects the relative position of the equity holders and the lenders and indicates the companys policy on the mix of capital funds. The debt to equity ratio is calculated as follows:

Total debt Debt to Equity Ratio = ____________ Total equity Table 4.1 Debt-Equity Ratio IDEA RELIANCE AIRTEL TOTAL INDUSTRY (TOTAL) Years 2007-08 1.88 0.77 0.38 3.03 1.01 2008-09 0.95 0.67 0.3 1.92 0.64 2009-10 0.62 0.54 0.2 1.36 0.453

Graph 4.1

Debt-Equity Ratio
1.2 1.01 1 0.8 0.6 0.4 0.2 0 2008 2009 2010 0.64 0.453

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Interpretation:Debt Equity was little out of control during the year 2008 but it got controlled from next year, company should control their debt in future and industry has to be careful while borrowing the debt and reducing debt.

2). Current Ratio: The Current Ratio expresses the relationship between the firms current assets and its current liabilities. Current assets normally include cash, marketable securities, accounts receivable and inventories. Current liabilities consist of accounts payable, short term notes payable, short-term loans, current maturities of long term debt, accrued income taxes and other accrued expenses (wages). Current assets Current Ratio = ________________ Current liabilities

Table 4.2

Current Ratio

Years 2007-08 IDEA 0.66 RELIANCE 1.25 AIRTEL 0.49 TOTAL 2.40 INDUSTRY (TOTAL) 0.8

2008-09 0.76 1.17 0.61 2.54 0.846

2009-10 0.97 1.33 0.7 3 1

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Graph 4.2

current ratio
1.2 1 1 0.8 0.8 0.6 0.4 0.2 0 2008 2009 2010 0.846

Interpretation:In year 2010 current ratio is increased compared to past year which is good for the industry as current assets increase current ratio increase of the industry .it is good for industry that its current ratio increase year by year. 3). Net Profit Ratio

This is a widely used measure of performance and is comparable across companies in similar industries. The fact that a business works on a very low margin need not cause alarm because there are some sectors in the industry that work on a basis of high turnover and low margins, for examples supermarkets and motorcar dealers. What is more important in any trend is the margin and whether it compares well with similar businesses.

Earnings after interest and taxes Net Profit Ratio =______________________________ *100 Net Sales

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Table 4.3 Net Profit Years 2007-08 IDEA RELIANCE AIRTEL TOTAL INDUSTRY TOTAL Graph 4.3 14.97 10.1 24.1 49.17 16.39 2008-09 8.33 3.94 22.14 34.41 11.47 2009-10 8.37 1.39 26.10 35.86 11.953

Net Profit Ratio


20 16.39 15 11.47 10 5 0 2008 2009 2010 11.953 Net Profit Ratio

Interpretation:This ratio is the overall measure of the firms ability to turn each rupee sales into net profit. If the net margin is inadequate, the firm will fail to achieve satisfactory return on shareholders fund. In the year 2008 the ratio was 16.39% and then it decrease to 11.47% in year 2009. In the year 2010 the ratio was 11.953% which indicate industry has decline profit compare to the last year, so industry has to increase profit in the future.

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4.4 TREND ANALYSIS Ratio analysis enables a firm to take the time dimension into account. In other words, whether the financial position of a firm is improving or deteriorating over the years. This is made possible by the use of trend analysis. The significance of the trend analysis of ratio lies in the fact that the analysts can know the direction of movement, that is, whether the movement is favorable or unfavorable. For example, the ratio may be low as compared to the norm but the trend may be upward. On the other hand, though the present level may be satisfactory but the trend may be a declining one. Table 4.4 :Sales trend: 2008 Idea 6,719.99 Reliance 13,416.19 Airtel 25,703.51 Total 45,839.69 Ind.sales 15279.89667 2009 9,857.08 13,610.58 34,014.29 57,481.95 19160.65 2010 11,850.24 12,290.61 35,609.54 59,750.39 19916.8

Graph : 4.4

sales trend
25000 19160.65 20000 15279.9 15000 10000 5000 0 2008 2009 2010 sales 19916.8

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Interpretation: Due to increasing sales of companies there is overall industry sales is increasing as company has less credit sales compared to previous year which has increased the sales of the industry ultimately.

Table 4.5 :Debt trend: 2008 Idea 6,514.76 Reliance 20,286.43 Airtel 6,570.34 Total 33,371.53 Industry 11123.84333 2009 7,579.36 30,903.61 7,713.65 46,196.62 15398.87 2010 6,526.41 24,478.28 5,038.92 36,043.61 12014.54

Graph 4.5

debt trend
18000 16000 14000 12000 10000 8000 6000 4000 2000 0 2008 2009 2010 11123.84 12014.54 debt 15398.87

Interpretation: Debt trend is shows that trend of debt is increasing in 2009 but decrease in next year which is good for the industry. in the year 2010 total debt of the company was decreasing compared to previous year.

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Chapter:5 Conclusion and Limitations: 5.1 Challenges for Telecom Industry


The challenges of the day is to search for new cost effective ways to roll out telecom services in rural areas it means one has to choose proper and effective technology for deployment and leverage on the use of available infrastructure to reduce cost and time of role out of services. Those service providers who create the right business would emerge wireless and the rest would remain spectators.

Connectivity of network and cost of bandwidth are also important to facilitate broadband usage. Availability of local application and content is another are of concern available on website as of today is in English. The content in local and regional language will increase interest of the local population in broadband utilization. Wireless technology is the future growth driver for which spectrum is the most important input. The task of spectrum management in a multi-user and multi usage scenario is more daunting and crucial than ever before.

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5.2 Findings
New entrants can take advantage of gaps in the offerings of these aging pioneers, or find innovative ways to market their product or service. Re-examining high levies: The Indian telecom sector is one of the highest taxed sectors in the developing world, through levies, which comprise service tax, revenue share, spectrum cess, and value added tax. Bringing down operators' capex: To expand the telecom services, there will be greater investment needs in the future. Telcos will have to engage on active and passive infrastructure sharing. Rational policy for spectrum allocation: The allocation of adequate spectrum is an urgent requirement for new and existing operators. A clear roadmap for future spectrum allocation has to be drawn, whether it is a 2G or a 3G platform. Operators need to be cautious in bidding' and should not overpay for spectrum as that could disturb project economics. Data revenues to provide buffer': India's data revolution is going to be fuelled by 3G and WiMAX. For the data revolution to reach villages, low-cost access devices, vernacular content, and community initiatives such as e-governance need to be in place. Enhancing skill sets: The sector will require specialist resources to support and sustain growth over the next four to five years. And pressure on talent is expected to increase with the deployment of 3G and WiMAX services. The private sector will need to reorient its focus on talent development through training schools and facilitation programs that cater to the needs of the telecom industry. Impact of global economic downturn: The current financial crisis could have a low-to-medium impact on the telecom sector in terms of rising costs of capital and reduction in discretionary spending on the part of customers, among other determinants.

5.3 Limitation
We have collected the secondary data where we cannot able to get exact information about the telecommunication industry privilege in the market as ratio are based in past data and hence cannot be reliable guide to future performance as future is dependent on other factors. 65

5.4 CONCLUSION
The technology improvement has helped the sector to perform better and has also expanded the meaning of the term telecommunication from just audio message transformation to virtual presence of person. The sector clearly shows a great scope for future.

In our opinion, instead of taking a short-term view of paying capacity, the telecom companies should focus on a long-term game. There is one word that telecom companies are hearing a lot these days-Volumes. They need volumes to sustain the network and the large employee base they have enrolled. In this regard, companies like Reliance and Tatas have been agg ressive over the final rollout of connections to PCO owners. Reliance is giving up to 30% commission on each call. . If and when the carrier access codes are introduced, there could be a tough fight among these outlets, as far as prices are concerned. Yet, prices can go down further by almost 40% of the present structure. Part of the price cuts could be because of tax exemptions, if and when these companies can lobby for the same. The other part could be earning through volumes. New players like Virgin Mobile, which already has an international presence in close to 17 countries are entering India. It is doing so in collaboration with Tata Tele services. The target market for Virgin Mobile is the youth, which in India is around 54% of its population. Mobile Number Portability (MNP) is to be introduced by Jan 2011. A neutral third-party operator is likely to be licensed to provide an end-toned MNP solution. MNP could well be a catalyst in the realignment of subscriber market share in favor of strong players with better service quality. There are challenges like porting time, allocation of capital and operational porting costs among participants, and other inter connect issues. Yet, the atmosphere around the MNP issue looks positive and will be set once the committee submits its final report on the same. The telecom sector is attracting significant domestic and global investment. The capital investment made by the telecom service industry during 2006-07 was around $8.5 billion, out of which $550 million was foreign direct investment. The margins and profits of almost all the telecom companies have been increasing. In fact there are cases where significant portions of profit of international telecom companies have been from their operations in India. India is well prepared for the introduction of NGN (Next-Generation Networking). Being a late starter in the telecom scenario, India has the advantage of using the latest technology and so it is

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in a better position when compared to many other countries as far as introduction of NGN is concerned. Besides, the TRAI has identified introduction of NGN as apriority area. As of today, the trend seems favorable toward the continued growth of the telecom industry. The target of 500 million telephone connections by the year 2010 is very much achievable. Even with 300 million telephone connections, the tele-density of the country is only about 26 percent. It has been noted that mobile telephony is growing at an annual rate of over 90 percent. Also, on an average over eight million subscribers are being added every month. Besides the basic telephone service, there is a huge potential for different Value Added Services (VAS). In fact, the real potential for telecom service growth is still lying untapped.

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BIBLIOGRAPHY Books:
Crafting & Education straregy for competitive advantage. In G. a. Thomson. New delhi: Mack grow hill publication. (2008, Ninth Edition). Financial Management. In I. M. Pandey. New Delhi: Vikas Publishing House Pvt. Ltd.

News papers 1. Economies of times 2. Business standard Websites:

www.wikipedia.org. (n.d.). Retrieved 11 23, 2010, from www.wikipedia.org: http://en.wikipedia.org/wiki/telecomm.html www.2indya.com. (n.d.). Retrieved 11 09, 2010, from www.2indya.com: www.2indya.com/telecommunication-industry-in-india www.ibef.org. (n.d.). Retrieved 12 5, 2010, from www.ibef.org: www.ibef.org/industry/telecommunications.aspx www.indiaonestop.com. (n.d.). Retrieved 11 5, 2010, from www.indiaonestop.com: www.indiaonestop.com/fdi-telecom.htm

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Annexure
Idea Cellular Ltd Profit & loss account
(Rs in Crs) Year INCOME : Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income EXPENDITURE : Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Administration Expenses Miscellaneous Expenses Less: Pre-operative Expenses Capitalised Total Expenditure Operating Profit Interest Gross Profit Depreciation Profit Before Tax Tax Fringe Benefit tax Deferred Tax Reported Net Profit Extraordinary Items Adjusted Net Profit Adjst. below Net Profit P & L Balance brought forward Statutory Appropriations Appropriations P & L Balance carried down Dividend Mar 10 Mar 09 Mar 08 6,719.99 0 6,719.99 199.05 0 6,919.04 0.01 235.44 337.72 2,766.45 1,069.86 46.98 0 4,456.46 2,462.58 468.96 1,993.62 876.76 1,116.86 0 7.37 65.13 1,044.36 38.21 1,006.15 0 2,450.86 0 0 1,406.50 0 69

11,850.24 9,857.08 0 0 11,850.24 9,857.08 587.38 477.37 0 -0.05 12,437.62 10,334.40 0.02 968.89 563.78 6,012.05 1,390.15 219.09 0 9,153.98 3,283.64 563.71 2,719.93 1,551.20 1,168.73 0 0 115.07 1,053.66 61.41 992.25 -1,529.21 -405.28 0 -484.46 -396.37 0 18.92 552.35 462.75 4,720.24 1,257.15 74.97 0 7,086.38 3,248.02 918.3 2,329.72 1,242.86 1,086.86 0 9.3 76.35 1,001.21 179.67 821.54 0 -1,406.50 0 0 -405.29 0

Preference Dividend Equity Dividend % Earnings Per Share-Unit Curr Earnings Per Share(Adj)-Unit Curr Book Value-Unit Curr

0 0 3.19 34.59

0 0 3.23 36.37

0 0 3.96 13.44

balancesheet
(Rs in Crs) Year SOURCES OF FUNDS : Share Capital Reserves Total Equity Share Warrants Equity Application Money Total Shareholders Funds Secured Loans Unsecured Loans Total Debt Total Liabilities APPLICATION OF FUNDS : Gross Block Less : Accumulated Depreciation Less:Impairment of Assets Net Block Lease Adjustment Capital Work in Progress Investments Current Assets, Loans & Advances Inventories Sundry Debtors Cash and Bank Loans and Advances Total Current Assets Less : Current Liabilities and Provisions Current Liabilities Provisions Total Current Liabilities Net Current Assets Miscellaneous Expenses not written off Deferred Tax Assets Mar 10 Mar 09 Mar 08

3,299.84 3,100.10 2,635.36 8,112.95 8,176.09 906.91 0 0 0 44.44 18.23 0 11,457.23 11,294.42 3,542.27 5,988.61 5,564.93 5,315.42 537.8 2,014.43 1,199.34 6,526.41 7,579.36 6,514.76 17,983.64 18,873.78 10,057.03 22,834.40 15,562.75 13,204.30 7,907.34 4,739.86 4,221.50 0 0 0 14,927.06 10,822.89 8,982.80 0 0 0 462.58 1,721.82 1,625.72 2,755.13 4,928.81 569.93 46.7 430.12 280.44 3,124.64 3,881.90 42.73 329.59 2,344.43 2,047.10 4,763.85 27.62 198.59 497.05 850.74 1,574.00

3,679.63 137.76 3,817.39 64.51 0 408.5

3,122.40 98.65 3,221.05 1,542.80 0 231.11

2,547.42 81.82 2,629.24 -1,055.24 0 100.14 70

Deferred Tax Liability Net Deferred Tax Total Assets Contingent Liabilities

634.14 373.65 166.32 -225.64 -142.54 -66.18 17,983.64 18,873.78 10,057.03 3,009.27 2,142.56 1,572.83

Reliance Communication Profit & loss account


(Rs in Crs) Year INCOME : Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income EXPENDITURE : Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Administration Expenses Miscellaneous Expenses Less: Pre-operative Expenses Capitalised Total Expenditure Operating Profit Interest Gross Profit Depreciation Profit Before Tax Tax Fringe Benefit tax Deferred Tax Reported Net Profit Extraordinary Items Adjusted Net Profit Adjst. below Net Profit P & L Balance brought forward Statutory Appropriations Appropriations Mar 10(12) Mar 09(12) Mar 08(12)

13,554.60 15,086.66 14,792.05 1,263.99 1,476.08 1,375.86 12,290.61 13,610.58 13,416.19 2,484.06 4,246.80 520.58 0 0 0 14,774.67 17,857.38 13,936.77 0 144.27 670.45 8,890.69 1,691.04 134.38 0 138.32 757.06 6,931.39 2,019.82 226.53 0 91.76 823.12 5,207.99 2,339.46 156.64 0 8,618.97 5,317.80 870.05 4,447.75 1,843.66 2,604.09 2.1 15.54 0 2,586.45 -9.92 2,596.37 0 2,294.90 0 581.11 71

0 0 11,530.83 10,073.12 3,243.84 7,784.26 1,113.13 1,035.68 2,130.71 6,748.58 1,511.24 1,933.51 619.47 4,815.07 140.54 0 0 12.4 0 0 478.93 4,802.67 -14.83 3,459.99 493.76 1,342.68 0 0 502.75 4,300.24 0 0 319.54 8,600.16

P & L Balance carried down Dividend Preference Dividend Equity Dividend % Earnings Per Share-Unit Curr Earnings Per Share(Adj)-Unit Curr Book Value-Unit Curr

662.14 175.44 0 17 2.18 244.66

502.75 165.12 0 16 23.13 250.44

4,300.24 154.8 0 15 12.4 120.35

Balance sheet
(Rs in Crs) Year SOURCES OF FUNDS : Share Capital Reserves Total Equity Share Warrants Equity Application Money Total Shareholders Funds Secured Loans Unsecured Loans Total Debt Total Liabilities APPLICATION OF FUNDS : Gross Block Less : Accumulated Depreciation Less:Impairment of Assets Net Block Lease Adjustment Capital Work in Progress Investments Current Assets, Loans & Advances Inventories Sundry Debtors Cash and Bank Loans and Advances Total Current Assets Less : Current Liabilities and Provisions Current Liabilities Provisions Total Current Liabilities Net Current Assets Mar 10 1,032.01 49,466.88 0 0 50,498.89 3,000.00 21,478.28 24,478.28 74,977.17 Mar 09 1,032.01 50,658.31 0 0 51,690.32 3,000.00 27,903.61 30,903.61 82,593.93 Mar 08 1,032.01 23,808.02 0 0 24,840.03 950 19,336.43 20,286.43 45,126.46

39,838.17 37,941.15 21,576.32 9,225.69 6,533.38 4,688.69 0 0 0 30,612.48 31,407.77 16,887.63 0 0 0 1,683.52 3,643.86 7,117.56 31,898.60 31,364.75 13,844.14 298.34 253.14 201.22 1,738.63 1,482.22 1,093.21 82.18 535.15 192.66 17,886.79 23,272.50 17,028.20 20,005.94 25,543.01 18,515.29

5,836.53 5,781.49 7,207.76 3,386.84 3,583.97 4,030.40 9,223.37 9,365.46 11,238.16 10,782.57 16,177.55 7,277.13 72

Miscellaneous Expenses not written off Deferred Tax Assets Deferred Tax Liability Net Deferred Tax Total Assets Contingent Liabilities

0 0 0 0 0 0 0 0 0 0 0 0 74,977.17 82,593.93 45,126.46 3,054.61 5,904.67 3,053.92

Airtel Profit & loss account


(Rs in Crs) Year INCOME : Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income EXPENDITURE : Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Administration Expenses Miscellaneous Expenses Less: Pre-operative Expenses Capitalised Total Expenditure Operating Profit Interest Gross Profit Depreciation Profit Before Tax Tax Fringe Benefit tax Deferred Tax Reported Net Profit Extraordinary Items Adjusted Net Profit Mar 10(12) Mar 09(12) Mar 08(12)

35,609.54 34,014.29 25,703.51 0 0 0 35,609.54 34,014.29 25,703.51 1,228.73 525.14 359.91 -34.91 5.29 9.05 36,803.36 34,544.72 26,072.47 35.1 125.09 2,265.01 2,173.30 1,407.24 1,404.54 13,507.18 13,049.37 4,034.65 3,766.89 731.2 616.74 155.3 1,045.16 1,306.57 8,184.32 3,718.17 1,028.47

49.69 107.4 112.4 21,930.69 21,028.53 15,325.59 14,872.67 13,516.19 10,746.88 283.35 2,148.38 607.76 14,589.32 11,367.81 10,139.12 3,890.08 3,206.28 3,166.58 10,699.24 8,161.53 6,972.54 942.73 777.73 859.36 0 35.87 37.23 330.36 -395.91 -168.24 9,426.15 7,743.84 6,244.19 130.81 212.46 48.38 9,295.34 7,531.38 6,195.81 73

Adjst. below Net Profit P & L Balance brought forward Statutory Appropriations Appropriations P & L Balance carried down Dividend Preference Dividend Equity Dividend % Earnings Per Share-Unit Curr Earnings Per Share(Adj)-Unit Curr Book Value-Unit Curr

0 5.5 -22.25 18,502.83 11,797.22 5,533.92 0 0 0 1,150.51 1,043.73 -41.36 26,778.47 18,502.83 11,797.22 379.79 379.65 0 0 0 0 20 20 0 24.65 40.45 32.9 96.73 145.62 106.63

Balance sheet
(Rs in Crs) Year SOURCES OF FUNDS : Share Capital Reserves Total Equity Share Warrants Equity Application Money Total Shareholders Funds Secured Loans Unsecured Loans Total Debt Total Liabilities APPLICATION OF FUNDS : Gross Block Less : Accumulated Depreciation Less:Impairment of Assets Net Block Lease Adjustment Capital Work in Progress Investments Current Assets, Loans & Advances Inventories Sundry Debtors Cash and Bank Loans and Advances Total Current Assets Less : Current Liabilities and Provisions Mar 10 Mar 09 Mar 08

1,898.77 1,898.24 1,897.91 34,838.41 25,745.43 18,342.35 0 0 0 0 0.29 1.23 36,737.18 27,643.96 20,241.49 39.43 51.73 52.42 4,999.49 7,661.92 6,517.92 5,038.92 7,713.65 6,570.34 41,776.10 35,357.61 26,811.83 44,212.52 16,187.56 0 28,024.96 0 1,594.74 15,773.32 27.24 2,104.98 816.74 6,276.12 9,225.08 37,266.70 28,115.65 12,253.34 9,085.00 0 0 25,013.36 19,030.65 0 0 2,566.67 2,751.08 11,777.76 10,952.85 62.15 2,550.05 2,251.60 4,561.21 9,425.01 56.86 2,776.46 502.94 2,923.61 6,259.87

74

Current Liabilities Provisions Total Current Liabilities Net Current Assets Miscellaneous Expenses not written off Deferred Tax Assets Deferred Tax Liability Net Deferred Tax Total Assets Contingent Liabilities

12,179.99 13,117.98 11,909.07 658.76 634.4 209.88 12,838.75 13,752.38 12,118.95 -3,613.67 -4,327.37 -5,859.08 0 0.08 0.2 796.29 1,041.62 436.3 799.54 714.51 500.17 -3.25 327.11 -63.87 41,776.10 35,357.61 26,811.83 5,396.61 3,241.16 2,148.87

75

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