Telecommunication Industry in India

Deep Aggarwal
MBA (MS) -BATCH OF 2012

FACULTY OF MANAGEMENT STUDIES, NEW DELHI

 Background of Indian Telecom Industry

Fastest growing telecommunication industry in the world.

Second largest network in the world (in terms of number of subscribers) [#1-
China]
Total Telephone subscriber base reaches 764.76 Million
 Wireless subscription reaches 729.57 Million
 Wireline subscription declines to 35.19 Million
[TRAI latest report released on 25 Jan 2011]
Overall Tele-density reaches 64.34
Broadband subscription is 10.71 Million
Total Market Size: US $ 60 Billion
Telecommunication Services can be broadly classified under 3 heads: Telephone,
Broadcasting and Internet.
An exponential growth in the number of subscribers has been witnessed over
the recent years with the annual growth going as high as 47%.
Indian tariffs are very low in comparison to world standards.
 Telephone Services

Over the years, Indian telecommunication industry has been undergoing

phenomenon growth (both in terms of revenue and number ofsubscribers).
Telephone service is right in the center of this success story.
Telephone services can be broadly divided into categories as shown below.

Telephone
Services

Fixed
Wireless
Landlines

GSM CDMA

Subscribers

The number of subscribers in telephone services has seen some exponential growth
over the years. The table below confirms this success story. An interesting
observation in this table is that while the wireless sector has grown alarmingly, the
fixed landline service has actually gone through a decline.
According to data released by Trai, the mobile subscriber base increased to 729.57 million by the
end of November 2010 from 706.69 million in the preceding month, registering a growth of 3.24 per
cent.

With this, the overall teledensity (telephones per 100 people) in India touched 64.34 per cent.
The growth in the wireless category was led by Vodafone, which added 3.12 million users taking its
subscriber base to 121.16 million by end of November 2010.

The wireline subscriber base, on the other hand, declined from 35.43 million in October to 35.19 million in
November. BSNL and MTNL hold 83.12 per cent share of the wireline market.

The total broadband subscriber base increased 1.80 per cent to 10.71 million in November 2010 from 10.52
million in October 2010.

(Source: TRAI; http://www.business-standard.com/india/news/2288-mn-telecom-users-added-in-nov-

trai/123480/on)

The wireless sector has become so dominant that it is has almost made the landline
part dormant with no new happenings/activities/technology in that domain of
telecommunication services.

A look at their contribution to the total telephone services shows the rapidly
change face of the telecommunication industry in India.

Year 2000 Year 2010

1.9 Mobile 3.2
Landline

26.6
5 584.
32

Contribution Variation over the years

This sea change has been caused by a number of factors varying from reduction in
tariffs and cost of mobile handsets to change in government policies to mindset of
the general public.

Market Structure

Indian telecommunication market is divided into a total of 23 circles, which include

4 metros, and 19 other circles. These circles are further classified into A, B and C
type of circles base in the certain economic parameters and revenue potential.

KEY PLAYERS

Wireless

The pie chart below shows all the active players in the wireless segment in Indian
telecommunication industry.
Companies with their market share as of 30.11.2010 [TRAI Report]
Thus, the top six players in the wireless segment in India are:

Operator Subscriber base Market Share

Bharti Airtel 151,293,078 20.48%%

Reliance Communications 123,351,438 16.77%

Vodafone 120,038,438 16.61%

BSNL 82,739,935 11.48%
Tata Teleservices 82,817,298 11.32%
Idea 78,023,551 10.80%
Aircel 49,019,629 6.68%
Total 729,572,245 100%
As on Oct, 2010; TRAI

Fixed Landline

The key players in the fixed landline segment continue to be the state-run
companies like BSNL and MTNL. Though, privately owned companies like Bharti
Airtel and Tata are posing a challenge, the competition is not as stiff as it is in the
case of the wireless segment.

Operator Subscriber base

BSNL 27,446,969
MTNL 3,014,454
Bharti Airtel 2,528,254
Reliance Communications 1,152,237
Tata Teleservices 1,003,261
All India 35,196,334
News aboutBharti Airtel

Subscribers:Bharti has more than 200 million subscribers bmaking it 5th largest
telecom company in the world. It has more than 150 mn subscribers in India, 43 mn
in Africa and 7mn subscribers in Sri Lanka and Bangladesh

Rebranding:

Airtel, unveiled its new brand identity in its

latest campaign, and also talks about new
offerings, which include mobile commerce and 3G services. The brand has also
recently unveiled its new positioning, 'Dil jo chahe paas laye'. The idea as told by
company representatives was to give the brand a uniform presence across all these
markets. Also, the world is moving towards digitalization. From now, it's also going
to be about social media, commerce and 3G. Therefore, keeping the evolution of the
telecom business as well as our expansion in mind, they decided to take brand Airtel
to the next level.
Reason
◦ The logotype is modern, vibrant and friendly and signals our resolution to be
accessible to our customers and stakeholders.
◦ The lowercase is our recognition for humility. The red colour, which is an integral
part of the brand, continues to represent heritage, energy and passion.
◦ The new curved and the gentle highlight almost gives the impression of a living
object; at the same time, it represents a dynamic force of unparalleled
energy, brings us closer to consumers and is a symbol which will help ensure
instant recognition across diverse international markets
(Source:http://www.afaqs.com/news/story.html...n+for+consumer)

Campaign Evaluation
The Good
The new positioning of the brand “ Dil 'Dil jo chahe paas laye' Meaning whatever
heart wants, the Airtel brings it to its customer is good strategy to advertise about
value added services which would come along with 3G services
The new logo also symbolizes youth and freshness which is important to tap the
youth population, which constitutes around 60% of the customers
The Bad
The company didn’t communicate the change to existing customers via a message.
It reflected badly on the relationship.
The new advertisements are more targeted towards the upper strata of the society
thus it makes company vulnerable to lower strata customers
The Ugly
The Airtel’s new logo has strong resemblance with its competitor Vodafone, which
makes it look like a copycat. The brand has been damaged due to this inadvertent or
deliberate similarity being crept in.

(Source: http://studyshare.in/share/showthread.php?1858-Airtel-Rebranding-
Campaign&p=2146&viewfull=1#post2146 )

Zain Deal:Bharti Airtel has completed its $10.7 billion acquisition of African
operations from Kuwait's Zain in a deal that would make the firm the world's No. 5
wireless carrier by subscribers.In March 2010, Bharti struck a deal to buy the Kuwait
firm's mobile operations in 15 African countries, in India's second biggest overseas
acquisition.Airtel is currently number 1 in 10 countries in Africa, and there are, on an
average 2-3 telecom operators in a country. In the continent, Airtel-Zain is number 2
after MTN, and covers a population of 450 million.Bharti Airtel has started showing
early signs of the success of its strategy to tap the global telecom markets for
growth. During the December 2010 quarter, its domestic business remained
sluggish, but the African subsidiaries reported improved traction with a marginal
increase in the revenue market share.
3G Services in India

India’s 3G spectrum auction went on for 34 days and took 183 rounds of bidding.
The Indian government has managed to raise Rs. 67,718.95 crores with Rs.
50,968.37 crores coming from private telecom operators, and Rs. 16,750.58 crores
from the state owned telecom operators BSNL and MTNL. The two circles of Delhi
and Mumbai together account for 39.19% of the total money raised, while the top
five circles – Delhi, Mumbai, Karnataka, Tamil Nadu and Andhra Pradesh account for
65.56% of the bids.

Even though clouds of uncertainty lurked over the success of 3G in India, the auction
was able to fetch such high prices. These high prices are also being attributed to the
saturation of capacity in 2G and 2.5 G spectrum of most of the operators. The
operators would like to transfer their high end customers to 3G spectrum in order to
accommodate more subscribers in their 2G spectrum. All the major players have
already launched their 3G services with attractive plans.

Mobile Number Portability(MNP)

MNP, which allows mobile subscribers to change service providers while retaining
numbers, was launched across the country on January 20, 2011. To avail of MNP
service, a mobile user has to pay a porting fee of Rs 19. The user has to send a
message to 1900, following which he gets a unique porting code. With this code, the
user can fill a form of the new service provider. The process is generally completed
in seven days. However, subsequently, the user cannot avail of the service again for
90 days.
Industry experts feel MNP will not be a game-changer. Even operators are not
expecting the churn due to MNP to be more than one per cent, as against the
current rate of four-five per cent. This is based on their experience in the Haryana
circle, where MNP was launched in December. Haryana has seen a churn of about
one per cent.

Although, Idea Cellular’s campaign, “No Idea, Get Idea”, to woo subscribers of rival
telecom companies seems to be paying it rich dividends. The country’s sixth-largest
mobile operator was the biggest gainer in the first eight days of mobile number
portability (MNP) being launched across the country. According to figures, Idea
Cellular saw a net gain of 12,300 subscribers. Vodafone Essar was the second-
biggest gainer, with a net addition of 11,252 subscribers, while Aircel was a distant
third with 3,389 net additions.The biggest loser was Reliance Communications (both
GSM and CDMA), followed by state-run Bharat Sanchar Nigam and Tata Teleservices
(CDMA and GSM).

[Source: http://www.business-standard.com/india/news/idea-gets-advantage-rcom-
bsnl-atloss/423440/]
 Strategies of different operators post MNP

Vodafone -set up a customer care cell to get in touch with subscribers

opting out of their system.
-launched an advertising campaign talking about how everyone is
welcome to their network
Loop -going to compensate and offer money back to its customers in
Mobile case of any call drops
-option of texting to a number and to get money back under the
'going for great service' guarantee
BHarti Airtel -sent out text messages to select subscribers saying they will get
a 10% discount on their bill for the next two months. When asked
if this was a move to counter the potential churn, the company
said the move was not part of the MNP offer.
MTS -looking to lure GSM subscribers to its network by offering
subsidized rates for CDMA handsets and EMIs on smart phones
-expected to launch a whole slew of an offer of offering half a
paisa per second plan along with other freebies in the form of
value-added services.
Industry estimates say there is a monthly churn of 2% among the postpaid
customers in India while the prepaid segment sees a churn of 5-6%-the highest
in the world.

Source: http://timesofindia.indiatimes.com/business/india-business/Telcos-shower-
goodies-to-retain-users/articleshow/7322670.cms#ixzz1BZREMUo3
 Broadband Market

Internet penetration – one of the lowest in world(7%)

India has the world's third largest Internet users with over 100 million users (of
whom 40 million use the internet via mobile phones) as of December 2010.
BSNL is the largest Broadband Internet Service Provider with 53 % Market
Share.
In INDIA, ISPs are providing Broadband Service on DSL, Cable Modem,
Ethernet LAN, Fibre, Radio, Leased Line etc.
India’s auction for Broadband Wireless Access (BWA) license ended with bids
for pan-India licence touching Rs. 12,850 crore with the government clocking
a total revenue of Rs. 38,543.31 crore.
The Infotel Broadband Services has won bid for all the 22 circles while Aircel
won 8, Bharti Airtel and Qualcomm won in 4 circles, Tikona in 5 and Augere in
1 circle.
The State operators BSNL and MTNL, which have already been given
spectrum, ahead of the private players, will have to pay the equivalent of the
winning bid in each service area.
According to the International Telecommunication Union, BWA can deliver
download speed of 100 mbps to 1 gbps. However till date download speed of
70 mbps have been achieved in lab condition.
 Other Important News related to Telecom:

TRAI to start consultation process for 4G spectrum: Even as the operators are
yet to start offering 3-G mobile services the Telecom Regulatory Authority of
India will make it public its consultation paper on 4G spectrum to facilitate its
introduction by 2012.
The fourth generation or 4G technology offers download at faster speed
known as ultra-broadband and high definition video on demand among other
such services.
Licensing Norms made tougher: Telecom minister, Kapil Sibal, introduced a
new policy on 28 Jan 2011 whereby all operators would have to pay market
price for initial as well additional spectrum. This will also lead to spectrum not
being bundled with the license.
(Source: http://economictimes.indiatimes.com/news/news-by-industry/telecom/new-
telecom-policy-mobile-tariffs-may-go-upward/articleshow/7385145.cms)
 2G Scam

- allegations that A Raja had allotted the 2G spectrum to a few favourite parties at throwaway
prices.

-The Comptroller and Auditor General pegged the loss to exchequer at Rs 1.76 lakh crore.

-Demanding probe into the scam by a joint parliamentary committee, the opposition stalled
parliament proceedings for 23 days during the winter session. Ironically, the deadlock in parliament
cost the exchequer Rs 146 crore.

(Source: http://www.business-standard.com/2010year/scandal.php)

-Before the government initiated action in the 2G-spectrum scam, it went into denial mode.

-Sacked A Raja, Kapil Sibal New Telecom minister (Problem: Raja, on the other hand, is
the Dalit face of the Dravida Munnettra Kazhagam (DMK), a key ally of the Congress at
the Centre)

(Source: http://economictimes.indiatimes.com/news/politics/nation/after-a-raja-kalmadi-
next-to-be-arrested/articleshow/7415883.cms)

(Source: http://studyshare.in/share/showthread.php?1829-General-
NewsByte&p=2084&viewfull=1#post2084 )

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