A GLANCE ON TELECOMMUNICATION SECTOR

The father of telecom revolution in our country was the erstwhile PM Shri Rajiv Gandhi, wherein he called Mr. Sam Pitroda who initiated the Digital telephony revolution in our country. dvances in technology coupled with reforms of !""! and the fundamental, structural and institutional changes #rought a#out in that period were instrumental in setting up the tone for future growth and development. Today, $ndia is one of the fastest growing telecom mar%ets in the world with current su#&scri#er #ase nearing '() mil&lion. $ndia, the fastest growing telecom mar%et in world, registered a * GR of around +,- over the last decade and has left analysts around the world totally in awe. mong the various segments, cellular or mo#ile segment has #een the %ey contri#utor and specially prepaid services, with its wide offerings of services, has #een leading the growth wave. .ith the upcoming +G allotment, the sector is li%ely to grow at a good rate riding on #etter and possi#ly a whole new range of services. Telecom parameters /wing to the huge competition among the players, price wars are 0uite evident. !) years ago su#scri#ers were made to pay for an incoming call1 today they have the li#erty to pay for per second of their usage, with T T D/*/M/ #ringing the mar%et disruption #y their concept of v&erage per second #illing. The reduction in tariff has culminated in a downward trend in current and future revenue projections $ncum#ents The $ndian mo#ile services mar%et is more or less e0ually divided #etween GSM and *DM customers with the former capturing around 5+- of the su#&scri#er #ase. *urrently there are !! players who are fighting tooth and nail to increase even one single percentage point in their mar%et share. .hile 6harti irtel dominates the GSM arena, nil communications has #een leading the *DM m#ani led D G7s Reliance services space in mo#ile telephony #ut the good

revenue per user 2 RP34, a metric which is used #y Telecom companies as a metric for their

sign for the sector is that revenues of all the incum#ents have increased leading to an increase in

their revenues. $n GSM, 6harti

irtel is given a tough competition #y 8odafone and Tata

Teleservices which operates Tata $ndicom and in *DM 1 it is considera#ly #ehind Reliance communications in terms of mar%et share. .ith Mo#ile num#er porta#ility coming into the scene, the war will #e fiercer in this space and there will #e a huge swapping of su#scri#ers among the e9isting players. Growth Prospects: $ndian telecom industry has set an e9ample #y penetrating the mar%et to an e9tent of around ,+in a span of !) years when analysts and e9perts were e9tremely s%eptical a#out $ndia as a mar%et. The growth has not #een restricted only to the higher section of the society, now it is driven primarily #y the rural mar%et as well and the acceptance has #een in&creasing considera#ly over the years. /n an average appro9imately ; million users are added per month to the %itty there#y ma%ing $ndia the world7s fastest growing telecom mar%et and thus happens to #e the country offering highest R/$ for the telecom companies. To support the growing telecom mar%et, the government is supporting telecom manufacturing #y providing ta9 sops as well as setting up Special economic <ones 2S=>4 for the sector. There is an immense opportunity for DT? in the $ndian mar%et which is almost !) times compared to the developed countries li%e the 3S and =urope. @or every channel there is a scope for #roadcasting it in at least ten different languages. So every channel multiplied #y ten that is the %ind of scope for DT? in the country. $ndiaAs media players have all the ingredients to develop a successful DT? industry. So currently there is a lot of pent&up demand in the $ndian mar%et for DT?

/ne way of loo%ing at the welfare gains to su#scri#ers is to watch the trend in prices for telecom services, whether such prices came down in the competitive regime. .hat consumer ultimately pays includes rental as well as telecom tariffs. 6ecause of complications involved in summari<ing differential rates applica#le to pea% and non&pea% hours, a convenient pro9y for the change in telecom prices could #e constructed in terms of o#served trend in revenue earned from telephone services at constant prices e9pressed as a ratio of num#er of main telephone lines in operation. Ta#le ( shows a significant decline in this ratio since !""5 in $ndian fi9ed line segment. $t may #e noted that the Bational Telecom Policy was announced in May !"",. Steps were iuensified to introduce private competition in the #asic and cellular services thereafter. The Government has

modified method of calculation of Direct and $ndirect

@oreign $nvestment in sector with

caps2para ,.! of consolidate @D$ Policy circular !C()!) of D$PP4 and have also issued guidelines on downstream investment #y $ndian *ompanies. 2para ,.' of consolidate @D$ Policy circular !C()!) of D$PP4 Guidelines for transfer of ownership or control of $ndian companies in sectors with caps from resident $ndian citi<ens to non&resident entities have #een issued 2para ,.(.+ of consolidate @D$ Policy circular !C()!) of D$PP4. $nvestment /pportunities and $ncentives n attractive trade and investment policy and lucrative incentives for foreign colla#orations have made $ndia one of the worldAs most attractive mar%ets for the telecom e0uipment suppliers and service providers. Bo industrial license re0uired for setting up manufacturing units for telecom e0uipment. !))- @oreign Direct $nvestment 2@D$4 is allowed through automatic route for manufacturing of telecom e0uipments. Payments for royalty, lump sum fee for transfer of technology and payments for use of trademar%C#rand name on the automatic route. @oreign e0uity of D,- 2," - under automatic route4 permitted for telecom services & #asic, cellular mo#ile, paging, value added services, BED, $ED, $SPs & and glo#al mo#ile personal communications #y satellite. @ull repara#ility of dividend income and capital invested in the telecom sector. Betwor% =9pansion The telecom sector has shown ro#ust growth during the past few years. $t has also undergone a su#stantial change in terms of mo#ile versus fi9ed phones and pu#lic versus private participation. The following ta#le shows the growth trend of telecom sector from last five years: The num#er of telephones has increased from 5,.'+ million as on +!.)+.())+ to '(!.(; million as on +!.)+.()!). .ireless su#scri#ers increased from !+.+ million as on +!.)+.())+ to 5;,.+( million as on +!.)+.()!). .hereas,the fi9ed line su#scri#ers decreased from ,!.++ million in +!.)+.())+ to +'."5 million in +!.)+.()!). The #road#and su#scri#ers grew from a meager ).!; million to ;.D' million as on +!.)+.()!).

Trend in Tele&density Tele&density in the country increased from 5.!!- in ())+ to 5(.D, - in March ()!). $n the rural area teledensity increased from !.,"- in Mar ())+ to (,.+!- in March ()!) and in the ur#an areas it is increased from !,.+(- in Mar ())+ to!!".,5- in March ()!). This indicates a rising trend of $ndian telecom su#scri#er Rural Telephony. part from the ()).DDmillion fi9ed and .EE connections on March ()!) provided in the rural areas, 5D)))) uncovered 8PTs have #een provided as on March ()!). Thus, "'- of the villages in $ndia have #een covered #y the 8PTs. More than + la%h P*/s are also providing community access in the rural areas. @urther, Mo#ile Gramin Sanchar Sewa% Scheme 2GSS4 F a mo#ile Pu#lic *all /ffice 2P*/4 service is provided at the doorstep of villagers. t present, (DD( GSSs are covering !(),+ villages. lso, to provide $nternet service, Sanchar Dha#as 2$nternet Gios%s4 have #een provided in more than +5)) 6loc% ?ead0uarters out of the total '++D 6loc%s in the country. The target of ;) million rural connections #y ()!) have already met during year ()); itself. 3S/@ su#sidy support scheme is also #eing utili<ed for sharing wireless infrastructure in rural areas with a#out !",))) towers #y ()!). /pportunities $ndia offers an unprecedented opportunity for telecom service operators, infrastructure vendors, manufacturers and associated services companies. host of factors are contri#uting to enlarged opportunities for growth and investment in telecom sector:

n e9panding $ndian economy with increased focus on the services sector

Population mi9 moving favora#ly towards a younger age profile

3r#ani<ation with increasing incomes

$nvestors can loo% to capture the gains of the $ndian telecom #oom and diversify their operations outside developed economies that are mar%ed #y saturated telecom mar%ets and lower GDP growth rates.

$nflow of @D$ into $ndiaAs telecom sector during pril ())) to @e#. ()!) was a#out Rs ,)5,,') million. lso, more than ; per cent of the approved @D$ in the country is related to the telecom sector. Research H Development $ndia has proven its dominance as a technology solution provider. =fforts are #eing continuously made to develop afforda#le technology for masses, as also comprehensive security infrastructure for telecom networ%. Research is on for the preparation of tested infrastructure for ena#ling interopera#ility in Be9t Generation Betwor%. $t is e9pected that the telecom e0uipment R H D shall #e dou#led #y ()!) from present level of !5-. Modern technologies inductions are #eing promoted. Pilot projects on the e9isting and emerging technologies have #een underta%en including .iMa9, +G etc. =mphasis is #eing given to technologies having potential to improve rural connectivity. lso to #eef up RHD infrastructure in the telecom sector and #ridge the digital divide, cellular operators, top academic institutes and the Government of $ndia together set up the Telecom *entres of =9cellence 2*/=s4. The main o#jectives of the */=s are as follows:

chieve Telecom 8ision ()!) that stipulates a definite growth model and ta%e it #eyond. Secure $nformation $nfrastructure that is vital for countryAs security. *apacity 6uilding through Gnowledge for a sustained growth. Support Planned Predictive Growth for sta#ility. Reduce Rural 3r#an Digital Divide to reach out to masses. 3tili<e availa#le talent pool and create environment for innovation. Management of Bational $nformation $nfrastructure 2B$$4 during Disaster *ater the re0uirement of South =ast sia as Regional Telecom Eeader